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

  • Robert W. Fairlie


    (University of California, Santa Cruz, Division of Social Sciences, Department of Economics)

  • Alicia Robb


    (Foundation for Sustainable Development (FSD))

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. 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.

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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm435.

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Date of creation: 28 Jul 2004
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Handle: RePEc:ysm:somwrk:ysm435
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  1. Michael Hout & Harvey Rosen, 2000. "Self-Employment, Family Background, and Race," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 670-692.
  2. Fairlie, Robert, 2014. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Santa Cruz Department of Economics, Working Paper Series qt49c4n0fg, Department of Economics, UC Santa Cruz.
  3. Holtz-Eakin, D. & Joulfaian, D. & Rosen, H.S., 1992. "Entrepreneurial Decisions and Liquidity Constraints," Papers 129, Princeton, Department of Economics - Financial Research Center.
  4. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
  5. Timothy Bates & Robert McGuckin, 1990. "The Characteristics of Business Owners Data Base," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 736-751.
  6. David Brownstone & Robert Valletta, 2001. "The Bootstrap and Multiple Imputations: Harnessing Increased Computing Power for Improved Statistical Tests," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 129-141, Fall.
  7. Robert W. Fairlie, 1999. "Drug Dealing and Legitimate Self-Employment," JCPR Working Papers 88, Northwestern University/University of Chicago Joint Center for Poverty Research.
  8. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  9. Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November.
  10. Bruderl, Josef & Preisendorfer, Peter, 1998. " Network Support and the Success of Newly Founded Businesses," Small Business Economics, Springer, vol. 10(3), pages 213-25, May.
  11. Thomas Dunn & Douglas Holtz-Eakin, 1996. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc.
  12. Boden, Richard Jr., 1996. "Gender and self-employment selection: An empirical assessment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 25(6), pages 671-682.
  13. Greg Hundley, 2000. "Male/female earnings differences in self-employment: The effects of marriage, children, and the household division of labor," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(1), pages 95-114, October.
  14. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
  15. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
  16. Frazer, Garth, 2006. "Learning the master's trade: Apprenticeship and human capital in Ghana," Journal of Development Economics, Elsevier, vol. 81(2), pages 259-298, December.
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  19. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
  20. Bernard F. Lentz & David N. Laband, 1990. "Entrepreneurial Success and Occupational Inheritance among Proprietors," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 563-79, August.
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  22. Bruce D. Meyer, 1990. "Why Are There So Few Black Entrepreneurs?," NBER Working Papers 3537, National Bureau of Economic Research, Inc.
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