Entrepreneur: an Economic Theory

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preneur The Entrepreneur
Team FOS

Dedicated to the memory of my cousin Nowell Barlow

The Entrepreneur
An Economic Theory, Second Edition

Mark Casson
Professor of Economics, University of Reading, UK

Edward Elgar
Cheltenham, UK • Northampton, MA, USA

© Mark Casson 1982, 2003 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GL50 1UA UK Edward Elgar Publishing, Inc. 136 West Street Suite 202 Northampton Massachusetts 01060 USA First published 1982 Second edition 2003 A catalogue record for this book is available from the British Library

Library of Congress Cataloguing in Publication Data Casson, Mark, 1945– The entrepreneur : an economic theory / Mark Casson.— 2nd ed. p. cm. Includes bibliographical references and index. 1. Entrepreneurship. I. Title. HB615 .C37 2003 338'.04—dc21 2002037937 ISBN 1 85898 910 8 (cased) Typeset by Manton Typesetters, Louth, Lincolnshire, UK. Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall.

Contents
List of figures List of tables Preface to the second edition Introduction PART I THEORETICAL FOUNDATIONS 9 19 34 43 56 vi vii viii 1

1 The significance of the entrepreneur 2 Basic concepts of the theory 3 The entrepreneur as intermediator 4 The competitive threat to the entrepreneur 5 Partial coordination: the case of innovation PART II THE MARKET-MAKING FIRM

6 Making a market 7 Internal and external markets 8 The market for information 9 Speculative intermediation and the role of inventory management 10 Organizing the supply of market-making services PART III SYNTHESIS 11 12 13 14 15 Growth and dynamics of the firm The market for entrepreneurs Social mobility and the entrepreneur Alternative theories of the entrepreneur Conclusions

79 106 119 135 146

161 188 200 215 233 244 265

Bibliography Index

v

Figures
3.1 3.2 4.1 4.2 5.1 5.2 5.3 5.4 6.1(a) 6.1(b) 6.1(c) 6.2 11.1 11.2 11.3 12.1 The Edgeworth box Offer curves in the Edgeworth box Competition between two entrepreneurs in intermediating an exchange of goods using a multi-part tariff Competition between two entrepreneurs in intermediating an exchange of goods using a one-part tariff Technological innovation: a partial analysis Product innovation: a partial analysis Arbitrage: a partial analysis Arbitraging stocks: a partial analysis Total cost functions for the first market-making activity Total cost functions for the second market-making activity Total cost function for market making Determination of the quantity of trade with market-making costs Diffusion curves with and without advertising Dynamics of demand for a new durable product Information feedbacks on product quality improvement: their internalization within the firm Steady state of the market for entrepreneurs 37 40 45 47 61 63 66 68 101 101 101 103 173 175 177 196

vi

Tables
2.1 2.2 Decision-making activities and the qualities they require Additional activities required when there is functional specialization within decision making, and the qualities they require An analysis of entrepreneurial qualities Classification of obstacles to trade, and the corresponding market-making activities Market-making activities and their most suitable contractual arrangements Alternative forms of entrepreneurship Alternative methods of advancement and their requirements Personal abilities and the way they are acquired 25

2.3 6.1 10.1 13.1 13.2 13.3

30 31 84 148 203 205 209

vii

Preface to the second edition
I am delighted that the continuing demand for this book warrants the publication of a new edition more than 20 years after it first appeared. Although the book has been in print almost continuously since it was first...
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