Entrepreneurship and the Firm

Entrepreneurship and the Firm

Austrian Perspectives on Economic Organization

Edited by Nicolai J. Foss and Peter G. Klein

While characteristically ‘Austrian’ themes such as entrepreneurship, economic calculation, tacit knowledge and the temporal structure of capital are clearly relevant to the business firm, Austrian economists have said relatively little about management, organization, and strategy. This innovative book features 12 chapters that all seek to advance the understanding of these issues by drawing on Austrian ideas.

Chapter 5: Schumpeter’s and Kirzner’s Entrepreneur Reconsidered: Corporate Entrepreneurship, Subjectivism and the Need for a Theory of the Firm

Wolfgang Gick

Subjects: business and management, entrepreneurship, economics and finance, economics of entrepreneurship, industrial organisation

Extract

Wolfgang Gick CURRENT CONSIDERATIONS AND EMPIRICAL FINDINGS Entrepreneurship is not a new term, but one that is often used. Current discussions link the entrepreneur to small firms, and small entrepreneurial firms count for a high percentage of an industry’s employment. Entrepreneurship stands for combating unemployment and poverty and has recently led governments to set up a new series of policy measures for entrepreneurship promotion.1 The interest in entrepreneurship as a purely empirical phenomenon started in the 1970s and has meanwhile led to a series of empirical studies delivering new insights on firm growth, employment, firm entry, market structure and innovative activity. Put briefly, in most of the empirical studies entrepreneurship is either treated as a firm-specific factor or an aspect of the firm founder. Acs and Audretsch (1986 and 1990) refuse the ‘Schumpeter hypothesis’ that economies of scale in innovation lead to large-scale R&D activities. Small firms generate more innovations per employee than large ones, but innovation activity is also promoted by large firms and in markets with imperfect competition. These results can be found in earlier works like Kamien and Schwartz (1975) and Scherer (1984). In any case, one should be cautious about concluding that small firms are the main source of innovation. The size variable used in these studies provides a test of large firms versus small firms but not necessarily large firms versus entrepreneurial firms - in other words: small firms are not necessarily entrepreneurial ones (Kirchhoff, 1991). In a more recent analysis, Audretsch (1995) in...

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