Entrepreneurship Theories

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 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

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

Among personality theories used by entrepreneurship researchers, locus of control has received considerable attention. The concept was developed in the 1950s by Julian Rotter who is an American psychologist working on social learning theories. Locus of control refers to an individual’s perception about the causes of their life conditions. External locus of control describes an individual that believes that most of their life conditions are determined by forces outside of their control, such as like deities, governments, power structures, institutions, and also fate or luck. Internal locus of control describes an individual that believes that they are their own master and can act to change their own life conditions. They are viewed as a continuum and most individual are situated between the two extremes of complete external control and total internal control orientations. When applied to entrepreneurs, those with an external locus might believe that their survival or success chance

What is the achievement motivation theory of entrepreneurship? Harvard psychologist David McClelland developed the Achievement Motivation Theory in his book entitled The Achieving Society  in 1967. McClelland sought to explain why some societies are more economically successful than others. For answers, he looked at the entrepreneurial behaviors of individuals, which he thought were key to the development of all economies. According to McClelland, entrepreneurs do things in a new and better way and make decisions under uncertainty. Entrepreneurs are characterized by a need for achievement or an achievement orientation , which is a drive to excel, advance, and grow. By focusing in on a particular need, he was able to challenge the then prevailing  great man theory of entrepreneurship  as well as religious theories of entrepreneurship . He believed that entrepreneurship is learned and that such learning can be encouraged fruitfully. Need for achievement The need for achieve

What is the expectancy theory of entrepreneurship? Expectancy theory was developed to explain work motivation and organizational behavior ( Kanfer, 1990 ). It has since been used to explain additional behaviors, including entry into entrepreneurship. Expectancy theory starts with the concept of motivational forces that Vroom (1964) expressed as an equation: MF = V x I x E, where V = valence, I = instrumentality, and E = expectancy. Valence refers to the value that an individual places on the outcome of their efforts—such as the importance of financial rewards. Instrumentality refers to the belief that if an individual meets performance expectations, that they will actually receive the reward. Expectancy is the belief or probability that an individual’s effort will result in the desired goal being achieved. Since the equation involves multiplication, it implies that if any one of the parts is zero then the motivational forces equal zero. Valance depends upon the individual’

What is the self-efficacy theory of entrepreneurship? Bandura (1977) proposed that an individual’s belief in their ability to perform a given task can be conceptualized as self-efficacy. Self-efficacy is viewed as an antecedent to the formation of intentions. If an individual believes that they have the ability to achieve a goal, they are more likely to develop the intention to achieve the goal. By contrast, if an individual believes that they do not have the ability to achieve a goal, then they will not form intentions to purse the goal. Individuals develop self-efficacy over time as they obtain a variety of skills (cognitive, social, linguistic, or physical) through life experiences. Past achievements (e.g., mastery of a given task) reinforce self-efficacy, thus leading to more ambitious intentions (i.e., higher aspirations). Self-efficacy can also be gained via modeling the behaviors of others through close observation (i.e., vicarious or social learning), self-reflection, and

What is the regulatory focus theory of entrepreneurship? Regulatory focus theory was developed by psychologist  E. Tory Higgins of Columbia University in the 1990s. At the core of regulatory focus theory is the idea that individuals change between two states dubbed a promotion focus and a prevention focus. When in the promotion focused state, individuals attempt to bring themselves into alignment with their need for growth and advancement (their ideal self), causing them to focus on potential gains from risk-taking. By contrast, when individuals are in the prevention focused state, they tend to succumb to their needs for security and safety (their ought self), causing them to focus on potential losses from risk-taking. A recent meta-analysis confirms that regulatory focus is associated with several organizational outcomes. Brockner et al., (2004) borrow regulatory focus theory to explain entrepreneurial phenomena. They argue that entrepreneurial process requires a greater promo

What is the planned behavior theory of entrepreneurship? The theory of planned behavior was developed by Polish social psychologist Icek Ajzen (1991) to predict a variety of social behaviors in different fields including consumer behavior, politics, and healthcare. According to the theory, the most important determinants of an individual’s behaviors is their intention to engage in the behavior—not their attitudes toward behaviors as these are only expected to affect intentions. Thus, for example, if a potential voter has the intention to vote they are more likely to vote than if they merely think voting is a good thing to do. The theory hangs on the concept of intentions, which are defined as an individual’s motivation and conscious decision or plan to expend effort to bring about a behavior. The link between intention and action is expected to be stronger when there is a short time gap between them and when there is an appropriate level of specificity between the intention an

What is the withdrawal of status respect theory of entrepreneurship? Everett E. Hagen was a political scientist and economist writing at MIT in the 1950s and 1960s. He sought to explain how traditional societies changed into those with continual technological progress and hence rising incomes. Here we discuss Hagen's (1963) theory of entrepreneurship. Hagen argues that a process eventually leading to entrepreneurship is triggered when a social group loses status in relation to other groups in a society. When members of a given social group perceive that they are given their due respected by the dominant groups in society, it triggers a creative spark that encourages entrepreneurial behaviors (Dana, 1995). Some examples of "withdrawal of status respect" include when: 1) a formerly higher status group is displaced by a new group; 2) a social group's symbols are insulted by the dominant group; 3) a group's symbols become unaligned with their actual economic