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Abstract:
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Entrepreneurs in a competitive economy face three fundamental problems. They need to search for
and discover a business opportunity (Kirzner, 1973), evaluate it (Knight, 1921), and then seize the
opportunity to reap entrepreneurial profits (Schumpeter, 1911) (Langlois, 2007). The problem that
we address is how the ability to exploit business opportunities is influenced by entrepreneurial search
and the economic organization of entrepreneurship (Arrow, 1962; Lippman & Rumelt, 2003; Aghion
et al., 2005; Foss et al., 2007). In many cases, the discovery for a new business opportunity needs to
be motivated by expected gains, since the search and evaluation of business opportunities is a costly,
resource-consuming process (Denrell, Fang & Winter, 2003; Nickerson & Zenger, 2004; Foss &
Klein, 2005; Teece, 2007; Foss & Foss, 2008).1 We show the critical role of expectations for
understanding of the economic organization of entrepreneurship, and argue that transaction cost
economics, with its insistence on bounded rationality, but far-sighted contracting offers useful
insights and presents rich opportunities for further theoretical and empirical research (cf. also
Furubotn, 2002). |
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