Entrepreneurial aspiration and transition into self-employment: evidence from British longitudinal data

Abstract

This paper is about whether transitions into self-employment are preceded by well-formed entrepreneurial aspirations, and the extent to which aspiration and actual transition are associated with the same factors. It analyses data from a British general purpose longitudinal survey, allowing the tracking of stated entrepreneurial aspiration through to self-employment transition one or more years later. The majority of transitions are not preceded by a statement of aspiration a year earlier and therefore many new ventures may be hastily conceived. Studies which identify nascent entrepreneurs from a sample of the general population and subsequently trace new venture creation may therefore miss significant numbers of entrepreneurial transitions. Although first noted by Katz (1990), this issue has attracted relatively little research attention since. The paper adopts the novel approach of allowing unexplained heterogeneity in the formation of aspirations to be correlated with that in the self-employment transition choice. Aspirations are associated with displacement factors such as low job satisfaction, but this finding is not translated into an association with transitions. Aspirations are not found to be associated with intentional activity such as active saving, or with correlates of personal efficacy such as financial wealth and educational background. Aspirations display regional variation with some regions having higher levels of aspiration that do not translate into a higher start-up rate. These findings reinforce a strong conclusion that policy should address the level of preparedness for new business start-up amongst aspiring entrepreneurs.