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15). Estimates are reported in Table 4. Some caution is required in interpreting the

results, however, as the amount of required startup capital is potentially endogenous to

business success (Bates 1990b).23 Furthermore, the choice of industry may not be

entirely exogenous as it is related to the entry decision.

As expected, small business outcomes are positively associated with the amount

of required startup capital. The coefficients on the startup capital dummies are large,

positive (negative for the closure probability), and statistically significant in all

specifications. Industry is also linked to business success and size although the

coefficients vary across specifications. More importantly, the addition of startup capital

and industry does not overly influence the estimated effects of the family business

background and similar business experience variables. The coefficient estimates on

having a self-employed family member and inheriting the business do not change

substantially. The coefficient estimates on previous work experience in a family

member's business are generally smaller in absolute value (although statistically

significant) in the new specifications. The coefficients on prior work experience in a

similar business are very similar.

23 A similar problem occurs in examining whether asset levels affect the probability of self- employment using cross-sectional data. A correlation between assts and self-employment may simply represent the ability of the self-employed to accumulate more assets than wage/salary workers through operating and owning their own businesses. The approach taken in several recent studies is to examine transitions into self-employment measuring an individual's net worth prior to starting a business (see Evans and Jovanovic 1989, Evans and Leighton 1989, Meyer 1990, Holtz-Eakin, Joulfaian, and Rosen 1994a, Fairlie 1999, and Dunn and Holtz-Eakin 2000). Unfortunately, the CBO does not contain a measure of the owner's net worth prior to starting the

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