l042-2587-93-181$1.50 Copyright 1993 by Baylor University The Effects of Education on Business Ownership: A Longitudinal Study of Women Arthur L. Dolinsky Richard K. Caputo Kishore Pasumarty Hesan Quazi This study uses a national iongitudinal sample of women to examine variations in the likelihood of entering, staying, and reentering self-employment by ievei of educational at- tainment. The study found that each iikelihood increased with increasing leveis of educa- tion. This finding supports the notion that less-educated women may face financial or hu- man capital constraints which limit their business pursuits. The study aiso identified to what extent differences in each iikelihood contributed to the overall difference in the iikelihood of being self-empioyed between more- and less-educated women. Of the three, differences In the likelihood of entry accounted for most of the overaii difference in the iikelihood of being self-empioyed between the more and less educated. X he growth of the number of female self-employed business owners over the last two decades has been well recognized. Over this time period, the number of self- employed women increased from roughly I million to 3 million (U.S. Dept. of Labor, 1969 and 1991). In light of this entrepreneurial growth, a number of studies have begun to investigate female self-employed business ownership (Brush, 1992; Birley, Moss, & Saunders, 1987; Neider, 1987; Longstreth, Stafford, & Mauldin, 1987; Mescon & Stevens, 1982; Cuba, Decenzo, & Anish, 1983; Waddell, 1983; Pellegrino & Reece, 1982; Sexton & Kent, 1981). While these studies have increased our knowledge, they suffer from limitations that handicap \he\x generalizability (i.e., limitations due to the use of convenience samples, small sample sizes, samples focused on particular geographic locales and the like). Perhaps, more importantly, these studies are limited by their cross-sectional data, where individuals are observed only at a single point in time. This limitation not only handi- caps, but makes it impossible to trace, the self-employment pattems and gross flow dynamics of women in and out of self-employment over time. The value of such a tracing has been well noted, yet remains to be empirically examined. For example, a report by the Small Business Administration (SBA) states, ". . . the gross flow of establishment birth and deaths over any period, produces a much more active and dynamic economy than normally described. Attention to the relatively large size of the gross flows may provide some insight on appropriate public policy in support of small business" (U.S. Small Business Administration, 1985, p. 24). Fall 1993 43