Theory, Networks, History
Chapter 1: The Economic Theory of Entrepreneurship: An Overview
1. The economic theory of entrepreneurship: an overview The aim of this book is to provide a rigorous and up-to-date account of the economic theory of the entrepreneur, and its practical applications to business behaviour and policy formation. The theory emphasizes the importance of good judgement in economic success. Entrepreneurs are people who specialize in the application of judgement to economic decisions. Good judgement leads to timely innovation and profitable arbitrage; it eliminates waste caused by the misallocation of resources, and reduces the risks associated with major projects. Entrepreneurs establish firms through which they can exploit their superior judgement, although they may take over the control of existing firms instead. Entrepreneurship is not confined to small firms. Reputable entrepreneurs may be employed as salaried strategic managers – they do not always have to own the firms for which they work. The demand for entrepreneurship is driven by volatility in the economic environment, whilst the supply of entrepreneurship is determined by the number of people with suitable personality characteristics. The interaction of demand and supply determines the reward to entrepreneurship and the number of entrepreneurs who are active in the economy. 1.1 INTRODUCTION The Fundamental Significance of the Entrepreneur Entrepreneurship is a fundamental concept linking different academic disciplines – notably economics, sociology and history. Entrepreneurship is not just an ordinary interdisciplinary subject; it is a core subject that links the conceptual frameworks of different social sciences. Indeed, it may be regarded as a key building block of an integrated social science. But if...
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