X hits on this document

PDF document

ECONOMIC GROWTH CENTER - page 12 / 34

92 views

0 shares

0 downloads

0 comments

12 / 34

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

sample.

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.

10

Document info
Document views92
Page views92
Page last viewedFri Dec 09 06:06:04 UTC 2016
Pages34
Paragraphs1279
Words8832

Comments