Reconceptualizing Necessity Entrepreneurship: A Contextualized Framework of Entrepreneurial Processes Under the Condition of Basic Needs

Abstract

Scholarly interest in necessity entrepreneurship has risen steadily over the last four decades, with much of the research in this area focused on distinguishing individuals who are pushed into entrepreneurship by negative factors such as unemployment, from those who are pulled into it by its attractiveness. Yet, although past research has extended knowledge considerably, the dichotomous framing commonly employed in studies in this realm has limited theoretical development, as it ignores important variation among necessity entrepreneurs and, hence, the processes by which they engage in entrepreneurship. In this paper, we seek to reconceptualize the necessity entrepreneurship construct by drawing on a motivational theory of necessity to predict how variation in founders' basic needs influences the entrepreneurial process, conditional on the level of their human capital endowments, the environmental context in which they are embedded, and the presence of supportive institutional levers. We conclude by discussing the implications of our study and the potential ways in which our theory can be tested and extended.

The influence of ecosystems on the entrepreneurship process: a comparison across developed and developing economies

“…It also helped to distinguish the Schumpeterian orientation per type of entrepreneurial activity (i.e. technology/innovative vs. non-technology/ innovative) (Dencker et al 2019). The third criterion related to diversity in context.…”

“…Distinguishing between Schumpeterian entrepreneurship and other business activities may, therefore, facilitate the differentiation between low-impact and high-impact entrepreneurship in terms of outcomes, such as employment, sales, innovation, and the wealth of the founders (Henrekson and Sanandaji 2019). By understanding the diversity inherent in entrepreneurship (Iversen et al 2007;Welter 2011;Dencker et al 2019) and capturing the notion of Schumpeterian entrepreneurship (Henrekson and Sanandaji 2019;Karlsson et al 2019), this research categorises entrepreneurship into either (a) non-Schumpeterian entrepreneurship or (b) Schumpeterian entrepreneurship. The first category (non-Schumpeterian entrepreneurship) is characterised by self-employment (individuals who do not generate employment and with outcomes that merely allow them to survive) and traditional entrepreneurs (individuals who generate lower impacts/outcomes).…”

Necessity entrepreneurship and industry choice in new firm creation

“…Although a general appreciation of necessity entrepreneurship and its outcomes is evident in the literature (cf. Caliendo & Kritikos, ; Dencker, Bacq, Gruber, & Haas, in press), a closer inspection of this work indicates that research has focused mostly on bottom‐of‐the‐pyramid individuals in the developing world (Brewer & Gibson, ). It would, however, be desirable to improve our knowledge of necessity entrepreneurship in developed countries—where necessity entrepreneurs often come from the ranks of the unemployed—because such findings would allow a clear comparison with the vast literature on opportunity entrepreneurship, and could reveal boundary conditions of existing theoretical insights.…”

“…Our focal independent variable is the founder's duration of unemployment , a commonly used empirical way of analyzing necessity entrepreneurship (cf. Dencker et al, in press). We measure duration of unemployment based on survey respondent's choices among nine unemployment categories that are measured in months: “less than 1,” “1 to 2,” “3 to 4,” “5 to 6,” “7 to 9,” “10 to 12,” “13 to 24,” “25 to 36,” and “more than 36.” These categories do not reflect a purely linear measure, and thus, following theory and convention, we created three dummy measures to capture short‐ (less than 13 months), medium‐ (13–24 months), and long‐term (greater than 24 months) unemployment.…”

“…Dencker, Gruber, & Shah, ), whereas those who have been unemployed for some period of time may discover an opportunity to exploit during their job search. In addition, individuals who have been unemployed for a long period of time may perceive that they are unhireable, and thus resort to self‐employment to fulfill their needs (Dencker et al, in press).…”