Decline Of Family Businesses? Most Indian Heirs Do Not Feel Obligated To Join, HSBC Study Finds

Indian Family businesses contribute around 79 per cent of the country’s gross domestic product (GDP). Around 88 per cent of these family entrepreneurs believe that the next generation of the family is compatible to take care of the family business, according to a report titled, Family-owned Businesses in Asia: Harmony through Succession Planning 2025, by Ipsos UK on behalf of HSBC Global Private Banking. The study was conducted to understand intergenerational dynamics and succession planning to understand preparedness of the next generations to carry on the business responsibility.

The study collected data online and also conducted fieldwork. It includes data of 1,882 business owners/entrepreneurs (1,798 current and 84 former business owners) for the quantitative research and 36 interviews for qualitative research.

The report suggests that although more than four-fifths feel confident about the next-generation’s ability to handle the family business, only around 7 per cent of heirs of these Indian business entrepreneurs feel obligated to join their family business.

83 Per Cent Heirs Feel No Obligation To Continue The Family Business

In business families, typically, the reign is transferred to the children from one to the next generation and that is how succession is planned. However, this trend seems to be changing.

The study observes a growing openness in business families, especially in the inter-generational families, to let the next-gen pursue their interests. The outcome is reflected in the responses as 83 per cent of the respondents (heirs) feel no obligation but encouragement from family to explore their own interest than simply taking on business from the previous generation.

The report highlights that 55 per cent of first-generation and 35 per cent of multi-generation entrepreneurs (an average 45 per cent of respondents) do not expect the next-gen to carry on the family business.

Trust On Next Generation For Maintaining Values And Culture

In India, business families have been transferring their wealth to the next generation with confidence. Around 95 per cent of the second and third generation entrepreneurs felt the Trust from their previous generation while inheriting business. Compared to this, the global average stands lower at an average 81 per cent.

Now, the current entrepreneurs also trust their next generation for maintaining the values and culture of the family business. Around 79 per cent of entrepreneurs in India want to keep their business within family.

Unlike second generation business, multi-generational family businesses are more open and value their extended family and kinship for running business or while planning succession.

Motivation For Business

The study notes that most of the Indian family businesses came into existence in 1990s after economic liberalisation. Most of these entrepreneurs were from humble family background. However, their next generation (second generation) is not like them. They have studied abroad and have grown up in a cosmopolitan environment.     

it reflects the difference in entrepreneurs’ motivation for business across generation. While the first generation felt motivated to make financial returns, the second generation feels inspired to maintain it whereas the youngest generation of entrepreneurs prioritises health and wellness for self and family over financial freedom.

Referring to the Hurun data of 2024, the report notes that there were 334 billionaires and the number of such entrepreneurs is increasing every year by 29 per cent.

Besides, almost 70 per cent of these billionaires are estimated to having USD 1.5 trillion when they would plan succession. According to the report, it amounts to around one-third of the country’s GDP.