Entrepreneurship Theories

The External Enabler Framework (Davidsson, Recker & von Briel, 2020) is a conceptual toolbox developed for analyzing the strategic and fortuitous influence of changes to the business environment in entrepreneurial pursuits. External Enabler (EE) refers to significant changes to the business environment, such as new technologies, regulatory changes, macroeconomic shifts, demographic and sociocultural trends, changes to the natural environment, and the like. The basic assumption of the EE body of work is that every such change will benefit some entrepreneurial initiatives even if it disadvantages other economic activities. EE analysis focuses on those enabled; other frameworks are needed for analyzing negative consequences of change. Moving Beyond "Objective Opportunity" The EE concept was introduced as a more workable alternative to “objective opportunity” for realizing the idea of entrepreneurship as a nexus of enterprising agents and favorable ...

The Lean Launchpad: A Scientific Approach to Entrepreneurship What is the most reliable way to build a startup today? For many, the answer is the Lean Launchpad . Developed by Steve Blank (serial entrepreneur and adjunct professor at Stanford), this methodology is designed as a repeatable process to create a startup. It has become the gold standard in entrepreneurship education, featuring heavily in university curricula and top accelerator programs like Y-Combinator . The Core Premise: "Get Out of the Building" Unlike traditional business models that focus on writing lengthy business plans, the Lean Launchpad focuses on testing hypotheses. It operates on the belief that founders do not know what the customer wants until they leave the office and ask. [Image of Steve Blank customer development model] The Theoretical Basis: Discovery vs. Creation To understand why the Lean Launchpad works, we must look at the academic theories behind it. Entrepreneurship litera...

What is the niche theory of entrepreneurship? In ecology, the concept of a niche is crucial to understanding the interactions between species and their environment. Essentially, a niche is a space or role that a particular species occupies within an ecosystem, defined by the specific environmental conditions it needs to survive and thrive. These conditions can include factors like temperature, humidity, available food sources, and predators. One interesting aspect of the niche concept is the phenomenon of convergent evolution. This occurs when two or more species independently evolve similar adaptations or traits because they occupy similar ecological niches. The marsupial wolf and the placental wolf mentioned in the prompt are a great example of this. Despite being separated by millions of years of evolution and located on opposite sides of the world, the marsupial wolf of Australia and the placental wolf of North America share remarkable similarities in their physical appearance an...

Actualization Theory of Entrepreneurship: Bridging Discovery and Creation Actualization Theory: Bridging the Gap in Entrepreneurial Opportunity The Actualization Theory of entrepreneurial opportunities, introduced by Ramoglou and Tsang (2016), is intended to resolve one of the biggest debates in the field: the gap between Discovery and Creation theories. The Great Debate: Discovery vs. Creation To understand Actualization, we must first understand the two opposing views it attempts to reconcile. The debate centers on whether business opportunities exist objectively (realism) or are imagined subjectively (constructionism). 1. The Discovery Perspective This view argues that opportunities exist "out there" in objective reality, waiting to be found and exploited. This implies that if an opportunity does not exist, no amount of effort will be fruitful. The Edison Analogy: Denying objective existence is like arguing that if Thomas Edison had ...

The Individual-Opportunity Nexus: Are Opportunities Found or Made? There is a long-standing debate in academia about the origins of business ideas. Do entrepreneurs create opportunities through sheer willpower, or do they merely discover gaps that already exist? Scott Shane and Jonathan Eckhardt (2003) argue firmly for the latter. Their theory, the Individual-Opportunity Nexus , proposes that opportunities are objective phenomena that are found, not made. Defining the Opportunity According to this theory, the foundation of entrepreneurship relies upon the objectiveness of opportunities. If opportunities were just hallucinations of founders, the field would be on shaky ground. "[W]e define entrepreneurial opportunities as situations in which new goods, services, raw materials, markets, and organizing methods can be introduced for profit." — Eckhardt and Shane (2010) The Core Argument: Discovery Theory This theory places Shane and Eckhardt in the ...

The Harvard School Theory: Entrepreneurship as Strategy While some theories view entrepreneurship as a personality trait (Psychology) or a market function (Economics), the Harvard School Theory views it as a strategic process. Often described as a Process Theory , this framework argues that entrepreneurship is not about "magic" or "luck," but about the rigorous analysis of internal and external forces. The Core Definition Pradhan and Nath (2011) define the Harvard School approach as: "All such activities that initiates, maintains and results in a profit oriented enterprise for production or distribution of economic goods or services and which is consistent with internal and external forces." In simple terms: Successful entrepreneurship happens when a founder finds a "Strategic Fit" between what they *can* do (Internal) and what the market *needs* (External). [Image of SWOT analysis diagram] The Two-Step Analysis Accordi...

Israel Kirzner is a British-American economist and emeritus professor at New York University. He is a leading figure in the Austrian School of Economics . Below, we review Kirzner's "Alertness Theory" of entrepreneurship, which argues that entrepreneurs balance supply and demand by detecting market imperfections and exploiting them. The Cause: Market Imperfections Kirzner argues that opportunities exist because markets are not perfect. These imperfections are primarily caused by two factors: Information Asymmetry: Cases where different stakeholders have varying information about a business venture. If one stakeholder uses an information advantage to profit from another, it is considered opportunistic bargaining. Bounded Rationality: The idea that humans are not perfectly rational. While Neo-classical economics models the assumptions of "perfect" economic man, Kirzner acknowledges that real humans have limits on their knowledge and processing power...

X-Efficiency Theory: Why Incumbents Waste Resources and Startups Win Why do big, established companies waste so much money? And why does this waste create the perfect opening for entrepreneurs? American economist Harvey Leibenstein (1966) developed X-Efficiency Theory to answer these questions. While traditional economics assumes companies always maximize profits, Leibenstein argued that, in reality, most firms operate far below their potential due to "X-Inefficiency." The Problem: X-Inefficiency X-Inefficiency occurs when a firm fails to utilize its resources efficiently. This "gap" between actual performance and maximum potential emerges due to: Inertia: "We've always done it this way." Organizational Bloat: Excessive middle management. Lack of Motivation: Employees (and managers) who are not incentivized to work hard. Lack of Competitive Pressure: Monopolies get lazy. [Image of allocative efficiency vs x-effi...