Determinants of satisfaction for entrepreneurs

This study considers the extent to which entrepreneurs are satisfied with their businesses in their third year of business ownership. Entrepreneurial satisfaction might be viewed as a basic measure of performance. It may bear upon decisions by individual entrepreneurs about whether to invest more time and money, whether to cut back, or whether to close down. It may also influence whether entrepreneurs work effectively with their customers and employees. For researchers, the investigation of why, in particular settings, some entrepreneurs may be more satisfied than others may aid in the interpretation of past research, which has used this as a performance measure.This research draws upon a theoretical framework used in investigations of employee satisfaction. Called discrepancy theory, it suggests that individual satisfaction is determined, in part, by whether there is a “gap” between actual rewards or performance and the individual's goals or expectations.In this research, it was hypothesized that entrepreneurs emphasizing primarily noneconomic goals (such as doing the work they wanted to do) would have higher satisfaction when the business was experiencing lower levels of performance. For higher levels of performance, there would be no difference. In essence, the satisfaction of those emphasizing economic goals would vary more with economic performance. A related hypothesis was that, for this sample of start-up firms (many of which would be experiencing low levels of performance), those emphasizing noneconomic goals would have higher average levels of satisfaction. This was based upon the expectation that many start-up firms would be experiencing marginal performance, so that the “gap” between goals and performance would be greater for economically oriented entrepreneurs. The research also focused upon expectations, because one aspect of discrepancy theory suggests that satisfaction decreases if there is a gap between expectations and performance. Accordingly, it was hypothesized that, controlling for performance, entrepreneurs with higher initial expectations would subsequently have lower levels of satisfaction. Previous research suggests that membership in particular demographic groups may influence expectations. This led to hypotheses that older entrepreneurs, female entrepreneurs, and minority entrepreneurs would have lower levels of initial expectations. This, in turn, may influence later satisfaction. Thus, it was hypothesized that, controlling for performance, entrepreneurs in each of these groups would have higher satisfaction because their initial expectations would be lower. The study utilized a sample of 287 entrepreneurs who were followed over a 3-year period. The data on predictors of satisfaction were gathered in year 1, when the average owner had been in business for 11 months. The satisfaction measures were gathered 2 years later. By that time there should have been some stabilization in the routines of the business, and the entrepreneur could reflect upon historic performance and experiences in judging the extent to which business ownership had been satisfying. The data were analyzed primarily using path analysis, in which it was hypothesized that certain variables would have both direct and indirect effects upon satisfaction.It was found that the satisfaction of entrepreneurs emphasizing economic goals was not more sensitive to economic performance, at least within the range of performance considered in this sample. For this group of firms, many of which appeared to be experiencing marginal performance, those emphasizing noneconomic goals did express higher levels of satisfaction. It had been expected that those with higher initial expectations would later be less satisfied because they would have a greater expectation-performance gap. However, the opposite was found; those who were more optimistic initially were more satisfied later, even when controlling for performance. Demographic influences on initial expectations were examined. Contrary to expectations, none of the demographic traits was significantly related to initial assessment of likelihood of success. Older entrepreneurs, women entrepreneurs, and minority entrepreneurs were just as optimistic as those in other groups. The relationship between membership in these demographic groups and later satisfaction was also examined. No significant relationships were found for older entrepreneurs and minority entrepreneurs. However, there was some evidence (p = .07) that women entrepreneurs were more satisfied with business ownership.Two of the most interesting findings were those related to initial expectations and to women entrepreneurs. Contrary to discrepancy theory, those who had higher initial expectations were later more satisfied, not less. This may suggest, as Staw and Ross (1985) found in a longitudinal study of employee satisfaction, that attitudes are, in part, a function of stable individual traits. Those who had a positive view of their initial prospects later viewed the experience of business ownership more favorably, regardless of subsequent performance. For women entrepreneurs, the higher levels of satisfaction may reflect a view that they have fewer attractive alternatives; it may also be that they discover greater relative satisfaction from the day-to-day aspects of business ownership.For entrepreneurs and their advisors, the findings suggest that particular goals, attitudes, and backgrounds are likely to be associated with greater satisfaction. This may influence whether entrepreneurs stay with marginal businesses. For researchers, the study provides insight into discrepancy theory by considering its application to entrepreneurs rather than the hired employees normally studied. In addition, subjective measures of performance, such as satisfaction, have often been used in previous research on entrepreneurial performance. This study casts light on why, in particular settings, some entrepreneurs may be more satisfied than others.