The significant failure rates observed in mergers and acquisitions (M&A) indicate structural deficiencies in business transactions. This paper identifies serious weaknesses in common valuation methods that play a key role in poor transaction practice. Common valuation methods are in particular discounted cash flow (DCF) methods. DCF methods are usually based on neo-classical theories that assume the existence of a perfect and complete capital market. As will be demonstrated, the underlying theoretical patchwork is contradictory and lacks utility. Therefore, utilizing DCF methods to value a business and deduce economic decisions from such a valuation is decision-making built on sand. Following a normative-deductive methodology, this paper seeks an alternative theoretical concept to build a business valuation theory on solid ground. Such an alternative is found in the Austrian School of thought. The resulting valuation concept, subjective business valuation theory, is based on the theory of marginal utility proposed by Gossen, which was rediscovered and refined by the scholars of the early Austrian School. Contrary to highly restrictive neo-classical valuation, subjective business valuation approaches reality and is therefore well-suited for practical implementation.

In the division of labor, economizing valuations require an appraisement of the structure of market prices of goods beforehand. Yet, investment decisions concerning the purchase of an entire business enterprise, for example, necessitate considerations beyond appraisement. An economizing valuation of businesses must be based upon both appraisement and a genuine investment appraisal which provides the valuing person with the marginal price he can barely accept. However, even though the computation of this marginal price is a necessary step towards an economizing investment decision, it is still not sufficient. In case of a company purchase, the price to be paid is unknown beforehand. Therefore, an economizing valuation of firms not only requires both appraisement and investment appraisal but also a negotiation of the final price to be paid. Because the corresponding negotiation process must be characterized as a terra incognita in Austrian economics, this paper investigates in depth the negotiation between the involved parties as the final step towards their economizing valuations and discusses purposive negotiation tactics.

Research Summary Entrepreneurial judgment remains a concept that resembles a black box. This article attempts to further open that black box by developing a dimensionalization of types of judgment. To achieve this, it joins recent efforts to explicitly link entrepreneurship to Simonian themes by integrating the notion of decision problem structures into the judgment‐based approach (JBA) to entrepreneurship. This article proposes a more comprehensive and nuanced approach to judgment in the face of decision problems we label “real‐structured.” Extending the JBA comes with several important implications: It uncovers additional entrepreneurial knowledge problems, provides new insights for both economic organization and judgment communicability, and informs research on entrepreneurial success and failure. It also sheds new light on the controversy over the relationship between effectuation and judgment. Managerial Summary When taking decisions, entrepreneurs cannot know how the future will pan out. Those decisions are made under conditions of uncertainty and only time will tell whether they prove astute or otherwise. The uncertainty of the future leads entrepreneurs to exercise judgment based on their individual beliefs and to act accordingly. The components of that entrepreneurial judgment remain rather underexplored. The purpose of this article is to dig deeper into, and thereby improve, the understanding of entrepreneurial judgment. The main result of this article is a four‐part dimensionalization of judgment, covering entrepreneurial (sub‐)judgments on the effects incurred by action, the appraisal of action alternatives, the goals underlying action, and resolving the decision problem.

Decision-making is at the heart of entrepreneurship. Unsurprisingly, entrepreneurship research has engaged with processes of entrepreneurial decision-making resulting, most importantly, in the notions of causation, effectuation, and enactment. Nevertheless, the range of processes delineated to date remains somewhat incomplete. Drawing on crucial insights from the analysis of decision problem structures reveals that entrepreneurship theory has lacked a process that both recognizes the ill-structuredness typically surrounding entrepreneurial decisions and places prognoses center stage. While effectuation implicitly addresses structural defects but denies prognoses a central role, causation emphasizes the importance of predictions while being associated with well-structured, risky environments, and thus, unaffected by structural defects. Theorizing about a combination thereof, that is, a process recognizing and considering the ill-structuredness of entrepreneurial environments yet building on predictions of the future is overdue. This paper, therefore, seeks to foster a more comprehensive yet nuanced understanding of entrepreneurial decision-making processes by outlining the intrinsic features of one such process that we term execution and relating it to existing processes.

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