When hearing the term’ family business,’ some people imagine a small, traditionally managed enterprise, such as a neighborhood grocery store or a home-based, hereditary business. However, this perception does not fully reflect the reality of today’s business world.
A lecturer from the Department of Management who specializes in family business studies, Rocky Adiguna, S.E., M.Sc., Ph.D., revealed that approximately 75–80 percent of businesses worldwide are family-owned, encompassing various scales of operation. Nevertheless, family businesses often have a reputation for being unprofessional.
In the 360 Management program titled Why Family Businesses Are Decimating in the New Generation, Rocky explained that family ownership is not contradictory to professionalism. In fact, many global brands operating as multinationals are family-owned companies with robust governance structures. According to him, family businesses make a highly significant contribution to national economies.
“There are companies ranging from small and medium-sized enterprises to large and even multinational corporations. They are dominant contributors to a country’s Gross Domestic Product (GDP),” he explained.
Given the vital role of family businesses in the national economy, questions arise regarding the characteristics that distinguish family firms from non-family firms. To understand the uniqueness of family businesses, Rocky introduced the Three Circles Model, which illustrates the relationship between family, business, and ownership. In family firms, family members often serve in multiple roles, including owner, manager, and team member. This situation differs from non-family firms, where owners and employees do not necessarily have family ties. Such conditions can become complex if the management of a family business is not adequately regulated.
Rocky noted that this complexity becomes particularly apparent during intergenerational transitions. He referred to a Chinese proverb, “Fu bu guo san dai,” which suggests that family businesses rarely survive beyond the third generation.
“Of the 80 percent of family businesses, only about 30 percent successfully continue to the second generation, and only around 12 percent survive into the third generation. It indicates that intergenerational transitions tend to become increasingly difficult,” he explained.
Nevertheless, Rocky emphasized that such failures are not inevitable. Many family businesses worldwide have proven capable of surviving across generations. The Hoshi Ryokan in Japan, for example, can trace its management back through 47 generations since the 1200s. Another example is Zamil Group in Saudi Arabia, which has reached its fifth generation, while Antinori in Italy has survived through 25 generations.
In Indonesia, there are also long-standing family businesses, such as Ayam Goreng Mbok Berek in Yogyakarta, which has endured through six generations. Interestingly, this business’s sustainability does not stem from rigid governance structures, but rather from family agreements regarding the use of the brand across business branches.
However, many family businesses have also failed to sustain their operations. Rocky cited Nyonya Meneer, a traditional herbal medicine company founded in 1919 that ceased operations in 2017. Another example is Margo Redjo, a coffee company in Semarang established in 1915, which experienced fluctuations due to changing eras—from Dutch colonial rule to the Japanese occupation. Today, Margo Redjo is attempting to revive its business by leveraging its history and tradition as a competitive advantage.
According to Rocky, the key challenge for family businesses lies in their ability to preserve core values while simultaneously innovating to remain relevant in the market. It creates a tension between continuity and innovation that companies must navigate.
“Sustainability is not merely about generating profit, but also about personal emotional attachment to the company,” he stated.
He further emphasized that family businesses have distinct characteristics compared to non-family firms, particularly due to the emotional and social aspects embedded among their owners. Therefore, appropriate corporate governance becomes crucial for ensuring that family businesses can survive across generations.
The full 360 Family Businesses program video can be accessed via:
Why Family Businesses Are Declining in the New Generation
Author: Dwi Zhafirah Meiliani
Editor: Kurnia Ekaptiningrum
Sustainable Development Goals
