Niche theory of entrepreneurship

What is the niche theory of entrepreneurship?

In ecology, a niche refers to a space with specific necessary environmental conditions that may guide the evolution and existence of species (Hardesty, 1972).

This is closely related to the concept of convergent evolution, where two or more species develop similar adaptations because they occupy similar evolutionary niches. For example, the marsupial wolf is adapted to forests, plains and preys on other mammal herbivores, just like the placental wolf.


In entrepreneurship lingo, a niche refers to a narrow market space.  Hutchinson (1978) suggests that much like animal species, competitors rarely occupy the same niche because if they do then they compete directly and would result in frequent fights (e.g., price wars). Rather, each species tends to specialize, for instance, one might evolve to prey at night, while the other preys during the day. Similarly, businesses can cater to distinct customer segments by offering differentiated products and services. The theory of population ecology is used to elaborate on the role of entrepreneurship so we point the reader there (Hannan and Freeman, 1977).

Nonetheless, the basic idea is that each niche can only accommodate a fixed population size and mix and that entrepreneurs compete for space in niches with incumbents and other entrepreneurs. The theory points to the need for unique niche exploitation strategies in order to carve out unique space. This is related to blue ocean strategy and disruptive innovation theory, both of which focus on the concept of unique market spaces.


Sources:

Hutchinson, G. E. (1978). An introduction to population ecology.
Hannan, M. T., and; Freeman, J. (1977). The population ecology of organizations. American journal of sociology, 82(5), 929-964.
Hardesty DL, 1972. The human ecological niche. American Anthropologist, 74: 458- 466.

Comments

Anonymous said…
This is interesting, I have heard of niche marketing in business before but I never thought of the parallels with evolution in nature!