Publication
A Study of Finance, Growth and Productivity in Family-Owned SMEs
Published: 11 November 2026
ERC Research paper No 127
Associated Themes
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Longitudinal Small Business Survey
Family-owned firms (FOFs) constitute a substantial proportion of the business base in most modern-day economies. Numerically, they also form the vast majority of small and medium-sized enterprises (SMEs) in these countries. Yet somewhat paradoxically, the volume of research on the financial affairs of these firms has been relatively modest. This report seeks to rectify this omission within the small business finance literature by specifically examining their experiences when attempting to raise finance, their levels of borrower discouragement in FOFs and how these credit conditions affect their performance outcomes. The main dataset interrogated for this empirical analysis is the UK’s single largest survey of small firms, the Longitudinal Small Business Survey (LSBS). In terms of the project’s methods, we wish to undertake econometric analysis which will employ a multi-tier empirical strategy that exploits both the broad coverage and the longitudinal features of the LSBS. A number of key findings emerged from this novel empirical analysis. Our findings show that FOFs have a greater propensity towards being discouraged and this applies particularly for limited liability partnerships (LLPs). It appears that discouragement in these firms may be irrational decision-making behaviour as the counterfactual approval probability of discouraged firms accessing finance is high. Plus overall, FOFs do not experience any greater credit rationing than non-FOFs. In terms of the economic impact of borrower discouragement, FOFs encounter no greater discernible impact than non-FOFs. Borrower discouragement was found to be a permanent state rather than a transitory phase. Despite this, surprisingly, no change in the growth ambition is detected in firms suffering from discouragement.
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