Foundations and Trends® in Entrepreneurship > Vol 1 > Issue 3

Theories of Entrepreneurship: Alternative Assumptions and the Study of Entrepreneurial Action

Sharon A. Alvarez, Fisher College of Business The Ohio State University, USA, alvarez_42@cob.osu.edu
 
Suggested Citation
Sharon A. Alvarez (2005), "Theories of Entrepreneurship: Alternative Assumptions and the Study of Entrepreneurial Action", Foundations and Trends® in Entrepreneurship: Vol. 1: No. 3, pp 105-148. http://dx.doi.org/10.1561/0300000003

Published: 15 Jun 2005
© 2005 S.A. Alvarez
 
Subjects
Business formation
 

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In this article:
1 Introduction
2 Theory One: The Discovery Theory. Individual/opportunity nexus view
3 Theory Two: The Creation Theory
4 Are these theories contradictory or complementary?
5 Entrepreneurship phenomena
6 Rents, quasi-rents, and entrepreneurial rents
7 The governance effects of behavioral and market uncertainty
8 Differences in theoretical predictions
9 Discussion
References

Abstract

The field of entrepreneurship continues to struggle with the development of a modern theory of entrepreneurship. In the past 20 years development of the current theories of entrepreneurship have centered on either opportunity recognition or the individual entrepreneur. At the same time many theoretical insights have come from economics including a rediscovery of the work of Schumpeter. However, because there is a lack of clarity about the theoretical assumptions that entrepreneurship scholars use in their work, assumptions from both individual opportunity recognition and economics have been used as if they are interchangeable. This lack of theoretical distinction has hampered theory development in the field of entrepreneurship.

While explanations of entrepreneurship have adopted different theoretical assumptions, most of these concern three central features of entrepreneurial phenomena: the nature of entrepreneurial opportunities, the nature of entrepreneurs as individuals, and the nature of the decision making context within which entrepreneurs operate. Nonetheless, various theoretical traditions in the field have adopted radically different interpretations with respect to these assumptions of entrepreneurial phenomena, therefore arriving at different explanations of these phenomena. This article investigates two sets of assumption about the nature of opportunities, the nature of entrepreneurs, and the nature of the decision making context within which entrepreneurs operate. It is suggested that these two sets of assumptions constitute logically consistent theories of entrepreneurship. Moreover, these two theories are complementary and can be applied to widely studied entrepreneurial phenomena – the organization of the entrepreneurial firm. These applications demonstrate both the differences between these two theories and how they can be complementary in nature.

DOI:10.1561/0300000003
ISBN: 978-1-933019-11-6
60 pp. $38.00
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Table of contents:
1 Introduction
2 Theory One: The Discovery Theory. Individual/opportunity nexus view
3 Theory Two: The Creation Theory
4 Are these theories contradictory or complementary?
5 Entrepreneurship phenomena
6 Rents, quasi-rents, and entrepreneurial rents
7 The governance effects of behavioral and market uncertainty
8 Differences in theoretical predictions
9 Discussion

Theories of Entrepreneurship

The field of entrepreneurship has yet to develop a single, modern theory of entrepreneurship. Current theories of entrepreneurship have centered on either opportunity recognition or the individual entrepreneur. At the same time many theoretical insights have come from economics, including a rediscovery of the work of Joseph Schumpeter. The absence of a single theory is due a lack of clarity about the theoretical assumptions. While explanations of entrepreneurship have adopted different theoretical assumptions, most of these concern three central features of entrepreneurial phenomena: the nature of entrepreneurial opportunities, the nature of entrepreneurs as individuals, and the nature of the decision-making context within which entrepreneurs operate. Nonetheless, various theoretical traditions in the field have adopted radically different interpretations with respect to these assumptions of entrepreneurial phenomena, thereby arriving at different explanations of these phenomena. Theories of Entrepreneurship investigates two sets of assumption about the nature of opportunities, the nature of entrepreneurs, and the nature of the decision-making context within which entrepreneurs operate. It is suggested that these two sets of assumptions constitute logically consistent theories of entrepreneurship. Moreover, these two theories are complementary and can be applied to widely studied entrepreneurial phenomena - the organization of the entrepreneurial firm. These applications demonstrate both the differences between these two theories and how they can be complementary in nature. Theories of Entrepreneurship sets the basis for future explorations into entrepreneurship theory. Students and researchers alike will benefit from the framework presented by the author in developing the theoretical underpinnings of entrepreneurship.

 
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