Are new entrepreneurs better off quitting or keeping their day jobs when they start a business?
Researchers Joseph Raffiee and Jie Feng examined the performance of hybrid entrepreneurs compared to full-time entrepreneurs. In their fascinating study, they identified and carefully analyzed data collected from over five thousand individuals who became entrepreneurs.
According to their study, founders who kept their day job while starting their new ventures were 33% more likely to survive than those who quit and jumped headfirst into the entrepreneurial adventure.
In their paper, the researchers write:
“(…) we argue and find that hybrid entrepreneurs who subsequently enter full-time self-employment (i.e., quit their day job) have much higher rates of survival relative to individuals who enter full-time self-employment directly from paid employment.”
A Few Possible Explanations
1. Mitigating Risk
Entrepreneurial activities often involve risk and uncertainty, which is a contributing factor to the high rates of new business failure. Reducing these risk factors (i.e., by keeping your current job) can greatly boost the chances of a new venture’s survival.
The researchers write:
“(…) hybrid entrepreneurship—the process of starting a business while retaining a “day job” in an existing organization—influences entrepreneurial entry and survival.”
2. Taking the Time to Learn
Entrepreneurs who keep their day jobs don’t feel as much pressure to make their businesses successful as soon as possible. Therefore, they are more open to experimentation and learning and less likely to make premature decisions.
A Few Noteworthy Examples
Several of the world’s most innovative entrepreneurs have chosen the hybrid entrepreneurship path. These entrepreneurs worked as employees after launching their businesses.
- Steve Wozniak remained an employee of Hewlett-Packard long after co-founding Apple.
- eBay was launched by Pierre Omidyar while working for General Magic, a software development company.
- According to Inc. magazine, 20% of CEOs of the world’s 500 fastest-growing companies continue to work their day jobs long after founding their organization.
It’s a common misconception that entrepreneurs have a high tolerance for risk, according to researchers. However, their findings suggest that may not be the case. It is not uncommon for entrepreneurs to be as risk-averse as the rest of society. More accurately, they are obsessed with risk. What separates successful entrepreneurs from unsuccessful ones is their ability to manage these risks.
- Joseph Raffiee and Jie Feng, “Should I Quit My Day Job? A Hybrid Path to Entrepreneurship,” Academy of Management Journal 57 (2014): 936–63. Study here
- Grant, Adam, and Grant, Adam. Originals: How Non-Conformists Move the World. United States, Penguin Publishing Group, 2016. Link here
- Schulz, Matthias, and Schulz, Matthias. Hybrid Entrepreneurship. Germany, Josef Eul Verlag GmbH, 2018. Link here
- Folta, Timothy B., Frédéric Delmar, and Karl Wennberg. “Hybrid entrepreneurship.” Management Science 56.2 (2010): 253-269. Study here
- Demir, Cemre, et al. “Hybrid entrepreneurship: a systematic literature review.” Journal of Small Business & Entrepreneurship 34.1 (2020): 29-52. Study here