Carl Menger's Grundsätze as a Foundation for Contemporary Entrepreneurship Research

Abstract

This paper takes the subjective value theory, conception of economic goods, and the hierarchy of needs from Carl Menger's Grundsätze der Volkswirtschaftslehre (1871) to elaborate a model of strategic entrepreneurship. Menger's account of subjective valuation by buyers of goods in market exchange fills a gap in most conceptual approaches to entrepreneurship, which are based on a highly impermeable boundary around the entrepreneurial firm. We examine how this account "closes" an economic model of entry for an entrepreneurial firm in an existing rivalry network by making the assessment of value explicit with respect to buyer needs relative to goods sold by incumbent firms. A formal representation of Menger's needs hierarchy in the face of qualitatively different market goods is the centerpiece of the strategic entrepreneurship model. This conceptual model is tied to methods of eliciting subjective valuations of product attributes and buyer needs fulfilment from the literatures of consumer behavior, marketing, and organizational psychology. This serves as a methodological basis for scholarship in entrepreneurship.