July, 2007

Without Judgement: An Empirically-Based Entrepreneurial Theory of the Firm

  • Saras Sarasvathy

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The entrepreneur has always been central to Austrian conceptions of market process, and Austrian views have made considerable impact in the growing scholarship in entrepreneurship. Recently, however, the Austrian conversation is being expanded to include economic organization as well as market process. It is to this conversation that the current paper is addressed. · What is the role of entrepreneurial judgment? In fact, what counts as judgment? · How is judgment related to capital heterogeneity? Is this an antecedent or consequent to the entrepreneurial process? · How does judgment or the lack of it resolve the coordination problem within firms, and how is that related to economic organization as a whole? These are some of the questions the authors of this working paper propose to tackle using recent empirical work in entrepreneurship that has identified key elements of what might reside inside the "black box" of entrepreneurial judgment. In doing so, Sarascathy and Dew specify a framework for economic organization that substantially differs from current Austrian views, yet coheres with and builds upon key themes dear to Austrians including imagination, individual freedom, property rights, dispersed knowledge, the market as "a game without goods" and the powerful and inescapable role of human action in building and sustaining a value creating free society.