HYDERABAD: Liberalisation has led to the rise of standalone family firms (SFFs) and they were the primary drivers of growth of the services sector in India, says a recent study conducted by the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business (ISB). Authored by Dr Nupur Pavan Bang, Professor Kavil Ramachandran of ISB and Professor Sougata Ray of IIM Calcutta, the study tracks family businesses in India since the initiation of liberalisation between 1990 and 2015.
"There were widespread apprehensions about the capabilities of the family owned and run businesses to withstand the pressure of the newly created 'freedom' post liberalisation. Not only did the family firms withstand the new competitive forces, but also adapted to the changing business environment. Liberalisation enabled family firms to take stock, restructure and open up new opportunities in the services sector, thereby, increasing their contribution to the economy.
A wave of entrepreneurial spirit also got unleashed due to conducive environment," observed the report. According to the report, in 1990 family firms represented 15.7 per cent of the GDP in terms of total income, whereas by 2015, these represented 25.5 per cent. In comparison, non-family firms formed 20.5 per cent of the GDP in 1990 and 26.6 per cent in 2015.
The report further stated that due to resource constraints, SFFs focused on the services sector, which requires relatively lesser investment and were forced to list earlier. However, the report points out that the issue of succession remains the number one concern for most family businesses even today, as the senior management comprises family members in most cases.
Families rising
In 2015, family firms represented 25.5 per cent of the GDP in terms of total income, up from 15.7 per cent of GDP in 1990