A possible dialogue between Schumpeter, Chandler, Thompson and Kirzner on entrepreneurial action and corporate structuring in an environment of economic freedom

Prof. Marcos A. Franklin

Mestrado Profissional em Administração do Desenvolvimento de Negócios

Prof. Dr. Paulo Rogério Scarano

Mestrado Profissional Economia e Mercados

The present essay aims to analyze the explanatory gains of the combination of perspectives of four authors, Schumpeter, Chandler, Thompson and Kirzner, on entrepreneurial action and corporate structuring, in a competitive market scenario. Entrepreneurial action and corporate action will be treated as equivalent for purposes of this work, as well as entrepreneur and entrepreneur. Despite the differences - which will not be the object of this work - among the authors listed, who often started from different theoretical perspectives, it is believed that it is possible to integrate part of their contributions to understand the importance of business action in the face of the competitive challenges inherent in an environment of economic freedom imposed on the different structures of companies.

Schumpeter is known for his analysis of the role of the entrepreneur in the introduction of innovations and of these for economic development. His assessment of the changes in the economic system with the advance to oligopolized capitalism is also well known. In this phase of capitalism, where there is a prevalence of large firms, the innovative process tends to be routinized in research and development departments and the very process of choosing business leaders is more akin to the political process, which "separates business success from success of man "(Schumpeter 1997: 86). In this phase, the schumpeterian entrepreneur is gaining an increasingly secondary role, tending to cool one of the dynamic elements of the economic system. This is because the Schumpeterian entrepreneur was originally responsible for the introduction of innovations, understood as a new product, a new production method, a new market or a new source of inputs, as well as new forms of industrial organization, initiating a wave of destruction (Schumpeter, 1961).

In an environment such as this, Chandler (1962) explores the idea that firms that belong to an activity, whose markets and environments are more stable, are few entrepreneurial decisions. However, in the face of situations in which markets and environments change rapidly, the shortcomings of this structure become more evident. In fact, for Schumpeter (1961), there is no reason to suppose suppression of competition, even in the oligopolized phase of capitalism, because nothing stops the process of creative destruction. The effects of this process require a long period of time to be observed. Thus economic strategy assumes its real meaning "in relation to this process and within the situation created by it (Schumpeter 1961: 111). In this sense, it is worth Chandler's (1962) observation that in order for the company's strategy to remain fixed for a given time, an organizational structure capable of attending to this strategy must be constructed, applying the resources that meet the demand from the market. Chandler (1962) adds that the nature of investment in these resources helps determine the course and direction of growth, favoring a change in organizational structure. After that, they systematically adjust their resources, within each function and each activity developed, in each department of the organization, according to market demand.

The challenge, as Schumpeter (1961) shows, is that real competition in a given sector is less related to the number of competitors and their market share than to the need to face, at all times, the threat of a wave of creative destruction, which, in the limit can destroy your business. It is this threat and this process that every firm needs, every day to face.

Thus, Schumpeter (1961) understands that government antitrust initiatives tend to be innocuous because they envisage how existing market structures are managed rather than how the economic system builds and destroys such structures. In addition, attempts to defend competition tend to focus on price competition, while competition in terms of quality and sales effort are also very important. This movement is intensified by the current pace of innovation and economic and financial globalization, which makes corporate environments increasingly sophisticated and complex.

In this sense, Thompson (1967) explains that the task environments of complex organizations turn out to be multifaceted or pluralistic. He considers this pluralism important: it means that organizations must change not only one but multiple elements, and that each is involved in an interdependent network in its own environment.

Considering these two approaches, especially in the environment, even in stable environments, in which companies are inserted, economic freedom is a very strong and influential variable. This condition presents itself in the form of an arrangement of exchanges between parts, for which each party expects to obtain gains from this exchange. In this way, the free market allows greater flexibility of action to the entrepreneurs. Thus, entrepreneurs and managers are expected to be constantly vigilant in the dynamism of the market. Some aspects are necessary for these entrepreneurs and managers: observe, create and react to the installed competition. Observe how competitors or potential competitors are behaving, create strategies, products / services in order to meet competitors and develop responsiveness.

Kirzner also attributes a central role to the constant alert posture for entrepreneurial action. For the author, the entrepreneur would be "endowed with a state of alert for new ends and for the discovery of resources unknown until then" (KIRZNER 1986: 41). It is this state of alert that will allow the entrepreneur to find untapped opportunities for earnings, discovering "where buyers have been paying too much and where the sellers have been receiving less and supplying this deficiency by offering to buy for a little more and to sell for a little less" (KIRZNER, 1986, p.48).

Barbieri (2001) points out that for Kirzner, business action has a balancing role in the market process, perceiving and adjusting the incompatibilities of the coordination process. This is because the exchange process occurs in a discovery environment and several agents have their original intentions frustrated. Some are overly optimistic about their products and end up not doing business that could be favorable to them because they believe they would find better opportunities (this is a kind of mistake that the market tends to eliminate in a slightly more automatic way). Others are overly pessimistic and end up doing business under worse conditions than if they were in another part of the market. Kirzner shows that the role of the entrepreneur is fundamental to eliminate this type of error, due to the excess of pessimism, because he perceives the opportunity of gain with the difference and does the arbitration. In turn, competition among rival entrepreneurs tends to drive the market process toward equilibrium. It is worth emphasizing that, for Kirzner, business action is fundamental even in ordinary activities, making the necessary adjustments required by the specifics of the place and the moment in which it operates.

In terms of market power, the degree of monopoly that certain firms attain and the market structures that are formed, Kirzner (1986) understands that, as long as there are no governmental obstacles to the entry of competitors and there is no exclusive control over the necessary inputs blocking new entrants, such a position was gained by the efficiency of these companies and because their entrepreneurs glimpsed, before others, the profit opportunities offered by those markets. In view of these conditions, it can be seen that, even in these more concentrated structures, there is no obstruction of competition.

Economic freedom ensures that each entrepreneur can freely pursue untapped gain opportunities in the marketplace and can unhesitatingly reap the fruits of the innovations he has introduced. The freedom of competition, in turn, ensures that the gains will spread throughout society. In addition, in competition there is no permanently stable organizational structure. Thus, Schumpeter, Chandler, Thompson and Kirzner show the importance of business action to adapt and direct organizations in the discovery process revealed by the market.

REFERENCES

BARBIERI, F. O processo de mercado na escola austríaca moderna. 2001. Dissertação de Mestrado em Economia – Universidade de São Paulo, São Paulo, 2001.

CHANDLER, A. D. Strategy and structure: chapters in the history of American Industry Enterprise, Cambridge, MIT Press, 1962.

KIRZNER, Israel M. Competição e atividade empresarial. Rio de Janeiro: Instituto liberal, 1986.

SCHUMPETER, J. A. A instabilidade do capitalismo. CARNEIRO, Ricardo. Os clássicos da economia. v. 2. São Paulo: Ática, 1997.

SCHUMPETER, J. A. Capitalismo, socialismo e democracia. Rio de Janeiro: Editora Fundo de Cultura, 1961.

THOMPSON, J. D. Organizations in action: social, science bases of administrative theory. New York: Mc Gew-Hill Book Company, 1967.