Entrepreneurship as a Utility Maximizing Response

We develop a utility-maximization model to explain why some choose to be entrepreneurs while others prefer employment. The individual’s utility from any occupation is assumed to depend on income, work effort, risk bearing, independence, and other working conditions of that occupation. The individual chooses the occupation and career path that maximizes utility. We demonstrate that the incentive to be an entrepreneur increases with entrepreneurial ability and the ‘positiveness’ of one’s attitudes toward income, risk, hard work, or independence. But positive attitudes are neither necessary nor sufficient conditions for entrepreneurial intentions, and thus ‘entrepreneurial’ people might happily work for someone else.