Working Paper Series, Department of Industrial Economics & Strategy, Copenhagen Business School
Peter G. Klein
Entrepreneurship and Corporate governance.
Abstract: This paper explores the relationship between the theory of
the firm and the theory of financial markets. I begin with Misesís claim
that the defining feature of an industrialized, market economy is the use
of financial markets to allocate capital among firms and among industries.
This presupposes a market for the ownership and control of productive
assets. Unfor-tunately, the Austrian theory of capital markets is
relatively undeveloped. Focusing on the financial-market entrepreneur, I
outline some features of an Austrian theory of corporate gover-nance and
relate them to the internal organization of the firm. I begin by reviewing
the tradi-tional, production-function theory of the firm and suggesting two
alternative perspectives: that of the entrepreneur and that of the
capitalist. I next discuss the Coasian or "contractual" approach to the
firm and argue that it provides a useful organizing framework for Austrian
research on the firm. The subsequent section proposes entrepreneurship and
economic calculation as building blocks for an Austrian theory of the firm.
Finally, after a brief review of capital-market behavior and the
disciplinary role of takeovers, I outline four areas for Austrian research
in corporate governance: firms as investments, internal capital markets,
comparative corporate governance, and financiers as entrepreneurs.
Keywords: austrian economics; capital markets; corporate governance; (follow links to similar papers)
JEL-Codes: L22,; G30; (follow links to similar papers)
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