Academic journal article Entrepreneurship: Theory and Practice

Early Retirees as the Next Generation of Entrepreneurs

Academic journal article Entrepreneurship: Theory and Practice

Early Retirees as the Next Generation of Entrepreneurs

Article excerpt

In this article, we combine perspectives from labor economics and entrepreneurship to examine early retirees' decision to become self-employed. Many individuals leave career employment before the traditional age of 65 and return to the labor market for a period of time before they fully retire. This phenomenon is referred to in the labor economics literature as bridge employment. Initial research of bridge employment has identified entrepreneurial activities to be common. The authors argue that first early retirees have to make the decision whether to permanently retire or to continue their labor force participation. If they decide to return to work, then self-employment is one option. Using the theoretical foundations of entrepreneurship, the authors outline the factors that would influence the self-employment choice and the types of entrepreneurial paths emanating from that choice.

Introduction

The decision to become self-employed is likely to occur at various critical junctures in an individual's life course. Young individuals, for example, who have grown up in an entrepreneurial family, may choose to move directly from high school to selfemployment (Shaver & Scott, 1991). Another group may enroll in an entrepreneurship program at a university, learn how to construct a business, and then make the transition to self-employment. Adults who leave labor market employment and move to selfemployment are shown to have career anchors rooted in autonomy and innovation (Katz, 1994). Older workers who are downsized and subsequently become self-employed are less likely to be risk averse (Galbraith & Latham, 1996). Technology-oriented early retirees are more likely to start a business in which their technical skills are integral to the business venture (Baucus & Human, 1994). It seems as if the decision to become self-employed is affected by different factors at various stages of an individual's life course (Si ngh & Verma, 2001a).

Much research is done on the processes, paths, and antecedents of the first two transitions (school to self-employment, and career employment with an employer to selfemployment). Only a handful of studies have concentrated on early retirees' transition to self-employment. Baucus and Human (1994) examine the process (e.g., punctuated equilibrium) by which an early retiree becomes self-employed. Galbraith and Latham (1996) a priori classify displaced older workers who become self-employed as "reluctant entrepreneurs" and show that they were different from "normal entrepreneurs" in terms of risk-taking behavior. Researchers in the field of entrepreneurship, therefore, have begun to recognize the prospects of early retirees as the next generation of entrepreneurs (Baucus & Human, 1994; Galbraith & Latham, 1996).

For decades, researchers in the field of labor economics have focused their attention on individual transitions out of career employment. Using the income-leisure choice model, labor economists have successfully differentiated older workers into those that choose leisure or continued bridge employment by examining their backgrounds in terms of health, wealth, work history, and macroeconomic conditions (Singh, 1998). This traditional research lens does not adequately explain the postcareer bridge employment decision to pursue an entrepreneurial path. Given the increasing number of retirees opting for self-employment as a bridge employment option (Singh, 1998; Baucus & Human, 1994; Galbraith & Latham, 1996), it is important to develop a new model that deepens our understanding of this emerging phenomenon. Our article constructs a deductive model of the process by which an early retiree becomes self-employed and the antecedents of that decision. It also identifies three types of early-retiree entrepreneurs and t heir characteristics. Hence, it integrates past research on early retirees' transition to self-employment and paves the way for further research. …

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