Entrepreneurship and Firm Boundaries: The theory of a Firm

In this paper, we consider how a better understanding of entrepreneurial activities can help explain how firm and industry boundaries change over time; and how a more complete understanding of boundary setting can help us understand where entrepreneurial activities are directed. We argue that while entrepreneurs believe themselves to have superior ideas in one or multiple parts of the value chain, they often are short of cash – or of the ability to convince others to provide them cash / capital. On the basis of this observation we construct a simple model in which the entrepreneur has a value-adding set of ideas for “upstream” and “downstream” parts of a value chain, as well as for the ways to make these two parts of the value chain work together even better. Assuming that the entrepreneur’s....