Abstract

http://ssrn.com/abstract=596226
 
 

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Entrepreneurship and the Economic Theory of the Firm: Any Gains from Trade?


Nicolai J. Foss


Copenhagen Business School - Department of Strategic Management and Globalization

Peter G. Klein


University of Missouri, Division of Applied Social Sciences; Norwegian School of Economics and Business Administration; Ludwig von Mises Institute

August 2004

CORI Working Paper No. 2004-09

Abstract:     
Though they developed in isolation, the theory of entrepreneurship and the economic theory of the firm can be usefully integrated. In particular, the concept of entrepreneurship as judgment associated with Knight (1921) and some Austrian school economists aligns naturally with the theory of the firm. Because judgment cannot be purchased on the market, the entrepreneur needs a firm - a set of alienable assets he controls - to carry out his function. We show how this notion of judgment illuminates key themes in the modern theory of the firm (existence, boundaries, and internal organization). In our approach, resource uses are not data, but are created as entrepreneurs envision new ways of using assets to produce final goods. The entrepreneur's problem is aggravated by the fact that capital assets are heterogeneous. Asset ownership allows the entrepreneur to experiment with novel combinations of heterogeneous assets. The boundaries of the firm, as well as aspects of internal organization, may also be understood as responses to entrepreneurial processes of experimentation.

Number of Pages in PDF File: 28

Keywords: Entrepreneurship, heterogeneous assets, judgment, ownership, firm boundaries, internal organization

JEL Classification: B53, D23, L2

working papers series


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Date posted: September 27, 2004  

Suggested Citation

Foss, Nicolai J. and Klein, Peter G., Entrepreneurship and the Economic Theory of the Firm: Any Gains from Trade? (August 2004). CORI Working Paper No. 2004-09. Available at SSRN: http://ssrn.com/abstract=596226 or http://dx.doi.org/10.2139/ssrn.596226

Contact Information

Nicolai J. Foss
Copenhagen Business School - Department of Strategic Management and Globalization ( email )
Porcelænshaven 24
Frederiksberg, 2000
Denmark
+45 3815 3030 (Phone)
+45 3815 3035 (Fax)
HOME PAGE: http://www.cbs.dk/staff/nicolai_foss
Peter G. Klein (Contact Author)
University of Missouri, Division of Applied Social Sciences ( email )
135 Mumford Hall
Columbia, MO 65211
United States
573-882-7008 (Phone)
HOME PAGE: http://web.missouri.edu/~kleinp
Norwegian School of Economics and Business Administration ( email )
Breiviksveien 40
N-5045 Bergen
Norway
Ludwig von Mises Institute ( email )
Auburn, AL
United States
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