Local labor force education, new business characteristics, and firm performance

It is often asserted that a highly educated workforce is vital to improving the competitive position of American businesses, especially by boosting entrepreneurship. To examine this contention, we use population Census data and a new panel data of startup firms, to examine how the education and skill level of the local labor force are related to the creation and success of new businesses. This paper studies relationship between education, entrepreneurship, and businesses outcomes, and considers simultaneously both the education of the entrepreneur and of the workforce where the entrepreneurs operate their businesses. Consistent with this simultaneous focus, our initial results indicate that more educated entrepreneurs tend to be located in metropolitan areas with more educated workforces. Moreover, highly educated areas have above average entrepreneurship rates. Finally, the level of education of entrepreneurs is strongly related to positive business outcomes, especially for college graduates compared to those with less than a four-year degree.