What determines the mode of entry into self-employment?

This paper compares family business owners to business owners who started their business from scratch and business owners who took over an existing business, using data of 40 countries. Much of the present literature compares individuals in self-employment and individuals in paid employment on basis of individual characteristics. Within the group of self-employment comparisons have been made between owners of family businesses and non-family businesses, and between those who took over a business versus those who started from scratch. An international comparison of the three modes of entry has not yet been provided in earlier research. The present research compares the self-employed on basis of their educational level and type, type of income, preferences for a family business or a public- or private business, fear of failure and risk taking behaviour. Results show that compared to family business owners, founders are higher educated, a big share prefers to own a family business, show more risky behaviour and have a lower fear of failure. Business owners who took over an existing business compared to family business owners are higher educated, do not differ in preferences for a family business, but do not show significantly more risky behaviour and do not differ significantly in fear of failure. Furthermore, family business owners are not more likely to report shares and savings as their main source of income. The minority of family business owners prefers actually the family business over a public- or private firm, implicating that factors keep them from making the choice to exit the family business for a non-family business. A comparison of these three types of business owners on the mentioned characteristics is not conducted before and adds to the present literature in that way.