It is widely acknowledgedthat entrepreneurial activity has a huge bearing on the economies of nationsand the global economy at large. Badal (2010) recognizes entrepreneurialactivities as important owing to the fact that they lead to the creation of jobs.As such, entrepreneurship has been a topic that conjures a lot of interest fromtime memorial. Economists have featured entrepreneurs as their major feature intheir theories, either so as to establish differences between entrepreneurs andemployees in organizations in the organization of resources or as boosters ofchange within societies. This trend has persisted to the present and recentstudies have placed their focus on gaining a better understanding of thespecific characteristics that influence the choices to venture into entrepreneurshipas well as comprehending the characteristics that might raise the capacity ofsuccess for an entrepreneur. In specific, researchers have placed significantfocus on the phenomena of employee entrepreneurship that sees employeesstarting up abusiness that deals with thesame line of work as the incumbent firm.
A number of researchers examine thefrequency and dynamics of new businesses that are started from scratch byentrepreneurs who subsequently move into self-employment. The beliefs, as well as attitudes regardingself-employment, have also been assessed in comparison to the attitudesof employees working in organizations. According to Badal (2010) and otherscholars such as Agarwal et al. (2012), there is asignificant reason to believe that entrepreneurial activities thatemanate from employment sectors are significantly successful since theyintegrate the knowledge of parent firms with the flexibility that is broughtabout by entrepreneurial activities.
Regardless of the significanceto both economic thinkers and policy makers, research on entrepreneurship andemployment are partially impaired by monumental issues surrounding thedefinition entrepreneur and the demarcation between entrepreneurial activitiesand normal employment. Most of the empirical work has concentrated on self-employment(Alvarez, Agarwal, & Sorenson,2006). But according toSchumpeter and Knight, entrepreneurs refer to individuals who introduceinnovations to markets as they seek to create destruction and bear the risk of uncertaintiessurrounding the success of entrepreneurship work. From this definition, it isclear that self-employed individuals are not simply entrepreneurs(Demirgüç-Kunt, Klapper, & Panos,2007). As a matter of fact,according to some researchers, some self-employment efforts and ventures can beexplained as being lack of opportunities for employment. Similarly, Baumol(2013) differentiates between innovative and non-authentic entrepreneurs andcontends that only innovative entrepreneurs are significant in the success ofan economy in the long run. Conversely, non-authentic entrepreneurs are responsibleforresponding to growing population’s local demand and are thus symptoms of aneconomy that grows rather than the causes of that growth.
In order to understand thedynamic and current trend in the interplay between entrepreneurial activitiesand employment, it is critical to draw the history of the focus on the subject.In the past century, Schumpeter contended thatentrepreneurs are responsible forthe financial and technical innovations that burgeon in the face of fallingprofits and rising competition(Baumol, 1979). Through developing novel products and establishingnew ways of trading, entrepreneurs are credited for creating new avenues andmarkets for goods hence leading to burstsin economic activities in terms that may be seen as creative.
Over the years,both economists and researchers have included entrepreneurs in businesstheories and models, including in the theories of economists Robert Lucas andTheodore Schultz. According to Schultz (1975), entrepreneurs were seen as peoplewith significant value that they could generate through taking advantage of theopportunities they would create in developing new products hence causing disequilibria.The need for the new products was seen as significant and also as a respondentto technological developments(Klein & Cook, 2006). On the other hand, Lucas (2008) contended thatfirm managers or entrepreneurs were organizers of inputs. This is significantas the two terms, manager and entrepreneur, have been interchanged over theyears. Based on the notion that only efficient managers could effectivelyorganize inputs, Lucas contended that only efficient managers could ventureinto entrepreneurial activities, start firms, and run them(Lucas, 2008).
Recent work by scholars Sanandajiand Leeson (2010) and Hursrt andPugsley (2015) cast further insight indifferentiating an entrepreneur from those who are self-employed. The insightis drawn from their study on the relationship between entrepreneurship in itssalient forms and self-employment. By salient aspects, the researchers focus oninnovation and business creation in both urban as well as rural areas(Hurst & Pugsley, 2015). A combination of data from firms around the world depicts a trend whereby employees of incumbentfirms leave their work to get into self-employment with a number of the self-employmentsstanding out to be innovative entrepreneurial activities(Preto, Baptista, & Lima, 2009). As such, the transition from paid employment toentrepreneurial activities has been studied and theorized with growing body ofliterature on entrepreneurs who have had previous experience working in organizationsbefore founding their own ventures. In assessing the differences between theexperiences of paid employees and entrepreneurs, Goyal (2016) notes that thereare monumental differences. The author notes that paid employees know thattheir innovative ideas may never be addressed, and research shows that this maysadly be the case,especially in governmentpositions.
It has further been noted that all people who are salaried asemployees are afraid of getting into independent entrepreneurial ventures.Goyal (2016) further compares the autonomy between an entrepreneur and a paidemployee and proceeds to contend that paid employees have talents that remainunexploited as opposed to entrepreneurs. The characteristics of entrepreneurshavealso been assessed by a number of authors in comparison to paid employment.From the strand of literature that specifically deals with the distinguishingfeatures of entrepreneurs and entrepreneurship,it is noted that entrepreneurs are risk takers sometimes venturing intoimpossibilities(Sanandaji & Leeson, 2013). For instance, Indian consumers may be consideredas conventional purchasers who do not buy online but an entrepreneur sees thatfrom a different light(Henrekson & Sanandaji, 2011). The aspirationsand activities of entrepreneurs are wellnoted in theliterature showing that theysee opportunities where others see uncertainty. For instance, Startups such asStarbucks, Microsoft, and Apple began as small ventures that sought to addressissues that had been prevalent yet untouched by many. The examples are not apreserve of big brands but every entrepreneur is attempting to make the world abetter place through solving the issues of consumers.
In this study, thechanging paradigms, as noted in the strand of literature on the current trendof venturing into entrepreneurial activities, are assessed. As such, this studywill seek to shed insight into the issue of conversion from employment to entrepreneurship.That is, in the process of transitioningfrom paid employment to entrepreneurial activities.
In considering the issue oftiming, of when individuals move on to become entrepreneurs on their own, thisstudy will consider empirical work from across the globe narrowing down tocases and trends in India. The evidence will interact well with theories andcomplement current findings in the areaof study. The goal is to provide a characterization of the directionalcausality between the expected benefits from the exercise of entrepreneurshipand the period spent in employment by most entrepreneurs prior to venturinginto their private practice. MethodologyThis paper takes asystematic review approach with studies on the research topic being consideredfor review. The researcher used keywords to search for relevant articles injournals and other relevant repositories. The keywords included employer ship, entrepreneurship,paid employment, and entrepreneurial activity.
Phrases and connecting termssuch as ‘versus’ and ‘movement from’ were utilized to ensure that relevantarticles were extracted. The review of literature also focussed on theglobal sphere and later narrowed down to the Indianeconomic landscape. The desk review was informed by theoretical approaches thatelucidate the dynamics between paid employment and entrepreneurialactivities.The models considered in this review had to provide a good and significantexplanation of the trends in the market as far as amovement for paid employment to entrepreneurial activity isinvolved. With the general results from the various repositories, theresearcher further narrowed down to the articles that focused on the scope of the study. Journals that were older than 10years were also left out.
In addition to the important information retrievedfrom journals, the research also considered papers that contained importantinformation and that fit the classification of working papers hence able to beconsidered as being of reputable value. In addition to that, the research alsoconsidered statistical information on employment from labour sites including the Indian labourofficial website. Literature ReviewTransitions between paidemployment and entrepreneurial activities including transitions back to paidemployment are commonplace yet they have only become popular among scholars.According to researchers, around a third of the young people, today are launching new ventures while a great majority of entrepreneursare getting into ventures that have already been initiated. This pattern ofmobility shows that the transition to new ventures or into entrepreneurialactivities occurs within the period of paid employment, mostly during the earlyyears(Sanandaji & Leeson, 2013). This is also the case for serial entrepreneurs whohold series of unique entrepreneurial experiences that have starting points andending points.
Theoretical underpinnings from sociology focus on two approachesin the attempt to elucidate transition from paid employment to entrepreneurialactivity. The attainment approach, for instance, perceives career as a sequencethat is ordered including experience in the corporate world. Growth in thesequence represents positive progress as well as advancement. The conventionalnotion of attainment depends on the principles of steps, opportunities, andadvancements, and is majorly focussed on the progressmade in and outside formal organizations. Researchers in the field of career advancements consider the progressthat people make and the speed at which they make this progress, consideringtheir age, gender, and other demographics, in making inferences on theirconclusions.
Sharkey’s (2014) entrepreneurial entry model explains thetransition of individuals from paid employment to entrepreneurial activities arguingthat the movement occurs based on the occurrence of opportunities withinorganizations and externally. According to another theoryreferred to as the stage passages, transformations and transitions occurgradually with demarcated beginnings. A stage passage stands not only as atemporary phase that individuals go through as they move from one social role toanother but as a significant change in the identity of an individual. Thenotion of entrepreneurship as a transformation of identity has attracted the enthusiasmof scholars over time. Soto (2010), for instance, considers moving from paidemployment into entrepreneurship as a significant situation that involves achange in identity.According to Barnett and Dobrev (2011), transitioning intoentrepreneurship isdriven by identity dissonance – a conclusion that the authors make particularlyon founders of ventures as they develop their space over time.
On the otherhand, though, there are some notions from the stage theory that have remainedfallow. For instance, notions such as that transition from states such as beingsick to being well or from being healthy to being sick represent movementacross less desirable phases to better ones may or may not be reversible whileothers(de Soto, 2010). This has raised concerns over the dependency pathand the reversibility and repeatability of various transitions with questionsthat have not caught the attention of many. In most career cycles, a significantnumber of individuals usually move into entrepreneurship and this is likely acommonly shared model of the typical and ideal entrepreneurship engagement. Yeta fascinating perspective of entrepreneurship as a legitimized and sociallyaccepted role is that there are various normative models. Compare, forinstance, entrepreneurship to other commonly understood choices in careers suchas in the health sector or in law(Dobrev & Barnett, 2015).
These alternative paths in career arecharacterized by a strong age grading factor; some individuals who may have thedesire to become physicians comprehend the timing and sequence of decisionsthat are needed to pursue that area. Hence, very few people select that careeras a second choice. Entrepreneurship, on the other hand, appears to be brandedby much more heterogeneity(Kickul & Lyons, 2012). In addition to the perceptions of entrepreneurshipas the termination of a career in paid employment, the popular perception iswell captioned by stories of entrepreneurial activities initiated by schooldrop outs – Steve Jobs and Mark Zuckerberg. Similarly, a plethora of studentsin business schools turns toentrepreneurship once they complete school. Studies show that highly developedeconomies encourage entrepreneurship and there are fewer fears of moving from paid employment to entrepreneurship.
Inthe United States, for instance, around 39% of new employments are beingcreated every year with around 7% credited to entrepreneurial activity (Badal,2010). Research also shows that the high degree of risk in the global economy –as evidenced by the high unemployment index levels that have led to job creation rates to stall and economic recoveryefforts to be muted – has renewed the interest among many for entrepreneurialactivity as the only means to generate significant economic growth. In India, the employment sector is uncertainjust like the global trend. In that situation, the population is quickly movingto multidimensional aspects of entrepreneurial activities where people arehighly innovative in order to find ways to exploit the opportunities that arethere. The entrepreneurs in the Indian community are mostly from family basedbusinesses. In certain cases, the entrepreneurs in the current generation arebreaking off into their own ventures from the first generation. According toGulati and Sharma (2013), this current century has seen a lot of the natives inIndia venture into entrepreneurial activities. Over this time, there has been avisible trend of the natives getting into businesses both in the local scene aswell as in the international scene.
Research also shows that the widespreadsecular language, increasing nationalist feelings, and reforms in social movementshave had a fillip in the starting phase in the emergence of entrepreneurialactivities. Some studies show that entrepreneurial activities in the Indianmarket have been male dominated, a phenomenon that has attracted attention. However,the recent past has seen the landscape in India change and today there aresignificant entrepreneurs in the country(Sherwani & Sabiha, 2015). Similarly, women from all regionsin the world are exerting effort to match up their entrepreneurial activitieswith men. Except in some cases where Islamic nations, laws currently favourwomen entrepreneurship. As such, the trend in India follows the corporate worldand much progress has been witnessed in the past two decades. Gulati and Sharma(2013) notes that India is becoming an entrepreneurial nation because there aremany reasons for it including freedom of speech as well as, high caliber ofhuman talent, diversity in all aspects, venture capital, efficient capitalmarket, young populace, entry of competitors and multinational companies, absenceof legacy technologies that offer leapfrogging opportunities, and uniquestructure of the market.
As such, it can be inferred that India has been ableto achieve a significant portion of its potential through entrepreneurialactivities, some studies put this attainment at 10% growth. A deeper insight into the scenario inIndia, statistics show that the country that is home to more than a billionunder 25’s and a powerhouse of physical and intellectual energy is just inswift transition as far as social entrepreneurship is concerned. An analysis ofthe statistics from the country’s labour report shows that the country’sunprecedented population growth will lead to a huge increase in the productiveage group. With such statistics, there is no denying the significance of educatingthe young people, creating jobs, and training the young people for the jobmarket (Badal, 2010). By the year 2025, projections show that India will behome to around 25% of the entire global workforce(Sherwani & Sabiha, 2015).
With such numbers, there isdefinitely a need for a formula where some of the paid employees or even thosewho have never been in employment to get into entrepreneurship. According toscholars in entrepreneurship in the country as well as the India labour report,there is a need for a regulatory and legal ecosystem that delineates employabilityand provides an enabling environment for the creation of jobs by becomingentrepreneurs. Research acknowledges social entrepreneurs for their innovationand creativity which closes the gaps in the job market and development(Dobrev & Barnett, 2015; Sherwani& Sabiha, 2015). Whether to solve education, water,sanitation, or energy issues, social entrepreneurs are known to deviseinventive methods to bring novel solutions to social issues. However, all thisinventiveness may not necessarily solve the employers issue that is at hand orthe generation of employment where jobs were not in existence before.
Conclusions and RecommendationsIn sum, it is clear thatentrepreneurs are important and entrepreneurial activity is critical to anyeconomy. That said, the role that entrepreneurs play in any economy bearssignificant influence to the nation and citizens – both employed and self-employed.This paper has discussed the various scenarios including movement from paidemployment to entrepreneurship and founding start-upsinstead of advancing thecareer ladder in paid employment.
The pressure experienced by economies in terms of high rates of employmenthave been cited as one of the influencing factors that underlie entrepreneurialactivity. Further, the benefits of entrepreneurs to the entrepreneursthemselves and to other parties have also been assessed as influencing factors thatdrive people to consider entrepreneurship. The former is a significant factoras young people with energy and intellect have to grapple to find success inthe corporate world. The scenario in India is that the population is growing ata faster rate than paid employment can support and there is need to train theyoung people to become entrepreneurs. This study recommends training of thosewith the willing heart to venture into entrepreneurship, particularly in Indiawhere the economy may not be able to support the young and emerging talent, tobe able to exploit the opportunities that are available.