Entrepreneurship as a non-profit-seeking activity

  • Matthias Benz


It is typically assumed that people engage in entrepreneurship because there are profits to be made. In contrast to this view, this paper argues that entrepreneurship is more adequately characterized as a non-profit-seeking activity. Evidence from a broad range of authors and academic fields is discussed showing that entrepreneurship does quite generally not pay in monetary terms. Being an entrepreneur seems to be rather rewarding because it entails substantial non-monetary benefits, like greater autonomy, broader skill utilization, and the possibility to pursue one’s own ideas. It is shown how incorporating these non-monetary benefits into economic models of entrepreneurship can lead to a better understanding of the phenomenon.


Entrepreneurship Self-employment Wage and return differentials Non-monetary work benefits Job satisfaction 

JEL Classification

M13 J23 J31 J32 M54 



I would like to thank Thomas Astebro, William Baumol, Gary Becker, Raquel Bernal, Patrick Bolton, Robert D. Cooter, Bruno S. Frey, Gerald Hosp, Paul DiMaggio, Henry Hansmann, Amir Licht, Raymond Miles, Ebba Norsted, Alois Stutzer, Tom Tyler, Burton Weisbrod, Oliver Williamson, several anonymous referees and seminar participants at UC Berkeley, Northwestern University, Harvard Business School and the University of Zurich for helpful comments and discussions. The paper was written while I was a visiting research fellow at the Boalt School of Law, University of California at Berkeley, whose hospitality I gratefully acknowledge, as well as financial support by the Swiss National Science Foundation.


  1. Aghion, P., & Howitt, P. (1997). A schumpeterian perspective on growth and competition. In D. M. Kreps & K. F. Wallis (Eds.), Advances in economics and econometrics: Theory and applications, vol. 2 (pp. 279–317). Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
  2. Amabile, T. (1983). The social psychology of creativity. Berlin Heidelberg New York: Springer.Google Scholar
  3. Amabile, T. (1997). Motivating creativity in organizations: On doing what you love and loving what you do. California Management Review, 40(1), 39–58.Google Scholar
  4. Amit, R., MacCrimmon, K. R., Zietsma, C., & Oesch, J. M. (2000). Does money matter?: Wealth attainment as the motive for initiating growth-oriented technology ventures. Journal of Business Venturing, 16, 119–143.CrossRefGoogle Scholar
  5. Arabsheibani, G., de Meza, D., Maloney, J., & Pearson, B. (2000). And a vision appeared unto them of a great profit: Evidence of self-deception among the self-employed. Economics Letters, 67, 35–41.CrossRefGoogle Scholar
  6. Åstebro, T. (2003). The return to independent invention: Evidence of unrealistic optimism, risk seeking or skewness loving? Economic Journal, 113(484), 226–239.CrossRefGoogle Scholar
  7. Åstebro, T. (2005). Does it pay to be a jack-of-all-trades? Working Paper, Rotman School of Management, University of Toronto.Google Scholar
  8. Backes-Gellner, U., & Lazear, E. P. (2003). Entrepreneurs and specialists: Jack-of-all-trades or master of one? Mimeo, University of Zurich.Google Scholar
  9. Baumol, W. J. (1990). Entrepreneurship: Productive, unproductive, and destructive. Journal of Political Economy, 98, 893–921.CrossRefGoogle Scholar
  10. Baumol, W. J. (1993). Entrepreneurship, management, and the structure of payoffs. Cambridge and London: MIT.Google Scholar
  11. Baumol, W. J. (2004). Education for innovation: Entrepreneurial breakthroughs vs. corporate incremental improvements. NBER Working Paper No. 10578.Google Scholar
  12. Benz, M., & Frey, B. S. (2007). The value of doing what you like: Evidence from the self employed in 23 countries. Journal of Economic Behavior and Organization, forthcoming.Google Scholar
  13. Blanchflower, D. G. (2000). Self-employment in OECD countries. Labour Economics, 7, 471–505.CrossRefGoogle Scholar
  14. Blanchflower, D. G. (2004). Self-employment: More may not be better. Swedish Economic Policy Review, 11(2), 17–73.Google Scholar
  15. Blanchflower, D. G., & Oswald, A. J. (1998). What makes an entrepreneur? Journal of Labor Economics, 16(1), 26–60.CrossRefGoogle Scholar
  16. Blanchflower, D. G., Oswald, A. J., & Stutzer, A. (2001). Latent entrepreneurship across nations. European Economic Review, 45, 680–691.CrossRefGoogle Scholar
  17. Brockhaus, R. H. (1980). Risk taking propensity of entrepreneurs. Academy of Management Journal, 23, 509–520.CrossRefGoogle Scholar
  18. Busenitz, L. W., & Barney, J. B. (1997). Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making. Journal of Business Venturing, 12, 9–30.CrossRefGoogle Scholar
  19. Cramer, J. S., Hartog, J., Jonker, N., & van Praag, M. (2002). Low risk aversion encourages the choice for entrepreneurship: An empirical test of a truism. Journal of Economic Behavior and Organization, 48(1), 29–36.CrossRefGoogle Scholar
  20. Desai, M., Gompers, P., & Lerner, J. (2003). Institutions, capital constraints and entrepreneurial firm dynamics: Evidence from Europe. NBER Working Paper No. 10165.Google Scholar
  21. Djankow, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2002). The regulation of entry. Quarterly Journal of Economics, 117(1), 1–37.CrossRefGoogle Scholar
  22. Evans, D., & Leighton, L. (1989). Some empirical aspects of self-employment. American Economic Review, 79, 519–535.Google Scholar
  23. Frank, R., & Cook, P. (1995). The winner-take-all society. New York: Free.Google Scholar
  24. Frey, B. S., & Benz, M. (2003). Being independent is a great thing: Subjective evaluations of self-employment and hierarchy. CESifo Working Paper No. 959.Google Scholar
  25. Frey, B. S., Benz, M., & Stutzer, A. (2004). Introducing procedural utility: Not only what, but also how matters. Journal of Institutional and Theoretical Economics, 160, 377–401.CrossRefGoogle Scholar
  26. Friedwald, W. (1995). Sinatra! The song is you: A singer’s art. New York: Scribner.Google Scholar
  27. Gimeno, J., Folta, T. B., Cooper, A. C., & Woo, C. Y. (1997). Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly, 42, 750–783.CrossRefGoogle Scholar
  28. Hamilton, B. H. (2000). Does entrepreneurship pay? An empirical analysis of returns to self-employment. Journal of Political Economy, 108, 604–632.CrossRefGoogle Scholar
  29. Hundley, G. (2001). Why and when are the self-employed more satisfied with their work? Industrial Relations, 40, 293–317.Google Scholar
  30. Hvide, H. (2004). Firm size and the quality of entrepreneurs. Working Paper, Graduate School of Business, Stanford University.Google Scholar
  31. Kawaguchi, D. (2002). Compensating wage differentials among self-employed workers: Evidence from job satisfaction scores. Institute of Social and Economic Research, Osaka University, Discussion Paper No. 568.Google Scholar
  32. Kerins, F., Smith, J., & Smith, R. (2004). Opportunity cost of capital for venture capital investors and entrepreneurs. Journal of Financial and Quantitative Analysis, 39, 385–405.CrossRefGoogle Scholar
  33. Kihlstrom, R. E., & Laffont, J. J. (1979). A general equilibrium entrepreneurial theory of firm formation based on risk aversion. Journal of Political Economy, 87, 719–749.CrossRefGoogle Scholar
  34. Kirzner, I. M. (1973). Competition and entrepreneurship. Chicago, IL: University of Chicago Press.Google Scholar
  35. Klapper, L., Laeven, L., & Rajan, R. (2004). Barriers to entrepreneurship. Working Paper, World Bank.Google Scholar
  36. Knight, F. H. (1921). Risk, uncertainty and profit. New York: Houghton-Mifflin.Google Scholar
  37. Lazear, E. P. (2005). Entrepreneurship. Journal of Labor Economics, 23, 649–680.CrossRefGoogle Scholar
  38. Lindh, T. & Ohlsson, H. (1996). Self-employment and windfall gains: Evidence from the Swedish lottery. Economic Journal, 106(439), 1515–1526.CrossRefGoogle Scholar
  39. Martinelli, A. (2001). Entrepreneurship. In N. J. Smelser & P. B. Baltes (Eds.), International encyclopedia of the social and behavioral sciences (pp. 4545–4552).Google Scholar
  40. McMillan, J., & Woodruff, C. (2002). The central role of entrepreneurs in transition economies. Journal of Economic Perspectives, 16(3), 153–170.CrossRefGoogle Scholar
  41. Merz, J. (2004). Reichtum in Deutschland: Mikroanalytische Ergebnisse der Einkommensteuerstatistik für Selbständige und abhängig Beschäftigte. Perspektiven der Wirtschaftspolitik, 5(2), 105–126.CrossRefGoogle Scholar
  42. Moskowitz, T. J., & Vissing-Jorgensen, A. (2002). The returns to entrepreneurial investment: A private equity premium puzzle? American Economic Review, 92, 745–778.CrossRefGoogle Scholar
  43. Murphy, K. M., Shleifer, A., & Vishny, R. W. (1991). The allocation of talent: Implications for growth. Quarterly Journal of Economics, 106, 503–530.CrossRefGoogle Scholar
  44. OECD (1992). OECD employment outlook, Ch. 4: Recent trends in self-employment. Paris: Organisation for Economic Cooperation and Development.Google Scholar
  45. Parker, S. C. (2003). What is entrepreneurship? A proposal for a data-based methodology. Academy of Entrepreneurship Journal, 9(2), 45–66.Google Scholar
  46. Parker, S. C. (2004). The economics of self-employment and entrepreneurship. Cambridge, UK: Cambridge University Press.Google Scholar
  47. Poutvaara, P., & Tuomala, J. (2004). What is left to residual claimants? The empirics of income reported by entrepreneurs and workers. IZA Working Paper No. 1178.Google Scholar
  48. Puri, M., & Robinson, D. (2005). Optimism and economic choice. NBER Working Paper No. 11361.Google Scholar
  49. Rosen, S. (1981). The economics of superstars. American Economic Review, 71, 845–858.Google Scholar
  50. Schuetze, H. J., & Bruce, D. (2004). The relationship between tax policy and entrepreneurship. Swedish Economic Policy Review, 11, 235–265.Google Scholar
  51. Schumpeter, J. A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.Google Scholar
  52. Stern, S. (2004). Do scientists pay to be scientists? Management Science, 50, 835–853.CrossRefGoogle Scholar
  53. Throsby, D. (1996). Disaggregated earnings functions for artists. In V. A. Ginsburgh & P.-M. Menger (Eds.), Economics of the arts: Selected essays (pp. 331–346).Google Scholar
  54. Towse, R. (2000). Creativity, incentive and reward. An economic analysis of copyright and culture in the information age. Cheltenham: Edward Elgar.Google Scholar
  55. Tucker, I. B. (1988). Entrepreneurs and public sector employees: The role of achievement motivation and risk in occupational choice. Journal of Economic Education, 19, 259–268.CrossRefGoogle Scholar
  56. van Praag, M. (1999). Some classic views on entrepreneurship. De Economist, 147, 311–335.CrossRefGoogle Scholar
  57. van Praag, M., & Cramer, J. S. (2001). The roots of entrepreneurship and labor demand: Individual ability and low risk aversion. Economica, 68(269), 45–62.CrossRefGoogle Scholar
  58. Vivarelli, M. (1991). The birth of new enterprises. Small Business Economics, 3, 215–223.CrossRefGoogle Scholar
  59. Vivarelli, M. (2004). Are all the potential entrepreneurs so good? Small Business Economics, 23, 41–49.CrossRefGoogle Scholar
  60. Wagner, J. (2003). Testing Lazear’s jack-of-all-trades view of entrepreneurship with German micro data. Applied Economics Letters, 10, 687–689.CrossRefGoogle Scholar
  61. Wassall, G. H., & Alper, N. O. (1992). Toward a unified theory of the determinants of the earnings of artists. In R. Towse & A. Khakee (Eds.), Cultural economics. Berlin Heidelberg New York: Springer.Google Scholar
  62. Wasserman, N. (2004). Executive compensation in entrepreneurial teams: The founder gap, board membership, and pay for milestones. Best Paper Proceedings, Academy of Management 2004 Annual Meeting.Google Scholar

Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  1. 1.Institute for Empirical Research in EconomicsUniversity of ZurichZurichSwitzerland

Personalised recommendations