The wealthiest nascent entrepreneurs are more likely to start a business than are their less wealthy counterparts, concludes a study released today by the Office of Advocacy of the U.S. Small Business Administration. However, this effect differs when the race and ethnicity of the entrepreneur are considered as factors.
"Self-employment rates among minorities are generally less than would otherwise be predicted," said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. "Yet, there tends to be more ‘pre-business’ activity among nascent minority entrepreneurs. This study looks at some of the possible factors that might explain that gap."
The study finds that as a whole, the wealthiest (top 25 percent as determined by net assets) nascent entrepreneurs (individuals putting effort towards opening a business, but who have not yet done so) are four times more likely to open a business than those in the lower part of the wealth distribution. However, even controlling for net wealth, white nascent entrepreneurs are more likely to open a business than are Black or Hispanic nascent entrepreneurs.
The study, The Effect of Wealth and Race on Start-up Rates, written by Maritza Salazar of BCT Partners, LLC with funding from the Office of Advocacy, also found that:
The existence of a formal business plan did not influence start-up rates;
Nascent entrepreneurs who sought funds for start-up are more likely to open a business than those who did not;
Having entrepreneurial parents did not affect start-up rates;
Nascent entrepreneurs with experience in their intended industry are less likely to open a business than those with no experience in the field.
The Office of Advocacy, the "small business watchdog" of the federal government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats, and it funds research into small business issues.
For more information and a complete copy of the report, visit the Office of Advocacy website at www.sba.gov/advo.
Washington - July 25, 2007
Release Number: 07-27 ADVO
Contact: John McDowell, (202) 205-6941,
john.mcdowell@sba.gov
Information courtesy of the Small Business Administration.
