| Abstract |
The European Commission estimates that more than 99% of all European businesses are SMEs, providing about 70% of the private sector jobs and more than 50% of the European GDP. They are the primarily responsible for wealth and economic growth and play a key role in innovation and R&D. Many SMEs are led by a family, and the company represents the main source of wealth and incomes for its members. According to evolutionary theory (Emlen, 1982), the individual pursues the improvement of its disposable resources to continue its own specie. Transposing these concepts to a family (Nicholson, 2008), the family leader should set a mechanism that provides resources in order to grant to present and the future generations at least the same resource level per capita. When the company is the mean through which the family generates these for the continuation of the specie, the family goals impact the company goals. In particular, the company's growth rate should be the one that allows to a growing number of family members to have the same income and wealth level. This means the expected return of Family-led SMEs, is different by large Non-Family companies, where theories like CAPM (Fama et al., 2004) are usually applied. The purpose of the article is to discover if the growth rate of a family SME is compatible with the need for incomes and wealth generated by the increase of family members in the long term. In order to answer the question we developed a model connecting the family growth, which depends on the average life expectation and on the fertility index of the family, with the company growth in terms of net incomes. The results reveal that for a SME led by a family that generates 2 new branches each generation, the annual company growth rate in real terms is far lower than the MSCI annual growth of the last 40 years. |