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3. Results

FAMILY BUSINESS BACKGROUND

Past empirical studies of the intergenerational link in self-employment find that an

individual who had a self-employed parent is roughly two to three times more likely to be

self-employed than someone who did not have a self-employed parent (Lentz and Laband

1990, Fairlie 1999, Dunn and Holtz-Eakin 2000, and Hout and Rosen 2000). Several

explanations for the intergenerational transmission of business ownership have been

offered. First, the informal learning or apprenticeship-type training that occurs in

growing up in the context of a family business may provide an important opportunity for

the acquisition of human capital related to operating a successful business (Lentz and

Laband 1990). To be sure, family business experience can be classified into two types,

which we term "general business human capital" and "specific business human capital."

General business human capital includes "general administrative and personnel

management skills" and "general managerial expertise" (Lentz and Laband 1990, Dunn

and Holtz-Eakin 2000). Specific business human capital includes "enterprise-specific

skills, "information specific to the firm's production," and "job- or industry-specific

knowledge."

Another explanation is that intergenerational links in self-employment may be

caused by a correlation among family members in preferences for entrepreneurial

activities.8 The correlation may simply be due to similarities among family members in

8 Dunn and Holtz-Eakin (2000) consider an additional explanation. Successful business owners may be more likely to transfer financial wealth to their children potentially making it easier for them to become self-employed. Their empirical results, however, suggest that it plays only a modest role. Related to this issue we find that financial transfers from parents to children are not a common source of startup capital among small business owners. Only 6.4 percent of owners borrowed capital from their family.

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