Toward a theory of entrepreneurial differentiation: how entrepreneurial firms compete

This paper presents arguments toward developing a theory of entrepreneurial differentiation. The comprehensive theory enables the distinction between entrepreneurial and non-entrepreneurial firms by providing a clear framework based on the idea of differentiation. In developing our framework, we relied heavily on previous research and prior theoretical developments as well as established understanding of entrepreneurial phenomena. Our theory delineates eight specific dimensions of differentiation we utilize to determine and assess the entrepreneurial profile of the firm. We argue that these eight dimensions work together to increase the overall amount of differentiation of the firm, and therefore, entrepreneurial nature of the firm. We then present formal propositions of the Theory of Entrepreneurial Differentiation as we relate our eight dimensions of differentiation to entrepreneurial orientation, management objectives, and organizational outcomes with specific relationships between each of these constructs. The resulting framework provides a comprehensive explanation of how entrepreneurial firms compete. We then assess how these theoretical conceptualizations impact existing research and how future research might proceed given these ideas.