Austrian Perspectives on Economic Organization
Edited by Nicolai J. Foss and Peter G. Klein
Chapter 7: Entrepreneurship, Contracts and the Corporate Firm: Austrian Insights on the Contractual Nature of Business Organization
CHAPTER 7 4/7/02 1:58 PM Page 1 7. Entrepreneurship, contracts and the corporate firm: Austrian insights on the contractual nature of business organization Stavros Ioannides Modern research on the firm is usually described as belonging to one of two perspectives. The first stems from the work of Coase (1937), Alchian and Demsetz (1972), Williamson (1975, 1985) and Hart (1995), and is usually described as ‘contractual’. These theorists view the firm as a set of optimal contracts that bind together the assets it employs, primarily by aligning the incentives under which they operate. The second perspective comprises the ‘capabilities’ theories of the firm that stem from the work of Penrose (1959), Richardson (1972) and Nelson and Winter (1982). These theories view the firm as a bundle of capabilities, which are largely tacit and shared by the human assets that constitute it. Austrian economics has not yet made a significant mark in this field, although this is beginning to change, as the present volume suggests.1 The affinity of Austrian ideas - such as tacit knowledge, coordination and evolutionary processes - with those of the capabilities perspective is beyond doubt. However, in this chapter we attempt to take the opposite path: we intend to explore whether the concept of entrepreneurship can account for the arrangements that correspond to three contractual forms through which business organizations acquire their resources: (1) spot contracts, (2) longterm contracts, and (3) equity holding. More specifically, we will seek to bring out the entrepreneurial element in each of...
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