Entrepreneurs have long enjoyed a hometown advantage, leveraging financing opportunities, networks, and expertise in their own communities. But that edge is disappearing.
Like a salaried worker relocating for a better job, more would-be founders are leaving to seek their fortunes elsewhere, says research by Harvard Business School Professor William Kerr.
After combining US census data spanning nearly half a century, Kerr and colleagues found that by 2018, self-employed White men born in the US were only 2 percentage points more likely than wage workers to remain in their birthplace state. This represents an important decline from the 8 percentage-point difference recorded in 1970. The hometown advantage fades even further for all Americans in the sample and drops below zero in the most recent census used in the analysis.
Entrepreneurship has long been viewed as a path to upward mobility and economic development, with local and state governments offering incubators and incentives to nurture startups. Kerr’s findings reflect the global forces and industrial shifts that have made small-business ownership perhaps less appealing than a job at a company.
Kerr, the D’Arbeloff Professor of Business Administration at Harvard Business School, coauthored “The Declining Local Bias of Entrepreneurship in the United States” with Innessa Colaiacovo, an assistant professor at the University of Oregon; Margaret Dalton of the Minnesota Department of Human Services; and Sari Pekkala Kerr, senior research scientist at Wellesley College. The article was published in May in AEA Papers and Proceedings.
Why has the “local bias of entrepreneurship” declined?
One possibility: Self-employment in industries that require substantial capital has diminished.
In 1970, most self-employment occurred in high-capital sectors—agriculture, retail trade, and utilities, for example. That share shrank to one-quarter in the 2014-2018 period. The decline was mostly among entrepreneurs who once enjoyed a local advantage.
In contrast, self-employment in low-capital industries, such as personal services, construction, and real estate, increased for locals and movers.
Since self-employment has grown in low-capital sectors and declined in high-capital sectors, lending might be less tied to local connections, making those relationships less advantageous, the authors write.
The Declining Local Bias of Entrepreneurship in the United States
Colaiacovo, Innessa, Margaret Dalton, Sari Pekkala Kerr, and William R. Kerr. “The Declining Local Bias of Entrepreneurship in the United States.” AEA Papers and Proceedings 116 (May 2026): 241–245.
