Abstract Entrepreneurship and happiness has been a topic ofinterest in the research world for many years. Theself-employed are consistently found to be happier and satisfied with theirjobs. But do they really live a happy life? We find that happiness is largelylinked to job satisfaction. In this review, we will discuss what the motivatingfactor for self-employment is. Also, we shall discuss the determinants for jobsatisfaction and how it affects happiness.
We will discuss “procedural utility”and the “crowding-out” phenomenon in the life of entrepreneurs. IntroductionWork is an important factor of human life and it has stronge?ects on individuals’ satisfaction with life or happiness. High work satisfaction for the self-employed has often been interpretedto mean that self-employed are happier with their lives, although strictlyspeaking, the evidence on the self-employment-happiness relationship isconsiderably weaker and more mixed than with work satisfaction. Review of LiteratureThe self-employed are said to be earning less thanemployed people according to a study (Hamilton, 2000), yet they are found to besubstantially more satisfied and therefore happy with their employment. Thenwhat is the factor that gives people an edge over paid employment? If it is notthe monetary gains, then we must look in to the more intangible factors. Determinants of EntrepreneurialSatisfaction Some entrepreneurs are more satisfied with their venturesthan others. In this review we link entrepreneurial satisfaction to performanceand other factors like human capital (general and specific), start-upmotivation, procedural utility, etc. These factors may have both a direct andindirect effects on satisfaction.
Procedural Utility According to this journal (Benz and Frey, 2008a), we cansee that employment has been identified as the major factor influencing aperson’s happiness or sate of well-being. For example, an employed person willobviously be happier than an employed one. This paper also argues that self-employedpeople can achieve more happiness than their paid employee counterpart becauseit provides “procedural utility”.
Procedural utility means that people not onlyvalue the outcomes but also the conditions and processes leading to thoseoutcomes. Individuals derive procedural utility from being self-employedbecause it gives them more freedom and self-determination. This freedom to makechoices and in having a say in all the processes increases the satisfaction aperson receives from his/her job. Being your own Boss According to a study (Blanchflower, 2004), large numbersof individuals find becoming their own boss highly attractive. Considering thestudy of Benz and Frey (2004), their results suggested that self –employedpeople do not derive more utility from their work because of any materialoutcome. On the contrary, they earn less than paid employees. They haveempirically shown that greater autonomy and independence have led to increasedjob satisfaction. Their findings thus, suggest that greater independence atwork or the greatly held notion of “being your own boss” is the reason ofincrease in job satisfaction, thereby leading to happiness.
Opportunity or Necessity? It is said that the self-employed are a ratherheterogeneous group (Santarelli and Vivarelli, 2007) and that only certainforms of self-employment is conducive for subjective well-being. In the study(Binder and Coad, 2013a) they have explored the self-employment happiness scaleby distinguishing whether an individual pursues entrepreneurship to exploit newbusiness opportunities or just to escape from unemployment(out of necessity) . Thuswe can imply that the reason for choosing self-employment is a huge factor whenconsidering job happiness. It is widely known that if an individual does a jobjust to earn a living and not out of passion for the work, that individual willnot be happy with his/her life. The individuals who seek self-employment out of necessityand to avoid unemployment might not profit at all from becoming self-employed(Fuchs-Sch¨undeln, 2009). Only individuals who voluntarily go intoself-employment to pursue entrepreneurial opportunities can be conjectured toenjoy the entrepreneurial life-style and enjoy procedural utility from becomingself-employed. Therefore, it can be seen that self-employed people who chosetheir career out of sheer desire to be entrepreneurs were significantly more satisfied with theirlife overall than their employed counterparts rather than those who becameentrepreneurs out of necessity(to avoid unemployment).
Human Capital In a study(M.A.Caree and I.Verheul, 2011) it was provedthat entrepreneurs who have large number of specific/relevant human capitalthan general human capital at the time of start-up have more realisticexpectations and, accordingly, are more likely to be happy with financialperformance or non-monetary utility derived from the business (e.g.
,psychological well-being, leisure time, etc.). The opposite will be true forhigh levels of general human capital, which are expected to boost theexpectations of individual entrepreneurs and make it more difficult to achievesatisfaction. Start-up motivation According to a study by Salinas Jimenez (2010), thereason for motivation in start-ups have an important effect on lifesatisfaction.
And also that intrinsic motivation leads to better satisfactionthan extrinsic motivation. Intrinsic motivation refers to the behavior thatarises from within because it is naturally satisfying, whereas extrinsicmotivation refers to behavior driven by external rewards like money, famepraise, etc. Two important intrinsic motivations include being your own bossand the challenges of entrepreneurship. Individuals who are motivated due tothese reasons will be less disappointed by unexpected financial hardships orlong working hours. Performance The firm’s performance also has an indirect effect on theindividual’s satisfaction.
This related to the income generated on the venture.The firm’s success rate can further motivate the individual to therebyincreasing the satisfaction. Link between job satisfaction andhappiness In the above sections we have seen the effects ofself-employment on job satisfaction. But now let us study whether jobsatisfaction direct link to life satisfaction/happiness.
In recent studies, (P.Andersson,2005), even thoughentrepreneurs enjoy more job satisfaction, they seem to have more stress andseem more tired than regular employees. As has been argued in previous work onthe topic, one explanation for this puzzling finding could lie in acrowding-out phenomenon: self-employed who are much happier with their workthan the employed spend considerably more time with their job thus “crowding-out”other important domains of life (such as leisure time) and leading in sum to aneutral effect on overall life satisfaction. Self-employedindividuals obtain satisfaction from leading an independent lifestyle and “beingtheir own bosses”. Having a higher job satisfaction, however, does notnecessarily translate into self-employed individuals being overall moresatis?ed with their lives as a whole. Life satisfaction in itself is a muchmore global evaluation of individual’s actual state of being, being in?uencednot only by job satisfaction but a complex and interacting web of in?uences(Binder and Coad, 2010a,b). Since individuals might be able to compensate highachievement in some domains of life with low achievements otherwise, a high jobsatisfaction might be counterbalanced by lower satisfaction in the familydomain, or social life.This weak association betweenself-employment and life satisfaction might be a result of the above-mentioneddomain view of well-being.
Highly satisfied with their jobs, the self-employedignore other important life domains and turn out to be less satisfied in those,leading to an overall sketchy association of self-employment and globalwell-being. But considering the above discusseddeterminates of job satisfaction, we can see that the reasons for happinessoutweighs the negative effects especially for those who have chosenself-employment due to genuine interest. ConclusionBecoming an entrepreneur is a lifechanging event and it has a major impact on the overall well-being of anindividual. I can conclude that after considering the major determinants of jobsatisfaction and well-being, the self-employed appear to be happier andsatisfied with their work and life.Overall, we have found that beingforced into self-employment due to any reason can have decreasing effects onhappiness.
So, happiness depends on the natural interest someone has in thework he does.