Review of Austrian Economics, 12: 43–64 (1999)
1999 Kluwer Academic Publishers
Towards an Austrian Theory of the Firm
AND PIERRE GARROUSTE
he 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”.
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 de-
veloping 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
CERDI-CNRS, University of Auvergne, 65 boulevard Fran¸cois Mitterand, 63000 Clermont Ferrand, France.
GATE-CNRS, University Lumiere Lyon 2, 93 chemin des Mouilles, 69130 Ecully, France. garrouste@
This ﬁnding is shared by a number of authors belonging to the Austrian tradition. O’Driscoll and Rizzo explain
in the very last pages of their book that: “Surprisingly, there is no subjectivist or Austrian theory of the ﬁrm.
This is true even though the subjectivist approach is particularly appropriate for analyzing ﬁrms as evolved social
institutions. Clearly, much more work needs to be done on a subjectivist or Austrian theory of ﬁrm behavior”
(1996, pp. 123–124). Adopting a similar point of view, Langlois notes that “Hayek’s theory of the market is not
fully general (...) the business ﬁrm is an anomaly or lacuna in his theory of economic order” (1994, p. 2), Loasby
even talks of “most obvious deﬁciency in Austrian economics” (1989, p. 166).