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Born Global Startups

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Born global startups are ventures that start thinking and acting globally in their early stages of development, which utilize international markets and resources to scale their growth. Attention to born global startups comes from a stream of theory and research that examines how startups rapidly internationalize their new ventures (Knight and Cavusgil, 2004). Traditionally, entrepreneurs would focus on domestic markets first and then pursue internationalization gradually as they develop the requisite skills through trial and error. Modern advances in internet technologies, global talent flows, and international supply chains have substantially lowered the cost for entrepreneurs to internationalize (McCormick & Somaya, 2020). They have also made it possible for startups to address global markets from the very beginning of their existence. Entrepreneurs can now bypass many of their home-country constraints such as government inefficiencies and physical location (McCormick & Somay

Informal Entrepreneurship

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Informal entrepreneurship refers to economic activity that occurs outside of the formal economy, which is typically characterized by the absence of legal and regulatory frameworks. This type of entrepreneurship is often associated with small-scale, unregistered, and unregulated businesses that operate in the informal sector. The informal economy is made up of a diverse range of activities, including street vending, artisanal production, and home-based businesses, among others. While these businesses may provide a means of livelihood for individuals and communities, they often face significant barriers to growth and sustainability due to their lack of access to formal financing, legal protections, and other resources. In contrast, the formal economy is the part of the economy that is recognized and regulated by government institutions. Companies and entrepreneurs operating in the formal economy are required to pay taxes, adhere to labour laws and regulations, and obtain necessary licens

Slacker theory of entrepreneurship

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Do slackers have an advantage in entrepreneurship? This theory is passed around more as rumour than formal theoretical framework. The theory starts with a premise about how entrepreneurial ventures come about. Entrepreneurial opportunities are viewed as difficult to discover or create, requiring a lot of time and trial and error. Perhaps slacker have nothing more important to do, allowing them the resilience to keep trying, even after repeated failures.   Perhaps individuals who are not particularly motivated or hardworking can still become successful entrepreneurs. By embracing a more laid-back approach to work, entrepreneurs may find creative and innovative solutions to problems that others might overlook. The idea of the slacker theory of entrepreneurship challenges the conventional wisdom that success in business requires long hours and a relentless work ethic. Instead, it suggests that entrepreneurs who are willing to take risks and think outside the box can find success even if

Feminist Theory of Entrepreneurship

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How can feminist theory enlighten us about entrepreneurship? For the most part, women entrepreneurs are in the minority, and they are less likely to be funded by venture capitalists. This naturally leads to criticism of the old boys club in venture capital investment that tends to invest less in women led ventures. There are some indications that these trends are changing but its far from over. Much of the feminist literature that discusses entrepreneurship tends to look at differences between entrepreneurial entry rates and opportunities for women entrepreneurs as well as the systems and structures that cause the disparities between men and women. Hurley (1999): "Traditional anthropological theories stated that the key factor in human evolution was the male’s hunting activities. The men developed the important social skills of  communication, co-operation and tool making, while women contributed little...Feminist theories showed that women’s activities were the key

Dynamic Capabilities Theory and Entrepreneurship

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Do entrepreneurs exhibit dynamic capabilities?  At the core of the theory of dynamic capabilities is the assumption that an organization's current resources and capabilities, which may be optimally suited to the current environmental conditions, will not likely be relevant under future conditions. Recognizing that changes in technologies, policies, and tastes make for a continuously evolving landscape of needs and wants, an organization needs to be able to respond. Organizations need to be able to transform their capabilities over time as needed to seize new opportunities. They also need to be continually sensing new opportunities. According to Teece (2007): "the competitive advantage of firms stems from dynamic capabilities rooted in high performance routines operating inside the firm, embedded in the firm’s processes, and conditioned by its history" Responding to change How do they respond effectively to changes on the order of converging industries and intern

Information Asymmetry Theory and Entrepreneurship

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Information asymmetry refers to a conditions whereby two parties in a market or organizational relationship have access to different information about the exchange.  It can be seen as an alternative to the classical assumption of "perfect information" in economics. Information asymmetries have been acknowledged by regulators who have made laws forbidding insider trading. Insiders have special access to the real financial picture of a company and have an unfair advantage when buying and selling company stock (Aboody, 2000). Company executives, like CEOs also have fiduciary responsibilities toward their investors which require them to be truthful and forthcoming. Information asymmetry is also a potential source of problems in entrepreneurship. For example, an entrepreneur knows much more about the real potential of their ventures because they have inside access to knowledge about their customers and the issues with production. The investors, on the other hand, have less informa

Diffusion of Innovations Theory and Entrepreneurship

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The diffusion of innovations has been studied by many scholars over the ages, but notably from 1970 onward by American sociologist Everett Rogers. Dr. Rogers was interested in trying to get farmers to adopt innovations (like farm equipment) that could better their lives and make their businesses more productive. He pondered the forces that lead some to adopt and others to abstain. He suggests that different types of adopters: innovators, early adoptions, early majority, late majority and laggards have different adoption criteria. For instance, a strategy that may attract early adopters may not attract the early majority because they want different things. The size distributions of the different types of adopters (i.e., number of members of a particular adopter category), grow and then shrink giving rise to an inverted u-shaped curve, giving rise to the famous s-curve of total adoption. Image source: Wikicommons Rogers noted that it is not always the best technologies that get

Hybrid Entrepreneurship

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Most entrepreneurs work for organizations before or while they start their businesses. There is macho entrepreneurship dogma that says you have to go all in, experience "the fear" and dedicate yourself for 80 hours a week to your venture. Implicit in this is the notion that an entrepreneur cannot succeed if they hedge their bets by keeping one foot in employment. But isn't this a bad assumption? Why go all in to a startup if startup success stories are probabilistic events, not givens?    Hybrid entrepreneurship refers to entrepreneurship whereby an employee starts a business on the side and keeps their stable and sustaining day job until the startup reaches a certain size. Ardianti et al. (2022) suggests that hybrid entrepreneurs experience a distinct psychological well-being than other entrepreneurs, perhaps because they are keeping their foot in the door of stability. Once the business is large enough to command the founder's full attention, then the emp

Lean launchpad and entrepreneurship

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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

Social safety nets and entrepreneurship

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What is the risk compensation theory of entrepreneurship? Peltzman’s (1975) pioneering study of automobile accidents revealed that expected positive effects of safety regulations rarely materialized upon implementation. He argued that when drivers feel safer, they take more risks, which compensate for the safety interventions. Support for what is now dubbed the ‘Pelzman effect’ (or risk compensation theory) is far reaching and extends to varying contexts including new rules in NASCAR racing, mandated visor use in hockey, consumer vigilance in response to food safety messages, and bike helmet laws. But does this phenomenon also explain greater entrepreneurial risk-taking in the presence of social safety nets? There is emerging evidence that social safety nets can have positive benefits for entrepreneurs by reducing the risk associated with entry. Olds (2016a) finds that states that provided more food stamps have more limited liability company registrations among members of newly

Individual Ambidexterity and Entrepreneurship

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Most new ventures are founded by former employees of organizations. Employees make discoveries while working for organizations and decide to exploit them on their own, especially when parent firms do not see the value in their discoveries, or choose not to exploit them due to a lack of fit with the firm’s strategy. When employees leave to start new ventures, we call their ventures employee spinouts .  Ambidextrous behaviors have been observed in entrepreneurs. Entrepreneurs display ambidextrous through boundary-spanning relationships, by avoiding excess exploitation and keeping time aside for exploration, by using platforms for discussing issues related to exploration, and by shifting focus from exploration to exploitation and vice versa as the current situation requires (Volery et al., 2013). The entrepreneurial process is often conceptualized as stage-based. For example, Kazanjian and Drazin (1990) suggest four stages: conception and development, commercialization, growth, and

Attribution Theory and Entrepreneurship

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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 t

Self‐competition theory of entrepreneurship

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Elias Khalil (1997) at Monash University asks why is it that some entrepreneurs that have prior accomplishments continue to risk their capital again and again? Why don't they retire? One possibility is that these entrepreneurs are trying to be the best in the world or in a given territory or space. Another possibility is that they are striving just to be better than their former selves. Self-competition theory's main assumption is that individuals develop the desire to improve themselves, or rather, upon their former selves. Entrepreneurship can be viewed as behaviors that individuals use to better themselves. The theory also assumes that individuals keep track of their personal best and have the ability to compare themselves to their former bests. For example, one might try to obtain a return on investment that is double what a previous venture was able to provide. Or one might try to expand the scale of the venture to be larger than previous ventures, or to span more

Embeddedness Theory of Entrepreneurship

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What is the embeddedness theory of entrepreneurship? Karl Polanyi was an Austrian-Hungarian economic sociologist in the middle years of the twentieth century. He coined the term 'embeddedness' to mean the extent that economic activity is constrained by institutions that are non-economic. Non-economic institutions may include: 1) kinship or family 2) religious or cultural 3) power and politics Embeddedness can also be thought of as the nature, depth and extent of an individual’s ties into the environment (Jack and Anderson, 2002). Patterns of economic exchange become embedded in webs of social relations that over time leading to the development of trust and reciprocity (Uzzi, 1997). Embeddedness affects decisions about who to transact with including potential investors and customers of entrepreneurs' ventures. For instance, someone that graduates from Stanford may be more likely to get investment from someone in the Stanford venture capital network, but they may also

Social judgement theory and entrepreneurship

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What is the social judgement theory of entrepreneurship? The central concept in social judgement theory is legitimacy (Suchman, 1995), as the buyers and suppliers of any new venture must believe that the startup is legitimate in order to commit their scarce resources or risk capital. A startup must meet the regulatory, normative and cognitive institutional requirements of the markets where it competes.  A social judgment theory of entrepreneurship looks to the entrepreneurs stakeholders' social judgement about their ventures. These judgments are important because of the way that stakeholders make decisions to support a burgeoning venture or not to. Impression management? Perhaps and interesting critique of the social judgement theory as stated above is that is may be descriptive rather than prescriptive. For example, if the theory is considered prescriptive (i.e., normative), then an entrepreneur might thus manages the impressions that stakeholders build about them in o

Biculturalism and Entrepreneurship

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What is the biculturalism theory of entrepreneurship? Biculturalism refers to an individual characteristic that develops as a result of exposure to two cultures. The typical case is the immigrant who must learn the host country's local culture and in doing so adopts elements of a second culture. The Al-Shammari team examines individuals with bi-cultural skills and experiences: "those who are exposed to different cultures and environments will experience different types of experiences in their social interactions and thus will accumulate rich knowledge that is diverse" (page 7). They theorize that biculturalism provides advantages in the opportunity recognition, evaluation, selection and exploitation stages . They find that bicultural individuals have advantages in the earlier stages, but struggle with exploitation (due to institutional constraints), unless they are able to build networks in the host country. This is an interesting theory, though obviously lends its

Resilience and entrepreneurship

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What is the resilience theory? Resilience is the ability to get up after you fall down, whether it be physically, psychologically, cognitively, financially, socially, or economically. Resilience is expected to be an important capability of entrepreneurs because they typically face numerous failures on their way to eventual success. The idea of resilience as a virtue for entrepreneurs is appealing because it soothes the failed or failing entrepreneur. It involves a belief that continuing on despite setbacks is better than withdrawing from entrepreneurial activities. For example, the popular idea of the pivot implies the need to change directions as reality comes into focus. Ayala and Manzano (2014) find that Spanish small business owners are more resilient than the general population, highlighting the sub-construct of resourcefulness.  Bullough, Renko and Myatt (2014) focus on entrepreneurs during times of war, who show great resilience in the face of conflict. Entrepreneurial

Spinout versus spinoff: What's the difference?

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What is the difference between a spinout and spinoff? When I talk to entrepreneurs and managers, there is much confusion about the difference between spinouts and spinoffs. This confusion is due to the ambiguous use of these terms both in practice and academia. Although there exist many opinions about the differences between spinouts and spinoffs, I will focus here on the authority behind a spinout or spinoff. Spinoffs (often called "corporate spinoffs") are the outcome of a corporate decision making process ( Agarwal, Audretsch, and Sarkar, 2007) . A parent company's managers decide to make a division or subsidiary of the corporation into a separate legal entity with different (albeit often overlapping) owners. Spinoffs are often used to increase corporate coherence and to give new ventures the independence they need to flourish. Spinoffs are a form of corporate restructuring decision that involves divestment. Owners of shares in the parent receive shares in the spinof

Hoselitz Theory of Entrepreneurship

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What is Hoselitz theory of entrepreneurship? Burt F. Hoselitz was a professor of economics at the University of Chicago. Hoselitz argues that entrepreneurship tends to come from socially marginalized groups in a given society. This is very similar to the withdrawal of status respect theory and the misfit theory of entrepreneurship , which both deal with marginalized populations. Hoselitz (1963) assumes that entrepreneurship can only come out of a developed cultural base. His theory is that marginalized populations must be considered culturally developed in order to be considered eligible for entrepreneurship. He refers to entrepreneurship by marginalized groups as "pariah entrepreneurship". U.S. Coast Guard Photo Hoselitz claimed that his theory helps to explain to the highly entrepreneurial behaviors of Greeks and Jewish people in medieval Europe, Lebanese in West Africa, Chinese in Southeast Asia, and Indians in East Africa. The concept of cultural develo

Experiential Learning and Entrepreneurship

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Learning involves the transformation of experience into potential knowledge, cognition, behaviours or actions (Kolb, 1984). Experiential learning can be differentiated from rationalist (e.g., cognitive theories).  Rather than emphasize the role of acquiring, manipulating, and recalling, experiential learning theory embraces subjective experience.  Know-how   The concept of subjective experience is often used to describe personal and individual experiences that cannot be fully captured or understood through objective observation or measurement. While there are many different types of subjective experiences, one useful way to think about them is through the lens of "know-how." Unlike knowledge, which can be learned through language and formal education, know-how is often acquired through hands-on experience and practice. This type of experiential learning is particularly important in areas like entrepreneurship, where success often depends on a deep understanding of the pr

Prospect theory and entrepreneurship

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Prospect theory was developed by behavioural economists Daniel Kahneman and Amos Tversky in the 1970s. Their aim was to better understand decision making processes by looking at how individuals assess the potential gains and losses from a decision separately. The most famous hypothesis tied to the theory is that most individuals fear losses more than they value gains. The theory posits that when individuals think they are winning (gain domain frame), they become more risk-averse, whereas when they think they are losing (loss domain frame), they become inclined to take bigger risks to get back to a break-even position. According to Hsu et al. (2017): "So essentially, whether a person frames a situation as associated with gains or losses influences his or her attitude toward engaging in risky behaviors such as reentering entrepreneurship."    Entrepreneurs judge whether they are in a gain or loss position based on a reference point. For instance, Hsu et al. use the entrepre

Social entrepreneurship

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The concept of social entrepreneurship is relatively new and may not be thought of as a theory. It is more like a domain or niche phenomenon that may deserve attention. According to Dees (2017), social entrepreneurship has largely emerged out of discontent with the performance of government and charitable organizations in tackling social problems. Governments are often underfunded, ineffective, and too political to do what is right for all. Charities are busy fighting for funds and justifying their existence and many successful such organizations use many of their donors funds for internal development purposes. If governments and charities would be more effective at tackling poverty, health issues, and inequality, then there would not be a need for social entrepreneurs to try to pick up the slack. This is also a core idea in the stakeholder theory of entrepreneurship . Social entrepreneurs bring market logic and business acumen to bear in combating social problems. They are chan

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