December 14, 2005

Weatherhead professor co-authors new study linking age distribution of a country’s population and its entrepreneurial activity

Early 30's found to be prime age for starting a new business

Policymakers trying to stimulate entrepreneurial activity usually focus how factors such as taxes and regulations affect new businesses. While these things are important, a new study suggests that the age distribution of a country’s population also has a significant influence on its level of entrepreneurialism.

In "Demographic Structure and Entrepreneurial Activity" Moren Lévesque and Maria Minniti argue that there is an age level—usually in the early to mid-30’s—at which a person is most likely to start their own business. Countries where the average age is significantly older or younger are likely to experience less entrepreneurialism than are those places with more people around the peak entrepreneurial age. Lévesque is an assistant professor of operations and management studies at Case Western Reserve University's Weatherhead School of Management and Minniti is a professor of entrepreneurship at Babson College.

The relationship between age and entrepreneurial activity stems from the fact that a young person is less likely to have accumulated the capital necessary to start a business. Conversely, older people are less willing to take the risks and forego the salary and perks that come with spending a long time employed in the same place. Consequently, in both cases large portions of the population have relatively little ability or incentive to start new businesses.

The relationship between age distribution and entrepreneurial activity has important policy implications in economics as well as other arenas. For example, countries with high levels of immigration may consider policies favoring individuals who are around the peak entrepreneurial age. Others might choose to make it more difficult for people around the peak age to collect unemployment benefits, so they will have a greater incentive to start their own business.

Either way, say the authors, any policies aimed at stimulating entrepreneurial activity are likely to be less effective if the population’s age distribution is heavily skewed towards the old or the young.

The Case Western Reserve University Weatherhead School of Management is an international center of management scholarship, committed to preparing and enhancing organizational leadership. The Weatherhead School is dedicated making discoveries of enduring consequence, developing innovative educational programs, fostering strategic partnerships with students and organizations, and providing services to multiple communities.

For more information: Jeff Bendix 216-368-6070.

Posted by: Heidi Cool, December 14, 2005 02:29 PM | News Topics: Research, Weatherhead School of Management

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