An examination of happiness in entrepreneurs : evidence from a survey experiment

Abstract

Entrepreneurs, the most active and influential factor in the market economy, are key drivers of economic growth. Their wellbeing is closely related to economic development. Therefore, understanding their wellbeing is of great significance for the study of economics and management. However, due to the lack of data, we still know little about their sense of happiness and the sources. In China, the China Family Panel Studies (CFPS) and the Chinese General Social Survey (CGSS) are two main individual micro databases for studying subjective wellbeing, but these are hardly valid for studying the entrepreneur group, since non-agricultural self-employed individuals account for less than 8% of the interviewees and have an average annual income of around RMB 8,467 —in other words, not reflective of entrepreneurs at all. Other micro databases used to study enterprises, such as the Chinese Private Enterprise Survey (CPES), only involve entrepreneurs’ personal information without a measurement of their subjective attitudes towards happiness and satisfaction. Therefore, the existing micro survey databases are not suitable for studying entrepreneurs’ wellbeing, and a new methodology needs to be developed to do so. It is of great significance to study the sense of wellbeing of the entrepreneur group, since their sense of gain, happiness and security, play a key role allowing them to utilize their creativity and entrepreneurial spirit to the fullest extent in order to bring about positive externalities in society. For individuals who seek to maximize profit, is there a ceiling effect on their happiness as their income increases? How does wealth affect an entrepreneur’s wellbeing? After controlling for personal income and wealth, is there a correlation between enterprise size and an entrepreneur’s wellbeing, that is, how willing entrepreneurs are to expand their enterprise? How does broader economic uncertainty correlate with an entrepreneur’s wellbeing? Based on survey data collected from entrepreneurs, the study try to explore the influence of economic uncertainty and an entrepreneurs “capitalist spirit” on their wellbeing. To be more specific, three mechanisms were verified that affect entrepreneurs' wellbeing: entrepreneurial adversity, economic uncertainty, and an entrepreneurs' sleep. The empirical model used in this paper is a multiple regression model. The study takes a random distribution of entrepreneurs between the experimental group and the control group to identify the impact of these three key factors on entrepreneurs’ wellbeing. This random experiment is based on Kahneman’s research. The Nobel laureate in economics once stated that people tend to have a common cognitive bias: before being asked about wellbeing, the experimental group is first presented with questions about their entrepreneurial experience and future outlook, while the control group is presented with these questions directly. The framing applied to the experimental group means that respondent’s subsequent answers will be influenced by their entrepreneurial experience and future outlook, helping us identify the causal relations between these two influential factors and entrepreneurs’ wellbeing. This method of random experimentation has been widely used in the identification of causality. Daron Acemonglu, an institute professor of MIT Economics, also adopted this method in his study on trust in government in 2020 (Acemonglu, 2020), demonstrating its viability. The conclusions of this paper are as follows: First, the study demonstrated the relationship between entrepreneurs’ wellbeing, their income, and entrepreneurial adversity. Entrepreneurial adversity has a negative effect on entrepreneurial wellbeing, but this negative externality weakens with an increase in entrepreneurial achievement. There is also heterogeneity among different types of entrepreneurs. The positive externality generated by income effect is stronger in male entrepreneurs in comparison with female entrepreneurs, for whom income has little effect on the relationship between entrepreneurial adversity and wellbeing. This demonstrates that an increase in personal income is a key source of the feeling of entrepreneurial achievement and success for male entrepreneurs, contributing to their wellbeing. In terms of educational background, the effect of income and entrepreneurial adversity is more often seen among entrepreneurs who have not received higher education, with no such obvious effect among entrepreneurs with higher education. This indicates that entrepreneurs without higher education may draw from a more limited source in terms of a sense of achievement. Rising income may ease their competitive pressure, thus improving their evaluation of their wellbeing. By type of entrepreneurship, the income-entrepreneurial adversity relationship is apparent among the first generation of entrepreneurs, while not that obvious among the second generation of entrepreneurs. This may be because there are huge differences between the entrepreneurial resources available to first generation entrepreneurs versus second generation entrepreneurs. Compared with the first generation, the second generation may have more help in resources and experience in the early stage of entrepreneurship and may face fewer obstacles in developing their enterprise. As such, the benefit of higher personal income may act as a stronger incentive for first generation entrepreneurs who have had to overcome difficulties a second-generation entrepreneur may not have had to encounter. Second, the research focused on the effect of economic uncertainty. it is found that uncertainty about the economic environment will inhibit entrepreneurs’ short-term evaluation of wellbeing, with the inhibitory effect increasing alongside the scale of the enterprise. In terms of gender, the effect of uncertainty about the economic environment is very apparent for female entrepreneurs, but not for male entrepreneurs. This may be attributable to risk sensitivity. Compared with female entrepreneurs, male entrepreneurs have a higher tolerance for uncertainty, seeing as the impact of uncertainty on their evaluation of happiness is low, while female entrepreneurs appear more sensitive to uncertainty. Therefore, upon evaluation of entrepreneurs’ wellbeing, the magnification effect of enterprise scale on the negative effect caused by uncertainty on short term happiness is more apparent in female entrepreneurs, while mal entrepreneurs are less affected even as enterprise scale increases. In other words, for female entrepreneurs, the negative externalities caused by economic uncertainty increase alongside enterprise scale. In terms of the type of entrepreneurship, a significant negative impact of uncertainty can be seen with the increase of enterprise scale, especially for the first-generation entrepreneurs; while for the second-generation, there is no significant impact in this area. This kind of heterogeneity can be attributed to the fact that a second-generation entrepreneur may be more flexible in entering or quitting an enterprise, but a first-generation entrepreneur faces much higher sunk costs. A difference in the scope of decision-making makes the first generation tend to be more worried about gains and losses and more sensitive to uncertainty. Third, the research found that different concepts of time may affect the relationship between sleep and the wellbeing of entrepreneurs and non-entrepreneurs. A propensity matching score has been employed in this study to match 2,412 respondents in the experiment with the non-entrepreneur survey samples from the 2020 China Family Panel Survey (CFPS). This aims to explore the correlations between sleep and wellbeing for entrepreneurs and non-entrepreneurs, adding empirical evidence to the existing literature. For entrepreneur and non-entrepreneur groups, the meaning of time to the two groups is quite different, and the way of feedback to action and utilization also shows huge differences. Sleep time has a more significant effect on the wellbeing of entrepreneurs. The main contributions of this paper are as follows: First, the paper studies the impact of entrepreneurial adversity and economic uncertainty on entrepreneurs’ wellbeing through investigation and experiment, removing the impact of reverse causal effect and focusing on the driving factors of entrepreneurs’ wellbeing. Second, we demonstrate that a ceiling effect on income may not exist for entrepreneurs, and show that an relationships between entrepreneurial adversity and personal income contribute to entrepreneurs’ wellbeing. Third, this study thoroughly examines Chinese entrepreneurs and the influential factors on their wellbeing, which provides valuable reference for both enterprise managers and policymakers for national development.