Beliefs as Determinants of Team Production: Implications on the Theory of the Firm

Abstract

This paper considers entrepreneurship as a way to implement interpersonal authority, i.e., to convince other persons of using their resources in an alternative way to the one that accordingly with their beliefs is the optimal one. The main contribution of the paper is to relate the assumption above with the following two questions, (i) how and why financial constraints can prevent the implementation of entrepreneurial projects; and (ii) how creditors’ priorities can cut down the financial requirements for implementing the firm. The legal form of the firm is related to the guarantee of those creditors’ priorities. The attractiveness of such an explanation lies in its capacity to justify a wide array of features of firms (entrepreneur origin, property rights, authority, financial constraints and creditor priorities) from just one basic assumption: the agents have differences in beliefs about how to organize the production.