Withdrawal of Status Respect
Everett E. Hagen was a political scientist and economist writing at MIT. He sought to explain how traditional societies changed into those with continual technological progress and rising incomes.
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.
The Core Mechanism
When members of a given social group perceive that they are denied their due respect by the dominant groups in society, it triggers a creative spark that encourages entrepreneurial behaviours (Dana, 1995).
In Everett Hagen's theory of social change, the "withdrawal of status respect" serves as a psychological catalyst. It occurs when a social group experiences a profound loss of prestige or recognition, which can drive subsequent generations to seek alternative avenues for success—often through economic innovation and entrepreneurship. Specific examples of this phenomenon include:
- Displacement of a Traditional Elite: This occurs when a formerly high-status group is forcibly or systemically displaced from power by a newly empowered group. This shift can be triggered by political revolutions, foreign conquests, or drastic economic transitions. For example, when the samurai class in Japan lost their traditional warrior privileges and social standing during the Meiji Restoration, many pivoted toward modern business and industry to regain their societal influence.
- Cultural and Symbolic Insults: A social group experiences this when their foundational values, religious practices, language, or cultural symbols are insulted, mocked, or actively devalued by a dominant ruling class. Often seen in colonial or imperial contexts, the ruling power may demand submission while treating the marginalized group's heritage as inferior, creating a deep psychological drive within that group to prove their worth and regain autonomy.
- Status Inconsistency (The Wealth-Prestige Gap): This happens when a group's traditional symbols of status become radically unaligned with their actual economic reality or political power. A classic example is a rising merchant class that accumulates vast economic wealth but is denied the social prestige, titles, or political rights reserved for a landed aristocracy. This frustrating disconnect forces the group to innovate and challenge the status quo to bridge the gap between their financial power and social standing.
- Migration and the "Misfit" Experience: A group's social status is often abruptly lowered due to migration—whether forced or voluntary—to a new region. Stripped of their previous social capital, professional credentials, and community standing, these immigrants find themselves on the margins of their new society. Because traditional pathways to upward mobility are often blocked by prejudice or lack of connections, they frequently turn to independent business to survive and rebuild their status (see Misfit Theory of Entrepreneurship).
The Reaction: From Anxiety to Innovation
Hagen explains that a lowering of status may take generations before leading to the development of anxiety and the rejection of traditional values. This eventually leads to creativity and sometimes authoritarianism.
A lowering of status is met by different reactions. An individual may acquiesce (work without hope), or they may rebel against the system by trying out innovations.
Historical Examples
The Samurai of Japan
Hagen used the example of the Samurai community, which traditionally enjoyed high status. When they were defeated by other groups with superior weapons, their status was lowered. To regain their status, the Samurai pursued entrepreneurial development and contributed to the fastest-growing Asian economy.
The Russian Schism
Similarly, when the Russian Tzar (1650s) adopted Greek practices to attain diplomatic ends, it undermined the Orthodox church and its members. This withdrawal of respect triggered change processes that eventually led to revolution.
Relation to Modern Theory
In a way, Hagen's theory is similar to Christensen's theory that neglected stakeholders are the early target markets for disruptive innovations. In this case, the stakeholders are those individuals who feel they are locked out of real advancement and who use entrepreneurship to get ahead—a means of social mobility.
Supporting Perspectives
Institutional Voids: When formal systems fail to provide paths for advancement, excluded groups create their own markets and structures.
Misfit Theory: Social outcasts or "misfits" often turn to entrepreneurship because they are not constrained by the status quo they wish to disrupt.
Necessity vs. Opportunity: Explains the transition from "forced" entrepreneurship to using disruption as a ladder for growth.
Video Overview: Theories of Social Change
Sources
- Dana, L. P. (1995). Entrepreneurship in a remote sub-Arctic community. Entrepreneurship Theory and Practice, 20, 57-72.
- Hagen, E. E. (1963). How economic growth begins: a theory of social change. Journal of Social Issues, 19(1), 20-34.
Ronin: Market Rebellion
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