Older Entrepreneurs as The New Economic Frontier

Abstract

For the past 30 years, start-ups and companies by younger individuals were thought responsible for the majority of net job creation, innovation, and productivity in the United States. Entrepreneurial activity is assumed to be a risk-taking activity individuals embark on when young. Envisioning successful entrepreneurs brings images of a young Bill Gates (Microsoft) or Steve Jobs (Apple), or Mark Zuckerberg (Facebook). When considering entrepreneurial behavior, one assumption has been that age is a motivating factor. Age in this context becomes a proxy for “time.” A start-up business requires time, energy, and investment to grow before returning profits. Even the best business ideas fail as indicated by the nearly 50% failure rate for business ventures 4 years out, reaching 70% at 10 years. Younger individuals have more time (years) to recoup lost income and investment than do older individuals. A slightly different assumption justifying entrepreneurial activity as belonging to younger adults is that time has a higher value to older people because they have fewer years to live. Older individuals considering a new business will calculate the time allocation cost at current wages plus reduced leisure time compared with unknown future income from entrepreneurial activity. The expected conclusion is that older individuals will opt for the immediate payoff in current wages and additional leisure time over unknown future income. Entrepreneurial activity involves risk, economically and socially, for most individuals regardless of age; for older individuals, the shortage of time to recoup potential losses is assumed to discourage entrepreneurial behavior.