THE NEED FOR AN ENTREPRENEURIAL THEORY OF THE FIRM

Entrepreneurship and the theory of the firm are two of the fastest-growing fields in economics and management. The two fields developed largely in isolation and are only now beginning to be brought together. We argue that each field has much to learn from the other and that combining them yields a better theory of the firm and a fuller understanding of the nature and effects of entrepreneurship in the economy. Specifically, the Knightian concept of entrepreneurship as judgment, combined with the Austrian approach to capital heterogeneity, leads to a number of unconventional insights about the nature, boundaries, and internal organization of the firm. The judgment perspective also shifts attention from the discovery or recognition of entrepreneurial opportunities to the exploitation of those opportunities through the acquisition, combination, and recombination of resources, adding to our understanding of the causes and consequences of entrepreneurship.