INNOVATIVE ENTREPRENUERSHIP UNDER UNCERTAINTY

Purpose- This paper analyzes the economic activity of innovative entrepreneurship under uncertainty. We examine the profit maximization model of innovative firm under two kinds of uncertainties. The first kind of uncertainty pertains to market conditions. Erratic behavior of future prices creates market uncertainty. Methodology- This uncertainty is at least partly resolved by rational expectations hypothesis. But repercussions of market imperfections still loom large in the background of theoretical framework. The second kind of uncertainty is caused by technological changes and the patterns of innovations. We use the black-box approach methodology to production function and then improve it with a learning model. Findings- The pace and space of innovation adoption is retarded and narrowed by technological uncertainties. This problem is tackled by neoclassical innovation models to some extent. In particular, endogenous growth models and the industrial dynamics model attempt to endogenize the innovation and technology under rational expectations.Conclusion- But these models provide incomplete insights for they do not deal with learning behavior of innovative entrepreneurs. We propose an alternative learning model which takes into account the adaptive and imitative behavior of individual innovators whose economic actions matter in the general framework of real life economics.

Keywords:

Innovation, technology, uncertainty entrepreneurship, expectations,

PDF

___

Aghion, P. and Howitt, P. (1992). “A Model of Growth Through Creative Destruction,” Econometrica, Vol. 60, pp. 323-351.
Assous, M. and Lampa, R. (2014). “Lange’s 1938 Model: ‘Dynamics and the Optimum Propensity to Consume,’” GREDEG Working Paper No. 2014-2.
Dennett, D. C. (1998). Brainchildren. Essays on Designing Minds. London, Penguin Books.
Ericsson, R. and Pakes, A. (1995). “Markov-Perfect Industry Dynamics: A Framework for Empirical Work,” Review of Economic Studies, Vol. 62, 53-82.
Hacıoğlu, V. (2015). “Bayesian Expectations and Strategic Complementarity: Implications for Macroeconomic Stability,” Procedia-Social and Behavioral Sciences, Elsevier, Vol. 195, pp. 580-591.
Keuzenkamp, H. A. (1991). A Precursor to Muth: Tinbergen’s 1932 Model of Rational Expectations,” The Economic Journal, Vol. 101, No. 408, pp. 1245-1253.
Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London: Macmillan.
Kirzner, I. (1997) “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach,” Journal of Economic Literature, 35, Vol. 1, pp. 60-85.
Lange, O. (1943). “A Note on Innovations,” The Review of Economics and Statistics, Vol. 25, No. 1, pp. 19-25.
Lazonick, W. (2013). “The Theory of Innovative Enterprise: Methodology, Ideology, and Institutions” in Jamee K. Moudud, Cyrus Bina, and Patrick L. Mason, eds., Alternative Theories of Competition: Challengesto the Orthodoxy, Routledge, pp. 127-159.
Lewin, P. (2000). “Firms, Resources and Production Functions: The Relevance of the New Growth Economics for the Theory of the Firm,” A paper Presented to the School of Management, University of Texas at Dalles.
Lucas, R. E. JR. (1988). “On the Mechanics of Economic Development,” Journal of Monetary Economics, Vol. 22, 3-42.
Muth, J. F. (1961). “Rational Expectations and the Theory of Price Movements,” Econometrica, Vol. 29, pp. 315-335.
Nelson, R. R. and Winter, S. (1982). An Evolutionary Theory of Economic Change. London: The Belknap Press of Harvard University.
_________. (2002). “Evolutionary Theorizing in Economics,” Journal of Economic Perspectives, Vol. 16, No. 2, pp. 23-46.
Oltra, V. and Yıldızoğlu, M. (1998). “Learning and Expectations in R&D Decisions,” BETA-THEME Working Paper. Université Louis Pasteur. France.
Romer, P. M. (1986). “Increasing Returns and Long-Run Growth,” Journal of Political Economy, Vol. 94, pp. 1002-1037. Schumpeter, J. A. (1934). The Theory of Economic Development, Oxford University Press.
_________. (1942). Capitalism, Socialism and Democracy, New York: Harper and Brothers.
_________. (1947). “The Creative Response in Economic History,” The Journal of Economic History, Vol. 7, No. 2, pp. 149-159.
_________. (1939). Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process, New York: McGraw Hill.
Silverberg, G., and Verspagen, B. (1995). An Evolutionary Model of Long Term Cyclical Variations of Catching Up and Falling Behind, IIASA.
Silverberg, G. and Verspagen, B. (1995b) From the Artificial to the Endogenous: Modelling Evolutionary Adaptation and Economic Growth. IIASA Working Paper, 95-08, February.
Silverberg, G., and Verspagen, B. (1999). “Evolutionary Theorizing on Economic Growth,” in K. Dopfer (ed.), The Evolutionary Principles of Economics. Norwell: MA, Cambridge University Press.
Simon, H. A. (1982) Models of Bounded Rationality. Cambridge: MA: The MIT Press. Tinbergen, J. (1933). “The Notions of Horizon and Expectancy in Dynamic Economics,” Econometrica, Vol. 1, No. 3, pp. 247-264.
_________. (1932). “Ein Problem der Dynamik,” Zeitschriftfiur Nationaldkonomie, III. Bd., 2. H., pp. I69-84.
Winter, S. (1984). “Schumpeterian Competition in Alternative Technological Regimes,” Journal of Economic Behavior and Organization, Vol. 5, pp. 287-320.

Journal of Business Economics and Finance-Cover

Yayın Aralığı: Yılda 4 Sayı
Başlangıç: 2012
Yayıncı: PressAcademia

Arşiv