Stages theory of entrepreneurship
The Stages Theory: Understanding the Entrepreneurial Life Cycle
The entrepreneurial process is often conceptualized as a life cycle. Borrowed from biology, where the life cycles of flora and fauna are studied extensively, this theory views a business as a living organism.
By definition, a life has a beginning (birth) and an end (decline/death). The "Stages Theory" attempts to map the critical transitions that happen in between.
The Biological Analogy
In ecology, these theories start with the assumptions of Birth, Growth, Maturity, and Decline. The core argument is that the drivers and resistors of entrepreneurship are different at each stage. What works for a newborn startup (e.g., product development) will kill a mature company (e.g., lack of process).
[Image of business life cycle stages graph]Model 1: The Kazanjian & Drazin Framework (1990)
Kazanjian and Drazin focused on technology-based ventures. They proposed that the focus shifts from "technical" to "managerial" as the firm ages:
- Conception and Development: The invention phase. The primary focus is resource acquisition and technology development.
- Commercialization: The first sales. The focus shifts to production and marketing.
- Growth: Rapid expansion. The focus shifts to sales volume and market share.
- Stability: The mature phase. The focus shifts to profit maximization and internal bureaucracy.
A key insight here is that only the first stage or two are truly "entrepreneurial." Once the firm hits the Growth and Stability stages, the challenge becomes a general management issue.
Model 2: Bhave’s Process Model (1994)
Bhave took a more process-oriented approach. While his transitions are ordered, he acknowledged that in the real world, these stages often overlap temporally or happen simultaneously:
- Opportunity Stage: Recognizing the market need.
- Technology Set-up: Building the solution.
- Organization-Creation: Structuring the legal and physical entity.
- Exchange Stage: The moment value is traded for money (sales).
Critique: Is It Just a Good Story?
The pattern in academia seems to be defining stages and checking if they really exist across different contexts. However, a critic might wonder if these models are too rigid. Real startups are messy and non-linear.
Some argue that stage-based theories are simply a convenient way to organize a textbook or a keynote speech—a story with a nice progression—rather than a reflection of the chaotic reality of building a business.
References
Bhave, M. P. (1994). A process model of entrepreneurial venture creation. Journal of Business Venturing, 9(3), 223-242.
Kazanjian, R. K., & Drazin, R. (1990). A stage-contingent model of design and growth for technology based new ventures. Journal of Business Venturing, 5(3), 137-150.
