Entrepreneurial governance and the nature of the entrepreneurial firm

Abstract

Everyone uses—but no one defines—the term “entrepreneurial firm.” Nobel laureate Oliver Williamson described the entrepreneurial firm as “a special challenge” to the theory of the firm. Organization scholars struggle with the “evergreen problem” of whether “entrepreneurial organizations are distinct from established organizations.” Building on a rarely used distinction in early transaction cost economics between “capitalist,” “entrepreneurial,” and “collective” enterprises, an entrepreneurial governance mode is here dimensionalized and distinguished from other modes of governing an enterprise. The critical dimension is the allocation of property rights, whereby entrepreneurial governance can be characterized as a hybrid between capital governance and labor governance. This notion is then used to derive the conditions that other relevant legal and organizational traits of the entrepreneurial firm should satisfy to be compatible with this hybrid character. The conclusions indicate three main trails for a new research agenda in a structural view of entrepreneurship: new organizational dimensions and forms; the design of ownership structures; and entrepreneurship and law.