Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-24T02:42:00.216Z Has data issue: false hasContentIssue false
  • English
  • Français

Let's do it Frank's way: general principles and historical specificity in the study of entrepreneurship

Published online by Cambridge University Press:  22 March 2021

Marek Hudik Open the ORCID record for Marek Hudik [Opens in a new window]  and
Per L. Bylund Open the ORCID record for Per L. Bylund [Opens in a new window]
Marek Hudik*
Affiliation:
Faculty of Business Administration, Prague University of Economics and Business, Prague, Czechia
Per L. Bylund
Affiliation:
School of Entrepreneurship, Spears School of Business, Oklahoma State University, Stillwater, OK, USA
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Formal economic models of entrepreneurship have two characteristics: they model entrepreneurship as an allocation of resources, and they identify common factors affecting this allocation. These common factors are represented as parameters of optimization models, and they are evaluated at the market level. We argue that although these models are useful, they are incomplete because certain aspects of entrepreneurial behavior, such as judgment, alertness, or innovativeness, cannot be easily transformed into allocative problems. Moreover, entrepreneurial acts involve idiosyncratic elements, which limit the applicability of the market-level analysis to individual cases. Thus, the traditional economic methods have to be complemented by approaches highlighting the role of individual and historical specificity. The study of entrepreneurship, therefore, requires a synthesis of both general theory and historicist approaches, as envisioned a century ago by Frank Knight.

Keywords

EntrepreneurshipFrank Knightgeneral theoryhistorical specificityhistoricismprice theoryB41B31B52L26
Type
Research Article
Information
Journal of Institutional Economics , Volume 17 , Special Issue 6: Special Issue on the Centenary of Frank H. Knight's Risk, Uncertainty, and Profit , December 2021 , pp. 943 - 958
Copyright
Copyright © Millennium Economics Ltd 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Akerlof, G. A. (2020), ‘Sins of Omission and the Practice of Economics’, Journal of Economic Literature, 58(2): 405–418.CrossRefGoogle Scholar
Alvarez, S. A. and Barney, J. B. (2007), ‘Discovery and Creation: Alternative Theories of Entrepreneurial Action’, Strategic Entrepreneurship Journal, 1(1–2): 11–26.CrossRefGoogle Scholar
Audretsch, D. B., Keilbach, M. and Lehmann, E. (2006), Entrepreneurship and Economic Growth, New York: Oxford University Press.CrossRefGoogle Scholar
Baron, R. A. (1998), ‘Cognitive Mechanisms in Entrepreneurship: Why and When Entrepreneurs Think Differently Than Other People’, Journal of Business Venturing, 13(4): 275–294.CrossRefGoogle Scholar
Baron, R. A. (2006), ‘Opportunity Recognition as Pattern Recognition: How Entrepreneurs “Connect the Dots” to Identify New Business Opportunities’, Academy of Management Perspectives, 20(1): 104–119.CrossRefGoogle Scholar
Baumol, W. J. (1968), ‘Entrepreneurship in Economic Theory’, The American Economic Review, 58(2): 64–71.Google Scholar
Baumol, W. J. (1990), ‘Entrepreneurship: Productive, Unproductive, and Destructive’, Journal of Political Economy, 98(5): 893–919.CrossRefGoogle Scholar
Baumol, W. J. (2000), ‘The Allocation of Limited Entrepreneurial Attention, by Sharon Gifford, Boston: Kluwer Academic Publishers, 1998’, Small Business Economics, 14(3): 239–244.CrossRefGoogle Scholar
Baumol, W. J. (2002), The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism, Princeton: Princeton University Press.CrossRefGoogle Scholar
Becker, G. S. (1978), The Economic Approach to Human Behavior, Chicago: University of Chicago Press.Google Scholar
Bianchi, M. and Henrekson, M. (2005), ‘Is Neoclassical Economics Still Entrepreneurless?’, Kyklos, 58(3): 353–377.CrossRefGoogle Scholar
Blaug, M. (2003), ‘The Formalist Revolution of the 1950s’, Journal of the History of Economic Thought, 25(2): 145–156.CrossRefGoogle Scholar
Boettke, P. J. (1995), ‘Interpretive Reasoning and the Study of Social Life’, Methodus, 2(2): 35–45.Google Scholar
Boettke, P. J. and Candela, R. A. (2017), ‘Price Theory as Prophylactic against Popular Fallacies’, Journal of Institutional Economics, 13(3): 725–752.CrossRefGoogle Scholar
Boudreaux, C. J. (2014), ‘Jumping Off of the Great Gatsby Curve: How Institutions Facilitate Entrepreneurship and Intergenerational Mobility’, Journal of Institutional Economics, 10(2): 231–255.CrossRefGoogle Scholar
Butos, W. N. and Koppl, R. G. (1993), ‘Hayekian Expectations: Theory and Empirical Applications’, Constitutional Political Economy, 4(3): 303–329.CrossRefGoogle Scholar
Bylund, P. L. (2016), The Problem of Production: A New Theory of the Firm, London: Routledge.Google Scholar
Bylund, P. L. (2018), ‘Management is What's Wrong with Socialism: Cost at the Expense of Value’, in McCaffrey, M. (ed.), The Economic Theory of Costs: Foundations and New Directions. Abingdon, UK: Routledge, pp. 225–241.Google Scholar
Bylund, P. L. (2020), ‘Finding the Entrepreneur-Promoter: A Praxeological Inquiry’, Quarterly Journal of Austrian Economics, 23(3–4): 355–389.CrossRefGoogle Scholar
Bylund, P. L. (forthcoming), ‘Understanding the Limits of Pure Theory in Economics: Knight and Mises’, Research in the History of Economic Thought and Methodology.Google Scholar
Bylund, P. L. and McCaffrey, M. (2017), ‘A Theory of Entrepreneurship and Institutional Uncertainty’, Journal of Business Venturing, 32(5): 461–475.CrossRefGoogle Scholar
Cantillon, R. (1931), Essai sur la Nature du Commerce en Général. Translated by C B Henry Higgs. London: Macmillan and Co.Google Scholar
Casson, M. (1982), The Entrepreneur: An Economic Theory, Oxford: Martin Robertson.Google Scholar
Davis, J. (2018), ‘Extending Behavioral Economics’ Methodological Critique of Rational Choice theory’, Journal of Behavioral Economics for Policy, 2(2): 5–9.Google Scholar
Elert, N. and Henrekson, M. (2016), ‘Evasive Entrepreneurship’, Small Business Economics, 47(1): 95–113.CrossRefGoogle Scholar
Emmett, R. B. (2009), Frank Knight and the Chicago School in American Economics, London and New York: Routledge.CrossRefGoogle Scholar
Endres, A. M. and Harper, D. A. (2013), ‘“Wresting Meaning from the Market”: A Reassessment of Ludwig Lachmann's Entrepreneur’, Journal of Institutional Economics, 9(3): 303–328.CrossRefGoogle Scholar
Evans, D. S. and Jovanovic, B. (1989), ‘An Estimated Model of Entrepreneurial Choice Under Liquidity Constraints’, Journal of Political Economy, 97(4): 808–827.CrossRefGoogle Scholar
Farrell, M. J. (1957), ‘The Measurement of Productive Efficiency’, Journal of the Royal Statistical Society: Series A (General), 120(3): 253–281.CrossRefGoogle Scholar
Foss, N. J. and Klein, P. G. (2012), Organizing Entrepreneurial Judgment: A New Approach to the Firm, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Foss, N. J. and Klein, P. G. (2014), ‘Why Managers Still Matter’, MIT Sloan Management Review, 56(1): 73–80.Google Scholar
Foss, N. J. and Klein, P. G. (2015), ‘Introduction to a Forum on the Judgment-Based Approach to Entrepreneurship: Accomplishments, Challenges, New Directions’, Journal of Institutional Economics, 11(3): 585–599.CrossRefGoogle Scholar
Foss, N. J., Klein, P. G. and Bjørnskov, C. (2019), ‘The Context of Entrepreneurial Judgment: Organizations, Markets, and Institutions’, Journal of Management Studies, 56(6): 1197–1213.Google Scholar
Gage, D. (2012), ‘The Venture Capital Secret: 3 out of 4 Start-ups Fail’, Wall Street Journal, www.wsj.com/articles/SB10000872396390443720204578004980476429190. (accessed 9 September 2020).Google Scholar
Garrison, R. W. (1982), ‘Austrian Economics as the Middle Ground: Comment on Loasby’, in Kirzner, I. M. (ed.), Market Process, and Austrian Economics: Essays in Honor of Ludwig von Mises. Lexington, Mass: Lexington Books, pp. 131–138.Google Scholar
Garrison, R. W. (1995), ‘Equilibrium and entrepreneurship’, Advances in Austrian Economics, 2(part A): 67–78.Google Scholar
Gifford, S. (1992), ‘Allocation of Entrepreneurial Attention’, Journal of Economic Behavior and Organization, 19(3): 265–284.CrossRefGoogle Scholar
Gifford, S. (1993), ‘Heterogeneous Ability, Career Choice and Firm Size’, Small Business Economics, 5(4): 249–259.CrossRefGoogle Scholar
Hastie, R. (2001), ‘Problems for Judgment and Decision Making’, Annual Review of Psychology, 52(1): 653–683.CrossRefGoogle ScholarPubMed
Hébert, R. F. and Link, A. N. (1988), The Entrepreneur: Mainstream Views and Radical Critiques (2nd edn.), New York: Praeger.Google Scholar
Henrekson, M. and Johansson, D. (1999), ‘Institutional Effects on the Evolution of the Size Distribution of Firms’, Small Business Economics, 12(1): 11–23.CrossRefGoogle Scholar
Henrekson, M. and Sanandaji, T. (2011), ‘The Interaction of Entrepreneurship and Institutions’, Journal of Institutional Economics, 7(1): 47–75.CrossRefGoogle Scholar
Hodgson, G. M. (1998), ‘The Approach of Institutional Economics’, Journal of Economic Literature, 36(1): 166–192.Google Scholar
Hodgson, G. M. (2001), How Economics Forgot History: The Problem of Historical. Specificity in Social Science, London and New York: Routledge.CrossRefGoogle Scholar
Hodgson, G. M. (2004), The Evolution of Institutional Economics: Agency, Structure and Darwinism in American Institutionalism, London and New York: Routledge.CrossRefGoogle Scholar
Holmes, T. J. and Schmitz, J. A. Jr (1990), ‘A Theory of Entrepreneurship and its Application to the Study of Business Transfers’, Journal of Political Economy, 98(2): 265–294.CrossRefGoogle Scholar
Hudik, M. (2019), ‘Two Interpretations of the Rational Choice Theory and the Relevance of Behavioral Critique’, Rationality and Society, 31(4): 464–489.CrossRefGoogle Scholar
Hudik, M. and Fang, E. S. (2020), ‘Money or In-Kind Gift? Evidence From Red Packets in China’, Journal of Institutional Economics, 16(5): 731–746.CrossRefGoogle Scholar
Kihlstrom, R. E. and Laffont, J. J. (1979), ‘A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion’, Journal of Political Economy, 87(4): 719–748.CrossRefGoogle Scholar
Kirzner, I. M. (1973), Entrepreneurship and Competition, Chicago: Chicago University Press.Google Scholar
Kirzner, I. M. (1982), ‘Uncertainty, Discovery, and Human Action: A Study of the Entrepreneurial Profile in the Misesian System’, in Kirzner, I. M. (ed.), Method, Process, and Austrian Economics: Essays in Honor of Ludwig von Mises, Lexington, Mass: Lexington Books, pp. 139–159.Google Scholar
Klein, P. G. (2008), ‘Opportunity Discovery, Entrepreneurial Action, and Economic Organization’, Strategic Entrepreneurship Journal, 2(3): 175–190.CrossRefGoogle Scholar
Klein, P. G. and Cook, M. L. (2006), ‘T.W. Schultz and the Human-Capital Approach to Entrepreneurship’, Review of Agricultural Economics, 28(3): 344–350.CrossRefGoogle Scholar
Knight, F. H. (1921), Risk, Uncertainty and Profit, Boston: Houghton Mifflin.Google Scholar
Knight, F. H. (1924), ‘The Limitations of Scientific Method in Economics’, in R. G. Tugwell (ed), The Trend of Economics, New York: Knopf, pp. 229–67. Repr. in F. H. Knight (1935), The Ethics of Competition and Other Essays, New York: Harper.Google Scholar
Koppl, R. (2002), Big Players and the Economic Theory of Expectations, New York: Palgrave Macmillan.CrossRefGoogle Scholar
Koppl, R. and Whitman, D. G. (2004), ‘Rational-Choice Hermeneutics’, Journal of Economic Behavior and Organization, 55(3): 295–317.CrossRefGoogle Scholar
Lachmann, L. M. (1956), Capital and Its Structure, London: G. Bell and Sons.Google Scholar
Lancaster, K. J. (1966), ‘A New Approach to Consumer Theory’, Journal of Political Economy, 74(2): 132–157.CrossRefGoogle Scholar
Langlois, R. N. (2018), ‘Fission, Forking and Fine Tuning’, Journal of Institutional Economics, 14(6): 1049–1070.CrossRefGoogle Scholar
Lavoie, D. (ed) (1991), Economics and Hermeneutics, London: Routledge.Google Scholar
Lazear, E. P. (2004), ‘Balanced Skills and Entrepreneurship’, American Economic Review, 94(2): 208–211.CrossRefGoogle Scholar
Lazear, E. P. (2005), ‘Entrepreneurship’, Journal of Labor Economics, 23(4): 649–680.CrossRefGoogle Scholar
Leeson, P. T. (2020), ‘Economics is not Statistics (and Vice Versa)’, Journal of Institutional Economics, 16(4): 423–425.CrossRefGoogle Scholar
Leigh, A. H. (1974), ‘Frank H. Knight as Economic Theorist’, Journal of Political Economy, 82(3): 578–586.CrossRefGoogle Scholar
Lerner, J. (2012), Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – And What to Do About It, Princeton: Princeton University Press.Google Scholar
Levesque, M. and Minniti, M. (2006), ‘The Effect of Aging on Entrepreneurial Behavior’, Journal of Business Venturing, 21(2): 177–194.CrossRefGoogle Scholar
Lucas, R. E. Jr (1978), ‘On the Size Distribution of Business Firms’, The Bell Journal of Economics, 9(2): 508–523.CrossRefGoogle Scholar
Lucas, D. S. and Fuller, C. S. (2017), ‘Entrepreneurship: Productive, Unproductive, and Destructive – Relative to What?’, Journal of Business Venturing Insights, 7: 45–49.CrossRefGoogle Scholar
Lumpkin, G. T. and Dess, G. G. (1996), ‘Clarifying the Entrepreneurial Orientation Construct and Linking it to Performance’, Academy of Management Review, 21(1): 135–172.CrossRefGoogle Scholar
Masten, S. E. (1986), ‘Institutional Choice and the Organization of Production: The Make-or-buy decision’, Journal of Institutional and Theoretical Economics (JITE)/Zeitschrift für die gesamte Staatswissenschaft, 142(3): 493–509.Google Scholar
McCloskey, D. (2014), ‘What Economics Is on the Wrong Track’, in Lanteri, A. and Vromen, J. (eds), Economics of Economists: Institutional Setting, Individual Incentives, and Future Prospects, Cambridge: Cambridge University Press, pp. 211–242.CrossRefGoogle Scholar
McKelvie, A., Wiklund, J., McMullen, J. and Palubinskas, A. (2020), ‘A Dynamic Model of Entrepreneurial Opportunity: Integrating Kirzner's and Mises's Approaches to Entrepreneurial Action’, Quarterly Journal of Austrian Economics, 23(3–4): 499–541.CrossRefGoogle Scholar
McMullen, J. S. (2015), ‘Entrepreneurial Judgment as Empathic Accuracy: A Sequential Decision-Making Approach to Entrepreneurial Action’, Journal of Institutional Economics, 11(3): 651–681.CrossRefGoogle Scholar
McMullen, J. S. and Dimov, D. (2013), ‘Time and the Entrepreneurial Journey: The Problems and Promise of Studying Entrepreneurship as A Process’, Journal of Management Studies, 50(8): 1481–1512.CrossRefGoogle Scholar
Menger, C. (2009), Investigations Into the Method of the Social Sciences, translated by F. J. Nock, Auburn, AL: Ludwig von Mises Institute.Google Scholar
Morgan, M. S. (2019), ‘Exemplification and the Use-Values of Cases and Case Studies’, Studies in History and Philosophy of Science Part A, 78: 5–13.CrossRefGoogle ScholarPubMed
Otani, K. (1996), ‘A Human Capital Approach to Entrepreneurial Capacity’, Economica, 63(250): 273–289.CrossRefGoogle Scholar
Packard, M. D. (2017), ‘Where Did Interpretivism Go in the Theory of Entrepreneurship?’, Journal of Business Venturing, 32(5): 536–549.CrossRefGoogle Scholar
Packard, M. D. (2020), ‘Autarkic Entrepreneurship’, Quarterly Journal of Austrian Economics, 23(3–4): 390–426.CrossRefGoogle Scholar
Packard, M. D. and Bylund, P. L. (2018), ‘On the Relationship Between Inequality and Entrepreneurship’, Strategic Entrepreneurship Journal, 12(1): 3–22.CrossRefGoogle Scholar
Reder, M. W. (1982), ‘Chicago Economics: Permanence and Change’, Journal of Economic Literature, 20(1): 1–38.Google Scholar
Ridley, M. (2020), How Innovation Works: And Why It Flourishes in Freedom, New York: HarperCollins.Google Scholar
Robbins, L. (1932), An Essay on the Nature and Significance of Economic Science, London: Macmillan.Google Scholar
Sarasvathy, S. D. (2001), ‘Causation and Effectuation: Toward A Theoretical Shift From Economic Inevitability to Entrepreneurial contingency’, Academy of Management Review, 26(2): 243–263.CrossRefGoogle Scholar
Sarasvathy, S. D. and Dew, N. (2013), ‘Without Judgment: An Empirically-Based Entrepreneurial Theory of the Firm’, The Review of Austrian Economics, 26(3): 277–296.CrossRefGoogle Scholar
Saviotti, P. P. and Metcalfe, J. S. (1984), ‘A Theoretical Approach to the Construction of Technological Output Indicators’, Research Policy, 13(3): 141–151.CrossRefGoogle Scholar
Say, J. B. (1836), A Treatise on Political Economy: Or the Production, Distribution, and Consumption of Wealth, Philadelphia: Grigg and Elliot.Google Scholar
Schmoller, G. (1883), ‘Zur Methodologie der Staats-und Sozialwissenschaften’, Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reich, 7(7): 975–994.Google Scholar
Schultz, T. W. (1980), ‘Investment in Entrepreneurial Ability’, Scandinavian Journal of Economics, 82(4): 437–448.CrossRefGoogle Scholar
Schumpeter, J. A. (1934), The Theory of Economic Development, Cambridge, Mass: Harvard University Press.Google Scholar
Schumpeter, J. A. (1947), Capitalism, Socialism, and Democracy (2nd edn.), New York: Harper and Bros.Google Scholar
Schutz, A. (1932), The Phenomenology of the Social World, Evanston: Northwestern University Press.Google Scholar
Selgin, G. A. (1988), ‘Praxeology and Understanding: An Analysis of the Controversy in Austrian Economics’, The Review of Austrian Economics, 2(1): 19–58.CrossRefGoogle Scholar
Shane, S. A. (2003), A General Theory of Entrepreneurship: The Individual-Opportunity Nexus, Cheltenham: Edward Elgar Publishing.CrossRefGoogle Scholar
Skarbek, D. (2020), ‘Qualitative Research Methods for Institutional Analysis’, Journal of Institutional Economics, 16(4): 409–422.CrossRefGoogle Scholar
Smith, A. (1965), The Wealth of Nations, New York: Modern Library.Google Scholar
Spong, H. (2019), ‘Individuality and Habits in Institutional Economics’, Journal of Institutional Economics, 15(5): 791–809.CrossRefGoogle Scholar
Stigler, G. J. and Becker, G. S. (1977), ‘De Gustibus non est Disputandum’, The American Economic Review, 67(2): 76–90.Google Scholar
Tarko, V. (2013), ‘Can Probability Theory Deal with Entrepreneurship?’, The Review of Austrian Economics, 26(3): 329–345.CrossRefGoogle Scholar
von Mises, L. (1949), Human Action: A Treatise on Economics, New Haven: Yale University Press.Google Scholar
Wadhwani, R. D. and Lubinski, C. (2017), ‘Reinventing Entrepreneurial history’, Business History Review, 91(4): 767–799.CrossRefGoogle Scholar
Wadhwani, R. D., Kirsch, D., Welter, F., Gartner, W. B. and Jones, G. G. (2020), ‘Context, Time, and Change: Historical Approaches to Entrepreneurship Research’, Strategic Entrepreneurship Journal, 14(1): 3–19.CrossRefGoogle Scholar
Wales, W. J., Covin, J. G. and Monsen, E. (2020), ‘Entrepreneurial Orientation: The Necessity of a Multilevel Conceptualization’, Strategic Entrepreneurship Journal, 14(4): 639–660.CrossRefGoogle Scholar
Weintraub, E. R. (2002), How Economics Became A Mathematical Science, Durham and London: Duke University Press.Google Scholar
Wennekers, S. and Thurik, R. (1999), ‘Linking Entrepreneurship and Economic Growth’, Small Business Economics, 13(1): 27–56.CrossRefGoogle Scholar
Weyl, E. G. (2019), ‘Price Theory’, Journal of Economic Literature, 57(2): 329–384.CrossRefGoogle Scholar
Wiklund, J. (1999), ‘The Sustainability of the Entrepreneurial Orientation – Performance Relationship’, Entrepreneurship Theory and Practice, 24(1): 37–48.CrossRefGoogle Scholar
Wiklund, J., Davidsson, P., Audretsch, D. B. and Karlsson, C. (2011), ‘The Future of Entrepreneurship research’, Entrepreneurship Theory and Practice, 35(1): 1–9.CrossRefGoogle Scholar
Williamson, O. E. (1990), ‘A Comparison of Alternative Approaches to Economic Organization’, Journal of Institutional and Theoretical Economics (JITE)/Zeitschrift für die gesamte Staatswissenschaft, 146(1): 61–71.Google Scholar
Williamson, O. E. (2000), ‘The new Institutional Economics: Taking Stock, Looking Ahead’, Journal of Economic Literature, 38(3): 595–613.CrossRefGoogle Scholar
Witt, U. (1998), ‘Imagination and Leadership–the Neglected Dimension of an Evolutionary Theory of the Firm’, Journal of Economic Behavior & Organization, 35(2): 161–177.CrossRefGoogle Scholar