Family Businesses in Germany: Significance and Structure.(contains bibliography)(Industry Overview)

This paper shows the relevance of family businesses to the German economy and their structure with respect to ownership, governance, and management. The data show that ownership, rather than governance or management, is the key to differentiating family from nonfamily businesses. As governance and management are more complementary to each other, families in German family businesses seek influence either through family members on the supervisory board or on the management board. The empirical data from this study is based on a clear definition of family business and a random sample, and it provides the basis for further investigation into German family businesses.

Introduction

The literature, as well as consulting and training, on family businesses in Germany mainly takes a succession point of view. Politicians and researchers focus on succession in family businesses and the problems that may arise from it. In 1989, Albach and Freund stated that discontinuity in family businesses may cause serious problems for the German economy (Albach & Freund, 1989, p. 19). Zucker and Borwick (1992) estimate that only 50% of family businesses make it to the second generation. Recent data from Schroer and Freund, based on tax statistics and extrapolations, state that 321,837 of 1,554,766 family businesses in Germany will be passed down to the next generation within the next 5 years (Schroer & Freund, 1999, p. 17).

Family business facts are classified as "based on actual empirical research which uses a precise definition of a family business" (Shanker & Astrachan, 1996, p. 108). Shanker and Astrachan classify the family business statistics into four categories: so-called "street lore" statistics, educated estimations, extrapolations based on known data or small samples, and family business facts.

There are no facts concerning family business and the German economy (Shanker & Astrachan, 1996, p. 108). Although family businesses are considered to be a significant and important part of the German economy (Freund, Kayser, & Schroer, 1995), the data concerning German family business is rather poor compared to those of other countries (Welsch, 1991). The data available so far is deduced from tax statistics (Freund, Kayser, & Schroer, 1995), estimated (Reidel, 1994), or based on a specific approach related to a hypothesis (for example, Goehler 1993; Gerke-Holzhauer, 1996) rather than a representative approach.

Because there is no reliable information concerning the number and structure of family businesses in Germany, questions about the significance and structure of German family businesses cannot be answered satisfactorily. It is impossible to compare family and nonfamily businesses in Germany or German and non-German family business.

Any further investigation into German family businesses requires knowing how many German businesses are family businesses, their sizes, how many people they employ, which generation is in charge, how closely they are held, and how they are governed and managed - as well as a precise definition of family business. "One very basic and foundational problem concerns defining exactly what is meant by the term family business" (Litz, 1995, p. 71).