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The Entrepreneurial Theory of the Firm and the Theory of the Entrepreneurial Firm

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  • Richard N. Langlois

    (University of Connecticut)

Abstract

The entrepreneurial theory of the firm argues that entrepreneurship, properly understood, is a crucial but neglected element in explaining the nature and boundaries of the firm. By contrast, the theory of the entrepreneurial firm presumably seeks not to understand the nature and boundaries of "the firm" in general but rather to understand a particular type of firm: one that is entrepreneurial. This paper is an attempt to reconcile the two. After briefly delving for the concept of entrepreneurship in the work of Schumpeter, Kirzner, and (especially) Knight, the paper makes the case for the entrepreneurial theory of the firm. In such a theory, the firm exists as the solution to a coordination problem in a world of change and uncertainty, including Knightian or structural uncertainty. Taking a historical or developmental perspective, the paper then examines the changing nature of the entrepreneurial coordination problem over the life-cycle. In this formulation, "the entrepreneurial firm" is a nascent firm or proto-firm facing a problem of coordinating systemic change in economic capabilities. Lacking (by definition) adequate guidance from existing systems of rules of conduct embedded in markets or organizations, the entrepreneurial firm typically relies on a form of organization Max Weber called charismatic authority. In the end, although there is no such thing as a non-entrepreneurial firm, firms that must solve coordination problems in a world of novelty and systemic change ("entrepreneurial firms") are perhaps the purest case of the entrepreneurial theory of the firm.

Suggested Citation

  • Richard N. Langlois, 2005. "The Entrepreneurial Theory of the Firm and the Theory of the Entrepreneurial Firm," Working papers 2005-27, University of Connecticut, Department of Economics, revised Oct 2005.
  • Handle: RePEc:uct:uconnp:2005-27
    Note: Paper for the conference "Why Do Entrepreneurial Firms Exist?" Ohio State University, October 27-29, 2005. To be considered for a special issue of the Journal of Management Studies.
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    Cited by:

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    2. Jürgen Wandel, 2011. "Business groups and competition in post-Soviet transition economies: The case of Russian “agroholdings”," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 403-450, December.
    3. Marco Bellandi & Lisa De Propris, 2012. "Small Firms and Industrial Districts," Chapters,in: Handbook on the Economics and Theory of the Firm, chapter 27 Edward Elgar Publishing.
    4. Bartz, Wiebke & Winkler, Adalbert, 2016. "Flexible or fragile? The growth performance of small and young businesses during the global financial crisis — Evidence from Germany," Journal of Business Venturing, Elsevier, vol. 31(2), pages 196-215.
    5. Lionel Désiage, 2010. "What are Entrepreneurs’ Objectives When Starting a New Business?," TEPP Working Paper 2010-06, TEPP.
    6. Richard Langlois, 2013. "The Institutional Revolution: A review essay," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 26(4), pages 383-395, December.
    7. Truls Erikson & Nicolai S Løvdal & Arild Aspelund, 2015. "Entrepreneurial Judgment and Value Capture, the Case of the Nascent Offshore Renewable Industry," Sustainability, MDPI, Open Access Journal, vol. 7(11), pages 1-14, November.
    8. Klein, Peter G. & Mahoney, Joseph T. & McGahan, Anita M. & Pitelis, Christos N., 2009. "Toward a Theory of Public Entrepreneurship," Working Papers 09-0106, University of Illinois at Urbana-Champaign, College of Business.
    9. repec:eee:rujoec:v:2:y:2016:i:1:p:86-110 is not listed on IDEAS
    10. Nicolai J. Foss & Peter G. Klein, 2013. "Entrepreneurship, entrepreneurial governance and economic organization," Chapters,in: Handbook of Economic Organization, chapter 22 Edward Elgar Publishing.
    11. Guo, Liang & Wei, Yinghong Susan & Sharma, Ruchi & Rong, Ke, 2017. "Investigating e-business models’ value retention for start-ups: The moderating role of venture capital investment intensity," International Journal of Production Economics, Elsevier, vol. 186(C), pages 33-45.
    12. Kraaijenbrink, Jeroen & Spender, JC & Groen, Aard, 2009. "The resource-based view: A review and assessment of its critiques," MPRA Paper 21442, University Library of Munich, Germany.
    13. Chassagnon, Virgile, 2014. "Consummate cooperation in the network-firm: Theoretical insights and empirical findings," European Management Journal, Elsevier, vol. 32(2), pages 260-274.
    14. Virgile Chassagnon & Naciba Haned & Christian Le Bas, 2016. "The Determinants Of Organisational Creativity Methods: An Empirical Study Based On A French Survey," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(04), pages 1-23, May.
    15. Ehret, Michael, 2014. "Financial socialism: The role of financial economics in economic disorganization," Journal of Business Research, Elsevier, vol. 67(1), pages 2686-2692.
    16. Giovanni Favero & Vladi Finotto & Anna Moretti, 2016. "Historicizing Entrepreneurial Imprinting: Sensitive Periods, Cognitive Frames and Resistance," Working Papers 10, Department of Management, Università Ca' Foscari Venezia.
    17. Bettiol, M & Di Maria, E & Finotto, Vladi, 2012. "Marketing in smes: the role of entrepreneurial sensemaking," MPRA Paper 39405, University Library of Munich, Germany.
    18. Nicolai J. Foss, 2013. "Knowledge governance: meaning, origins and implications," Chapters,in: Handbook of Economic Organization, chapter 4 Edward Elgar Publishing.
    19. Maria Rosaria Marcone, 2009. "THE COMPETITIVE REPOSITIONING OF SMEs WITHIN THE PROCESS OF INTERNATIONAL COMPETITION," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(2), pages 101-122.
    20. repec:spr:scient:v:94:y:2013:i:1:d:10.1007_s11192-012-0744-3 is not listed on IDEAS
    21. Saskia Crucke & Mirjam Knockaert, 2016. "When Stakeholder Representation Leads to Faultlines. A Study of Board Service Performance in Social Enterprises," Journal of Management Studies, Wiley Blackwell, vol. 53(5), pages 768-793, July.
    22. Mohammad Keyhani & Moren Lévesque & Anoop Madhok, 2015. "Toward a theory of entrepreneurial rents: A simulation of the market process," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 76-96, January.
    23. Foss, Nicolai J. & Klein, Peter G. & Kor, Yasemin Y. & Mahoney, Joseph T., 2006. "Entrepreneurship, Subjectivism, and the Resource-Based View: Towards a New Synthesis," Working Papers 06-0121, University of Illinois at Urbana-Champaign, College of Business.
    24. Vladi Finotto & Anna Moretti, 2014. "Unveiling the founder effect: a conceptual framework of entrepreneurial imprinting," Working Papers 07, Department of Management, Università Ca' Foscari Venezia.
    25. Mats Forsgren, 2016. "A note on the revisited Uppsala internationalization process model – the implications of business networks and entrepreneurship," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(9), pages 1135-1144, December.

    More about this item

    Keywords

    entrepreneurship; transaction costs; coordination; Coase; Knight; Schumpeter; Weber.;

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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