Newswise — Some people are just born to be entrepreneurs. Two Rutgers-led studies examine why some employees decide to quit their job and start a small business, even if they have tried and failed in the past.

The first study, published in the Journal of Applied Psychology, identifies four distinct “career shocks” that make employees more likely to strike out on their own.

“You may have a career plan in the back of your mind, but sometimes it takes a slap in the face to make you go through with it,” said lead author Scott Seibert, a Professor of Human Resource Management in the Rutgers School of Management and Labor Relations. “Managers should understand the impact of their decisions, especially in this tight labor market, because you never know what will be the last straw for one of your top performers.”

Surveying 226 people in multiple industries over a six-month span, researchers found workers were significantly more likely to take steps toward starting a business if:

• They did not receive an expected raise, or it was lower than they were anticipating;
• They took a pay cut;
• Their business ideas were ignored or rejected at work; or
• Their employer went through a scandal, merger, or other organizational change.

Workers were less likely to explore entrepreneurship if they lost their job. Researchers believe this is due to an erosion of confidence and financial security.

The second study, published in Personnel Psychology, reveals what happens when former entrepreneurs go to work for a company. They may bring multidimensional skills and knowledge to the role, but they tend to grow bored easily.

“They’re still entrepreneurs at heart and they sometimes feel like misfits in a salaried job,” said lead author Jie (Jasmine) Feng, an Associate Professor of Human Resource Management in the Rutgers School of Management and Labor Relations. “This entrepreneurial identity makes them more likely to quit and, in some cases, start another business.”

Researchers surveyed 603 workers in 22 Chinese tech companies and found that former entrepreneurs were three times more likely to quit than employees who had never owned a business. The research team then analyzed nearly 40 years of federal data on 12,686 American workers employed in a wide variety of industries and confirmed that former business owners were quicker to jump ship.

What can employers do? The study finds ex-entrepreneurs are more willing to stay in a salaried job if they have greater autonomy and opportunities to use their entrepreneurial skills, such as initiating projects, leading people, and utilizing creativity to develop new ideas, processes, and businesses within organizations.

Researchers collected the data for both studies prior to the pandemic. While additional research is needed to understand how COVID and “The Great Resignation” affected entrepreneurial identity, Census Bureau data reveal a significant increase in the number of new businesses forming since June 2020. In addition, the latest federal jobs report shows a jump in self-employment, which includes freelancers, gig workers, and small business owners.

“The pandemic was a macro-level ‘career shock’ for millions of Americans,” said Maria Kraimer, a Distinguished Professor of Human Resource Management in the Rutgers School of Management and Labor Relations and co-author of the first study. “From what we’re seeing nationally, many workers have responded by striking out on their own.”

About the Research

Awakening the Entrepreneur Within: Entrepreneurial Identity Aspiration and the Role of Displacing Work Events by Scott Seibert (Rutgers University), Jordan Nielsen (Purdue University), and Maria Kraimer (Rutgers University) appears in the Journal of Applied Psychology.

Once an Entrepreneur, Always an Entrepreneur? Entrepreneurial Identity, Job Characteristics, and Voluntary Turnover of Former Entrepreneurs in Paid Employment by Jie (Jasmine) Feng (Rutgers University), David Allen (Texas Christian University), and Scott Seibert (Rutgers University) appears in Personnel Psychology.

About the School

The Rutgers School of Management and Labor Relations (SMLR) is the world’s leading source of expertise on managing and representing workers, designing effective organizations, and building strong employment relationships.