Withdrawal of status respect theory of entrepreneurship

What is the withdrawal of status respect theory of entrepreneurship?

Everett E. Hagen was a political scientist and economist writing at MIT in the 1950s and 1960s. He sought to explain how traditional societies changed into those with continual technological progress and hence, rising per capita incomes. Here we discuss Hagen’s theory of entrepreneurship.

Hagen argues that a process eventually leading to entrepreneurship is triggered when a social group loses status in relation to other groups in a society. When members of a given social group perceive that they are not respected by the dominant groups in society, this triggers a personality change (creativity) that encourages entrepreneurial behaviors (Dana, 1995).

Some examples of withdrawal of status respect include: 1) when a formerly high-status group is displaced by a new group with better technology; 2) when the symbols of a social group are denigrated due to some change in attitude by the elites; 3) when inconsistencies arise between the status symbols of a group and their actual economic reality (e.g., when the stories of elders reflect a more favorable past than the present); and 4) a lowering of status due to immigration to another society (see misfit theory).

Hagen explains that a lowering of status may take generations before leading to the development of anxiety and the rejection of traditional values, leading to creativity and authoritarianism, as in the case of Henry Ford who was the self-made progeny of immigrants to the U.S.

A lowering of status is met by four different reactions. An entrepreneur may retreat by continuing his work with indifference; ritually continuing to work without hope of improvement; reforming by rebelling against the system by trying new ways of working; and innovating by creating new means to achieve goals. For example, the Samurai community of Japan had traditionally enjoyed a high status, which was lowered when they were defeated by other groups with superior weapons (Tokugawa). To regain their status, the Samurai pursued entrepreneurial development and contributed to the fastest growing Asian economy. Similarly, when the Russian tzar (1650s) adopted Greek practices to attain diplomatic ends, it undermined the Orthodox church and its members, triggering change processes that eventually led to revolution.

Hagen’s theory emphasizes a process that takes decades to unfold and tends to be more dynamic than other cultural theories of entrepreneurship. The theory also looks to the personality of the figureheads, relating to a larger class of psychological theories of entrepreneurship.

In a way, Hagen’s theory is similar to Christensen’s theory that neglected stakeholders are the early target markets for disruptive innovations. In this case the stakeholders are those individuals who feel they are locked out of real advancement and who use entrepreneurship to get ahead–a means of social mobility.

Sources:

Hagen, E. E. (1963). How economic growth begins: a theory of social change. Journal of Social Issues, 19(1), 20-34.

Dana, L. P. (1995). Entrepreneurship in a remote sub-Arctic community. Entrepreneurship Theory and Practice, 20, 57-72.

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