Constrained Entrepreneurship: An Interdisciplinary Extension of Bounded Rationality

Abstract

The intention of this paper is to extend critiques of rationality that have been developed across a range of disciplines and within a number of strands of feminism. Initially providing a brief review of rationality critiques, the paper then focuses on bounded rationality, the key behavioural assumption of transaction cost economics (TCE). It is shown that, to some extent, this notion of rationality erodes the atomistic model of economic activity central to the economic orthodoxy and is therefore an improvement on the neoclassical orthodox view of rationality. The paper then moves on to a more critical examination of bounded rationality through the development of the feminist slanted concept of ‘constrained entrepreneurship’. This new conceptualisation also provides a means of extending TCE through the incorporation of the Coasian insight that the development of TCE has tended to lose sight of the raison d’être of the firm, that of ‘running a business’ (Coase, 1988a). The concept of constrained entrepreneurship offers a useful, integrative, interdisciplinary framework in which to work and provides a focus for synthesising aspects of social network analysis (a central concern of the new economic sociology) and a feminist oriented perspective, with TCE, an important strand within new institutional economics.