Entrepreneurship Theories

What is a Born Open Startup? Definition and Strategies What is a Born Open Startup? Definition & Strategy A startup that is "Born Open" is one that rejects the traditional notion of proprietary knowledge appropriation (e.g., obtaining patents). For these companies, software patents are often viewed as an obstacle rather than an asset. Instead, a Born Open startup views itself as part of an ecosystem . These firms typically operate autonomously but share interconnected goals, participating in a community with shared governance to prevent the exclusive appropriation of technology. [Image of diagram comparing closed innovation vs open innovation funnel] The Philosophy of Open Strategy According to Mekki MacAulay (2010): "Open strategy involves the collective production of a shared good in an open fashion such that the resulting product is available to all, including competitors. In the case of open entrepreneurship, ...

Feminist Theory and Entrepreneurship: Bridging the Gender Gap How can feminist theory enlighten us about the state of modern business? For the most part, women entrepreneurs remain in the minority, particularly regarding high-growth ventures. The statistics paint a stark picture. According to recent data from PitchBook, companies founded solely by women garnered only 2.3% of the total capital invested in venture-backed startups in the US in 2020. This disparity naturally leads to criticism of the "old boys club" in venture capital investment. While there are indications that these trends are shifting, feminist literature provides the theoretical framework to understand why these systems exist and how they can be dismantled. Anthropological Roots: Hunter vs. Gatherer Hurley (1999) suggests that our understanding of business evolution is often biased by gendered history: "Traditional anthropological theories stated that the key factor in human evolution...

The concept of social entrepreneurship is relatively new and may not be thought of as a theory. It is more like a domain or niche phenomenon that may deserve attention. According to Dees (2017), social entrepreneurship has largely emerged out of discontent with the performance of government and charitable organizations in tackling social problems. Governments are often underfunded, ineffective, and too political to do what is right for all. Charities are busy fighting for funds and justifying their existence and many successful such organizations use many of their donors funds for internal development purposes. If governments and charities would be more effective at tackling poverty, health issues, and inequality, then there would not be a need for social entrepreneurs to try to pick up the slack. This is also a core idea in the stakeholder theory of entrepreneurship . Social entrepreneurs bring market logic and business acumen to bear in combating social problems. They are chan...

Utility Theory: Why Entrepreneurs Choose Freedom Over Money Why do people leave high-paying corporate jobs to start risky ventures that might pay less? According to Utility Theory , the answer is that "value" is measured in more than just dollars. Developed by moral philosophers in the early 1900s, including John Stuart Mill , the core concept is that individuals make decisions to maximize Utility —a measure of total satisfaction, happiness, and value. The Entrepreneurial Equation While traditional economics assumes people want to maximize profit , Utility Theory argues people want to maximize satisfaction . For entrepreneurs, this equation includes intangible assets. Douglas and Shepherd (2002) conducted a study to see if entrepreneurs truly think in ways compatible with utilitarian thinking. They found that the desire for Independence had massive utility, often outweighing income. "Significant relationships were found between the utility expected f...

Procedural Justice Theory: Why "Fair Process" Matters More Than the Outcome Why do employees accept a decision that negatively affects their pay? Why do investors stick with a founder even when returns are low? The answer often lies in Procedural Justice Theory . Introduced by Thibaut and Walker (1975) , this theory proposes a counter-intuitive idea: People care more about the fairness of the process used to make a decision than they do about the actual outcome of that decision. The Core Distinction: Process vs. Result To understand this theory, you must distinguish between two types of justice: Distributive Justice: Focuses on the outcome. (e.g., "Did I get the bonus I wanted?") Procedural Justice: Focuses on the process. (e.g., "Was the criteria for the bonus applied fairly to everyone?") The theory argues that processes are often more important in the evaluations of participants than the actual results. People will accept a ...

Niccolò Machiavelli (born 1469) was an Italian diplomat and infamous strategist who wrote extensive letters teaching cunning strategies to "princes" ruling over territories throughout Europe. 16th-century Europe was very divided compared to today, especially in and around Italy, which was composed of a large number of small autonomous and semi-autonomous territories (city-states and kingdoms). Princes as Early Entrepreneurs Although Machiavelli is often considered a figure in the history of political science, these rulers acted as what Baumol (1996) describes as entrepreneurs of their time. Princes would take territory, or castles, rather than fight over money. Machiavelli's letters can be thought of as elaborating entrepreneurial strategies to get ahead in feudal times. However, many of these are largely inappropriate in the current business context. Core Machiavellian Axioms Many regard Machiavelli's strategies as unethical, yet his famous book The Prin...

Mathew Hayward and colleagues (2006) introduce a Hubris Theory to entrepreneurship. Their aim is to explain why so many new ventures are started despite a very high background failure rate. After all, most businesses fail within the first few years of founding. So why do entrepreneurs keep trying to create new ones? The theory suggests that individuals overestimate the personal wealth they may attain by starting new ventures. [Image of Dunning-Kruger effect graph] The Mechanism: Overconfidence The theory assumes that individuals have information about their likelihood of success, but think that they can "beat the odds." The theory hangs on the idea of confidence. More confident individuals have the bravado to be able to start businesses and allocate resources in challenging situations, while less confident individuals may not be moved to start ventures or grow them. The Double-Edged Sword While confidence drives entry, it can be detrimental to operations. ...

A stakeholder approach to entrepreneurship has roots in a debate that occurred between professors Ron Mitchell and S. Venkataraman in 2002, regarding the connections between stakeholder theory (Freeman, 1984) and entrepreneurship. Historically, stakeholder theory was born out of studies of large corporations managing their stakeholders to improve incumbent firm performance. It had not been fully applied to the entrepreneurship area to explain entrepreneurial behaviors, processes, or outcomes. The Tension: Creation vs. Distribution Entrepreneurship and strategy research tends to focus on how new wealth is created , whereas stakeholder theory historically focused on how that wealth should be distributed . For some, value creation and distribution are separate problems requiring different logics. However, a Stakeholder Theory of Entrepreneurship seeks to integrate the wealth creation and redistribution problems. The Core Mechanism: Marginalized Stakeholders Developed economie...

Stewardship Theory: Are Managers Selfish or Selfless? For decades, economics was dominated by a cynical view of human nature known as Agency Theory . In the late 1980s, Lex Donaldson and James Davis introduced a compelling alternative: Stewardship Theory . This theory challenged the prevailing assumption that managers are inherently opportunistic, proposing instead that they can be trustworthy stewards motivated by the greater good. The Great Debate: Agency vs. Stewardship To understand Stewardship, you must first understand what it is reacting against. 1. Agency Theory (The Cynical View) Rooted in economics, this theory assumes that agents (managers/entrepreneurs) are self-interested and opportunistic. The relationship between the "Principal" (investor) and the "Agent" (manager) is one of inevitable conflict. The Problem: Managers will prioritize their own wealth over the shareholder's returns. The Solution: Control mechanisms. Stock...