On the Origins of Entrepreneurship: Evidence from Sibling Correlations

Despite the consensus that entrepreneurship runs in the family, we lack evidence regarding the total importance of family and community background, as well as the relative importance of different background influences that affect entrepreneurship. We draw on human capital formation theories to argue that families and communities provide a salient context for the development of individual entrepreneurial skills and preferences, beyond the existing focus on parental entrepreneurship. We posit that early influences are more important than later influences and propose a hierarchy of family influences, whereby genes have the largest explanatory power, followed by parental entrepreneurship, neighborhoods, and parental resources, and finally by parental immigration, family structure, and sibling peers. Finally, we argue that the higher human and financial capital intensity of incorporated relative to unincorporated entrepreneurship predictably alters the hierarchy of family influences, as does gender. Sibling correlations estimated on Swedish register data confirm our hypotheses.