Hoselitz Theory of Entrepreneurship
Hoselitz’s Theory: The Entrepreneur as the "Marginal Man"
Why does entrepreneurship so often emerge from socially marginalized groups? Burt F. Hoselitz, a professor of economics at the University of Chicago, argued that the drive to create new ventures is often a reaction to being on the outside looking in.
Hoselitz’s work (1963) suggests that marginalization is a feature, not a bug, of the entrepreneurial class. This concept shares DNA with the Withdrawal of Status Respect Theory and the Misfit Theory.
The Concept of the "Marginal Man"
Hoselitz uses the specific term “Marginal Men” to describe the ideal entrepreneurial candidate. According to the theory, these individuals sit at the intersection of two distinct conditions:
- They belong to a socially marginalized population in their current society.
- They originate from a "developed" cultural base (or possess high cultural capital).
Because these individuals are excluded from traditional paths to power (politics, corporate ladders, land ownership), they channel their ambition into the only path left open to them: Economic Innovation.
"Pariah Entrepreneurship"
Hoselitz referred to this phenomenon as "Pariah Entrepreneurship." He pointed to historical examples where minority groups, excluded from mainstream society, became the dominant commercial class:
- Jewish people and Greeks in Medieval Europe.
- The Lebanese diaspora in West Africa.
- The Chinese diaspora in Southeast Asia.
- Indian communities in East Africa.
Critique: The Problem of "Cultural Development"
The theory is not without controversy. Hoselitz assumed that entrepreneurship could only emerge if the marginalized group came from a "developed" culture.
The problem? "Cultural development" is ambiguous and subjective. It often relies on the biased perspective of the dominant group to decide which cultures are "developed." Critics argue this contributes to stereotyping and ignores the fact that cultures adapt dynamically.
A Modern Re-interpretation
How can we use this theory today without the bias? A more inclusive version of the theory focuses on Routines rather than cultural hierarchy.
Entrepreneurs who migrate may look to aspects of their home cultures (routines, heuristics, efficiency methods) that are simply different from the host culture. Routines developed under conditions of scarcity in a home country may provide significant efficiency advantages in a resource-rich host country. This avoids labeling cultures as "better" and focuses on the competitive advantage of cognitive diversity.
References
Gambe, A. R. (2000). Overseas Chinese Entrepreneurship and Capitalist Development in Southeast Asia. LIT Verlag Münster.
Hoselitz, B. F. (1963). Entrepreneurship and traditional elites. Explorations in Economic History, 1(1), 36.
