Let’s use Theories of Entrepreneurial Opportunity to Explain Entrepreneurs Develop Profitable New Ventures

Published in 2016

Introduction

This short essay dives into the juicy realm of entrepreneurial opportunity theories and how they explain the birth of successful new ventures.

Entrepreneurial activity kicks off when someone or some savvy organization jumps into the ring to snag a piece of that sweet profit pie that pops up in the economy (Alvarez & Barney, 2007). But here’s the kicker: these opportunities aren’t exactly flashing neon signs for everyone to spot. Nope, sometimes it’s like having a secret decoder ring of knowledge that only a select few possess (Ardichvili et al., 2003). This know-how can be the golden ticket for recognizing market quirks or knowing what’s lacking in the goods department. And let’s face it, not everyone’s got that ticket. So while some folks are busy seizing opportunities, others might be left scratching their heads (Barringer & Ireland, 2010).

Now, when we talk about entrepreneurship in areas like healthcare or electronics, it’s all about having your finger on the pulse and whipping up something fresh that folks need (McGrath & MacMillan, 2000). It’s like being a mad scientist but with dollar signs in your eyes.

But wait, there’s more! While some theories say entrepreneurial wizards are all about spotting existing opportunities or whipping up products to fill a gap, others swear by the gospel of creativity (Dimov, 2011). It’s like the difference between finding a hidden treasure chest and conjuring up a whole new island. Creativity is the fuel that powers the entrepreneurial engine, sparking innovation and birthing shiny new businesses (McGrath & MacMillan, 2000). Schumpeter, the OG of entrepreneurship, even said that if existing businesses snooze on innovation, they’re basically signing their own death warrants (Schumpeter, 1934). And guess what? Studies back him up, showing that creative destruction is the name of the game.

So, here we are, dissecting the dance between creativity, opportunity, and getting down to business. It’s like trying to figure out if the chicken came before the egg or vice versa. Can we really explain the hustle and bustle of profitable entrepreneurship just by looking at opportunities? Or is there some secret sauce of creativity that we’ve been overlooking? That’s the puzzle we’re here to crack.

Lets Discuss

The entrepreneurial function essentially involves discovering, evaluating, and exploiting various opportunities, such as new products and services, as well as new production processes, strategies, organisational forms, and even markets for non-existing products (Cuervo et al., 2007). The entrepreneurial opportunity can thus be succinctly defined as “an unexpected and therefore undervalued economic opportunity” (Cuervo et al., 2007, p18).

Shane (2000) reckoned that entrepreneurial opportunities crop up because different folks have different ideas about the value of certain resources or when those resources get turned from inputs into outputs. So, basically, it’s all about seeing things from different angles and spotting potential where others might miss it (Shane, 2000).

Now, when we talk about entrepreneurship, we’re not just talking about starting a business. It’s a whole bundle of concepts like entrepreneurial factor, entrepreneurial initiative, and entrepreneurial behaviour (Alvarez & Busenitz, 2001). The entrepreneurial factor is like a new ingredient in the mix, shaking things up and bringing fresh ideas to the table. And the entrepreneurial function? Well, that’s all about getting down to business, whether it’s creating something new or jumping on an opportunity (Alvarez & Busenitz, 2001).

As for entrepreneurial behaviour, it’s like a cocktail of innovation, risk-taking, and being proactive (Schumpeter 1934; Knight, 1921; Miller, 1983). It’s about being willing to take a leap of faith and try something new, even if it means stepping out of your comfort zone. And let’s not forget about entrepreneurial initiative, which is all about spotting gaps in the market and coming up with fresh ideas to fill them. It’s about being ahead of the curve and thinking outside the box (Cuervo et al., 2007).

Lastly, there’s entrepreneurial spirit, which is all about being on the lookout for new opportunities and getting creative with how you approach them. It’s about being curious, adventurous, and always ready to explore new horizons (Cuervo et al., 2007). So, when it comes down to it, entrepreneurship is about more than just starting a business—it’s a whole mindset, a way of thinking and acting that’s all about seizing opportunities and making things happen.
So, check it out: according to big shots like Ucbasaran (2009) and Lee and Paterson (2000), entrepreneurs are all about one thing: making money. Yep, they argue that at the heart of it all, entrepreneurship boils down to creating business ventures that rake in the cash. It’s like being a money-making maestro, orchestrating deals and ventures that bring in the big bucks.

Now, the study of entrepreneurship isn’t just about admiring successful entrepreneurs from afar. It’s about digging deep into why they do what they do, when they do it, and how it all plays out in the end (Lee and Paterson, 2000). It’s like peeling back the layers of an onion to uncover the juicy bits inside.

And to tackle these burning questions, we’ve got two heavyweights in the ring: the Discovery Theory and the Creation Theory (Lee and Paterson, 2000). These bad boys are all about figuring out why humans do what they do and how it helps them achieve their goals (Ardichvili et al., 2003). In simple terms, they’re like the Sherlock Holmes of human behaviour, piecing together clues to understand what makes us tick.

So, when we talk about entrepreneurial action, we’re talking about the moves entrepreneurs make to sniff out opportunities and make them work in their favour (Ardichvili et al., 2003). It’s like a game of chess, where every move is calculated to bring them closer to their goals. In a nutshell, entrepreneurship isn’t just about dreaming big—it’s about taking action to turn those dreams into reality and cashing in on the rewards.

Alright, let’s break down the Discovery Theory versus the Creation Theory showdown.

So, here’s the deal: both these theories have their similarities, but they end up making different bets on how effective certain entrepreneurial actions will be (Ardichvili et al., 2003).

The Discovery Theory is like saying entrepreneurs are out there on a treasure hunt, looking to snag opportunities left, right, and centre (Alvarez & Barney, 2007). It’s all about spotting those golden nuggets that pop up in the market, usually because something big has changed, like new tech or shifting consumer preferences (Alvarez & Barney, 2007). According to Shane (2003), it’s like when the winds of change blow through the market, stirring things up and creating new openings. The Discovery Theory figures that these opportunities are just waiting to be stumbled upon, regardless of what entrepreneurs are thinking or doing (Shane, 2003). But here’s the kicker: entrepreneurs bring their A-game and turn those opportunities into gold when they seize them (Shane, 2003).

Now, all this talk about exogenous changes shaping opportunities basically means that the Discovery Theory is all about playing detective. It’s about scanning the environment for clues and sniffing out those opportunities, like Google constantly improving its search engine speed to keep up with the demand for faster searches (Singhal & Cutts, 2010). It’s about being proactive and staying ahead of the curve.

So, in a nutshell, the Discovery Theory is like being on a perpetual treasure hunt, with entrepreneurs keeping their eyes peeled for those golden opportunities that pop up when the winds of change blow through the market. And when they spot them, it’s all about swooping in and turning them into big wins.

Alright, let’s break it down: When big changes hit the market, like new tech or economic shifts, opportunities start popping up left and right. Now, you’d think everyone would jump on these opportunities, right? But here’s the thing: not everyone notices them. That’s where entrepreneurs shine. They’ve got this knack for spotting these hidden gems when others miss them (Bhide, 1999).So, why are entrepreneurs so good at this? Well, according to experts like Shane (2003), it’s all about being alert. They’re tuned into things like information gaps, how they think, and their risk appetite. It’s like they’ve got a sixth sense for sniffing out opportunities in the chaos (Shane, 2003).

Now, let’s talk about the two big theories in town: the Discovery Theory and the Creation Theory. The Discovery Theory says that these opportunities are just waiting to be found, like buried treasure. But the Creation Theory? It’s a whole different ball game. It says that entrepreneurs aren’t just stumbling upon these opportunities—they’re creating them (Alvarez & Barney, 2007).

Yep, you heard that right. The Creation Theory says that entrepreneurs aren’t just sitting around waiting for the market to shake things up. They’re out there, making moves and shaking things up themselves. They’re like mad scientists, cooking up new ideas and products from scratch (Alvarez & Barney, 2007). So, while the Discovery Theory says it’s all about being in the right place at the right time, the Creation Theory says it’s about making your own luck. It’s about taking charge and carving out your own path in the business world.

So, let’s dive into the Creation Theory’s perspective on opportunities. According to Alvarez & Barney (2007), in this theory, opportunities aren’t just sitting around waiting to be found in existing industries or markets. Nope, entrepreneurs aren’t playing hide-and-seek with opportunities; they’re out there creating them.

Picture this: entrepreneurs aren’t waiting for the stars to align or for some big market shake-up to happen. Nah, they’re taking matters into their own hands. They’re like architects, designing opportunities from scratch (Aldrich & Ruef, 2006). They’re not just finding mountains, they’re building them. And this isn’t some passive waiting game; they’re actively shaping the business landscape (Aldrich & Ruef, 2006).

This whole idea ties in perfectly with Schumpeter’s concept of disruptive innovation. It’s like throwing a curveball at the market, shaking up the status quo and forcing everyone else to step up their game or risk being left behind (Aldrich & Ruef, 2006). According to Azavedo (2002), these creation opportunities aren’t just random occurrences; they’re social constructs born from entrepreneurial vision. When entrepreneurs spot these opportunities and start taking action, they’re basically putting their beliefs and perceptions to the test. It’s like a trial by fire, with the market serving as the judge (Azavedo, 2002).

And get this: the Creation Theory suggests that entrepreneurs aren’t necessarily born different from non-entrepreneurs. Nope, it’s often just slight differences in their mindset or environment that set them on the path to opportunity (Azavedo, 2002). So, in a nutshell, the Creation Theory flips the script on how we see opportunities. It’s not about waiting for opportunities to come knocking—it’s about going out there, forging your own path, and shaping the future of business.

Let’s break it down with a couple of examples. Take Google and their quest for a faster search engine—that’s classic Discovery Theory at work. They’re constantly tweaking and improving, making small changes to meet the evolving needs of users. It’s like they’re always on the hunt for the next big thing, but in bite-sized chunks. Now, contrast that with the birth of the microwave oven—that’s straight out of the Creation Theory playbook. Back in the 1940s, Dr. Percy Spencer was messing around with radar technology when he stumbled upon the idea. One day, he noticed that microwaves were zapping food with lightning speed. So, he and his crew put together the first microwave oven, and the rest is history.

Sure, those early models were clunky, but once they got it right, microwaves became a staple in American kitchens. They changed the game, disrupting the whole cooking scene. That’s what we call radical innovation, baby! But here’s where it gets really interesting: the microwave also dabbles in Discovery Theory territory. Over time, it’s not just about creating something new—it’s about refining and improving it. Think about all those fancy microwave-safe containers and the settings for browning food. That’s incremental innovation in action, building on what’s already there to make it even better. So, whether you’re talking about cooking up a storm with microwaves or surfing the web with Google, it’s all about mixing and matching these different theories to get the job done. Innovation isn’t a one-size-fits-all deal—it’s about finding the right recipe for success.

So, let’s unpack this idea with another example—the birth of the microwave. It’s a perfect illustration of what the Creation Theory is all about.

Back in the day, Dr. Percy Spencer wasn’t some superhuman entrepreneur with special powers. Nope, he was just a regular guy, tinkering away with radar technology. There wasn’t anything particularly unique about him compared to other folks.

But here’s the kicker: it was his environment that set him apart. See, while he was messing around with microwaves, he noticed something odd. They were cooking food in a flash! And just like that, a light bulb went off in his head.

Now, according to the Creation Theory, before this whole microwave saga unfolded, there wasn’t much to distinguish Dr. Spencer from anyone else. We were all pretty much on the same playing field when it came to cognitive abilities.

But here’s where it gets interesting: as Dr. Spencer dove deeper into his entrepreneurial journey, certain traits started to shine through. Things like confidence and boldness—they were like muscles getting stronger with every risk he took.

And that’s the magic of the Creation Theory. It’s not about being born with some innate talent—it’s about how you roll with the punches and grow along the way. Sure, we might all start out the same, but it’s what we do with our experiences that sets us apart in the end.

Cognitive Theory

So, let’s break it down: This study dives deep into how theories of entrepreneurial opportunity play a key role in explaining why entrepreneurs create successful businesses.

Entrepreneurship is happening all around us, with folks starting up new ventures left, right, and centre. Most of these ventures focus on existing products or services, with entrepreneurs spotting a gap in the market and swooping in to fill it. Think opening a new store in a neighbourhood or improving a smartphone camera. That’s where the discovery theory comes into play—it helps us understand how these new businesses come to life.

But sometimes, entrepreneurs do more than just fill gaps—they completely revolutionise industries. Think about how the personal computer, microwave oven, mobile phone, and internet search engine changed the game. That’s where the creation theory kicks in. It helps us understand why and how entrepreneurs come up with these groundbreaking ideas and turn them into reality.

So, when we combine our understanding of entrepreneurial concepts like initiative and behaviour with these two key theories, we get a clearer picture of how entrepreneurs bring their ideas to life and create successful ventures. It’s all about seeing the bigger picture and understanding the driving forces behind entrepreneurial success.

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