An Entrepreneurial Theory of the Firm

The most effective way to synthesise the insights of transactions cost-based and resource-based theories of the firm is to build the theory of the firm around the personality of the entrepreneur. The theory of entrepreneurship has a long tradition, going back to Cantillon and Say, but its contribution to the theory of the firm is often ignored. An entrepreneur is someone who specialises in identifying new opportunities for coordination. The entrepreneur's personal comparative advantage lies in processing information , and particularly in synthesising information. This requires considerable judgement, because the information collected is sometimes conflicting, and often incomplete. An entrepreneurial theory of the firm can encompass all the the major issues in current debate on the nature of the firm. The synthesising skills of the entrepreneur are closely linked to the core competencies of the firm. The appropriation of rents from entrepreneurial innovation raises important transaction cost issues, and the way these issues are resolved determines where the boundaries of the firm are drawn. The synthesis of information can be effected in different ways, and different types of synthesis lead to different forms of corporate evolution: organic growth, merger and acquisition, diversification , joint ventures, and so on.