Tim Gurner, an Australian real estate mogul, recently claimed that millennials struggle financially because they spend their time eating avocado toast instead of working. Are young people really this indifferent to the business world? According to Edelman et al., it depends on the type of support they receive from their family.
Having access to the social capital of their family encourages university students to prepare the founding of their own businesses during their studies. The importance of networking is often emphasized on this blog so it is hardly surprising that young people with well-connected family members are more inclined to become entrepreneurs. They enjoy a critical advantage from the founding of their firm and family members often do not even have to be directly involved in the networking process. Being associated with them is enough to achieve relatively easy success.
This effect is magnified if the prospective entrepreneur has a cohesive family where the members share their experiences and provide emotional support to each other. However, having such a family occasionally turns into a disadvantage. The authors mention two typical cases where tight family ties become an obstacle. First, they occasionally foster an inward-looking mentality and, consequently, unfavorable information flow. Second, in certain cultures becoming an entrepreneur is frowned upon which leads to constant conflicts within the family.
Financial support also has negative impact on the motivation of university students. The authors explain this by the comfort family wealth provides: well-off young people have plenty of time before they have to produce a business plan as they do not have to find partners or other sources of funding. Furthermore, the negative impact is fairly long lasting. Other studies found that financial support from family members might help the growth of sales but it hurts the strategic orientation, growth orientation and entrepreneurial culture of companies.
Policymakers should pay more attention to family connections as they support youth entrepreneurship.
Edelman et al. discuss two implications of their findings. First, governments should pay more attention to family connections when they plan their policies to support youth entrepreneurship. In certain cases providing indirect support through them might prove very effective. Second, young people should take better care of their family connections as they might prove essential at the launch of their career as an entrepreneur.
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Contributed by Bence Juhasz