Challenges Facing Family Companies in the Gulf Region.(contains bibliography)(Industry Overview)

Introduction

In the 21st century, family businesses in all areas of the world face significant challenges and plentiful opportunities. The growth and survival of family firms depends on their ability to address these challenges, capitalize on their strengths, and take advantage of the opportunities facing them. Nowhere is this dictum truer than in the Gulf Region, where family companies are likely to experience dramatic changes to their environment in the next decade.

The family with its extended kinship network is probably the central element of the Gulf Region socioeconomic system. The family household unit in the Gulf, the extended family, and the family's close allies are the chief nurturers and arbiters of individuals' values, attitudes, and beliefs. A person's primary social and economic support comes from his or her nuclear and extended families. Social and business life revolves around the family.

There is a strong cultural preference that business opportunities should be pursued, if possible, first within the family, and then with other ally families. More than in any other area of the world, in the Gulf, business is viewed as a way to enhance a family's social standing rather than as an impersonal, wealth-generating, market-driven activity.

Of course, many factors interrelate with the family element to create the distinctive features of the Gulf socioeconomic system. The patriarchal system of government; comfort with traditional, seniority-based leadership; social and economic protectionism; the importance of the oil industry; welfare-state economics; fast-paced economic development; and a reliance on expatriate labor are the obvious ones.

This paper considers the above factors and their combined impact on family companies. It focuses on the countries of the Gulf Cooperation Council (GCC), including Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the United Arab Emirates (UAE). Any relevant economic and social differences among GCC countries will be pointed out.

This research is based on interviews with 56 family business leaders, 20 nonfamily managers of family companies, and 26 experienced observers of the region, as well as an extensive review of statistics and literature on the economic and social life of the region. The interviews were conducted by telephone and in person between July and September 1997.