by Sophie Bacq Published 2 May 2025 in Leadership • 7 min read
When we think of entrepreneurship, Silicon Valley startups or innovative tech companies often come to mind. However, there is another entrepreneurial world that thrives in vastly different circumstances – one born not from opportunity but necessity.
These ‘necessity entrepreneurs’ tend to operate in contexts marked by extreme resource constraints, lack of formal employment opportunities or social safety net, weak formal institutions, and economic hardship. Yet, their ability to adapt, innovate, and create value offers powerful lessons for business leaders everywhere. Our recently published volume, ‘Necessity Entrepreneurship: Getting Beyond the Binary’ (Research in the Sociology of Organizations, 2025), challenges traditional views of necessity entrepreneurship as merely a response to poverty or lack of employment options. The book, which I edited alongside colleagues Katrin M. Smolka, Angelique F. Slade Shantz, and Pursey P.M.A.R. Heugens, reveals a far richer picture: one where necessity entrepreneurs demonstrate remarkable agency, strategic decision-making, and community-oriented approaches to value creation.
For decades, the entrepreneurship literature has maintained a binary distinction: opportunity entrepreneurs who identify market gaps and seize them creatively, versus necessity entrepreneurs who venture into business simply because they have no other options for survival. This dichotomy is fundamentally flawed.
Every entrepreneur identifies opportunities. The notion that necessity entrepreneurs are not identifying opportunities is nonsensical. Instead, research shows that they are demonstrating agency, making strategic decisions, and creating value that often extends beyond individual gain to benefit their families and broader communities.
Our volume expands the understanding of necessity entrepreneurship through three interconnected perspectives:
“Agu has extensive firsthand experience with Nigeria’s entrepreneurial landscape.”
What does necessity entrepreneurship look like on the ground? To understand this better, I spoke with Emeka Agu, a researcher from Nigeria studying informal firms at Erasmus University in the Netherlands. Agu has extensive firsthand experience with Nigeria’s entrepreneurial landscape.
“In Nigeria, necessity entrepreneurs face challenges that would seem insurmountable in more developed economies – from chronic power outages and poor infrastructure to security issues and corruption,” Agu explains. “Yet they find ways to navigate these obstacles through remarkable resilience, creativity, and communal approaches to business.”
In Nigeria’s Southeast region, political tensions have resulted in mandatory ‘stay-at-home’ days every Monday, enforced by threat of violence and imposed by Indigenous People of Biafra (IPOB) – a nationalist separatist group that aims to restore the historic Republic of Biafra. In the face of this weekly business shutdown, which suppresses tax-take to the government and would devastate most companies, necessity entrepreneurs have adapted.
“They know that on Monday they will not earn anything,” Agu explains. “So, from Saturday, they actually prepare to take care of themselves on Monday.” This proactive adaptation – planning inventory, adjusting cash flow, and preparing customers – demonstrates the remarkable flexibility that has become second nature to these entrepreneurs. When faced with similar disruptions, like Nigeria’s 2023 crisis involving the removal of the country’s fuel subsidy, many necessity entrepreneurs pivoted quickly. “Some selling clothes rapidly switched to selling fuel,” Agu notes. “It was high risk, but they recognized the opportunity to cash in at the moment to generate sales and profits before the problems were resolved.”
Perhaps the most fascinating example of necessity entrepreneurship is the Igbo apprenticeship system, sometimes referred to as an ‘informal MBA.’ In this system, business owners (masters) take on apprentices for five to seven years, teaching them financial management, customer engagement, inventory control, and other craft and business skills.
After this training period, the master provides capital for the apprentice to start their own business, with the understanding that the apprentice will continue this cycle by training future apprentices and supporting them to also go it alone. This self-perpetuating system has lifted countless families out of poverty while creating a robust entrepreneurial ecosystem.
“The Igbo apprenticeship system is well recognized in Nigeria because the model has helped a lot of Igbos to have their own businesses,” Agu explains. “It has helped so many community members to be self-reliant and has taken many people out of poverty.”
The system offers flexibility beyond traditional education – apprentices can choose different industries than their masters originally established, and the system accommodates those starting at various ages, from teenagers to adults.
In environments where formal financial institutions are inaccessible or insufficient, necessity entrepreneurs have developed alternative financing mechanisms based on trust. The “Ajo” or “Esusu” system enables groups of entrepreneurs to contribute money weekly or monthly, with the collected sum given to one member on a rotating basis.
“Trust is a currency, a business enabler,” says Agu. This community-based financing approach has even inspired formalized fintech innovations like PiggyVest, a savings and investment platform that allows entrepreneurs to act as mobile ATMs for customers to withdraw and deposit cash and which has helped thousands of Nigerians build financial security. Another innovation addressing infrastructural gaps is Moniepoint (formerly TeamApt), which emerged from informal entrepreneurs’ need to provide access to cash in areas underserved by traditional banking. By equipping micro-entrepreneurs with point-of-sale machines, Moniepoint has created a distributed network ensuring cash availability while generating income for its operators. It’s now also rolling out a debit card.
“By solving societal problems, they are also making profits,” Agu notes, highlighting how necessity entrepreneurs create value by addressing community needs, achieving win-wins much desired by larger corporates looking to contribute sustainably.
The master-apprentice model provides a powerful framework for developing talent and building organizational capability.
What can traditional business leaders learn from necessity entrepreneurs?
Several key insights emerge:
For necessity entrepreneurs, trust forms the foundation of business relationships. “I could see trust as a business enabler,” Agu explains. When formal contracts and institutions are weak, reputation and relationship-building become crucial competitive advantages. Relationships matter for businesses of all sizes.
The ability to pivot quickly in response to changing conditions – whether political instability, infrastructure failures, or economic shocks – is essential for survival. This adaptability, or agility muscle – is highly developed in necessity entrepreneurs. Given an increasingly volatile trade and geopolitical environment – businesses can further develop their own agility. This may be by anticipating and developing responses and contingencies to various scenarios as part of their risk- and crisis-management processes.
Operating under extreme resource constraints forces necessity entrepreneurs to maximize value from minimal inputs. This ‘start with nothing and work it up’ innovation mindset (also known as “entrepreneurial bricolage” in the literature) can help larger organizations identify efficiency opportunities often overlooked in resource-rich environments where duplication and waste can remain undetected.
Necessity entrepreneurs often succeed by meeting the needs of their families and communities, cultivating shared prosperity rather than extracting value from those they serve. This stakeholder-oriented approach, similar to what Harvard Business Review has identified as a Nigerian model for stakeholder capitalism, offers insights for businesses seeking longer-term sustainability. It also echoes the importance of community in creating wealth that goes beyond money and material possessions, to capture a range of resources and capacities benefiting a segment of society – what we call civic wealth.
The master-apprentice model provides a powerful framework for developing talent and building organizational capability. As Agu notes, “The bottom line is the knowledge that the master is transmitting to the apprentice. And if you look at the business world, it also revolves around knowledge.”
For business leaders navigating today’s uncertain landscape, necessity entrepreneurs offer compelling lessons of resilience, community orientation, and innovation under constraint.
Necessity entrepreneurship challenges our fundamental assumptions about what drives business creation and how and what value is generated. By recognizing the agency, creativity, and strategic acumen of necessity entrepreneurs, we gain a more nuanced understanding of entrepreneurship – a global phenomenon that is adaptive to its changing environments.
For business leaders navigating today’s uncertain landscape, necessity entrepreneurs offer compelling lessons of resilience, community orientation, and innovation under constraint. Their ability to create value despite – or perhaps because of – adversity provides a powerful model for entrepreneurship that transcends the traditional opportunity-necessity binary.
There is agency to change the trajectory of your life. If we limit necessity entrepreneurship as another kind of deterministic view, saying you are born in poor conditions and will struggle all your life, it takes all the hope out of the picture. These entrepreneurs are not just reacting to misery. Necessity entrepreneurs make strategic decisions, behave intentionally, and proactively create value. And they have a lot to teach us.
Professor of Social Entrepreneurship and Coca-Cola Foundation Chair in Sustainable Development, IMD
Sophie Bacq is Professor of Social Entrepreneurship and Coca-Cola Foundation Chair in Sustainable Development at IMD. As a globally recognized thought leader on social entrepreneurship and change, she investigates and theorizes about entrepreneurial action to solve intractable social and environmental problems, at the individual, organizational, and civic levels of analysis. At IMD, she leads the Social Entrepreneurship Initiative, which aims to inspire entrepreneurs, leaders, scholars, and organizations to change the system and to create and share new solutions for positive societal change.
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