Posts filed under ‘– Klein –’

The Judgment-Based View of Entrepreneurship: Accomplishments, Challenges, New Directions

| Peter Klein |

JOIWe have been using the term “judgment-based view” to describe our approach to entrepreneurship. The term “judgment” of course comes from Knight, and was used also by Mises, Casson, and many others. Contemporary entrepreneurship research is still dominated by the opportunity-discovery view, but increasing criticism from the judgement-based view, the effectuation and bricolage approaches, the opportunity-creation view, and other perspectives is challenging the notion that profit opportunities exist, waiting to be discovered, and even that “opportunity” is a meaningful construct at all.

Nicolai and I organized a themed section in the Journal of Institutional Economics on the judgment-based view with papers from Niklas Halberg, Jeff McMullen, and Andrew Godley and Mark Casson. Our introduction reviews the increasing importance of entrepreneurship in economics and management research, explains the relationship between entrepreneurship and economic organization, discusses some microfoundations of judgment, and distinguishes judgment from luck and judgment per se from good or skilled judgments.

The papers are available electronically at the links above, and in hardcopy in the Fall 2015 issue of JOIE.

29 May 2015 at 1:11 pm 8 comments

Artistic and Entrepreneurial Ecosystems

| Peter Klein |

We’ve featured several posts on the relationship between artistic and entrepreneurial creativity, arguing that great art, like great entrepreneurship, is rarely the product of isolated individuals, toiling away privately and swimming against the tide, misunderstood or ignored by the establishment. Rather, both art and entrepreneurship are usually highly social and commercial activities, with subtle and nuanced relationships among creators, patrons, rivals, and customers.

orange-and-yellowI’ve been reading two interesting books on modern art that emphasize the idea of an artistic “ecosystem,” a complex set of interactions among artists, curators, critics, buyers, and others with commercial interests, Daniel Seidell’s Who’s Afraid of Modern Art and Sarah Thornton’s Seven Days in the Art World. I see many parallels with the contemporary entrepreneurship literature and its focus on ecosystems of entrepreneurs, funders, suppliers, customers, makers of complementary products, regulators, and so on. Phone and tablet makers depend on app programmers and vice versa; engineers need venture capitalists and vice versa; founders and funders are embedded within clubs, networks, and associations; etc. As Seidell notes:

Serious art in the Western tradition — that is, art that is not content to “imagine” what we think we already know about the world of appearances and experiences, but probes more deeply into the nature of such reality through aesthetic form — has always been inextricably bound up with business. It is inseparable from patrons and collectors, with markets and dealers, with personalities and egos. . . .

Great art emerges out of the warp and woof — some would say the muck and mire — of commerce, of production and distribution that is at the very heart of [the art world].

Seidell is trying to help us understand the modern and contemporary art that frustrates and confuses most of us — abstract expressionism, pop art, Damien Hirst’s formaldehyde shark — by explaining that the value of these works comes not solely from the work itself, or even from the relationship between the work and the viewer, but from the way the work is perceived by critics, curators, collectors, and other artists. Much “high art” is actually produced for them, not for us. Of course, with entrepreneurship, the commercial value of any venture is ultimately determined by us, the consumers who willingly part with our hard-earned money for the services of the company or product. But, like art, entrepreneurship is a social activity, and great entrepreneurs know how to situate themselves within, or create from scratch, the ecosystem that makes their work great.

23 May 2015 at 2:02 pm 7 comments

The Mark of a Good Library

| Peter Klein |

I took this photo in the conference room of the Beijing Information Science and Technology University, School of Economics and Management. A display case holds a large collection of Chinese works and just two books in English. Most of you will recognize the silver one with the blue letters. Now, where is Organizing Entrepreneurial Judgment?

IMG_20150513_130234_edit

17 May 2015 at 7:09 am 7 comments

Schumpeterian Recombination and Scientific Progress

| Peter Klein |

Scientific progress, like economic progress, largely consists of combining and recombining existing resources and knowledge. At least that’s the way I interpret a new paper from Santa Fe Institute researchers Hyejin Youn, Luis Bettencourt, Jose Lobo, and Deborah Strumsky, “Invention as a Combinatorial Process: Evidence from US Patents” (via Steve Fiore):

Invention has been commonly conceptualized as a search over a space of combinatorial possibilities. Despite the existence of a rich literature, spanning a variety of disciplines, elaborating on the recombinant nature of invention, we lack a formal and quantitative characterization of the combinatorial process underpinning inventive activity. Here, we use US patent records dating from 1790 to 2010 to formally characterize invention as a combinatorial process. To do this, we treat patented inventions as carriers of technologies and avail ourselves of the elaborate system of technology codes used by the United States Patent and Trademark Office to classify the technologies responsible for an invention’s novelty. We find that the combinatorial inventive process exhibits an invariant rate of ‘exploitation’ (refinements of existing combinations of technologies) and ‘exploration’ (the development of new technological combinations). This combinatorial dynamic contrasts sharply with the creation of new technological capabilities—the building blocks to be combined—that has significantly slowed down. We also find that, notwithstanding the very reduced rate at which new technologies are introduced, the generation of novel technological combinations engenders a practically infinite space of technological configurations.

Or, as the Santa Fe press release puts it, “Most new patents are combinations of existing ideas and pretty much always have been, even as the stream of fundamentally new core technologies has slowed.” See also the authors’ earlier paper, “Atypical Combinations and Scientific Impact.”

2 May 2015 at 5:47 pm 1 comment

Peer Review in One Picture

| Peter Klein |

Great illustration from the Mad Scientist Confectioner’s Club (via Fan Xia).

car_peer_review_comic_12

29 April 2015 at 10:20 am 3 comments

Congratulations to Henry Butler

| Peter Klein |

butler_henry_11_smCongratulations to Henry Butler for being named Dean of the George Mason University School of Law. Henry has been director of GMU’s Law and Economics Center, and previously directed the Searle Center at Northwestern. In these roles he has been a prolific economic educator, following in the footsteps of his mentor Henry Manne (aka “Big Henry,” Henry Butler being “Little Henry”).

Younger readers may not know that Henry Butler is also a significant contributor to the early theoretical and empirical literature in transaction cost economics, particularly through two papers with Barry Baysinger, “Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition” (JLEO, 1985) and “The Role of Corporate Law in the Theory of the Firm” (JLE, 1985). These papers argued that, contrary to a naive reading of the nexus-of-contracts literature on the firm, institutional constraints such as contract law do have an effect on firm organization and governance. One strand of the research literature on the firm, taking its cue from Alchian and Demsetz (1972) and Jensen and Meckling (1976), maintained that the legal structure of the firm is relatively unimportant for organization and performance, as market participants can simply price out, and contract around, any constraints imposed by the legal system. Baysinger and Butler, following Coase and Williamson, showed that legal rules, particularly those related to incorporation, do matter in the presence of transaction costs. Their work on boards showed that board structure and composition affect firm performance, while emphasizing that boards and other governance mechanisms including corporate law are interdependent.

22 April 2015 at 9:55 am Leave a comment

Cocktail Construction Chart

| Peter Klein |

This may be the most useful document ever produced by a government agency:

gallery-1428082544-cocktail-a

It’s real, it was created at the US National Forest Service in 1972 or 1974, and a copy exists in the National Archives. See here and here for the backstory. (HT: Randy Westgren.)

21 April 2015 at 11:01 pm 3 comments

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Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

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