X hits on this document

PDF document

ECONOMIC GROWTH CENTER - page 15 / 34

87 views

0 shares

0 downloads

0 comments

15 / 34

more likely to close and are less likely to have employees, but are more likely to have

large profits and have higher sales than firms located in non-urban areas.

Having a family business background is important for small business outcomes.

The main effect, however, appears to be through the informal learning or apprenticeship

type training that occurs in working at a family business and not from simply having a

self-employed family member. The coefficient estimates on the dummy variable

indicating whether the owner had a family member who owned a business are small and

statistically insignificant in all of the specifications except for the closure probability

equation. In contrast, working at this family member's business has a large positive and

statistically significant effect in all specifications. The probability of a business closure is

0.042 lower, the probability of large profits is 0.032 higher, the probability of

employment is 0.055 higher, and sales are roughly 40 percent higher if the business

owner had worked for one of his/her self-employed family members prior to starting the

business.16 The effects on the closure, profit and employment probabilities represent 15.3

to 26.6 percent of the sample mean for the dependent variables.

The findings from the closure equation are roughly consistent with the findings

from previous studies. Using a sample of white male-owned firms from the 1982 CBO,

Bates (1990b) finds that having a close relative who was self-employed has a negative,

but statistically insignificant (t-statistic of 1.41) effect on the probability of a business

failure. In the 1982 CBO "close relatives," however, are defined to include non-family

members with whom frequent contact was maintained by the owner. Fairlie (1999)

provides additional evidence from the Panel Study of Income Dynamics (PSID). Having

16 These estimates are not overly sensitive to the exclusion of firms started before 1980. In addition, estimates from the log sales specification are not sensitive to the exclusion of firms with

13

Document info
Document views87
Page views87
Page last viewedWed Dec 07 10:56:47 UTC 2016
Pages34
Paragraphs1279
Words8832

Comments