8. Entrepreneurial motives
People
become self-employed for a variety of motives, such as the following:
-
refuge
from unemployment into self-employment due to economic crisis or discrimination
in labour markets
- independence and ‘doing one’s own thing’ as an aim in itself
- desire to combine the personal with work
- maintenance of small scale, escape from pressures for growth
- unwillingness or inability to function under a hierarchy
- ambition to pursue ideas that are not accepted in established firms
- motivation to serve society according to one’s own convictions
- thirst for profit, power or growth
- answer to a ‘wake-up call’ from some personal crisis (illness, accident, divorce, bereavement)
- an opportunity that happens to come along, in an inheritance, succession of a relative in a family
firm, an offer of a partner to join, a facility that happens to become available.
The variety
of motives and ways of doing things further increases the transaction costs
that small firms impose on others. It also complicates government policy for
small firms. While due to the idiosyncrasy of small firms a differentiated,
custom-made approach, with tailored regulations and schemes is in order,
precisely due to the small scale of the firms that is uneconomic.
Note that
only some of the motives for self-employment are related to innovation. Some
may well yield a highly traditional or even conservative venture. In fact, the
great majority of self-employed (say 80 %) are hardly innovative. Novelty often
goes no further than a new location for a traditional activity.
Often, the
only source of income is profit from the firm. As a result, motivation is strong.
In bad times, independent entrepreneurs are more willing to absorb a cut in
income than employees would be. Next to this advantage there is also a possible
disadvantage here. For lack of a spread of risk (as is offered in capital
markets) the entrepreneur may be more conservative, less willing to stake his
source of income in risky projects. In fact, as already indicated, the majority
of small business is traditional and wary of change.
The
combination of private and commercial interests can yield problems. The bonds
and emotions of family or partnership may yield a lock-in into relationships
that are (no longer) viable, and in an excess of trust and informality, with
too few explicit agreements, and an obstacle in expressing criticism. Such lack
of openness can in fact lead to a breakdown of trust in the failure to achieve
expectations that were left unclear and in misunderstandings that were left
undiscussed.
Often, an
entrepreneur is either technically or commercially oriented and inspired, and
seldom both at the same time, while both orientations are needed for success.
Hence one often sees teams of technical and commercial partners. A third and
neglected dimension here is organizational ability, in particular the ability
to collaborate with other firms.
By leaving
innovation to entrepreneurs risk is privatized, left to entrepreneurs who
undertake risk willingly. The alternative is to let government innovate, by
which risk is socialized and imposed on a society that is largely risk-averse.
That would not come off the ground.