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By considering the amount of uncertainty perceived and the willingness to bear uncertainty concomitantly, we provide a more complete conceptual model of entre- preneurial action that allows for examination of entrepreneurial action at the indi- vidual level of analysis while remaining consistent with a rich legacy of system-level theories of the entrepreneur. Our model not only exposes limitations of existing theories of entrepreneurial action but also contributes to a deeper understanding of important conceptual issues, such as the nature of opportunity and the potential for philosophical reconciliation among entrepreneurship scholars.
Baylor University
Indiana University
By considering the amount of uncertainty perceived and the willingness to bear
uncertainty concomitantly, we provide a more complete conceptual model of entre-
preneurial action that allows for examination of entrepreneurial action at the indi-
vidual level of analysis while remaining consistent with a rich legacy of system-level
theories of the entrepreneur. Our model not only exposes limitations of existing
theories of entrepreneurial action but also contributes to a deeper understanding of
important conceptual issues, such as the nature of opportunity and the potential for
philosophical reconciliation among entrepreneurship scholars.
Entrepreneurship requires action. Whether
conceptualized as the creation of new products
or processes (Schumpeter, 1934), entry into new
markets (Lumpkin & Dess, 1996), or the creation
of new ventures (Gartner, 1985), entrepreneur-
ship typically involves a mesolevel phenome-
non in which personal initiative influences
system-wide activity and outcomes (Kilby, 1971;
Stevenson & Jarillo, 1990). To be an entrepreneur,
therefore, is to act on the possibility that one has
identified an opportunity worth pursuing.
Theories of entrepreneurship that embrace
this perspective traditionally have taken one of
two forms. The first form is devoted to a system-
level approach concerned primarily with how
the economic system functions. Proponents of
these theories argue that the health of the econ-
omy depends on the pursuit of opportunities by
prospective entrepreneurs (e.g., Kirzner, 1973;
Schumpeter, 1934). Who acts is inconsequential
as long as someone does. Thus, the central issue
is whether entrepreneurial action occurs. The
second form is devoted to an individual-level
approach concerned primarily with how pro-
spective entrepreneurs go about acting. These
researchers seek to explain why some individu-
als are more likely than others to pursue possi-
ble opportunities for profit (e.g., Begley & Boyd,
1987; Sarasvathy, 2001a; Shane, 2000; Shaver &
Scott, 1991). Like before, entrepreneurial action
takes center stage, but this time more in terms of
how it occurs and who does it than whether it
The conceptual overlap of these approaches
suggests that they are complementary. In fact, re-
searchers of the individual-level approach have
frequently borrowed from theories grounded in
the system-level approach (e.g., Kaish & Gilad,
1991). However, this can lead scholars to rely on
models of entrepreneurial action that are incom-
plete when applied at a level of analysis other
than that intended by the theorist. Accordingly,
our purpose in this article is twofold. First, we
demonstrate that economic theories of the entre-
preneur are theories of action proposing those el-
ements that enhance and hinder individuals from
acting entrepreneurially. Although these models
may be sufficient for examining entrepreneurial
action at the system level, they can collapse when
applied at the individual level, making them sus-
ceptible to confounded theorizing and inconclu-
sive or misleading empirical findings. This neces-
sitates our second purpose: to offer a perspective
that allows for examination of entrepreneurial ac-
tion at the individual level of analysis while re-
maining consistent with a rich legacy of system-
level theories of the entrepreneur.
Because action takes place over time, and be-
cause the future is unknowable, action is inher-
We acknowledge Jeff Covin, Denis Gregoire, Duane Ire-
land, P. Devereaux Jennings, and three anonymous review-
ers for their valuable comments on an earlier draft of this
Academy of Management Review
2006, Vol. 31, No. 1, 132–152.
ently uncertain (Mises, 1949). This uncertainty is
further enhanced by the novelty intrinsic to en-
trepreneurial actions (Amabile, 1997; Smith &
DiGregorio, 2002), such as the creation of new
products, new services, new ventures, and so
forth (Gartner, 1990; Schumpeter, 1934). There-
fore, it is no surprise that uncertainty constitutes
a conceptual cornerstone for most theories of the
entrepreneur. However, the role this uncertainty
plays in preventing entrepreneurial action has
remained a matter of debate. As a result, two
research streams have emerged, each inspired
by alternative conceptualizations of uncertainty.
The first stream focuses on the amount of un-
certainty perceived and frequently discrimi-
nates those who decide to act entrepreneurially
from those who do not as a matter of differences
in knowledge (e.g., Busenitz, 1996; Gaglio & Katz,
2001; Kaish & Gilad, 1991; Kirzner, 1979). Thus,
the amount of uncertainty is considered to be
the barrier between prospective entrepreneurs
and entrepreneurial action. The second stream
highlights the willingness to bear uncertainty
and typically proposes that those who decide to
act entrepreneurially are distinguishable from
those who do not owing to differences in moti-
vation, attitude, or risk propensity (e.g., Douglas
& Shepherd, 2000; Knight, 1921; Schumpeter,
1934). In this scenario, an unwillingness to bear
uncertainty is deemed responsible for prevent-
ing prospective entrepreneurs from engaging in
entrepreneurial action.
Because an individual must ultimately act to
become an entrepreneur, and because action
involves knowledge and motivation (Higgins &
Kruglanski, 2000), we propose that each stream
merely emphasizes a different aspect of the un-
certainty experienced in the decision to act
entrepreneurially. Therefore, each conceptual-
ization of uncertainty is representative of a con-
struct that is not only reconcilable with its coun-
terpart but also necessary for further theorizing
about entrepreneurial action.
By demonstrating that action is central to
most theories of entrepreneurship, we distill the
various elements of action that must be consid-
ered concomitantly when determining whether
one will act entrepreneurially. These include
knowledge (as it relates to the amount of uncer-
tainty perceived), motivation (as it relates to the
willingness to bear uncertainty), and, arguably,
a stimulus. We propose that each of these ele-
ments produces a belief that is qualified by un-
certainty. This uncertainty takes the form of
doubt, which prevents action by undermining
the prospective actor’s beliefs regarding (1)
whether an environmental stimulus presents an
opportunity for someone in the marketplace, (2)
whether this opportunity could feasibly be en-
acted by the actor, and (3) whether successful
exploitation of the opportunity would ade-
quately fulfill some personal desire. Drawing on
these elements, we then generate a two-stage
conceptual model of entrepreneurial action that
makes an important distinction between third-
person opportunity (an opportunity for someone)
and first-person opportunity (an opportunity for
the actor) while explicitly recognizing that both
knowledge and motivation must be considered
concomitantly when examining entrepreneurial
action in each stage.
This article makes a number of contributions
identified by Whetten (1989) as important theo-
retical insights. First, we use epistemological
evidence from the philosophy and psychology of
action literature to demonstrate that the entre-
preneurship literature is characterized by one-
dimensional conceptualizations of uncertainty’s
preventive role in the entrepreneurial action
process. Second, we offer a conceptual model of
entrepreneurial action that demonstrates how
the addition of a new construct (in some cases
motivation and in others knowledge) signifi-
cantly alters our understanding of the role that
uncertainty plays in preventing entrepreneurial
action. Third, we use the proposed model to re-
interpret theories of the entrepreneur, thereby
enhancing these highly influential economic
models’ predictive validity of entrepreneurial
action at the individual level. Fourth, we use the
model to reveal points of empirical tractability
and philosophical impasse between entrepre-
neurship theorists employing different ontolog-
ical assumptions regarding opportunity. Fi-
nally, we offer a pragmatic and a conceptual
approach to the difficult task of reconciling con-
tentious philosophical perspectives.
The article proceeds as follows. First, we ex-
plore the notions of the entrepreneur and entre-
preneurial action that highlight the importance
of judgment under uncertainty, and then ac-
knowledge the role of belief and doubt in entre-
preneurial judgment using a discussion involv-
ing three types of uncertainty: state, effect, and
response. Second, we introduce a number of the-
ories of the entrepreneur and classify them in
2006 133McMullen and Shepherd
terms of two streams of research on uncertainty:
one stream emphasizes the role of perceived
uncertainty and the second gives prominence to
the willingness to bear uncertainty. Third, we
offer a conceptual model of entrepreneurial ac-
tion that reconciles aspects of the two streams of
research that have previously remained inde-
pendent of each other. We describe our concep-
tual model of entrepreneurial action as the out-
come of the willingness to bear perceived
uncertainty. Fourth, we use our proposed con-
ceptual model of entrepreneurial action to rein-
terpret three economic theories of the entrepre-
neur that are considered to be most influential
to the management literature. Finally, we can-
not avoid a discussion of the “thorny” issue of
ontology. In this section we discuss a number of
different perspectives about the existence of an
objective opportunity and propose two potential
approaches for reconciling apparently contrast-
ing views.
Because we are interested in the entrepreneur
as an organizational or economic function that
is filled by an individual, rather than as a per-
sonality (i.e., innovative, risk seeking, etc.) or
position (i.e., small business manager, owner,
etc.), we seek definitional foundation in econom-
ics, where the entrepreneur traditionally has
been conceptualized in this manner (Casson,
1982: 22). After surveying economic theory de-
voted to entrepreneurship, Hebert and Link at-
tempt to synthesize several theoretical profiles
by defining the entrepreneur as “someone who
specializes in taking responsibility for and mak-
ing judgmental decisions that affect the loca-
tion, the form, and the use of goods, resources or
institutions” (1988: 155). They openly admit their
definition’s similarity to that proposed by Mark
Casson, who defines an entrepreneur as “some-
one who specializes in taking judgemental de-
cisions about the coordination of scarce re-
sources” (1982: 23). Interestingly, both of these
definitions are reminiscent of the first theory of
the entrepreneur put forth by Richard Cantillon
in 1755, in which he defined the entrepreneur as
“someone who engages in exchanges for profit;
specifically, he or she is someone who exercises
business judgment in the face of uncertainty”
(quoted in Hebert & Link, 1988: 21).
Each of these definitions suggests that the
entrepreneur is an individual who exercises
judgment, which Hastie defines as “the compo-
nents of the larger decision-making process that
are concerned with assessing, estimating, and
inferring what events will occur and what the
decision-maker’s evaluative reactions to those
outcomes will be” (2001: 657). “Decision making,”
he adds, “refers to the entire process of choosing
a course of action” (2001: 657). Finally, Hastie
suggests that uncertainty refers to “the decision-
maker’s judgments of the propensity for each of
the conditioning events to occur” (2001: 657).
Therefore, judgment is what must be exercised
to make a decision between alternative courses
of action that take place in an uncertain future.
Although many scholars have emphasized the
individual’s exercising of judgment under un-
certainty in the form of a decision (e.g., Cantil-
lon, Cole, Keynes, Marshall, Menger, Schultz,
Shackle, etc.), it is important to note that a deci-
sion is a necessary but insufficient condition for
the occurrence of entrepreneurship. We return to
the basic realization that entrepreneurship re-
quires one not just to decide but to decide to act.
Therefore, we subscribe to Hebert and Link’s
(1988) position that entrepreneurs respond to and
create change through their entrepreneurial ac-
tions, where entrepreneurial action refers to be-
havior in response to a judgmental decision un-
der uncertainty about a possible opportunity for
Whether entrepreneurial action occurs,
however, depends on how much one must rely
on one’s judgment, which, in turn, depends on
the degree of uncertainty experienced in the de-
cision of whether to act.
Alternative conceptualizations of uncertainty
exist within the management, economics, and
psychology literature. Particularly noteworthy is
Milliken’s (1987) exposure of conceptual incon-
sistencies of the term within the organizational
literature. As a result, he proposes three distinct
types of uncertainty (state, effect, and response)
that appear to be as applicable to the individual
This conceptualization of entrepreneurial action is pro-
cess oriented and transferable across a range of different
definitions of entrepreneurship within the management lit-
erature (e.g., Gartner, 1990; Shane & Venkataraman, 2000).
These scholars identify specific behaviors that are thought
to be especially “entrepreneurial” in nature, such as new
venture creation or Schumpeter’s (1934: 66) five forms of new
134 JanuaryAcademy of Management Review
as they are to the organization as a unit of anal-
ysis. Milliken suggests that state uncertainty is
used to denote when administrators perceive
the environment to be unpredictable (1987: 136).
In contrast, effect uncertainty is defined as “an
inability to predict what the nature of the impact
of a future state of the environment or environ-
mental change will be to the organization” (1987:
137). Finally, Milliken suggests that response un-
certainty is “a lack of knowledge of response
options and/or an inability to predict the likely
consequences of a response choice (Conrath,
1967; Duncan, 1972; Taylor, 1984)” (1987: 137), and
he further points out that “response uncertainty
is likely to be salient when there is a perceived
need to act...because a pending event or
change is perceived to pose a threat or to pro-
vide some unique opportunity to the organiza-
tion” (1987: 137).
Milliken’s framework implies that uncertainty
in the context of action falls within the exclusive
domain of response uncertainty. However, this
perceived need to act frequently is stimulated
by state or effect uncertainty. This would sug-
gest that, in the context of action, Milliken’s
three types of uncertainty could be simplified
into three questions asked by a prospective ac-
tor about his or her relationship to the environ-
ment: (1) What’s happening out there? (state un-
certainty), (2) How will it impact me? (effect
uncertainty), and (3) What am I going to do about
it? (response uncertainty).
Questions like these require one to form a
belief, defined as a “conviction that certain
things are true” (Neufeldt & Sparks, 1995: 55).
However, this belief is often qualified by a re-
lated sense of doubt, which means “to be uncer-
tain or undecided; to tend to disbelieve”
(Neufeldt & Sparks, 1995: 180). This process, in
which a belief and a related sense of doubt are
formed, presupposes the existence of a world
that is malleable and somewhat susceptible to
beneficial actor influence. Therefore, it commu-
nicates a world view that is neither fully deter-
mined nor fully random (Moya, 1990; Shackle,
1966), and, as a consequence, “uncertainty” can
be viewed as a sense of “doubt” that is inextri-
cable from the beliefs that produce action.
Therefore, because we are interested in the
role that uncertainty plays in preventing people
from acting entrepreneurially, we embrace the
proposition made by Lipshitz and Strauss that
“uncertainty in the context of action is a sense of
doubt that blocks or delays action” (1997: 150).
This conceptualization captures three essential
features of uncertainty integral to our argument.
First, the proposition suggests that uncertainty
is subjective in that “different individuals may
experience different doubts in identical situa-
tions” (Lipshitz & Strauss, 1997: 150; see also
Duncan, 1972). Lipshitz and Strauss (1997) point
out that the conceptualization of uncertainty as
a subjective experience has a long tradition
within psychology (Duncan, 1972; Smithson,
1989). Entrepreneurship enthusiasts have con-
tributed to this tradition (1) by assuming that
uncertainty prevents action (Shane & Venkat-
araman, 2000; Stevenson & Jarillo, 1990) and (2)
by attributing variation in its action-obstructive
nature to individual differences in needs (Mc-
Clelland, 1961), values (Weber, 1930), attitudes
toward risk (Khilstrom & Laffont, 1979), confi-
dence (Cooper, Woo, & Dunkelberg, 1988), per-
ceptions (Palich & Bagby, 1995), and heuristics
(Busenitz & Barney, 1997).
The second and third features of Lipshitz and
Strauss’s uncertainty proposition are that it is
inclusive in that no particular form of doubt is
specified, such as ignorance of future outcomes
(Conrath, 1967; Smithson, 1989), and that it is
conceptualized in terms of the effect of uncer-
tainty on action—that is, hesitancy, indecisive-
ness, and procrastination (Dewey, 1933; Gold-
man, 1986; March, 1981; Yates & Stone, 1992).
These last two features serve to define uncer-
tainty more in terms of what it does than what it
is. This diminishes the importance of determin-
ing which of Milliken’s (1987) three forms of en-
vironmental uncertainty is technically being
discussed, because each prevents action by con-
tributing to doubt. Likewise, whether conceptu-
alized as risk (MacCrimmon & Wehrung, 1986),
Knightian uncertainty (Knight, 1921), ambiguity
(Hogarth, 1987; March & Olsen, 1976), turbulence
(Terreberry, 1968), or equivocality (Weick, 1979),
uncertainty in the context of action acts as a
sense of doubt that (1) produces hesitancy by
interrupting routine action (Dewey, 1933), (2) pro-
motes indecision by perpetuating continued
competition among alternatives (Goldman,
1986), and (3) encourages procrastination by
making prospective options less appealing
(Yates & Stone, 1992).
Entrepreneurship theorists have embraced
the position that uncertainty is detrimental to
entrepreneurial action because properties such
2006 135McMullen and Shepherd
as hesitancy, indecisiveness, and procrastina-
tion are thought to lead to missed opportunities
(Casson, 1982). The opportunity for action is of-
ten conceptualized as fleeting (James, 2002;
Shane & Venkataraman, 2000), owing to the com-
petitive nature of the market process (Mises,
1949; Schumpeter, 1942). This position is
grounded in an economic assumption that the
procrastination of one actor is typically offset by
the profit-seeking proactiveness of others
(Mann, 1996). Thus, economists often consider it
inevitable that someone in the marketplace will
act, which makes the decision process experi-
enced by any one individual seemingly incon-
sequential (Stigler, 1963).
Despite economists’ system-level, probabilis-
tic perspective of entrepreneurial action, how-
ever, we wish to point out that there is no market
independent of the actors who create it. There-
fore, ultimately, someone somewhere must
undergo a decision process in which action is
chosen if any market “process” is to occur. Over-
looking this fact has arguably contributed to the
generation of alternative theories of the entre-
preneur characterized by examination of only
one dimension of uncertainty’s effect on action.
Traditionally, the label theory of the entrepre-
neur has been used within the economics liter-
ature to denote the study of the relationship
between entrepreneurship and economic activ-
ity. These theories (e.g., Kirzner, 1973; Knight,
1921; Schumpeter, 1934) frequently attribute the
movement of the economy to a catalystic func-
tion fulfilled by the entrepreneur. Accordingly,
the entrepreneur is conceptualized in terms of
what he or she does—that is, innovates, coordi-
nates, etc. This behavior is then thought to in-
fluence the system by moving it toward, or away
from, some ideal state, such as equilibrium or
Two assumptions are characteristic of most
theories of the entrepreneur: (1) entrepreneur-
ship is a “good” thing, with beneficial outcomes
that accrue to the system in which it occurs
(Kilby, 1971; Stevenson & Jarillo, 1990),
and (2)
entrepreneurship is observable as a behavior
that can be attributed to some definitive theo-
retical attribute capable of differentiating entre-
preneur (actor) from nonentrepreneur (nonactor).
Although the first assumption is important for
understanding why scholars have devoted so
much energy to the subject and why the study of
entrepreneurial behavior at the individual level
is of value to organizational studies, it is not the
focal point of this article. The second assump-
tion, however, is highly significant to our argu-
ment in that it helps to expose the manner in
which uncertainty is conceptualized within
these theories.
We suggest that many theoretical explana-
tions of why prospective entrepreneurs choose
to pursue a possible opportunity can be classi-
fied into two simple conceptualizations of the
role that uncertainty plays in preventing action:
(1) the amount of uncertainty perceived and (2)
the willingness to bear uncertainty. We turn
now to a deeper examination of each.
Entrepreneurial Action As the Outcome of
Less Perceived Uncertainty
While neoclassical economists were abolish-
ing the need to consider individual differences
by constructing theories with assumptions such
as perfect information, “Austrian” economists
were building their economic theories on such
premises as the subjectivity of value (Menger,
1950), imperfect knowledge (Hayek, 1945), asym-
metric beliefs (Mises, 1949), and differences in
entrepreneurial alertness (Kirzner, 1973, 1985).
Austrian economists typically have considered
the entrepreneur to be the engine of the econ-
omy (Kirzner, 1989; Mises, 1949; Pasour, 1989) and
have attributed the stagnation of the economy to
a lack of entrepreneurial action. This lack of
entrepreneurial action, they believe, is often the
consequence of unperceived opportunities (Kirz-
ner, 1979), which arise from the various explana-
tions mentioned above.
Although Austrians are labeled subjectivists,
this subjectivism traditionally has referred to
the epistemological limitations suffered, to a
greater or lesser extent, by the subjects of their
Baumol (1996) questions this assumption by suggesting
that entrepreneurs pursue profit. If this profit is achieved via
innovation, then the system benefits as a by-product. How-
ever, if innovation is difficult or unnecessary for profit, then
entrepreneurial energy is likely to take unproductive or even
destructive forms.
136 JanuaryAcademy of Management Review
theories. Thus, people who have acted entrepre-
neurially are seen to possess a more accurate
picture of reality than those individuals who
have not acted. Moreover, an objective reality is
thought to exist in which a market opportunity is
there for the taking, but only for those who pos-
sess the qualities necessary both to discover
and exploit it (see Addleson, 1995, for an elo-
quent articulation of this point). Thus, entrepre-
neurial action is seen as something all would
engage in if they knew what to do, but, owing to
epistemological differences, only some people
(the entrepreneurs) “know” what to do. Accord-
ingly, entrepreneurs are thought to have taken
action because they somehow escaped the igno-
rance and paralysis produced by uncertainty,
whereas those who have not acted entrepre-
neurially are believed either to have fallen vic-
tim to doubt or to have been blinded to the need
for forming a belief at all.
Graphically, this can be depicted as in Figure
1. This figure shows two hypothetical internal
response curves centered around two means.
The left mean represents the noisy status quo,
and the right mean represents third-person op-
portunity, which we define as a potential oppor-
tunity for someone in the marketplace. Thus,
third-person opportunity may not reflect an op-
portunity for everyone, but, for those individuals
with the right qualities, market potential exists.
The distance between the means signifies the
ability to discern the market potential of this
third-person opportunity. For example, one
would expect the market potential of a tele-
porter to be more easily discerned than, say, the
market potential of the internet prior to web
The distance between the means and the dis-
tribution of the curves contribute to the amount
of uncertainty perceived in the decision to act.
Although the Austrian presumption of an objec-
tive reality suggests that the distance between
the means is the same for any prospective actor,
the distribution of the curves surrounding these
means frequently is discussed as a function of a
theoretically determined individual difference.
For example, according to Hayek’s (1945) argu-
ment, considerable overlap between the two
curves would represent an individual with little
“local” knowledge of time and place, whereas
little overlap would reflect an individual with a
knowledge base that is highly applicable to the
recognition and exploitation of this particular
third-person opportunity. Thus, the discriminat-
ing feature between these two individuals is the
possession of applicable knowledge. This
knowledge reduces perceived uncertainty to a
point that not only enables prospective entre-
preneurs to form a belief that they have recog-
The curves centered around the two means are repre-
sentative of hypothetical responses to the question of
whether the individual believes that a third-person oppor-
tunity exists. If the answer is no, then the decision would
reflect a point on the left curve, whereas if the answer is yes,
then the decision would reflect a point on the right curve.
Under a repeated decision scenario, such as those con-
ducted in experimental settings, this process would produce
a response curve around each mean composed of points
representing actual decisions. However, we qualify the
curves as “hypothetical” because, in a natural context, only
one point of an individual’s response curve is observable.
Hypothetical Internal Response Curves Regarding Third-Person Opportunity
2006 137McMullen and Shepherd
nized a third-person opportunity but also allows
them to overcome the belief-related doubt that
would otherwise prevent action.
Therefore, according to many theories of en-
trepreneurial action, uncertainty has been con-
ceptualized in terms of quantity. Owing to the
distance between the means and the distribu-
tion around the means, the prospective entrepre-
neur is thought to face more or less uncertainty,
which prevents action either by obfuscating the
existence of the third-person opportunity or by
contributing to the doubt people experience in
their belief that a third-person opportunity ex-
ists. Thus, the uncertainty perceived by a pro-
spective actor forms a continuum, with complete
ignorance on one end (denoted graphically as
flat response curves) to near certainty on the
other end (denoted graphically as response
curves that nearly form a perfectly straight per-
pendicular line at the mean, with no overlap
between these narrow curves). Although the role
that perceived uncertainty plays in obstructing
entrepreneurial action is important, we argue
that it is insufficiently explanatory, because it
says nothing about the willingness to bear the
uncertainty that is perceived.
Entrepreneurial Action As the Outcome of
More Willingness to Bear Uncertainty
The theory of the entrepreneur is not the ex-
clusive domain of the Austrian economist. Prom-
inent non-Austrians, from Knight (1921) to
Schumpeter (1934), also have recognized the role
that uncertainty plays in preventing entrepre-
neurial action. However, these economic theo-
rists conceptualize uncertainty’s action prohibi-
tive role in a slightly different way. They see
entrepreneurial action not as the outcome of
less perceived uncertainty but as more willing-
ness to bear the uncertainty faced by all pro-
spective actors. For instance, Knight addresses
uncertainty explicitly. He posits that profit is the
reward for those willing to bear uncertainty be-
cause, unlike risk, uncertainty is inestimable
and therefore uninsurable. Thus, entrepreneurs
are distinguishable from nonentrepreneurs in
their willingness to bear the uncertainty intrin-
sic to a possibly profitable course of action.
In contrast, the willingness to bear uncer-
tainty is implicit in Schumpeter’s theory, where
he argues that the entrepreneur’s function lies
in the innovative act of creating new combina-
tions. Believing that the potential for new com-
binations is abundant and at times obvious,
Schumpeter delineates entrepreneurs from non-
entrepreneurs not by differences in knowledge
or perception but by the performance of the in-
novative act itself (1934: 88). This elimination of
perceptual differences forces Schumpeter to
speculate reluctantly about motivational differ-
ences in an attempt to explain why some indi-
viduals and not others engage in entrepreneur-
ial action (1934: 90).
Schumpeter’s (1934) behavioral bent attracted
psychologists, such as McClelland (1961), Hagen
(1962), and Kunkel (1965), who exchanged the
economic theorists’ descriptive orientation for a
more prescriptive theoretical viewpoint. Where-
as economic theories of the entrepreneur fo-
cused on explaining what must occur (e.g., un-
certainty bearing) for the economy to function,
psychological theories sought to explain why
entrepreneurs are more willing than their coun-
terparts to bear this uncertainty. Because these
psychologists shared the economists’ belief that
entrepreneurship produced economic growth,
they tried to identify the motives underlying en-
trepreneurial activity in an effort to develop
these motives in their subjects. Unfortunately,
this was thought to produce explanations that
relied too heavily on unchangeable needs and
values developed in childhood.
Graphically, this can be depicted as in Figure
2. Figure 2 builds on the graph shown in Figure
1. However, in this case, the distance between
the means and the distribution of the curves
remain constant. The vertical line in Figure 2
indicates the criterion, used to designate the
point at which the prospective entrepreneur is
willing to act. It is at this point that the prospec-
tive entrepreneur decides that a possible third-
person opportunity is an opportunity for him or
her—that is, a first-person opportunity. The cri-
terion, therefore, conveys the individual’s will-
ingness to bear the uncertainty intrinsic to en-
trepreneurial action.
A criterion that splits the uncertainty (denoted
by the area of the overlapping response curves)
It should be noted that, unlike critics, these theorists did
not see these motives as unchangeable elements of person-
ality. For instance, much of McClelland’s empirical work
was devoted to establishing that the need for achievement
could be learned. We wish to thank Jerry Katz for this in-
sightful observation.
138 JanuaryAcademy of Management Review
in half means that a prospective actor will be as
likely to act as not. In contrast, if an individual
chooses a lax criterion (denoted by moving the
criterion to the left), he or she will pursue almost
every possibility that comes along. Such a loca-
tion of the criterion is representative of the pro-
file of the Schumpeterian entrepreneur who is
frequently conceptualized as an innovator,
leader, and/or adventurer. It is also reflective of
the Knightian entrepreneur who is explicitly
conceptualized as a “bearer of uncertainty.” Psy-
chologists like McClelland sought to explain the
“laxity” of the criterion (e.g., as the need for
achievement) and promote it in an effort to en-
courage entrepreneurial activity.
If the individual chooses a strict criterion (de-
noted by moving the criterion to the right), he or
she will choose to pursue very few possibilities.
Given the uncertainty surrounding the decision,
there is always overlap between the noise and
third-person opportunity curves. Thus, individu-
als are forced to expose themselves to the pos-
sibility of either committing an error of commis-
sion (taking action only to find their belief was
unfounded) or committing an error of omission
(not taking action only to regret it when time
proves that their passed-over hunch was cor-
rect). Although only time proves prophecy, con-
sideration of the possible payoffs associated
with these various decisional outcomes shapes
prospective actors’ decisions as they contem-
plate whether to commit to a particular course of
A simple amalgamation of the above argu-
ments suggests that uncertainty prevents action
by obfuscating (1) the need or possibility for
action, (2) the knowledge of what to do,
and (3)
whether the potential reward of action is worth
the potential cost. In the next section we present
a conceptual model (illustrated in Figure 3) that
relates perceived uncertainty and motivation to
entrepreneurial action.
Environmental change is usually thought to
be a source of business opportunities. For exam-
ple, Shane (2000) investigated a technological
change in printing (a patented three-dimen-
sional printing process) and eight teams of en-
trepreneurs, each of whom pursued a different
opportunity arising from the technology. Simi-
larly, we use technological change as a starting
point to summarize our conceptualization of the
two stages of entrepreneurial action.
Stage I: Attention and Third-Person
Stage I addresses first-person attention. Either
people acknowledge a third-person opportunity
arising from a technological change or they do
not. Of course, those individuals who are un-
aware of the technological change are likely to
We use “what to do” inclusively. That is, “what to do”
does not refer merely to the “end” but also to the “means” of
“how,” “when,” and “where” that end is to be achieved.
The Criterion As the Individual’s Willingness to Bear Uncertainty Intrinsic
to Entrepreneurial Action
2006 139McMullen and Shepherd
fall into the latter category. For example, with-
out a certain degree of domain-specific knowl-
edge, one may not even recognize the possibility
for action (by oneself or others). In other words,
there may be so much uncertainty that the indi-
vidual is too ignorant to ask, “What’s happening
out there?” Thus, whether individuals perceive
Milliken’s state and effect uncertainty depends
on whether they know enough about a techno-
logical change to perceive it, even if only faintly.
This suggests that a general form of domain-
specific knowledge is necessary to trigger the
experiencing of response uncertainty.
However, knowledge need not predicate moti-
vation in this process. Before the criterion be-
comes attached to the evaluation of a particular
third-person opportunity, its location depends
on an individual’s strategy. “A strategy refers to
a pattern of decisions in the acquisition, reten-
tion, and utilization of information that serves to
meet certain objectives, i.e., to insure certain
forms of outcome and to insure against certain
others” (Bruner, Goodnow, & Austin, 1956: 54).
Thus, the position of the criterion prior to the
existence of a stimulus represents the individu-
al’s strategy.
For example, when a person becomes dissat-
isfied with his or her current athletic shoes, the
individual may begin to consider switching
brands when buying a new pair. As a conse-
quence, the individual will likely become more
sensitive to what others are wearing than before
and will increasingly allocate attention to the
issue. This relaxes the criterion, making the in-
dividual more sensitive to his or her environ-
ment. This can produce deliberate search, such
as exploring various stores in the hopes of find-
ing the qualities the person is looking for in an
athletic shoe (e.g., improved performance and
comfort, through reduction of the accumulation
of sweat in the shoe), or it can take form as a
discovery heuristic (Gigerenzer, 1991), such as a
sudden increase in awareness of ventilation
technology used in other products (e.g., bellows,
fans, suction devices) that one (and others) had
previously ignored. Either way, the desire for a
new, improved athletic shoe has spurred the
acquisition of knowledge likely to prompt the
recognition of recent technological advances in
fan miniaturization (for use in computers) and
the determination that to insert miniaturized
fans in athletic shoes represents a third-person
opportunity, one that reduces the temperature of
the foot and thus reduces sweating, odor, and
such fungal infections as athlete’s foot. Once
that opportunity is noticed, however, the crite-
rion becomes attached to the specific action nec-
A Conceptual Model Relating Perceived Uncertainty and Motivation to Entrepreneurial Action
140 JanuaryAcademy of Management Review
essary to assess whether third-person opportu-
nity represents first-person opportunity.
Therefore, the acknowledgment of a third-
person opportunity arising from a technological
change is configural in the sense that people
who have the necessary knowledge and motiva-
tion will believe that there is third-person oppor-
tunity arising from a technological change, but
those who do not have the necessary knowledge
and motivation will not believe that the techno-
logical change represents an opportunity for
someone and will no longer attend to it. Stage II
applies only to those individuals who believe
that a third-person opportunity exists.
Stage II: Evaluation and First-Person
Stage II addresses first-person evaluation.
The belief that a technological change repre-
sents a third-person opportunity triggers a deci-
sion-making process in which the prospective
entrepreneur must evaluate whether this third-
person opportunity constitutes a first-person op-
portunity. The individual forms beliefs regard-
ing what to do and why to do it—that is, whether
the potential reward for this particular action is
worth the potential cost specific to oneself. How-
ever, both of these beliefs are undermined to a
greater or lesser extent by doubt. Therefore, re-
gardless of whether the construct of knowledge
or motivation is discussed, the process remains
the same: a belief is formed regarding a desired
end state, but doubt exists regarding whether
that desired end state is feasible (can be
achieved in the manner envisioned) and desir-
able (whether its attainment will fulfill the mo-
tive for which it is being sought).
This evaluation stage is rooted in Aristotle’s
“practical syllogism,” which forms the founda-
tion of most expectancy-value theories (e.g.,
Ajzen, 1996a,b; Gatewood, Shaver, Powers, &
Gartner, 2002). According to Aristotle (1987), the
premises of this syllogism are the actor’s desires
(“Awants to achieve X”) and beliefs (“Abelieves
that if Bis performed Xwill occur”), and the
conclusion is not another belief but the action
itself. Thus, the realization that individual ac-
tion is not solely a function of knowledge or
motivation but, rather, a composite of belief and
desire regarding a particular form of behavior is
not new, nor is it limited to expectancy-value
theory (Greve, 2001). In fact, Hastie suggests that
the field of judgment and decision making is
about “how people...combine desires (utilities,
personal values, goals, ends, etc.) and beliefs
(expectations, knowledge, means, etc.) to choose
a course of action” (2001: 655– 656). He goes on to
point out that the conceptual and perhaps defin-
ing template for a decision comprises three com-
(a) courses of action (choice, options, and alterna-
tives); (b) beliefs about objective states, pro-
cesses, and events in the world (including out-
come states and means to achieve them); and (c)
desires, values, or utilities that describe the con-
sequences associated with the outcomes of each
action-event combination (2001: 656).
Believing that one has recognized a third-
person opportunity does not necessarily mean
one believes one possesses the knowledge and
motivation necessary to exploit it. However,
through learning efforts and/or the encourage-
ment of others, one may be able to overcome
doubt and act. Therefore, the question of the
second stage is similar to a classic “risk/return”
dilemma in which a prospective actor must ask
him/herself whether he or she believes that the
payoff of the third-person opportunity justifies
bearing the perceived uncertainty necessary to
attain it. If the answer is yes, then a first-person
opportunity is believed to exist, and entrepre-
neurial action takes place. The “risk” of this
risk/return dilemma, however, is subjectively
determined by the prospective actor. Thus, it
seems that, to act entrepreneurially, people
need not have a high tolerance for uncertainty if
they believe that they know what they are doing.
Therefore, whether one will engage in a par-
ticular action is a decision that depends on
whether the individual is motivated enough to
act, given the uncertainty he or she expects to
encounter in pursuit of a third-person opportu-
nity. The next section applies our model to a
number of influential economic theories of the
entrepreneur (conveyed in Table 1) not only as a
means of revealing problems that management
scholars face when trying to apply these theo-
ries of the entrepreneur to the individual rather
than system level, but also as a means of glean-
See Barnard (1968) for an analogous argument in which
the terms effectiveness and efficiency are used, respectively,
to delineate goal attainment from motive satisfaction.
2006 141McMullen and Shepherd
ing theoretical insights that are not ontologi-
cally constrained.
Failure to address entrepreneurial action in
terms of both knowledge and motivation has
produced a number of theories of the entrepre-
neur that are incomplete when used at the indi-
vidual level of analysis. In this section we use
our conceptual model of entrepreneurial action
to address possible limitations of the three the-
ories of the entrepreneur that are considered
most influential in the management literature:
Schumpeter (1934), Kirzner (1973), and Knight
Schumpeter’s Innovator: Epistemological and
Ontological Issues
Schumpeter’s theory introduces two major as-
sumptions. The first is that perceived uncer-
tainty does not play a role in entrepreneurial
action. This assumption is derived from a belief
that opportunity is abundant and readily iden-
tifiable. For example, Schumpeter discusses the
economy as if it were a relatively closed system
that merely interfaces with science, literature,
politics, and so forth via the entrepreneur.
doing so, Schumpeter suggests that opportuni-
ties originate elsewhere for all prospective en-
trepreneurs to see. Because all of the prospec-
tive entrepreneurs are equally capable of
seeing the development, it is only the adventur-
ous who make the leap—that is, entrepreneurs
can be discriminated from others only in terms
of the location of their criterion. Schumpeter is
then forced to speculate about individual differ-
ences in the motivation to act entrepreneurially,
and he identifies a number of “traits,” including
greater self-centeredness (1934: 91–92), “the
dream and the will to found a private kingdom”
We have chosen to emphasize these three theorists over
others for the following reasons. First, as Stevenson and Jarillo
(1990) point out, Schumpeter’s conceptualization of the entre-
preneur has provided one of the primary theoretical founda-
tions on which entrepreneurial management research has
been built. Second, Kirzner’s conceptualization of the entrepre-
neur is the most influential in the opportunity paradigm pro-
posed by Shane and Venkataraman (2000) in their recent but
already highly influential piece. Finally, Knight was chosen to
round off our examples because his theory is typically recog-
nized as the third primary and distinctly original theory of the
entrepreneur (Barreto, 1989; Hebert & Link, 1988).
For example, Schumpeter notes:
It is no part of [the entrepreneur’s] function to “find” or
to “create” new possibilities. These are always
present, abundantly accumulated by all sorts of peo-
ple. Often they are also generally known and being
discussed by scientific or literary writers. In other
cases, there is nothing to discover about them, be-
cause they are quite obvious. To take an example from
political life, it was not at all difficult to see how the
social and political conditions of France at the time of
Louis XVI could have been improved so as to avoid a
breakdown of the ancient regime. Plenty of people as
a matter of fact did see it. But nobody was in a position
to do it. Now, it is this “doing the thing,” without which
possibilities are dead, of which the [entrepreneur’s]
function consists (1934: 88).
Limitations and Assumptions of Three Influential Theories of the Entrepreneur
Willingness to
Bear Uncertainty
Stance Importance of Configural Argument
Schumpeter Relatively ignored Addressed—primarily
in terms of the
Naive realism Moderate—third-person opportunity
is considered to be readily
Kirzner Addressed—primarily
in terms of the
attention stage
Relatively ignored Critical realism High—third-person opportunity is
thought to be obscured by market
Knight Addressed—primarily
in terms of the
in terms of the
Critical realism Low—awareness of third-person
opportunity is taken for granted
142 JanuaryAcademy of Management Review
(1934: 93), “the will to conquer” (1934: 93), and the
“joy of creating” (1934: 93–94).
Schumpeter’s second major assumption is
that opportunities have an objective existence—
an argument that communicates a social realist
ontology. Ontological assumptions are assump-
tions concerning the nature of social reality. “[A]
social realist ontology presumes that actors are
real—natural persons having innate capacities
to act so as to secure and protect their interests.
. . . The environment too is regarded as real: it is
out there as a part of the natural world” (Scott,
1995: 50). In contrast, a social constructionist on-
tology suggests that “individuals do not dis-
cover the world and its ways, but collectively
invent them. Such invention is not random and
arbitrary, but itself arises out of and is informed
and constrained by existing social arrange-
ments and beliefs” (Scott, 1995: 50). Because
Schumpeter’s theory conceptualizes possibili-
ties as existing objectively (i.e., in the form of
new technologies observable by all), it not only
recognizes the existence of a third-person oppor-
tunity but it also equates this third-person op-
portunity with first-person opportunity in every
way except one: the amount of desire people
exhibit in deciding whether to exploit it.
Subscription to this social realist ontology, in
combination with the elimination of epistemo-
logical differences, puts Schumpeter into a bit of
a straitjacket. Because everyone in his economy
shares the same perceptual acumen, opportuni-
ties must be new to everyone, not merely the
actor, or else they would already have been
exploited. This limits Schumpeter’s “true” entre-
preneur to the domain of radical innovation.
However, the radicalness of the innovation and
even the innovation itself become third-party
assessments subject to post hoc analysis. That
is, the degree of innovativeness exhibited is
more dependent on a subjective evaluation
made by a number of observers after the fact
than it is on some objectively definable criteria.
Consequently, a priori classification of “radical
innovation” is exceptionally difficult and empir-
ically problematic.
One potential explanation for this difficulty is
that action is an individual phenomenon affect-
ing system-level outcomes. Traditionally, theo-
retical focus has started with the system-level
outcome (i.e. radical innovation), and the theo-
rist then looked to the actor(s) to determine the
cause. This approach unwittingly imposes the
ontological assumptions common to economic,
system-level theories on to the process experi-
enced by the individual actor (i.e., entrepreneur).
Unlike these system-level theories, which rely
on an observer’s assessment of whether an actor
is engaging in radical innovation or bearing
uncertainty, a theory of individual action fre-
quently defines novelty through the eyes of the
actor (see Weber 1947, 1968) and argues that it is
this actor’s assessment of the situation that ul-
timately determines whether entrepreneurial
action will occur. Thus, the individual action
that impacts the system depends on whether an
activity is radical, uncertain, novel, and so forth
in the mind of the prospective actor. If this action
occurs on a scientific knowledge frontier, then it
will likely appear radical to observers, but if this
action occurs on a personal knowledge frontier
(e.g., franchising), then it may appear to observ-
ers to be nothing more than imitation. To the
particular actor, however, it may be novel either
way. An embrace of this first-person approach is
characteristic of the Austrian school and of Kirz-
ner’s theory, to which we now turn our attention.
Kirzner’s Alert Arbitrageur: Motivational and
Configural Issues
Whereas Schumpeter’s entrepreneur disrupts
equilibrium by introducing radical innovation,
Kirzner’s entrepreneur begins in disequilibrium
and fulfills the function of an arbitrageur who
moves the economy toward equilibrium by rec-
tifying discrepancies in supply and demand.
Unlike Schumpeter, Kirzner (1973) provides am-
ple attention to epistemological differences un-
der the guise of entrepreneurial alertness. How-
ever, within Kirzner’s (1979) work, there is an
We use the adjective true because although Schumpeter
often used the term entrepreneur to refer to both the pioneer
and the subsequent entrants, he considered the pioneer, or
“leader,” to represent the “true” theoretical entrepreneur
responsible for stimulating the system. To avoid the confu-
sion associated with introducing a new term, we thought it
best to designate this theoretical profile as the “true” entre-
preneur rather than the “leader.”
These discrepancies in supply and demand are not
limited to existing products and services. They also include
future discrepancies that can arise from discoveries of su-
perior means-end frameworks of which people were previ-
ously unaware.
2006 143McMullen and Shepherd
unwitting dilution of his concept of entrepre-
neurial alertness from a description of a behav-
ior that is necessary for the economy to function
to a description of a psychological
characteristic common to successful entrepre-
We say “unwitting” because Kirzner fre-
quently acknowledges the importance of a
statement made by his mentor, Ludwig von
Mises: “The economist must never be a special-
ist. In dealing with any problem he must fix his
glance upon the whole system” (Mises, 1949: 69).
As a behavior that is necessary for the econ-
omy to function properly, entrepreneurial alert-
ness is what happens when the market presents
a profitable situation that is successfully ex-
ploited by an individual who “fits” the neces-
sary profile (Kirzner, 1973, 1980). In essence, en-
trepreneurial alertness is a less mathematical
exposition of probability theory in which the
market presents an objective opportunity for
someone possessing the necessary knowledge.
Entrepreneurial alertness ensures exploitation
of this opportunity and consequently perpetu-
ates the market system.
To use an analogy, entrepreneurial alertness
is like a radio trivia contest. Although you or I
may not know the answer to the trivia question
asked by the disc jockey, someone inevitably
does. Therefore, an objective opportunity can be
said to exist. The first individual who knows the
answer and calls in to claim the prize is the
exhibitor of Kirzner’s (1973) concept of entrepre-
neurial alertness. Accordingly, entrepreneurial
alertness has no meaning a priori. By definition,
it can only be said to exist post hoc. Therefore,
alertness can only be said to exist for the suc-
cessful radio caller (and possibly to a lesser
degree for those who know the answer, try to
call, but are not as fast as the winner). The caller
who gets through but provides the wrong an-
swer cannot be described as exercising entre-
preneurial alertness. Thus, entrepreneurial
alertness is a configural concept in which an
objective market opportunity is only an opportu-
nity for those possessing the necessary at-
tributes. Therefore, because this alertness is a
product of the market, it is problematic for it to
be discussed as a universal attribute of entre-
preneurial individuals independent of the sys-
tem in which they operate.
However, entrepreneurial alertness is used as
a description of a psychological characteristic
common to successful entrepreneurs in Kirzner’s
later works (1982, 1997, 1999; Kirzner & Institute of
Economic Affairs, 1997) as an effort to soften
(1982: 156 –157) the more deterministic stances
taken in his earlier work (e.g., 1979: 9). In doing
so, he obfuscates the configural nature of the
“alertness” concept by discussing it more in
terms of a quality observable in characteristics
such as prescience, boldness, self-confidence,
creativity, and innovative ability (Kirzner, 1999).
This transforms entrepreneurial alertness into
nothing more than judgment and leads the
reader to believe that the concept is separable
from the market context. However, we argue that
it is not. This judgment is still discussed in terms
of how well the entrepreneur’s envisaged future
corresponds to the realized future (Kirzner, 1982:
The problem that this introduces lies in the
fact that Kirzner equates opportunity recogni-
tion with entrepreneurial action (e.g., “entrepre-
neurial alertness exploits these opportunities
when others pass them by”—see footnote 11). In
a subsequent article in which he compares and
contrasts his entrepreneur with Schumpeter’s,
Kirzner (1999) comes closer to recognizing the
need for a criterion. However, he still tries to
address motivation in terms of perception (i.e.,
the proposed solution is still the need for a
For example, Kirzner notes:
This entrepreneurial alertness is crucial to the mar-
ket process. Disequilibrium represents a situation
of widespread market ignorance. This ignorance is
responsible for the emergence of profitable oppor-
tunities. Entrepreneurial alertness exploits these
opportunities when others pass them by. G.L.S.
Shackle and Lachman emphasized the unpredict-
ability of human knowledge, and, indeed, we do not
clearly understand how entrepreneurs get their
flashes of superior foresight. We cannot explain
how some men discover what is around the corner
before others do....As an empirical matter, how-
ever, opportunities do tend to be perceived and
exploited. And it is on this observed tendency that
our belief in a determinate market process is
founded (1979: 9).
For example, within the same book providing the pre-
vious comment, Kirzner states:
The truth is that the ability to learn without delib-
erate search is a gift individuals enjoy in quite
different degrees. It is this gift surely, that we have
in mind when we talk of entrepreneurial alertness.
Entrepreneurial alertness consists, after all, in the
ability to notice without search opportunities that
have been hitherto overlooked (1979: 148).
144 JanuaryAcademy of Management Review
tighter distribution around the mean of the
third-person opportunity). Kirzner explicates:
The seer who can imagine how the world might
be improved by a radical innovation but who
lacks the needed boldness and initiative (to
shoulder the risks which he would have to as-
sume in order actually to introduce this innova-
tion to reality in a world fraught with uncertain-
ties)— has in fact not yet really discovered an
available, attractive opportunity for innovation. If
he has not seen that opportunity in so shining a
light that it drives him to its implementation in
spite of the jeering skepticism of others, and in
spite of the possibility of its ultimate failure—
then he has not really “seen” that opportunity
(1999 13).
In essence, Kirzner’s argumentation collapses
the attention and the evaluation stages of our
conceptual model of entrepreneurial action into
one simultaneous occurrence in which individ-
uals become entrepreneurs if and only if their
prior knowledge enables them to go from igno-
rance to near certainty instantaneously. That is,
an individual becomes an entrepreneur when
his or her distribution around the third-person
opportunity mean is so tight that uncertainty is,
for all material purposes, eliminated from the
question of whether to act (as was the case in
the aforementioned radio contest analogy). The
primary problem with this conception lies in the
realization that you or I may frequently know the
answer to a radio trivia question without believ-
ing that the prize is motivating enough to waste
time on the unlikely prospect of getting through
to the station. Therefore, without motivation, en-
trepreneurial alertness cannot be expected to
produce entrepreneurial action, regardless of
how “clearly” one may have “seen” an opportu-
For the most part, Kirzner’s theory of entrepre-
neurial alertness is an elegant explanation of
the attention stage. Ignorance is addressed in
terms of perception, and the ability to notice
opportunities without search is highly reminis-
cent of personal strategy. However, to be a the-
ory of the entrepreneur, both the attention and
the evaluation stages are necessary. After all,
entrepreneurial perception can only be consid-
ered “entrepreneurial” when it produces action.
This cannot be achieved without evaluating
action-specific uncertainty (even if only briefly,
owing to a potentially nominal amount of uncer-
tainty). This evaluation, in turn, involves the
necessary motivation in relation to one’s belief
and corresponding doubt that one knows what
to do. Therefore, according to Kirzner, being an
entrepreneur logically implies that entrepre-
neurial alertness has been exercised. Without
entrepreneurial alertness, the individual would
not have perceived and acted on the opportu-
nity, and would not, therefore, be an entrepre-
Knight’s Uncertainty Bearer: Attention Issues
Because it emphasizes uncertainty in the ex-
planation of profit, Knight’s (1921) theory comes
the closest of the three in recognizing the signif-
icance of both knowledge and motivation in en-
trepreneurial action. However, because the con-
text of the theory is an existing firm, the
existence of a decision scenario is frequently
taken for granted, and little explanation is given
to how the decision maker escapes ignorance.
Knight argues that individuals frequently face
uncertainty in the decisions they make regard-
ing the normal functioning of the enterprise—
that is, forecasting consumer demand, project-
ing costs, and so on. Thus, recognizing or
creating opportunities is made insignificant, be-
cause profit is believed to come from uncer-
tainty, which Knight considers to be rarely in
short supply. Instead, he places emphasis on the
responsibility associated with decision making.
Accordingly, Knight’s theory discusses entre-
preneurial action solely in terms of the evalua-
tion stage, without adequate concern for the at-
tention stage. In other words, there is no need to
address the kind of radical uncertainty (i.e., flat
response curves) indicative of market ignorance
if one begins with the assumption that the stim-
ulus will be thrust on the individual in the nor-
mal course of business activities. This position
makes Knight’s theory congenial to discussions
of scanning and deliberate search common to
strategy research (Dutton & Jackson, 1987, 1997)
but incomplete when addressing discussions of
discovery, which are more commonly associated
with entrepreneurship. Because scanning and
deliberate search are prompted by a conscious
awareness of a need for more information, they
address uncertainty and known ignorance (i.e.,
“I know what it is that I don’t know”). Discovery,
however, is based on notions of complete igno-
rance (i.e., “I don’t know what it is that I don’t
know”). That is, the individual is not consciously
investigating the phenomenon and may even be
2006 145McMullen and Shepherd
involved in alternative activities that engage
his or her attention, thereby preventing recogni-
tion of a third-person opportunity.
Although in some respects Knight’s theory of-
fers a less comprehensive explanation of why
the economy functions effectively and why firms
emerge than either Schumpeter’s or Kirzner’s, in
other ways Knight may have an advantage over
Schumpeter and Kirzner. By not discussing the
economy explicitly, Knight is able to focus more
clearly on the individual’s decision-making pro-
cess. This focus on the individual and relative
neglect of the system may be responsible not
only for preventing oversight of either knowl-
edge or motivation but also for keeping Knight
from becoming too enslaved by his ontological
assumptions. Although Knight clearly exhibits
social realist sympathies when he suggests that
“a man’s judgment has, in an effective sense, a
true or objective value” (1921: 270 –271 footnote),
his theory is not constrained by them, as is the
case with Schumpeter and Kirzner, each of
whom focuses substantially on the concept of
equilibrium and disequilibrium.
As a result, Knight’s theory is less configural
in nature. In fact, the third-person opportunity
could be conceptualized in terms of a socially
constructed situation in the future about which
the entrepreneur must try to accurately predict
what will take place. For example, the question
is not whether this is or is not an objective op-
portunity to seize; rather, it is “How firmly do I
believe that I can sell a certain number of my
new product to the market?” In such a scenario,
the expectation becomes the third-person oppor-
tunity and the actor’s knowledge and motivation
contribute to whether the actor deems the sce-
nario action worthy (i.e., “Can I make the future
what I want it to be?”). This kind of scenario
generation and enactment escapes the heavy
determinism implied by the equilibrium para-
digm and begins to look a lot like the psycho-
logical stances taken by radical, subjectivist
economists (e.g., Ebeling, 1986; Maki, 2001;
Shackle, 1972) and critical psychologists, such
as Weick (1979, 1995). This change in argumen-
tation, however, results in a shift in one’s onto-
logical assumptions.
Schumpeter and Kirzner embrace social real-
ism. In both theories discovery plays a role. Be-
cause Kirzner begins with a dynamic and inclu-
sive economy, he must address discovery
directly, which he does through his concept of
market ignorance. Schumpeter also addresses
discovery, but more indirectly. He simply pushes
it back into the realm of science, making the
scientists the inventors and the entrepreneurs
merely innovators. However, the fact remains
that “discovery” still occurs somewhere in his
world view.
In contrast, action theorists of a sociological
(DiMaggio & Powell, 1983; Meyer & Rowan, 1977)
and critical psychological bent (Burke & Reitzes,
1991; Weick, 1993) favor a social constructionist
orientation (Scott, 1995), shying away from terms
such as discovery when discussing social con-
texts (Scott, 1995). These theorists do not see the
social environment as something to be discov-
ered; instead, they view it as either “wider belief
systems and cultural frames [that] are imposed
on or adopted by individual actors and organi-
zations” (Scott, 1995: 44) or as “understandings
and scripts [that] emerge out of actions as well
as guide them” (Scott, 1995: 45), respectively.
This subtle but powerful shift of ontology from
social realism to social constructionism pre-
sents possibilities and problems for entrepre-
neurship research.
It is not our purpose in this article to act as
proponents or critics of social realism or social
constructionism. Rather, we merely wish to il-
lustrate that the many economic theories of the
entrepreneur that are so influential to manage-
ment theory today are, at their core, theories of
action that are laden with ontological assump-
tions. These assumptions influence not only
which components of action are discussed but
also the way that opportunity is conceptualized.
Recognition of this fact enables scholars to draw
from these theories in a more productive man-
ner, both theoretically and empirically.
We propose that an action framework can
lead to more productive discussions regarding
the important entrepreneurial concept of oppor-
tunity (Brown, Davidsson, & Wiklund, 2001;
Shane & Venkataraman, 2000; Stevenson &
Gumpert, 1985). Shane and Venkataraman (2000)
draw from economic theory and present an elo-
quent argument for the objective existence of
opportunities. In a highly original study, Shane
(2000) pushes this paradigm to the empirical
front by establishing the mediating role that
prior knowledge has in both the discovery and
146 JanuaryAcademy of Management Review
exploitation of opportunity. Perhaps what is
most interesting about this study, in relation to
our argument, is that the same term opportunity
is used to denote both the third-person opportu-
nity of the new technology and the first-person
opportunity of the various individuals who per-
ceive it in different ways. For example, Shane
states, “Potential entrepreneurs should look to
discover opportunities in what they know rather
than in what is popular with other entrepre-
neurs” (2000: 467). Language such as this con-
veys a belief in the objectivity of third-person
opportunity, even if epistemological differences
produce different interpretations of it.
Other entrepreneurship scholars who have
exhibited a qualified subscription to this para-
digm have provocatively proposed the use of
signal detection theory (MacMillan & Creelman,
1991; McFall & Treat, 1999; Swets, 1996) for exam-
ining opportunity recognition and evaluation
(e.g., Baron, 2002; McMullen & Shepherd, 2003).
However, the question of whether an error of
commission is attributable to entrepreneurial
error in terms of misperceived opportunity, poor
strategy formulation, poor strategy implementa-
tion, or unfavorable changes in environmental
conditions becomes, at best, difficult to deter-
mine using this ontological foundation.
In stark contrast to these social realists are
action enthusiasts who exhibit social construc-
tionist sympathies. For example, Gartner,
Carter, and Hills (2001) argue that opportunities
are often enacted phenomena with no existence
independent of the individuals who envision
and/or exploit them. For these scholars, discus-
sion of third-person opportunity undermines
their world view. They fear that the language
that accompanies this realist ontology reflects
an artificially constructed framework superim-
posed on the phenomenon by scholars to help
them make sense of it. They suggest that the
consequence of such a framework is that it ob-
fuscates scholarly understanding of the phe-
nomenon as it actually occurs. For example, by
using words in surveys such as “discovery,”
which they argue are not used by people when
confronting the phenomenon in a natural state,
scholars distort findings by introducing their
own conceptions of the phenomenon to be ex-
plained. Although the debate regarding which
ontology is more suited to entrepreneurship re-
search is integral to “good” science (Cannella &
Paetzold, 1994), it remains diluted as a discus-
sion of the nature of opportunity and unrecog-
nized for what it is—a philosophical debate
about the nature of the social world and human
action (Burrell & Morgan, 1979).
Therefore, the primary difference between en-
trepreneurship scholars with social realist sym-
pathies and those with social constructionist
sympathies concerns the nature of third-person
opportunity. Is an “opportunity” conceived to be
“out there” awaiting discovery, evaluation, and
exploitation? Or does one begin with an individ-
ual’s knowledge and motivation and attempt to
determine how that influences his or her mental
representation of the environment? We propose
two potential approaches for reconciling these
contrasting views: one pragmatic and the other
A Pragmatic Approach
Perhaps the easiest way to address the philo-
sophical nature of third-person opportunity is to
avoid it. Arguably, this is precisely what many
positivist psychologists, such as Simon, Tversky
and Kahneman, and Giegerenzer, have done.
Using experimental methods or controlled tasks,
the researcher is able to observe individual be-
havior within an “objective,” somewhat micro-
cosmic reality. For example, both Simon’s work
using the game of chess or Tversky and Kahne-
man’s framing experiments examine judgment
and decision making regarding an “objective”
answer (i.e., one that is logically right or wrong).
Historically, the quality of the individual’s deci-
sion has been determined by equating “good”
judgment with “rational” judgment as deter-
mined by statistics, or probability theory
(Hastie, 2001). Accordingly, these tasks are not
subject to multiple interpretations.
This same approach can be used to analyze
the decision of whether to engage in entrepre-
neurial action. Because one can control within
an experiment the amount of information pre-
sented to the individual, the researcher can con-
trol the distance between the noise and third-
person opportunity means in such a way as to
ensure substantial distance or close proximity.
This suggests that Shane subscribes to a social realist
ontology, but it is a “critical realism,” in which there are
limits on individuals’ epistemological abilities, versus a
“naive realism,” in which no such limitations exist (Lincoln
& Guba, 2000).
2006 147McMullen and Shepherd
Thus, regardless of whether an “opportunity” in
the real world ever objectively exists, one can
create an experiment in which an opportunistic
situation does undoubtedly exist (i.e., the poten-
tial for arbitrage).
However, such an experiment suffers from
some of the critiques leveraged against Knight’s
theory above (i.e., a decision scenario is forced
on the decision maker, leaving the researcher
uninformed about the allocation of entrepre-
neurial attention). In addition, whether a situa-
tion can be classified as an opportunity if an
individual recognizes it and deems it unworthy
of exploitation, and whether an arbitrage oppor-
tunity is an “entrepreneurial” opportunity, are
questions that require theoretical answers that
would most likely go unaddressed under this
One final observation regarding this solution
is that it is not so much behavioral as it is
cognitive or decisional in nature. Sarasvathy’s
(2001a,b) work on effectuation within a slightly
more natural setting epitomizes the promising
potential of this method. By using “think-aloud”
protocols to examine how entrepreneurs think
about opportunity, she successfully sidesteps
the configural issues that are often embedded in
economic theories of the entrepreneur. In fact,
the importance of ontological assumptions is
effectively eliminated by focusing only on per-
ceived behavioral control and not the actual be-
havioral control associated with subsequent ac-
tion. This obviates the need to worry about
whether it was the opportunity, the execution, or
the environment that prevented successful en-
trepreneurial action. This approach works well
if one is interested in the cognitive elements of
opportunity, which is Sarasvathy’s objective.
However, its extension to action explanation re-
quires one to determine whether the findings on
how entrepreneurs think they would go about
acting entrepreneurially correspond to how they
actually behave under natural circumstances.
A Conceptual Approach
Given these various observations, we propose
a conditional compromise that is consistent with
an action framework and that includes eco-
nomic theories of the entrepreneur but is not
exclusive to their ontological assumptions. We
argue that the willingness to bear the perceived
uncertainty associated with an entrepreneurial
act is representative of a belief-desire configu-
ration, in which belief of what to do is a function
of knowledge and desire of why to do it is a
function of motivation. This conceptualization is
identical to an intention as described in the con-
text of action theory. For instance, Greve notes:
Actions are distinguished from other kinds of hu-
man behavior by the way people usually explain
how they came about: They have reasons for ac-
tions. This means that individuals do what they
do because they desire (want) to reach a goal and
believe (expect) that the action is an appropriate
or necessary means of reaching it. The beliefs
and desires “rationalize” the action (Davidson,
1980a) (Greve, 2001: 437).
Given a specific action, the presence of a specific
intention (belief-desire configuration) cannot be
doubted. When an observed behavior is in fact
the expression of a certain action, then a corre-
sponding intention (constellation of desires and
beliefs) is necessarily implied; the hypothesis
that this action expresses these particular de-
sires and beliefs cannot be disproven by empiri-
cal means. The assertion that a person, when he
or she performs an action, does so due to certain
beliefs (expectations) and desires (values) is triv-
ially true, because whatever he or she performs
would not, in any other case, be an action (Greve,
2001: 439).
Greve suggests that action, by definition, is
intentional behavior. Therefore, one cannot start
with the behavioral portion of the action and
argue that increases in the intention caused the
action. This would be tautological, given that
the action partially consists of the intention.
However, one could avoid tautology by starting
with the strength of the intention and predicting
whether the intended behavior subsequently
ensues. Such an approach to entrepreneurial ac-
tion would equate the concept of opportunity
with that of intention. This action approach (in
which the researcher examines the composition
of the prospective entrepreneur’s intention as it
In the more problematic context of a natural setting,
scholars have investigated the role of knowledge in entre-
preneurship by using measures of general and specific hu-
man capital. General human capital typically is operation-
alized by years of schooling (Rauch & Frese, 2000; see, for
example, Bates, 1995; Evans & Leighton, 1989; and Davidsson
& Honig, 2003). In the entrepreneurship literature, the most
frequently investigated aspect of specific human capital is
previous start-up experience (Bates, 1995; Cooper, Folta, &
Woo, 1995; Davidsson & Honig, 2003; Wright, Robbie, & En-
new, 1997).
148 JanuaryAcademy of Management Review
forms and then determines whether subsequent
behavior occurs
)avoids the tautology inherent
in some entrepreneurial studies, the erroneous
ascriptions of risk tolerance or superior innova-
tive abilities made by observers, and the post
hoc rationalization common to retrospection
In addition, paradigm wars regarding onto-
logical assumptions become less important be-
cause, regardless of whether social environ-
ments are objective or subjective phenomena,
the impact they have on individuals’ intentions
are real just the same. Therefore, it seems that
the ontological concerns discussed in this arti-
cle only come to the forefront when one is inter-
ested in what accounts for the origination of the
intention or the quality of the outcome produced
by the entrepreneurial action. Thus, it appears
that although the study of entrepreneurial ac-
tion consists of an empirically tractable center
capable of paradigmatic reconciliation, entre-
preneurial action is “bookended” by two philo-
sophically intractable positions grounded in
metaphysical assumption. Whereas for the real-
ist these bookends consist of opportunity recog-
nition and accuracy, for the constructionist they
represent the origination of intention and
whether individuals can realistically impose
their will on any system.
We began this article with an examination of
the role that uncertainty plays in economic the-
ories of the entrepreneur. After establishing the
need to consider knowledge and motivation con-
comitantly when examining entrepreneurial ac-
tion, we proposed a two-stage conceptual model
of entrepreneurial action, built on these two con-
structs and consisting of an attention stage fo-
cused on the assessment of third-person oppor-
tunity (a possible opportunity for someone) and
an evaluation stage focused on the assessment
of first-person opportunity (a possible opportu-
nity for the actor). We then used this model to
illustrate the conceptual limitations of using
system-wide theories of the entrepreneur at the
individual level of analysis by reinterpreting
three economic theories considered highly influ-
ential to managerial thought on the subject of
entrepreneurial action. Following this, we dis-
cussed how the recognition that these theories
of the entrepreneur are theories of action, laden
with ontological assumptions about the social
world, highlights the need for greater scholarly
attention to both knowledge and motivation in
future theory building and empirical testing. Fi-
nally, we offered a pragmatic and a conceptual
solution, inspired by an action framework, as a
means of sidestepping or acknowledging philo-
sophically intractable areas associated with the
examination of entrepreneurial action.
Given the renewed interest in the individual
within entrepreneurship research and the im-
portance of the concept of opportunity to the
emerging field of entrepreneurship, we believe
that scholars who employ these economic theo-
ries of the entrepreneur will benefit from a
deeper understanding of their predictions, as-
sumptions, limitations, and possibilities. Not
only does it appear that an action framework
provides this benefit to entrepreneurship, but
also we believe that entrepreneurship provides
a promising phenomenon to extend scholarly
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Jeffery S. McMullen is an assistant professor of management and entrepreneurship at
the Hankamer School of Business, Baylor University. He received his Ph.D. and M.B.A.
from the University of Colorado. His research interests include the contextual deter-
minants of entrepreneurial cognition and action, self-regulation, institutional eco-
nomics, and opportunity.
Dean A. Shepherd is a dean’s research fellow and associate professor of entrepre-
neurship and strategy at the Kelley School of Business, Indiana University. He re-
ceived his Ph.D. and M.B.A. from Bond University (Australia). His research interests
include the decision making of entrepreneurs and their stakeholders, new venture
strategy/growth, opportunity, and failure.
152 JanuaryAcademy of Management Review
... A long established theoretical view within entrepreneurship research contends that entrepreneurship is of value to the economy and society only when action is taken. That is, value is created when individuals identify opportunities, intend to take action and then take the necessary actions required to create an actual venture (Audretsch & Keilbach, 2004;McMullen & Shepherd, 2006;Nikolaev, Boudreaux & Palich, 2018). In principle, entrepreneurship policy can be considered primarily a behavioural concept concerned with prioritising and directing human capital towards creating something new. ...
... The seminal work of Lundström & Stevenson (2005, 83), states that entrepreneurship education "is considered to be a very important factor in improving the overall entrepreneurial culture and capacity of a nation, but to achieve medium and long term increases in the rate of entrepreneurial activity, other adjustments in the support environment will inevitably have to be made". Entrepreneurship requires both the willingness and ability to take action (Campbell & Mitchell, 2012;Choi & Shepherd, 2004;McMullen & Shepherd, 2006). Limits in capability and functioning (e.g. ...
... Insufficient income and precarity have significant consequences for an individual's sense of wellbeing, agency over life events such as family planning, and access to the housing market (Codagnone, et al., 2018). Such life uncertainty can make it difficult for individuals to plan and co-ordinate their activities which can impact whether entrepreneurial opportunities are identified, which ones are considered valuable and whether they are pursued at all (Boudreaux et al., 2017;McMullen & Shepherd, 2006). Whereas employees can rely on social protection to buffer against social risks, a lack of social protection for entrepreneurs can magnify these risks. ...
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Entrepreneurship has the potential to drive economic development and social advancement. The European Commission implemented entrepreneurship policy as a pragmatic response to its economic and social challenges, especially after the 2008 financial crisis. Institutional changes to promote entrepreneurship and enable individuals to directly contribute to economic growth, job creation and society were introduced to create an entrepreneurial Europe. This study undertakes a systematic review to examine the implications of entrepreneurship policy within Europe. Examining and understanding the impacts of entrepreneurship policy and institutional changes are particularly relevant because of the billions of Euros invested and the impacts on the working lives of European citizens. By examining a broad range of existing literature, the study finds that the entrepreneurial Europe envisioned by policymakers has not been fully realised. Instead, entrepreneurship activity has skewed towards poor quality, necessity entrepreneurship. The European institutional context has also shifted away from the social model on which it was founded, increasing the exposure of European workers to social risks. To promote sustainable growth, wellbeing and well-functioning labour markets, researchers and policymakers are reconsidering the role of social protection. Social protection also has the potential to promote quality entrepreneurship. Based on the review of literature, seven testable propositions about how social protection can promote quality entrepreneurship have been developed for future empirical testing. This study advances knowledge in entrepreneurship research and contributes to debates in policymaking and practice. It also provides a sound basis for subsequent empirical research.
... Opportunity recognition requires alertness (Scott Shane & Nicolaou, 2015); proactively searching and scanning the environment (Fiet, 2002); gathering information (Ozgen & Baron, 2007); communication (Dimov, 2007); problemsolving (Ardichvili et al., 2003); and evaluating (McMullen & Shepherd, 2006). Opportunity recognition precedes opportunity exploitation (Kuckertz et al., 2017). ...
... Entrepreneurs are supposed to possess the capacity to bear risks when they start a business of their own (Subagyo et al., 2020). They can deal with uncertainty and take risks (McMullen and Shepherd, 2006;York and Venkataraman, 2010) but when the risk is on a greater scale like a pandemic then it will have an impact on various facets of the entrepreneurs' business operations. The risk is of handling external shock as well as carrying on the business properly (Kumar & Vidhyalakshmi, 2012). ...
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The COVID-19 pandemic was an extreme exogenous shock that had an adverse impact on every facet of human lives, including business. However, the pandemic has also provided an opportunity for companies to alter their business models by adopting digitalization, innovative customer interfaces, and innovative cost and revenue structures. In order to continue not only surviving but thriving through the effects of the pandemic, businesses will have to further improve and realign their models to engage clients, reskill their workforce, and advance the use of supportive technologies. Cases on Emerging Market Responses to the COVID-19 Pandemic provides a set of case studies on corporate and functional strategies adopted by firms irrespective of their industry, ownership type, or size. It highlights the innovative approaches of dealing with crises to survive and sustain the performances that better suit the unique requirements of the pandemic. Covering topics such as crisis management, innovative management strategy, and social entrepreneurship, this book is an essential resource for business leaders, government organizations, hospital administration, educational administration, computer scientists, researchers, and academicians.
... The effect also depends on the level of complexity, creativity and problem-solving 211 TOWARD SUSTAINABLE RECOVERY AND INCLUSIVE GROWTH OF THE CREATIVE ECONOMY IN A POST-COVID-19 WORLD efficiency required by entrepreneurs to achieve higher productivity. A positive relationship between entrepreneurial activity in the creative industries and sustainable economic growth is affected by the proportion of labor with different skills and creative endowments, acting in the face of uncertainty and transforming ideas into marketable innovations (McMullen and Shepherd 2006). ...
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Public policy is failing to engage with the freelance work and informal micro businesses, typified by the creative and cultural sector, that drive much innovation and job creation in the 21st century global economy, South and North. Desk research, combined with interviews, surveys, video and practical observation across ten mainly urban locations in the Global South demonstrated the need for new definitions that encompass both formal and informal work and business practices and improve access to finance, skills and social protection. This would enhance the creative and cultural sector’s capacity to drive growth that also contributes to the SDGs. Three key recommendations • Trusted intermediary organisations are the best way for public policy to engage with the rapid changes in informal business practice driven by digital technology, new cultural practice and urban growth. • New definitions of work and business are needed to improve social protection for informal workers and to improve access to finance and skills for marginalised workers. • Better data and definitions would enable simpler, transparent and appropriate forms of business registration that would encourage formalisation, protect traditional work practices and enable the creative energy of the informal sector to benefit the formal economy.
This research aims to explore how the COVID-19 pandemic has affected college students’ entrepreneurial intention (EI), as well as whether the well-studied link between entrepreneurial alertness (EA) and EI is involved. Data were collected from 612 respondents, and using the stepwise regression method we examined the moderating role of college students’ perceived risk of COVID-19 on the connection between EA and EI. The results show that students’ perceived risk of COVID-19 reduces their EI. Furthermore, the perceived risk of COVID-19 attenuates the relationship between EA and EI. Specifically, those who perceived a greater risk tended to show lower EI. This article contributes to a better understanding of how the relationship between EA and EI has changed during the pandemic.
Based on the data of 22 different countries from 2005 to 2018, this paper mainly studies the influence of entrepreneurship on sustainability, and further explores the influence of Economic Policy Uncertainty (EPU) and the interaction effect between EPU and entrepreneurship on sustainability. The results show that EPU can promote economic, environmental, and social development, the interaction between EPU and green entrepreneurship is beneficial to social development, and the interaction between EPU and non-green entrepreneurship inhibits social development. For the heterogeneity analysis, 22 countries are grouped by high and low Human Development Index (HDI). The empirical results find that EPU has a better performance in low HDI countries than that in high HDI countries. In high HDI countries, the interaction between EPU and green entrepreneurship will weaken the positive effects of green entrepreneurship on the environment.
The Coronavirus caused severe losses, many owner-managers lost their businesses, and many employees lost their jobs. This raises the question of whether such losses were a push into traumatic resignation or a push to start a business? And what are the main factors that influence responses? This chapter aims to answer these questions by drawing on the Theory of Planned Behaviour in order to help advance the scarce literature on entrepreneurial intentions under adverse conditions. We build and test a model of entrepreneurial intention highlighting entrepreneurial mindset (self-efficacy and opportunity perception) and social capital as core determinants of entrepreneurial intention. Using a sample of 1777 owner-managers and employees in Egypt surveyed by the Global Entrepreneurship Monitor (GEM), results of logistic regression reveal that former owner-managers, who had just lost their business, were less entrepreneurially minded and networked less than their continuing counterparts. Former employees, who had just lost their job, were no more entrepreneurially minded than their continuing counterparts. Results also show that self-efficacy and opportunity perception play a key role in promoting people’s entrepreneurial intention. The findings contribute to the debate on predictors of entrepreneurial intention in hostile environments and developing countries; and pave the way for studies on whether disadvantages such as the COVID-19 pandemic prompt a new type of entrepreneurship where necessity aligns with opportunity.
Although entrepreneurs' work tends to be highly stressful, it is unclear how specific work stressors influence entrepreneurs' work outcomes. Drawing on the challenge-hindrance stressor framework (CHSF), we examine how both challenge and hindrance stressors influence entrepreneurs' creativity. Additionally, to investigate a more complete view of the entrepreneurial stress process, we integrate the CHSF with theory on leisure crafting to examine how proactively structuring one's leisure might help entrepreneurs deal with stress and maintain creativity. Results from a time-lagged study of 258 entrepreneurs showed that challenge stressors were positively and directly related to entrepreneurs' creativity, whereas hindrance stressors were not. Hindrance stressors increased engagement in leisure crafting, which enhanced creativity, highlighting a positive indirect effect of hindrance stressors on entrepreneurs' creativity. These findings provide generative insights into the nature of stressors and the micro-foundational mechanisms of stress and leisure within entrepreneurship.
Purpose Decision-making is of utmost importance for entrepreneurs. One of the most important entrepreneurial decisions is the decision to persist, which under certain circumstances such as a high level of adversity may seal the fate of entrepreneurs’ businesses. Nevertheless, the main antecedents of the decision to persist among entrepreneurs have remained understudied. This dearth of research is more obvious with respect to women entrepreneurs, especially in developing countries. To address this gap, this paper aims to explore the main antecedents of the decision to persist among women entrepreneurs. Design/methodology/approach By adopting a narrative approach, data were collected through a combination of semi-structured and in-depth questions with a sample of Iranian women entrepreneurs founding and running small businesses offering services in a variety of sectors and analysed by narrative data analysis. Findings According to the findings, the pandemic-emanated uncertainty, personal attachment to one’s venture as well as the reluctance of being blamed by one’s family, and the fear of the unknown future were the main drivers of the decision to persist among the entrepreneurs. Originality/value This paper offers two novel contributions to the extant literature. This paper is a pioneer not only in exploring entrepreneurs’ decisions during the COVID-19 pandemic but also in studying the decision to persist in the context of the developing nations.
Next, this chapter—“Refugee Entrepreneurs Building and Displaying Resilience”—examines how refugees can harness entrepreneurial action to find a positive identity and better life under difficult circumstances. Against a theoretical backdrop comprising resilience, positive psychology, and positive organizational scholarship, we explore the important role entrepreneurial action plays in generating positive outcomes by investigating long-term refugee entrepreneurs (in refugee camps and not in camps) over 15 months. In particular, we describe the motivation underlying entrepreneurial action in highly constrained environments (in which the constraints go beyond a lack of financial resources) and explain the causes and consequences of entrepreneurs’ resilience in the face of severe constraints that create significant and ongoing adversity. Overall, this chapter shows that entrepreneurial action can help individuals achieve resilient outcomes in the face of adversity without addressing the underlying source of that adversity. We also hope this chapter changes the way people think about refugees starting and running illegal businesses.
This section presents the third volume of Max Weber's fundamental work Economy and Society which has been translated into Russian for the first time. The third volume includes two works devoted to the sociology of law. The first, 'The Economy and Laws', discusses differences between sociological and juridical approaches to studies of social processes. It describes peculiarities of normative power arenas (orders) at different levels and demonstrates how they influence the economy. The second, 'Economy and Law' ('Sociology of Law'), reviews the evolution of law orders (primarily, the three "greatest systems of law" including Roman Law, Anglo-American Law, and European Continental Law) in the context of changes in the organization of economy and structures of dominancy. Law is considered an influential factor of the rationalization of social life which in turn is affected by a rationalized economy and social management. The Journal of Economic Sociology here publishes an excerpt from the chapter 'Law, Convention and Custom' in this third volume, which shows the role of the habitual in the formation of law; explains the importance of intuition and empathy for the emergence of new orders; and discusses the changeable borders between law, convention and custom. The translation is edited by Leonid Ionin and the chapter is published with the permission of HSE Publishing House. © 2018 National Research University Higher School of Economics. All rights reserved.
The competitive dynamics literature, which reflects the market process movements of firms in pursuit of profits, has begun to identify the alternative actions firms can undertake to build, defend, and sustain superior profits. One class of action that is prominent in this literature is entrepreneurial actions. For example, Grimm and Smith use entrepreneurial action to characterize how firms move to exploit new opportunities that rivals have yet to perceive. Schumpeter was perhaps the first to describe entrepreneurial action. He used the expression to depict the actions firms employ to break away from the everyday status quo competition in pursuit of entrepreneurial rents. Kirzner employed the idiom to clarify how markets resolve information problems and move toward equilibrium.