When the Indian government suddenly invalidated 86% of its cash in 2016, millions of entrepreneurs faced a crisis. The government promoted digital payment platforms as the solution, but adoption among small-scale entrepreneurs varied dramatically. Why did some business owners rapidly adopt new technology, while others resisted—even when they had similar resources?

In our study, published in the Journal of Business Venturing Insights, we investigate how political identification shapes technology adoption decisions among necessity entrepreneurs in India. Our findings reveal that it’s not just what entrepreneurs have—but what they believe—that drives action in uncertain environments.

Political identity lowers the psychological cost of change

Drawing on survey data from 294 necessity entrepreneurs in Tamil Nadu—most earning just over the poverty line—we find that entrepreneurs aligned with the ruling party were more likely to adopt digital payment technology following the demonetization shock. This pattern held even when controlling for income, education, and technology access.

Why? Political identification served as a motivational lens. Those aligned with the party in power perceived the policy as legitimate and opportunity-enhancing. That cognitive alignment made it easier to mobilize scarce resources toward adoption. Entrepreneurs who weren’t politically aligned, in contrast, were more skeptical—even when they had the means to adopt the technology.

Resources matter—but only when identity says “Go”

Interestingly, we found that financial and human capital only translated into action when entrepreneurs were politically aligned. Political identification amplified the effect of income and education on adoption. For instance:

• Higher-income entrepreneurs who identified with the ruling party were much more likely to adopt digital payments than high-income entrepreneurs who didn’t identify with the ruling party.
• Among better-educated entrepreneurs, those aligned with the ruling party were far more likely to take action.

Implications: Resources Enable. Identity Mobilizes.

Our research has wide-ranging implications for how we support entrepreneurship in uncertain or politically polarized environments:

• Adoption hinges on trust. Entrepreneurs’ willingness to embrace new tools depends not only on technical feasibility, but on how they interpret the policy’s intent and credibility.
• Policymakers should consider the messenger. Neutral or locally trusted actors (e.g., non-profits, peer entrepreneurs, non-partisan leaders) may be more effective than central mandates in encouraging adoption.
• Incubators and support organizations should recognize that resource access is only part of the puzzle. Building perceptual readiness and reducing policy ambiguity—through peer role models or narrative framing—can be just as critical.

Who should read more?

Policy makers, entrepreneurship educators, non-profit leaders, and anyone working with informal or necessity entrepreneurs in low-trust or high-uncertainty settings. Our findings are especially relevant in regions facing rapid digitalization, regulatory transitions, or polarized political climates.

Read the full paper here: https://www.sciencedirect.com/science/article/pii/S2352673425000423

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Author bios

Amrita Lahiri is an Associate Professor of Entrepreneurship at Washington State University, Pullman. Her research explores how entrepreneurs and organizations respond to uncertainty, setbacks, and innovation challenges.

Alex Kier is an Associate Professor of Entrepreneurship at Washington State University, Vancouver. His research focuses on the psychology of entrepreneurship examining topics such as entrepreneurial imagination, new venture ideation, escalation of commitment, and entrepreneurship public policy. 

Nanjundi Karthick Krishnan is a micro-behavioral economist and a Ph.D. graduate from the University of Michigan. He works at the intersection of social impact, complex systems and behavioral science. A practitioner-first researcher, he is interested in using agentic models to drive Human-AI collaboration towards delivering impact at scale both in development and private sector contexts. 

Aditya Johri is a Professor of Information Sciences & Technology at George Mason University. He studies how the use of technology shapes learning in both formal and informal spaces, including the workplace, online communities, and extra-curricular activities.

Joyojeet Pal is an Associate Professor of Information at the University of Michigan, Ann Arbor. His research focuses on the role of social media in mainstream politics.