Family ownership is the most prevalent form of private enterprise in Norway. 70% of Norwegian companies are controlled by a family, in the sense that one family owns 50% or more of the firm’s equity.
Below, we present descriptive statistics on family firms from the CCGR data base.
Family firms constitute a considerable part of the Norwegian private economy, as shown by the figure below. In 2019, in the CCGR data base of limited liability firms, family firms represented 73% of the total number of firms, employed 39% of all individuals employed by data base firms, accounted for 24% of total sales, and owned 15% of total corporate assets.
Family firms can be found in all sectors of the economy, but they are more common in industries that use more labor and fewer fixed assets. Consequently, family firms account for a smaller proportion of employment, sales, and assets in more capital-intensive industries. For example, 79% of all firms in services sectors are family firms compared with 63% of firms in mining and oil. Family firms account for more than 60% of employment, sales, and assets in the farming, fishing, forestry, and the real estate sectors, but only around 10% in mining and oil.
Are family firms different from nonfamily firms? The table below compares the size, growth, risk, return, and age for the two types of firms in 2019.
Panel A shows that family firms are relatively small. The average nonfamily firm is about 7 times larger than the average family firm in terms of sales (181 vs. 24.6 million kr.), about 18 times larger in terms of assets (496.9 vs. 27.6 million kr.), and about 4 times larger in terms of employees (37 vs. 9.6).
The table also reflects the skewed size distribution of family firms. Large family firms are about as large as the average nonfamily firm, whereas sole entrepreneurships (owner-manager firms) are the smallest of all firms.
Panel B shows that the small size of sole entrepreneurships is partly explained by their very young age. The large family firms, on the other hand, are significantly older than the average firm.
Panel C shows that the average family firm has somewhat lower sales growth and asset growth than the average nonfamily firm. Growth rates are also highly skewed, as reflected by the large difference between mean and median growth rates.
Panel D shows that family firms are more profitable on average compared with nonfamily firms (3.1% vs. 1.6% when measured by the mean after-tax return on assets, and 6.3% vs. 5.5% when measured by the median after-tax return on assets). This higher profitability of family firms is a common finding in research and its causes is an an active topic of debate. The risk of family firms is slightly higher than that of nonfamily firms, here measured as the coefficient of variation of three-year sales.
More basic facts about Norwegian family firms are available here and here.
Family firms are smaller than nonfamily firms on average. For both groups, the size distribution is very skewed: there are many very small firms, but only a few very large firms. This property is illustrated by the graph below, which shows the distribution of family and nonfamily firms by their sales in million kroner in 2019:
The distribution is easier to read if we plot the log of sales:
The profitability differential between family and nonfamily firms is quite stable over the business cycle, here measured by the average annual return on assets (ROA) for the period 2000-2019:
The higher profitability of family firms is intact if one considers the proftiability of the median firm as opposed to the average profitability across firms.
While family firms are generally more profitable than nonfamily firms, they tend grow at a slower pace. Growth rates vary over the business cycle, but the lower relative growth of family firms is quite stable, shown below for the 2000-2019 period:
The average growth rates of sales are considerably higher than the median growth rates. This reflects the skewness of the distirbution and is driven by a small group of very fast-growing firms. The dip in 2008 is due to the financial crisis.
The relative lower growth of family firms remains if one considers instead the growth rate of assets or employment: :
Note: the rules for reporting the number of employees in a firm were changed in 2015.