Becoming a firm: An investigation of how one-person enterprises construct the problem of becoming an employer

This study draws on Coase’s (1937) Theory of the Firm, that suggests a firm exists only after it has employees and Penrose’s (1959) Theory of the Growth of the Firm which suggests human resources are a critical asset to the firm as a means to better understand the issue of job creation in the United States especially among one-person enterprises (OPEs). From the perspective of entrepreneurial cognition, and in the context of ill-defined problems (Abelson & Levi.1985) a survey was conducted to better understand the Becoming an Employer Problem (BEP) as it is perceived by OPEs. A measure of the BEP was developed and antecedents consistent with factors known to be associated with how problems are constructed in general (Reiter-Palmon & Robinson, 2009) was tested. Results suggest 3 main classes of problems associated with BEP: concerns related to administrative and legal, recruitment and selection, and regarding the OPE’s management abilities and preferences. The findings suggest that OPEs (n=100) who are older, married, have completed a business plan for their business, and have a promotion orientation towards goals will perceive less problems associated with becoming an employer, whereas those who have more expertise in the functional areas of business are likely to perceive more problems associated with BEP. These effects are significant after controlling for gender, minority status, operating state, type of business, and whether or not the entrepreneur has previously hired employees. Implications and opportunities for future research are discussed