ENTREPRENEURSHIP AND HAPPINESS: WHY IS THE ENTREPRENEUR HAPPIER THAN
THE AVERAGE EMPLOYEE?
A Literature Review
Sahil Ismayil Pulamon
Register No: 1712071
Entrepreneurs are happier and satisfied with their
work compared to employed persons. The aims of this research are to study why
the self-employed are happier than the dependent employees are. Decision-making
and hierarchy affect those employed. Procedural utility being another main
factor that deals with the process leading to the outcomes rather than the
result. Higher independence and autonomy are some factors affecting
entrepreneurs whereas for employees it includes factors like relationship,
quality of work life and leadership. Demographic determinants like gender, age
and so on are also discussed and how studies on these differ are shown. The
reasons and factors affecting the utility of employees and entrepreneurs are
This topic means a great deal to
a person like me who aspires to be an entrepreneur and who looks at its good
effects. When you work 5 days a week and if you get a chance to start something
of your own, something, which you are good at, why not try it? The required
investment might be high but if it proves to bring in huge profits, it
definitely is worth one. As we will be discussing about who is happier,
entrepreneurs may enjoy all the benefits and satisfaction even though the
results may not be that good. This is something called procedural utility which
will be discussed later.
The French word ‘entreprende’ is from where the
word ‘entrepreneur’ has originated which has the meaning ‘to undertake’. An
employee is a person who works under a person or a business firm. Entrepreneurs have been described as, ‘undertakers
who in order to gain profit, participate in market exchanges at their own risk
‘ (Roberts and Woods, 2005). These are
two entirely separate words and two different people experiencing their own separate
benefits and satisfaction. The factors affecting these are
Being an employed person, one has to look upon many
factors such as the working hours, work and life balance, the stress and above
all the money. However, when it comes to an entrepreneur, most of these factors
do not affect him much, thereby keeping him happier and satisfied than the
average employee. When the person is working, he always has to work almost 40
hours a week, but everything changes when he is self-employed. The working
hours might be higher in the beginning but once the person is established, the
working hours reduces largely. Therefore, the workload reduces once a person is
When the person is an employee, his work life
completes once he is out of his office. When comparing the average employee to
an entrepreneur, the latter always finds him mixing up his family and work life
as there is no fixed timing for him. He has difficulty finding time for his
family or friends once he starts working whereas an employee is no busier once
he leaves his office. Work stress being another factor also decides how much
happier the person is. An entrepreneur experiences the peak of work stress when
he has only started which is very high, compared to an employee.
For an employee, his income is always limited. He
gets his wages only for the number of hours he has done his work. There are
endless opportunities for an entrepreneur. He holds the decision when and what
to invest in and can bring in any amount of money at any time. The
decision-making is also dependent on him only as there is no hierarchy whereas
an employee has to obey the order of his superiors. Looking at all these
factors, it cannot be said that entrepreneurs are better than employees even
though they enjoy much more higher benefits than the employees.
In many European countries it has been discovered that
higher occupation fulfilment is observed with those self-employed (Blanchflower
and Oswald, 1998; Blanchflower, 2000; Benz and Frey, 2008), in the United
States (Kawaguchi, 2002; Hundley, 2001) and Canada (Finnie et al., 2003). There
are chances that self-employed people may work for a lower wage (Hamilton,
2000), and they know how to balance profits for their entrepreneurial
predictions (Moskovitz and Vissing-Jorgensen, 2002).
Self-employment in turn provides something called
‘procedural utility’, which means that people value not only value the outcomes
but also what processes and lead to these outcomes. Self-employed individuals
derive this factor as it provides them a greater sense of freedom and happiness
whereas the others are dependent on their work and have to obey the orders from
their superiors. This also shows the problem of hierarchy and the process of
decision making of hierarchy. Hierarchy means that there is an integrated
system and the decision making power resides within the power of a higher
authority. Around 10 % of employed people in the Western region are
self-employed (Frey et al. 2004; Benz 2007). These people enjoy a larger degree of
independence and self-determination at work compared to the employed. They are
also not subject to any form of hierarchy.
In this paper, we will be discussing how self-employed
people are different from those dependently employed and how happiness acts as
a factor. The material benefits obtained from an economic point of view would
be higher satisfaction in the form of higher pay or flexible working hours.
Although the utility might be higher, the self-employed earn lower wages than
the dependent ones. Data from Germany, Great Britain and
Switzerland (Benz and Frey, 2004) show that job satisfaction as a measure for
utility show that the self-employed enjoy considerably higher utility than the
dependent employees in all the three countries considered. Furthermore, it is
also observed that on controlling
factors such as wages and working hours, this utility can vary and it is not
dependent on any personality characteristics of an individual. When it comes to
hierarchy, it can be said that larger the hierarchy, lesser will be the
satisfaction from the job.
remaining section of this paper deals with the factors and causes of happiness
and satisfaction among the entrepreneurs and employees and how procedural
utility as a factor is one of the main reasons why entrepreneurs are happier.
The concluding remarks are discusses later followed by what are the future
Entrepreneurs, Employee and Happiness
Causes of higher
satisfaction among the entrepreneurs and employees
Many researches on a basis of
empirical analysis. It has been show that higher job satisfaction and happiness
is mainly decided by two reasons; the higher autonomy and the interesting work
(Benz and Frey, 2008). In
such cases, income also acts as a factor why self-employed are happier.
Happiness at the workplace is when the personnel are happy working and not
feeling like it is work, they are efficient and achieve targeted goals, at the
personnel level as well as at organisational levels (Maenapothi, 2007). Factors
affecting are job inspiration, relationship, organization’s shared value,
quality of work life and leadership.
Business satisfaction is linked to performance and the
other four factors such as motivation to start up, human capital, individual
factors and specific risk factors that may or may not have a direct impact on
happiness or satisfaction (A. Carree, Verheul, 2011). The self-employed who
possess higher level of human capital are expected to be more happy with their
financial performance derived from their business. Another factor such as
motivation for start-up also decides the satisfaction level as they mostly link
their performance of the outcomes of the business to their initial expections
Individual-specific control includes
other determinants such as gender, age, life partner and risk tolerance. Many
paper show women derive more happiness than men do (Clark 1997; Vanden Heuvel and Wooden 1997; Clark et
al. 1996). It has also been said that women often opt for exit when
dissatisfied (Gazioglu and Tansel, 2006). Older people reflect higher level of
job satisfaction rather than younger people may have a prevalence of
overconfidence. (Bradley and Roberts 2004; Clark et al. 1996; Gazioglu and
Tansel 2006). A positive effect of marriage had been observed which is for all
employed people (Blanchflower and Ostwald, 1998).
In the particular context of
self-employment and job satisfaction, a large number of studies support the
idea that self-employed persons have higher levels of job satisfaction compared
with paid and dependent members. However, a smaller literary rule is allocated
to identify specific illustrators. As noted above, most economists seem to be
satisfied with the interpretation that autonomy and procedural freedom are the
reasons for increased job satisfaction for self-employed workers. Thus, it was noted
that ‘individuals derive procedural benefit from self-employment because it
gives them a higher measure of self-determination and freedom (Benz and Frey,
2008). By contrast, people who work in subordinate jobs must obey orders from
their superiors. Apart from economic discourse, it was shown that low levels of
depression among self-employed workers are a useful indicator of relatively
high level of job satisfaction (Bradley and Roberts, 2004). A general personal
research of well-being, that indicates a strong correlation between
satisfaction and mental health is a consistent finding (Thomas and Gangster,
1995; Wheaton, 1990). High levels of optimism also have a positive impact on
the level of enterprise satisfaction that emphasizes the observation that
‘self-employed workers may be more optimistic and cheerful than others (Cooper and
Artz, 1995; Blanchflower and Oswald, 1998). A set of personality traits affect
processes and preferences of adventure, which in turn are closely related to
outcome variables such as job satisfaction and worker motivation (Berings et.
Next it will be seen how procedural utility other than
the above mentioned factors is why entrepreneurs are happier than employees as
they overlook the results instead valuing the process and conditions that lead
How procedural utility affects overall
Procedural utility decides the happiness and
satisfaction enjoyed by both these sides. Procedural utility generally means
looking at the conditions and process that leads to the outcomes instead of
valuing the outcome itself (Frey
et al. 2004; Benz 2007).
Self-employment is a source of procedural utility, i.e. the person also enjoys
the benefits what he gets while overlooking the result. It has also been shown
that procedural utility is an important phenomenon in many areas of the society
and economy (Frey et al. 2003)
To analyse happiness and job satisfaction, it was
concluded that factors such as autonomy, the actual work and flexibility
contribute towards procedural utility (Benz
and Frey 2008, Parasuraman and Simmers 2001). Other studies focus on the
difference between entrepreneurs and the employed. Study is done to focus on
entrepreneurs and what leads them to start a business (Block and Koellinger,
2008). It has been noted that most entrepreneurs that start their business
after a period of unemployment or because there was no alternative, are
comparatively less satisfied with their start-up. Emerging entrepreneurs show
much higher levels of start-up satisfaction if they have achieved a high level
of independence and creativity (Block and Koellinger, 2008). Thus, there seems
to be an important reason for individuals to start their own business is the
possibility of self-realization and self-determination. For these individuals, the
‘road’ seems to be the ‘goal’. These entrepreneurs extract the benefit from
their work, and above the benefit they earn from the cash rewards of their
project. Does this mean that entrepreneurs do not care about money? Results
clearly show that this is not the case. In fact, financial success is the only
most important variable in our declines associated with startup satisfaction.
Thus, cash gains remain a major source of reported levels of satisfaction even
though individuals seem to care about other aspects of money when starting a
To introduce procedural utility into the economy, such
an important determinant of human well-being that must be integrated more
widely into economic theory and empirical research. So far, this has largely
been ignored. However, in other social sciences, similar concepts of procedural
utility have a long history. This paper identifies three key elements of the
concept of the procedural tool and provides ideas on how to effectively
integrate this factor into the existing economic approach. Moreover, it reviews
some of the evidence from a wide range of social sciences and regions in order
to 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, largely
neglected, aspect links happiness to employment. Free action provides
‘procedural utility’. Individuals derive procedural utility from
self-employment because it gives them greater self-determination and freedom.
By contrast, persons working in subordinate jobs must obey orders from their
superiors. Indeed, self-employment reflects the difference between the two most
important decision-making processes in the economy: market and hierarchy. Self-employed
persons enjoy their status as independent market players and as non-hierarchical
actors for procedural reasons (Benz and Frey, 2006). It is clear that this
procedural tool is different from the usefulness of the results, which relate
to the case of employment in particular income.
Self-employed workers estimate the independence of
non-exposure to hierarchy, regardless of the underlying consequences that may
result. Procedural aspects are also shared by people working within the
hierarchy. Workers tend to resist wage cuts, not only because of distributional
results or concerns but also for procedural considerations. This has immediate
consequences on employment policy and wages.
In this paper, it was found that self-employed persons
were more satisfied with their work mainly because they enjoy more interesting
jobs and greater autonomy. This result points to the importance of ‘Being your
own Boss’ in the workplace. According to psychological theories, both autonomy
and opportunity should also follow interesting activities and these factors should
be 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 job
satisfaction than wage- dependent employees do. Most studies in economic
literature support the hypothesis that the highest function; satisfaction of
self-employed, compared with employees and this can be explained by reference
to the preference for autonomy and independence. Personal traits and personal
values which have an important influence on the well-being of self-employed,
does not occupy prominence in these studies and is generally considered less
likely to explain the link between free work and job satisfaction. The factors
affecting values ??and personality traits rarely appear clearly in economists’
investigations, but are nonetheless, described as improbable factors that are
explanatory. The role of personality traits and the impact of procedural
facilities are not dependent on each other as this may be an important
Executives should pay attention to creating happiness for
staff, especially those in small and medium-sized enterprises with their own
capital and technology constraints. When employees work efficiently,
organizations gain competitiveness. Creating happiness at work does not
necessarily require money, but executives and employees must be identified in
creating a friendly atmosphere, one that increases creative thinking.
for future research include finding out happiness of women employees and women
entrepreneurs and find out what drives this. It has also been studied in many
papers that women enjoy more happiness than men do. The combination of work
responsibilities and domestic responsibilities appears to be an important
factor in starting to work consistently for a large number of entrepreneurs,
There may be gender bias in the
expectations of the performance of the newly established project. A lot of
studies 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 the
business considering their male counterparts. Gender differences in depends
largely on tasks that they do (Lundeberg et al. 1994; Cooper
and Artz (1995) and larger for tasks that are considered only for men, such as
entrepreneurship (Beyer and Bowden 1997). It has also
been suggested that there may be an impact on participation, meaning that women
are often secondary winners in bread, and may choose to leave at the earliest
dissatisfaction (Gazioglu and Tansel, 2006).
Therefore, this topic would be a vast work
of literature to explore as there are many reasons why women are happier than
men. Exploring this on a work basis and why women entrepreneurs and employees
find happiness and their reasons and how it affects their life can be found.
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