Theoretical Assumptions in Entrepreneurship and Caveats of Entrepreneurial Action, Dr. Muhammad Ali
Dr. Muhammad Ali
Lecturer, Business School
Universiti Kuala Lumpur Johor
Purpose: The purpose of this study is to investigate the two complementary sets of assumptions in the field of entrepreneurship i.e. the individual and the decision-making nexus in which the individual operates. The authors are of the view that these two assumptions provide a concrete foundation in the development of entrepreneurship theory as the application of both approaches is apparent in widely different contexts. The complementary aspect will be studied in the context of an entrepreneurial organization to justify the claim.
Methodology: The author has explored notable theoretical foundations in the field of entrepreneurship and tries to formulate a scenario where two diverging theoretical assumptions can work together in complementary manner to aid the process of entrepreneurial action.
Findings: This study suggests that entrepreneurs act differently in the two situations i.e. putting together plans to support decision making in the discovery settings and constantly revising the plans to support the fundamental assumption in the creation settings. This analysis does not say much about the transition time between the two situations of uncertainty and risk. It is quite possible that both conditions might hold for some time despite being in contradiction at a fundamental level.
Originality: This study is an attempt to contextualize and differentiate between the individual and opportunity on the basis of decision-making process by taking into consideration the elements of market uncertainty and risk. The diverging theoretical assumption of transaction cost economics and incomplete contract theory are discussed under the pretext of uncertainty transforming into risk in the market situation.
Keywords: Transaction Cost Economics, Incomplete Contract Theory, Uncertainty, Risk, Firm, Entrepreneurship.