represent an efficient form of transmitting reputation capital or an established clientele
from one generation to the next.
In contrast to the high likelihood of having a self-employed family member and
working for that family member, very few small businesses are inherited. Estimates from
the CBO indicate that only 1.6 percent of all small businesses are inherited. This finding
suggests that the role of business inheritances in determining intergenerational links in
self-employment is limited at best. Lentz and Laband (1990), however, find a much
higher rate of business inheritances in their sample of independent businessmen from the
NFIB. They find that 14.2 percent of businesses are inherited. The discrepancy may be
due to the much larger scale of businesses included in the NFIB. These firms had
average sales of approximately $2 million in 1979, compared to $212,791 for the CBO
Related to business inheritances, the CBO includes information on whether the
owner acquired the business through a "transfer of ownership/gift." This form of receipt
of ownership may capture parents giving firms to their children. Unfortunately, however,
it may also contain many other forms of business transfers and is not limited to family
members. We find, however, that only 6.6 percent of owners received their business
through a transfer of ownership or gift suggesting that direct parent-to-child transfers of
businesses cannot represent a large percentage of all small businesses.12
Although there is uncertainty over the correspondence between family members
and parents in the CBO questions, the estimates reported in Table 1 provide, at least,
some suggestive evidence on the causes of intergenerational links in self-employment.
12 If we remove owners who did not have a self-employed family member prior to starting the business, only 4.0 percent of owners received a transfer of ownership or gift.