You may think that entrepreneurs are happier than employees with their jobs because they probably make a lot of money and they have freedom and independence. While these all sound great, there are also some dark sides of entrepreneurship: job insecurity, market fluctuations and long working hours. What now? Do you still think the same?
This is an important question because job satisfaction may be associated positively with productivity, at the organization level, and with subjective well-being, at the individual level. Let’s dig deeper into it and see what scholars have to say.
A review of the existing research suggests a modest positive relationship between job satisfaction and self-employment. The argument is that the relationship may partly reflect distinct personality characteristics that predispose self-employed individuals to evaluate their jobs in a positive manner. This means that because entrepreneurs select the entrepreneurial path, they tend to affirm their previous decisions by reporting higher levels of job satisfaction.
Additionally, we also know that entrepreneurs are over-optimistic about the future of their business that can be part of the reason they are so positive about their experience.
Still, we need to look at the causality rather than the correlation to see if entrepreneurs get more satisfied because of their jobs or not. Moreover, we know that on average entrepreneurs earn less than employees so if they are happier what are the drivers?
A study by Lange in 2012 confirms the causality when he finds that there is indeed a positive causal relationship between starting a business and increased life satisfaction but it is not because of monetary reasons.
In the study, he finds that personality traits, autonomy and independence are the mechanisms by which self-employment leads to higher levels of job satisfaction.
However, these findings come with some caveats: one thing is that job satisfaction is likely to differ between those who are newly self-employed as compared to those who have employed themselves for several years. So those who are new experience much pressure to survive while they are more excited about their initiative.
Some other scholars show that start-up conditions and motivations are decisive for subsequent satisfaction with the venture. These scholars divide entrepreneurs to those who are pushed to start a business (necessity-based entrepreneurs) and those who start a business to realize a business opportunity with pull motivations (opportunity-based entrepreneurs).
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They argue that necessity entrepreneurs are somewhat more likely to want to switch back to paid employment later in their entrepreneurial careers. However, if the individual earns a satisfactory livelihood through self-employment, the negative effect of a necessity-based start-up on subsequent entrepreneurial satisfaction diminishes.
What are the implications? One thing is that job satisfaction of entrepreneurs is to some extent over-rated compared to employees as prior studies find moderate effects of starting a business. The second point is that their satisfaction is not mostly related to money they make. There are other aspects like autonomy, independence and their personality that come into play. Finally, not all entrepreneurs are happy with their jobs: it very much depends on their motivations and stage of their business.