| Recent strategic management literature has highlighted the relative ineffectiveness of isolating mechanisms to sustain competitive advantage in the new competitive environment (Hitt & Reed, 2000). Instead, it is argued that firms need to take an entrepreneurial approach to strategy and constantly update their sources of competitive advantage (Hitt, Ireland, Camp & Sexton, 2002a; Meyer & Heppard, 2000). The aim of this research study was to contribute to this growing research area by providing a framework for evaluating the returns to entrepreneurial behavior. As such, this study explored the nature of entrepreneurial rents and exploited various simulation tools and concepts from community ecology to model the dynamics of the wealth creation process.; A review of the economics and management literature reveals that entrepreneurial rents represent the temporary, ex ante non-contractible returns that a firm receives for exploiting new profit opportunities via entrepreneurial activity. These activities may take the form of arbitrage or innovations that systematically change the revenue, production, cost and transaction cost structure of the firm in search of wealth creation. Two models, a conceptual model and an empirical model, were developed to value the returns to such entrepreneurial activities. With respect to the latter, this model utilized a system dynamics framework to simulate the entrepreneurial rents created by implementing 11 entrepreneurial activities within a hog production system during the period of 1989-1995. The results of this simulation highlighted the temporary and dynamic nature of entrepreneurial rents and the organization constraints associated with engaging in entrepreneurial activities.; This research study also identifies 4 entrepreneurial firm capabilities that include: alertness, subjective judgment, dispersal ability and risk-taking. These capabilities were simulated using an agent-based model and experiments were run to examine their effect on firm performance over time and across different types of strategic landscapes. Furthermore, to inform the dynamics of firm behavior and the spatial elements of this model, an ecological metaphor of organizations was introduced that utilized concepts from community ecology and biogeography. The results of these experiments highlight the need for firms to develop entrepreneurial capabilities to succeed in the new competitive environment. |
