2 - Understanding Entrepreneurial Decisions

Summary

This chapter uses three classic examples to explain what entrepreneurship is NOT. Entrepreneurial decisions are different from managerial decisions, and cannot be understood within the neoclassical rational model. First, entrepreneurial decision-making is not scientific decision making, which is based on data and calculations, instead, it mainly depends on intuition, imagination, and judgement. Second, entrepreneurial decision-making is not about finding a solution under given constraints, instead it changes constraints. Third, entrepreneurial decision making is not solely profit focused, the entrepreneur has non-profit goals. Imagination is the most important for entrepreneurial decisions under an uncertain and indeterminate future. This means that mainstream economics’ externality theory, anti-monopoly theory, and corporate governance theory must all be revised. This also means industrial policy has lost its theoretical basis. This chapter is the core of the entire manuscript. It is extremely important for our understanding of the market economy.