Managerial Theories
Management Theories Applied to Entrepreneurship
Management theories focus on the administration and strategy of a venture. These frameworks explain how entrepreneurs structure their firms, manage resources, and navigate competitive environments.
1. Architectural Innovation Theory
This theory posits that incumbents often fail because they are locked into rigid organizational structures. This creates opportunities for entrepreneurs to enter by simply rearranging existing technologies in new, more efficient architectures (changing the linkages rather than the components).
2. Contingency Theory
Contingency theory looks at the venture and its environment as a problem of "fit." It argues there is no single best way to manage; successful entrepreneurship depends on adapting the internal organization to match external environmental conditions.
3. Disruptive Innovation Theory
Clayton Christensen’s theory puts the manager at the forefront. It explains how entrepreneurs enter markets by targeting low-end or ignored customers, eventually moving upmarket to displace incumbents who are focused on sustaining innovations for their most profitable clients.
4. First Mover Theory
First mover advantage posits that entrepreneurs should be early entrants to gain competitive advantages such as brand loyalty and resource control. However, it also highlights the risks of pioneering new markets without a roadmap.
5. Individual Ambidexterity
This theory suggests that successful founders must be "ambidextrous," capable of balancing Exploration (innovation and risk-taking) with Exploitation (efficiency and execution).
6. Machiavellian Theory
While often discussed in ethics, managerially this theory helps understand the "dark side" of entrepreneurship, looking at how founders use political maneuvering and power dynamics to survive in hostile competitive environments.
7. Resource-Based View (RBV)
RBV views entrepreneurship as a process of accumulating unique resources. To provide a sustainable edge, resources must be VRIO: Valuable, Rare, Inimitable, and Organized. This explains why some startups succeed while others with similar ideas fail.
8. Resource Dependency Theory
This perspective examines entrepreneurship as a power struggle. It argues that ventures are dependent on the environment for resources, and success comes from maneuvering to minimize dependence on others while maximizing others' dependence on the venture.
9. Resource Scarcity Theory
This theory posits that entrepreneurs' decisions are fundamentally shaped by the high costs and difficulty of accessing capital. It suggests that scarcity itself can drive creativity and efficient bootstrapping methods.
10. Stakeholder Theory
The stakeholder approach suggests that entrepreneurial opportunities often arise from poor incumbent management practices. By better addressing the needs of neglected stakeholders (employees, communities), entrepreneurs gain the support needed to enter the market.
11. Stewardship Theory
Stewardship theory views the founder not as a self-interested agent, but as a steward guiding their flock. It supports governance structures that give founders high authority, assuming their intentions are aligned with the long-term growth of the firm.
12. Strategic Disagreements Theory
This theory explains Spinouts. It suggests that entrepreneurship is often the result of a "strategic disagreement" between an employee and a parent organization, leading the employee to leave and launch the rejected idea independently.
13. Upper Echelons Theory
The Upper Echelons theory posits that the strategy and performance of a venture are a reflection of the top management team's background. It links firm outcomes to the specific ages, education, and experiences of the founders.
14. X-Efficiency Theory
This economic and management theory posits that opportunities exist because established firms are inefficient ("X-inefficient") due to a lack of competitive pressure. Entrepreneurs enter the market to exploit these inefficiencies.
