HAGEN’S THEORY OF

ENTREPRENEURSHIP
Withdrawal of status respect theory
Everett Einar Hagen (1906-1992)

Everett Einar Hagen was born in Holloway, Minnesota in 1906. He earned

his bachelor’s degree from St. Olaf College in 1927, and subsequently
attended the University of Wisconsin, where he earned a master’s degree
in history in 1932 and then a PhD in economics in 1941. Hagen served
under multiple federal agencies during and following World War II,
including the National Resources Planning Board, the Federal Reserve
Board, the and Office of War Mobilization and Reconversion.
In 1948, Hagen left his public service career behind to pursue an
academic career. He joined the University of Illinois in that year, and was
appointed the head of the Department of Economics in 1950 by Dean
Howard R. Bowen. Hagen and Bowens’ leadership led to a time of high
tensions in the department, however. Bowen and many of the professors
he recruited, including Hagen, were strong supporters of Keynesian
economics, which the older faculty members believed was a flawed
philosophy.
Everett Einar Hagen (1906-1992)

These tensions reached their boiling point in 1950 when Professor Ralph H. Blodgett, a faculty
member since 1936, resigned from the Department. Bowen had removed Blodgett from many
of his prior teaching duties, and Hagen said that Blodgett had not been using “new tools of
analysis” in his teaching. It soon became public that Hagen and Bowen had not attempted to
retain Blodgett, which enraged many older faculty members.
This sparked a civil war in the Department between the pro-Bowen Keynesians and the pro-
Blodgett neoclassical economists. The latter group ended up winning the dispute, and Bowen
was removed as Dean in late 1950. This caused the majority of Bowen’s supporters like Hagen
to resign from the University, and many went on to have successful careers elsewhere.
Hagen eventually joined MIT as a visiting professor of economics in 1953, and became a full
professor in 1959. In 1970, he was appointed the director of MIT’s Center for International
Studies, a position that he held until his retirement in 1972. Dr. Hagen died on November 29,
1992 in Grand Rapids, Michigan, at the age of 86.
Hagen’s theory of entrepreneurship

One important theory of entrepreneurial behaviour has been propounded by Hagen which
is referred to as the withdrawal of status respect. Status withdrawal occurs when members
of some social group perceive that their purposes and values in life are not respected by the
groups in the society they respect, and whose esteem they value.
Hagen postulates four types of events which can produce status withdrawal:
 Displacement of a traditional elite group from its previous status by another traditional
supply physical force.
 Denigration of valued symbols through some change in the attitude of the superior
group.
 Inconsistency of status symbols with a changing’ distribution of economic power.
 Non-acceptance of expected status on migration to a new society.
Hagen’s theory of entrepreneurship

Hagen further postulates that withdrawal of status respect would give to four possible
reactions and create four different personality types:
 (a) Retreatist: Entrepreneur who continues to work in society but remains indifferent to
his work or status.
 (b) Ritualist: One who works as per the norms in the society hut with no hope of
improvement in the working conditions or his status.
 (c) Reformist: One who is a rebellion and tries to bring in new ways of working and
new society.
 (d) Innovator: An entrepreneur who is creative and try to achieve his goals set by
himself.
Examples of the withdrawal of status
respect
Some examples of "withdrawal of status respect" include when:
 a formerly higher status group is displaced by a new group;
 a social group's symbols are insulted by the dominant group;
 a group's symbols become unaligned with their actual economic reality (e.g.,
elders stories reflect a more favorable past); and
 a group's status is lowered due to migration to a new place
Examples of the withdrawal of status
respect
Hagen explains that a lowering of status may take generations before leading to the
development of anxiety and the rejection of traditional values, leading to creativity and
authoritarianism, as in the case of Henry Ford who was the self-made progeny of migrants
to the U.S.

A lowering of status is met by different reactions. An entrepreneur may acquiesce, or

continue to work without hope of improvement. Or they may rebel against the system by
trying out innovations. 
Hagen used examples like the Samurai community of Japan, which had traditionally
enjoyed a high status, but it was lowered when they were defeated by other groups with
superior weapons. To regain their status, the Samurai pursued entrepreneurial development
and contributed to the fastest growing Asian economy. Similarly, when the Russian tzar
(1650s) adopted Greek practices to attain diplomatic ends, it undermined the Orthodox
church and its members, triggering change processes that eventually led to revolution.