Small Business
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RESEARCH SUMMARY
United States Small Business Administration
Office of Advocacy
RS 152
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Entrepreneurial Origins: A Longitudinal
Inquiry
by Bradley R. Schiller and Philip Crewson
1994. 24 p. Capitol Research, Inc., 4323 Hawthorne St.,
N.W., Washington, DC 20016, under contract no. SBA8032OA93.
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Purpose
Successful entrepreneurs have backgrounds and characteristics
that distinguish them from both unsuccessful entrepreneurs and
the larger group of nonentrepreneurs. This study is an extension
of earlier research performed for the Office of Advocacy that
was also based on the personal experiences of 12,000 young individuals
during the 1980s. This new study, however, adds the experiences
of entrepreneurship entry and exit of young entrepreneurs by gender,
race and educational background.
On the basis of the data provided, different strategies are needed
to develop entrepreneurship among men and women. Young entrepreneurs
have characteristics that distinguish them from young nonentrepreneurs.
Profiles of successful and unsuccessful entrepreneurs are quite
distinctive, as are gender differences, as determinants of entrepreneurial
supply and later performance.
Scope and Methodology
The data source for this study is the National Longitudinal Survey
of Youth (NLSY), the successor to the National Survey of Young
Men (NSYM). The NLSY is a weighted cross section of more than
12,000 young men and women between the ages of 14 and 23 in 1979.
Since 1979, the individuals have been reinterviewed annually,
with a cumulative sample retention rate of close to 90 percent.
The author combines the experiences of these individuals over
a decade (1979-1990) with a crosssectional analysis of entry
into selfemployment in 1990.
Because the NLSY presently covers only the early stages of the
worklife cycle - up to age 37 in 1991 - entrepreneurial activity
commencing at later ages cannot be identified, nor can the NLSY
measure continuing performance of established entrepreneurs beyond
that age. Accordingly, this limitation will tend to exclude later
entrepreneurial initiatives and may understate female entrepreneurship.
(Women typically become entrepreneurs later in life than do men,
although recent surges in female entrepreneurship have decreased
this difference.) This research identified 212 males and 163 females
as entrants into selfemployment in 1990, representing 3.7
and 2.8 percent of the respective gender subpopulations.
Highlights
- Attempts at selfemployment are common among young men
and women. More than 1 out of 4 young men and 1 out of 5 young
women became selfemployed during the 1980s. A total of 375
selfemployed entrants were identified in 1990 as individuals
who were exclusively wage earners in the two preceding years and
reported some selfemployment in 1990. There were 212 male
entrants (representing 3.7 percent of the gender subpopulation)
and 163 female entrants (representing 2.8 percent of the female
subpopulation). Female entrepreneurial entrants were overwhelmingly
engaged in services industries (70 percent). Male entrants were
likely to be in the construction trades (28 percent), wholesale
and retail trade (15 percent), and manufacturing (14 percent).
- Based on the profile of the 1980s, the experience of the youthful
entrepreneurs is very limited, with a mean exposure of 2.2-2.7
years. However, 38 percent of the men and 30 percent of the women
with entrepreneurial experience report engaging in such activity
for at least 3 years. This period consitutes a substantial portion
of their brief labormarket history. However, few of these
young entrepreneurs attain abovemedian incomes: 8 percent
of the females and 21 percent of the males had selfemployment
incomes above $15,000 - the median income of NLSY wage earners
in 1989.
- There are a variety of significant influences on entrepreneurial
supply by gender and race. Role models and selfassurance
are critical to the supply of female entrepreneurs. Young men
have a tendency to accumulate some market experience before attempting
to become selfemployed. Whites are much more likely than
blacks or Hispanics to become entrepreneurs. Neither education
nor measured intelligence is a significant correlate of selfemployment.
- Correlates of female selfemployment are similar to those
of males, with a few significant exceptions. Although the sense
of control is significant for both, it is five times larger in
quantitative influence for women than for men, suggesting that
a higher threshold of selfassurance is needed before young
women take the entrepreneurial plunge. Having a mother with managerial
experience is a major influence on a young woman's decision to
become selfemployed; in contrast, a mother's occupation
has no effect on young men, and a father's occupation has no effect
on either men or women.
- Marriage has starkly differing effects on entrepreneurship
by men and women. Although marriage reduces the probability of
selfemployment for young men, it substantially increases
the probability of selfemployment for <%2>women.
This supports the traditional view of the family <%0>in
which the husband's primary employment enables the wife to pursue
riskier secondary employment. Divorce reverses such prospects,
given increased childcare responsibilities and reduced per
capita income faced by women. Although marriage is a negative
influence on entry into selfemployment for men, it is positively
correlated with entrepreneurial success for both genders.
- Gender differences also exist in the education and experience
levels of those studied. Women with higher education levels and
more work experience are less inclined to attempt entrepreneurship,
suggesting that young women entering selfemployment generally
have small stocks of human capital and thus diminished prospects
for success.
- High exit rates reduce the total number of people engaged
in selfemployment at any one time. A total of 28.5 percent
of all men and 20.7 all percent of women had engaged in selfemployment
during the 1980s. By contrast, the proportions of selfemployed
in a single year at the end of the observation period (1989) were
only 10.6 percent and 7.7 percent, respectively. As the high exit
rates imply, success is limited among youthful entrepreneurs.
In addition, only 1 in 5 male and 1 in 12 female entrepreneurs
earned an income in excess of median wages in any year; success
is gauged by an annual selfemployment income above $15,000
- the median income of NLSY wage earners in 1989. Successful male
entrepreneurs are more likely to be married and collegeeducated.
For women, age and work experience are the dominant predictors
of success.
Ordering Information
The complete report is available from:
National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4650
(703) 487-4639 (TDD)
Order Number: PB95187373
Cost: A03; A01 Microf.
*Last Modified 6-11-01