The Entrepreneur

The Entrepreneur

An Economic Theory, Second Edition

Mark Casson

This thoroughly revised and updated new edition of Mark Casson’s modern classic The Entrepreneur presents a novel synthesis of the ideas of Joseph Schumpeter, Frank Knight and Friedrich Hayek, according to which the defining characteristic of the entrepreneur is the exercise of judgement in business decisions.

Chapter 4: The Competitive Threat to the Entrepreneur

Mark Casson

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


4.1 INTRODUCTION The preceding analysis of coordination has assumed that each opportunity is exploited by a single entrepreneur. It has been shown that the entrepreneur can appropriate a private reward which, under certain conditions, is equal to the value of the improvement in resource allocation which he effects. In some cases his reward exceeds this value and in other cases it is less. In the long run, the existence of such potential rewards will bring entrepreneurs into competition with each other in seeking them out. This raises the possibility that a given opportunity could be discovered simultaneously by several entrepreneurs. There is no reason why any of the entrepreneurs should know that others have made the same discovery – at least not until they all seek to exploit the opportunity at the same time. At this point each entrepreneur will become aware of competition through his inability to negotiate a favourable price. He is unlikely to know from precisely where this competition originates. It is possible, of course, that he could identify the source of competition and arrange to eliminate it through collusion. In practice this is likely to prove difficult; for, even if the source of competition could be identified, a collusive agreement would prove difficult to enforce. The simultaneous discovery of an opportunity for coordination is not, however, the only threat to the entrepreneur. A more serious threat comes from the presence of people seeking to acquire knowledge of opportunities at second hand from the entrepreneur....

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