How Firms Create Entrepreneurial Competitors

It’s long been known that giving employees greater autonomy and decision-making power can boost organizational health. These are essential ingredients to what academics call psychological ownership — the perception of having a stake in something due to one’s commitment or contributions, be it to products and brands, relationships or, yes, organizations.  

Two decades of research confirm that feelings of ownership and efficacy resulting from psychological ownership benefit organizations. Employees who feel like owners experience greater commitment, job satisfaction, sense of belonging and a willingness to go above and beyond their formal job requirements in support of the organization.

So perhaps it should not be a surprise to learn that high-flying employees who feel like owners may be primed to leave their jobs to be owners of their own businesses.

“It’s well established that feeling like an owner provides so many benefits to an organization in terms of citizenship behaviour, longer tenures and greater commitment,” says Sarah Burrows, an assistant professor of entrepreneurship at Smith School of Business. “But no one has really thought about whether the inverse can be true: If you really start to feel like an owner, might that lead you to want to go off and do your own thing?”

Entrepreneurial self-confidence grows

The intriguing possibility that psychological ownership may be a double-edged sword for organizations motivated Burrows, with colleagues Alexander Hamrick (University of Richmond), Jacob Waddingham (Texas State University) and Craig Crossley (University of Central Florida), to learn more.

In two related studies, the researchers surveyed more than 600 employees. They measured their possessive feelings for their organizations, their level of confidence in their entrepreneurial abilities (known as entrepreneurial self-efficacy), their current and past work performance and their likelihood to take steps to start a business.  

Results revealed that employees with higher levels of psychological ownership demonstrated higher confidence in their entrepreneurial abilities and were more likely to express their intention to start their own business. This was especially true among high-performing employees.

The results highlight a potential long-term implication for businesses. “They risk losing their highest performing employees,” says Burrows. “And those employees might actually become competitors if they engage in business ownership within the same industry."

The value of intrapreneurship

In today’s economy, it is not an unusual scenario. According to a 2021 report, 31 per cent of employees who left their jobs over a six-month period did so to start new businesses. What this new research suggests is that while organizations should be lauded for fostering psychological ownership among employees, they will need to be more strategic in their execution.

Burrows and her colleagues have a few suggestions. For one, given that higher-performing employees are more likely to develop entrepreneurial intentions, organizations should focus on fostering feelings of psychological ownership among lower-performing employees to try and boost performance.

For high performers, the researchers say organizations can try to satisfy these employees’ entrepreneurial interests by providing in-house opportunities to engage in intrapreneurship. By doing so, they can maximize the benefits of psychological ownership while mitigating its potential detriments.

Given how tough it can be to find and retain talent, Burrows says there is significant value in cultivating an environment in which employees feel they have a stake in the organization’s success.

“Even though we found this potential risk,” she says, “it doesn’t negate all the other positives that exist with psychological ownership.”