Entrepreneurship Theories

The External Enabler Framework (Davidsson, Recker & von Briel, 2020) is a conceptual toolbox developed for analyzing the strategic and fortuitous influence of changes to the business environment in entrepreneurial pursuits. External Enabler (EE) refers to significant changes to the business environment, such as new technologies, regulatory changes, macroeconomic shifts, demographic and sociocultural trends, changes to the natural environment, and the like. The basic assumption of the EE body of work is that every such change will benefit some entrepreneurial initiatives even if it disadvantages other economic activities. EE analysis focuses on those enabled; other frameworks are needed for analyzing negative consequences of change. The EE concept was introduced as a more workable alternative to “objective opportunity” for realizing the idea of entrepreneurship as a nexus of enterprising agents and favorable environmental conditions (Davidsson, 2015). Unlike the notion of objective ...

What is the Lean Launchpad? The Lean Launchpad was developed by Steve Blank (serial entrepreneurs and adjunct professor at Stanford) and colleagues as a repeatable process to create a startup. It is probably the most popular methodology today, featuring in a great number of entrepreneurship programs for students and mature students. It is also the method used at Y-Combinator and other top incubator programs. Despite its popularity, there is little empirical research examining the method. Assumptions behind the Lean Launchpad The theory behind the Lean Launchpad can be described as a discovery theory. The entrepreneurship literature is divided about the nature of entrepreneurial opportunities. At one end of the spectrum is the creationist school that views entrepreneurship as a process of opportunity creation led by teams and individuals (McMullen and Dimov, 2013). At the opposite end of the spectrum, the discovery school defends an objective view of entrepreneurship where opportu...

What is the niche theory of entrepreneurship? In ecology, the concept of a niche is crucial to understanding the interactions between species and their environment. Essentially, a niche is a space or role that a particular species occupies within an ecosystem, defined by the specific environmental conditions it needs to survive and thrive. These conditions can include factors like temperature, humidity, available food sources, and predators. One interesting aspect of the niche concept is the phenomenon of convergent evolution. This occurs when two or more species independently evolve similar adaptations or traits because they occupy similar ecological niches. The marsupial wolf and the placental wolf mentioned in the prompt are a great example of this. Despite being separated by millions of years of evolution and located on opposite sides of the world, the marsupial wolf of Australia and the placental wolf of North America share remarkable similarities in their physical appearance an...

 The actualization theory of entrepreneurial opportunities introduced by Ramoglou and Tsang (2016) is intended to bridge the gap between discovery and creation theories of entrepreneurial opportunity. The discovery perspective views entrepreneurial opportunities as existing out there in objective reality waiting to be found and exploited by entrepreneurs. This implies that if an opportunity does not exist, then no amount of effort to exploit it will be fruitful. One would be spinning their wheels! Denying the objective existence of opportunities is a bit like arguing that if Edison had died early, we might not have the electric world we current experience as perhaps only he could subjectively construct the notion of electric light. Clearly it is a stretch to have so little faith in multiple independent invention. The creation perspective takes the opposite view, suggesting that opportunities do not exist outside of entrepreneurs themselves and are created by their cognitions and ac...

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...

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...

Israel Kirzner is a British-American economist and emeritus professor at New York University. He is associated with the Austrian school of economics. Below, we review Kirzner's alertness theory of entrepreneurship. Kirzner argues that entrepreneurs balance supply and demand by detecting market imperfections and exploiting them. Market imperfections are caused by information asymmetry and bounded rationality.   Information asymmetry refers to cases where different stakeholders have varying information about a business venture. If one stakeholder uses the information advantage to profit from the another, it is engaging in opportunistic bargaining. Bounded rationality refers to the idea that humans are not perfectly rational. Neo-classical and Classical economics model the assumptions of economic man, and tend to ignore bounded rationality. According to Kirzner, the profits entrepreneurs receive from entrepreneurship are their reward for their tolerance of uncertainty ...

What is the x-efficiency theory of entrepreneurship? Harvey Leibenstein , American economist, developed X-efficiency theory in the 1960s. He views entrepreneurs as gap-fillers and input complementors. Gaps (X-inefficiency) emerge when there are inefficiencies in markets, such as when incumbents do not utilize their resources efficiently (Leibenstein, 1966;1978) because of political, normative, cognitive, and structural factors. A classic example is the startup without a union that enters a market where all the incumbents have strong unions. The cost advantage of disorganized labor may help firms with low cost business models to thrive at the bottom of the market at margins that are uneconomical for incumbent firms to pursue within the target ranges given to them by their shareholders. If the maximum possible productive use of a resources is greater than the actual use by incumbents , an arbitrage opportunity emerges that an entrepreneur can exploit for profit. Entrepreneurs can ...