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

Publication information

Original languageEnglish
Place of PublicationKøbenhavn
Number of pages31
ISBN (Print)8791506263
StatePublished - 2004

ID: 21690