Individuals and Opportunities: A resource-based and institutional view of entrepreneurship

Abstract

Entrepreneurial activity holds many promises for economic well-being. Some of the most well-documented promises are economic growth and job creation. Considering entrepreneurship’s potential in creating jobs and economic growth, one would think that it is an ideal strategy to use in those places that need it the most; in the economically depleted regions of the world. The answer is yes and no. It is an ideal strategy because a healthy entrepreneurial base has far-reaching effects on the economy and society. It is not an ideal strategy if the human and institutional resource base is weak. Since entrepreneurship is a socially constructed phenomenon, it will only be as robust as the people practicing it and the institutional environment in which it is enacted. This paper has two goals. The first is to examine human capabilities and the institutional environment as a set of resources giving rise to different processes and forms of entrepreneurship. The second goal is to consider how novel (Schumpeterian) and non-novel (Kirznerian) forms of entrepreneurship are affected by resources on these levels. Two theoretical platforms aid in this consideration: Edith Penrose’s resource-based theory of firm growth and Douglass North’s Theory of Institutions and Institutional Change. Penrose’s theory supports the notion of the development of individual resources since the entrepreneur functions as a firm and is engaging in an individual process and not a collective one. His personal resources are anchored in his psychological traits and capability set. Douglass North and his Theory of Institutions and Institutional Change provide us with the missing context within which the entrepreneur acts. North sees institutions acting as societal rule or norm setters, thereby either permitting or constricting entrepreneurial economic action through the availability of resources in the environment. The point of departure for this paper is that it begins to conceptualize a research framework to observe the entrepreneurial process from the standpoint of individual and institutional resources. The implication of this framework is that it can act as a resource assessment structure which could reveal a region’s ability to support different forms of entrepreneurship. Regarding my future empirical research, it should provide more information as to what resources are used by non-novel entrepreneurs in what we deem as a resource-poor, post-socialist periphery.