Last Modified: Mon, Jan 22 2018. 11 24 AM IST

The dynastic roots of entrepreneurship

A male entrepreneur is much more likely to lead start-ups and succeed in his father’s industry than in other industries

Dinner table human capital—where children obtain industry knowledge through their parents—is an important factor behind what type of firm is started, and how well it performs. Photo: iStockphoto
Dipti Jain

Male entrepreneurs are much more likely to start a business in the industry their father worked in or in a closely related one than in other industries, shows a new National Bureau of Economic Research (NBER) working paper by Hans K. Hvide of University of Bergen and Paul Oyer of Stanford University. This could be due to a greater awareness of the industry through acquired knowledge, parental pressure or expectations to enter the same industry, or similarities in taste. Individuals with relatively lower IQ levels are more likely to follow their father’s path compared with those with relatively high IQ levels, the study shows. The study also finds that an entrepreneur in the same industry where his father worked is much more likely to survive for four or more years, have more employees and invest substantially more capital.

The authors conclude that “dinner table human capital”—where children obtain industry knowledge through their parents—is an important factor behind what type of firm is started, and how well it
performs.

Also read: Dinner Table Human Capital and Entrepreneurship

The family not only influences entrepreneurial choices but also casts a strong influence on health-related choices, it seems. Another NBER working paper by Itzik Fadlon of the University of California and Torben Heien Nielsen of University of Copenhagen shows that a single health shock faced by a family member or co-worker can have a profound impact on health behaviours. Their research shows that spouses and children immediately increase their health investments and improve their health behaviours in response to shocks. This could be due to a realization of one’s own risk from the disease, or maybe because the shock brings the health risk to notice, thus triggering preventive care. The paper shows that a health shock in the family also resulted in increased rates of hospitalizations for suspected conditions that were later ruled out upon examination. Excessive preventive care, in such cases, could prove to be both harmful and expensive.

Also read: Family Health Behaviours

Optimism about the future can have a real and positive impact on short-term consumption, investment and growth, according to an International Monetary Fund (IMF) working paper by economists Gabriel Di Bella and Francesco Grigoli. The duo analyse data for 89 countries over the period 1990-2022, to find that high expectations or predictions of long-run growth tend to raise short-term consumption, investment and output.

Also read: Optimism, Pessimism, and Short-Term Fluctuations

Poor migrants and marginalized caste groups have poorer access to basic amenities such as toilets and tap water in urban India, a recent Economic and Political Weekly paper by Debolina Kundu of the National Institute of Urban Affairs and Arpita Banerjee with Child in Need Institute in Kolkata points out. Analysing two rounds of data from the National Sample Survey Office for 2002 and 2012, the duo show that in both years, non-migrants had better access to amenities than migrants, upper-castes had better access than marginalized castes, and non-poor households had better access compared with the poor.

Although marginalized social groups face poorer amenities compared with upper-caste groups, the difference is starker between the poor and the non-poor, the paper shows.

Also read: Migration, Caste and Marginalised Sections: Inequality in the Coverage of Basic Services in Urban India

To prevent tragedies such as the one witnessed in a Gorakhpur hospital last year, the Indian state needs to document data on the cause of deaths in a more robust manner, put more emphasis on preventive healthcare and ramp up overall spending on health, argues an Ideas for India blog post by public health expert Chandrakant Lahariya.

Also read: For no more Gorakhpur

Economics Digest runs weekly, and features interesting reads from the world of economics

Topics: Roots of enterpreneurshipmale entrepreneurstart-upssuccession planentrepreneurship

First Published: Fri, Jan 19 2018. 11 59 PM IST

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