Organizing Entrepreneurial Judgment: A New Approach to the Firm

by Nicolai J. Foss , Peter G. Klein

• ISBN13: 9780521697262
• ISBN10: 0521697263
• Format: Paperback
• Copyright: 2012-04-09
• Publisher: Cambridge University Press

Summary

Entrepreneurship, long neglected by economists and management scholars, has made a dramatic comeback in the last two decades, not only among academic economists and management scholars, but also among policymakers, educators and practitioners. Likewise, the economic theory of the firm, building on Ronald Coase's (1937) seminal analysis, has become an increasingly important field in economics and management. Despite this resurgence, there is still little connection between the entrepreneurship literature and the literature on the firm, both in academia and in management practice. This book fills this gap by proposing and developing an entrepreneurial theory of the firm that focuses on the connections between entrepreneurship and management. Drawing on insights from Austrian economics, it describes entrepreneurship as judgmental decision made under uncertainty, showing how judgment is the driving force of the market economy and the key to understanding firm performance and organization.

Table of Contents

List of figures	p. vii
Preface	p. ix
The need for an entrepreneurial theory of the firm	p. 1
The theory of the firm in economics	p. 3
Entrepreneurship	p. 5
Why entrepreneurship and the (theory of the) firm belong together	p. 8
An overview of our narrative	p. 15
What is entrepreneurship?	p. 23
The enigmatic entrepreneur of economic theory	p. 24
Concepts of entrepreneurship and the firm	p. 28
Conclusion: entrepreneurial judgment as a natural complement to the theory of the firm	p. 41
Entrepreneurship: from opportunity discovery to judgment	p. 43
The Austrian school of economics	p. 45
Kirzner and entrepreneurial alertness	p. 55
Kirzner and the management research literature on entrepreneurship	p. 72
Conclusions	p. 76
What is judgment?	p. 78
Knightian uncertainty	p. 81
Judgment: purposeful behavior under uncertainty	p. 91
Judgment, complementary investments, and the unit of analysis in entrepreneurship research	p. 100
Conclusions	p. 103
From shmoo to heterogeneous capital	p. 105
Entrepreneurship and organization in a world of shmoo capital	p. 107
Austrian capital theory: an overview	p. 113
Capital heterogeneity: an attributes approach	p. 116
Entrepreneurial judgment in the context of a complex capital structure	p. 121
Conclusions	p. 129
Entrepreneurship and the economic theory of the firm	p. 131
Entrepreneurship and the theory of the firm: why so little contact?	p. 133
Established theories of the firm	p. 136
The modern theory of the firm and entrepreneurship	p. 146
Entrepreneurship as an unrealized potential in the theory of the firm	p. 156
Conclusions	p. 161
Entrepreneurship and the nature and boundaries of the firm	p. 163
The emergence of the firm	p. 164
The boundaries of the firm	p. 175
The dynamics of firm boundaries	p. 178
Economic calculation, judgment, and the limits of organization	p. 181
Conclusions	p. 186
Internal organization: original and derived judgment	p. 188
Original and derived judgment	p. 192
Derived entrepreneurship: productive and destructive	p. 197
Implications for economic organization	p. 207
Dispersed knowledge, authority, and firm organization	p. 213
Conclusions	p. 219
Concluding discussion	p. 221
Introduction	p. 221
Implications for entrepreneurship theory	p. 223
Implications for the theory of the firm	p. 231
Implications for public policy	p. 240
Final remarks	p. 248
References	p. 250
Index	p. 293
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