Entrepreneurship Theories

“Who am I?” / “Who are we?” Social identity theory (SIT) has long been a mainstay of social psychological thinking about politics and human behaviour in general. SIT is at its core a theory about in-groups and out-groups, as easily formed social constructions that can manifest with real consequences. Consider football hooligans beating each other over their team colours. We all have multiple identities, and some scholars propose that the more central one's entrepreneurial identity, compared with family and other identities, the more likely they will start a venture, grow a startup, or develop a capability (Hayter et al., 2021). "I am an Entrepreneur" In entrepreneurship, SIT is pointed at the entrepreneurial identity (EI), defined as a set of attitudes, beliefs and behaviours reinforcing being an entrepreneur. According to Shepherd et al. (2018) "a meaningful self-identity is central to individuals’ psychological functioning and well-being." The li...

Embeddedness Theory of Entrepreneurship: Polanyi & Network Ties Embeddedness Theory argues that economic activity is not an isolated event. Instead, it is constrained by non-economic institutions and social structures. The term was coined by economic sociologist Karl Polanyi in the mid-20th century. He argued that you cannot separate business from the society in which it operates. These "non-economic" constraints include: Kinship: Family ties and obligations. Culture: Religious beliefs and social norms. Politics: Power dynamics and government structures. Trust, Reciprocity, and the "Web" In the context of modern entrepreneurship, embeddedness refers to the nature, depth, and extent of an individual’s ties to their environment (Jack & Anderson, 2002). As entrepreneurs interact, patterns of economic exchange become embedded in a web of social relations . Over time, these repeated interactions lead...

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 ...