Locus of control
Locus of Control Theory: Are You the Master of Your Fate?
Do you believe you create your own luck, or do things just happen to you? In the psychology of entrepreneurship, this distinction is known as the Locus of Control.
Developed in the 1950s by psychologist Julian Rotter, this concept has received considerable attention because it attempts to explain the fundamental worldview of the founder.
Internal vs. External: The Continuum
Locus of control refers to an individual’s perception of the underlying causes of events in their life. It is viewed as a continuum with two extremes:
- External Locus of Control: The belief that life is determined by forces outside of one's control, such as fate, luck, deities, or powerful institutions. ("I failed because the economy is bad.")
- Internal Locus of Control: The belief that one is the master of their own destiny. Success or failure is determined by one's own efforts and abilities. ("I failed because I didn't market the product well.")
The Entrepreneurial Mindset
When applied to business, the correlation is clear. Internal Locus of Control is strongly associated with the intention to become an entrepreneur.
Entrepreneurs with an internal locus believe that their survival is determined by their own hustle. This belief system is a prerequisite for action; if you believed that market forces were entirely random (External Locus), there would be no logical reason to start a business.
Origins: Nature, Nurture, and Culture
Where does this trait come from? Schultz and Schultz (2005) argue it develops largely from family upbringing.
- Childhood: Children who receive consistent discipline and are promised rewards for their efforts are more likely to develop an Internal Locus. They learn the causal link between Action and Result.
- Disruption: Conversely, societies experiencing unrest (e.g., military occupation or economic depression) often breed an External Locus, as individuals learn that their efforts do not necessarily change their outcomes.
Mueller and Thomas (2001) expanded this to the national level. They found that Locus of Control acts as a cultural trait. Countries that culturally engender an Internal Locus tend to have higher rates of innovative entrepreneurship.
Critique: Intention vs. Action
One major critique of the theory is that while an Internal Locus is necessary, it is not sufficient. There are many "Internals" who choose to be managers or surgeons rather than entrepreneurs.
Modern researchers often pair this with the Theory of Planned Behavior, suggesting that traits like Locus of Control influence intentions, but other factors determine whether those intentions ever become actions.
Video: Locus of Control Explained
References
Mueller, S. L., & Thomas, A. S. (2001). Culture and entrepreneurial potential: A nine country study of locus of control and innovativeness. Journal of Business Venturing, 16(1), 51-75.
Rotter, J. B. (1990). Internal versus external control of reinforcement: A case history of a variable. American Psychologist, 45(4), 489.
Schultz, D. P., & Schultz, S. E. (2005). Theories of Personality (8th ed.). Wadsworth: Thomson.
