26 YU facilitating communications. In short, the ﬁrm is a social world constructed for the purpose of coordination (Section 1). The ﬁrm in which production takes place has a capital structure, just as the whole economy does. The employment of capital resources is associated with the agent’s production plans, knowledge and expectations. Given the heterogeneity and multiple speciﬁcity of capital goods, capital resources are combined in such a way as the entrepreneur perceives to be most proﬁtable. A meaningful capital structure implies that these plans must be consistent with each other. Plans which are inconsistent with either the consumer or the producer plans will be revised. Changes in circumstance will cause the disintegration of the capital combinations which the owner of the ﬁrm previously considered optimal (Section 2). The growth of the ﬁrm is critically dependent on entrepreneurial discovery. The ﬁrm expands as the entrepreneur explores or exploits proﬁtable opportunities. As the ﬁrm grows, capital accumulation results in an increase in the number of production stages as capital combinations become more and more specialised. The increased number of stages is indica- tive of increased complexity, which, in turn, is indicative of an increase in the productivity of the ﬁrm.
The Review of Austrian Economics – Springer Journals
Published: Oct 6, 2004
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