How does a family business background influence the success of next-generation entrepreneurs?

Family firms are deeply woven into the global economic fabric. Their reputations for long-term orientation, resilience, and community embeddedness make them natural breeding grounds for entrepreneurship. Common wisdom suggests that relatives of family firm owners who venture out to start their own businesses benefit from greater resources and support—after all, blood is thicker than water, right?

But this study challenges that intuition. What if nonfamily employees—those who aren't tied by blood—are actually better positioned to thrive as entrepreneurs once they leave a family firm? And what role does proximity—be it spatial, social, or cognitive—play in shaping the survival chances of these so-called “spawns”? In one of the largest datasets ever analyzed in this context, this research explores how different types of founders benefit (or don’t) from their previous ties to family firms.

What We Studied

This study examines entrepreneurial spawns—new ventures founded by employees leaving established firms. Using data from Sweden, a country with a strong tradition of both entrepreneurship and family ownership, the authors tracked 114,837 independent startups launched between 2000 and 2007, observing their survival until 2008.

Crucially, the researchers distinguished three types of spawns:

1. Family Member Spawns: Founded by relatives of the owning family in a family firm.
2. Nonfamily Member Spawns: Founded by non-relatives who worked at a family firm.
3. Spawns from Nonfamily Firms: Founded by employees of nonfamily firms.

To explain differences in survival, the study draws on social capital theory, focusing on two types of resources:

• Bonding Social Capital: Resources from close kinship ties, such as trust, loyalty, and family-specific support.
• Bridging Social Capital: Resources from the firm’s external networks and reputation—especially important for navigating markets and building stakeholder trust.

In addition, the study explores how spatial (geographic), cognitive (industry-related), and social (tenure-based) proximity affects the value of these resources.

Key Insights

1. Family Firms Provide Fertile Ground—But Not Equally for All

Working in a family firm boosts a spawn’s survival odds compared to coming from a nonfamily firm. Nonfamily employees who spawn from family firms survive significantly longer than those from nonfamily firms, due to their exposure to strong external networks and reputational spillovers.

2. Blood Ties Alone Are Not a Silver Bullet

Contrary to popular belief, spawns created by family members do not survive longer than those created by nonfamily employees of family firms. In fact, when they are farther away geographically or operate in unrelated industries, family spawns may fare worse.

This finding suggests that access to bonding capital is conditional, and may not extend fully when ventures are too distant—physically or cognitively—from the parent firm.

3. Proximity Deeply Shapes Outcomes

• Spatial proximity enhances survival across the board, especially for nonfamily spawns who can more easily tap into stakeholder networks and reputation benefits.
• Cognitive proximity (staying in a similar industry) helps nonfamily and family member spawns maintain relevance and extract value from inherited knowledge and reputation.
• Social proximity (longer tenure at the parent) particularly boosts the survival of nonfamily spawns, likely due to stronger socialization and embeddedness.

Interestingly, for family member spawns, distance—rather than closeness—may hurt, as it undermines both bonding and bridging effects.

4. Kinship May Come with Liability, Not Just Privilege

When family members launch ventures that deviate too much—in location or focus—from the parent firm, they may face a "liability of kinship". Rather than gaining unconditional support, they might be seen as abandoning or challenging the family’s strategic path.

This over-embeddedness can limit their flexibility and hinder their ability to form new, independent stakeholder relationships in new environments.

Takeaways for Family Business Leaders

1. Recognize the Strategic Value of Nonfamily Employees

Nonfamily employees can be powerful entrepreneurial assets. When they leave to start new ventures, their survival rates suggest they carry forward the family firm’s values, stakeholder goodwill, and legitimacy. Support them deliberately. They may become strong allies, partners, or even future collaborators.

2. Reassess How You Support Family Spawns

Kinship is not always enough. Family members seeking independence may require more structured, formal support, especially if they move away from the firm’s region or industry. Consider whether your expectations and legacy might unintentionally hinder their path.

3. Proximity Matters—Foster It Strategically

• Encourage local entrepreneurship among spawns.
• Provide mentoring and introductions to stakeholders within the same or adjacent industries.
• Keep ties alive even after employees depart. Your firm's social capital can be an enduring asset for them—and a reputation builder for you.

Impact: Rewriting Assumptions about Family Firms and Entrepreneurship

This research enriches three key areas:

Spawning Literature

It broadens our understanding of what makes a “good” parent firm. Beyond knowledge and routines, social capital—especially bridging capital—is a critical factor influencing startup survival.

Family Business Scholarship

It challenges the idea that family members always have the upper hand. By showing how proximity conditions the benefits of kinship, it calls for a more nuanced view of family business influence.

Entrepreneurship Studies

It contributes to the debate on prior work experience by showing that the type of firm matters—not just tenure or position. Family firms offer unique resources, but how they're accessed and who benefits depends on role and relationships.

Recommendations

For Family Firms:

• Create spinout-friendly policies that support both family and nonfamily entrepreneurs.
• View former employees as long-term ambassadors and ecosystem partners.
• Promote mentoring programs that link current staff with alumni entrepreneurs.

For Family Members Starting Ventures:

• Stay geographically and strategically close to the parent firm to maximize support.
• Be aware of implicit expectations and explore transparent discussions with family owners.
• Seek out external networks early to reduce dependency on family capital.

For Policymakers:

• Encourage platforms and funding programs that connect spawns from family firms with local ecosystems.
• Recognize the hidden contribution of family firms to the broader entrepreneurship economy, including nonfamily founders.

‍