Question

What is the difference between homogeneous capital and heterogeneous capital? Why Would a theory of entrepreneur make more sense if capital if capital is heterogeneous rather than homogeneous?

Answer 1

Heterogeneous capital is a type of capital wher each capital asset has specific physical structure and is used for an entirely different purpose. In contrast, when capital goods are homogeneous in nature, they acquire a similar shape and serve a common purpose.

Scholars have argued that it is the Heterogeneous capital that gives the firm a comparative advantage over others and so it is pivotal to the entrepreneur. Because the entrepreneur is able use a variety of capital goods when it heterogeneous. This also implies that the mutual interaction among resources is helpful in granting market power to only certain firms over other firms.