Question

Is it possible for a super-entrepreneur to solve all of the coordination failure problems within a developing economy? Please give a specific example.

Answer 1

Answer: In a developing economy it is difficult for super-entrepreneur to solve all of the coordination failure issues. For example, education and skill development allows for a legal constraint on bonded workers however in regard to industrialization concern, why one agent can't become a super-entrepreneur is because of the below given reasons:

-- Limits to knowledge: There is a limit to knowledge as one individual is not in a position to obtain sufficient knowledge to oversee all investments

-- Failures in capital market: It is not possible for one entrepreneur to acquire all of the capital needed.

-- High agency costs / asymmetric information: In developing economy there are high agency costs of monitoring the management; and in designing and implementing schemes for a proper compliance. The potential purchasers in the industry have to face a problem of asymmetric information.

-- Lack of communication: There are failures to communication for one individual as does not knows whom to follow

For example, in a developing nation it is difficult to find a firm producing steel or even a large fraction of steel products, let alone one entrepreneur owing all the industries backwardly linked from steel usage industries into industries further down the chain of production