Balancing Agency with Structure: Institutional Entrepreneurship as an Embedded Discovery Process

Abstract

While mainstream research has treated entrepreneurship as a highly individualised and agentic process, institutional researchers contend that entrepreneurship operates within a greater embedded setting. Various researchers have appealed to Giddens’ dual structure to explain an entrepreneur’s embedded-agency. According to Giddens’ dual structure, this embedded-agency consists of the rules or norms of a social group in which these rules constrain and enable an entrepreneur’s resources. Yet, despite Giddens’ contributions, Giddens is criticised for conflating the rules of this embedded setting with an entrepreneur’s resources in which neither affects the other in any significant way. By drawing on concepts of the Austrian entrepreneur and embeddedness, a theory of institutional entrepreneurship is developed to address this conflation problem. This institutional entrepreneurship offers an embedded-agency to explain how an entrepreneur can create, maintain and disrupt their embedded social settings. This embedded-agency addresses Giddens’ conflation problem and broadens the agent-centric focus of institutional entrepreneurship research.

Keywords

Institutional entrepreneurship agency-structure embeddedness institutional change Austrian entrepreneurship

Introduction

While entrepreneurship and institutional entrepreneurship have received much interest among scholars and practitioners, each, however, focuses on an aspect of entrepreneurship that is ignored by the other. Entrepreneurship research attributes the discovery of market opportunities to a highly individualised and agentic process. This discovery emphasises an entrepreneur’s vision and their ability to deploy resources in realising this vision (Alvarez & Barney, 2007). The popular business press has reinforced this agentic view in which the success of Tesla is attributed to Elon Musk’s ability to raise external capital to supporting his green vision. In contrast, institutional entrepreneurship research argues that entrepreneurs cannot do it alone, and that an entrepreneur’s success depends on their embeddedness to a greater institutional setting (Ahlstrom & Bruton, 2010; Bruton et al., 2010; Garud et al., 2007; Sarason et al., 2006). This embeddedness involves a conformance to institutionalised norms that govern an entrepreneur’s discovery of market opportunities. For instance, entry into foreign markets, especially China, requires that entrepreneurs develop products and services that conform to the regulations, customs and general norms and traditions of their market setting.

Giddens’ (1984) concept of a ‘dual structure’ offers a unique perspective to bridge the agentic and embedded aspects of entrepreneurship (Bruton et al., 2010; Jack & Anderson, 2002; Mole & Mole, 2010; Sarason et al., 2006). Giddens’ (1984) dual structure consists of a set of rules and resources that are recursively related. Rules have been defined by generalisable procedures and practices that guide individuals to conform to the normative expectations or norms of a social setting (Braithwaite, 2006; Lizardo, 2010). According to institutional explanations, these rules increase a firm’s legitimacy and acceptance by members of its social group. For instance, an entrepreneurial firm that ascribes to social justice causes, like Nike, is likely to gain the acceptance of disenfranchised minority groups. In addition, a dual structure consists of resources or ‘material objects’, involving a firm’s human and physical capital (Braithwaite, 2006). For instance, according to Austrian economic explanations, these resources consist of a firm’s factors of productions in which an entrepreneur’s subjective assessments of their productive uses impact the discovery of market opportunities (Foss et al., 2008; Klein, 2008). While these characterisations of rules and resources reflect different aspects of institutional entrepreneurship and entrepreneurship research, Giddens (1984) argues that the rules and resources of a dual structure are mutually constitutive. He argues that rules provide a generalisable procedure that guides entrepreneurs to enact or instantiate resources that reproduce the rules of their dual structure. Yet, because of the ‘generalised’ nature of rules, an entrepreneur has considerable discretion to interpret and apply these rules in ways consistent with their subjective experiences. This subjectivity introduces resources that can reproduce and disrupt the prevailing rules of a dual structure.

While Giddens’ (1984) dual structure plays an important role in bridging the agentic and embedded aspects of entrepreneurship, few institutional entrepreneurship and entrepreneurship researchers have recognised (Bruton et al., 2010; Mole & Mole, 2010), let alone addressed, Giddens’ conflation problem (Douhan & Henrekson, 2010; Henrekson & Sanandaji, 2011; Jack & Anderson, 2002; Sarason et al., 2006). This conflation problem refers to a situation where the rules and resources of a dual structure are so closely related that one cannot determine the influence of one over that of the other (Archer, 1982; Callinicos, 1985; Whittington, 1992). For instance, critics argue that rules are applied through an agent’s subjective experiences, and thus every resource can be reasoned on subjective grounds to be consistent with the rules of a dual structure (Archer, 1982; Callinicos, 1985; Whittington, 1992). This subjective rationalisation of rules undermines the very duality that Giddens (1984) sought to explain (see also Mole & Mole 2010). Institutional entrepreneurship and entrepreneurship research have avoided this conflation problem because each focused on only one aspect of this duality. By avoiding this conflation problem, institutional entrepreneurship and entrepreneurship research cannot explain an embedded-agency in which an institutional entrepreneur (IE) can shape and be shaped by their embedded settings. This shortcoming motivates the following research question: how can a subjective entrepreneur create, maintain and disrupt their embedded social settings when neither the embedded structure nor the entrepreneur can shape the other in any significant way (see also Archer, 1982; Mole & Mole, 2010)?

To address this research question, the goal of this study is to draw on the subjective tenets of Austrian economics (Hayek, 1945, 1967, 1978; Kirzner, 1997, 2000) and Granovetter’s (1985) concept of embeddedness to develop a theoretical model of institutional entrepreneurship that addresses Giddens’ conflation problem. This model introduces an embedded-agency in which its rules and resources are recursively related to each other, but yet each has an existence separate from the other. With this embedded-agency, an IE’s subjective efforts to create, maintain and disrupt their embedded social settings are explained as a product and cause of an IE’s opportunity discovery process. A basic contribution of this discovery process is that it not only addresses Giddens’ conflation problem, but it also offers an embedded-agency that cannot be explained by prevailing institutional entrepreneurship and entrepreneurship approaches.

To organise the development of this study’s theoretical model, we outline in greater detail Giddens’ (1984) dual structure and his problem of conflation. The subjective and alert tenets of Austrian economics (Hayek, 1945, 1967, 1978; Kirzner, 1997, 2000) and the recursive properties of Granovetter’s (1985) concept of embeddedness are then used to develop this study’s proposed dual structure. By drawing on these developments, the recursive, yet separated, properties of this dual structure are explained. This dual structure is then used to explain how an IE’s discovery process creates, maintains and disrupts their embedded social settings. To advance future research, propositions relating this discovery process to each of these institutional processes are outlined. This study concludes with a discussion of its contributions, limitations and future research.

Conceptual Foundations

Giddens’ (1984) Theory of Structuration

Giddens’ (1984) theory of structuration has been a seminal influence to understanding the recursive exchanges between an entrepreneur’s agency and their embedded social settings (Jack & Anderson, 2002; Mole & Mole, 2010; Sarason et al., 2006). In his theory of structuration, Giddens (1984) develops a concept of a ‘dual structure’ in which structure and agency are mutually constitutive. A dual structure’s existence stems from the actions and interactions of individuals that make up this structure. This mutually constitutive property underscores a unique aspect of Giddens’ dual structure because it conveys an institutional realm that frames individuals into realising an institutional order, while, at the same time, it does not determine an individual’s agency (see also Emirbayer & Mische, 1998; Smets et al., 2012). This yields a duality in which structure is ‘both a medium and outcome of the practices they recursively organize’ (Giddens, 1984, p. 25).

Subjective Foundations of Dual Structure

Subjectivism is a basic starting point for understanding Giddens’ duality (Giddens, 1984). Subjectivism entails an agency that involves actions that favour an individual’s interests and/or ‘the “motivation of biases” that is built into institutions’ (Giddens, 1984, p. 15). Subjective action, however, is not focused on those ‘heroic’ efforts that shape institutions in accordance with an individual’s self-interests. Subjectivity, instead, refers to a broader or more basic concept of ‘power’ that involves a ‘capability of doing those things in the first place’ (Giddens, 1984, p. 9). This power is derived from an agent’s subjective ‘knowledge’ in which ‘knowledgeable agents’ can interpret and act on their personal experiences. Yet, because such power is limited by an individual’s subjective experiences, subjective agents cannot fully anticipate the consequences of their actions (Giddens, 1984). Hence, Giddens subscribes to a subjective agency in which knowledgeable actors have the power to shape institutions, but not in ways of their choosing (Giddens, 1984, p. xxi).

Dual Structure’s Rules and Resources

With this subjectivity, Giddens (1984) argues that human agency is deeply intertwined with the ‘rules and resources’ of a dual structure. A dual structure’s ‘rules’ refer to ‘techniques or generalizable procedures applied in the enactment/reproduction of social practices’ (Giddens, 1984, p. 21). While Giddens’ (1984) definition of rules has been criticised for its lack of conceptual clarity (Lizardo, 2010; Sewell, 1992), rules are distinguished by their ‘generalised’ quality—a quality in which rules can be applied to a variety of social circumstances (Sewell, 1992). For instance, rules can involve the adoption of diversity and inclusion practices in which these practices are sufficiently general that they can be applied to the hiring practices of small start-ups to university organisations. More broadly speaking, this generality is important to Giddens’ account of subjective agency because agents or firms with different knowledge experiences can apply these generalised rules in ways that address the agent’s/firm’s specific operational and situational challenges (Giddens, 1984, p. 22). This application of rules occurs through a subjective agent’s resources (Douhan & Henrekson, 2010; Giddens, 1984). Resources refer to material objects, consisting of both human and inhuman capital, ‘that can be used to enhance or maintain power’ (Sewell, 1992, p. 9). Resources—like rules—also exhibit a generalised or heterogeneous quality in which the same set of resources can be applied to a variety of social circumstances (Feldman, 2004; Ng, 2005; Sewell, 1992; Smets et al., 2012). For instance, resources, like basic scientific advances in biotechnology—in particular CRISPR technologies—have a wide range of commercial applications involving the development of pest-resistant agricultural products to therapeutic treatments of cancer. This generality offers subjective agents not only the power to use resources to accomplish their desired ends, like making a profit, but the generalised or heterogeneous nature of these resources enables the subjective agent to deploy resources in ways consistent with their ‘generalised’ interpretation of rules. With these distinctions, the rules and resources of Giddens’ dual structure are deeply intertwined with his subjective account of human agency because the practice of applying rules to an agent’s resources can only arise through an actor’s subjective interpretations.

Creation, Modification and Destabilisation of Institutions

As a dual structure’s rules are closely intertwined with a subjective agent’s resources, Giddens (1984) argues that the subjective agent can reproduce and modify these rules. The subjective agent reproduces the rules of their dual structure because the subjective agent faces a need for ‘ontological security’ (Giddens, 1984, p. 50). This ontological security involves ‘habitual or habitus’ (Bourdieu, 1977) like behaviours in which the subjective agent relies on ‘predictable’ routines to replicate their ‘day-to-day’ resources (Bourdieu, 1977; Giddens, 1984). The application of rules introduces routine behaviours that address this need for ‘ontological security’ (see also Bourdieu, 1977). In particular, because an agent’s resources are an application or an ‘instantiation’ of rules, this application of rules introduces predictable behaviours that not only address an individual’s need for ontological security, but it also reproduces a dual structure’s rules (Giddens, 1984).

For instance, although CRISPR technologies have varied commercial applications, the scientific community has general rules or routines that specify the appropriate application of these technologies (Caplan et al., 2015). These generalised rules involve moral, ethical and regulatory procedures that prohibit the application of CRISPR to the engineering of human embryos (Hirsch et al., 2019). These rules introduce a predictability to a firm’s research and development (R&D) investments by investing in only those CRISPR technologies or resources that are in the non-human engineering domains. This predictability offers a source of ontological security in which scientists’ application of CRISPR into non-human domains circumvents the need to address the difficult ethical debates of human engineering. By engaging in such applications, scientists replicate those resources (i.e., non-human domain applications of CRISPR) that reproduce the generalised rules of their scientific setting.

Yet, while the replication of the rules of this dual structure satisfies an individual’s need for ontological security, Giddens also argues that a subjective agent can develop resources that defy the existing rules of this structure. Subjectivity supports multiple or ‘generalised’ interpretations of rules that empower the actor to interpret and apply rules in ways the actor deems fit (see also Emirbayer & Mische, 1998; Ng, 2005; Sewell, 1992; Smets et al., 2012). These interpretations empower the actor to develop new resources (Giddens, 1984; see also Sewell, 1992), which introduce new ‘generalised procedures’ that modify a dual structure’s prevailing rules (Giddens, 1984).

For instance, in a study, involving an international law firm, conducted by Smet et al. (2012), they found that this newly founded firm was governed by two sets of generalised rules. The German lawyers of this firm had a commitment to enact a fiduciary logic of professionalism. This commitment to professionalism focused on ‘serving justice in a higher and more disinterested sense’ (Smets et al., 2012, p. 885). This commitment resulted in a judicial training in which German lawyers were focused on ex post evaluations of past legal cases and a commitment to ensure past precedents were correctly applied to current cases. In contrast, the English lawyers of the firm were committed to a doctrine of freedom of contract. This doctrine operated on the principle that lawyers should use the law to their client’s interests, and that their client’s welfare is the primary concern. The challenge with these unique sets of generalised rules or doctrines is that German lawyers were trained to think like judges to raise issues on the enforceability of English contract law. English lawyers whose emphasis on resolving contract disputes considered the German lawyer’s enforceability concerns as unhelpful in meeting clients’ needs (Smets et al., 2012). Yet, to ‘get the deal done’, each group’s respective rule systems were integrated to create a hybrid practice that forced each group to recognise the shortcomings of the other’s legal doctrine (Smets et al., 2012). The application of this hybrid practice resulted in offering an integrated legal service—resources—whose hybrid legal practices introduced a new set of rules that altered the prevailing rules or conventions of the legal profession.

The Problem of Conflation

While these subjective accounts of human agency enable knowledgeable agents to reproduce and modify the rules and resources of their dual structure, Giddens’ dual structure suffers from a serious problem of conflation (Archer, 1982; Callinicos, 1985; Mole & Mole, 2010; Whittington, 1992). Emirbayer and Mische (1998) describe:

Foremost among these is a tendency toward what Margaret Archer terms the ‘fallacy of central conflation’: the tendency to see structure as so closely intertwined with every aspect of practice that ‘the constituent components [of structure and agency] cannot be examined separately... In the absence of any degree of autonomy, it becomes impossible to examine their interplay’. (p. 1003)

Critics contend that this conflation problem is rooted in Giddens’ ‘excessively subjective’ (Whittington, 1992, p. 697) account of human agency in which the generalised rules can be rationalised in accordance to a subjective agent’s resources (Callinicos, 1985; Sewell, 1992). This yields a subjective agency in which structure will cease to exist because agents are not constrained or enabled in any significant way by the rules of their dual structure (Archer, 1982). The recursive exchanges in Giddens’ dual structure cannot be explained as a ‘medium and outcome’ of an agent’s subjective actions because the rules of this structure do not have an existence that affects nor can be affected by an agent’s resources (Archer, 1982; Mole & Mole, 2010).

Subjective and Alert Tenets of Austrian Economics

To develop a subjective account of human agency that resolves Giddens’ conflation problem, the subjective and alert tenets of Austrian economics (Kirzner, 1997, 2000) offer an approach, where the rules of an institutional setting have a shared social existence, that is separate from an entrepreneur’s resources (Hayek, 1945, 1978; O’Driscoll & Rizzo, 1985). This separation starts with, first, understanding the subjectivism found in Austrian economics. This subjectivism is rooted in an individualised beliefs about ‘how the world works’, where ‘agents will typically hold different mental constructions (theories, ideologies, images, codes, cultures,…) for making sense of reality’ (Foss, 1997, p. 176). This subjectivity underscores a basic

pre-supposition that the contents of the human mind and hence decision making are not rigidly determined by external events. Subjectivism makes room for the creativity and autonomy of choice. (O’Driscoll & Rizzo, 1985, p. 1)

An entrepreneur’s subjective view of ‘how the world works’ is created (see also Alvarez & Barney, 2007) through an entrepreneur’s resources. Resources refer to a firm’s factors of production, consisting of human and inhuman capital, that can be combined in different ways to yield a variety of valued uses (Denrell et al., 2003; Foss et al., 2008; Ng, 2005; Penrose, 1959; Sewell, 1992). Like Giddens’ concept of resources, resources exhibit a generalised or heterogeneous quality in which resources have multiple uses or commercial applications (Denrell et al., 2003; Foss et al., 2008; Ng, 2005; Penrose, 1959; Sewell, 1992). An important distinction from Giddens’ concept of resources is the discovery of a resource’s varied uses is driven by an entrepreneur’s subjective knowledge. This subjectivity is distinctly absent in Giddens’ characterisation of resources (Lizardo, 2010).

While subjective knowledge has been an important basis for an entrepreneur’s opportunity discovery process (Foss et al., 2008; Klein, 2008; Shane & Venkataraman, 2000), an entrepreneur’s subjective knowledge is vulnerable to a ‘subjective ignorance or error’ (Hayek, 1945; Kirzner, 1997, 2000; Mole & Mole, 2010; O’Driscoll & Rizzo, 1985). Since heterogeneous resources can be combined in a multitude of ways (Denrell et al., 2003; Foss et al., 2008; Ng, 2005; Penrose, 1959; Sewell, 1992), limits with an entrepreneur’s subjective knowledge render the entrepreneur unable to know all those combinations of resources that will reveal valued uses (Denrell et al., 2003; Ng, 2005). Because of this ignorance, an entrepreneur’s resources will fail more often than they will succeed (Hayek, 1978; Ng, 2005). Hence, this ‘subjective ignorance or error’ introduces a discovery process in which ‘non-equilibrium opportunities’ (Kirzner, 1997, 2000; Shane & Venkataraman, 2000) are exploited by discovering those resources that would overcome the failures or ignorance of others (Kirzner, 1997, 2000; Ng, 2005; O’Driscoll & Rizzo, 1985).

Alertness

An entrepreneur’s subjective ignorance or error forms the basis of their alertness (Kirzner, 1997, 2000). Alertness (see also Henrekson & Sanandaji, 2011; Pacheco et al., 2010) involves seeking those undiscovered opportunities that ‘push back the boundaries of subjective ignorance’ (Kirzner, 2000, p. 5). This alertness does not pertain to actions consistent with an entrepreneur’s experiences, like Giddens’ need for ontological security (see also Bourdieu, 1977). Alertness, in contrast, seeks those qualities of ‘vision, boldness and creativity’ (Kirzner, 2000, p. 247) to develop resources that overcome the subjective ignorance or failures of their rivals (Kirzner, 1997, 2000; O’Driscoll & Rizzo, 1985). As there have been increasing calls to examine rivals’ failed experiences as a source of opportunity (Baum & Ingram, 1998; Ingram & Baum, 1997; Hardy & Maguire, 2008; Holcomb et al., 2009; Kim & Miner, 2007; Politis, 2005), the IE is defined by an alert individual who draws on their own subjective experiences as well as rivals’ failed experiences into discovering opportunities—resources—that create, maintain and disrupt the rules of an embedded social setting. This characterisation of the IE is consistent with institutional entrepreneurship research that finds that the IE discovers opportunities by creating, maintaining and disrupting the rules of their institutional settings (Ahlstrom & Burton, 2010; Bruton et al., 2010; Henrekson & Sanandaji, 2011).

Embeddedness

Since the IE involves a discovery process that is inherently relational (Hayek, 1945, 1978; Jack & Anderson, 2002; O’Driscoll & Rizzo, 1985; Sarason et al. 2006), Granovetter’s (1985) concept of embeddedness offers insights to understanding the relational properties of an IE’s discovery process. According to Granovetter (1985), embeddedness is defined by a recursive exchange, where close, frequent and reciprocal social exchanges ‘constrain’ as much as they ‘enable’ opportunities for entrepreneurial action (see also Jack & Anderson, 2002; Sarason et al. 2006; Upson et al., 2017). For instance, institutional researchers have argued that close social exchanges place normative pressures on individuals to conform to the rules of their institutional setting (DiMaggio & Powell, 1983; Uzzi, 1997) and promote a shared social reality (DiMaggio & Powell, 1983; Uzzi, 1997). Granovetter (1985) and others(Garud et al., 2007; Hansen, 1999; Jack & Anderson, 2002; Sarason et al., 2006; Upson et al., 2017) have argued that embedded relationships can also enable individual action. For instance, institutional change studies find that rules offer a social capital that enables the IE to discover resources that alter the prevailing rules of their embedded setting (Emirbayer & Mische, 1998; Smets et al., 2012).

Concept of Embeddedness as a Dual Structure

To elaborate on the dual properties of this embedded-agency, this study draws on the recursive exchanges described in Giddens’ (1984) dual structure. Specifically, while institutional entrepreneurship and entrepreneurship research have appealed to an embedded explanation of Giddens’ dual structure (Bruton et al., 2010; Jack & Anderson, 2002; Mole & Mole, 2010; Sarason et al., 2006), few have explained how this embeddedness constrains and enables an entrepreneur’s actions (Mole & Mole, 2010; Pacheco et al., 2010). This study appeals to three embedded processes to explain this duality, and they involve: (a) the mutual identification (Granovetter, 1985; Uzzi, 1997), (b) the transfer of complex knowledge (Hansen, 1999; Uzzi, 1997) and (c) the reciprocal exchanges among rival members (Granovetter, 1985; Uzzi, 1997). Each of these embedded processes is elaborated:

First, since institutionally embedded processes are commonly described in competitive terms (DiMaggio & Powell, 1983; Ng et al., 2009; Porac et al., 2011), this embedded process involves a ‘mutual identification’ of ‘rivals’. Competitive identification research finds that rivals are ‘mutually identified’ by individuals who compete on a similar set of competitive attributes or resources (Ng et al., 2009; Porac et al., 2011). For instance, in a study on Scottish knitwear industry conducted by Porac et al. (2011), knitwear producers developed close and intimate exchanges that promoted a common group identity. This common identity was founded on producers’ consensus that investments in specialised crafting skills and fully fashioned knitting machines were essential to developing the group’s identity of being the ‘best in the world at fully fashioned cashmere knitwear’ (Porac et al., 2011, p. 652). Hence, since embeddedness involves exchanges with members who share a common social reality (Granovetter, 1985), the close and frequent interactions of an embedded social setting offer a mutual identification in which the IE identifies with rivals who compete on a common set of resources (Ng et al., 2009; Porac et al., 2011).

Second, a consequence of this mutual identification is that embeddedness promotes a transfer of a ‘complex’ knowledge of rivals’ resources. According to Hansen (1999), complex knowledge is defined by ‘the extent to which knowledge to be transferred is independent or is an element of a set of interdependent components’ (p. 87). Since heterogeneous resources can be combined in a multitude of ways (Denrell et al., 2003; Foss et al., 2008; Ng, 2005; Penrose, 1959), resources exhibit a complex knowledge that is difficult to articulate and codify because it requires knowledge of the resource’s various possible synergistic relationships and uses (Denrell et al., 2003; Ng, 2005). Hansen (1999), however, argues and shows that embeddedness can promote a transfer of this complex knowledge because close and repeated exchanges offer ‘multiple opportunities’ for their assimilation (see also Holcomb et al., 2009). For instance, the fierce rivalries, between Steve Jobs of Apple and Bill Gates of Microsoft, involved frequent technology exchanges that exposed each firm to the technical competencies or resources of the other. These frequent exchanges involved an interdependence in which Apple relied on Microsoft’s development of Office Applications (Thubron, 2020), while Microsoft relied on Apple’s expertise in designing user-friendly interfaces (Domanska, 2019). These frequent exchanges promoted a transfer of complex knowledge in which each firm integrated their expertise into the other’s respective operating systems. An IE who engages in these close and repeated exchanges promotes a transfer of complex knowledge because these repeated exchanges offer multiple opportunities for the IE to learn how their rivals’ resources can be combined with their own.

Through this complex transfer of knowledge, embeddedness introduces a ‘reciprocal’ (Granovetter, 1985; Uzzi, 1997) exchange that mutually embeds an IE’s knowledge of their resources with those of their rivals. This reciprocal process involves an alertness to discover opportunities that overcome rivals’ subjective ignorance or failure. Specifically, through the mutual identification of rivals and the complex transfer of knowledge, the IE gains a deep and intimate understanding of their rivals’ resources (i.e., Apple vs. Microsoft). Yet, since rivals’ resources are the outcomes of their subjective experiences, these resources are vulnerable to rivals’ subjective ignorance. This subjective ignorance offers alert opportunities for the IE to discover those resources that overcome their rivals’ failures (Kirzner, 1997, 2000; Ng, 2005; O’Driscoll & Rizzo, 1985). Yet, since an IE’s resources are also the products of their subjective experiences, an IE’s resources are also subject to its own subjective ignorance. This ignorance creates alert opportunities for rivals to develop resources that overcome an IE’s failures (Ng, 2005; O’Driscoll & Rizzo, 1985). As a result, the IE and rivals engage in a reciprocal process that increasingly embeds an IE’s subjective experiences with their rivals’ subjective experience to develop a shared understanding of each other’s failed resources. For instance, Thomas Edison’s invention of the light bulb was the result of overcoming the failed attempts of his predecessors. By learning from the failures of his past inventors or rivals (i.e., Edward Sheppard, Global and Sprengel), Edison, through many failed attempts of his own, discovered a bamboo-derived filament that burnt for 1,200 hours (Payne, 2014). These reciprocal exchanges eventually led to a shared understanding of those resources, involving the filaments, vacuum housing and shape of the bulb, that would make the light bulb a commercial success (see also Ng et al. 2009; Porac et al., 2011).

Embeddedness as a Constraint and Enabler of Institutional Entrepreneur’s Action

By drawing on these three embedded processes, an IE’s embeddedness offers a duality, where a shared understanding of their rivals’ failures can constrain as much as they enable an IE’s resources. According to Austrian economics, this shared understanding constitutes the social rules (Hayek, 1967, 1978; O’Driscoll & Rizzo, 1985) of an embedded setting (Ng, 2005). These social rules are defined by a generalised procedure, consisting of the failed experiences or practices of rivals that guide alert entrepreneurial action (Ng, 2005). Like Giddens, these social rules exhibit a generalised quality that does not prescribe the IE to a specific course of action. However, an important distinction from Giddens is that this generality arises from a subjective ignorance (Hayek, 1967, 1978; Kirzner, 2000; Ng, 2005). With this ignorance, rules can only prohibit the entrepreneur from repeating the mistakes of the past but cannot prescribe the entrepreneur to a specific course of action. Hayek describes:

free men who are to be allowed to use their own means and their own knowledge for their own purposes must therefore not be subject to rules which tell them what they must positively do, but only to rules which tell them what they must not do. The rules of just conduct thus merely delimit the range of permissible actions but do not determine the particular actions a man must take at a particular moment. (Hayek, 1967, p. 167)

This generalised quality of social rules is important to giving the IE the freedom to use their subjective knowledge to discover those ‘means’ or resources that will overcome their rivals’ failures (Hayek, 1978). As result, by drawing on the subjective and alert tenets of Austrian economics, embeddedness exhibits a dual structure in which social rules constrain as much as they enable an IE’s resources.

Embeddedness: A Separation of Social Rules and Resources

While embeddedness appeals to the rules and resources of Giddens’ (1984) dual structure, a unique distinction of this embeddedness is that social rules have a shared existence that is separate from an IE’s resources. This separation stems from opportunities in solving a ‘Hayekian knowledge problem’ (Hayek, 1945; O’Driscoll & Rizzo, 1985; Pacheco et al., 2010). The Hayekian knowledge problem is concerned with how to use a distribution of subjective (i.e., rival) experiences in ways that offer the entrepreneur an asymmetric knowledge advantage over their rivals (Hayek, 1978; O’Driscoll and Rizzo, 1985; Pacheco et al., 2010). According to Hayek’s knowledge problem, rivals’ failed experiences constitute a shared collective reality that is separate from an IE’s subjective experiences. An IE’s subjectivity involves bringing to bear their own experiences to discover new and valued uses for their resources. This subjectivity reflects an IE’s vision of a yet-to-be-realised future (O’Driscoll & Rizzo, 1985). In contrast, social rules do not reflect an individual’s vision or projection of the future, but, instead, they reflect a shared understanding of resources or practices that have failed in the past. Austrian economists contend that these shared understandings are an important source of non-equilibrium opportunities because the alert entrepreneur sees opportunities to draw on their subjective experiences (i.e., their creativity, imaginations and visions) into addressing their rivals’ past failures (Hayek, 1978; Kirzner, 1997; Ng, 2005; O’Driscoll & Rizzo, 1985). For instance, in the case of Edison (see also Jeff Bezos and Webvan), his commercial success with the light bulb was directly attributed to his ability to bring to bear his own subjective experiences, like his ingenuity and tenacity, into overcoming the failures of his predecessors. Vicarious learning studies have similarly found that an understanding of rivals’ past failures motivate a firm to develop internal resources and strategies to cope with such failures (Baum & Ingram, 1998; Kim & Miner, 2007; Ingram & Baum, 1997). Hence, and consistent with the Hayekian knowledge problem, rivals’ failed experiences are a source of non-equilibrium opportunities that reward an IE to draw on their subjective experiences, such as their imaginations, creativity and vision, into discovering resources that overcome the failures of the past (see also Kim & Miner, 2007; Ng, 2005).

Unlike Giddens’ conflation problem, this entrepreneurial discovery process prevents the IE from engaging in a subjective rationalisation of rules. In an Austrian economic context, a subjective rationalisation of rules would mean that the IE would interpret and apply rivals’ failed experiences in ways that confirm or reinforce an IE’s existing resources. The IE will be subject to ‘habitual- or habitus’ (Bourdieu, 1977)-like behaviours in which the IE lacks an agency to affect changes in their resources (see also Bourdieu, 1977). In the absence of this agency, the IE will lack the alert qualities of vision, imagination and creativity to discover resources that differ from their rivals’ failures and thus cannot discover the non-equilibrium opportunities of the market. Hence, an IE’s efforts to discover opportunities in solving the Hayekian knowledge problem require an agency in which the IE avoids a subjective rationalisation of rules. This agency involves choosing resources that are separate from the social rules of their embedded setting because a subjective rationalisation of rules would render the IE unable to discover opportunities in addressing the mistakes of their rivals. An IE’s discovery process, thereby, introduces a separation that not only resolves Giddens’ conflation problem, but it also makes room for the IE to discover opportunities to create, maintain and disrupt their embedded social structure. These institutional change processes are elaborated:

The Creation of an Embedded Social Structure

The IE has an incentive to create embedded relationships with their rivals because this embeddedness offers the IE opportunities to gain a detailed and intimate understanding of their rivals’ failures. Embedded studies find that entrepreneurs form close exchanges to gain a detailed and intimate understanding of the challenges facing a local group (Hargadon, 2002; Holcomb et al., 2009; Jack & Anderson, 2002; Sarasvathy, 2001). In Jack and Andersons’ (2002) embedded study, they found that a rural entrepreneur’s embeddedness to their local conditions enabled the entrepreneur to not only identify local opportunities (i.e., an established loyal customer base) but to also intimately understand the constraints or challenges in pursuing these embedded opportunities. These constraints involve an intimate understanding of the difficulties in developing those resources necessary for starting and running a local business, such as a lack of access to financial capital, difficulties sourcing skilled employees, access to critical supplier inputs and dealing with underdeveloped product technologies, marketing and distribution channels. For instance, in explaining the difficulties in sourcing skilled employees, Peter, an owner and local entrepreneur, commented that his knowledge of personal contacts was more important to gaining access to quality workers than advertising. He noted:

to be quite honest, I find advertising (for staff) a waste of time. We do it through personal contacts. All I have got to is go to the factory and say to Alan or Martin, I’m needing a couple of guys…That’s the way we’ve done and it always works. (Jack & Anderson, 2002; p. 480)

Jack and Andersons’ (2002) embedded study suggests that by creating an embedded exchange, an IE gains a detailed understanding of the challenges faced by other local entrepreneurs or rivals (i.e., difficult finding skilled labour), and that such detailed understandings inform the IE about those resources or practices (i.e., advertising) to avoid. This avoidance is consistent with studies that find firms that learn from their rivals’ failure can experience ‘survival-enhancing benefits’ (see also Baum & Ingram, 1998). In Ingram and Baums’ (1997) study of the Manhattan hotel industry, they found that a hotel entrepreneur can learn from the failed experiences of their rivals by learning what not to do and to use such learning lessons into developing new competitive strategies (see also Baum & Ingram, 1998; Kim & Miner, 2007). Ingram and Baum describe:

in the 1920s, hotels were slow to recognize the market opportunity presented to auto travelers, and failed to make necessary changes such as providing garage space and making it possible for guests to register without walking through a formal lobby in dirty road clothes. When one or a few hotels tried this, things they were very successful, allowing other hotels that observed that success to realize that consumers wanted more conveniences for auto travelers than were being offered. (Ingram and Baum, 1997, p. 81–82)

While these ‘survival-enhancing benefits’ have not been explained in terms of embedded exchanges, embeddedness provides the IE access to the failed and distributed experiences of their rivals. This access provides a solution to the Hayekian knowledge problem because by learning from rivals’ failures, the IE can draw on their own subjective experiences to discover resources that avoid these failures. Hence, while studies have associated survival-enhancing benefits with reductions in an entrepreneur’s liabilities of newness (Holcomb et al., 2009; Kim & Miner, 2007; Politis, 2005), the IE has an incentive to create an embedded social structure because it offers survival-enhancing benefits that solve the Hayekian knowledge problem.

By creating these embedded exchanges, the IE also promotes the creation of social rules. Unlike more traditional explanations (Henrekson & Sanandaji, 2011; Pacheco et al., 2010), the creation of social rules is not the product of an entrepreneur’s leadership or charisma. But these social rules are the product of an IE’s subjective ignorance because an IE’s ability to draw on their subjective experiences in solving the Hayekian knowledge problem is vulnerable to their own ignorance. Hence, while an IE’s efforts to create an embedded network offer opportunities to avoid the challenges/obstacles of their rivals, this embeddedness cannot eradicate an IE’s own ignorance in solving the Hayekian knowledge problem. Those resources that fail to solve this Hayekian knowledge problem constitute the social rules (Hayek, 1967) of the embedded setting (Ng, 2005). Hence, unlike prevailing institutional entrepreneurship explanations, an IE’s subjective ignorance—along with the ignorance of rivals—contributes to the creation of social rules in an embedded setting.

Proposition 1: An IE’s efforts to discover opportunities that avoid the failures of rivals positively influence the creation of an embedded social structure and social rules.

Maintenance/Reproduction of Embedded Social Structure

While social rules are the unintended products of an IE’s subjective ignorance, the IE has an incentive to reproduce the rules of their embedded setting. This reproduction offers the IE a ‘deeper and more intimate’ understanding of the ‘causes’ affecting their rivals’ failure (Kim & Miner, 2007; Politis, 2005). This causal understanding involves more than developing an understanding that avoids rivals’ failures (Kim & Miner, 2007). This causal understanding involves making inferences about the reasons underlying their rivals’ failed experiences (Kim & Miner, 2007; Politis, 2005). Kim and Miner describe:

a more fruitful way in which an observing firm may learn to improve its survival odds is for it to draw inferences from the failures of other firms in its industry, which can produce an understanding of causal processes that can guide future actions. This form of learning involves changes that go beyond the simple rejection of inefficient organizational forms…. (Kim & Miner, 2007, p. 692)

For instance, Webvan, a company worth over US$1.2 billion, failed in its entry into the market of online grocery deliveries. The cause of this failure included an aggressive expansion of costly warehouses and an entry into low delivery density markets (i.e., suburban areas). Low delivery density markets are particularly problematic because they incur great transportation and delivery costs that cannot be readily recovered in a low-margin grocery business. To enter this online grocery market, Jeff Bezos of Amazon hired the former management of Webvan because they intimately understood the causes underlying the failures of their e-delivery business model (Cohan, 2013).

While the social mechanisms responsible for such causal inferences are not entirely clear, decision-making researchers argue that causation requires a repeatable social setting because they provide repeatable observations that establish stable cause–effect relationships (Giles, 2002; Sarasvathy, 2001). Since embedded settings promote frequent exchanges, an embedded social structure offers a repeatable social setting to generating such causal inferences. In particular, given that rivals’ resources consist of a complex combination of resources, this complexity introduces an ambiguity in understanding the causes affecting rivals’ failure. Thus, complexity reduces an IE’s ability to develop a causal understanding of their rivals’ failure. Yet, since an embedded social structure promotes the transfer of complex knowledge (Hansen, 1999), the IE has an incentive to reproduce the social rules of their embedded setting. This reproduction of rules offers a repeatable social setting in which the IE faces ‘multiple opportunities’ to learn from their rivals. This reproduction of rules enables the IE to overcome the causal ambiguities in their rivals’ failures and thus enable the IE to make inferences about the causes of their rivals’ failures.

A consequence of an IE’s reproduction of social rules is that it increases the frequency and intensity of exchanges with rivals to which offer a deeper understanding and solution to the Hayekian knowledge problem. By developing a deeper causal understanding of their rivals’ failures, this reproduction increases an IE’s ability to draw on their own subjective experiences into discovering resources that address the causes affecting their rivals’ failures. For instance, by learning about the causes of Webvan’s failure, like growing too aggressively in low delivery density markets (i.e., suburban areas), Amazon drew on its own distribution, logistics and robotics expertise in addressing these causes to develop Amazon Fresh (Barr, 2013). This study argues that the reproduction of social rules can offer this type of causal understanding in which the IEs can differentiate themselves from rivals by developing a ‘deeper’ solution to the Hayek knowledge problem (see also Kim & Miner, 2007).

Proposition 2: An IE’s reproduction of social rules increases an IE’s ability to develop resources that overcome the causes of their rivals’ failures.

Disruption of Embedded Social Structure

While institutional research has argued that the reproduction of rules strengthens an embedded structure’s stability and order (DiMaggio & Powell, 1983; Uzzi, 1997), an IE’s continued reproduction of social rules can, however, promote a ‘reframing’ process that disrupts the rules of this embedded setting. In explaining this ‘reframing’ process, Hargadon and Bechkys’ (2006) innovation study found that when an individual draws on the collective experiences of a social setting, this exposure calls into attention different aspects of an individual’s subjective experiences. These collective experiences give new meanings to an individual’s experiences, where the individual reframes ‘the relevance of their past experiences in new a light’ (Hargadon & Bechky, 2006, p. 492). This reframing involves fundamentally changing an individual’s prior assumptions and beliefs to offer novel ways to solve problems of a particular social situation (Hargadon, 2002; Hargadon & Bechky, 2006). This reframing process suggests that when an IE reproduces the rules of their embedded setting, rivals’ failed experiences are brought to bear on an IE’s subjective experiences. These collective failures bring new meanings and interpretations to an IE’s assumptions and beliefs about the causes affecting their rivals’ failures. As a result, this reframing process can offer fundamentally new ways to re-examine the Hayekian knowledge problem in which the IE no longer draws on their causal understandings to overcome a rival’s failures. Instead, the IE solves the Hayekian problem by reframing their own causal understandings.

For instance, during the 1980s, the breakfast cereal industry faced great competition by discounted store brands (i.e., Walmart) in which the major cereal makers, Kellogg’s and its rivals—Post and General Mills—experienced significant declines in their operating margins (Boyer, 2004). Prior to this period, Kellogg’s operating assumption was that a commitment to a volume-based strategy was key to its success in which investments in scale were prioritised over investments in R&D and marketing. Kellogg’s rivals—Post and General Mills—were also committed to this operating assumption. Yet, due to shifts in consumer tastes towards healthier breakfast alternatives and an increasing competition from cheaper private label brands (i.e., Walmart), these breakfast giants responded by engaging in deep price cuts and engaged in further commitments to their volume-based strategies. Yet, this created an oversupply in the industry to which further eroded the operating margins of the major cereal producers. Mr Carlos Gutierrez, who ran Kellogg’s cereal business in 1993 and later became its CEO, said ‘we were setting ourselves up to fail which was demoralizing’ (p. 2). Kellogg’s inability to restore its operating margins required a fundamental ‘reframing’ of the underlying volume assumptions of Kelloggs’ business model. In taking the helm of CEO in 1999, Carlos Gutierrez made the statement that ‘doing the opposite of what we had been doing was a good idea’ (p. 3). This reframing fundamentally challenged Kellogg’s volume strategy in which investments in scale were eschewed in favour of a value strategy that favoured investments in R&D and marketing. This reframing enabled Kelloggs to develop innovative breakfast cereal offerings (e.g., Kashi cereal, Kelloggs Special K with Berries, movie ties to breakfast) that responded to the health needs and preferences of its consumers. Hence, Kellogg’s failure and those of its rivals not only fundamentally challenged Kellogg’s causal understandings of the sources of its firm’s success but, as a result, developed new causal understandings that resulted in the development of new and more effective breakfast cereal products.

By drawing on this reframing process, an IE’s reproduction of rules induces a reframing process that offers a deeper causal understanding and solution to the Hayekian problem. This reframing offers a type of double-loop learning (Argyris & Schon, 1978) in which the IE seeks to correct the errors in their own causal understandings. This double-loop learning parallels the ‘higher-ordered’ learning capabilities described in dynamic capabilities research (Winter, 2003) in which routines or repetitive behaviours enable the firm to ‘reframe’ its own understandings in the development of its resources (Ambrosini et al., 2009). An IE’s reproduction of rules is argued to induce a reframing process that mirrors this higher-ordered dynamic capability in which the development of new resources disrupts the prevailing rules of an embedded setting. This disruption occurs because these resources not only challenge an IE’s prevailing ‘causal’ understandings, but these resources introduce ‘new generalised’ (Giddens, 1984) procedures that disrupt the shared understanding of rules of their embedded environment. For instance, in the breakfast cereal case, Kellogg’s value strategy involved resources that favoured investments in R&D and marketing. These resources help institutionalise new social rules that call for an avoidance to commodity- or scale-based production strategies because they are unresponsive to the health needs and preferences of breakfast cereal consumers. These developments suggest that while the reproduction of embedded rules reduces the causal ambiguities in an IE’s discovery process, this reproduction can also promote a reframing of an IE’s subjective experiences. This reframing enables the development of new resources that endogenously disrupts the social rules of an IE’s embedded setting. This endogenous disruption is consistent with Garud et al. (2007) in which they describe ‘embedding structures do not simply generate constraints on agency but provide a platform for the unfolding of entrepreneurial activities’ (p. 961).

Proposition 3: An IE’s reproduction of social rules increases an IE’s ‘reframing’ of their subjective experiences, where their resources endogenously disrupt the rules of their embedded setting.

Conclusions: Contributions, Limitations and Research

Although various institutional entrepreneurship and entrepreneurship researchers have appealed to an embedded explanation of Giddens’ dual structure, Giddens’ (1984) problem of conflation remains unaddressed (Mole & Mole, 2010). By drawing on the subjective and alert tenets of Austrian economics (Hayek, 1945, 1967, 1978; Kirzner, 1997, 2000) and Granovetter’s (1985) concept of embeddedness, this study develops a concept of an IE that bridges the opportunities and constraints of an embedded setting with an IE’s subjective agency. A unique feature of this concept of IE is that it introduces a separation that addresses Giddens’ conflation problem. Specifically, this study introduces a separation in which embeddedness constrains as much as it enables an IE’s ability to create, maintain and disrupt their embedded social settings. Through this embedded-agency, this study offers four contributions to institutional entrepreneurship and entrepreneurship research.

First, this study’s concept of the IE underscores an embeddedness that broadens the agent-centric focus of institutional entrepreneurship research. The IE is commonly described as being highly calculative in their pursuits, and that institutions are explained as a product of an IE’s power and influence (Bruton et al., 2010; Henrekson & Sanandaji, 2011; Hillman et al., 2009; Pacheco et al., 2010). Specifically, resource dependence (RD) research argues that an IE’s centralised position increases an IE’s power because this centralised position offers access and control of the resources of other organisational members (Hillman et al., 2009; Pfeffer & Salancik, 1978). Such power enables the IE to mobilise members into shaping rules that reinforce the IE’s centralised position and power (Pacheco et al., 2010). Yet, since this centrality also entails an element of embeddedness (Hillman et al., 2009), the rules of this embedded-agency cannot be shaped in accordance with an IE’s power and influence. This is because since an IE cannot anticipate his/her future knowledge (O’Driscoll & Rizzo, 1985), the IE cannot anticipate those resources that would fail (Ng, 2005). The social rules of an embedded setting, thereby, cannot be intentionally shaped and/or controlled by IE’s actions. Thus, while RD explanations argue that an IE’s centralised position offers an important source of agency and power, an IE’s subjective ignorance introduces an agency in which the IE does not have the power to shape rules that directly favour an IE’s interests. As a result, a contribution of this study’s concept of the IE is that this subjective ignorance introduces an embeddedness that reduces rather than increases an entrepreneur’s power and influence in mobilising the support of embedded members. As an entrepreneur’s confidence in their abilities is central to securing the support of external resources (i.e., venture capital), this reduction in power and influence suggests that greater caution is needed when evaluating an IE’s abilities.

Second, this study’s theory of IE challenges commonly accepted understandings of the entrepreneurial discovery process. A commonly accepted view is that entrepreneurs possess unique cognitive schemes (Klein, 2008; Shane & Venkatraman, 2000) and resources (Foss et al., 2008). These asymmetric advantages offer unique ‘information corridors’ that enable the entrepreneur to exploit external opportunities not seen by others (Shane & Venkatraman, 2000). This study argues that an entrepreneur’s asymmetric advantage does not determine an entrepreneur’s ‘information corridors’. But, rather, the failed experiences of their embedded setting, offer an ‘information corridor’ that shapes an entrepreneur’s identification of their asymmetric advantages. For instance, the reproduction of rules offers the IE a deeper causal understanding of their rivals’ failures and thus increases an IE’s ability to draw on their subjective experiences into overcoming these failures. This means that opportunities are ‘not waiting to be discovered’ by an entrepreneur’s asymmetric advantage (Shane & Venkatraman, 2000), but rather these advantages are waiting to be discovered by the failed experiences of an entrepreneur’s embedded setting. This suggests an ‘outside-in’ (Jack & Anderson, 2002; Sarasvathy, 2001) as opposed to an ‘inside-out’ approach (Foss et al., 2008; Klein, 2008; Shane & Venkatraman, 2000) to the entrepreneurial opportunity discovery process. As understanding the origins of an entrepreneur’s asymmetric advantage remains poorly understood (Bruton et al., 2010; Pacheco et al., 2010), this study offers an ‘outside-in’ approach that attributes the antecedents of an entrepreneur’s asymmetric advantages to their embedded settings. The implications of this outside-in approach is that rivals’ failure offers an important source of opportunity, and that an entrepreneur’s success is attributed to those who can draw on their own subjective experience in overcoming such failures (e.g., Edison, Jeff Bezos).

Third, and subsequently, this study’s embedded discovery process offers insights that advance resource-based view (RBV) explanations of the entrepreneurial discovery process (Foss et al., 2008; Klein, 2008). The RBV argues that a firm’s performance is tied to its valuable, rare and costly-to-imitate resources. In extending the firm level of focus of RBV, this study offers an embedded discovery process in which the valuable, rare and costly-to-imitate attributes of resources are shaped by an IE’s embeddedness. For instance, since an entrepreneur’s asymmetric advantage is attributed to their embedded settings, an entrepreneur’s asymmetric resources are valuable only when an entrepreneur’s resources can address their rivals’ failures. Furthermore, since an entrepreneur’s application of social rules is unique to their subjective experiences, the rareness of an entrepreneur’s resources stems from an entrepreneur’s unique ability to draw on their subjective experiences into overcoming their rivals’ failures. Lastly, the costly-to-imitate aspects of an entrepreneur’s resources can be explained by a reproduction of rules. This reproduction of rules offers a causal understanding that cannot be replicated at a low cost. This is because, as this causal understanding arises through an entrepreneur’s reproduction of rules, this reproduction requires multiple exchanges and thus introduces path dependencies to an entrepreneur’s causal understandings. As these path-dependent processes introduce a cost to imitation, this reproduction generates a causal understanding that cannot be replicated at a low cost. Hence, this study broadens the firm-level explanations of the RBV by attributing a firm’s valuable, rare and costly-to-imitate resources to its embedded settings. This suggests that an entrepreneur’s long-term success resides in their ability to not only develop resources that are valuable, rare and costly to imitate but in their ability to develop these resource attributes that offer an asymmetric advantage over the failed experiences of their embedded rivals.

Lastly, as innovation is an important facet in both institutional entrepreneurship and entrepreneurship research, this study offers an embedded-agency that advances a social constructive or creative explanation of the opportunity discovery process (see also Alvarez & Barney, 2007). The most commonly accepted explanation of embeddedness is that close social exchanges create myopic tendencies that stifle an entrepreneur’s innovation (Granovetter, 1985; Hansen, 1999; Upson et al., 2017). While an IE’s reproduction of rules yields an embeddedness consistent with this myopic argument, the constraining influences of social rules are also argued to promote a ‘reframing’ of an entrepreneur’s subjective experiences. Specifically, since the reproduction of rules involves forming close social exchanges, these exchanges promote an exploitation of closely related experiences. Yet, since the reproduction of rules can also promote a reframing of an entrepreneur’s subjective experiences, this reframing induces an exploration that can overcome the path dependencies of exploitation. This exploration addresses an important challenge in entrepreneurship research because exploitation is commonly associated with ‘competency trap’ behaviours that drive out an entrepreneur’s explorative efforts. Unlike prior studies, this study argues that an entrepreneur’s embeddedness offers a reframing of subjective experiences, and that this reframing offers a higher-order dynamic capability that can overcome such competency trap behaviours. In particular, as creative explanations of the opportunity discovery process remain underdeveloped (Alvarez & Barney, 2007), this reframing offers an exploration that overcomes an entrepreneur’s exploitation and thus explains the creative aspects of an entrepreneur’s social construction process. In more practical terms, this reframing increases an entrepreneur’s ability to develop new product and service innovations and thus improves an entrepreneur’s ability to respond to the changing needs of the market.

This study also outlines its limitations and offers directions for future research. It is important to recognise that political forms of entrepreneurship, as described by Henrekson and Sanandaji (2011), should be considered in this study’s concept of the IE. This political form of IE involves a response to the inefficiencies of an institution’s pay-off structure (Douhan & Henrekson, 2010). These inefficiencies offer incentives for the political entrepreneur to change or evade the legal codes of an institutional setting (i.e., tax evasion). These institutional opportunities are not considered in our embedded-agency framework, and, thus, an important direction for future research is to integrate Henrekson and Sanandaji’s (2011) concept of ‘abiding, evading and altering’ into this study’s concept of the IE. However, the challenge with this integration is that the system of rewards in a market-based process (i.e., solving the Hayekian knowledge problem) are not the same as those of a political reward system (i.e., to earn political capital and influence), and, thus, this integration will require efforts to resolve differences in these reward systems.

Footnotes

Declaration of Conflicting Interests

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

ORCID iD

Desmond Ng

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