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The Entrepreneurial Organization of Heterogeneous Capital

Author

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  • Kirsten Foss
  • Nicolai J. Foss
  • Peter G. Klein
  • Sandra K. Klein

Abstract

abstract Transaction cost, property rights, and resource‐based approaches to the firm assume that assets, both tangible and intangible, are heterogeneous. Arranging these assets to minimize contractual hazards, to provide efficient investment incentives, or to exploit competitive advantage is conceived as the prime task of economic organization. None of these approaches, however, is based on a systematic theory of capital heterogeneity. In this paper we outline the approach to capital developed by the Austrian school of economics and show how Austrian capital theory provides a natural bridge between theory of entrepreneurship and the theory of the firm. We refine Austrian capital theory by defining capital heterogeneity in terms of subjectively perceived attributes, the functions, characteristics, and uses of capital assets. Such attributes are not given, but have to be created or discovered by means of entrepreneurial action. Conceiving entrepreneurship as the organization of heterogeneous capital provides new insights into the emergence, boundaries, and internal organization of the firm, and suggests testable implications about how entrepreneurship is manifested.

Suggested Citation

  • Kirsten Foss & Nicolai J. Foss & Peter G. Klein & Sandra K. Klein, 2007. "The Entrepreneurial Organization of Heterogeneous Capital," Journal of Management Studies, Wiley Blackwell, vol. 44(7), pages 1165-1186, November.
    • Handle: RePEc:bla:jomstd:v:44:y:2007:i:7:p:1165-1186
    DOI: 10.1111/j.1467-6486.2007.00724.x
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    References listed on IDEAS

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    1. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135, February.
    2. Kirsten Foss & Nicolai J. Foss, 2005. "Resources and transaction costs: how property rights economics furthers the resource‐based view," Strategic Management Journal, Wiley Blackwell, vol. 26(6), pages 541-553, June.
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