On the Origins of Entrepreneurship: Evidence from Sibling Correlations

The success of policies promoting entrepreneurship rests partly on the assumption that entrepreneurial outcomes are not fully determined at a young age by factors unrelated to current policy. We test this assumption and assess the importance of family and community background by estimating sibling correlations in entrepreneurship. We find that between 20 and 50 percent of the variance in entrepreneurial outcomes is explained by factors that siblings share: hence, entrepreneurship is far less than fully determined at a young age. The estimates increase little when allowing for differential treatment within families by gender and birth order. We then investigate mechanisms explaining sibling similarity: parental entrepreneurship plays a large role, as do shared genes; neighborhood effects matter, but are rather small, while sibling peer effects and parental income and education matter even less. An implication is that there is ample room for policy and education to develop more and better entrepreneurship.