Towards an Austrian Theory of the Firm

Abstract

The Austrian school faces a true ambiguity concerning its ability to develop a positive theory of the firm. Although it never really forms the subject of specific studies, the enterprise nevertheless implicitly appears both in Austrian theories of entrepreneurship—which deal with the market behavior of enterprises facing the problem of knowledge—and in their writings on the microeconomic analysis of the production structure. Both works are important in the Austrian school’s research program. But while in the first case the enterprise is unavoidably interwoven with the concept of the entrepreneur, it represents at best, in the second case, nothing more than one of the potential bases for the implementation of a capital structure. It therefore seems fair to label the Austrian view of the enterprise “residual”. 1 This anomaly must be considered in relation to another particularity of the Austrian school, which is the relative separation between the two veins around which Austrian thought has developed, even though both deal with the same problem of coordination. One can only be struck by the few connections between the works dealing with the problem of knowledge coordination with those devoted to the coordination over time of the different stages that compose the production process in an Austrian perspective. It all looks as if Menger’s legacy had been strictly shared out within the Austrian family, some authors developing the cognitive and entrepreneurial dimension of Menger’s thought through a theory of market processes, such as Hayek (1937, 1945, 1946, 1967), Mises (1949), Lachmann (1986), Kirzner (1973, 1985, 1992), while others investigated the temporal dimension of ⁄ We wish to thank Nicolai J. Foss, Stavros Ioannides, Jacques-Laurent Ravix and Ulrich Witt, as well as the two anonymous referees of the review, for their comments on this paper. We alone are responsible for the errors