Cultural theories of entrepreneurship

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 the 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 the entrepreneurs. Every individual is responsible for making cultural choices. Entrepreneurs are one of the important product of culture. It is important for entrepreneurs to apply their cultural values within the cultural environment. 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 the entrepreneurship are discussed below.

Hoselitz’s theory

Hoselitz socio-cultural theory is based on the assumption that every individual is endowed with social and cultural power. According to him, entrepreneurs can be developed where the 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 the society who are considered as culturally developed. and belong to a well-developed society 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 the marginal men are the pools of the development of entrepreneurs. These marginal men have the potentiality 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 the managerial and leadership skills- Entrepreneurs must possess extraordinary leadership and managerial skills which would drive them to yield profits. Hoselitz emphasizes on the fact that the managerial and the 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- The 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).

Peter F. Drucker’s entrepreneurship theory

Peter F. Drucker explained that the 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 help him to increase his productivity. Similarly, resources like capital is important to incorporate new innovations. (Simpeh, 2011). The theory explains that there is a complex relationship between the innovation, resources and the behaviour of the entrepreneurs. Peter F. Drucker had derived three main points which help to explain the role of the entrepreneurs:

  1. Entrepreneurs increase the value and satisfaction of the customer through the efficient utilization of the 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 the entrepreneurial growth.
  3. The organizational context is the concatenation of the 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 of the theorist fails to explain different aspects of the entrepreneurship. The cultural theories are one such example where the cultural aspects are considered to motivate the 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&[email protected]&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 Chetty

Partner at Project Guru
Priya is a master in business administration with majors in marketing and finance. She is fluent with data modelling, time series analysis, various regression models, forecasting and interpretation of the data. She has assisted data scientists, corporates, scholars in the field of finance, banking, economics and marketing.

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