Are children of divorce better entrepreneurs?

"The seeds of later economic success in adulthood are often sown very early in childhood in the family environment," says Dr Mateja Andric from the Swiss Research Institute of Small Business and Entrepreneurship at HSG (Swiss Research Institute of Small Business and Entrepreneurship). "It is known, for example, that children of entrepreneurs are more likely to pursue an entrepreneurial career themselves later on and that parental parenting style has an impact on their children's later success as company founders." However, little is known about the influence of parental divorce on the entrepreneurial careers of offspring. Intuitive conclusions have tended to be drawn on this question, emphasising the negative consequences of divorce or claiming the opposite, such as in a Forbes article in which Elon Musk's business success was attributed to his parents' divorce.

Divorces make people more independent

Andric, together with Prof Dr Isabella Hatak and Prof Dr Thomas Zellweger from the Swiss Research Institute of Small Business and Entrepreneurship (HSG) and Prof Dr Josh Hsueh from the Jönköping International Business School, analysed data from a national longitudinal study in the USA to answer this question. They were able to trace and analyse the careers of 1735 self-employed people. The researchers found that parental divorce in childhood has long-term effects on entrepreneurial success in adulthood. While the negative consequences predominated for some children, others were able to emerge stronger from this experience. "Our results show that, on average, children who experience parental divorce develop an increased conviction that they can successfully overcome difficult situations and challenges on their own," says Prof Dr Isabella Hatak. "Parental divorce appears to promote children's independence and maturity, which means that their increased self-efficacy will benefit them later in their entrepreneurial careers." So were the authors of the Forbes article on the reasons for Elon Musk's entrepreneurial success right? Not necessarily, because according to the study, in addition to the positive effects, there are also negative consequences of divorce, and surprisingly, especially for children from privileged family backgrounds.

The disadvantages outweigh the benefits for privileged children

Children from homes with a higher level of education lose important resources through divorce that could have supported them in their economic development. For example, the financial prosperity of the family unit can afterwards usually can no longer be maintained at the same level extent by the custodial parent after divorce. In such cases, less financial resources are then available for educational activities such as tutoring and hobbies. Parental support and supervision of the child's learning can also be made more difficult if the custodial parent has to increase their workload as a result of the divorce. "A parental divorce can lead to these children losing their privileges, putting them in the same restricted situation that less privileged children often experience even without a parental divorce," says Mateja Andric. When asked whether a divorce has a positive or negative effect on the child's entrepreneurial career, the researchers summarised their findings by concluding that it depends on how educated the parents are. While disadvantages predominate for people with highly educated parents, the advantages tend to dominate for people with less educated parents.

What to do in the event of divorce?

"Our study generally suggests that success in entrepreneurship is a question of privileged endowments, as children with highly educated parents tend to have better chances of succeeding in entrepreneurship later on," says Prof Dr Thomas Zellweger. Government programmes that aim to promote entrepreneurship should therefore support people from disadvantaged family backgrounds, regardless of whether the disadvantages were caused by parental divorce or already existed beforehand. And parents, how should they behave in the event of a divorce so as not to jeopardise their child's entrepreneurial success? Mateja Andric: "They should proactively invest in the child's education, while at the same time taking care not to overprotect them after the divorce. This will allow the child to use the challenging post-divorce period as an opportunity to develop greater independence and self-reliance, which will increase their chances of success in entrepreneurship later on."