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Family: Burden or Support to Entrepreneurship in Times of Crisis?

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During economic downturns, governments often provide business grants to stimulate entrepreneurship. However, in societies where kinship ties play a significant role, policy design may be suboptimal if spillover effects are not accounted for. This paper examines the role of family ties in shaping entrepreneurship and the effectiveness of business support measures during economic crises. Using a randomized controlled trial in Kenya, I find that entrepreneurs with larger families coped better with the crisis. However, when external funding was available, strong family ties reduced the positive effects on entrepreneurship.The analysis identifies mutual assistance, crowding-out effects, and managerial interference as key mechanisms. These findings highlight the dual role of family networks, acting as both a safety net and a constraint, with implications for the design of business support policies in developing economies.

Suggested Citation

  • Yanina Domenella, 2025. "Family: Burden or Support to Entrepreneurship in Times of Crisis?," Working Papers wp2025_2529, CEMFI.
    • Handle: RePEc:cmf:wpaper:wp2025_2529
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    Keywords

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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