Good Judgment, Good Luck: Frank Fetter's Neglected Theory of Entrepreneurship

36 Pages Posted: 8 Mar 2016 Last revised: 22 Jun 2017

See all articles by Matthew McCaffrey

Matthew McCaffrey

University of Manchester - Manchester Business School

Date Written: 2016


Frank Fetter’s contributions to entrepreneurship and the theory of the firm are usually overlooked, even though his original treatments are relevant to both the history of economic thought and contemporary entrepreneurship research. I highlight three ways Fetter’s work adds to our understanding of the entrepreneurial process. First, entrepreneurs direct their enterprises via the careful delegation of authority to managers, thereby maintaining residual control over the firm; similar views were pioneered by Frank Knight and the Austrian economists, who continue to study cognate problems like judgmental decision-making and “proxy-entrepreneurship.” Second, Fetter foreshadows Knight’s influential distinction between risk and uncertainty, arguing that entrepreneurs bear uncertainty through their investment decisions; however, Fetter adds to Knight’s work by explicitly considering the role chance and luck play in entrepreneurial success, a problem still debated in entrepreneurship studies. Third, Fetter argues that scarcity implies the active investment of resources, and thus, the need for entrepreneurship; this view hints at current research on entrepreneurial bricolage, as well as work emphasizing investment rather than opportunity as the defining concept of entrepreneurship. It also provides “microfoundations” for strategic entrepreneurship research.

Keywords: Frank Fetter, entrepreneurship, judgment, risk, uncertainty, capital, political economy

JEL Classification: B13, D81, L10, L26

Suggested Citation

McCaffrey, Matthew, Good Judgment, Good Luck: Frank Fetter's Neglected Theory of Entrepreneurship (2016). Review of Political Economy, Vol. 28, No. 4, pp. 504-522., Available at SSRN:

Matthew McCaffrey (Contact Author)

University of Manchester - Manchester Business School ( email )

United Kingdom

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