Childhood Adversity Theory of Entrepreneurship
The Underdog Advantage: Does Childhood Adversity Create Entrepreneurs?
While researchers have long studied resilience in adults, few have examined how childhood adversity specifically affects entrepreneurial entry later in life. Does early trauma break a person, or does it forge the skills necessary to build a business?
Recent studies suggest the latter, pointing to a biological and psychological link between hardship and business creation.
The Underdog Theory of Entrepreneurship
To explain this phenomenon, scholars utilize the ‘Underdog Theory’ proposed by Miller and Le Breton-Miller (2017). The core premise is that life challenges require the development of adaptive skills that inadvertently make individuals better suited for entrepreneurship.
"Negative personal circumstances of an economic, sociocultural, cognitive, and physical/emotional nature may have a … powerful role to play in getting people to become effective entrepreneurs" (p. 3).
Evidence from Historical Trauma
Recent research supports this theory by analyzing entrepreneurs who survived major historical crises.
1. The Vietnam War (Churchill et al., 2020)
Researchers measured adversity based on the bombing intensity experienced by entrepreneurs during early childhood in Vietnam. They found a direct correlation:
- As bombing intensity increased, so did the likelihood of becoming an entrepreneur later in life.
- The Effect Size: A 10% increase in bombing intensity correlated with a 5% increase in entrepreneurial entry.
2. The Great Chinese Famine (Cheng et al., 2021)
Similarly, researchers measured the impact of starvation during the societal upheavals in China (1959–1961). Their analyses revealed that survivors of the famine were significantly more likely to grow up to become entrepreneurs compared to those who did not experience such food insecurity.
Is Adversity a "Mixed Blessing"?
While the link is clear, is it always positive? A more recent paper by Yu et al. (2023) suggests that childhood adversity is a "mixed blessing."
Analyzing over 4,000 records of U.S. mothers reporting on their children, they found two competing outcomes:
- The Advantage: Adversity (especially for boys) seems to promote advancement via "rule-breaking behaviors." In the context of innovation, this willingness to break norms is an asset.
- The Disadvantage: Conversely, severe childhood adversity can reduce cognitive ability or educational attainment, which acts as a barrier to entry.
As studies accumulate, it will be vital to determine if these effects are context-dependent or universal across different cultures and economies.
References
Cheng, Z., Guo, W., Hayward, M., Smyth, R., & Wang, H. (2021). Childhood adversity and the propensity for entrepreneurship: A quasi-experimental study of the Great Chinese Famine. Journal of Business Venturing, 36(1), 106063.
Churchill, S. A., Munyanyi, M. E., Smyth, R., & Trinh, T. A. (2020). Early life shocks and entrepreneurship: Evidence from the Vietnam War. Journal of Business Research, 124, 506-518.
Miller, D., & Le Breton-Miller, I. (2017). Underdog entrepreneurs: A model of challenge–based entrepreneurship. Entrepreneurship Theory and Practice, 41(1), 7-17.
Yu, W., Stephan, U., & Bao, J. (2023). Childhood adversities: Mixed blessings for entrepreneurial entry. Journal of Business Venturing, 38(2), 106287.
