Entrepreneurship, Capabilities, and Public Organizations

Abstract

States, state agencies, multilateral agencies, and other non-market actors are relatively understudied in the strategic entrepreneurship literature. While important contributions examining public decision makers have been made within the agency-theoretic and transaction-cost traditions, there is little research on the capabilities that develop in public organizations. Yet public organizations can be usefully analyzed as bundles of physical, organizational, and human resources and capabilities; they interact with other organizations competitively in pursuing of advantage; they can possess excess capacity, and they may grow and diversify in part according to a Penrosean capabilities logic. Public organizations may be managed as stewards of resources and capabilities by agents that can be viewed as public entrepreneurs. Public organizations frequently interact with private actors in processes that establish new markets, which we describe as “market co-creation.” We show how a capabilities approach sheds light on the nature and governance of public organization and elucidates the processes of market co-creation.