When it comes to entrepreneurship, inheriting knowledge at the dinner table may play a big role.
In their research paper, “Dinner Table Human Capital and Entrepreneurship,” Hans K. Hvide, professor of economics at the University of Bergen in Norway and Paul Oyer, professor of economics at Stanford’s graduate school of business studied how fathers discuss their work with their sons.
Although the study only looked at male entrepreneurs — approximately 3,800 young and middle-aged Norwegian men (22-45 years old) — it found several key insights that help all small business owners and entrepreneurs.
Inherited industry knowledge can help.
The concept is simple: if parents have in-depth conversations about their work while eating a family meal, they often pass their business knowledge along to their children. Their kids become more likely to understand industry-specific nuances, which may give them a boost if they become an entrepreneur.
Despite the old adage that it is “Not what you know, but whom you know,” the truth may be that what you know is because of whom you know.
Researchers found that if an entrepreneur started a firm in the same industry as his father’s, the person tends to outperform entrepreneurs in the same industry whose fathers did not work in that industry.
Although the researchers concede some of the success could be due to greater awareness of a parent’s specific industry, general parental pressures or expectations to enter that type of business, as well as similar business interests, they also found something else.
The researchers point to having parents having “dinner table conversations,” which can potentially give children a boost if they go into business in the same or a closely related field. Having that inherent proficiency can also make someone more likely to innovate and become an entrepreneur within that industry.
The funeral business, for example, is an industry that has historically been dominated by family businesses where the next generation of undertakers usually learn the trade from their parents. Typically that means when a new funeral home is opened, an entrepreneur who learned the business as part of growing up will have an advantage over someone who did not acquire the relevant institutional knowledge from family members, the researchers says.
More upfront capital and employees, better long-term results.
The researchers also found these businessmen, who listened to their fathers talk shop, were also more likely to substantially invest a larger amount of initial capital, more likely to have a larger number of employees, and more likely to survive the first four years.
That made these entrepreneurs “positive outliers” the study found because of their large number of employees or high assets.
Use on-the-job conversations.
Surprisingly, many successful entrepreneurs worked in the same industry as their parents, but they used on-the-job observations and conversations, not financial help.
Eighty-four percent of entrepreneurs who started a firm were in the same industry or a closely related one to their fathers’ employment. They reported that they acquired industry knowledge from their parents. The most common method: having conversations at home and observing parents at work to learn the right type of “human capital,” the economic value of a person’s skill sets.
Surprisingly, what wasn’t as common was obtaining help from parents through cheap labor or access to important networks.
Institutional knowledge may counter the Amazon effect.
At a time when more customers are shopping online and retailers and box stores need to counter the Amazon effect, having generational institutional knowledge can make a big difference. It doesn’t matter if you work within professional services, hospitality or medical practice industries.
Track customer behavior and then combine that information with historical knowledge. Offering a more personalized, tailored service can also help, according to a Forbes story “What The Amazon Effect Means for Retailers.”
That’s because price matching online retailers, while offering superior customer service can make a big difference in creating a long-term relationship.
Sue Smith, store manager of Baker Book House in Grand Rapids, Michigan told the CBA, the Association for Christian Retail she will price match Amazon all day long with the philosophy: “Don’t send away empty-handed a customer who is standing right there. ‘I always say to my team that it’s not about the transaction in front of you. It’s about the next one, and the next one, creating an experience where you are inviting them to come back again.'”
Sometimes, going out on your own in a new industry is preferred.
Even if you have insider knowledge, the dinner table capital study also found something else, high-IQ entrepreneurs were more innovative and more likely to strike out on their own in search of greater financial success.
Think of Google and Facebook as well as other technology-based startups that have typically been successful because the founders had an innovative idea for a new product concept, the researchers say.
“The founders of these companies could not have learned the trade from their parents – search engines and social networks did not exist,” the researchers say. “Their natural intelligence and education allowed them to create companies based on innovative ideas.”
Gaining industry knowledge from others.
Unfortunately, not everyone has a relative with the business expertise you need. If you don’t have a parent who has industry knowledge, networking with those who do might be a good way to make up some lost time.
Harvard Business Review offers some great insights in its “When You Agree to a Networking Meeting But Don’t Know What You’re Going to Talk About” article.
First, be clear on your reasons you’re asking for (or accepting) a business meeting. Specifically state if you’re looking to gain information and learn more about the field; or if you would like to discuss long-term business goals in the hopes of potentially collaborating; or if you would like to have a more social discussion to get to know the person.
Next, give a variety of options to set up the length of time and duration to have a conversation This can range from a 30 or 60 minute phone call, grabbing a coffee or a meal, or attending a larger group event like a cocktail reception.
Then, prepare ahead of time to make sure you’re asking the right questions.
If you’re giving advice, ask “How can I be most helpful?” If you’ve asked for the meeting, ask specific questions about the person’s area of expertise ranging from the hiring process to the most exciting projects the person has worked on.
Finally, don’t treat the meeting as a one-off. Follow-up after the initial conversation to establish a connection to help solidify your relationship.
It doesn’t make up for years of dinner table conversation, but it’s a good way to start catching up.