Frontiers of Entrepreneurship Research
1997 Edition

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HOW DO FIRMS COME TO BE? TOWARDS A THEORY OF THE ENTREPRENEURIAL PROCESS

D. K. Sarasvathy, Carnegie Mellon University


INTRODUCTION
THE ENTREPRENEURIAL PROCESS-DEFINITIONS

FIGURE 1 The Entrepreneurial Process
TABLE 1 Examples of an "idea"
A. Theories That Deal With Resources
B. Theories That deal With Stakeholders
C. Theories That Deal With The Environment

THE ENTREPRENEURIAL PROCESS-ENTREPRENEURIAL DECISIONS
THE ENTREPRENEURIAL PROCESS-THE MODEL
FIGURE 2 Interconnected causal domains for entrepreneurial decisions
THE ENTREPRENEURIAL PROCESS-THE ENTREPRENEUR
AN APPLICATION OF THE MODEL OF THE PRE-FIRM
THE PRE-FIRM-EMPIRICAL INVESTIGATIONS
THE PRE-FIRM-POSSIBILITIES FOR THEORETICAL LINKAGES
CONCLUSION
ACKNOWLEDGMENTS
REFERENCES

 

ABSTRACT

This paper challenges the basic assumption of microeconomics that firms and households are the primitive entities in the economic process.

The paper presents a model of the pre-firm-defined here as the entity that transforms an idea into a firm. The entrepreneur who undertakes the pre-firm process creates the firm through a set of entrepreneurial decisions that arise out of four interconnected decision domains. Every pre-firm, whether it aborts early or creates a firm, provides the economy with an opportunity to create economic novelty and discover/create new demand-and leads to constraints and consequences that influence economic realities down the road. Developing a theory of the pre-firm should enhance our understanding of a variety of economic phenomena in terms of their initial conditions.

 

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