Stay or Go? Research explores the transition from paid employment to entrepreneurship

Wednesday, June 16, 2021

Leaving a safe and secure job to pursue a business venture as an entrepreneur can be a daunting endeavor. What motivates these people to take the leap of faith? A new study coauthored by Jordan Nielsen, an assistant professor at Purdue University’s Krannert School of Management, examines events that may motivate people to leave their employment and pursue entrepreneurship.

The study, “Awakening the Entrepreneur Within: Entrepreneurial Aspiration and the Role of Displacing Work Events,” was recently published in the Journal of Applied Psychology by Nielsen and his research colleagues Scott Seibert and Maria Kraimer from Rutgers University.

“People change jobs all the time, but forming your own business or joining a startup venture is different. The broadest question that we're answering with this research is why people start to engage in entrepreneurship or start that transition out of their organization or traditional employment,” Nielsen says. “Why aren’t they just moving to a different organization or staying with their current employer?”

To answer that question, the researchers surveyed 226 individuals working across multiple industries at two time points. They measured entrepreneurial identity aspiration, which means how much people see their future selves as entrepreneurs. Six months later, they measured discovery-oriented entrepreneurial behavior, such as identifying and developing new business opportunities.

Results from their analyses indicated that entrepreneurial identity aspiration was positively related to discovery-oriented behaviors — meaning that as aspirations increased, so did discovery-oriented behavior.

The researchers also examined the role of negative occurrences at work, which they call “displacing events.” These can include failing to receive an expected raise or bonus, a cut in pay, a business idea being ignored or rejected, or an organizational disruption. When employees experienced these kinds of displacing events, the relationship between entrepreneurial identity and discovery-oriented behaviors became significantly stronger.

“The extent to which you aspire to be an entrepreneur is a strong predictor of these discovery behaviors, which is what we expected,” Nielsen says. “But it’s an even stronger predictor when these displacing events occur over a period of time.”

Nielsen says the study provides implications for both managers and organizations.

“For organizations, employees leaving to pursue new ventures leads to turnover and a loss of human capital,” he says. “This could be particularly harmful if entrepreneurs were to use their creative business ideas to compete with their former organization. But even if people choose to pursue their ideas on the side, the organization risks losing the employees’ best ideas and effort.”

To mitigate these potential risks, managers should recognize that displacing events might push entrepreneurs out the door. Managers can retain top talent by ensuring job security and avoiding displacing events. They can also try to make those events seem less unexpected or disruptive by providing information/context or psychological support to help employees cope.

The research also suggests that having alternative “possible work selves” (i.e., alternative ideas for what you could be, professionally) might help people make career transitions more smoothly and increase their career resilience.

“Managers should allow employees to express their entrepreneurial identity within the organization,” Nielsen says. “Organizations can do this by fostering an innovation climate that is receptive to creative ideas.”

Media Contact: Jordan Nielsen, jniel@purdue.edu