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United States Small Business Administration 
Office of Advocacy 
RS 152_______________________________________________________________________________________________







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Purpose

Successful entrepreneurs have backgrounds and characteristics
that distinguish them from both unsuccessful entrepreneurs and
the larger group of non­entrepreneurs. This study is an extension
of earlier research performed for the Office of Advocacy that
was also based on the personal experiences of 12,000 young individuals
during the 1980s. This new study, however, adds the experiences
of entrepreneurship entry and exit of young entrepreneurs by gender,
race and educational background.

On the basis of the data provided, different strategies are needed
to develop entrepreneurship among men and women. Young entrepreneurs
have characteristics that distinguish them from young non­entrepreneurs.
Profiles of successful and unsuccessful entrepreneurs are quite
distinctive, as are gender differences, as determinants of entrepreneurial
supply and later performance.

Scope and Methodology

The data source for this study is the National Longitudinal Survey
of Youth (NLSY), the successor to the National Survey of Young
Men (NSYM). The NLSY is a weighted cross section of more than
12,000 young men and women between the ages of 14 and 23 in 1979.
Since 1979, the individuals have been re­interviewed annually,
with a cumulative sample retention rate of close to 90 percent.
The author combines the experiences of these individuals over
a decade (1979-1990) with a cross­sectional analysis of entry
into self­employment in 1990.

Because the NLSY presently covers only the early stages of the
worklife cycle - up to age 37 in 1991 - entrepreneurial activity
commencing at later ages cannot be identified, nor can the NLSY
measure continuing performance of established entrepreneurs beyond
that age. Accordingly, this limitation will tend to exclude later
entrepreneurial initiatives and may understate female entrepreneurship.
(Women typically become entrepreneurs later in life than do men,
although recent surges in female entrepreneurship have decreased
this difference.) This research identified 212 males and 163 females
as entrants into self­employment in 1990, representing 3.7
and 2.8 percent of the respective gender subpopulations.

Highlights

- Attempts at self­employment are common among young men
and women. More than 1 out of 4 young men and 1 out of 5 young
women became self­employed during the 1980s. A total of 375
self­employed entrants were identified in 1990 as individuals
who were exclusively wage earners in the two preceding years and
reported some self­employment in 1990. There were 212 male
entrants (representing 3.7 percent of the gender subpopulation)
and 163 female entrants (representing 2.8 percent of the female
subpopulation). Female entrepreneurial entrants were overwhelmingly
engaged in services industries (70 percent). Male entrants were
likely to be in the construction trades (28 percent), wholesale
and retail trade (15 percent), and manufacturing (14 percent).
- Based on the profile of the 1980s, the experience of the youthful
entrepreneurs is very limited, with a mean exposure of 2.2-2.7
years. However, 38 percent of the men and 30 percent of the women
with entrepreneurial experience report engaging in such activity
for at least 3 years. This period consitutes a substantial portion
of their brief labor­market history. However, few of these
young entrepreneurs attain above­median incomes: 8 percent
of the females and 21 percent of the males had self­employment
incomes above $15,000 - the median income of NLSY wage earners
in 1989.
- There are a variety of significant influences on entrepreneurial
supply by gender and race. Role models and self­assurance
are critical to the supply of female entrepreneurs. Young men
have a tendency to accumulate some market experience before attempting
to become self­employed. Whites are much more likely than
blacks or Hispanics to become entrepreneurs. Neither education
nor measured intelligence is a significant correlate of self­employment.
- Correlates of female self­employment are similar to those
of males, with a few significant exceptions. Although the sense
of control is significant for both, it is five times larger in
quantitative influence for women than for men, suggesting that
a higher threshold of self­assurance is needed before young
women take the entrepreneurial plunge. Having a mother with managerial
experience is a major influence on a young woman's decision to
become self­employed; in contrast, a mother's occupation
has no effect on young men, and a father's occupation has no effect
on either men or women.
- Marriage has starkly differing effects on entrepreneurship
by men and women. Although marriage reduces the probability of
self­employment for young men, it substantially increases
the probability of self­employment for <%­2>women.
This supports the traditional view of the family <%0>in
which the husband's primary employment enables the wife to pursue
riskier secondary employment. Divorce reverses such prospects,
given increased child­care responsibilities and reduced per
capita income faced by women. Although marriage is a negative
influence on entry into self­employment for men, it is positively
correlated with entrepreneurial success for both genders.
- Gender differences also exist in the education and experience
levels of those studied. Women with higher education levels and
more work experience are less inclined to attempt entrepreneurship,
suggesting that young women entering self­employment generally
have small stocks of human capital and thus diminished prospects
for success.
- High exit rates reduce the total number of people engaged
in self­employment at any one time. A total of 28.5 percent
of all men and 20.7 all percent of women had engaged in self­employment
during the 1980s. By contrast, the proportions of self­employed
in a single year at the end of the observation period (1989) were
only 10.6 percent and 7.7 percent, respectively. As the high exit
rates imply, success is limited among youthful entrepreneurs.
In addition, only 1 in 5 male and 1 in 12 female entrepreneurs
earned an income in excess of median wages in any year; success
is gauged by an annual self­employment income above $15,000
- the median income of NLSY wage earners in 1989. Successful male
entrepreneurs are more likely to be married and college­educated.
For women, age and work experience are the dominant predictors
of success.

Ordering Information

The complete report is available from:

National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4650
(703) 487-4639 (TDD)

Order Number: PB95­187373

Cost: A03; A01 Microf.
*Last Modified 6-11-01