Abstract
Unlike large firms with management teams, small businesses are usually run by one key person, the owner-entrepreneur, who bears almost all of the risks and makes almost all of the decisions related to the business. Because the owner-entrepreneur also embodies most of the firm-specific knowledge capital, health of the owner-entrepreneur is an important factor in the production process. Following a cohort of respondents in townships around Durban, South Africa, over a three-year period, we examined the relationship between an individual's physical health and the decision to start a business. Our results suggest that respondents who were recent business entrants were in better health than respondents who did not start new businesses. Moreover, respondents without a business at the beginning of the study who later opened businesses during the three-year study interval were significantly more likely to have better baseline health than those respondents who never started a new business. Hence, good health among entrepreneurs seems to be an important prerequisite to small business entry.
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