We review the place of Austrian economics in contemporary entrepreneurship and management research, focusing on the contributions of Israel Kirzner. We show that Kirzner’s central concept of entrepreneurial discovery has been vastly influential in theoretical and applied work on entrepreneurship, even though Kirzner’s larger research program has not been well understood. We also describe and assess a number of methodological, ontological, and cognitive critiques of the opportunity-discovery approach and review the most important alternatives, including the judgment-based view associated with Knight (1921) and more recent contributors. We conclude that the entrepreneurship and management literatures provide a useful example of how Austrian economics—Kirznerian economics in particular—can play an important role in shaping mainstream discussions, debates, and research programs in the social sciences.
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Academy of Management Review, Academy of Management Journal, Organization Science, Administrative Science Quarterly, and Strategic Management Journal.
Chiles et al. (2012) document a steady increase in interest in Austrian economics more generally within the top management journals. Schumpeter remains the most highly referenced, followed by Kirzner and Hayek; Mises, Menger, Shackle, Lachmann, Rothbard, Wieser, and Bӧhm-Bawerk are referenced much less frequently than Schumpeter, Kirzner, and Hayek.
The management literature on Schumpeterian entrepreneurship ignores almost entirely the central role of bank credit expansion in facilitating innovation within Schumpeter’s system, however (Rothbard 1987).
We exclude here what Klein (2008b) calls “occupational” or “structural” approaches to entrepreneurship, which equate entrepreneurship exclusively with self-employment or small business management.
Critics have also charged Shane with misunderstanding, and even trivializing, the critiques of the opportunity-discovery view (Klein 2013).
The same is true of other classic contributions to the economic theory of entrepreneurship. For Knight and Mises, entrepreneurship is that which generates profit under uncertainty, while for Schumpeter (at least in some of his writings), entrepreneurship is that which innovates. Each writer is invoking entrepreneurship instrumentally, as a means of explaining something else (Klein 2008b).
Of course, Kirzner describes his own contribution as providing a theory of action as discovery that is distinct from action as optimizing (“Robbinsian maximization”). Kirzner sees alertness or discovery as the essence of purposeful human action. Nonetheless, we regard his account as methodological, not ontological. For Kirzner’s purposes, it doesn’t matter what alertness is, only what alertness does.
Actually this approach does build on Kirzner—his theory of capital (Kirzner 1966), not his theory of entrepreneurship.
Shane (2003, pp. 18–19) argues that alert entrepreneurs can make losses by pursuing opportunities that turn out to be unprofitable. While this view appears to hold entrepreneurial opportunities as objectively existing while permitting entrepreneur’s to earn losses, it solves little. Rather, it undermines the value of using the opportunity construct to study entrepreneurship since the possibility of unprofitable opportunities only brings our attention back to the nature of entrepreneurship: it cannot be identification of opportunity, but the subjective valuation (or judgment) of market situations that can yield profit.
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We thank Peter Boettke, James Chappelow, Chris Coyne, Todd Chiles, Nicolai Foss, Joseph Salerno, Mark Thornton, and Jingjing Wang for helpful comments, corrections, and conversations.
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Klein, P.G., Bylund, P.L. The place of Austrian economics in contemporary entrepreneurship research. Rev Austrian Econ 27, 259–279 (2014). https://doi.org/10.1007/s11138-014-0256-x
- Israel M. Kirzner