Entrepreneurship and the Economic Theory of the Firm

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Entrepreneurship and the Economic Theory of the Firm

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Title: Entrepreneurship and the Economic Theory of the Firm
Author: Foss, Nicolai Juul; Klein, Peter G.
Abstract: In Knight‟s (1921) view, firm organization, profit and loss, and entrepreneurship are inex tricably 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 econom ists have followed Knight in linking the firm, profit and loss, and entrepreneurship, 1 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 ques tions 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? Ho w 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 theses, 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.
URI: http://hdl.handle.net/10398/8291
Date: 2011

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