Markets, Firms, and the Process of Economic Development
We develop a framework to describe value creation as a process comprising resource combinations and exchanges and use the framework to show how organizations in general, and business firms in particular, interact with markets to create economic value for themselves, for their members, and for society
Even more curious than our choice of name, is how little attention scholars have given to the role organizations play in economic development, relative to that played by markets
Formal models of economic growth, offer little to reflect this process of creative destruction or to suggest any significant role for organizations, much less model the process itself
Notwithstanding the insights yielded by this work, Nelson writes, "The new formal models continue in the spirit of the older ones in treating the actions taken by firms as determined by the environment they are in, and in ignoring anything like Schumpeter's 'entrepreneurship' or Abramovitiz' 'enterprise"'
With the framework we have developed, it is clear why no fixed institutional matrix that naturally accompanies any organization of resources can contribute as much to economic development as a diverse mix of firms and markets
As we stated in the introductory section, our objective in this article was to lay the groundwork for a theory that would relate the role of firms to the process of economic development
To the extent these others join the firm and pursue their convictions at a lower cost than is available anywhere else, they expand Mf n Pf. This entrepreneurial process of motivating known but currently unproductive deployment possibilities and of stimulating the perception of new ones provides generally more productive opportunities at lower cost than would otherwise be possible