The purpose of this paper is to elaborate Kirzner's concepts of entrepreneurial alertness and discovery in the subjectivist perspective. Specifically, it argues that the entrepreneurial discovery process is associated with the actor's interpretation framework, or the stock of knowledge, which is derived from everyday life experiences. Discovery in this context means that the actor interprets incoming information in a way different from perceptions of the general public. Two kinds of entrepreneurial discovery, namely ordinary and extraordinary, are discussed. In terms of mental constructs, ordinary discovery is a ‘backward’ interpretation in a sense that the entrepreneur endeavours to exploit profit opportunities by doing some things better. This type of discovery largely promotes change within an existing situation. Extraordinary discovery is a ‘forward’ interpretation that involves a new dimension of interpreting events. In this case, the entrepreneur explores profit opportunities by doing some things drastically different from the traditional. This type of discovery enhances revolutionary change to the economy. Inertia is explained, in the subjectivist perspective, as a result of actors taking knowledge for granted and being locked inside the old interpretation frameworks. The argument developed is applied to explain (1) why firms vertically integrate and, (2) why the socialist system impedes entrepreneurial alertness and discovery.
The Review of Austrian Economics – Springer Journals
Published: Oct 9, 2004
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