Author Information : Teemu Kautonen, Aalto University, Finland
Ewald Kibler, Aalto University, Finland
Maria Minniti, Syracuse University, USA
Year of Publication : Journal of Business Venturing (Forthcoming)
Summary of Findings : Our empirical analysis shows that for late-career individuals, starting a business is positively associated with change in quality of life and negatively associated with change in income.
Research Questions : By extending the employment choice theory to simultaneously account for career stage and non-monetary motivations, we investigate how late-career transitions from organizational employment to entrepreneurship influence the returns from the monetary (income) and non-monetary (quality of life) components of an individual’s utility.
What we know : Transitioning to entrepreneurship from full time employment, on average, does not pay in monetary terms across all ages
Novel Findings : In spite of the negative income effect, transitioning is a rational choice for late stage career individuals
Implications for Policy: From a policy perspective, our findings suggest that promoting late-career switches to entrepreneurship can be socially sustainable because older workers undertaking such transitions are, on average, better off. Hence, the promotion of late-career entrepreneurship can provide an attractive opportunity for societies to move from aging models that emphasize economic inactivity and dependence on pension benefits toward active aging models that are better suited to address the personal needs of aging individuals.
Implications for Society: The principal societal benefit of late-career entrepreneurship is that it can extend aging workers’ careers: research shows that self-employed individuals tend to retire later than their employed counterparts, which generates savings in public pensions and the prolonged deployment of those individuals’ human capital in the economy.
Implications on Research: Our study contributes to the entrepreneurship literature in a number of ways. First, we move the focus of late-career entrepreneurship research from expected utility—ex ante motivations and intentions—to one analyzing the utility of outcomes, or what the individuals actually achieve by starting a business. Second, our analysis adds to the employment choice theory applied to entrepreneurship by simultaneously considering non-monetary utility and career stage. Third, we contribute to the employment choice literature by expanding knowledge of the utility of outcomes with self-determination theory and the concept of quality of life as a career-phase specific, theory-driven conceptualization of non-monetary utility.
Abstract : Late-career transitions to entrepreneurship are discussed as a promising way to address some of the problematic implications of population aging. By extending employment choice theory to simultaneously account for career stage and for non-monetary rewards from entrepreneurship, we investigate how late-career transitions from organizational employment to entrepreneurship influence the returns from the monetary (income) and non-monetary (quality of life) components of an individual’s utility. Using data from the English Longitudinal Study of Ageing, our empirical analysis shows that for late-career individuals, starting a business is positively associated with change in quality of life and negatively associated with change in income.
This research demonstrates that for late-career individuals, starting a business increases the quality of life, despite its potential negative effect on income.