Families, Human Capital, and Small Business: Evidence from the Characteristics of Business Owners Survey

Abstract

An important finding in the rapidly growing literature on self-employment is that the probability of self-employment is substantially higher among the children of business owners than among the children of non-business owners. Using data from the confidential and restricted-access Characteristics of Business Owners (CBO) Survey, we provide some suggestive evidence on the causes of intergenerational links in business ownership and the related issue of how having a family business background affects small business outcomes. Estimates from the CBO indicate that more than half of all business owners had a self-employed family member prior to starting their business.Conditional on having a self-employed family member, less than 50 percent of small business owners worked in that family member's business suggesting that it is unlikely that intergenerational links in self-employment are largely due to the acquisition of general and specific business human capital and that instead similarities across family members in entrepreneurial preferences may explain part of the relationship. In contrast,estimates from regression models conditioning on business ownership indicate that having a self-employed family member plays only a minor role in determining small business outcomes, whereas the business human capital acquired from prior work experience in a family member's business appears to be very important for business success. Estimates from the CBO also indicate that only 1.6 percent of all small businesses are inherited suggesting that the role of business inheritances in determining intergenerational links in self-employment is limited at best.

Building up the Entrepreneurial Intent Construct among Technical Students in Vietnam

“…Through working in a family business, people can acquire certain business ideas and skills to start their own or continue their families' businesses (Basu & Goswami, 1999). In particular, research specifically related to entrepreneurial behavior has shown that entrepreneurs often have a family history where their mother or father was self-employed (Fairlie& Robb, 2007). Even if, in some cases, many entrepreneurs have indicated that they were often placed in positions of responsibility within their family's business at a very young age (Dyer & Handler, 1994).Entrepreneurial parents tend to use the family business as a mean to teach their children the skills, values, and confidence required to own businesses.…”

Intergenerational Transmission of Self-Employed Status in the Informal Sector: A Constrained Choice or Better Income Prospects? Evidence from Seven West African Countries

“…To my knowledge, only two studies aim at understanding the impact of familial background on small business outcomes (Lentz andLaband 1990, Fairlie andRobb 2007b). Both relate to the USA.…”

“…Fairlie and Robb (2007b) introduce it but very indirectly, as a component of the inheritance of a family enterprise. They do not formally test it.…”

“…However, very few studies document the reasons for this high intergenerational correlation of the self-employed status. The rare studies deal with data from developed countries and show that having a self-employed father provide an advantage in terms of earning exepcted (Dunn and Holt-Eakin 2000, Lentz and Laband 1990, Fairlie and Robb 2007a2007b, Colombier and Masclet 20062008, Laferrère and McEntee 1996. In the context of developing countries, the high correlation across generations of the self-employed status raises the following question: Do the children of self-employed become themselves self-employed because they have an advantage relatively to the children of wage earner?…”

Searching for the entrepreneurial personality: New evidence and avenues for further research

“…For instance, there is evidence for the positive influence of parental role models (e.g. Fairlie and Robb, 2007). Networks (e.g., Klyver, et al, 2007) and peer groups (e.g.…”