A theory of entrepreneurship (Austrian Science Fund (FWF): P31248-G27)

We propose to study the choice of organizational structure by an entrepreneur who owns control or property rights with respect to some potential innovation. Apart from the option of simply selling the idea’’ and leaving the exploitation to someone else, this entrepreneur can invite partners into a joint enterprize or hire agents in return for wage payment. In the first case, the resulting partnership implies both shared control rights and shared investment burden for all participants. In the second case, a principal-agent environment is created in which the principal enjoys exclusive control. In both cases, the contract offer is made by the entrepreneur who actively participates in subsequent production. This proposal presents a structured research program that has the potential to delineate which option is best for the entrepreneur under which circumstances. As such, we propose to create an entirely novel theory of entrepreneurship potentially capable of explaining one of the most important choices an entrepreneur faces in both theory and practice.