Family Firms and Sustainability

Sustaining a family business across generations is not easy. While many family firms start with strong entrepreneurial drive and shared commitment, maintaining both business success and family harmony over time presents a fundamental challenge. At the heart of this challenge lies a dilemma that many family businesses inevitably face.

On the one hand, the family acts as business owners. In this role, they aim to grow the company, remain competitive, and maximize profits. Making sound business decisions—such as hiring the most capable leaders, investing, and strengthening governance—is essential for long-term success. From this perspective, the family must focus on enhancing firm value.

On the other hand, the family is also a family. Family members often expect the business to provide employment opportunities, financial support, and security. In addition, controlling the family firm can bring social status, and influence. For many families, the business represents not only a source of income but also identity and legacy. These motivations are often referred to as private interests.

The challenge arises when these two objectives conflict. For example, prioritizing dividends for family members may reduce resources needed for reinvestment and growth. Similarly, appointing a family member to a leadership role may strengthen family ties but may not always benefit the firm if the person lacks the required expertise. This situation may also create the glass ceiling, making it challenging to recruit talented individuals. When private interests consistently take precedence, the firm may struggle to remain competitive.

Ultimately, sustaining a family business requires balancing these competing goals. Successful family firms recognize this tension and develop governance structures, clear roles and rules, and shared values that align family and business interests. Some families demonstrate exceptional commitment by consistently prioritizing the firm’s interests. By doing so, they improve their chances of preserving both the business and the family legacy for generations to come.

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Yupana Wiwattanakantang is a tenured Associate Professor at the National University of Singapore (NUS) Business School, and an ECGI Research Member.

This blog is based on a discussion held at the 2026 IESE-ECGI Corporate Governance Conference Family Firms: Purpose, Economic Performance and Social Impact. Visit the event page to explore more conference-related blogs.

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