Wednesday, May 18, 2011

SBA Office of Advocacy Releases Study, 'Factors Affecting Entrepreneurship Among Veterans'

Are veterans more likely to become entrepreneurs than otherwise demographically similar individuals?

Using one measure of entrepreneurship -- self-employment -- both past research sponsored by SBA’s Office of Advocacy, plus current data from the Bureau of Labor Statistics, indicate that veterans have had, and do have, a higher rate of self-employment than do non-veterans.

Overall Findings
What could account for this finding?

SBA-contracted SAG Corporation researchers investigated whether military service has a statistically significant impact on veteran entrepreneurship, using three complementary data sources. Their analysis tests the hypothesis that military service imparts some unique training or acculturation that makes veterans more likely to become self-employed than otherwise similar individuals.

Report Highlights
* In the private-sector workforce, veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed.

* Although veterans are more likely to be self-employed than the general population, analysis of veterans-only data shows that self-employment is negatively correlated with the length of military service. Veterans with four or fewer years of service were most likely to be self-employed.

* Among all veterans, those who chose the military as a career path [five or more years of service] were about 33 percent less likely to be self-employed than those who left after one enlistment. This result suggests that higher rates of self-employment among veterans may be due to individual characteristics, rather than training, education or other qualities imparted by military service.

* An exception to the negative correlation of self-employment with length of service among veterans occurs with the subgroup of veterans who are career military retirees with service of 20 years or more. In this group, additional years of service are correlated with a higher probability of self-employment. The authors suggest that this relationship may result from a wealth effect; i.e., military retirees with longer careers receive larger military pensions, and may be financially better able to pursue self-employment opportunities.

* Career military retirees have higher rates of self-employment than the general population, but they are also predominantly older, male, married, and have at least a high-school education. In addition, self-employed military retirees have a higher average income from pensions than those not self-employed.

* Older military retirees are more likely to be self-employed; an additional year in age increases the probability of self-employment by about 7.5 percent.

* Among military retirees, officers are 55.6 percent more likely to be self-employed than enlisted personnel. The study suggests that this is attributable to differences in education, as most officers hold a bachelor’s degree or higher, and most enlisted veterans are high-school graduates. The measured differential between officers and the enlisted is similar to the differential between high-school graduates and college graduates in the broader general population.

* The cohort of veterans who served in World War II, the Korean War, and the Vietnam War eras were more likely to be self-employed, relative to veterans serving since 2001, or Gulf War veterans [10.9 percent vs. 3.6 percent].

* Age and home ownership show consistent positive and significant effects on self-employment, and are highly correlated to stability and maturity -- as well as providing a potential supply of risk capital.

* In the general population, age, marital status, gender, occupation, home ownership, military service, and some regional and race variables have a significant effect on self-employment, while education and children do not.

* Among veterans, career military service, age, male gender, and children are positive indicators of self-employment, while employment in service occupations and manufacturing occupations are negative indicators.

A full copy of the report is available at

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