"Growth" in the theory of the firm: What role for entrepreneurship?

When explaining growth, the firm as its generator should be integrated into the theory. In this spirit, the aim of this paper is to connect growth theory to the theory of the firm. Since there is no such a link in neoclassical economics, we propose the Austrian economics as a framework to make a bridge, through the concept of entrepreneurship, between these two theories. We build our theory upon two concepts: the extended Kirznerian concept of entrepreneurship (Kirzner 1999) and those of physical and social technologies (Nelson 2002). Based on these, we differentiate between two types of entrepreneurship, both contributing to growth. The first is innovation which is an entrepreneurial act shifting the production possibility frontier (PPF) out. The second is spread which pushes the economy from an inefficient point towards an efficient one on the PPF. The essence of the firm in our theory resides in these two kinds of entrepreneurial acts.