In wider public debate, entrepreneurs are often characterised as ‘gold hunters', always in pursuit of fresh opportunities, creating - and at the same time - exploiting new areas of economic activity. While not technically untrue, this view discards a lot of nuances.
For a start, many entrepreneurs could earn more by working as an employee for someone else. Second, entrepreneurship allows a person greater autonomy over their work schedule, offering a psychological incentive. After all, striving for control over our lives is a fundamental part of being human.
A common claim is that entrepreneurs suffer higher levels of burnout compared to employees. While entrepreneurs are not immune to burnout, as they tend to be very engaged with their work and don't get much daily recovery after work hours, this belief is false. In fact, the opposite is true.
As Head of the Entrepreneurship Unit at Aalto University School of Business in Finland, I worked with colleagues at prestigious universities and business schools based around the world to analyse survey information gathered from over 340 entrepreneurs and 1,000 full-time employees located in the UK.
We find that entrepreneurs experience fewer demands such as time pressures and admin tasks which build stress and have been linked to burnout. Entrepreneurship also offers a greater degree of flexibility and autonomy, so people can plan and carry out each day as they see fit. These results contradict assumptions in earlier research on the topic which suggests that entrepreneurs have to deal with particularly stressful work demands.
In contrast, the common view that self-employed individuals are less stressed than entrepreneurs who employ people is true. We find that solo entrepreneurs benefit from an especially positive pattern of work demands and resources. This means that the demands of their jobs are relatively low compared with the resources available to them to meet those demands - in a way, the positive aspects of the job outweigh the negatives.
Both types of entrepreneur are highly engaged in their work, but those who employ other people don't benefit from the same favourable balance of demands and resources. As a result, they are more likely to burn out than entrepreneurs who don't employ anyone.
When we take into account the fact that entrepreneurs could often make more money being employed by someone else, it becomes clear that the psychological benefits of entrepreneurship are a large factor in why people choose it as a career path.
In academic theory, we call this psychological utility - it means that a certain outcome is subjectively valuable to a person. And, in the case of entrepreneurship, working for yourself is valuable because of the lower stress levels and greater autonomy it offers, both of which help protect people from burnout. It's a sort of compensation for the fact that you could be earning more money in another occupation.
Another myth that frequently comes up is the idea that serial entrepreneurs are better equipped to cope with stress than people who are running a business for the first time. It might seem like a natural assumption, but the findings of our study show that veterans and novices both experience the same levels of stress and burnout when launching a business. The business's age also does not matter. For instance, burnout and stress are not more prominent among people fresh to the world of entrepreneurship with young businesses.
There are several ways this can be explained. No two business ventures are the same; each one comes with a unique set of challenges which must be dealt with, regardless of the entrepreneur's level of prior experience. Beginners will face difficulties navigating a new industry, building networks, and understanding the regulatory environment. At the same time, seasoned pros often come up against having to juggle managing multiple ventures, scaling businesses, and dealing with more complex organisational issues.
Entrepreneurs also have different coping mechanisms. The effectiveness of these mechanisms is usually determined by factors such as the extensiveness of personal networks, or access to resources, which are not necessarily determined by the length of time a person has spent as an entrepreneur.
On the other side, when we look at the problems facing employees, we find that they often have no opportunity to turn strong work engagement into protection against burnout. This is why we recommend organisations start arranging jobs more like the entrepreneurial model.
For example, managers and corporate leaders should consider promoting individual job crafting, a collaborate process in which employees make a greater contribution in co-designing their role at the company and work process. This creates positions better aligned with each person's individual needs, goals, and skills.
This kind of thinking could be especially important in highly stressful jobs that require employees to consistently show a high level of engagement. This includes teachers, police officers, and healthcare workers.
Of course, the process depends on strong collaboration and mutual trust. But it is clear and intuitive that tailoring jobs to meet employee's requirements will help readjust the balance of demands and resources to better insulate against burnout