Attribution Theory and Entrepreneurship

Attribution theory was developed by Austrian psychologist Fritz Heider in the 1950s. The fundamental assumption of attribution theory is that people are motivated to find causes for their own success and failure events as well as the behaviors of others. Individuals are more likely to attribute the causes of a successful event to themselves or their in-group, whereas they are more likely to attribute the causes of failure events to distal forces or out-group members. This is called a self serving bias.

Similarly, when we see others fail, we are likely to attribute their failure to internal causes, such as laziness or incompetence rather than considering environmental conditions. This is called fundamental attribution error. Thus, when we see an entrepreneur fail in business, we assume that the failure is because they did something wrong. This may lead to a belief in wrong causes because the entrepreneur could have failed for reasons outside of his or her control.

If attribution theory explains how stakeholders view entrepreneurs, then it seems to suggest that entrepreneurs that fail will be seen by stakeholders in the business (e.g., investors and customers) to be incompetent. This is why we consider this to be a bias, as if stakeholders can overcome it and look to the true causes, both internal and external, then the distribution of resource allocation might be more like a meritocracy.

It may also help to explain the common heuristic of an ecosystem or field, to pile the rewards onto a known winner such that the winner keeps on winning in a virtuous circle. Attribution theory helps us to explain self-fulfilling prophecies, not just fashions.

The table below provides the typical 3 dimensional depiction of attribution theory. If the factor is internal, stable, and controllable, we attribute the success or failure to effort. If the factor is external, uncontrollable and unstable, we attribute the success or failure to luck. There are 8 combinations in total. 
Image source: Wikimedia


Shaver, K. G., Gartner, W. B., Crosby, E., Bakalarova, K., and Gatewood, E. J. (2001). Attributions about entrepreneurship: A framework and process for analyzing reasons for starting a business. Entrepreneurship Theory and Practice, 26(2), 5-28.

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