The Economic Psychology of Entrepreneurship and Family Business

Abstract

The paper studies how the attitudes of entrepreneurs, in general, and family business owners, in particular, differ from others in the economy. Family business owners are entrepreneurs who operate a business with their spouse or adult children. We use data from the Survey of Consumer Finance to measure and isolate the enjoyment of private benefits, attitudes towards risk, and optimism for these groups. Entrepreneurs are more optimistic, and enjoy the nonpecuniary benefits of work more than wage earners. They are somewhat more risk loving, but perhaps less so than commonly believed. Family business owners share optimism and non-pecuniary benefits with other entrepreneurs; their tolerance for risk is not different than wage earners. These attitudes translate into actions: optimism and non-pecuniary benefits increase hours spent at work, and in some cases increase measured labor productivity. Family business owners are primarily responsible for the observed labor productivity associated with entrepreneurship.