Doing it for the money: Are employees outearning entrepreneurs?
Mojca Svetek | 18 October 2023
Entrepreneurs are willing to give up their stable corporate careers and put their financial security on the line, all for an idea. They’re the risk-bearers, unlike employees who receive a fixed compensation or investors who can diversify their investments. Entrepreneurs willingly embrace the uncertainty of future demand and, thus, the uncertainty of their livelihood. The question is, does it pay to venture?
In this episode we are uncovering:
- Why do people choose entrepreneurship as a career (despite risk and uncertainty);
- Earning gap between entrepreneurs and employees;
- Inconsistencies in research findings on entrepreneurial earnings;
- Individual differences in entrepreneurial earnings.
Research articles:
- Åstebro, T., & Chen, J. (2014). The entrepreneurial earnings puzzle: Mismeasurement or real? Journal of Business Venturing, 29(1), 88-105.
- Carter, N. M., Gartner, W. B., Shaver, K. G., & Gatewood, E. J. (2003). The career reasons of nascent entrepreneurs. Journal of Business Venturing, 18(1), 13–39.
- Feldman, D. C., & Bolino, M. C. (2000). Career patterns of the self-employed: Career motivations and career outcomes. Journal of Small Business Management, 38(1), 53–67.
- Hegde, D., & Tumlinson, J. (2021). Information frictions and entrepreneurship. Strategic Management Journal, 42(3), 491-528.
- Hurst, E., Li, G., & Pugsley, B. (2014). Are household surveys like tax forms? Evidence from income underreporting of the self-employed. Review of Economics and Statistics, 96(1), 19-33.
- Laffineur, C., Barbosa, S. D., Fayolle, A., & Nziali, E. (2017). Active labor market programs’ effects on entrepreneurship and unemployment. Small Business Economics, 49, 889-918.
- Sanandaji, T., & Leeson, P. T. (2013). Billionaires. Industrial and Corporate Change, 22(1), 313-337.
- Wu, B., & Knott, A. M. (2006). Entrepreneurial risk and market entry. Management Science, 52(9), 1315-1330.