Entrepreneurship and Resource Allocation

Historical surveys show that most analyses of the entrepreneur focus primarily upon one aspect or function of entrepreneurship such as risk-bearing, innovation, or the perception of and response to market disequilibria. Despite the richness of entrepreneurial theory over the last two hundred years, economists have yet to adequately model the market for entrepreneurship. The analysis in this paper implies a supply of entrepreneurial expenditures function, that when coupled with a concept of the demand for entrepreneurial expenditures, yields a market model of the entrepreneurial process. The model is significant in three important ways; first, it synthesizes the different but complementary elements of entrepreneurial behavior that have been separately developed in the received literature, second, it explains how market forces drive an economy toward an efficient allocation of entrepreneurial resources, and third, it provides a framework for considering and analyzing policy actions to stimulate entrepreneurial activity and economic growth.