On the Theory of Entrepreneurial Incentives and Alertness

Entrepreneurship Theory and Practice, Vol. 38, No. 4, pp. 891-911, July 2014

41 Pages Posted: 13 Oct 2014

See all articles by Matthew McCaffrey

Matthew McCaffrey

University of Manchester - Manchester Business School

Date Written: 2013

Abstract

This paper analyzes the theory of “entrepreneurial incentives” in the work of Israel Kirzner. It argues that there is a logical problem with the notion of profit opportunities as exogenous causal agents: Without additional assumptions, the existence of opportunities alone does not sufficiently explain the alertness of entrepreneurs. The paper considers both stronger and weaker versions of this problem. It also questions the relation between entrepreneurial incentives and the tendency toward entrepreneurial success. Finally, it provides some commentary on the relevance of entrepreneurial incentives for an overall theory of the entrepreneur, and identifies several potential solutions to the problems discussed.

Keywords: Alertness, Opportunity Discovery, Opportunity Creation, Judgment, Entrepreneurial Incentives, Israel Kirzner, Austrian Economics

JEL Classification: B53, D81, L26, O31

Suggested Citation

McCaffrey, Matthew, On the Theory of Entrepreneurial Incentives and Alertness (2013). Entrepreneurship Theory and Practice, Vol. 38, No. 4, pp. 891-911, July 2014, Available at SSRN: https://ssrn.com/abstract=2508200

Matthew McCaffrey (Contact Author)

University of Manchester - Manchester Business School ( email )

United Kingdom

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