NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, November 16, 2015

Family-owned Asian businesses like the conglomerates that dominate the Philippine economy get a bad rap from more widely held “western” corporations, which are seen as more competitive due to better management.

But big businesses where power is shared among brothers and sisters or parents and their children can excel where other companies owned by investors obsessed with quarterly reports typically fail: investing for the long term.

It’s this advantage that can make Asian firms leaders in creating business models that tap the base of the pyramid, resulting in meaningful reductions in poverty.

“They invest for the long-term. For some reason, the companies we’ve dealt with for years that have been successful have been family-owned companies,” said Eriko     Ishikawa, global head of the Inclusive Business group at International Finance Corp. (IFC), the World Bank’s private investment arm, “They’re not just trying to make a quick buck.”

Delayed gratification

In an interview with the Inquirer, Ishikawa said family-owned businesses were accountable to shareholders with both financial and sentimental ties to companies.

These shareholders are either the founders of the companies they run, or close kin.

As a result, these types of firms, which are common in Asia but less so in Europe and North America, are more comfortable with delayed gratification.