Henrik Berglund - A tale of two Kirzners

A tale of two KirznersPresentation from AoM 2011 San Antonio
Henrik Berglund
Chalmers University of Technology
Center for Business Innovation
www.henrikberglund.com
twitter: khberglund

Israel Kirzner
Student of Mises, inspired by Hayek
Important work on entrepreneurship
Alertness, discovery and opportunities.

Kirzner in context
Part of the greater Austrian tradition (uncertainty, subjectivism& marketprocess)
But his worksoften speak to ”neoclassical” economists
Focusing on entrepreneurship as an abstract economicfunction

Why is Kirzner interesting?
Well cited among entrepreneurship scholars
Has influencedimportantentrepreneurship research (e.g. Shane and Venkataraman, 2000)
But whichKirzner has extertedthisinfluence?

Kirzner Mark I

Kirzner Mark II

Kirzner Mark I
Single time period (uncertainty abstracted away)
Objectively existing arbitrage opportunities
Alertness as passively responding
Key references: 1973, 1997

Kirzner Mark I
“I feel it necessary to draw attention to entrepreneurship as a responding agency. I view the entrepreneur not as a source of innovative ideas ex nihilo, but as being alert to the opportunities that exist already and are waiting to be noticed” (Kirzner, 1973: 74).

Related ENT
“Although recognition of opportunities is a subjective process, the opportunities themselves are objective phenomena that are not known to all parties at all times.” (Shane and Venkataraman, 2000: 220).

Kirzner Mark II
Multiple time periods
Uncertainty is essential
Alertness: speculation and creativity
Key references: Kirzner 1982/1985, Kirzner 1999

Kirzner Mark II
“My emphasis on alertness to hitherto unperceived opportunities as the decisive element in the entrepreneurial function stemmed from my pursuit of a didactic purpose. This purpose was to distinguish the analysis of the market process (a process in which the entrepreneur plays the crucial role) as sharply as possible from the analysis of equilibrium states (in which all scope for entrepreneurial activity has been assumed away).” (Kirzner, 1982: 140-141)

Kirzner Mark II
“This writer has often talked as if alertness is able to identify existing opportunities for future profit. Purists, in both linguistic usage and philosophical consistency, may certainly be excused for expressing unhappiness with such loose or metaphorical use of language in regard to the non-existent future” (Kirzner 1992: 26 note 4).

Kirzner Mark II
“It was certainly not the intention, in deploying this analytical device, to deny that in the real world of production and (consequently) of multi-period decision making and radical uncertainty, entrepreneurship is exercised only by calling upon the entrepreneur’s qualities of boldness, innovativeness and creativity” (Kirzner, 1999: 11)

Kirzner Mark II
“…the futurity that entrepreneurship must confront introduces the possibility that the entrepreneur may, by his own creative actions, in fact construct the future as hewishes it to be” (Kirzner 1985: 155).

Kirzner Mark II
“The profit opportunities embedded in existing prices are thus extraordinarily effective communicators of knowledge (in a sense quite different from that in which prices summarize knowledge)” (Kirzner 1992: 149).
They encouraging entrepreneurs to: “conjecture (and to try out!) hunches that may in fact be closer to the truth (than the information that the prices themselves reflect)” (Kirzner 1992: 148).

Related ENT
“profit opportunities do not exist, objectively, when decisions are made, because the result of action cannot be known with certainty. Opportunities are essentially subjective phenomena. As such, opportunities are neither ‘discovered’ nor ‘created’ but imagined [and should be] treated as a latent concept underlying the real phenomenon of interest, namely entrepreneurial action” (Klein 2008: 176)

Related ENT
“entrepreneurial opportunities should be thought of in relation to entrepreneurial action. From this perspective, their ontological status, i.e. whether they exist or not, is of lesser importance as the opportunity perceptions themselves provide cognitive and practical drivers or ‘points of orientation’ that more or less temporarily guide entrepreneurial actions.” (Berglund 2007: 245).

Related ENT
“Opportunityexists out there, independently of particular actors. However, opportunities do not exist as complete, individual entities. Rather, opportunity exists as an uncountable in the form of technological possibilities, knowledge, and unfulfilled human needs backed with purchasing power. Venture ideas are the creations of individuals’ minds. They are specific (but changeable and more or less elaborate) entities that are acted upon.” (Davidsson 2003: 338-339).

Kirzner I & II - So what?
Avoid mistakes (e.g. misplaced concreteness)by understanding Kirzner as part of the greater Austrian tradition
But still valuable as inspirational heuristic for empirical research

Backup

Asset ownership
“An important point, is that ownership and entrepreneurship are to be viewed as completely separate functions” (Kirzner 1978, p. 47)

Asset ownership
“Kirzner's entrepreneur is a curious formulation. … In what sense can an entrepreneur ever make profits if he owns no capital to make profits on?” (Rothbard, 1985, p. 282-83).

Thank You!
Henrik Berglund
Chalmers University of Technology
Center for Business Innovation
www.henrikberglund.com
twitter: khberglund

Henrik Berglund - A tale of two Kirzners

by Henrik Berglund on Aug 20, 2011

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Henrik Berglund - A tale of two Kirzners — Presentation Transcript