Entrepreneurial Origins: A Longitudinal Inquiry

Editor: 

 

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 critica