Introduction. While many studies have explored transitions into
entrepreneurship, far less is known about the reverse pathway—from
entrepreneurship to wage employment. This is surprising given the high
failure rates of entrepreneurial ventures and the fact that most former
entrepreneurs ultimately return to paid employment. Whereas prior
research has focused largely on the structural costs of this transition
(e.g., hiring stigma, wage penalties), we examine how individuals adapt
to paid employment, focusing on changes in job characteristics, which in
turn influence work-related well-being.
Purpose. Drawing on prospect theory, we propose that individuals
evaluate their work characteristics in paid employment relative to their
prior entrepreneurial experience. Specifically, the loss of autonomy and
the gain in job security—two hallmark features of entrepreneurial
versus employed work—may have competing effects on overall job
satisfaction.
Methods. We tested our hypotheses using 20 years of panel data from
the Household, Income and Labour Dynamics in Australia (HILDA)
survey.
Results. Using within-person fixed effects models, our findings reveal a
clear trade-off: former entrepreneurs experience a significant drop in
autonomy and satisfaction with autonomy, alongside a substantial and
sustained increase in job security and satisfaction with job security after
transitioning to paid employment. Crucially, the positive effect of
increased job security outweighs the negative effect of reduced
autonomy, resulting in an overall increase in job satisfaction.
Conclusion. We extend career transition research by introducing a
reference-point perspective showing that changes in job characteristics
during transitions are evaluated not only in absolute terms but also
through subjective comparisons to prior roles. In doing so, we challenge
the prevalent assumption that returning to paid employment represents
a "career failure" and instead demonstrate that this transition can offer
a fulfilling and stabilizing path—an insight with important implications
for organizations hesitant to hire former entrepreneurs.