Reluctant entrepreneurs: Why they do it and how they do it

The phrase “buying a job” has gained more currency in the past several years, as more and more salaried employees — downsized, fired or phased out – have found that buying a business, perhaps a franchise, is their only option. Such a cohort is part of a growing breed, the reluctant entrepreneur. These authors researched the phenomenon and discovered an intriguing reality: Most reluctant entrepreneurs, even if successful, long to return to their previous life as a salaried employee.

Little is known about the growing phenomenon of individuals who choose start a new venture because they have no other choice.  These “reluctant entrepreneurs” comprise a significant proportion of entrepreneurs. However, the phenomenon of entrepreneurial reluctance has been rarely examined. Not surprisingly, our knowledge of the kind of people and personalities that become reluctant entrepreneurs is lacking. 

The popular literature often paints a heroic picture of entrepreneurs. Success stories and colorful personalities are integral parts of narratives and analyses of entrepreneurship.  Reluctant entrepreneurs, on the other hand, tend to be neglected because they appear to be less interesting or even less glamorous. Typically, these are people who preferred to work as salaried employees but found themselves suddenly shut out from the labor market, and so forced to start their own business.  Thus, their motivation was less the pull of the proactive entrepreneurial spirit than the push of economic necessity.

Current research attempts to shed some light on this understudied phenomenon.  For example, we now know that the starting point for reluctant entrepreneurs is very different from that of opportunity entrepreneurs. In fact in terms of motivation, passion, and the need for independence, the two types might be diametric opposites.  The opportunity entrepreneur is enthusiastic about starting and expanding the new venture, whereas the reluctant entrepreneur starts a business only because there is no better option. One may therefore wonder whether this ambivalence and uncertain motivation may indicate or predict unstable footing for a new venture. 

This paper delves into the personality issues that may (or may not) drive the reluctant entrepreneur, and provides evidence that this breed can achieve impressive results despite their less-than-ideal motivation.  Our paper is based on a theory-driven, empirical study of 287 reluctant entrepreneurs.

Entrepreneurs and reluctant entrepreneurs: Who and why?

Entrepreneurship accounts for economic growth and a large share of total employment.  Entrepreneurs also work hard and invest in developing new ventures despite the overwhelming obstacles they face. Research indicates that entrepreneurs’ persistence despite the general low success rate of new ventures can be attributed to personal traits such as optimism, passion, the need for autonomy, self-confidence, a willingness to take risks and internal locus of control (the extent to which a person feels that they are in control).

This set of personal characteristics may be rightly attributed to entrepreneurs who deliberately seek out business opportunities and have opted for entrepreneurship as a way to accomplish their goals. However, these traits may fail to describe those people who become entrepreneurs only reluctantly, mainly because they have no other choice.  Most of these individuals, whose numbers are growing, have been unable to find new jobs after having been salaried employees for years.  This group has been dubbed “necessity entrepreneurs” in the recent literature (Block & Sandner, 2006; Block, et al., 2009).

Since 2001, the Global Entrepreneurship Monitor (GEM) has differentiated between opportunity and necessity entrepreneurship (Reynolds et al., 2005). Opportunity entrepreneurs start their business to take advantage of a unique opportunity, whereas necessity entrepreneurs had no better option.  This article advances the discourse by focusing on (and measuring) the entrepreneur’s personal feeling of reluctance, and thus uses the term “reluctant entrepreneurs when referring to this particular breed.


The entrepreneur defined

An entrepreneur is defined as “one who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them” (Kuratko, 2008). Hence, we define the reluctant entrepreneur as:

One who creates a new business in the face of risk and uncertainty for the purpose of achieving constant income because he/she does not have a better alternative. The business is created by identifying opportunities and assembling the necessary resources to capitalize on them.

Very few studies have investigated reluctant or necessity entrepreneurs. Most have dealt with the differences between opportunity and necessity entrepreneurs in the context of national economies (Bergman & Sternberg, 2007; Block & Sandner, 2006; Block, et al., 2009; Block & Wagner, 2007).    One study, by Block and Wagner (2010), investigated the differences between opportunity and necessity entrepreneurs in terms of human capital, profitable opportunities and determinants of success.


A profile of the entrepreneur

Researchers in entrepreneurship have long been interested in the entrepreneurial profile. This interest has resulted in major efforts to structure and develop both descriptive and normative theories, and in testing their core propositions. However, since McClelland’s (1961) first attempt to find the essential traits of entrepreneurs, there has been little normative or descriptive consensus on such traits. Hisrich and Peters (2002), for example, argue that there is no “true entrepreneurial profile.”

 Entrepreneurs come from a variety of educational backgrounds, occupations, race, gender, and family situations. Vecchio (2003) suggests that five attributes are at the forefront of debates on the entrepreneurial profile. This set of attributes, which he calls “Entrepreneurship’s ‘Big Five” includes: risk-taking, need for achievement, need for autonomy, self-efficacy, and the extent to which one feels in control. However, even Vecchio agrees that controversy still surrounds the issue of whether these attributes form an accurate profile.

There is abundant evidence that entrepreneurship is a “young man’s game” (Arenius & Minniti, 2005). Reynolds et al. (2003) found that individuals between 25 and 34 are most likely to be budding entrepreneurs. Female entrepreneurs are somewhat older (35-45) when starting their first business. Nevertheless, reluctant entrepreneurs differ from other entrepreneurs in many ways. Clearly, they are older than the average entrepreneur when they start their first business (Reynolds et al., 2005). Most of the individuals in our sample were people in their forties or fifties who had been fired and could not find a new job, primarily because firms prefer to hire younger people for most positions, and because managers believe that people in their forties are less effective, less motivated and more expensive. However, age is only one factor that differentiates reluctant from opportunity entrepreneurs.

Researchers since the 1950s have looked for personality traits that determine who tends to become an entrepreneur. McClelland (1961) found that entrepreneurs had a higher need for achievement than non-entrepreneurs and were, contrary to popular opinion, only moderate risk takers. Considerable research on the personality characteristics of successful entrepreneurs was conducted in the 1980s and 1990s. William Lee (quoted by Timmons & Spinelli, 2003: 63) argues that, “There is no evidence of an ideal entrepreneurial personality. Great entrepreneurs can be either gregarious or low key, analytical or intuitive, charismatic or boring, good with details or terrible, delegators or control freaks. What you need is a capacity to execute in certain key ways.”

The main hypothesis tested in our study is whether the “Big Five” characteristics are associated with both reluctant entrepreneurs’ success and their reluctance to remain self-employed. The differences in the success of the entrepreneurs in the current sample as well as their reluctance to remain entrepreneurs should thus be linked to differences in their characteristics.


Reluctant entrepreneurs and managerial experience

Because they start their own businesses relatively late in life, many reluctant entrepreneurs have significant managerial experience, a fact that is likely to be important, because managing and organizing skills are key components of an entrepreneurial venture.  Previous management experience can affect entrepreneurial success in various ways. For example, experience with the demands of a management position may foster the ability to inspire and motivate subordinates, a critical skill for entrepreneurs. Management experience might also be positively correlated with their scores on all the “big five” measures (Brockhaus, 1980; Masters & Meier, 1988; Peacock, 1986).  Various studies have shown that these big five variables differentiate between entrepreneurs and regular employees, but not between entrepreneurs and managers (Brockhaus & Horwitz, 1986; Chen et al., 1998; Johnson, 1990).

Managers are exposed to demands and activities that, in many cases, are quite similar to those to which entrepreneurs are exposed. In the contemporary business environment managers are required to deal with risks quite often. As well, managerial positions are associated with higher levels of autonomy, an indication that people who seek autonomy are more likely to become managers.

Also, highly motivated people are more likely to be promoted to managerial position (McClelland, 1961). Managers have more control over their job environment and circumstances than non-managers; therefore, those who exhibit higher levels of internal control will be more attracted to managerial positions. Finally, the intense job dynamics and the experience in situations that have a lot in common with entrepreneurial situations can build the confidence needed to believe that one will be able to start a new venture—and succeed. This belief is known as self-efficacy (Bandura, 2001; Chen, Gully & Eden, 2004, Eden, Ganzach, Flumin-Granat & Zigman, 2010).  We conclude that managerial experience among reluctant entrepreneurs might predict the presence of a high level of the big five factors, which in turn might affect the level of reluctance and success. Therefore, we can hypothesize that managerial experience will affect both the reluctance to remain an entrepreneur and the venture’s success.


Empirical results and discussion

A group of 287 Israeli reluctant entrepreneurs took part in our research. The results support the hypotheses that both the reluctance level and success are predicted by previous experience, and that these relationships are mediated by some of the characteristics that are attributed to entrepreneurs.  Although generally quite successful, most of the participants would prefer to return to their former positions as salaried employees. Our findings emphasize the fact that managerial experience plays a big role in these entrepreneurs’ success and their ongoing reluctance. Our research also revealed that there is a positive co-relation between managerial experience (in years) and success level (reported by the entrepreneurs). As well, the greater the managerial experience, the greater financial success.

On the other hand, research revealed a negative correlation between managerial experience and a reluctance to remain entrepreneur. More managerial experience equated with less reluctance to remain an entrepreneur. Our findings also reveal the importance of relevant personality attributes—of which self-efficacy (the confidence or belief of a person in her ability to perform a task successfully) is one of the most important.

The goal of our study was to delve into the growing phenomenon of reluctant entrepreneurship, and in particular to better understand the reluctant entrepreneur.  Participants in this research became entrepreneurs less by choice and more by necessity. Unlike opportunity entrepreneurs, who are drawn by the advantages of being an entrepreneur, the reluctant ones preferred their lives as salaried employees. The main finding of this study is that in spite of their relative success, most reluctant entrepreneurs would prefer to return to their previous positions as salaried employees. Specifically, our data indicate that the more managerial experience the reluctant entrepreneur had, the more successful they were likely to be and the less reluctant as well. These direct effects are mediated to some extent by “Entrepreneurship’s Big Five.”

Implications for theory and practice

Many attempts to characterize entrepreneurs have been inconclusive. Researchers have examined dozens of variables to depict both the characteristics of a person who tends to become an entrepreneur and the attributes required to succeed. The current research looked at this question from a different angle, by exploring attributes customarily applied to entrepreneurs by choice that are also found in previously salaried, reluctant entrepreneurs.

“Enterpreneurship’s Big Five” suggested by Vecchio (2003) – locus of control, need for autonomy, need for achievements, risk-taking propensity and self-efficacy – can indeed predict reluctance. Specifically, low levels of these five measures are associated with a high degree of reluctance to become and to remain an entrepreneur. Even in cases of financial success, the “Big Five” could better predict the level of reluctance. They were all negatively related to a reluctance to remain an entrepreneur. The higher the level of the five measures, the lower the level of reluctance exhibited by the entrepreneurs.

In previous studies, these five attributes were investigated as predictors of motivation to become an entrepreneur (e.g. Boyd & Vozikis, 1994; Scherer, et al., 1989). In the current study, entrepreneurs who in different circumstances would be salaried employees expressed a willingness to engage in activities that are associated with entrepreneurship when they scored high on the five attributes. Hence, when forced to become entrepreneurs, the presence of these five attributes enabled them to them make the transition less reluctantly.

Self-efficacy is very important predictor of success in almost every aspect of life. Confidence in one’s ability to organize and execute a course of action affects people’s performance. Not surprisingly, self-efficacy was found to be a critical factor in predicting both the level of reluctance and success. This is understandable when considering the special circumstances in which reluctant entrepreneurs are placed. It is likely that these individuals did not choose to become entrepreneurs because they believed that they could do better as salaried employees or evaluated their ability to do so as such. Eden and Aviram (1993) argue that self-efficacy training can help people who are unemployed. The findings of the current study suggest that a similar training program would also help reluctant entrepreneurs to achieve better results. There is little likelihood that the employment status of these people will change; hence, increasing their confidence in their capabilities would be an excellent way to improve their performance and enhance their being.

In spite of their reluctance to become self-employed, the fact that most of these entrepreneurs have been doing very well is encouraging. Losing a job mid-career is not a dead end; moreover, there are rewarding alternatives.  However, the fact that these successful entrepreneurs are still unhappy with what they are doing is less encouraging. The current research suggests some ways of alleviating this problem. Strengthening reluctant entrepreneurs, specifically their managerial skills and self-efficacy, might help them become more enthusiastic about their new venture. Finding a proper and sustainable solution for these people would be good for them and good for the economy in general. Shane (2009) argues that encouraging people to become entrepreneurs is bad public policy; however, for people who cannot return to the labor market, starting a new business is clearly better than being unemployed.   



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About the Author

Eyal Yaniv is a Professor of Management, Graduate School of Business, Bar Ilan University.

About the Author

David M. Brock is an Associate Professor of International Management and Strategy at the Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev. He is also….
Read David Brock's full bio

About the Author

David M. Brock is an Associate Professor of International Management and Strategy at the Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev. He is also….
Read David Brock's full bio