If you are an entrepreneur or a potential entrepreneur, you may wonder how starting a business, instead of employment experience, affect your chances of finding a decent job after exiting entrepreneurship. It is a legit question as you need to understand the consequences of starting a new business on your future career.
There are various views as, entrepreneurship thinkers have little consensus on this point.
One view is in line with Baptista et al study in 2012 that many skills learnt in entrepreneurship have a value in employment, e.g., experience in organizing, supervising, and coordinating activities in firms, and the only way that a person may be able to signal the possession of these valuable skills is to demonstrate them through practice.
In addition, one may also think of functional skills such as sales, marketing, and financial management that can be improved while you are an entrepreneur as well as sector specific skills such as technology and industry specific social capital.
This option is particularly useful if you are unemployed: if this you have no job to prove your qualifications, then one would expect an unemployed person to seek to demonstrate them in the only available economic activity left which is entrepreneurship. This way, gross utility is enhanced by increasing the probability of future employment.
On the other hand, prior entrepreneurship experience may signal to employers some undesirable traits such as being less manageable and adaptable. Employer’s argument, in this case, would be that if you have some entrepreneurship experience, you are inclined to appreciate some features such as the freedom and independence of entrepreneurship so you are less likely to take orders from your future boss.
In other words, you are not an “organization man”. Not so attractive for the employer, right?
Employers, then, are less likely to hire persons with prior entrepreneurship experience compared to their counterparts without such experience. This is in fact the finding of the cool experiment formed by Koellinger et al study.
In their experiment, they sent two hypothetical applications in response to the same vacancies in human resource management. These two applications were equally qualified except that one was an entrepreneur while the other was not. Interestingly, they find that entrepreneurs systematically receive fewer interview invitations by employers than non-entrepreneurs.
Overall, my opinion is that entrepreneurs have a difficult time transiting into employment. They have to change their life (and work) style and accept orders from their boss; things that they don’t really appreciate. In addition, the labor market will ask them some tough questions on why they decided to leave entrepreneurship and what the outcome of their business was.