Outstanding Issues in Nonmarket Entrepreneurship Research
As detailed in the above review, nonmarket entrepreneurship research is becoming a vibrant branch of modern Austrian scholarship. Such research has seen theoretical inquiry at each of the four institutional levels and empirical application to an increasingly rich variety of contexts.
Yet, despite this progress, our understanding of the nonmarket entrepreneurial process still has important theoretical gaps. In fact, a cynical view of nonmarket entrepreneurship research is that of a puzzle factory, where pieces are being produced but no overarching picture is emerging. While the goal of this chapter is to synthesize this work into a coherent framework, the exercise has also revealed a number of fundamental questions and opportunities to advance the perspective. I discuss several of these below.The “Essence” of Nonmarket Entrepreneurial Action
A fundamental issue is whether the entrepreneurial lens is in fact (1) theoretically sound and (2) practically valuable in nonmarket contexts. Theoretical soundness relates to the coherence of the constructs employed; practical value relates to the explanatory power of the approach relative to others (e.g., a neoclassical approach to nonmarket choice). While I believe there is a case to be made on both counts, I also see legitimate issues that have yet to be sufficiently addressed.
The Austrian view tends to treat “entrepreneurial action” as a ubiquitous human phenomenon. While this premise opens door to inquiry on nonmarket entrepreneurship, it also runs the risk of tautology: if entrepreneurship explains all nonmarket action, does it explain any nonmarket action after all? The question lurks in the shadows of this growing body of research. Scholars should also ask in what sense a “theory” of nonmarket entrepreneurship currently exists. To see this, consider that the commonly understood socioeconomic benefits of market entrepreneurship—wealth creation, social coordination, etc.—greatly depend on well-functioning market institutions.
Nonmarket entrepreneurship research often borrows theoretical constructs, like opportunities or alertness, from the market context without attending to implications of an altered institutional context. Thus, there is a need to rigorously identify nonmarket feedback mechanisms, which would lead to consistent pattern predictions about opportunity identification and exploitation in this context.The Intersection of Market and Nonmarket Entrepreneurship
In this review, I have largely treated market and nonmarket spheres of action as mutually exclusive. This was done because of the prevalence of this perspective in extant scholarship on nonmarket entrepreneurship, and for the delineating of boundary conditions for the emerging conversation on nonmarket entrepreneurship. Scholars of the market process proclivity rarely explore entrepreneurs’ roles across these two contexts, tending to conceptualize entrepreneurs as either market or nonmarket actors. In the language of Table 5.1, existing work focuses on entrepreneurial actions in one Exchange Context at a time (cf., Wagner 2016; Boettke and Storr 2002). This may be problematic, considering that individuals frequently seek political or institutional change as part of their efforts to exploit market opportunities (Lucas and Fuller 2017b). More generally, as Lavoie and Chamlee-Wright (2000) argue, culture impinges thoroughly on market activity; individuals’ beliefs about concepts like authority, exchange, and markets profoundly influence the way they act in the market (for an application to economic development, see Chamlee-Wright 2002).
Consider the example of Uber, the ride-sharing service that actively engaged regulators from the beginning, in order to not be regulated as a taxi service. Were nonmarket entrepreneurship absent from the venture’s efforts, it is unclear whether or not the ride-sharing industry would have emerged at all. Entrepreneurial action is often characterized by simultaneous market and political arbitrage, or concurrent creative destruction and policy disruption (Elert and Henrekson 2016).
Market entrepreneurs may also seek to bring about cultural change as part of the opportunity exploitation process (e.g., through marketing). However, the longstanding debate among Kirznerian, equilibrating entrepreneurship versus Schumpeterian, disequilibrating entrepreneurship in many ways overlooks this issue of “hybrid” entrepreneurship that spans multiple institutional levels.The point here is that we have many comparative studies and fascinating cases of political entrepreneurship, but we know surprisingly little about the intersection of market and political entrepreneurship. This issue affords many compelling avenues for future research. For example, what are the implications of profit opportunity exploitation if actors first obtain political favoritism that facilitates the opportunity’s profitability? How is the equilibrating function of entrepreneurship affected by endo- genizing regulation to the entrepreneur’s political action? How does this kind of “entangled” entrepreneurship square with the dynamics of interventionism framework (Ikeda 2002), wherein policymaker decisions are largely treated as the exogenous impositions of benevolent actors? How do we conceptualize entrepreneurship in a world where the “rules of the game” are themselves part of the game?
Institutional Durability and Nonmarket Entrepreneurship
The proposed connection of nonmarket entrepreneurship to Williamson’s (2000) institutional hierarchy invites theoretical questions about the effectiveness of nonmarket entrepreneurship, especially at the higher levels. Specifically, consider the implications of entrepreneurial action in relation to Williamson’s propositions about the durability of institutions at the different levels. Williamson claims that changes to the higher levels (e.g., L1) take exponentially longer to change than the lower levels (e.g., L4). Whereas resources are continuously reallocated (L4), governance structures are said to last for one to ten years; more fundamental formal institutions such as constitutions (L3) tend to persist intact anywhere from ten to 100 years.
Informal institutions (L4) are the most durable of all, with changes occurring over the course of 100 to 1000 years. Furthermore, Williamson also asserts that with increasing durability comes an increasing role for spontaneity in the formation of the institutions: higher level institutions emerge rather than being brought about by design.The implications of these propositions for nonmarket entrepreneurship are potentially profound, but they are largely unexplored. As entrepreneurs engage increasingly durable institutions, does this mitigate their ability to achieve their ends? As spontaneity becomes increasingly important in determining outcomes, does this mean that entrepreneurs are less relevant—or perhaps more relevant, due to the process of marginal changes they initiate? How does durability impact the strategies that nonmarket entrepreneurs pursue, or the ways that they organize? Are longer planning horizons or more collective action required? Answering such questions would advance our understanding of the relationship among agency and emergence in institutional change.
Nonmarket Coordination and Economic Calculation
Austrian scholars are keen to point out the implications of the absence of comparable prices and profit and loss feedback outside the market process. This is an important task; as Hayek writes, “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design” (Hayek 1988, 78). The limits on human design have been elucidated across a range of issues from the impossibility of socialism (Mises 1920) to the failures of humanitarian efforts (Coyne 2013). One result of this is that Austrian nonmarket literature tends to emphasize “negatives” in the nonmarket context, highlighting the limits of nonmarket coordination (Skarbek and Leeson 2009).
Yet, some scholars have also argued for the possibility of “price-like” nonmarket coordination. This approach conceptualizes human exchange and interaction as involving “markets” even where money prices are absent.
Presenting a vision for Austrian law and economics, Leeson points out, “Nonmarket decision making is as much decision making as that which occurs in the context of conventional, explicit markets” (Leeson 2012a, 188). For Leeson, a focus on subjective beliefs and purposive action facilitates analysis of the emergence and persistence of legal institutions. This perspective implies that institutions arise endogenously through human interaction, suggesting the “efficiency” of even objectively false beliefs that persist over time (Leeson 2012b). Such a conclusion is, at a minimum, quite intriguing: while rooted in the Austrian notions of subjective beliefs and purposeful action, it also suggests powerful forces of spontaneous coordination in the absence of economic calculation.Similarly, in his work on digital privacy regulation, Fuller conceptualizes free (i.e., non-priced) internet browsing as a market, involving suppliers of web content and demanders who “pay” for access to this content with the provision of non-sensitive digital information (Fuller 2018). If digital information is the “price” paid for digital content, Fuller reasons, then regulation restricting the exchange of such information generates a “price control.” He then draws on the dynamics of interventionism to present evidence analogous to the “multiple margins of adjustment” (Boettke and Candela 2017) brought by competition in a price-controlled market.
These examples are not unique but rather illustrate a larger body of work highlighting the propensity for market-like competition and coordination beyond the scope of market institutions (Leeson and Harris 2018; Leeson and Suarez 2017; Lemke 2016; Skarbek 2014). This literature on nonmarket, non-price coordination can be positioned in the Nonmarket-Risk cell of Table 5.1. But this work also evokes new tensions and questions for scholars of nonmarket entrepreneurship.
For instance, how might patterns of nonmarket coordination—lacking money prices, and sometimes even property rights—be reconciled with the centrality of economic calculation to social coordination? This question is critically important for scholars working in the NonmarketUncertainty context.
Elinor Ostrom and the Bloomington School offer an interesting framework for understanding the design of nontraditional institutions to govern common pool resources (Ostrom 1990). Yet, one of the critical points of departure in the Austrian research tradition is that prices, property rights, and profit and loss are non-negotiable institutional prerequisites of economic coordination through entrepreneurship (Mises 1920). Market entrepreneurs provide an equilibrating role that is only possible in the presence of these prerequisites; without them, economies collapse (Boettke 1993). So what, then, are “political,” “cultural,” or “ideological” opportunities, which do not involve pecuniary signals? How does the nonmarket entrepreneur identify them, assessing that the benefits outweigh the costs? How does she know if she has successfully exploited the opportunity—even ex post—without monetary reward or penalization? What feedback mechanisms exist in these contexts, and toward what outcomes do they direct nonmarket entrepreneurial behavior? As these questions indicate, much work remains in the development of a systematic approach to nonmarket action through the lens of entrepreneurship.