Self‐competition theory of entrepreneurship
Self-Competition Theory: Why Entrepreneurs Compete Against Themselves
Why do successful entrepreneurs, who have already made their millions, continue to risk their capital again and again?
Elias Khalil (1997) at Monash University posed this question. Logic suggests that once an entrepreneur has achieved financial security, they should retire to protect their wealth. Yet, many do the opposite. They double down.
Beating the "Former Self"
Self-Competition Theory offers a psychological explanation. It posits that high-performing individuals are not necessarily trying to beat competitors in the market; they are trying to beat their former selves.
The theory's main assumption is that individuals keep a mental scorecard of their "personal bests." Entrepreneurship becomes a vehicle for self-improvement, where the goal is to exceed previous metrics. For example, an entrepreneur might try to:
- Obtain an ROI (Return on Investment) double that of their previous venture.
- Expand the scale of a new company to be larger than their last one.
- Enter new territories or industries they haven't conquered before.
The Link to Maslow and Self-Actualization
This drive to improve is not about money; it is about Self-Actualization. As described in Maslow's Hierarchy of Needs, once basic safety and esteem needs are met, the individual seeks to realize their full potential.
[Image of Maslow's hierarchy of needs]Rather than feeling a sense of loss after a failure, an entrepreneur driven by self-competition views it as data. They learn from the experience to improve their performance in the next round, much like an athlete training for the Olympics.
Related Frameworks
Self-Competition theory does not exist in a vacuum. It shares DNA with several other psychological frameworks in entrepreneurship:
- Prospect Theory: Analyzing how individuals value gains and losses.
- Regulatory Focus Theory: The balance between promotion (seeking gains) and prevention (avoiding losses).
- Self-Efficacy Theory: The belief in one's own ability to succeed.
- Hubris Theory: When self-confidence crosses the line into over-estimation.
Video: The Psychology of Competing with Yourself
Note: While not explicitly about Khalil's academic theory, this video explores the mindset of self-competition.
References
Khalil, E. L. (1997). Buridan's Ass, Risk, Uncertainty, and Self-Competition: A Theory of Entrepreneurship. Kyklos, 50(2), 147-163.
