Technology and Entrepreneurship: A Cross-Industry Analysis 

of Access to Computers and Self-Employment

By Robert Fairlie, Ph. D

2004. [31] pages Santa Cruz, CA 

under contract no. SBAHQ-03-M-0524

This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information and

and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not

necessarily reflect the views of the Office of Advocacy. For more information, write to the Office of Advocacy at 409 Third Street S.W., 

Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Purpose

The personal computer is one of the most important 

technological innovations in the twentieth century. 

Numerous studies have focused on the relationship 

between IT investment and productivity, but little has 

been done to learn more about the role of personal 

computers in business creation. This report examines 

whether computer ownership in the home influences 

self-employment or entrepreneurship or the types of 

businesses created by entrepreneurs. 

 

 

Overall Findings

Trends over the past two decades provide evidence of 

a positive relationship between home computers and 

entrepreneurship. Male and female computer owners were more likely to become entrepreneurs than 

non-computer owners, and the study indicated that 

entrepreneurs with prior access to home computers are 

starting many different types of businesses.

 

 

Highlights

• For both men and women, entrepreneurship rates 

increased in the early 1980s, dropped in the 1990s, 

and increased to higher levels in recent years based 

on estimates from the Current Population Survey 

(CPS). Over the entire time period, entrepreneurship rates appear to have increased for both men 

and women while home computer ownership rates 

increased dramatically.

• The time-series evidence is somewhat inconsistent, but an analysis of individual-level data reveals 

a positive relationship between computer ownership 

and subsequent business creation. Male computer 

owners are 0.6 percentage points more likely than 

non-computer owners to become an entrepreneur, 

and female computer owners are 0.7 percentage 

points more likely to become an entrepreneur than 

non-computer owners.

• Entrepreneurs who had prior access to home 

computers create a large variety of types of businesses and not only those in the IT industry. For example 

male entrepreneurs with prior access to home computers were much more likely to create businesses 

in Finance, Insurance, and Real Estate (F.I.R.E), 

professional services, and business and repair services than entrepreneurs without prior access to 

home computers. This finding suggests that industry

differences exist between the two groups, and the

estimates indicate that entrepreneurs with prior 

access to home computers are starting many different 

types of businesses.

• Female entrepreneurs with and without prior 

access to home computers create businesses in similar 

industries with the exception that women with access 

to home computers create businesses in the F.I.R.E. 

industry at a higher percentage while a lower percentage of them create businesses in personal services. 

• For both men and women, regression estimates 

do not provide evidence of an independent effect of 

Internet access on entrepreneurship.

• The average rates of business formation from 

1980 to 1982 were 2.2 percent for men and 1.2 percent for women, and by 1999 to 2001, the rates for 

entrepreneurship had increased to 2.7 percent for 

June 2005 No. 259
men and 1.5 percent for women.

• Estimates from regressions that control for race, 

age, education, family income, home ownership and 

other individual characteristics are also used to test 

whether having access to a home computer increases 

the likelihood that an individual becomes an entrepreneur. The evidence suggests that having access to 

a home computer is associated with the probability 

of becoming an entrepreneur. 

• In 2001, 53.9 percent of self-employed business owners indicated they used a computer at work, 

which is lower than the 56.7 percent of employed 

adults that reported using a computer at work.

Scope and Methodology

The data used for analysis are the matched Computer 

and Internet Usage Supplements (CIUS) files, and 

the Outgoing Rotation Group (ORG) to the Current 

Population Survey (CPS). The CPS micro-data 

includes incorporated and unincorporated businesses 

along with those who are employers or non-employers. One of the limitations to this dataset is that it 

does not provide information on when individuals 

started their businesses. Both surveys are conducted 

regularly by the U.S. Bureau of the Census and the 

Bureau of Labor Statistics, and they represent the 

entire population and contain observations for over 

130,000 people.

The years examined from the CIUS files were: 

1997, 1998, 2000 and 2001. Entrepreneurship rates 

were created by matching the CPS and CISU files 

for these years to subsequent CPS Outgoing Rotation 

Group (ORG) files thereby creating longitudinal 

data. Longitudinal data was created by linking the 

CPS files over time. To measure entrepreneurship all 

individuals who did not own a business when first 

surveyed were identified in the follow-up survey. 

This report was peer-reviewed consistent with 

Advocacy’s data quality guidelines. More information on this process can be obtained by contacting the Director of Economic Research at 

advocacy@sba.gov or (202) 205-6533.

Ordering Information

The full text of this report and summaries of other 

studies performed under contract with the U.S. Small 

Business Administration’s Office of Advocacy are 

available on the Internet at www.sba.gov/advo/research. 

Copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

(800) 553-6847 or (703)605-6000

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2005-106449

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