Here on our website, we've listed the chapter synopsis from the book's expanded Table of Contents. Thesis statements are then provided for the main source(s) discussed in each section of the chapter, along with a list of additional readings discussed in the section. Where possible, we've provided links to publicly available sources. To read our detailed synopsis, discussion, and thoughts about the practical application of the ideas presented in the sources listed below, buy the chapter by clicking on the cover image (or buy the entire book).
Chapter 2: Entrepreneurship
Shane and Venkataraman (2000, p. 218) define the academic field of entrepreneurship as the "scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited." Why do some people, and not others, discover and exploit the opportunities that are the heart of entrepreneurship?
Entrepreneurship and Why We Should Study It
The historical context for entrepreneurship provides insight into the field's economic and behavioral roots, grounding managerial decisions. In particular, entrepreneurial thought in the first half of the 20th century gave rise to the term "creative destruction" that has found its way into standard business jargon.
HUGH AITKEN. 1963. "The Future of Entrepreneurship Research." Explorations in Entrepreneurial History 1(1), 3–9. Available from SSRN.
Thesis: Entrepreneurship refers to firms based on social relationships, and is studied at the level of the enterprise.
FRANK KNIGHT. 1921. Risk, Uncertainty and Profit. Boston, Houghton-Mifflin.
Thesis: As the distribution of known possible outcomes, "risk" is distinct from "uncertainty," which describes that the set of possible outcomes is not known. Firms profit only by bearing uncertainty.
JOSEPH SCHUMPETER. 1934. The Theory of Economic Development. Cambridge, Harvard University Press.
Thesis: Enterprise is the carrying out of new combinations, and entrepreneurs are the individuals who do so. Economic development emerges when new combinations appear discontinuously in a process of creative destruction.
- Kets de Vries, Manfried. 1977. "The Entrepreneurial Personality: A Person at the Crossroads." Journal of Management Studies 14(1), 34–57.
- Drucker, Peter. 1985. Innovation and Entrepreneurship. New York, Harper and Row.
Opportunities and Opportunity Recognition
Much of the entrepreneurship literature focuses on opportunities and whether they exist independent of individuals, or whether entrepreneurs have specialized traits or abilities to identify or develop opportunities. The "individual–opportunity nexus" is a basis for entrepreneurship research and teaching. Mistakes by one entrepreneur can provide opportunities for another.
ISRAEL M. KIRZNER. 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach." Journal of Economic Literature 35(1), 60–85.
Thesis: Entrepreneurship is a mechanism through which temporal and spatial inefficiencies in an economy are discovered and mitigated.
SCOTT SHANE and SANKARAN VENKATARAMAN. 2000. "The Promise of Entrepreneurship as a Field of Research." Academy of Management Review 25(1), 217–227.
Thesis: Entrepreneurship involves the study of sources of opportunities to sell goods or services at greater than their cost of production. To sell in this fashion requires different beliefs about the value of resources.
ALEXANDER ARDICHVILI, RICHARD CARDOZO, and SUARAV RAY. 2003. "A Theory of Entrepreneurial Opportunity Identification and Development." Journal of Business Venturing 18(1), 105–124. Available from Science Direct.
Thesis: Entrepreneurial opportunities are made (not found), and require alertness, prior knowledge, creativity, and optimism.
- Stevenson, Howard H. and David E. Gumpert. 1985. "The Heart of Entrepreneurship." Harvard Business Review 63(March), 85–94. Available from HBR.
- Van de Ven, Andrew. 1993. "The Development of an Infrastructure for Entrepreneurship." Journal of Business Venturing 8(3), 211–230. Available from Science Direct.
- Krueger, Norris. 2000. "Cognitive Infrastructure of Opportunity Emergence." Entrepreneurship Theory and Practice 24(3), 5–24. Available from Emerald Insight.
- Shane, Scott. 2000. "Prior Knowledge and the Discovery of Entrepreneurial Opportunities." Organization Science 11(4), 448–469. Available from JSTOR.
Entrepreneurial Entry and Organizational Emergence
Where do entrepreneurs come from and why do they become entrepreneurs? Is the number of entrepreneurs in a context bounded? How can we understand the motivations and mindset of the individual entrepreneur along with the broader macroeconomic context that may facilitate (or impede) entrepreneurship?
HOWARD E. ALDRICH. 1990. "Using an Ecological Perspective to Study Organizational Founding Rates." Entrepreneurship Theory and Practice 14(3), 7–24.
Thesis: There appears to be an environmental carrying capacity that can limit the formation of new startups when too many already exist in a bounded competitive environment (which can be geographic, industrial, or market-based).
HOWARD E. ALDRICH and C. MARLENE FIOL. 1994. "Fools Rush In? The Institutional Context of Industry Creation." Academy of Management Review 19(4), 645–670. Available from JSTOR.
Thesis: New ventures need and seek legitimacy, which is fostered by symbolic behavior, links to established parties, and collective action.
JEROME KATZ and WILLIAM GARTNER. 1988. "Properties of Emerging Organizations." Academy of Management Review 13(3), 429–441. Available from JSTOR.
Thesis: Emerging organizations require intentional information-seeking, resources, boundaries, and an exchange of transactions. The goal of the article is to better link research on entrepreneurship to organization theory.
WILLIAM GARTNER. 1985. "A Conceptual Framework for Describing the Phenomenon of New Venture Creation." Academy of Management Review 10(4), 696–706. Available from JSTOR.
Thesis: Differences between entrepreneurial firms themselves may be greater than those between entrepreneurial firms and established firms. This complexity is driven by the interaction of four dimensions in the creation process: individuals, organization, environment, and process.
RICHARD E. KHILSTROM and JEAN-JACQUES LAFFONT. 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion." Journal of Political Economy 87, 719–748. Available from JSTOR.
Thesis: Individuals who are more risk-averse are less likely to choose to transition from employee to entrepreneur at any given wage, and are less likely to remain an employee at a lower wage.
MARTIN REUF, HOWARD ALDRICH, and NANCY CARTER. 2003. "The Structure of Founding Teams: Homophily, Strong Ties, and Isolation Among U.S. Entrepreneurs." American Sociological Review 68(2), 195–222.
Thesis: Teams compose themselves based on ascriptive characteristics such as gender or ethnicity. Teams with founders from diverse backgrounds are less common, and individuals from minority groups are more likely to be isolated.
DAVID EVANS and LINDA S. LEIGHTON. 1989. "Some Empirical Aspects of Entrepreneurship." American Economic Review 79(3), 519–535.
Thesis: Individuals should be more likely to become entrepreneurs to the extent they have previously been self-employed, are self-directed, and have a high net worth. Therefore, income and job tenure will be negatively correlated with the probability of becoming an entrepreneur.
- Saxenian, Annalee. 1994. Regional Advantage: Culture and Competition in Silicon Valley and Route 128. Cambridge, Harvard University Press.
- Amit, Raphael, Eitan Muller, and Iain Cockburn. 1995. "Opportunity Costs and Entrepreneurial Activity." Journal of Business Venturing 10(2), 95–106.
- Hamilton, Barton H. 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns of Self-Employment." Journal of Political Economy 108(3), 604–631.
- Azoulay, Pierre and Scott Shane. 2001. "Entrepreneurs, Contracts and the Failure of Young Firms." Management Science 47(3), 337–358. Available from Management Science.
Entrepreneurial Finance, Resources, and Economic Impact
For entrepreneurs, the source of funds is a critical element related to opportunity enactment, as access to various forms of capital (financial, social, and human) affects entrepreneurs in a number of ways. Resource availability is impacted by the value that entrepreneurship creates.
DAVID S. EVANS and BOYAN JOVANOVIC. 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints." Journal of Political Economy 97(4), 808–827. Available from JSTOR.
Thesis: The vast majority of startups remain capital-constrained, despite programs that have been enacted to help.
PAUL GOMPERS. 1995. "Optimal Investment, Monitoring, and the Staging of Venture Capital." Journal of Finance 50(5), 1461–1490. Available from JSTOR.
Thesis: Venture capital overcomes capital constraints. Staged investments offset agency conflicts to keep incentives better aligned between startup investors and startup managers.
TOBY STUART, HA HOANG, and RALPH HYBELS. 1999. "Interorganizational Endorsements and the Performance of Entrepreneurial Ventures." Administrative Science Quarterly 44(2), 315–349. Available from JSTOR.
Thesis: Associating with prominent partners facilitates access to resources that ventures need, and this access translates to enhanced performance.
RANJAY GULATI and MONICA HIGGINS. 2003. "Which Ties Matter When? The Contingent Effects of Interorganizational Partnerships on IPO Success." Strategic Management Journal 24(2), 127–144. Available from Wiley.
Thesis: Partnerships with organizations such as venture capital firms, investment banks, and strategic alliance partners can provide endorsement effects that may affect IPO performance.
WILLIAM J. BAUMOL. 1968 "Entrepreneurship in Economic Theory." American Economic Review 58(2), 64–71. Available from JSTOR.
Thesis: Economic theory should examine how to encourage entrepreneurial activity.
ALBERT BRUNO and TYZOON TYEBJEE. 1982. "The Environment for Entrepreneurship." In C. Kent, D. Sexton, and K. Vesper (editors), The Encyclopedia of Entrepreneurship. Englewood Cliffs, Prentice Hall. pp. 288–315.
Thesis: The environment of startups contributes to their geographic clustering, driven by the availability of venture capital, experienced entrepreneurs, suppliers, government policies, and proximity to universities.
- Sapienza, Harry J. 1992. "When do Venture Capitalists Add Value?" Journal of Business Venturing 7(1), 9–27. Available from Science Direct.
- Cable, Daniel and Scott Shane. 1997. "A Prisoner's Dilemma Approach to Entrepreneur–Venture Capital Relationships." Academy of Management Review 22(1), 142–176. Available from JSTOR.
- Baron, Robert and Gideon Markman. 2000. "Beyond Social Capital: How Social Skills can Enhance Entrepreneurs' Success." Academy of Management Executive 14(1), 106–116. Available from JSTOR.
- Sorenson, Olav and Toby Stuart. 2001. "Syndication Networks and the Spatial Distribution of Venture Capital Investments." American Journal of Sociology 106(6), 1546–1588. Available from JSTOR.
- Brush, Candida G., Nancy M. Carter, Patricia G. Greene, Myra M. Hart, and Elizabeth J. Gatewood. 2002. "The Role of Social Capital and Gender in Linking Financial Suppliers and Entrepreneurial Firms: A Framework for Future Research." Venture Capital International Journal 4(4), 305–323.
- Kaplan, Steven N. and Per Strömberg. 2003. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts." Review of Economic Studies 70(2), 281–315.
Research on international entrepreneurship has two main components: the study of differences in entrepreneurship across countries, and the study of ventures that enter foreign markets at an early age.
LOWELL BUSENITZ, CAROLINA GOMEZ, and JENNIFER SPENCER. 2000. "Country Institutional Profiles: Unlocking Entrepreneurial Phenomena." Academy of Management Journal, 43(5), 994–1003.
Thesis: Country variance in rates of entrepreneurship is based in part on differences in regulatory, cognitive, and normative institutional differences. Understanding these differences—and the competitive advantages they offer to entrepreneurs—is critical for managers seeking to operate in foreign countries.
RAPHAEL LA PORTA, FLORENCIO LOPEZ-DE-SILANES, ANDREI SHLEIFER, and ROBERT VISHNY. 2000. "Investor Protection and Corporate Governance." Journal of Financial Economics 58(1–2), 3–27.
Thesis: Countries differ with regard to firm ownership concentration and capital access, but one common element to these differences is the degree to which investors are protected by law from expropriation by the firm's managers and controlling shareholders. The legal basis of these differences may both explain and provide insights into strategies of corporate governance reform.
BENJAMIN M. OVIATT and PATRICIA P. McDOUGALL. 1994. "Toward a Theory of International New Ventures." Journal of International Business Studies 25(1), 45–64.
Thesis: New ventures that do business in foreign countries challenge existing international business theory, as they neither possess significant tangible resources nor advantages associated with internationalization.
BENJAMIN M. OVIATT and PATRICIA P. McDOUGALL. 2005. "Defining International Entrepreneurship and Modeling the Speed of Internationalization." Entrepreneurship Theory and Practice 29(5), 537–554. Available from Wiley.
Thesis: Internationalization speed is influenced by a variety of internal and external forces.
SHAKER A. ZAHRA and DENNIS M. GARVIS. 2000. "International Corporate Entrepreneurship and Firm Performance: The Moderating Effect of International Environmental Hostility." Journal of Business Venturing 15(5–6), 469–492. Available from Science Direct.
Thesis: Executives' perceptions of the characteristics of the firm's international environment, especially hostility, moderate the relationship between international corporate entrepreneurship and performance.
GARY A. KNIGHT and S. TAMER CAVUSGIL. 1997. "Emerging Organizational Paradigm for International Marketing: The Born Global Firm." in Proceedings: 1997 Annual Meeting, Academy of International Business, Honolulu.
Thesis: Early and successful international market expansion is distinctly different from traditional patterns.
GARY A. KNIGHT and S. TAMER CAVUSGIL. 2005. "A Taxonomy of Born Global Firms." Management International Review 45(3), 15–35.
Thesis: "Born global" companies are a distinct type of new venture.
ERKKO AUTIO, HARRY J. SAPIENZA, and JAMES ALMEIDA. 2000, "Effects of Age at Entry, Knowledge Intensity and Imitability on International Growth." Academy of Management Journal 43(5), 909–924. Available from JSTOR.
Thesis: Internationalization early in a company's life is associated with faster international growth and the knowledge intensity of the venture. Early international activities induce greater entrepreneurial behavior and confer a growth advantage.
- Coviello, Nicole E. and Hugh J. Munro. 1995. "Growing the Entrepreneurial Firm: Networking for International Market Development." European Journal of Marketing 29(7), 49–61. Available from Emerald Insight.
- Bell, James, Rod McNaughton, and Stephen Young. 2001. "'Born-Again Global' Firms: An Extension to the 'Born Global' Phenomenon." Journal of International Management 7(3), 173–189. Available from Science Direct.
- Sapienza, Harry J., Erkko Autio, Gerald George, and Shaker A. Zahra. 2006. "A Capabilities Perspective on the Effects of Early Internationalization on Firm Survival and Growth." Academy of Management Review 31(4), 914–933. Available from JSTOR.