How do Firms Come to Be? Towards a Theory of the Entrepreneurial Process

The paper presents a model of the pre-firm — defined here as the entity that transforms an idea into a firm. The entrepreneur who undertakes the pre-firm process creates the firm through a set of entrepreneurial decisions that arise out of four interconnected decision domains. Every pre-firm, whether it aborts early or creates a firm, provides the economy with an opportunity to create economic novelty and discover/create new demand — and leads to constraints and consequences that influence economic realities down the road. Developing a theory of the pre-firm should enhance our understanding of a variety of economic phenomena in terms of their initial conditions.

Journal or Publication:
Frontiers of Entrepreneurship Research
Saras Sarasvathy
Year Published
Relevant Principles:
Pilot-in-the-Plane (Control vs. Predict)
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