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Entrepreneurial opportunities, implicit contracts and market making for complex consumer goods

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Godley, A. C. (2013) Entrepreneurial opportunities, implicit contracts and market making for complex consumer goods. Strategic Entrepreneurship Journal, 7 (4). pp. 273-287. ISSN 1932-4391

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To link to this article DOI: 10.1002/sej.1167

Abstract/Summary

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

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > Leadership, Organisations and Behaviour
ID Code:29536
Uncontrolled Keywords:entrepreneurial opportunities; opportunity exploitation; implicit contracts; credible commitments; market making; price rigidity
Publisher:Wiley

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