Good Judgment, Good Luck: Frank Fetter’s Neglected Theory of Entrepreneurship

Abstract

Frank Fetter's contributions to entrepreneurship and the theory of the firm are usually overlooked, even though his original treatments are relevant to both the history of economic thought and contemporary entrepreneurship research. I highlight three ways Fetter's work adds to our understanding of the entrepreneurial process. First, entrepreneurs direct their enterprises via the careful delegation of authority to managers, thereby maintaining residual control over the firm; similar views were pioneered by Frank Knight and the Austrian economists, who continue to study cognate problems like judgmental decision-making and "proxy-entrepreneurship." Second, Fetter foreshadows Knight's influential distinction between risk and uncertainty, arguing that entrepreneurs bear uncertainty through their investment decisions; however, Fetter adds to Knight's work by explicitly considering the role chance and luck play in entrepreneurial success, a problem still debated in entrepreneurship studies. Third, Fetter argues that scarcity implies the active investment of resources, and thus, the need for entrepreneurship; this view hints at current research on entrepreneurial bricolage, as well as work emphasizing investment rather than opportunity as the defining concept of entrepreneurship. It also provides "microfoundations" for strategic entrepreneurship research.

Pure theory and progressive liberalism: Frank Fetter and the Austrian economists

“…However, documenting Fetter's relationship with the Austrians is only a first step in a larger research program that revolves around his life and ideas. As Hodgson (2008) and McCaffrey (2016) both argue, Fetter's work remains topical. And as indicated throughout, there is still ample room for studying his unique place in the history of economics and for applying his ideas to current controversies.…”

“…Salerno, 2004);research on capital, interest, rent, entrepreneurship (e.g. Foss and Klein, 2012: 48–50; Hodgson, 2008; McCaffrey, 2016);distribution theory and its application to research on firms and organizations (e.g. Lewin and Phelan, 1999);distribution theory and its application to research on business cycles and financial crises (e.g.…”

“…(4) research on capital, interest, rent, entrepreneurship (e.g. Hodgson, 2008;Foss and Klein, 2012, 48-50;McCaffrey, 2016);…”

“…The similarity between Fetter and the Austrians was observed early in his career (Hoxie, 1905; Whitaker, 1916), and has since become a trope of works studying his ideas (e.g. Dorfman, 1949; Coughlan, 1965; Rothbard, 1977; O'Driscoll, 1980; Herbener, 1999; McCaffrey, 2016). However, despite more than a century of acknowledgment – and apart from a few references to his early writings – none of the research on Fetter actually discusses his personal or professional relationships with the Austrians.…”

The Long Rehabilitation of Frank Fetter

“…Here, he plays a large role in debates about familiar topics such as capital, interest, and rent (Lewin 1997(Lewin , 2008Lynch 2010;Herbener 2011Herbener , 2013Topan and Păun 2013). However, this scholarship is being complemented by studies on entrepreneurship (Salerno 2008;Foss and Klein 2012, 48-50;McCaffrey 2016), the theory of the firm (Lewin andPhelan 1999, 2002), business cycles (O'Driscoll 1980), and monopoly (Salerno 2003(Salerno , 2004. 19 Outside the Austrian tradition, Fetter's work on capital is receiving renewed attention (Hodgson 2008), as well as his concept of consumer sovereignty (Desmarais-Tremblay 2020).…”