Sitting on the fence

Research Paper Title:

“Sitting on the fence - Untangling the role of uncertainty in entrepreneurship and paid employment for hybrid entry”

Authors:

Gertraud Gänser-Stickler (University of Cologne)
Matthias Schulz (University of Cologne)
Christian Schwens (University of Cologne)

Background:

Most people around the world start their business next to their wage job, an entry mode coined hybrid entrepreneurship. While it’s known that uncertainty in entrepreneurship makes such hybrid entries more likely than entries into full-time entrepreneurship, the role of uncertainty in paid employment has been largely neglected. This study highlights that hybrid entrepreneurship encompasses not only the decision to start a business, but also the decision to keep the wage job, which suggests that uncertainty in paid employment also shapes the decision between hybrid and full-time entry. By extending current theory on hybrid entrepreneurship to include also the decision to keep the wage job, this article increases knowledge on what makes individuals prefer hybrid over full-time entry. Furthermore, the empirical results suggest that uncertainty in paid employment not only matters for the decision between hybrid and full-time entry, but also for the decision to enter into entrepreneurship at all.

Methodology:

Sample: Full-Time Employees Aged 25 to 59 in the U.S.-Current Population Survey
Sample Size: 6,673
Analytical Approach: Logit Model

Hypothesis:

1. Uncertainty in entrepreneurship makes entry into hybrid entrepreneurship more likely than entry into full-time entrepreneurship (not supported)

2. Uncertainty in paid employment makes entry into hybrid entrepreneurship less likely than entry into full-time entrepreneurship (not supported)

3. The positive impact of uncertainty in entrepreneurship on the likelihood to enter into hybrid rather than full-time entrepreneurship weakens with an increasing uncertainty in paid employment (supported)

Results:

• Uncertainty in paid employment negatively moderates the positive impact of uncertainty in entrepreneurship on the decision for hybrid (compared to full-time) entry

• Uncertainty in paid employment has a positive impact on the decision whether to enter entrepreneurship at all (as either hybrid or full-time entrepreneur) compared to staying in paid employment

Conclusion:

This study builds on a real options portfolio rationale to explain how not only uncertainty in entrepreneurship, but also uncertainty in paid employment determines individuals’ decision to enter into hybrid or full-time entrepreneurship. Presenting hybrid entrepreneurship as a portfolio of a real option to grow in entrepreneurship and a real option to abandon paid employment allows us to disentangle how the separate uncertainties that underlie each real option drive the portfolio’s value jointly and in isolation. This study not only has useful implications for investigations of what drives hybrid entry but also contributes to debates on the influence of uncertainty in the entrepreneurial context.