The Context of Entrepreneurial Judgment: Organizations, Markets, and Institutions

Nicolai J. Foss*, Peter G. Klein, Christian Bjørnskov

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


The economics and management literatures pay increasing attention to the technological, competitive, and institutional environment for entrepreneurship. However, less is known about how context influences the judgment of entrepreneurs. Focusing on the emerging judgment-based approach to entrepreneurship, we argue that economics can say much about how the organizational, market, and institutional context shapes entrepreneurial judgment. We describe entrepreneurs as individuals who deploy scarce, heterogeneous resources to service customer preferences at a profit. Because of uncertainty, this process is essentially experimental, and context influences the experimental process. Thus, entrepreneurs will seek to design the internal organization of the firm so that it facilitates internal experimentation. Moreover, the market or task environment determines the need for experimentation (e.g., how fast do consumer preferences change, how does technology evolve, which assets are available at which terms, etc.). Finally, the institutional environment influences, for example, the transaction costs of acquiring and divesting assets as firms adjust their boundaries through ongoing commercial experimentation.
Original languageEnglish
JournalJournal of Management Studies
Issue number6
Pages (from-to)1197-1213
Number of pages17
Publication statusPublished - Sept 2019
Externally publishedYes


  • Entrepreneurship
  • Institutions
  • Judgment
  • Organizational structure
  • Uncertainty

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