It is often thought that those who undertake out of necessity do not report the same well-being as those who do it out of opportunity, but a new study denies this
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By: Dr. José Ernesto Amorós, National Director of Doctoral Programs at EGADE Business School at Tecnológico de Monterrey
One of the indicators of development of a society is its level of entrepreneurial activity (creation of new businesses). More than the number of entrepreneurs, the quality of the ventures that these individuals generate matters more than the number of entrepreneurs, which is closely related to both the motivation they have at the time of undertaking and their long-term well-being.
Thus, in the first place, it is worth asking what motivates entrepreneurs to undertake. In this sense, entrepreneurs are usually divided into two large groups: those who undertake out of necessity (to get out of a job they do not like or unemployment) or those who do it as an opportunity (to achieve more autonomy, financial success or personal development ).
The motivation of entrepreneurs can be relevant to understanding their aspirations, which can impact the performance of companies. Additionally, entrepreneurial activity may have a close relationship with the well-being of these individuals. In fact, various studies have shown that many of these entrepreneurs and the self-employed tend to report higher subjective well-being and more satisfying lives than salaried workers.
But do entrepreneurs whose motivation is opportunity report greater subjective well-being than those who undertake out of necessity? Most researchers believe so, associating ‘entrepreneurs by opportunity’ with positive traits such as rational risk taking, tolerance for ambiguity, self-efficacy and goal setting, while ‘entrepreneurs by necessity’ stand out possible resource or skill limitations, or your lack of vision for growth.
However, the study “ Entrepreneurship and subjective well-being: Does the motivation to start-up a firm matter? ”In which I have collaborated concludes that the levels of subjective well-being among entrepreneurs by opportunity and by necessity are similar. Published together with professors Oscar Cristi, from the University of San Sebastián (Chile), and Wim Naudé, from RWTH Aachen University and the IZA Institute for Labor Economics (Germany), our research uses data from the Global Entrepreneurship Monitor (GEM) from about 160 thousand entrepreneurs from 70 countries.
The study reflects that the motivations of entrepreneurs can change over time, and that both need and opportunity are drivers of entrepreneurship, not necessarily mutually exclusive. Therefore, the results undermine the supposed dichotomy between ‘entrepreneurs by necessity’ and ‘entrepreneurs by opportunity’, showing that they do not differ so much in terms of aspirations, risk taking or survival of their companies. Other studies have found differences in the profitability of their companies.
The main contribution of this research is that entrepreneurship, even being motivated by necessity, contributes to the subjective well-being of entrepreneurs. This well-being is not only material or financial, it can come from prioritizing psychological needs such as autonomy, achievement or family-work balance.
Finally, the results for Latin American countries suggest that higher subjective well-being may increase the probability of being an entrepreneur in general, but also of being an entrepreneur by opportunity, while individuals who show a high degree of subjective well-being are less likely to get involved. in entrepreneurial activities out of necessity.