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Institutions, uncertainty, and entrepreneurial judgment

Published online by Cambridge University Press:  05 July 2021

Claus Wiemann Frølund
Claus Wiemann Frølund*
Affiliation:
School of Business, University of South-Eastern Norway, Hønefoss, Norway
*
Corresponding author. Email: claus.frolund@usn.no
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Abstract

Entrepreneurial action takes place in a context of Knightian uncertainty. In order to overcome this uncertainty, entrepreneurs engage in a process of judgment resulting in a decision about the course of action. Institutions arise mainly to reduce economic friction by providing structure to human interaction and thus reducing uncertainty. However, institutions may also introduce further uncertainty and thus disrupt the judgment process preceding entrepreneurial action. The present paper builds upon recent efforts to integrate the concepts of uncertainty and institutions within the entrepreneurial context. Drawing on Frank H. Knight's seminal insight, the judgment-based view of entrepreneurship, and relevant concepts of entrepreneurial outcomes, the main contribution of the paper lies in the development of a model offering a coherent description of the way institutions affect uncertainty and the entrepreneurial process.

Keywords

Entrepreneurshipinstitutionsjudgmentuncertainty
Type
Research Article
Information
Journal of Institutional Economics , Volume 17 , Special Issue 6: Special Issue on the Centenary of Frank H. Knight's Risk, Uncertainty, and Profit , December 2021 , pp. 913 - 923
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

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