Entrepreneurship and Poverty Reduction: Applying I-O Psychology to Microbusiness and Entrepreneurship in Developing Countries

More than a billion people, the bottom billion of the world (Collier, 2007), live in extreme poverty. Both scholars and policymakers have proposed that entrepreneurship is an effective means for economic development and poverty alleviation in impoverished and lower-income regions of the world (Mead & Liedholm, 1998). Entrepreneurship can be defined as the identification and exploitation of business opportunities to create goods or services (Shane & Venkataraman, 2000). In this sense, entrepreneurship is a broad term, including different types of entrepreneurship, such as conventional for-profit entrepreneurship (i.e., starting new ventures), social entrepreneurship (i.e., identifying and exploiting opportunities to address social problems), or corporate entrepreneurship (i.e., entrepreneurship within established organizations) (Austin, Stevenson, & Wei-Skillern, 2006; Dacin, Dacin, & Matear, 2010; Phan, Wright, Ucbasaran, & Tan, 2009). Although it is fair to argue that each of the different types of entrepreneurship play an important role in the context of poverty reduction, we concentrate on conventional for-profit entrepreneurship in this chapter because this has been the main focus of research on entrepreneur ship in the domain of I-O psychology. The core of conventional for-profit entrepreneurship is an individual or a team of individuals who identify and enact an opportunity to create a new venture (Baron, 2007a; Gartner, 1985). We refer to this type of entrepreneurship in the remainder of this chapter when we discuss the role of entrepreneurship for poverty reduction and the means to promote entrepreneurship in developing countries. ¹ In this chapter, we provide an overview of factors that have been linked to successful entrepreneurship. We integrate the factors and develop a theoretical model of entrepreneurial success in developing countries (see Figure 13.1). This model argues that actions by the individual entrepreneur are central for entrepreneurial success (see also Frese, 2009; McMullen & Shepherd, 2006). Other factors, such as institutions and resources, have only indirect or moderating effects on entrepreneurial success. Figure 13.1 A theoretical model of entrepreneurial success in developing countries integrating individual and contextual factor https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9780203069264/48977a2e-4dc3-4810-9d2f-ac1032097f37/content/fig13_1_B.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/>