week 1: Role of entrepreneurship in society Flashcards
Division of knowledge
A way to emphasize the point that the division of labor is usually accompanied by a corresponding specialization in terms of knowledge, which according to Hayek, requires decentralization.
Corporate DNA
the basic assumptions, and beliefs that characterize the organization.
Hayekian knowledge problem
the fact that knowledge of the particular circumstances of time and place is dispersed
Austrian Economics: key concepts
Methodological individualism
Individuals and the things they perceive, like, plan, do, etc. are the ultimate
building blocks of social science.
Subjectivism
“value” is not something inherent or objective that exists within a good, but
describes a relation between a valuing person and an object being valued
Tacit and dispersed knowledge
This can include personal wisdom, experience, insight
Uncertainty
first, the existence of tacit and dispersed knowledge, and second,
the fact that action takes place in time > introduces the possibility of incomplete
information and error, which lead to the frustration of plans
and the waste of scarce resources
Heterogeneity of capital
the quality or state of being diverse in character or content.
Theories on Entrepreneurship
Occupational: self-employment
How to position the rise of the individual entrepreneur
Structural: Start-ups, scale-ups, etc.
Acknowledges the dynamic role of entrepreneurship, ‘driver’ of economic growth
Functional: the process of entrepreneurship
Acknowledges behavioral aspect of entrepreneurship, process contingent on
entrepreneurial judgment
The judgment-based approach
– the need for individuals to make decisions about the future without access to a formal model or decision rule, as would apply to situations of “rational” behavior under probabilistic risk.
examines the way individual entrepreneurs inform action and decision-making as
they attempt to successfully navigate a complex and uncertain environment
Entrepreneurial Employee Activity
employees developing new business activities for their employer
establishing a new outlet or subsidiary and launching new products or new product-
market combinations
The collaborative innovation bloc
The entrepreneur:
Treating the entrepreneur as a collaborator
Inventors
inventors can be involved in founding teams, but there is no reason to assume that
they have a comparative advantage in bringing new ideas to the market
Key personnel
Key personnel such as professional managers, skilled specialists, production staff,
and front-line personnel may contribute skills that are essential to an
entrepreneurial venture
Early-stage financiers
obtain loans to finance their ventures, start-ups, and scale-up phase injections.
Later-stage financiers
VC - where finance is substantial.
A most known exit strategy is through a trade sale, in which the
entrepreneur/founder hands over full control to the buyer (often a direct
competitor) buyout firm, which operates much like a VC firm, albeit dealing with
much larger sums
Competent customers
Customers are the ultimate arbiters of an innovation’s success, yet they hardly
appear in the cast in most accounts of innovation.
The common principles underlying all proposals
Neutrality: we wish to level the playing field between entrepreneurs and those they
challenge.
Transparency: operating in such a way that it is easy for others to see what actions are
performed and what consequences they will entail.
Moderation: policymakers should be modest in extracting and allocating resources lest
such measures become costly to reverse.
Contestability: all vested positions, opinions, and truths should be open to challenge
and debate.
Legality: legality ensures the rule of law is both upheld and aligned with the institutional
framework.
Justifiability: the appropriate balancing of public and private interests that is needed to
justify policy interventions.
Schumpeterian entrepreneurship
the kind of entrepreneurship that introduces new
products and technologies and serves as a conduit of knowledge to generate innovation and growth.
How, then, is the EU to become a more entrepreneurial society?
Entrepreneurs are both incentivized and constrained by society’s rules of the game
Institutions are path-dependent and complementary
Entrepreneurship contributes to prosperity by challenging the status quo in an open market economy.
Schumpeterian Mark I
Creative destruction, new product-market combinations
the dismantling of long-standing practices in order to make way for innovation and is seen as a driving force of capitalism.
Schumpeter Mark II
Large businesses spur innovation, as heavy R&D investments required
Framework linking entrepreneurship to economic growth
Three types of entrepreneurs
Schumpeterian - Managerial business owner - intrapreneur
Austrian vs neoclassical
Subjective
No equilibrium
Importance of knowledge
