Necessity Entrepreneurship as a Misnomer: Lessons Learned from Working with Poverty Entrepreneurs

Abstract – This paper argues that the distinction between necessity entrepreneurship (NE) and opportunity entrepreneurship (OE) represents a false dichotomy, while both forms of entrepreneurship represent a misnomer, an incorrect or inaccurate name or designation for some phenomenon. While the dichotomy would appear to be deeply embedded in contemporary entrepreneurship theory, research, and teaching, it is seriously flawed and is holding back the advancement of knowledge and understanding of different forms and types of entrepreneurship. We examine the historical emergence of the necessity–opportunity dichotomy and discuss how this distinction may have initially been useful but has become dysfunctional. The problematic nature of the dichotomy is traced to four major factors. Examples are provided of how an emphasis on the dichotomy has been detrimental. Attention is then devoted to specific challenges surrounding the concept of NE and the shortcomings of efforts to reconceptualize this concept. Emphasis is placed on the heterogeneous nature of the population of entrepreneurs placed into this category and on the meaning and implications of the necessity in NE. It is posited that scholars, economic development professionals, policymakers, and others tend to conflate NE with poverty entrepreneurship and that these represent two unique, if overlapping, categories. This conflation serves to undermine our ability to understand and advance either category. Emphasis is placed on the value of poverty entrepreneurship as a distinct category, and an agenda is proposed to advance the interface between the pursuit of venture creation based on necessity and its pursuit by those in poverty circumstances.