Locus of control theory and entrepreneurship

What is the locus of control theory of entrepreneurship?

Among personality theories of entrepreneurship, 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 chances are determined by market and institutional forces they cannot control. Conversely, entrepreneurs with an internal locus of control believe that success is determined by his or her own efforts and abilities. The main idea is that internal locus of control is associated with intentions to become and entrepreneur, and entrepreneurial entry.

Locus of control has also been deemed a cultural trait such that some countries’ cultures engender more of it than others (Mueller and Thomas, 2001). This has been used to explain why some countries have more innovative entrepreneurship than others.

Locus of control is believed to develop as a result of family upbringing (Schultz and Schultz, 2005). Children that receive promised rewards from their efforts and consistent discipline for wrongdoing are more likely to develop an internal locus. Some have argued that children raised by single mothers are more likely to develop an external locus of control. Locus of control tends to shift from external to internal with age.

Development of the trait can be disrupted in societies experiencing unrest caused by outside forces (e.g., military occupation or economic depression).

One problem with this type of theory is that there are many individuals with an internal locus of control who choose careers other than entrepreneurship. For instance, intention theories (e.g., Theory of Planned Behavior) suggest that traits influence intentions, which fully mediate the relationship with entrepreneurial behaviors.

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Other Psychological Theories of Entrepreneurship:


Rotter, J. B. (1990). Internal versus external control of reinforcement: A case history of a variable. American psychologist, 45(4), 489.

Mueller, S. L., and 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.

Schultz, D.P. and Schultz, S.E. (2005). Theories of Personality (8th ed.). Wadsworth: Thomson. ISBN 0-534-62402-2.