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Deciding on an Entrepreneurial Career: A Test of the Pull and Push Hypotheses Using the Panel Study of Entrepreneurial Dynamics Data

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Deciding on an Entrepreneurial Career: A Test of the Pull and Push Hypotheses Using the Panel Study of Entrepreneurial Dynamics Data
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  Deciding on anEntrepreneurial Career:A Test of the Pull andPush Hypotheses Usingthe Panel Study of EntrepreneurialDynamics Data 1 Leon SchjoedtKelly G. Shaver The Panel Study of Entrepreneurial Dynamics data were used to analyze if the potential forincreased life satisfaction pulls or job dissatisfaction pushes individuals toward an entre-preneurial career. For life satisfaction, we found no significant mean differences betweennascent entrepreneurs and the comparison group, whereas for job satisfaction, we found asignificantly higher mean for the nascent entrepreneurs than for the comparison group. Asthese results show little about nascent entrepreneurs being pulled into an entrepreneurialcareer, the results have to be taken as strong evidence against nascent entrepreneurs beingpushed toward an entrepreneurial career due to low job satisfaction in their preentrepre-neurial employment. Introduction Few will contest the importance of new venture creation and its desirable effects onthe economy. For example, out of the nascent entrepreneurs surveyed in the GlobalEntrepreneurship Monitor (GEM), 80% were expecting to create new jobs for other thanthemselves within the next 5 years (Minniti & Bygrave, 2004). Further, since Birch’s(1979) study on job creation by small businesses, a considerable amount of researchhas substantiated his findings that small businesses are a major source of employmentgrowth (Birch, 1979, 1987; Kirchhoff, 1994; Reynolds & White, 1997). However, Acs,Armington, and Robb (1999) found that there is a net loss of jobs among older businesses Please send correspondence to: Leon Schjoedt, tel.: (309) 438-3627; e-mail: leon.schjoedt@ilstu.edu.1. A previous version of this article was selected as a Best Paper Proceedings for the 2005 Academy of Management Annual Meeting, Honolulu, Hawaii, August 5–10, 2005. A six-page abbreviated version of thispaper is included in the  Proceedings of the Sixty-fifth Annual Meeting of the Academy of Management   (CD),ISSN 1543-8643. PTE  & 1042-2587© 2007 byBaylor University 733September, 2007  whether small, medium, or large. This suggests that new ventures, not small businessesper se, provide the principal force in creating new jobs.Given the economic contributions of new ventures, the reasons entrepreneurs give forstarting businesses are of practical, as well as academic, interest. One prominent accountsuggests that there may be factors that either  pull  individuals toward creating new venturesor  push  them into it. Specifically, e.g., according to the 2003 GEM report for the UnitedStates, 9% of Americans between 18 and 64 years of age were starting new ventures topursue opportunities that could improve their conditions, and 1.7% were creating newventures due to lack of alternatives for employment (Minniti & Bygrave, 2004). Thesedata suggest that pull may be more important than push, but both ideas warrant closerexamination. For example, in one of the early empirical studies of the “push” idea,Brockhaus (1980) found entrepreneurs to be less satisfied about their previous workingconditions than were managers in other business organizations. Recognizing the limits of his convenience sample, Brockhaus also drew comparisons to “the normative data”collected by Smith, Kendall, and Hulin (1969) in their book describing the developmentof the job description index (JDI). It is, however, reasonable to wonder whether thesefindings—25 and over 35 years old, respectively—would be replicated today. Otherprominent models of the relationship between job satisfaction and entrepreneurial activitysuch as Powell and Bimmerle (1980), Shapero and Sokol (1982), and even Herron andSapienza (1992) also predate the Internet and the World Wide Web, each of which hashelped to democratize the process of new venture creation.In reexamining the issues today, one is confronted with the need to choose betweenadministering a long and detailed job satisfaction questionnaire to a nonrepresentativeconvenience sample and using a much abbreviated measure on a nationally representativesample. We have elected to take the second route, provided by data from the Panel Studyof Entrepreneurial Dynamics (PSED).The PSED was developed to overcome a series of problems that have plagued theentrepreneurship literature (see Reynolds, 2000 for a review of these problems). Theprimary objective of the PSED was “to provide systematic, reliable data on the basicfeatures of the entrepreneurial or start-up process,” and the second objective was “toprovide reliable data on those factors or variables that would account for or explain orpredict the variation in these transitional events” (Reynolds, 2000, p. 160). As these twoobjectives illustrate, the focus of the PESD was to survey individuals in the process of starting their business. In other words, the focus was to survey nascent entrepreneurs. Aspart of the PSED, data were also collected from a comparison group not engaged instarting a business. Both PSED subsamples are nationally representative, and the selectionprocedures for the nascent entrepreneurs have ensured that problems like survival bias andretrospective reporting would be avoided. Consequently, this study examines the PSEDdata to determine whether job dissatisfaction pushes and/or the potential for increased lifesatisfaction pulls individuals to pursue an entrepreneurial career. Literature Review Venture creation does not happen by accident; it requires directed effort exerted overtime. In other words, direction, effort, and persistence over time are the three pillars of motivation (Spector, 1996). Motivation theory argues that individuals are either pulled orpushed toward a career choice, such as becoming an entrepreneur, and that satisfaction is acentral factor in motivating behavior (Gartner, Bird, & Starr, 1992; Katzell & Thompson,1990;Landy&Becker,1987;Perry,1993;Vroom,1964;Wanous,Keon,&Latack,1983). 734  ENTREPRENEURSHIP  THEORY and PRACTICE  For example, in their conceptual model, Shapero and Sokol (1982) suggest that negativepushfactors(e.g.,beingfired)andpositivepullfactorscandirectanindividualtowardnewventurecreation,orothercareerchoices.Further,PowellandBimmerle(1980)proposedintheir conceptual model of the venture initiation process that dissatisfaction with work ornonworkwasacontributingfactortonewventureinitiation.Similarly,HerronandSapienza(1992)presentedaconceptualventurecreationmodelinwhichtypeandlevelofsatisfactionwereconsideredcriticalfactors.Eventhoughtheseresearchers(Herron&Sapienza,1992;Powell & Bimmerle, 1980; Shapero & Sokol, 1982) argued for the importance of satisfac-tion,theydidnotdistinguishexplicitlyamongtypesorlevelsofsatisfactionthatmightpullorpushindividualstowardcreatingnewventures.Implicitly,however,theseresearchersdosuggest that an expectation of increased life satisfaction pulls individuals toward entrepre-neurship, whereas possible reduction of job dissatisfaction pushes them toward it. Improved Life Satisfaction as a Reason for New Venture Creation A study by Kolvereid (1996) addressed the reasons for career preference. He used anopen-ended format to capture a wider range of reasons and sampled alumni from a 4-yearmasters program in business administration in Norway. From the data, Kolvereid identi-fied 11 reasons for preferring either self-employment or organizational employment basedon a representative sample of the alumni where 91% were not self-employed. Kolvereidfound that economic opportunity, authority, autonomy, challenge, self-realization, andparticipation in the entire process were reasons for preferring self-employment, whereassecurity, workload, and autonomy were the reasons the respondents provided for prefer-ring organizational employment.These findings are interesting in two ways. First, no explicit mentioning of (job orlife) satisfaction was cited as a reason for either type of employment despite the literatureon career choice and employee turnover suggesting that life satisfaction and job dissat-isfaction are key factors in job choice (Gartner et al., 1992) and in employee turnover(e.g., Mobley, 1977). Second, it is interesting that 40% of the sample preferred self-employment despite the fact that only 9% were in fact self-employed. This suggests thatperhaps some of the respondents preferred self-employment, but other factors, like secu-rity, were more important to them in considering their actual choice of employment. Thefindings appear suggestive of reasons that would pull (e.g., self-realization and, in turn, theexpectation of increased life satisfaction) the respondents toward self-employmentwithout considering any push factors (e.g., job dissatisfaction). Further, the sample—individuals with advanced degrees (mostly in accounting)—is one that typically has goodemployment opportunities. For this group, job dissatisfaction might not have been a forceacting to push the respondents into entrepreneurship.A subsequent study by Noorderhaven, Thurik, Wennekers, and van Stel (2004)addressed life satisfaction as a reason for new venture creation directly. More specifically,these researchers examined how life dissatisfaction and dissatisfaction with the workingsof democracy influence self-employment in 15 European countries using the Eurobarom-eter surveys. Their results show that dissatisfaction with life and with the way democracyworks were both significant and positively associated with the rate of self-employment.Arguing that their measured variables were proxies for job dissatisfaction, Noorderhavenet al. (2004) argued that their findings indirectly pointed toward the importance of pushfactors in entrepreneurship. On the other hand, it is reasonable to wonder how good theproxies might actually be. Considering these proxies used by and the findings found byNoorderhaven et al., it seems pertinent to make some considerations about job satisfactionand life satisfaction explicit. 735September, 2007  Job Satisfaction and Life Satisfaction: Some Considerations Locke (1976) provided a widely recognized definition of job satisfaction. Lockedefined job satisfaction as “a pleasurable or positive emotional state resulting from theappraisal of one’s job or job experiences” (p. 1300). In this definition, job satisfaction isan attitude directly related to a person’s work and work-related experiences. For example,research has shown that the self-employed are more satisfied with their work, in part, dueto the autonomy they experience from being self-employed (Hundley, 2001). On the otherhand, life satisfaction is “a global cognitive evaluation or judgment of one’s satisfactionwith his or her life” (Heller, Watson, & Ilies, 2004, p. 574). If life satisfaction is “global,”then job satisfaction ought to be one of its subordinate components. Consistent with thisview, Johnson, Arthaud-Day, Rode, and Near (2004) reported that job satisfactionaccounted for 5–16% of life satisfaction. Further, research has shown that job satisfactiontakes on a more important role in a person’s life satisfaction if the job is important to theperson (Near, Rice, & Hunt, 1978). For example, job satisfaction is a stronger factor in lifesatisfaction for male executives (Judge, Boudreau, & Bretz, 1994) and for family businessCEOs (Daily & Near, 2000). Considering these findings and assuming that a new ventureis very important to an entrepreneur, it is not surprising that the self-employed reporthigher life satisfaction than employees in general (Blanchflower & Oswald, 1998;Blanchflower, Oswald, & Stutzer, 2001). This said, some have also argued the reverse,namely, that general affective states “spill over” into job satisfaction (Judge & Hulin,1993; Judge & Locke, 1993; Staw & Ross, 1985; Staw, Bell, & Clausen, 1986). Thus,there may exist some reciprocal causality between job and life satisfaction. Addressingthis issue, Near (1984) found that job satisfaction accounted for more variance in lifesatisfaction than life satisfaction accounted for in job satisfaction over a 5-year period. Onthe other hand, Shapero and Sokol (1982) argued that “research shows that individuals aremuch more likely to take action upon negative information rather than positive, and thedata on company formations support that conclusion” (p. 79). This is consistent with thefindings of Kolvereid (1996) and Blanchflower et al. (2001) that a substantial highernumber of people prefer self-employment than are actually self-employed. Whatever thedirection of causality may be, it is clear that job satisfaction and life satisfaction should betreated as separate conceptual entities. Thus, we continue by considering job satisfactionas a reason for new venture creation. Job Dissatisfaction as a Reason for New Venture Creation Based on the underlying logic that an individual can overcome job dissatisfaction bybecoming self-employed, job dissatisfaction has been offered as one reason for newventure creation and for choosing an entrepreneurial career. Liles (1974) contended that job dissatisfaction, or deterioration of satisfaction with the preentrepreneurial job, is afundamental factor that motivates an individual to become an entrepreneur. Further, theturnover literature has consistently showed that job dissatisfaction is related to motivationand intent to leave, actual turnover, and initiation of a search for alternatives (e.g., Mobley,1977). Additionally, Rosse and Hulin (1985) found evidence indicating that job attitudes(e.g., job satisfaction) underlie a spectrum of withdrawal or adaptive behaviors. Placingthis in the context of entrepreneurship, job dissatisfaction may lead an individual toconsider starting a part-time business venture as an adaptive behavior to reduce experi-enced job dissatisfaction or to consider a full-time business venture to avoid the experi-enced job dissatisfaction by leaving the employer.Evidence of job dissatisfaction as a reason for new venture creation is also found inthe entrepreneurship literature. Hisrich and Brush (1986) examined the reasons and 736  ENTREPRENEURSHIP  THEORY and PRACTICE
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