Understanding the Heterogeneity of Hybrid Entrepreneurs

16A general description of HEs is not very useful for policy makers because it groups together individuals who are extremely heterogeneous in interests, motivations, level of education and income, and so on. Although HEs are complex individuals with diverse goals and purposes, characterizing them based on a limited set of criteria is possible. Typologies may then prove useful to policy makers attempting to understand the needs and dynamics of hybrid entrepreneurs’ businesses and what could foster their survival and growth.

17Based on the 2015 QEI dataset and prior literature, we have identified four main types of hybrid entrepreneurs: (1) persistent HEs, (2) transitional HEs, (3) supplemental HEs, and (4) subsistence HEs.

18Persistent HEs. Most authors tend to consider hybrid entrepreneurship a transitional phase between employment and full-time entrepreneurship. Nevertheless, some HEs choose the status quo over the long term. There is empirical evidence that combining entrepreneurial activities with wage employment may be a permanent condition for many.

19Hybrid entrepreneurship may be used by some to explore business opportunities without abandoning the primary source of income. Interestingly, the financial aspect may not be the sole incentive of persistent HEs for maintaining their employment status. The 2015 QEI data show that persistent entrepreneurs exhibit the highest level of education in the sample. For this group of people, employment often entails a higher status and rank, which may explain their propensity to maintain their professional status quo. Consider the case of university professors who are also independent consultants. Even if their revenues from their counseling undertakings are significant, why would they renounce their academic status that has demanded so much effort to acquire? Moreover, it may be this very status that allows them to easily obtain consulting opportunities.

20Our data show that of all four categories, persistent HEs are the least interested in expanding their businesses. Three-quarters (76%) of them are not considering making any investments in the coming year. They are also the least concerned about the difficulties of finding funding sources. Only 9.6% of them claim that access to external financing is a major challenge to the growth of their firm.

21For transitional HEs, a hybrid path is simply a means toward full entrepreneurship. They combine their income from employment to fuel investment in their entrepreneurial activity. In this context, the combination ends once the new venture is launched and is proved to be sufficiently profitable.

22Transitional HEs show more confidence in their capabilities than persistent HEs. [5] They are also more motivated by a desire for self-fulfillment and have higher expectations regarding their venture’s market potential. The financial returns during the hybrid phase ultimately determine the transition to full-time entrepreneurship. These findings support the proposition that risk mitigation through an effectual approach is an important benefit of hybrid entrepreneurship.

23Subsistence HEs. While persistent entrepreneurs consider hybrid entrepreneurship as a prolongation of their professional career and transitional entrepreneurs see it as their future career; subsistence and supplemental entrepreneurs view their business mainly as a source of additional income.

24Subsistence entrepreneurs prefer employee status to business ownership but are underemployed. Consequently, the cumulation of activities is not intended to continue, and they exit entrepreneurship when they have access to full-time or permanent employment or when they deem their income sufficient. Subsistence hybrid entrepreneurship calls to mind the omniscient necessity-opportunity dichotomy, or “subsistence” versus “transformational” entrepreneurship. The former refers to individuals who are “pushed” into entrepreneurship by the necessity to provide for themselves and their close family members and the latter to those who are “pulled” to entrepreneurship by the pursuit of opportunities.

25Supplemental HEs. Individuals whose financial gain from entrepreneurial activity offers the opportunity to supplement their employment income deemed too low are supplemental HEs. This differs from subsistence entrepreneurship insofar as the additional income is not critical for the entrepreneur. Our data show that some individuals may opt for hybrid entrepreneurship to complement their incomes when they are having trouble obtaining regular or full-time employment. In contrast to transitional entrepreneurs, supplemental entrepreneurs place too much importance on their employment status to abandon it.

26To summarize our findings, we present a matrix with these four types of hybrid entrepreneurs. On the abscissa is the duration of the entrepreneurial commitment, and on the ordinate are the reasons for going into business (push vs. pull). It is recalled that “push” motives determine entrepreneurs who are dissatisfied with their positions to start a venture, i.e., “I do it because it is necessary.” “Pull” motives determine entrepreneurs who are lured by their new venture idea and initiate venture activity because of the attractiveness of the business idea and its personal implications, i.e., “I do it because I see an opportunity.”

27This typology is, of course, not intended to cover all possible configurations of hybrid entrepreneurship, which do not all raise the stakes to the same extent for all entrepreneurs.

The More, the Merrier?

29The most used indicator for measuring entrepreneurship is undoubtedly the rate of new venture creation. Researchers and policy makers usually consider that the more businesses are created, the more innovation, employment, and economic growth there will be. The first to rise against this approach was the economist William Baumol in his 1990 highly influential article “Productive, Unproductive, and Destructive,” [6] which showed that a decrease in the rate of business creation is not responsible for the periods of slow economic growth but rather a decline in productive entrepreneurship and a corresponding upsurge in unproductive entrepreneurship.

30A small number of start-ups have a positive impact on the economy, while most new businesses have low survival rates—they do not innovate and create jobs. Encouraging this type of businesses is ineffective and is the outcome of a narrow conception of entrepreneurship as consisting primarily in new venture creation, and of the mental representation of the entrepreneur as a hero providing top innovative businesses, bravely taking risks, and investing a huge amount of money, which is still quite strong in the minds while very far from reality.

31In today’s context of the “entrepreneurial society,” [7] the definition and role of entrepreneurship and the dichotomic occupational choice between paid employment and venture creation are questioned. From a value creation view of entrepreneurship, “the key issue is growth, which is hard (not easy), rather than market entry, which is easy (not hard).” [8] It has been shown [9] that using subsidies as a policy for supporting new ventures causes a major bias in the market selection process that could cause a decrease in the profits of higher-quality firms, thus jeopardizing their growth. Another problem with public support for new venture creation is that most entrepreneurs do not make a rational choice of an activity sector. Entrepreneurial motivations—such as personal interests, talents, and family tradition—make them choose sectors in which most start-ups fail. [10]

Are Gazelles the Solution?

32Numerous studies showing the inefficacy of the policies designed to subsidize the creation of typical start-ups exhorted policy makers to target high-growth potential new ventures that may increase employment, create new jobs, and bring economic growth. [11], [12] As an example, in 2014, the government of Quebec decided to concentrate its public assistance on 300 businesses, so-called gazelles (i.e., leaders in growth who drive an increase in their revenues by an average of 20% over 5 years). This program aimed to select 100 companies over 3 consecutive years and provide them with the necessary resources to accelerate their growth. This program never succeeded, even though the next elected government tried again. Gazelles are hard to find because they represent less than 1% of the firm population. And even if they can be found, how public policy could help them is unclear since their challenges are so diverse. [13]

33Another avenue for public intervention was favoring the financing of companies in the sectors identified as “high technology.” However, in a sector with a high mortality rate, financing such firms would be as if one were playing the lottery.

Self-Employment Entrepreneurial Status for Un- and Underemployed?

34Governments also need to find solutions to tackle un- and underemployment, which has become especially acute in the aftermath of the 2007–2008 financial crisis. One solution was to rely on self-employment to find alternatives to wage employment and, eventually, boost economic development.

35An example of this type of public initiative is in France, where a legal status for self-employed entered into force in 2009 allowing individuals to set up businesses easily, through simplified administrative procedures and the replacement of all social contributions and taxes with a single payment proportional to the turnover. The intention of the French government was twofold: to help (1) those who want to test a project, want to embark on entrepreneurship, and are primarily engaged in an activity and (2) those who are the most numerous, who use this status to supplement their income.

36Many have criticized the legal framework for the self-employment for being mostly a social policy tool designed to combat job loss. There is also fear that the proliferation of “self-employed” policies comes at the expense of employees, who are pressured to become independent so that their employers can avoid paying payroll taxes. It has also been suggested that self-employment policies as a way out of unemployment generally attract the worst entrepreneurs. [14]

What If Policy Makers Rely on Hybrid Entrepreneurs?

37The policies designed for self-employment can benefit the HEs, and this is because many of self-employed people aren’t directly jumping into full entrepreneurship. Many self-employed are actually hybrid entrepreneurs.

38Hence, the question is whether, to avoid criticism about the self-employed legal framework, policy makers should primarily target hybrid entrepreneurs, especially those who are contemplating transitioning to full-time entrepreneurship.

39Self-employment may decrease the unemployment rate and stabilize the incomes of a population, but it may produce companies that do not really participate in a population’s economic development. To end the vicious circle of the public aid dilemma for self-employed people, public policies must distinguish between the different types of entrepreneurs and their objectives.

40Drawing on our study and previous research, we review some arguments in favor of targeting hybrid entrepreneurship.

41■ Given the accumulation of income from entrepreneurship and employment, HEs are not striving for financial assistance. They are most interested in a healthy business environment and simplified procedures so that they can smoothly run their side businesses. Thus, the 2015 QEI shows that, as opposed to PEs, HEs are less concerned with financing and worry more about bureaucratic obstacles. In Mexico, HEs with a master’s degree or a Ph.D. benefited the most from the simplification of administrative procedures for starting a business (SARE reform).

42■ Like all self-employed, HEs are blamed for the smallness of their businesses, yet the small size of the businesses and the low investment needed to get into business are not only specific to HEs. The 2015 QEI data show that 41.7% of PEs started their businesses with less than C$5,000 (about US$3,885) and only 9.7% with C$100,000 (about US$77,714.) or more. The launching investment was relatively modest (less than C$50,000) for more than half of the respondents (56.4%). This is not a Quebec-specific phenomenon. The GEM dataset shows that. in 2015, new businesses were founded on average with €14,320 (about US$17,221) in Europe and US$18,673 in North America.

43■ Since Drucker’s writing, [15] innovation was associated with education. The 2015 QEI data show that HEs are, on average, better educated than PEs. These results are in line with prior research [16]. Therefore, there is a high potential for innovation among HEs. The high rate of PhD holders (3.75% in the 2015 QEI sample) must count for something. A 2017 research [17] showed that HEs are more innovative than full-time entrepreneurs. Hybrid entry is used by innovative entrepreneurs to test their business ideas at a small scale alongside their wage employment. Hence, their entrepreneurial projects might present a better market and growth potential than those that emerge in the context of the traditional entrepreneurial entry.

44We want to conclude by pointing out that particular attention should be given to avoid assimilating HEs into the self-employed category, and the diversity of their profiles should not be neglected. Thus, our typology may be interesting for policy makers because it would allow them to target the most appropriate type of aid according to the objectives of hybrid entrepreneurship, such as survival, income supplementation, growth, and full-time entrepreneurship. Hybrid entrepreneurs mobilize different motives, resources, and aptitudes in their exercise of entrepreneurship. Interestingly, their motives, the value of their resources, and the skills they possess are raised fairly early in their entrepreneurial activity. HEs are primarily seeking to stabilize the conditions of a profitable situation they created, and they use their employment as a parachute in case their ventures fail. If they feel safe and confident, some of them will pursue greater risks and go into full-time entrepreneurship.

45We think that hybrid entrepreneurship is an interesting phenomenon that deserves more attention from policy-makers and researchers. It would be interesting to consider the hybrid strategy to enter entrepreneurship more deeply. For example, what is the incidence and success rate of hybrid entrepreneurship in different industries and countries, how to maximize the efficiency of their activities, how can public policies increase the willingness to pursue the entrepreneurial hybrid path or help the transition to full-entrepreneurship ? Nonetheless, the hybrid entrepreneurship must not be seen as the only solution for tackling chaotic and unpredictable environments.