Article
Frank Knight and the cognitive diversity of entrepreneurship
Journal of Institutional Economics
(2021)
Abstract
In Risk, Uncertainty and Profit (RUP), Knight (1921) develops a theory of the firm that stresses the important role of entrepreneurial judgment for a firm’s success. For Knight, entrepreneurial judgment is first and foremost the selection of ‘proxy entrepreneurs’ who are capable of making good judgments under uncertainty. In this sense, entrepreneurial judgment is essentially ‘judgment of judgment’. An over- looked implication of Knight’s position is the fact that it leads to an endorsement of distributed entrepre- neurship and responsibility. We deem this a very modern idea that challenges a completely hierarchical understanding of the firm. Knight himself does not thoroughly examine the institutional implications of the analytical framework he sets up in RUP. In this paper, we summarize the ‘philosophical vision’ of Knight’s framework and illustrate his rationale behind the distribution of entrepreneurship. We con- clude the paper with a discussion of potential institutional implications by referring to the danger of monocultures, the additional value created by cognitively diverse teams, and the effectiveness of venture capitalists.
Keywords
- Cognitive diversity,
- entrepreneurship,
- Frank Knight,
- judgment,
- uncertainty
Disciplines
Publication Date
May 19, 2021
DOI
10.1017/S1744137421000321
Citation Information
Mario J Rizzo and Malte F Dold. "Frank Knight and the cognitive diversity of entrepreneurship" Journal of Institutional Economics Vol. 17 (2021) ISSN: 1744-1382 Available at: http://works.bepress.com/mario_rizzo/65/