Family Businesses And Their Significance In South Korea

South Korea’s economic story in the latter half of the twentieth century and into the twenty-first is often told in terms of its chaebols — large family-controlled conglomerates such as Samsung, Hyundai, LG, SK, and Lotte. Yet family businesses in South Korea are much more than the chaebol giants; they permeate the entire spectrum of the economy, from small and medium enterprises (SMEs) in provincial towns to globally competitive exporters, and their influence extends far beyond revenues and jobs.

So let's take a look at the importance of family businesses in South Korea: how they shaped the nation, the distinctive features they bring, the problems they face, and what their future may hold.

Origins and Economic Role

After the devastation of the Korean War, South Korea began a process of rapid industrialisation and export-led growth. In that period, the Korean government adopted policies that channelled capital, protection, and incentives (tax breaks, preferential financing, import restrictions) in part to large industrial conglomerates, often family controlled, to accelerate growth in heavy industries, steel, shipbuilding, electronics and automobiles.

The chaebols emerged during this period, becoming engines of scale, innovation, and global competition. Their owners, often family dynasties, saw industrialisation as a mission as much as a business opportunity, collaborating with government in building infrastructure, managing foreign debt, securing access to export markets, and investing in R&D. The historical influence of Confucian values — loyalty, hierarchy, respect for elders, family duty — also played into the way family firms were accepted and regarded in society.

Today, family firms — both the very large (chaebols) and the many smaller ones — continue to be vital pillars of the Korean economy. SMEs account for 99.9 per cent of all businesses in the country. They employ over 80 per cent of the workforce and generate almost half of total corporate revenue. The chaebol giants account for a large proportion of GDP through their scale of output, exports, investment and influence. According to various scholarly estimates, a handful of leading chaebol groups control assets or revenues equivalent to a large fraction of South Korea’s GDP.

Distinctive Features of South Korean Family Business

There are several features that make family-businesses in South Korea both powerful and peculiar.

First, the dual nature of the ecosystem. On one hand, the chaebols are extremely large, often diversified into many industries, and with huge influence domestically and internationally. On the other hand, there is a vast landscape of small and medium family-owned firms — SMEs in manufacturing, services, trades, retail, agriculture — which provide livelihoods, local employment, and contribute to regional economies in ways that often go unnoticed.

Second, long-term orientation and loyalty. Family businesses tend to take a multigenerational view. Successive generations usually see themselves not just as owners but as stewards of reputation and tradition. This often brings with it conservative financial practices, attention to maintaining relationships (with employees, suppliers, government), investment in brand and infrastructure that may pay off over decades rather than instantly, and sometimes slower but steadier growth. Confucian heritage plays a role in reinforcing expectations of duty, honour, and continuity.

Third, governance structures and family control. Many chaebols remain under tight family control even where professional managers are involved. The ownership, managerial, and board control often remain within the founding families. This carries strengths of cohesive decision-making, ability to pursue bold, long-term investments, to respond rapidly to opportunities or crises.

But it can also carry risks of nepotism, lack of transparency, resistance to external oversight, and potential agency problems. Some research suggests that when family members occupy CEO roles, corporate social performance or governance sometimes suffers; when non-family professionals are appointed, performance (in certain metrics) improves.

Fourth, social legitimacy and trust. Because many of these businesses have existed for generations, people often view them not merely as commercial entities but as institutions that contribute to national pride, export reputation, technology, job creation, training, philanthropy.

This legitimacy gives family businesses certain leverage with government policy, in access to finance, in ability to plan long-term projects, and in sustaining large infrastructure or R&D investments.

South Korea's Oldest Family Firms

Here are several of the oldest family or long-standing firms in South Korea that still operate or have strong 'old family' roots.

• Doosan Corporation (founded in 1896) - Often cited as South Korea’s oldest business; it began as a small linen or cotton shop in Seoul.
  

• Dongwha Pharmaceutical (founded in 1897) - A pharmaceutical company known for its long-established brand Whal Myung Su.
  

• Shinhan Bank (founded in 1897) - One of the oldest banks still operating in Korea.
  

• Woori Bank (founded in 1899) - Another bank.
  

• Monggo Foods (founded around 1905) - A company producing soy-based sauces and other food products.
  

• Sung Chang (founded in 1916) - Manufacturers of veneer.

Contribution to Social and Regional Cohesion

Family businesses contribute to social cohesion in a number of ways. They anchor local economies: smaller family-owned firms in provincial cities and rural areas provide jobs, maintain local services, keep supply chains alive, and help prevent depopulation. They are often sources of skill, craftsmanship, traditional trades, as well as providers of livelihoods in sectors that may not be attractive to multinational firms.

They also play a role in employment stability. Because of their longer-term view, family businesses may avoid sudden layoffs in difficult years; they may retain institutional knowledge, care more about employee loyalty, include family or intergenerational members in management or advisory roles, which fosters continuity.

In addition, family businesses can act as bridges between modernisation and tradition. Many small family firms preserve cultural or artisan skills, local practices, or craft traditions, while adapting to modern consumer demands, tourism, digital marketing, etc. This blend sustains cultural heritage and adds a layer of depth to the economy beyond raw metrics.

Challenges and Tensions

The dominance of family businesses, particularly chaebols, brings considerable challenges and tensions for South Korea.

Succession is a recurring issue. Although many founding families plan to transfer control across generations, finding heirs who are both willing and capable is not always straightforward.

Younger generations may prefer different styles of management, may wish to pursue education or careers elsewhere, may resist the weight of tradition, or may have values more aligned with sustainability, transparency or social impact. Research indicates that in SMEs especially, many owners are reluctant to burden children with company responsibilities, or children do not wish to take over.

Taxation, particularly inheritance or gift taxes, is another source of friction. High taxes on transferring leadership or ownership can discourage or complicate succession, lead to conflicts, or prompt avoidance strategies. Recently, there have been proposals to revise inheritance taxation in South Korea, including lowering the highest rates, in an effort to ease corporate succession and reduce perceived burdens.

Governance and transparency challenges are frequently raised in relation to the chaebol structure. Because ownership and control often remain in tight family hands, minority shareholders or outside observers may perceive or experience opaque decision-making, conflicts of interest, cross-shareholding, nepotism, or lack of external accountability. These issues have in the past contributed to public criticism, regulatory scrutiny, and sometimes scandals. Balancing family control with professional management, with independent oversight, is a difficult but important task.

Then there is tension between scale and agility. Big family firms, especially conglomerates, have power, resources, global reach; but they sometimes become slow, bureaucratic, resistant to change. SMEs, though flexible, may be vulnerable to competition from large firms, to regulatory burdens, to rising wages, labour costs, and to global competition. There is also the risk that capital, talent and policy support become overly focused on the large family firms, leaving smaller ones underserved.

Finally, demographic challenges, labour, regulation. South Korea has one of the lowest birth-rates in the world, an ageing population, rising expectations for work-life balance, and people increasingly caring about ethical business, sustainability, corporate social responsibility. Family businesses must adapt to changing norms, both internally (in leadership, policies, hiring) and externally (market expectations, environmental regulation, global supply chains).

Policy, Innovation, and Evolving Landscapes

Recognising both the strengths and challenges of family business, Korean government, civil society and private sector have taken steps or are under pressure to adjust.

One significant policy area is the proposed reform of inheritance tax. In 2024, the government proposed lowering the highest inheritance tax rate from 50 per cent (on estates over a large threshold) to 40 per cent, and raising the lowest threshold for the lowest bracket, in order to ease burdens on successors. This is part of a broader package of reforms tied to corporate value, investment and demographic issues.

Another area is regarding succession support, particularly for SMEs. There is increasing recognition that many of the small and medium enterprises which are family-owned may not survive the retirement or exit of their founder unless better legal, financial, advisory mechanisms are in place. Roundtables have been convened, business associations are pushing for simplified regulations, support for leadership training, tax clarity, inheritance planning etc.

Corporate governance reforms are also under pressure. Greater transparency, accountability, outside board members or professional CEOs are areas many scholars and regulators argue need strengthening, especially in large family-controlled companies where family control is strong. The challenge is to balance preserving the beneficial aspects of family control (long term thinking, swift decision making in some respects, loyalty, stability) with mitigating risks of over-concentration of power, lack of oversight, insider dealing or nepotism.

Increasingly, societal expectations around sustainability, labour practices, environmental impact, gender equity, and work-life balance are pushing family businesses to adopt “corporate social responsibility” practices more deeply. Some family firms do perform well in CSR indices; but among the chaebol, this is uneven.

Technology and global competition also shape the change: family firms must innovate, digitalise, invest in automation, expand overseas, diversify risk. For smaller firms particularly, collaboration with universities, clusters, export promotion, government support for R&D or digital transformation can determine whether they thrive or fall behind.

Why Family Businesses Remain Crucial

Despite the tensions, family businesses are more than relics of old economic models in South Korea; they are central to the country’s ability to compete, to sustain social stability, to preserve culture and identity, to provide employment broadly across regions, and to adapt in a volatile world.

They lend stability in turbulent times: economies are subject to shocks—financial, international competition, supply chain disruptions, fluctuating demand. Large family firms with long histories often have reserves, networks, experience, and relationships that help them weather downturns. Smaller family firms, embedded locally, may lack those buffers but often have flexibility and loyalty ties that help them endure.

They also transmit non-economic values: heritage, leadership, entrepreneurial discipline, craftsmanship, trust, reputation. These are soft assets that are hard to quantify but matter for social capital, for legitimacy, for attracting talent, for maintaining community relations.

Moreover, as South Korea confronts demographic decline, rising labour costs, shifting international political and trade dynamics, and environmental pressures, it is family businesses — both large and small — that will be at the forefront of responses: transforming business models, investing in green industry, reshaping labour practices, pivoting to new markets, fostering innovation. If these firms are resilient and well governed, they can be agents of adaptation; if not, their failures or stagnation could exacerbate regional inequalities, unemployment, social discontent.

Outlook: Risks and Opportunities

Looking forward, South Korean family businesses face a crossroads. On the one hand, the status quo is under pressure: citizen expectations are changing; regulatory and tax reforms are in the pipeline; competition is intensifying; global supply chains demand transparency, sustainability, digitalisation. On the other hand, there are opportunities: for export, for “green tech” and for high-value manufacturing, for services and creative industries; for leveraging domestic capital into global ventures; for tapping into younger generations’ inclinations toward purpose, ethics, sustainability.

Succession is perhaps the single most critical issue. How will founding families transfer ownership and leadership? Will they invest in education for their heirs, introduce more professional management, embrace external board oversight? Will tax and inheritance laws adapt to make this easier, fairer, less burdensome and more transparent?

Also, opportunities lie in strengthening smaller family firms—SMEs—through access to capital, advisory services, digital transformation, export promotion. Ensuring that policy support is not overly biased toward the large chaebol is vital for balanced regional development, to prevent excessive concentration of economic activity, to maintain innovation, and to prevent social and political backlash.

Finally, the cultural dimension matters. As younger South Koreans place increasing value on work-life balance, sustainability, corporate responsibility, fairness, and employee welfare, family businesses that adapt to these shifts without losing their core identity may find themselves with competitive advantage—not just in Korea, but in global markets that increasingly care about ethics, transparency and environmental impact.

Family businesses in South Korea are more than economic actors: they are national institutions, social anchors, engines of innovation and growth, carriers of culture and identity.

The chaebols embody power, scale and international reach; small and medium family firms provide resilience, diversity, employment and rootedness. The interactions of policy, culture, economics, leadership and values make the story complex: the strengths are many, the risks real.

For South Korea to sustain its economic dynamism and social stability, the health of its family businesses must be a priority. That means fostering environments for fair succession, equitable regulation, governance reforms, innovation, and sustainability; ensuring that both large and small family businesses are supported; and finding ways to balance tradition and modernity.

If that balance can be struck, family businesses will continue to matter not only in preserving what is, but in shaping what comes next for South Korea.