Women's Choice to Pursue Self-Employment: The Role of Financial and Human Capital of Household Members

Previous studies have attempted to identify which individuals choose self-employment rather than wage employment. Traditionally, these investigations have focused on men when considering the different characteristics which potentially distinguish entrepreneurs from non-entrepreneurs. Such a focus on men was justified, since until recently they constituted the vast majority of the self-employed. More recently, however, there has been a dramatic increase in the number of female entrepreneurs. While there were slightly more than 1 million self-employed women in 1969, that figure grew to well over 3 million by 1991 (U.S. Dept. of Labor 1969 and 1991). This increase reflected a roughly 500 percent growth rate relative to that of their male counterparts over the same period. Consequently, in part, there has been an emerging interest in identifying characteristics which distinguish female entrepreneurs from each other, and those characteristics which distinguish them from their male counterparts. Research to date has largely centered on the potential discriminating relevance of different psychological and sociological factors. The most commonly considered factors included personality traits relevant to achievement, locus of control, and risk-taking propensity. Brush (1992) provides a complete review of related studies. While research on female entrepreneurship has extensively considered such individual factors related to female self-employment choice, the potential effect of family and household composition has remained largely ignored. To help fill this gap, the present study considers the presence and absence of different family members as they potentially influence a woman's choice between wage employment and self-employment. Literature Review The potential effect of family composition on female labor force status and employment choice has long been a topic of study in the area of labor economics and demography. Probably the most widely examined issue has been the effect of the presence of young children on female participation in the labor force. Of particular concern has been the extent to which the cost of child care diminishes the likelihood of females participating in the labor force (Blau and Robins 1989; Presser and Baldwin 1980). Generally, the greater the cost of child care relative to the mother's wage potential, the less likely it is that she will seek employment. One way mothers may begin to overcome child care cost considerations is by pursuing self-employment. As self-employment typically permits a more flexible work schedule, it more readily enables mothers to care for their own children, thus reducing if not eliminating the cost of child care. Several researchers have noted that for mothers, entrepreneurship affords greater flexibility necessary to managing domestic and employment responsibilities (for example, see Birley 1989; Brash 1992 and 1990; Scott 1986; Darian 1975). Recognizing this possibility, a few isolated studies have examined the effect of the presence of young children on women choosing self-employment. based on a national sample of married women, MacPherson (1988) found initial evidence for this relationship. MacPherson's work was expanded when Connelly (1992) considered a sample of married and single women, and revealed similar results. Further corroborating evidence was most recently found by Robinson and Sexton (1994) when attempting to isolate the effect of education on employment choice. In addition to the presence of young children, the effect of a husband's role in the household has also been the focus of a few studies relevant to the impact of household composition on a woman's employment decisions. However, these studies are arguably limited in that they have either ignored certain husband-related effects or have neglected to partial them out adequately. Due to the different financial and human capital resources which husbands may possess, they may affect the woman's choice between wage employment and self-employment in a number of ways. …