Entrepreneurship Theories

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

Contingency theory proposes that an organization's success is determined by how well its internal resources, structure, and strategies align with the external environment in which it operates. This external environment includes factors such as political, economic, social, and technological conditions. The concept of fit is central to contingency theory, as it refers to the degree to which the organization's characteristics match those of the environment in which it operates. A good fit between the organization and its environment can lead to greater success, while a poor fit can lead to inefficiencies and even failure. The understanding that there is no one-size-fits-all strategy for organizational design and administration is a major component of contingency theory. Depending on the particular environmental conditions in which they function, various organizations may require various structures, resources, and methods. For instance, a company operating in a highly regulated se

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 as th

What is the disruptive innovation theory of entrepreneurship? Disruptive innovation theory of was developed by Harvard Business School professor Clayton Christensen in his famous book entitled The Innovator’s Dilemma (2003) . Christensen’s core argument is that new entrants succeed when they pursue disruptive innovation whereas incumbents tend to pursue sustaining innovations. Disruptive innovations are technologies, products and business models that are lower performing than incumbent offerings along traditional dimensions of performance, but compensate with increased simplify, convenience, customizability, or affordability. For example, the Nintendo Wii disrupted the Xbox and Sony Playstation by offering lower quality graphics in exchange for the simplicity in the intuitive movements offered by gyroscopic technology added to the controllers. This allowed younger children, game novices, and older gamers to be able to learn to play with a minimal learning curve. Sustaining inn

The term emancipation has roots in Roman era practices of buying, selling and keeping slaves, but also wives and children. In Roman times, a son needed to be freed from the legal authority of the father to make his own way in the world. The term is also associated Lincoln’s Emancipation Proclamation, which, in the U.S., was used to criminalize slavery. In the women’s liberation movement, emancipation is associated with breaking free from bonds of marriage to a man. In a very interesting paper, Rindova and associates (2009) propose that entrepreneurship can be thought of as means of emancipation. They take a positive spin on a critical theory perspective. They define entrepreneuring as efforts to create new economic, social, institutional and cultural environments via the actions of groups or individuals. To bolster their arguments, they point out three key way in which entrepreneuring resembles emancipation processes. These are seeking autonomy, authoring, and making declarations.