Organizational Employment versus Self-Employment: Reasons for Career Choice Intentions

By Kolvereid, Lars | Entrepreneurship: Theory and Practice, Spring 1996 | Go to article overview

Organizational Employment versus Self-Employment: Reasons for Career Choice Intentions


Kolvereid, Lars, Entrepreneurship: Theory and Practice


The objective of this paper is to identify reasons individuals have for their employment status choice intentions, and to systematically develop a comprehensive classification scheme of these reasons. The term "employment status choice" was defined by Katz (1992, p. 30) as "the vocational decision process in terms of the individual's decision to enter an occupation as a wage-or-salaried individual or a self employed one."

PREVIOUS RESEARCH

A number of researchers have attempted to identify relevant reasons for organizational formation. Scheinberg and MacMillan (1988) reported six different factors of motivation in their 11-country study of reasons leading to new firm formation: need for approval, perceived instrumentality of wealth, degree of communitarianism, need for personal development, need for independence, and need for escape. Reynolds and Miller (1988) and Cooper, Woo, and Dunkelberg (1989) suggested that the various objectives identified by other researchers can be reduced to three factors: challenge, wealth and autonomy. Using cluster analysis Woo, Cooper, and Dunkelberg (1991) identified two groups of entrepreneurs based upon their goals at the time of starting the business: (1) "independents" who placed high priority on not having to work for others, and (2) "organization builders."

The above studies all investigated founders who were owner/mangers of their business. Underlying assumptions in this research is (1) that the founder has started a business in order to become self-employed, and (2) that the founder has succeeded in achieving this objective. These studies are different from studies of career preferences and career intentions for three main masons. First, in order to become self-employed a person need not start a new business, but can obtain an existing business through purchase, inheritance, or marriage. Second, a businesses start-up may not lead to self-employment of the founder. This can happen if the founder, after having started the venture, hires personnel to manage the business, if the business is given away or sold immediately after implementation, or if the business remains a small-scale operation that only requires the founder's attention on a part-time basis. Moreover, many businesses are started by people who already are self-employed. This is clearly the case for many multiple business founders. Third, as Shane, Kolvereid, and Westhead (1991) pointed out, studies of existing businesses can say nothing about firms that have failed. Furthermore, these studies do not address Learned's (1992) observation that not all of those who attempt to form an organization will succeed. In order to get a comprehensive picture of reasons people may have for starting a business or for pursuing self-employment, it is not sufficient to ask only those who have fulfilled their objectives.

Previous research on employment status choice has adopted a number of different models that point to different reasons for individuals' employment status choice. Trait models focus on psychological attributes of founders compared to non-founders. The underlying assumption is that people who pursue a career as self-employed have a different personality profile from those who prefer organizational employment (Begley & Boyd, 1987). Tracking models suggest that personal history and social context are determinants of the propensity to enter self-employment (Katz, 1992). These models reflect the belief in tracking where the occupation of a parent or another close family member defines the most likely occupation.

Other models have focused on psychosocial values as predictors of employment status choice. Katz (1992) argued that the most relevant values in this connection are autonomy, creativity, material gain, and integration.

Economists have applied human capital theory in order to predict occupational status choice. Human capital theory essentially states that the relative paths of earnings and value of marginal product diverge over the working life (Tucker, 1990). …

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