Why Do Individuals Choose Self-Employment?

42 Pages Posted: 2 Feb 2009

See all articles by Christopher J. Dawson

Christopher J. Dawson

Swansea University

Andrew Henley

Cardiff Business School, Cardiff University; IZA Institute of Labor Economics

Paul L. Latreille

University of Sheffield

Abstract

This paper undertakes an analysis of the motivating factors cited by the self-employed in the UK as reasons for choosing self-employment. Very limited previous research has addressed the question of why individuals report that they have chosen self-employment. Two questions are addressed using large scale labour force survey data for the UK. The first concerns the extent to which the self-employed are self-employed out of necessity, opportunity, lifestyle decision or occupational choice. The second concerns the extent to which there is heterogeneity amongst the self-employed on the basis of the motivations that they report for choosing self-employment. Factor analysis reveals a number of different dimensions of entrepreneurship on the basis of stated motivation, but with no evidence that being 'forced' into entrepreneurship through economic necessity is a significant factor. Motivation towards entrepreneurship is therefore highly multidimensional. Multivariate regression analysis is employed using a method to control for self-selection into self-employment. This reveals significant differences between men and women, with women concerned more with lifestyle factors and less with financial gain. Market-directed 'opportunity' entrepreneurship is more strongly associated with higher educational attainment. Those joining family businesses appear not to value prior educational attainment. Public policy to promote entrepreneurship therefore needs to be tailored carefully to different groups.

Keywords: self-employment, entrepreneurship, motivation, occupational choice

JEL Classification: L26, J24

Suggested Citation

Dawson, Christopher J. and Henley, Andrew and Latreille, Paul L., Why Do Individuals Choose Self-Employment?. IZA Discussion Paper No. 3974. Available at SSRN: https://ssrn.com/abstract=1336091

Christopher J. Dawson (Contact Author)

Swansea University ( email )

Singleton Park
Swansea, SA2 8PP
United Kingdom

Andrew Henley

Cardiff Business School, Cardiff University ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Paul L. Latreille

University of Sheffield ( email )

Sheffield University Management School
Conduit Road
Sheffield, S10 1FL
United Kingdom

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