Hunting the Heffalump

Abstract

Reviews the major theoretical constructs devised for explaining the source of dynamic entrepreneurial performance in developing countries. Discusses the roles in terms of theories of entrepreneurial supply, which are constructed from either psychological or sociological elements. Provides a comparative evaluation of theoretical formulations in terms of the variables employed and the methodological approaches used. Evaluated are four psychological theories (of Joseph Schumpeter, David McClelland, Everett Hagen, and John Kunkel) and three sociological theories (of Max Weber, Thomas Cochran, and Frank Young). Sets out what each author regards as the defining qualities of the entrepreneur and the non-economic variables that control his appearance (supply), as well as the role played by social groups and the means by which individuals are directed into business pursuits. Theories may explain entrepreneurial supply in terms of need for achievement, of deviant or supernormal individuals, as representing society's modal personality, of society's incorporation of reactive subgroups, or as result of surrounding social structures. Critically evaluates the theories and discusses the entrepreneurial bottlenecks in developing countries. The mechanism by which persons with high need for achievement are directed into entrepreneurial careers is explained. Concludes that none of the psychological or sociological entrepreneurship theories achieves an acceptable level of empirical verification or can be rejected as demonstrably false. Almost all face a problem in explaining change in entrepreneurial performance: is it due to change in supply of entrepreneurial effort or improvement in economic environment (demand)? Concludes with a new model of entrepreneurial performance drawing on evidence contained in existing empirical studies of business performance in developing countries. In this model one exogenous fact is assumed: the psychological drive to maximize income. This reduces the entrepreneurial role to decision-making under uncertainty. Rejecting a binary conception that there is a presence or absence of the entrepreneur, proposes considering the 13 tasks and activities (rather than personal attributes), grouped as exchange relationships, political administration, management control, and technology. The social structure that supports and is enmeshed with traditional technology is explored. Evidence shows managerial and technological shortcomings are continuing impediments to entrepreneurial development rooted in the sociological variables on the supply side. Factors can be related to the status system, social structure, problems of role discontinuity and role incongruency. Concludes that various activities required of the industrial entrepreneur are hindered or reinforced by prior technological traditions and social structure factors. In modernizing economies, the crucial inputs are achieving and maintaining efficient production. (TNM)

Keywords: Exchange relationships, Startups, Developing countries, Economic development, Entrepreneurial environment, Motivation, Supply & demand, Entrepreneurial orientation, Startup rates, Background (biographical)