ENTREPRENEURSHIP AND HAPPINESS: WHY IS THE ENTREPRENEUR HAPPIER THANTHE AVERAGE EMPLOYEE? A Literature Review Submitted By Sahil Ismayil PulamonRegister No: 1712071 Abstract Entrepreneurs are happier and satisfied with theirwork compared to employed persons. The aims of this research are to study whythe self-employed are happier than the dependent employees are. Decision-makingand hierarchy affect those employed. Procedural utility being another mainfactor that deals with the process leading to the outcomes rather than theresult.
Higher independence and autonomy are some factors affectingentrepreneurs whereas for employees it includes factors like relationship,quality of work life and leadership. Demographic determinants like gender, ageand so on are also discussed and how studies on these differ are shown. Thereasons and factors affecting the utility of employees and entrepreneurs arediscussed below. IntroductionThis topic means a great deal toa person like me who aspires to be an entrepreneur and who looks at its goodeffects.
When you work 5 days a week and if you get a chance to start somethingof your own, something, which you are good at, why not try it? The requiredinvestment might be high but if it proves to bring in huge profits, itdefinitely is worth one. As we will be discussing about who is happier,entrepreneurs may enjoy all the benefits and satisfaction even though theresults may not be that good. This is something called procedural utility whichwill be discussed later.The French word ‘entreprende’ is from where theword ‘entrepreneur’ has originated which has the meaning ‘to undertake’. Anemployee is a person who works under a person or a business firm. Entrepreneurs have been described as, ‘undertakerswho in order to gain profit, participate in market exchanges at their own risk’ (Roberts and Woods, 2005).
These aretwo entirely separate words and two different people experiencing their own separatebenefits and satisfaction. The factors affecting these arediscussed below.Being an employed person, one has to look upon manyfactors such as the working hours, work and life balance, the stress and aboveall the money. However, when it comes to an entrepreneur, most of these factorsdo not affect him much, thereby keeping him happier and satisfied than theaverage employee. When the person is working, he always has to work almost 40hours a week, but everything changes when he is self-employed.
The workinghours might be higher in the beginning but once the person is established, theworking hours reduces largely. Therefore, the workload reduces once a person isself-employed.When the person is an employee, his work lifecompletes once he is out of his office. When comparing the average employee toan entrepreneur, the latter always finds him mixing up his family and work lifeas there is no fixed timing for him. He has difficulty finding time for hisfamily or friends once he starts working whereas an employee is no busier oncehe leaves his office. Work stress being another factor also decides how muchhappier the person is. An entrepreneur experiences the peak of work stress whenhe has only started which is very high, compared to an employee.For an employee, his income is always limited.
Hegets his wages only for the number of hours he has done his work. There areendless opportunities for an entrepreneur. He holds the decision when and whatto invest in and can bring in any amount of money at any time.
Thedecision-making is also dependent on him only as there is no hierarchy whereasan employee has to obey the order of his superiors. Looking at all thesefactors, it cannot be said that entrepreneurs are better than employees eventhough they enjoy much more higher benefits than the employees. In many European countries it has been discovered thathigher occupation fulfilment is observed with those self-employed (Blanchflowerand Oswald, 1998; Blanchflower, 2000; Benz and Frey, 2008), in the UnitedStates (Kawaguchi, 2002; Hundley, 2001) and Canada (Finnie et al.
, 2003). Thereare chances that self-employed people may work for a lower wage (Hamilton,2000), and they know how to balance profits for their entrepreneurialpredictions (Moskovitz and Vissing-Jorgensen, 2002). Self-employment in turn provides something called’procedural utility’, which means that people value not only value the outcomesbut also what processes and lead to these outcomes. Self-employed individualsderive this factor as it provides them a greater sense of freedom and happinesswhereas the others are dependent on their work and have to obey the orders fromtheir superiors.
This also shows the problem of hierarchy and the process ofdecision making of hierarchy. Hierarchy means that there is an integratedsystem and the decision making power resides within the power of a higherauthority. Around 10 % of employed people in the Western region areself-employed (Frey et al. 2004; Benz 2007).
These people enjoy a larger degree ofindependence and self-determination at work compared to the employed. They arealso not subject to any form of hierarchy. In this paper, we will be discussing how self-employedpeople are different from those dependently employed and how happiness acts asa factor.
The material benefits obtained from an economic point of view wouldbe higher satisfaction in the form of higher pay or flexible working hours.Although the utility might be higher, the self-employed earn lower wages thanthe dependent ones. Data from Germany, Great Britain andSwitzerland (Benz and Frey, 2004) show that job satisfaction as a measure forutility show that the self-employed enjoy considerably higher utility than thedependent employees in all the three countries considered. Furthermore, it isalso observed that on controllingfactors such as wages and working hours, this utility can vary and it is notdependent on any personality characteristics of an individual. When it comes tohierarchy, it can be said that larger the hierarchy, lesser will be thesatisfaction from the job.
Theremaining section of this paper deals with the factors and causes of happinessand satisfaction among the entrepreneurs and employees and how proceduralutility as a factor is one of the main reasons why entrepreneurs are happier.The concluding remarks are discusses later followed by what are the futureresearch options. Entrepreneurs, Employee and Happiness Causes of highersatisfaction among the entrepreneurs and employeesMany researches on a basis ofempirical analysis. It has been show that higher job satisfaction and happinessis mainly decided by two reasons; the higher autonomy and the interesting work(Benz and Frey, 2008). Insuch cases, income also acts as a factor why self-employed are happier.Happiness at the workplace is when the personnel are happy working and notfeeling like it is work, they are efficient and achieve targeted goals, at thepersonnel level as well as at organisational levels (Maenapothi, 2007). Factorsaffecting are job inspiration, relationship, organization’s shared value,quality of work life and leadership.
Business satisfaction is linked to performance and theother four factors such as motivation to start up, human capital, individualfactors and specific risk factors that may or may not have a direct impact onhappiness or satisfaction (A. Carree, Verheul, 2011). The self-employed whopossess higher level of human capital are expected to be more happy with theirfinancial performance derived from their business. Another factor such asmotivation for start-up also decides the satisfaction level as they mostly linktheir performance of the outcomes of the business to their initial expectionsand goals.
Individual-specific control includesother determinants such as gender, age, life partner and risk tolerance. Manypaper show women derive more happiness than men do (Clark 1997; Vanden Heuvel and Wooden 1997; Clark etal. 1996). It has also been said that women often opt for exit whendissatisfied (Gazioglu and Tansel, 2006). Older people reflect higher level ofjob satisfaction rather than younger people may have a prevalence ofoverconfidence.
(Bradley and Roberts 2004; Clark et al. 1996; Gazioglu andTansel 2006). A positive effect of marriage had been observed which is for allemployed people (Blanchflower and Ostwald, 1998).In the particular context ofself-employment and job satisfaction, a large number of studies support theidea that self-employed persons have higher levels of job satisfaction comparedwith paid and dependent members. However, a smaller literary rule is allocatedto identify specific illustrators.
As noted above, most economists seem to besatisfied with the interpretation that autonomy and procedural freedom are thereasons for increased job satisfaction for self-employed workers. Thus, it was notedthat ‘individuals derive procedural benefit from self-employment because itgives them a higher measure of self-determination and freedom (Benz and Frey,2008). By contrast, people who work in subordinate jobs must obey orders fromtheir superiors. Apart from economic discourse, it was shown that low levels ofdepression among self-employed workers are a useful indicator of relativelyhigh level of job satisfaction (Bradley and Roberts, 2004). A general personalresearch of well-being, that indicates a strong correlation betweensatisfaction and mental health is a consistent finding (Thomas and Gangster,1995; Wheaton, 1990). High levels of optimism also have a positive impact onthe level of enterprise satisfaction that emphasizes the observation that’self-employed workers may be more optimistic and cheerful than others (Cooper andArtz, 1995; Blanchflower and Oswald, 1998). A set of personality traits affectprocesses and preferences of adventure, which in turn are closely related tooutcome variables such as job satisfaction and worker motivation (Berings et.al, 2004).
Next it will be seen how procedural utility other thanthe above mentioned factors is why entrepreneurs are happier than employees asthey overlook the results instead valuing the process and conditions that leadto it. How procedural utility affects overallhappinessProcedural utility decides the happiness andsatisfaction enjoyed by both these sides. Procedural utility generally meanslooking at the conditions and process that leads to the outcomes instead ofvaluing the outcome itself (Freyet al. 2004; Benz 2007).
Self-employment is a source of procedural utility, i.e. the person also enjoysthe benefits what he gets while overlooking the result. It has also been shownthat procedural utility is an important phenomenon in many areas of the societyand economy (Frey et al. 2003)To analyse happiness and job satisfaction, it wasconcluded that factors such as autonomy, the actual work and flexibilitycontribute towards procedural utility (Benzand Frey 2008, Parasuraman and Simmers 2001). Other studies focus on thedifference between entrepreneurs and the employed. Study is done to focus onentrepreneurs and what leads them to start a business (Block and Koellinger,2008).
It has been noted that most entrepreneurs that start their businessafter a period of unemployment or because there was no alternative, arecomparatively less satisfied with their start-up. Emerging entrepreneurs showmuch higher levels of start-up satisfaction if they have achieved a high levelof independence and creativity (Block and Koellinger, 2008). Thus, there seemsto be an important reason for individuals to start their own business is thepossibility of self-realization and self-determination. For these individuals, the’road’ seems to be the ‘goal’.
These entrepreneurs extract the benefit fromtheir work, and above the benefit they earn from the cash rewards of theirproject. Does this mean that entrepreneurs do not care about money? Resultsclearly show that this is not the case. In fact, financial success is the onlymost important variable in our declines associated with startup satisfaction.Thus, cash gains remain a major source of reported levels of satisfaction eventhough individuals seem to care about other aspects of money when starting abusiness.To introduce procedural utility into the economy, suchan important determinant of human well-being that must be integrated morewidely into economic theory and empirical research. So far, this has largelybeen ignored. However, in other social sciences, similar concepts of proceduralutility have a long history.
This paper identifies three key elements of theconcept of the procedural tool and provides ideas on how to effectivelyintegrate this factor into the existing economic approach. Moreover, it reviewssome of the evidence from a wide range of social sciences and regions in orderto demonstrate that procedural benefit is a concept relevant to the economy.Finally, procedural utility is said to be of great political significance.One research paper argues that another, largelyneglected, aspect links happiness to employment. Free action provides’procedural utility’. Individuals derive procedural utility fromself-employment because it gives them greater self-determination and freedom.By contrast, persons working in subordinate jobs must obey orders from theirsuperiors. Indeed, self-employment reflects the difference between the two mostimportant decision-making processes in the economy: market and hierarchy.
Self-employedpersons enjoy their status as independent market players and as non-hierarchicalactors for procedural reasons (Benz and Frey, 2006). It is clear that thisprocedural tool is different from the usefulness of the results, which relateto the case of employment in particular income.Self-employed workers estimate the independence ofnon-exposure to hierarchy, regardless of the underlying consequences that mayresult. Procedural aspects are also shared by people working within thehierarchy. Workers tend to resist wage cuts, not only because of distributionalresults or concerns but also for procedural considerations.
This has immediateconsequences on employment policy and wages.ConclusionIn this paper, it was found that self-employed personswere more satisfied with their work mainly because they enjoy more interestingjobs and greater autonomy. This result points to the importance of ‘Being yourown Boss’ in the workplace. According to psychological theories, both autonomyand opportunity should also follow interesting activities and these factors shouldbe considered as important elements of a broader need for a person’s self-determination.Using job satisfaction as an indicator of employment,it was found that the entrepreneurs or self-employed enjoy higher levels of jobsatisfaction than wage- dependent employees do.
Most studies in economicliterature support the hypothesis that the highest function; satisfaction ofself-employed, compared with employees and this can be explained by referenceto the preference for autonomy and independence. Personal traits and personalvalues which have an important influence on the well-being of self-employed,does not occupy prominence in these studies and is generally considered lesslikely to explain the link between free work and job satisfaction. The factorsaffecting values ??and personality traits rarely appear clearly in economists’investigations, but are nonetheless, described as improbable factors that areexplanatory. The role of personality traits and the impact of proceduralfacilities are not dependent on each other as this may be an importantoversight.
Executives should pay attention to creating happiness forstaff, especially those in small and medium-sized enterprises with their owncapital and technology constraints. When employees work efficiently,organizations gain competitiveness. Creating happiness at work does notnecessarily require money, but executives and employees must be identified increating a friendly atmosphere, one that increases creative thinking. FutureResearch Recommendationsfor future research include finding out happiness of women employees and womenentrepreneurs and find out what drives this. It has also been studied in manypapers that women enjoy more happiness than men do.
The combination of workresponsibilities and domestic responsibilities appears to be an importantfactor in starting to work consistently for a large number of entrepreneurs,especially women. There may be gender bias in theexpectations of the performance of the newly established project. A lot ofstudies show that men are less satisfied with their jobs than women do (Clark 1997; VandenHeuvel and Wooden 1997; Clark et al. 1996). It is also believed that women entrepreneurs are more stable with thebusiness considering their male counterparts. Gender differences in dependslargely on tasks that they do (Lundeberg et al. 1994; Cooperand Artz (1995) and larger for tasks that are considered only for men, such asentrepreneurship (Beyer and Bowden 1997).
It has alsobeen suggested that there may be an impact on participation, meaning that womenare often secondary winners in bread, and may choose to leave at the earliestdissatisfaction (Gazioglu and Tansel, 2006).Therefore, this topic would be a vast workof literature to explore as there are many reasons why women are happier thanmen. Exploring this on a work basis and why women entrepreneurs and employeesfind happiness and their reasons and how it affects their life can be found. References Frey, B.
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