The Entrepreneurial Function as an Element of the Institutional Framework of Capitalism: The Enterprise, Not the Pure Entrepreneur, is Relevant

Abstract

The enterprise is a part of the institutional framework of capitalistic societies. It is a fictional agent created by accounting and sanctioned by law. It is based on capital and its purpose is to yield monetary profit. This article demonstrates that in capitalism, the entrepreneurial function is not fulfilled directly by pure entrepreneurs, but indirectly through enterprises. By situating the entrepreneurial function in the enterprise, this article fruitfully combines the gist of the theories of the pure entrepreneur with that of the institutionalist approach. The applicability of the main point of the article is demonstrated by reference to three approaches to the theory of the entrepreneur. It is the institutional framework of capitalistic societies that allows for the entrepreneurial function, regardless of whether the entrepreneur is defined as (1) the one who brings about equilibrium, (2) the one who destroys equilibrium and thus creates development and progress, or (3) the one who bears the uncertainty which prevails in disequilibrium. By factoring in the role of institutions, the article demonstrates that the theory of the entrepreneur does not have to be a mere dynamic add-on to otherwise static economics. Instead, the entrepreneurial function is necessary for the existence and coordination of production factors, and therefore for economic theory itself.