What makes entrepreneurs happy?

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Maria Petrescu, Nova Southeastern University and Aycan Kara, Indiana University Southeast

Is it the amount of money they make or the excitement they encounter in their job? Are self-employed individuals on their own, with no employees, happier because of the independence they have or are they more stressed out because of their sole responsibility for the functioning of their venture? The results of our analysis show the positive effects of satisfying individuals needs for autonomy, competence and relatedness on happiness. These do not exclude the positive implications of income satisfaction.

The outcomes of entrepreneurship and self-employment have been studied at both individual and at the aggregate levels. For example, at the aggregate level, entrepreneurship has been considered for a long time as essential factors in economic development and job creation, At the individual level, research has focused on the advantages of self-employment for individuals, including higher levels or autonomy and control, work flexibility and skills development. Our study focuses on the main factors that affect the subjective well-being of entrepreneurs, by using the theoretical framework of the Self-Determination Theory, with the three main universal factors affect individual performance and wellness: autonomy, competence and relatedness.

Subjective well-being is considered an important variable of a person’s life and is associated with a multitude of factors, including health, work performance and success. The term subjective well-being is used with different interpretations, but mainly as a synonym for happiness, as well as to assess individuals’ satisfaction with life. The results of the analysis using data from the European Social Survey show a significant positive relationship between the three main factors underlined by Self-Determination Theory – autonomy, competence and relatedness – and self-employed individuals’ subjective well-being.

This study showed the importance of autonomy, which allows individuals to experience choice and feel like they are the initiators of their own actions. In the context of self-employed individuals, the higher their levels of autonomy, the happier they are, which is in concordance with previous research that found autonomy as one of the main motivation for entrepreneurship. Entrepreneurs’ need for competence is not only a motivation for engaging in entrepreneurial behavior, but also an important factor that affects well-being as a function of its level of satisfaction. Social relatedness also has a positive relation with subjective well-being, confirming that self-employed persons who feel appreciated by others report higher levels of subjective well-being. Income satisfaction is important even for self-employed individuals, despite findings showing that this category is reporting lower incomes and longer working hours than employed persons.

The study also focused on the effect of cultural variables on subjective well-being and showed that the level of subjective well-being of self-employed individuals is different as a function of the level of individualism of the culture from which they come. From the demographic variables used as covariates, only number of years of full-time education was found a significant influencer of subjective well-being.

The findings represent a step forward in entrepreneurship research focused on what makes self-employed individuals happy, and a source of information for policy makers who want to stimulate entrepreneurial venture and business growth. The answer to the question regarding what makes entrepreneurs happy can help motivate entrepreneurial spirit and reward innovative individuals, in order to determine them to engage in further venture development. The results of this study show that self-employed individuals need not only to satisfy their personal desires for autonomy and competence, which can be more or less within their power and reach, but they also have needs that are related to their social environment. The opportunity to use their skills and knowledge, as well as social support, can motivate entrepreneurs, make them more satisfied with their lives and determine them to engage in further entrepreneurial behaviors.

Maria Petrescu is Assistant Professor of Marketing at Nova Southeastern University, Fort Lauderdale, Florida, USA. Aycan Kara is Assistant Professor of Strategic Management and Entrepreneurhsip at Indiana University Southeast, USA.

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