Commercial Entrepreneurship Model
Although the concept of entrepreneurship was first defined more than 250 years
ago, many have held it as one of the mysterious forces of human nature. The practice of
entrepreneurship is, of course, as old as trading between tribes and villages. Many different
and useful approaches have been used to describe and to analyze entrepreneurship.
They have tended to fall within three main streams of research, which include a focus on
the results of entrepreneurship, the causes of entrepreneurship, and entrepreneurial management
(Stevenson & Jarillo, 1991). In the first stream of research, economists have
explored the impacts and results of entrepreneurship. For example, Schumpeter (1934),
in his seminal article, examined entrepreneurship as a key process through which the
economy as a whole is advanced. The second stream of research has focused on the entrepreneurs
themselves. Research in this stream examines entrepreneurship from a psychological
and sociological perspective (e.g., Collins & Moore, 1964; McClelland, 1961).
Finally, the third stream has focused on the entrepreneurial management process. This
diverse literature includes research on how to foster innovation within established corporations
(e.g., Burgelman, 1983, 1984), start-ups and venture capital (e.g., Timmons &
Bygrave, 1986), organizational life cycles (e.g., Quinn & Cameron, 1983), and predictors
of entrepreneurial success (e.g., Cooper & Bruno, 1975; Dollinger, 1984).
Clearly from these three streams of research, earlier conceptualizations of entrepreneurship
have often focused on either the economic function of entrepreneurship or on
the nature of the individual who is “the entrepreneur,” whereas in recent years, significant
research has focused on the search of the “how” of entrepreneurship. Among the
many engaged in this area, Stevenson (1983) defined entrepreneurship as “The pursuit of
opportunity beyond the tangible resources that you currently control.” With this definition,
emphasis is placed upon how opportunity can be recognized, the process of committing
to an opportunity, gaining control over the resources, managing the network of
resources that may or may not be within a single hierarchy, and the way in which participants
are rewarded (Stevenson, 1985; Stevenson & Jarillo, 1991). The entrepreneurial
organization focuses on opportunity, not resources. Entrepreneurs must commit
quickly, but tentatively, to be able to readjust as new information arises. The process
of commitment becomes multistaged, limiting the commitment of resources at each
stage to an amount sufficient to generate new information and success before more
resources are sought. The entrepreneurial organization uses the resources that lie within
the hierarchical control of others and, therefore, must manage the network as well as the
Given our aim in this article of developing a framework on how to approach the
social entrepreneurial process more systematically and effectively, we draw on the literature
focusing on the “how” of entrepreneurship. We use Stevenson’s definition of entrepreneurship
and build on Sahlman’s (1996) analytical framework from the entrepreneurial
management literature. Sahlman’s model succinctly captures the key elements that are
critical considerations for commercial entrepreneurship, and therefore provides a strong
basis for developing a framework for social entrepreneurship. This model stresses the
creation of a dynamic fit among four interrelated components: the people, the context,
the deal, and the opportunity (PCDO) (Sahlman, 1996). Because these elements are interdependent
and are situationally determined, the entrepreneur must manage the fit and
4 ENTREPRENEURSHIP THEORY and PRACTICE
must adapt continuously to new circumstances over time. People is defined as those who
actively participate in the venture or who bring resources to the venture. They include
both those within the organization and those outside who must be involved for the venture
to succeed. People’s skills, attitudes, knowledge, contacts, goals, and values provide the
resource mix that contributes centrally to success. The presumption that economic selfinterest
drives most economic activity in organizations can lead to dangerous and expensive
mistakes. Whether in nonprofit or in for-profit organizations, the whole person with
multiple motivations and capacities creates the energy and determines the nature of the
Context is defined as those elements outside the control of the entrepreneur that will
influence success or failure. Contextual factors include the macroeconomy, tax and regulatory
structure, and sociopolitical environment. Economic environment, tax policies,
employment levels, technological advances, and social movements such as those involving
labor, religion and politics are examples of specific contextual factors that can frame
the opportunities and the risks that a new venture faces. With this definition, it is clear
that one of the critical elements for success is defining those elements that must be consciously
dealt with, and those that can simply play out as they will. Attention to everything
can mean attention to nothing. On the other hand, leaving out a single critical
element of context can be the precursor of failure.
Deal is the substance of the bargain that defines who in a venture gives what, who
gets what, and when those deliveries and receipts will take place. Each transaction delivers
a bundle of values. They include economic benefits, social recognition, autonomy
and decision rights, satisfaction of deep personal needs, social interactions, fulfillment of
generative and legacy desires, and delivery on altruistic goals.
Opportunity is defined as “any activity requiring the investment of scarce resources
in hopes of a future return” (Sahlman, 1996, p. 140). Change is motivated by the vision
of the future that is better for the decision maker, and by the credibility of the path presented
to that desired future state. One of the historic difficulties in the study of entrepreneurship
is that the definition of opportunity is not necessarily shared by the multiple
constituencies who must work together to create change. Often change affects power
relationships, economic interests, personal networks, and even self-image. A critical
factor that creates motivation for joint action arises out of the ability to create a common
definition of opportunity that can be shared.
Even slight perturbation in one of these PCDO domains can have tremendous implications
for the others. Changing people often requires a different deal. Changing context
can render the skill set of one group obsolete and make another group’s skills more important.
Different opportunities are perceived in differing contexts, and amending a deal may
attract new players and drive away the old. Entrepreneurs must consciously manage the
dynamic fit among these elements (see Figure 1 [Sahlman, 1996]).
Applying PCDO to Social Entrepreneurship
Now that we have developed a working definition of social entrepreneurship a
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