Entrepreneurship Theories

The stakeholder theory of entrepreneurship is being developed by this blog's authors and associates  (e.g., Laplume, Walker, Zhang & Yu, 2020), but has roots in a debate that had occurred between professors Ron Mitchell and S. Venkataraman in 2002, over the connections between stakeholder theory (Freeman, 1984) and entrepreneurship.    Stakeholder theory had largely been born out of studies of large corporations managing their stakeholders to improve firm performance (i.e., between incumbent competitors), and had not been fully applied to the entrepreneurship area to explain entrepreneurial behaviors, processes, or outcomes.   They were discussing how entrepreneurship and strategy research tends to be about how new wealth is created, whereas stakeholder theory is more about how that wealth should be distributed. For the latter author, the value creation and distribution issues were separate problems, complementary perhaps, but requiring different logics. The stakeholder theor

What is the ambiguity tolerance theory of entrepreneurship? Ambiguity tolerance theory can be traced back to Polish psychologist  Else Frenkel-Brunswik , whose work in 1949 focused on authoritarianism and ethnocentrism in children. Ambiguous information is everywhere and it can lead to the conclusion that there is no way out, no way to understand, or no viable way to proceed. The decision-making process can become paralyzed by ambiguity that prevents conclusive prescriptions. When there exist high levels of uncertainty about a particular entrepreneurial venture, those individuals that exhibit higher levels of tolerance of ambiguity, are more likely to succeed. The ability to tolerate conflicting information and deal with missing information makes the difference. The more uncertain a particular business opportunity, the more important it is that individuals are capable of tolerating the demands of conflicting information and vague information. We might expect that ventures

What is the individual-opportunity-nexus theory of entrepreneurship? There is a long standing debate about the origins of entrepreneurial opportunities. There is a divide between scholars that think entrepreneurs create opportunities, and those that believe they merely discover them. Scott Shane and Jonathan Eckhardt (2003) make the case that opportunities are found and discovered, not made or created. They propose that the foundation of the field of entrepreneurship relies upon the objectiveness of opportunities and would otherwise be on shaky ground. "[W]e define entrepreneurial opportunities as situations in which new goods, services, raw materials, markets, and organizing methods can be introduced for profit." - Eckhardt and Shane (2010) The theory suggests that it is the constant pivoting of the entrepreneur that lands him or her on an opportunity that exists out there, objectively. Although it resembles a process of search it appears from the outside to be a cr

Scholars have divided entrepreneurship into different categories. For example, self-employed individuals are often not considered entrepreneurs. To be an entrepreneur, there has to be an organization being built. There is even a growing sense that only scalable forms of entrepreneurship should be encouraged (Shane, 2009). Another way to slice up entrepreneurs is to separate between necessity and opportunity entrepreneurs (Harding, 2002). Most entrepreneurship theories focus on opportunity entrepreneurship, but perhaps scholars should also embrace broader views that include entrepreneurship that is based on necessity, or at least consider a greater diversity of entrepreneurship (Welter et al., 2017). This approach looks at the motivations of the entrepreneurs, thus can be considered a motivational theory. Basically, if you have one of the two motives, you are more likely become an entrepreneur. Necessity entrepreneurs are individuals who start businesses because they cannot find a

What is the disagreeableness theory of entrepreneurship? Gladwell (2013) introduces disagreeableness as a key attribute of entrepreneurs. Not needing the social approval of peers, is explained as a psychological capability of successful entrepreneurs. It is a capability because most people might be influenced by critical feedback. If a friend or family member says "that is a bad idea" and you stop...then you are agreeable, not disagreeable. He gives many examples, like IKEA pioneers in outsourcing production to Soviet periphery states during the Cold War, which was seen as a bad idea by many. In each case, the entrepreneurs are not afraid of being criticized (e.g., even for crossing into Eastern Europe). Disapproval should not stop an entrepreneur or keep them from trying again and again. The disagreeable entrepreneur shrugs off failure and critique and moves on. Interestingly, Gladwell uses an interpretation of the David and Goliath story that has David being the d

For some time there has been interest in the question of whether clusters form because of entrepreneurship, or whether clusters benefit entrepreneurs ( Delgado, Porter, and Stern, 2010 ). Clusters refer to geographic concentrations of similar firms, such the technology firms in Silicon Valley. Researchers are interested to know if clusters breed and boost entrepreneurs to see if pro-cluster policies, such as smart parks, make economic sense. Researchers also want to know if entrepreneurs are better off in clusters or not to inform industrial policy around entrepreneurship education and training ( Cusmano, Morrison and Pandolfo, 2015 ). Spinouts: where employees from firms in a cluster leave to start complementary or competing independent ventures, are seen as important to the diversity and competitiveness of clusters. They are especially important because spinouts tend to stay close to their parent firms and their own networks. Thus, where there are many spinouts, there tends to b

This one is a bit of a stretch to call a theory, but we can perhaps think of it as a process theory or a discovery theory . Pradhan and Nath (2011) discuss the Harvard School Theory of entrepreneurship. They say the theory views entrepreneurship as involving "all such activities that initiates, maintains and results in a profit oriented enterprise for production or distribution of economic goods or services and which is consistent with internal and external forces." According to Mohanty (2005) , the Harvard School Theory is a framework for strategic analysis and decision-making that is widely used in the field of entrepreneurship. It involves a thorough internal analysis of the organization's resources and capabilities, as well as an external analysis of the broader business environment. The internal analysis focuses on identifying the organization's strengths and weaknesses, as well as any opportunities and threats that may arise from the external environment. T

What is the impulsivity theory of entrepreneurship? Impulsiveness  refers to taking action without thinking about it first and considering data before deciding. Wiklund, Patzelt and Dimov (2016)  state that "acting without thinking is characterized by rapid decision making in situations that would seem to require extensive analysis and deliberation." They go on to explain that individuals need to act impulsively in some entrepreneurial conditions because it is impossible to complete a throughout analysis due to uncertainty, ambiguity, and urgency. Rather than succumbing to analysis paralysis, entrepreneurs take leaps of faith that most others are not willing to. As it turns out, there is a way to measure impulsivity. Attention deficit and hyper-active disorder (ADHD) is usually considered a problem that need to be addressed. For instance, many parents medicate their children with drugs like Ritalin in order to combat the negative effects of ADHD.  Interestingly, ADHD