The CBO also provides detailed information on other methods of acquiring
business human capital. Available questions include information on prior work
experience in a managerial capacity and prior work experience in a business whose goods
and services were similar to those provided by the owner's business. These variables may
have an important effect on small business outcomes.
The effects on small business outcomes of working for a self-employed family
member are generally stronger than the effects of previous work experience in a
managerial capacity. Management experience has a similar size effect in the profit and
employer probability equations, but has a much smaller effect on log sales and a positive
and statistically significant effect on business closures. Management experience prior to
starting or acquiring a business generally improves business outcomes, but has a less
consistent effect than experience working for a close relative.
The CBO also provides information on whether the owner worked in a business
whose goods and services were similar to those provided by his/her business. This more
general case of acquiring specific business human capital appears to be very important.
In fact, the coefficient estimates on a dummy variable for whether the owner had work
experience in a similar business are comparable in size to the coefficient estimates on
prior work experience in a family member's business in the closure probability and log
sales equations. The coefficient estimate is smaller in the employer probability equation,
but larger in the profits equation. In all specifications, the coefficient estimates are large
and statistically significant.
The inclusion of prior managerial experience and similar business experience
suggests that the large, positive coefficient estimates on working for a self-employed