Entrepreneur's interpretation, innovation and coordination in Austrian subjectivist perspective

Abstract

This paper utilises the contributions of A. Schutz and F. Hayek to understanding the entrepreneur's subjective interpretation, innovation and coordination. In terms of Schutz's phenomenology, this paper argues that intersubjectivity allows economic activities to be coordinated. When the interpretative framework is disrupted by a novel stimulus, the entrepreneur will project action in the future perfect tense. Through typification, a new stock of knowledge is established to enable the entrepreneur to solve new problems. The society's stock of knowledge in which entrepreneurs share serves as a social coordinator. In terms of Hayek's cognitive psychology, during the perception process, the entrepreneur's mind can classify events coming in from the outside world. If incoming events are repeated, a pattern will register in the mind and become a rule of thumb in decision making. If the mental map fails to give a sensible account of a novel event, the entrepreneur is then in a state of conflicting experience. The result is a gradual reclassification of the events. New rules (and hence institutions) are reestablished to help to solve coordination problems. This paper concludes that both Schutzian and Hayekian perspectives can be synthesised into fruitful tools to understand the business phenomena.