Management

Theory and Models for International Entrepreneurship

Theories are explanations and predictions of how something, somebody and/or an environment will or will not work, react and operate. Models are illustrations of these ideas.

These theories and models are important because:

1. As they comprise the work and ideas of those who have knowledge and understanding of the field/discipline, they should be considered and evaluated for accuracy, relevance and currency
2. They give a very useful framework for any discussion
3. Accepting, rejecting or modifying these is how our knowledge progresses – by evaluating these theories and models we get closer to the truth
4. Masters study is based upon the application and evaluation of theory and models

To each of the keywords below simply add the term ‘entrepreneurs’ to get some better search results. After briefly explaining them, consider which of the below could be relevant to your assignment, why and how:

1. Forcefield analysis [search: ‘forcefield analysis entrepreneurs’]
2. Learning theories [search: ‘learning theories entrepreneurs’]
3. Gender role theory
4. Culture theories – Hofstede?
5. Marketing theories
6. External/Market environment theories – PESTLE/5 Forces/Ansoff?
7. Personality/trait theories
8. Ethics theory – business and social
9. Risk management theory
10. ‘Liability of newness’
11. Barriers to entry
12. Human Capital
13. Social Capital
14. Reflective practice/theory
15. Mentoring theory v coaching theory
16. Product lifecycle
17. Social network theory/guanxi/entrepreneurial ecosystems
18. Innovation theory
19. Strategic positioning
20. Economies of Scale
21. Miles and Snow business strategy
22. Intersectionality
23. Customer profiling
24. Business Model Canvas

Can you adapt and/or modify these to suit your discussion?

A theory is an explanation and or a prediction. It is simply what someone does when they seek to offer information about how something might work. Like Hofstede’s theory for example. Or Maslow’s theory. A model is just an drawing/illustration of that theory. When reading about a theory or a model, perhaps you can consider and discuss:

• What issue does it seek to explain?

1. What are the principles on which it is based?
2. What are the strengths of this theory or model for understanding my topic:

• What new explanations/insights does it offer?
• What contribution does it make to understanding of issue?

3. What are key criticisms of theory or model:

• What are its limitations and/or gaps?

4. What other theory or model may be important in understanding this issue? Is this theory or model more, less or equally important in improving understanding of issue?
5. SO WHAT?

• In what way is this theory or model relevant to my assignment?
• What are the implications of this theory or model for practice?
• How can it be applied usefully to enhance practice?

Example – Writing critically about theory

A number of theories have attempted to explain how attitude can influence consumer behaviour. The theory of reasoned action (TRA) offers useful explanations of how consumers’ beliefs about the internet form their general attitudes towards the Internet, which may consequently influence their intention to use the internet as a shopping medium (Vijayasarathy 2004)

The theory of reasoned action (TRA) was developed in the field of social psychology by Adzen & Fishbein (1980) and proposes that intentions to behave in a certain way depends on the individual’s attitude towards that behaviour and society’s norms and expectations. These norms refers to perceived expectations from others in relation to that behaviour and the person’s motivation to comply with those expectations (Schiffman & Kanuk 2004). In other, words, the theory looks at how the expectations of others and of society affect how I may behave.

According to the TRA, individuals consciously evaluate the consequences of alternative behaviours and choose the one that leads to the most desirable outcome (Peter & Olson 1994). Thus, individuals will have favourable attitudes towards online shopping if they believe that it will bring positive results – for example saving time. So, by applying this theory, consumer behaviour, such as buying a product, can be predicted by people’s attitudes towards that behaviour and their beliefs of how other people perceive their behaviour and the degree to which they care about what others think.

The TRA model provides a link between attitude and behaviour and has been extensively used to predict online consumer behaviour (Pavlou 2003). However, a major limitation of TRA is that it assumes that all consumer’s behaviour is under their own control and it ignores personal and situational factors such as financial or time constraints – and it also does not consider what products or services customers are looking to buy – a young person buying training shoes will differ from a mother buying clothes for their children (Brown & Stayman 1992, Olson & Zanna 1993).

However, it is still a useful theory with which to try and understand how consumers behave, as it does highlight some important factors that drive consumers’ action.

Another example

‘Liability of Newness’ is a theory put forward by Stinchcombe (2012). Stinchcombe  argues that new businesses generally suffer from the low  average  quality  of  performance  because  they  initially  lack  experience.  If they survive, their experience learning curve increases with time, thus fostering the development of significant survival skills, such as gaining access to support network, better finance options, increased customer trust and better marketing skills. This is a useful concept for the new entrepreneur to consider, as being ‘new’ into the business arena will mean they will need to learn and learn very quickly.

Although a useful theory, Stinchcombe (2012) seems not to consider the type of industry the entrepreneur may enter into. Some industries that are very young result in almost all entrepreneurs being ‘new’ and perhaps facing the same challenges as each other. Also, Stinchcombe (2012) does not consider culture: in India, for example, the extensive family support that is often available to the new entrepreneur may mean that, newness’ is not such an issue. And in China, for example, the concept of ‘guanxi’ means that if you have right support network, being ‘new’ into a business area may not be such an issue.

Moving on the debate, 1986, Aldrich and Auster formulated the “liability of smallness” theory. They said that it mattered less if the entrepreneur was ‘new’ and that the real problems came from the new entrepreneur having a ‘small’ business. As the theory of ‘economies of scale’ shows, small businesses will always struggle more and have higher variable costs.

So, although the ‘liability of newness’ is an useful idea and one that new entrepreneurs need to be aware of, this liability may differ with culture; and perhaps the ‘liability of smallness’ is also an issue they need to consider.