Stages theory of entrepreneurship

The entrepreneurial process is often conceptualized as stage-based or as a life cycle. These theories are borrowed from biology where life cycles of flora and fauna are studied extensively. Thus, perhaps it is alright to think of this borrowing as a kind of analogy - imperfect, but potentially interesting.


In ecology and biology, there are stages of development or decay present in many phenomena. These theories start with the assumptions of birth, growth, maturity and decline. The description, explanation and prediction of cycles is one of the mainstays of the hard sciences.


By definition a life has a beginning and an end, which provides initial boundary conditions for the theory. What happens in between, or those inner-transitions, are where we are going to find most of the action in terms of debate.


Kazanjian and Drazin (1990) suggest four stages to explain how an entrepreneurial opportunity becomes a business. They propose that the drivers and resistors of entrepreneurship are different at each stage of venture development. Probably only the first stage or two is really about entrepreneurship, whereas growth and stability are really managerial issues after a certain point. 

  1. conception and development

  2. commercialization 

  3. growth

  4. stability

Bhave (1994) put forward four stages. In this case, the transitions were ordered but one can easily imagine cases where these stages overlap temporally or are happening simultaneously. While the stages proposed by each theory do not perfectly line up, there is a pattern between them. However, the length of each stage and the emphasis on indicators of stage transition differ. Perhaps there are stages, but these would be too context-specific to replicate.  

  • opportunity

  • technology set-up  

  • organization-creation

  • exchange stage 

The pattern in academia seems to be to define the stages and check that they are really there, especially across contexts. There are many stage based models out there and new ones are continually popping up. A critic might wonder if a four stage theory is a great way to kill an hour long paid keynote - it's a story with a nice progression, after all.


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Comments

Anonymous said…
While I agree with the stages theory, I think there are a couple of factors that should be included in the theory that are critical. The first is the difficulty of overcoming each stage. The second is somewhat related. It is what is the probability of each stage being successful? I would imagine that if one makes it through the first and second stages, the probability of success of the third stage is increased, although that might not actually be the case. I think it would be interesting to find out.