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- Title
ENTREPRENEURIAL OPPORTUNITIES, IMPLICIT CONTRACTS, AND MARKET MAKING FOR COMPLEX CONSUMER GOODS.
- Authors
Godley, Andrew Christopher
- Abstract
This article extends the theory of entrepreneurial opportunity exploitation, outlining how under certain conditions, opportunity exploitation is dependent on market making innovations. Where adverse selection and moral hazard characterize markets, consumers are likely to withdraw regardless of product quality. In order to overcome consumer resistance, entrepreneurs must signal credible commitments. But because consumers purchase without fully specifying requirements, entrepreneurs' commitments take the partial form of implicit contracts, creating strong mutual commitments to repeated transactions. These commitments enable novel markets to function, but introduce additional costs. This article illustrates the theory with the historic case of Singer in sewing machines.
- Subjects
ENTREPRENEURSHIP; MARKETING research; ADVERSE selection (Commerce); CONSUMER goods; TECHNOLOGICAL innovations; CONSUMER behavior
- Publication
Strategic Entrepreneurship Journal, 2013, Vol 7, Issue 4, p273
- ISSN
1932-4391
- Publication type
Article
- DOI
10.1002/sej.1167