Entrepreneurial Specialization: How Subjective ('Knightian') Uncertainty Matters

41 Pages Posted: 14 Jan 2022

See all articles by Amar Bhide

Amar Bhide

Tufts University - The Fletcher School of Law and Diplomacy

Date Written: November 23, 2021

Abstract

Subjective uncertainty helps explain features of entrepreneurial activity that fall outside the scope of models that focus on information asymmetries and misaligned incentives. Uncertainty, construed simply as missing information, can lead to unintended misjudgments. Efforts to control misjudgments affect the matching of projects with their funding. Specifically, self-financed or informally financed entrepreneurs start small simple businesses with high market uncertainties. Conversely, public companies fund large complex projects and control the coordination uncertainties they entail but have low tolerances for market uncertainties. And angel investors and venture capitalists favor businesses with intermediate resource requirements and uncertainties.

Keywords: entrepreneurship, economic methodology, business history, innovation

JEL Classification: B0, M0, O0

Suggested Citation

Bhide, Amar, Entrepreneurial Specialization: How Subjective ('Knightian') Uncertainty Matters (November 23, 2021). Available at SSRN: https://ssrn.com/abstract=3970310 or http://dx.doi.org/10.2139/ssrn.3970310

Amar Bhide (Contact Author)

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Cabot 505
160 Packard Avenue
Medford, MA 02155
United States
617-229-5050 (Phone)

HOME PAGE: http://www.bhide.net

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