Academic journal article New England Journal of Entrepreneurship

An Entrepreneurial Context for the Theory of the Firm: Exploring Assumptions and Consequences

Academic journal article New England Journal of Entrepreneurship

An Entrepreneurial Context for the Theory of the Firm: Exploring Assumptions and Consequences

Article excerpt

Entrepreneurs, as embodied and active members of a community, are not one-dimensional economic maximizers of self-interests (Calás, Smircich, & Bourne, 2009). Rather, they constantly balance their commitments toward their community at large and their individual social and economic needs, always framing their actions by local, socially constructed rules of engagement. In this article, we advance that a better understanding of entrepreneurs' (balancing) actions can help to inform a theory of the firm that may explain how entrepreneurial processes shape the socioeconomic environment of communities while at the same time serving the needs of individuals. Our interest is to develop a theoretical framework that allows for a unifying understanding of entrepreneurship as a new process creating the firm, taking into consideration spatial context as part of the socioeconomic process, thus developing a framework that is equally adequate to explain entrepreneurship and firms. In more concrete terms, we advance a theory of the firm that bridges the action of individuals (micro-processes) and the purposefully coordinated actions of collectives (macro-processes) while taking into account the locality of these processes. By way of conclusion, we explain the firm as a geographically embedded network of temporal (but recurrent) processes aiding entrepreneurs to achieve personal goals while (un)purposefully coconstructing their local socioeconomic environment.

There is a new and emerging understanding of the firm rooted in the field of New Economic Geography. This perspective is the outcome of a progressive understanding that seeks to link and explain simultaneously the micro and macro level of organizational analysis. At the macro level, it explores the relationships across firms and the firm as an organization. At the micro level, it describes the dynamics of individuals within firms and across firms. As such, it builds on earlier ideas of the firm and its processes, while expanding on the understandings of business and business activities. This conceptualization, besides taking into account the firm's geographical location and the role of individuals, suggests that socioeconomic relationships among organizations and between organizations and their environment are both relational (Bathelt & Glückler, 2003; Yeung, 2005) and processual in nature (Wooldridge, Calás, & Osorio, 2005). Accordingly, it advances two interrelated ideas. First, it suggests that the socioeconomic environment where individuals enact organizations' processes is simultaneously the outcome and the framework of these processes. Second, it proposes that organizations and their environment are open socioeconomic processes linked to, and influenced by, the geographical space where they take place.

While work in economic geography uses this theoretical lens to focus on understanding the spatial distribution of organizations (and individuals) as socioeconomic processes within regions (Bathelt & Glückler, 2003), we explore its potential to inform a processual theory of the firm for entrepreneurs and their enactment of the firm and its environment. To this end, we use the so-called business environment known as the cluster as an exemplar for several reasons. First, the cluster consists of a large concentration of entrepreneurs, entrepreneurial processes, and firms. Second, the cluster has been conceptualized as an organizational phenomenon that links the micro and macro levels of analysis. And, finally, the cluster has been defined as an above-average geographical concentration of interrelated firms affecting local conditions by fostering local economic wealth and an improved quality of life for neighboring stakeholders (Marshall, 1890; McDonald & Belussi, 2002). As such, our empirical work examines an artist and artisan cluster in Western Massachusetts to highlight how epistemological premises of the theory of the firm may frame understanding of the role of entrepreneurs as part of local dynamics, explore the link between firms and their environment (i. …

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