If I Were Rich? The Impact of Financial and Human Capital on Becoming a Nascent Entrepreneur

Data from the Panel Study of Entrepreneurial Dynamics (PSED) are used to study the role that financial resources and human capital play in an individual's decision to become an entrepreneur. Following areview of the literature on personal financial resources (such as householdincome and wealth) and human capital variables (including education and workexperience), several hypotheses are offered. Taken together, the hypotheses suggest that self-employed individuals with parents, friends, and relatives who are entrepreneurs, who have increasing household wealth, who have formal education, who have years of full-time workand managerial experience, and who have previous start-up experience are more likely than others to become nascent entrepreneurs. Increasing household income, however, is expected to make individuals reluctant to pursue entrepreneurial activities. Data from interviews with a secondary sample of nascent entrepreneurs who participated in the PSED are used to test the hypotheses. Analysis of thesurvey data reveals that household wealth and income have no effect on one's decision to become an entrepreneur. However, education, full-time work experience, current self-employment, and the presence of relatives who are entrepreneurs do play a role in the decision.The fact that human capital appears to affect one's decision to start a business promises to spur further research on the founding of organizations. (SAA)