Entrepreneurship and the Economic Theory of the Firm: Any Gains from Trade?

By N. J. Foss, Peter G. Klein. 2004

255 citations recorded by the source corpus.

Although they have developed very much in isolation from each other, we argue the theory of entrepreneurship and the economic theory of the firm are closely related, and each has much to learn from the other. In particular, the notion of entrepreneurship as judgment associated with Frank Knight and some Austrian school economists aligns naturally with the theory of the firm. In this perspective, the entrepreneur needs a firm, that is, a set of alienable assets he controls, to carry out his function. We further show how this notion of judgment adds to the key themes in the modern theory of the firm (i.e., the existence, boundaries, and internal organization). In our approach, resource uses are not data, but are created as entrepreneurs envision new ways of using assets to produce goods. The entrepreneur’s decision problem is aggravated by the fact that capital assets are heterogeneous. Asset ownership facilitates experimenting entrepreneurship: Acquiring a bundle of property rights is a low cost means of carrying out commercial experimentation. In this approach, the existence of the firm may be understood in terms of limits to the market for judgment relating to novel uses of heterogeneous assets; and the boundaries of the firm, as well as aspects of internal organization, may be understood as being responsive to entrepreneurial processes of experimentation.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/922509cc6337232431c86ff5e3aec4b8a7cf1d15

Citations in the corpus

• Firms as Realizations of Entrepreneurial Visions (2007, unknown): “Contrary to Foss and Klein (2005), cognitive and charismatic leadership are not identical.”
• Retail competition in electricity markets (2009, unknown): “Their ‘‘alertness’’, their ‘‘judgment’’ in business decision-making allow them to discover new opportunities, and to envision new ways of using assets to produce goods and services (Kirzner, 1997b; Endres and Woods, 2006; Foss and Klein, 2004).”
• Entrepreneurship, Subjectivism, and the Resource-Based View: Towards a New Synthesis (2008, unknown): “human capital) the entrepreneur’s problem is simple and there is no basis for sustained economic rents ( Foss & Klein, 2005 ).”
• The Resource-Based View: A Review and Assessment of Its Critiques (2010, unknown): “As Foss et al. (K. Foss, Foss, & Klein, 2007; K. Foss, Foss, Klein, & Klein, 2007; N. J. Foss & Ishikawa, 2007; N. J. Foss & Klein, 2005), Kor, Mahoney, and Michael (2007), and Alvarez and Busenitz (2001) argue, the practical assessment and evaluation of resources involve subjectivism, knowledge…”