KPMG: Transgenerational entrepreneurship drives the financial success and lasting legacy for Malaysian family businesses

A global survey conducted by KPMG Private Enterprise and the STEP Project Global Consortium (SPGC) found that transgenerational entrepreneurship is scored by family businesses in Asia as the biggest factor influencing legacy building. The survey received responses from 2,683 family business leaders from 80 countries, territories and regions, including 54 respondents from Malaysia. 

Malaysia’s family businesses are already witnessing active multigenerational participation in management (38%) with a significant prevalence of transgenerational entrepreneurship (77%). Consistent with other Asia Pacific family business leaders, it appears that family businesses in Malaysia put a relatively equal weight on incorporating family relationships, family entrepreneurship and future generations in their commitment to maintaining entrepreneurial legacy across generations.

Tai Lai Kok, Family Business Tax Leader of KPMG Private Enterprise in Malaysia, observed the need to harmonize tradition with innovation to establish an enduring legacy. 

“While majority of Malaysian family businesses are rooted in tradition and values, it is not enough to sustain in the long run. Our study found that integrating change and innovation, fueled by a culture of transgenerational entrepreneurship, can help drive family businesses towards building a successful legacy that withstands the test of time,” he explained. 

Out of the survey, Tai also discovered an important correlation between legacies and long-term business performance. Malaysian family businesses rated their performance to be at 78% in the survey, which is higher than the scores in Asia Pacific (68%) and globally (71%). A measure of performance encompasses scores across growth, market share, profitability, profit margin, return on equity and assets. 

Notably, family business leaders in Malaysia tend to incorporate social legacy into their family business (24%), which focuses on intangible assets such as the family’s shared values and beliefs in building community relationships and strong social ties. Biological legacy, i.e., bloodlines, comes in a close second at 23%. 

The survey also revealed that family businesses in Malaysia incorporate sustainability into their organization with a strong focus on natural environment (27%) and employees (21%). 

“Having a legacy serves as the invisible force that weaves together successive generations. Family businesses with strong legacies often play important roles in the communities in which they operate. However, legacy can also be a liability if it is too entrenched in tradition such that it may impede the ability to innovate and adapt, leaving it vulnerable to disruptions,” noted Tai. “Thus, a balancing act of purpose and adaptability is called for to build, nurture, and sustain a family business legacy.”

This can be achieved through a well-defined and communicated core family values and vision, and by practicing a leadership style that balances entrepreneurial action with stewardship, helping to ensure that leaders are ambassadors of both the family’s legacy and its entrepreneurial future.

KPMG and SPGC’s report entitled ‘Unlocking legacy — The path to superior growth in family businesses’ can be downloaded from kpmg.com.my/privateenterprise

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