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Why Employees Quit and Start Their Own Business

entrepreneur and a lightbulb, illustration

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Two Rutgers-led studies examine why some employees decide to quit their job and start a small business, even if they have tried and failed in the past.

The first study, published in the Journal of Applied Psychology, identifies four distinct "career shocks" that make employees more likely to strike out on their own:

  • They did not receive an expected raise, or it was lower than anticipated;
  • They took a pay cut;
  • Their business ideas were ignored or rejected at work; or
  • Their employer went through a scandal, merger, or other organizational change.

"Managers should understand the impact of their decisions, especially in this tight labor market, because you never know what will be the last straw for one of your top performers," says Scott Seibert, a professor in the Rutgers School of Management and Labor Relations.

What can employers do? A second study, published in Personnel Psychology, finds that ex-entrepreneurs are more willing to stay in a salaried job if they have greater autonomy and opportunities to use their entrepreneurial skills, such as initiating projects and leading people.

From Rutgers University
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