Frontiers of Entrepreneurship Research
1996 Edition


THE IMPACT OF THE OWNER'S EMPLOYMENT STATUS ON  NEW BUSINESS FORMATIONS AND THEIR SUBSTANCE

William J. Dennis, Jr., NFIB Education Foundation

Terri Dial, Wells Fargo Bank


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Introduction
Prior research tying unemployment and business formation
Evidence from the wells fargo/NFIB series on entries and Exits
Summary and Conclusion
References


ABSTRACT

Almost three of four people forming businesses are employed 30 days prior to opening; six percent are unemployed; and 16 percent enter from out-of-the-labor force. Virtually the same proportions hold if the business is a de novo start or a purchase. Most form very small or marginal activities. However, the substance of those formed by employed people and those entering from out-of-the-labor force are similar and greater, while those formed by unemployed people are different and smaller. These results suggest that investigations of the relationship between employment and new formations cannot ignore labor force participation issues. They also suggest that businesses formed by unemployed people are most likely to fade when other employment alternatives appear.

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1997 Babson College All Rights Reserved
Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

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