The Palgrave Encyclopedia of Strategic Management

2018 Edition
| Editors: Mie Augier, David J. Teece

Entrepreneurial Rents

Reference work entry
DOI: https://doi.org/10.1057/978-1-137-00772-8_476
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Definition

Entrepreneurial rents are the reward for shouldering the risk and uncertainty inherent in attempting something new with respect to existing or emerging business activities.

Entrepreneurial rents are the amount by which a project’s ex post value exceeds its ex ante cost (Rumelt 1987). When such rents are received, they are the reward for shouldering the risk and uncertainty inherent in attempting something new. The novelty may involve anything from a minor improvement to an existing product or process to a radical innovation that creates or reorganizes an entire industry. It thus applies to entrepreneurship in the Schumpeterian (1942) sense and is not restricted to the establishment of a new company.

Entrepreneurial rents are distinct from rents attributable to other sources, such as the ownership of a scarce factor of production (Ricardian rents) or a monopoly position based on governmentally imposed barriers to entry (Teece and Coleman 1998). They are also different from...

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Copyright information

© Macmillan Publishers Ltd., part of Springer Nature 2018

Authors and Affiliations

  1. 1.Berkeley Research Group, LLCEmeryvilleUSA
  2. 2.Haas School of Business, University of California, BerkeleyBerkeleyUSA