Slipping the surly bonds: The value of autonomy in self-employment

Abstract

This paper models the tradeo¤ between increased autonomy from self-employment and the generally higher income that traditional employment o¤ers. While the demand for autonomy is a purely psychological construct, the economic tradeo¤s involved in its achievement are eminently amenable to quanti…cation and analytical modeling characteristic of economic analysis. We use this setup to o¤er a multifactor utility formulation formalizing the notion of an explicit, autonomy-based preference for self-employment. We propose that such a formulation as a theoretically-defensible alternative to the classic (and also psychologically-based) overcon…dence hypothesis in explaining why self-employment is chosen despite evidence that newly self-employed individuals earn less than comparable individuals who continue their current employment. Our model, founded on utility maximization by a rational individual, demonstrates not only that newly self-employed individuals are willing to accept lower earnings outcomes in exchange for psychic bene…ts from self-employment, but also that the structure of their optimal launch-timing decision guarantees that they will quit at a time such that their income will (at least initially) be reduced. We conclude with implications for the design of empirical instruments to quantify the relative importance of autonomy and income.

A configurational analysis of the antecedents of entrepreneurial orientation

“…Emotional attachment to the business refers to the value associated to the non financial benefit of owing the firm (Zellweger & Astrachan, 2008) and encompasses the desire of maintaining the control of a family business as a form of loyalty to the family (Madison, Runyan, & Swinney, 2014). The literature has also found that need-for-achievement and need-for-independence, individually considered, are positively associated with EO, while emotional attachment may be found in more conservative strategic postures (Brandst€ atter, 2011;Carter, Gartner, Shaver, & Gatewood, 2003;Croson & Minniti, 2012).…”

Ageing and entrepreneurial preferences

“…Owner-managers tend to attach a high value to independence (β) (Croson and Minniti 2012) and exhibit comparatively higher levels of risk propensity (α) . Since risk propensity is also assumed to increase with age, these parameters suggest that, ceteris paribus, enterprising activity in this preference group should increase with age.…”

“…Self-employers are interested in maintaining a lifestyle and attach a comparatively high value to independence (β) (Croson and Minniti 2012). They are also 8 inclined to reduce exposure to risk.…”

Can working conditions explain the return-to-entrepreneurship puzzle?

“…2 It seems thus natural to assume that there is a trade-off between these beneficial working conditions and earnings in self-employment that accounts for the apparently low returns to entrepreneurship. Croson & Minniti (2012) develop a theoretical model based on this idea that implies that the self-employed will in fact have (initially) lower earnings in exchange for more beneficial working conditions. Åstebro & Thompson (2011) also argue that entrepreneurs may be willing to forego earnings to satisfy a taste for variety.…”