Contextualizing Entrepreneurship-Conceptual Challenges and Ways Forward

By Welter, Friederike | Entrepreneurship: Theory and Practice, January 2011 | Go to article overview

Contextualizing Entrepreneurship-Conceptual Challenges and Ways Forward


Welter, Friederike, Entrepreneurship: Theory and Practice


This paper sets out to explore contexts for entrepreneurship, illustrating how a contextualized view of entrepreneurship contributes to our understanding of the phenomenon. There is growing recognition in entrepreneurship research that economic behavior can be better understood within its historical, temporal, institutional, spatial, and social contexts, as these contexts provide individuals with opportunities and set boundaries for their actions. Context can be an asset and a liability for the nature and extent of entrepreneurship, but entrepreneurship can also impact contexts. The paper argues that context is important for understanding when, how, and why entrepreneurship happens and who becomes involved. Exploring the multiplicity of contexts and their impact on entrepreneurship, it identifies challenges researchers face in contextualizing entrepreneurship theory and offers possible ways forward.

The Starting Point: Why Contextualize Entrepreneurship?

How can a contextualized view on entrepreneurship add to our knowledge of entrepreneurship? The call for considering context in entrepreneurship research is not new; and there is growing recognition that economic behavior can be better understood within its context(s) (Low & MacMillan, 1988), be that the social (Granovetter, 1985), spatial (Katz & Steyaert, 2004) or institutional (Polanyi, 1957) and societal (1) contexts (Weber, 1984). Gartner (1995, p. 70) prompts entrepreneurship research to acknowledge the context in which entrepreneurship takes place, as observers "have a tendency to underestimate the influence of external factors and overestimate the influence of internal or personal factors when making judgements about the behaviour of other individuals," while Baumol (1990, p. 898) draws attention to the fact that the rules for entrepreneurship "do change dramatically from one time and place to another."

Context simultaneously provides individuals with entrepreneurial opportunities and sets boundaries for their actions; in other words, individuals may experience it as asset and liability. For example, in Uzbekistan the specific local environment, together with a resurgence of traditional and Islamic values in the post-Soviet period, is crucial in enabling or constraining female entrepreneurs. There are examples where representatives of local governing councils (mahallas) assist women in the registration process, but also instances where local traditions constrain the activities of women entrepreneurs (Welter & Smallbone, 2008). This can be illustrated by this young woman in rural Uzbekistan who had to go into business after her father's death to earn income for her family: She took up gold embroidery and sewing. Were we to consider only the entrepreneur, we would see a young woman who set up business in a low-growth sector, which would confirm well-known results from previous research on female entrepreneurs in market economies, and which probably would be attributed to a lack of access to resources from her side. If we take context into account, this changes: In rural post Soviet Uzbekistan young women and girls are supposed to stay home until they are married. Therefore, the young woman learned a traditional craft because this was one of the few vocational training opportunities available to her; and this activity could be conducted from home. Here, the institutional and social contexts, in the form of local traditions and norms that determine gender roles within families, help explain why female entrepreneurs start in specific, oftentimes low-growth and low-income, industries.

Deficiencies in the institutional context also can create opportunities when entrepreneurs exploit gaps left by new regulations and rules. Again, this is particularly evident in post-Soviet countries undergoing fundamental political and economic changes. For example, in the Ukraine, a combination of rapid and frequent changes in laws and overly excessive business regulations created a demand for consultants who could solve particular operational problems, such as taxation or accounting issues, as well as a demand for assistance in obtaining licences, permits, and planning permissions required for starting or expanding a business, including contacts and connections to administrations. …

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