Family Entrepreneurship Swiss-style: The secret to longevity is finding the middle path
Although entrepreneurship is alive and healthy all over the globe, each country has interesting characteristics which can serve as lessons for others. In Switzerland for example, the STEP researchers found that long-lived family firms all followed a middle path in terms of entrepreneurship.
They discovered this after carrying out a study in Switzerland of the five dimensions of entrepreneurship, which is defined as the Entrepreneurial Orientation (EO). These dimensions are: autonomy, innovativeness, risk taking, proactiveness and competitive aggressiveness. A high EO company would be very innovative, take high risks, be very proactive and very aggressive.
For the Swiss study the researchers examined three long-established family firms in three sectors – health (pharmaceuticals), food (chocolate) and printing. The pharmaceutical company is being run by the 5th generation of the family and was 140 years old, the chocolate producer is in the 3rd generation and was 80 years old (at the time of the research), while the printing company is in the 7th generation and 175 years old!
The EO of all these companies was very similar - all scored in the medium range, not high. Specifically, innovation levels were only medium, business risk was medium to low, while proactiveness was medium to low. Research results also found that for these family firms the EO profiles were not stable over time but changed in response to different conditions. Often, periods of low innovation were then followed by phases of very high innovation.
An interesting comparison for these very successful and old Swiss companies is the American dotcom companies of the 1990s which had very high EO – i.e. they were very innovative, aggressive, autonomous and took high risks – however most were unable to survive for more than a few years.
When EO is too high, companies may make mistakes and, like the dotcom startup companies of the 90s, they will not last long. On the other hand, a too low EO may lead to stagnant inertia or a downturn in the long term.
The Swiss experience is a clear message that for business longevity, the secret lies in the middle – EO that is average, but dynamic, and adapts in response to changing conditions.
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