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The Knightian Firm: Uncertainty, Entrepreneurial Judgement and Coordination

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  • Yu Tony Fu-Lai

    (The University of New South Wales)

Abstract

This paper interprets Knight's views of the firm from the standpoint of his theory of human agency. Focusing on the coordination perspective, this paper argues that Knightian firms are institutions which deal with intersubjective uncertainty. The fundamental principle underlying an organized activity is the reduction of the uncertainty inherent in judgements and decisions by grouping the decisions of a particular individual and estimating the proportion of successes and failures. Coordinating activities by the use of the firm, shift focus and interest from errors in human agents' opinions of things to errors in their opinions of other people. By routinizing some judgements in the form of wage payments, firms allow the coordination of the interests of various parties and thus reduce uncertainty. Furthermore, entrepreneurs conduct economic calculation and bet their judgements on the value of the factors of production they employ. Correct entrepreneurial judgement is the ultimate source of profit. This paper calls for a research agenda on the theory of the firm to incorporate Knight's insights.Cet article interprète la vision knightienne de la firme du point de vue de sa théorie de l'agent humain. En s'intéressant principalement à l'enjeu de la coordination, cet article soutient que les entreprises sont, selon Knight, des institutions qui "agissent" en incertitude intersubjective. Le principe fondamental qui sous-tend une activité organisée est la réduction de l'incertitude inhérent aux jugements et décisions par le regroupement des décisions d'un individu et l'estimation des proportions de succès et d'échecs. Les activités de coordination par le biais de l'entreprise, déplacent le sujet d'étude et l'intérêt des erreurs dans les opinions qu'ont les agents humains à propos des choses vers leurs erreurs d'opinion sur les autres personnes. En rendant routiniers les jugements par la pratique de paiements de salaires, les firmes permettent la coordination des intérêts de parties variées et réduisent ainsi l'incertitude. De plus, les entrepreneurs procèdent à des calculs économiques et fondent leurs jugements sur la valeur des facteurs de production qu'ils emploient. Le jugement entrepreneurial correct est l'ultime source de profit. Cet article plaide en faveur d'un programme de recherche en théorie de l'entreprise qui incorpore les perspectives ouvertes par Knight.

Suggested Citation

  • Yu Tony Fu-Lai, 2002. "The Knightian Firm: Uncertainty, Entrepreneurial Judgement and Coordination," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(4), pages 1-17, December.
    • Handle: RePEc:bpj:jeehcn:v:12:y:2002:i:4:n:1
    DOI: 10.2202/1145-6396.1072
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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