Skip to main content Accessibility help
×
Home
Hostname: page-component-768dbb666b-v9bzm Total loading time: 0.599 Render date: 2023-02-05T02:25:54.181Z Has data issue: true Feature Flags: { "useRatesEcommerce": false } hasContentIssue true

6 - Entrepreneurship and the economic theory of the firm

Published online by Cambridge University Press:  05 June 2012

Nicolai J. Foss
Affiliation:
Copenhagen Business School
Peter G. Klein
Affiliation:
University of Missouri, Columbia
Get access

Summary

In Knight’s (1921) view, firm organization, profit and loss, and entrepreneurship are inextricably linked. These phenomena arise as an embodiment, a result, and a cause, respectively, of commercial experimentation – a view founded on a particular ontology of the world as essentially open-ended and not deterministic (1921: chapter 7). Few economists have followed Knight in linking the firm, profit and loss, and entrepreneurship, especially from his philosophical starting points. And yet, as we noted in the beginning of this book, there are many good reasons to treat the theory of entrepreneurship and the theory of the firm together. Such a synthesis informs many foundational questions in economics, business strategy, and public policy: Can we meaningfully address entrepreneurship without considering the organization in which such entrepreneurship takes place? How does the structure of the firm influence entrepreneurial actions? How does firm organization (e.g., the allocation of residual income and control rights) affect the quantity and quality of entrepreneurial ideas? And so on. To answer these, we need to bring the theory of the firm and entrepreneurship literatures into close contact. And yet, the important connections between these two bodies of literature have been largely overlooked. We seek to identify and establish some of those connections in this and the next two chapters.

In bringing together entrepreneurship and the theory of the firm we hope to convince scholars in both fields that there are significant gains from trade. We start by reviewing extant theory of the firm, asking why these gains were not recognized, evaluated, and exploited. Economics, and hence the economic theory of the firm, developed throughout the twentieth century in a particular way, one that effectively excluded the entrepreneur from the organization and the market – not because the insights of Schumpeter, Knight, Mises, and other thinkers on entrepreneurship are unimportant or not subject to clear, precise, systematic presentation and development, but because the increasingly formal and stylized treatment of economic phenomena made it difficult to incorporate judgment and creativity, bounded rationality, unforeseen contingencies, and so on.

Type
Chapter
Information
Organizing Entrepreneurial Judgment
A New Approach to the Firm
, pp. 131 - 162
Publisher: Cambridge University Press
Print publication year: 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×