Cultural theories of entrepreneurship

By Priya Chetty on June 7, 2016

Entrepreneurs are considered to be the seeds of the development of industries. Entrepreneurs play a pivotal role in the process of the promotion and execution of the business. In other words, entrepreneurs are the persons who are responsible for organizing and managing the business by the judicious utilization of the theories of entrepreneurship. The different theories of entrepreneurship are relevant for the development of the business which helps the beneficiaries to perform better. The objective of these theories is not only to enhance the skills and knowledge of entrepreneurs but also to help them apply them in the practical world (Chakraborty et al., 2014). The entrepreneurial theories can be divided into sociological, economic and cultural aspects.

There does not exist one universal theory that can be utilized and applied by entrepreneurs. Every individual is responsible for making cultural choices. Entrepreneurs are one of the important products of culture. It is important for entrepreneurs to apply their cultural values within the cultural environment. The cultural theory of entrepreneurship helps to influence the stakeholders of their enterprise by instilling in their minds the importance of culture with respect to the business (Chatterji et al., 2013). The cultural theories of entrepreneurship provide a massive knowledge of some traditional and effective theories on entrepreneurship.

The three main theories that focus on the cultural aspects of entrepreneurship are discussed below.

Hoselitz’s theory

Hoselitz’s sociocultural theory is based on the assumption that every individual is endowed with social and cultural power. According to him, entrepreneurs can be developed where society is well developed. Most of the entrepreneurs hail from a certain socio-economic class. Hoselitz centres on the concept that the culturally marginal people in society who are considered culturally developed. and belong to a well-developed society and are considered eligible for being entrepreneurs. These sections of society stimulate entrepreneurial and economic development (Hofstede, 1993). In this regard, the marginally cultural groups of the society include Jews in medieval Europe, Chinese in South Africa, Indians residing in East Africa etc. (Lounsbury & Glynn, 2001). The basis of Hoselitz is derived from the following viewpoint:

  1. Marginal men hypothesis- Hoselitz explained that marginal men are the pools of the development of entrepreneurs. These marginal men have the potential to adjust in variable situations in spite of their ambiguous social and cultural position. In the process of adjustment, they innovate their social behaviour.
  2. The importance of managerial and leadership skills- Entrepreneurs must possess extraordinary leadership and managerial skills which would drive them to yield profits. Hoselitz emphasizes the fact that managerial and leadership skills are both necessary for the company as it would not only help to manage the company well but would also motivate the entrepreneurs to lead (Lounsbury & Glynn, 2001).
  3. Involvement of specific social classes- Entrepreneurial talents are prevalent in every country but the persons having socio-economic backgrounds are the ones that shine in the entrepreneurial skill. One example can be drawn from India where the Marwaris and the Parsis are the leading social class in the arena of entrepreneurs (Hofstede, 1993).
Use 5EFDB474F3A68 to get a discount of 4000 on 4001 - 6000 words standard delivery of persuasive and evidential narratives for your research paper.
Order now

Peter F. Drucker’s entrepreneurship theory

Peter F. Drucker explained that entrepreneurs are one that is constantly looking for new avenues to change and utilize this change as an opportunity. Drucker’s theory is based on two important factors which are innovation and resources; innovation depends on resources and resources gain importance only when perceived to possess economic value. Innovating new ideas as well as new products or any elements related to his business helps him to increase his productivity. Similarly, resources like capital are important to incorporate new innovations. (Simpeh, 2011). The theory explains that there is a complex relationship between innovation, resources and the behaviour of entrepreneurs. Peter F. Drucker derived three main points which help to explain the role of entrepreneurs:

  1. Entrepreneurs increase the value and satisfaction of the customer through the efficient utilization of resources.
  2. Entrepreneurs are responsible for the creation of new values.
  3. Entrepreneurs must combine the existing materials and resources (Scholte et al., 2015).

ECO Model

ECO analysis framework of entrepreneurship
ECO analysis framework

J.J. Kao’s conceptual model forms the basis of the ECO Model. The ECO analysis is derived from three key points which are Entrepreneurship, Creativity and Organization. Kao had stated that entrepreneurship and creativity are derived from the interrelationship between three components which are the person, the task and the organizational context (Dacin et al. 2010).

  1. The person is regarded as the most important element of this model where new ideas are implemented by efficient persons. The entrepreneurial talents of a person include skills, motivation, experience and psychological factors (Alvarez & Busenitz, 2007).
  2. The task emphasizes acquiring opportunities, management of resources and implementing leadership qualities which are necessary for entrepreneurial growth.
  3. The organizational context is the concatenation of creative and entrepreneurial work. For example, the organizational structure affects the entrepreneurial environment.

There is no single entrepreneurial theory that would be enough for any entrepreneur to operate in the competitive environment yet most theorist fails to explain different aspects of entrepreneurship. Cultural theories are one such example where the cultural aspects are considered to motivate entrepreneurs.

References

  • Alvarez, S.A. & Busenitz, L.W., (2007). The entrepreneurship of resource-based theory. In Entrepreneurship: Concepts, Theory and Perspective. Springer Berlin Heidelberg, pp. 207–227.
  • Chakraborty, S., Thompson, J. & Yehoue, E.B., (2014). The Culture of Entreprenuership. MPRA Paper, (56892), pp.0–45.
  • Chatterji, A., Glaeser, E.L. & Kerr, W.R., (2013). Cluster of Entreprenuership and Innovation. NBER Working Paper, No. 19013.
  • Dacin, P. a, Dacin, M.T. & Matear, M., (2010). Social entrepreneurship: Why we don’t need a new theory and how we move forward from here. Academy of Management Perspectives, 24(3), pp.37–58.
  • Hofstede, G., (1993). constraints in Cultural theories management. Academy of Management, 7(1), pp.81–94. Available at: http://web.ebscohost.com.ezproxy.lib.uts.edu.au/ehost/detail?vid=4&hid=111&sid=bef30093-8cf1-4813-86f0-7d91a155269e@sessionmgr15&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ==#db=bth&AN=9409142061.
  • Lounsbury, M. & Glynn, M.A., (2001). Cultural entreprenuership: Stories, legitimacy, and the acquisitions of resources. Strategic Management Journal, 22(6), pp.545–564.
  • Scholte, S.S.K., van Teeffelen, A.J.A. & Verburg, P.H., (2015). Integrating socio-cultural perspectives into ecosystem service valuation: A review of concepts and methods. Ecological Economics, 114, pp.67–78.
  • Simpeh, K.N., (2011). Entrepreneurship theories and Empirical research : A Summary Review of the Literature. European Journal Of Business and Management, 3(6), pp.1–9.

Priya is the co-founder and Managing Partner of Project Guru, a research and analytics firm based in Gurgaon. She is responsible for the human resource planning and operations functions. Her expertise in analytics has been used in a number of service-based industries like education and financial services.

Her foundational educational is from St. Xaviers High School (Mumbai). She also holds MBA degree in Marketing and Finance from the Indian Institute of Planning and Management, Delhi (2008).

Some of the notable projects she has worked on include:

  • Using systems thinking to improve sustainability in operations: A study carried out in Malaysia in partnership with Universiti Kuala Lumpur.
  • Assessing customer satisfaction with in-house doctors of Jiva Ayurveda (a project executed for the company)
  • Predicting the potential impact of green hydrogen microgirds (A project executed for the Government of South Africa)

She is a key contributor to the in-house research platform Knowledge Tank.

She currently holds over 300 citations from her contributions to the platform.

She has also been a guest speaker at various institutes such as JIMS (Delhi), BPIT (Delhi), and SVU (Tirupati).

 

Discuss

3 thoughts on “Cultural theories of entrepreneurship”