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Families, Human Capital, and Small Business: Evidence from the Characteristics of Business Owners Survey

Robert W. Fairlie rfairlie@ucsc.edu

Alicia Robb alicia@fsdinternational.org

Abstract

Using data from the confidential and restricted-access Characteristics of Business Owners

(CBO) Survey, we provide some suggestive evidence on the causes of intergenerational links in

business ownership and the related issue of how having a family business background affects small

business outcomes. Estimates from the CBO indicate that more than half of all business owners had a

self-employed family member prior to starting their business. Conditional on having a self-employed

family member, less than 50 percent of small business owners worked in that family member’s business.

In contrast, estimates from regression models conditioning on business ownership indicate that having

a self-employed family member plays only a minor role in determining small business outcomes,

whereas the business human capital acquired from prior work experience in a family member’s business

appears to be very important for business success. Estimates from the CBO also indicate that only 1.6

percent of all small businesses are inherited suggesting that the role of business inheritances in

determining intergenerational links in self-employment is limited at best.

Keywords: Business Outcomes, Self-Employment, Entrepreneurship, Families, Human Capital.

JEL Classification: M13, J24.

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