Entrepreneurial Alertness

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Journal of Business Venturing 18 (2003) 105 – 123

A theory of entrepreneurial opportunity identification
and development
Alexander Ardichvilia,*, Richard Cardozob,1, Sourav Rayc,2
a

Department of Human Resource Education, University of Illinois at Urbana/Champaign, 345 Education Building, MC-708, 1310 South Sixth Street, Champaign, IL 61820, USA b
Center for Entrepreneurial Studies, University of Minnesota, 3-306 CSOM, 321 19th Avenue South, Minneapolis, MN 55455, USA
c
John Molson School of Business, Concordia University, 1455 de Maisonneuve Boulevard West, Montreal, QC, Canada H3G 1M8
Received 1 January 2000; received in revised form 1 November 2000; accepted 1 December 2000

Abstract
This paper builds on existing theoretical and empirical studies in the area of entrepreneurial opportunity identification and development. It utilizes Dubin’s [Theory Building, (second ed.). Free Press, New York, 1978.] theory building framework to propose a theory of the opportunity identification process. It identifies entrepreneur’s personality traits, social networks, and prior knowledge as antecedents of entrepreneurial alertness to business opportunities. Entrepreneurial alertness, in its turn, is a necessary condition for the success of the opportunity identification triad: recognition, development, and evaluation. A theoretical model, laws of interaction, a set of propositions, and suggestions for further research are provided.

D 2003 Elsevier Science Inc. All rights reserved.

1. Executive summary
Identifying and selecting right opportunities for new businesses are among the most important abilities of a successful entrepreneur (Stevenson et al., 1985). Consequently, * Corresponding author. Tel.: +1-217-333-0807; fax: +1-217-244-5632. E-mail addresses: ardichvi@uiuc.edu (A. Ardichvili), rcardozo@csom.umn.edu (R. Cardozo), sray@mercato.concordia.ca (S. Ray).

1
Voicemail: +1-612-624-5524.
2
Voicemail: +1-514-848-2772.
0883-9026/03/$ – see front matter D 2003 Elsevier Science Inc. All rights reserved. PII: S 0 8 8 3 - 9 0 2 6 ( 0 1 ) 0 0 0 6 8 - 4

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A. Ardichvili et al. / Journal of Business Venturing 18 (2003) 105–123

explaining the discovery and development of opportunities is a key part of entrepreneurship research (Venkataraman, 1997). This paper builds on existing theoretical and empirical studies in the area of entrepreneurial opportunity identification and development, and utilizes Dubin’s (1978) theory building framework. We focus on serial entrepreneurs, those who have participated in the formation of multiple businesses.

Entrepreneurs identify business opportunities to create and deliver value for stakeholders in prospective ventures. While elements of opportunities may be ‘‘recognized,’’ opportunities are made, not found. Careful investigation of and sensitivity to market needs and as well as an ability to spot suboptimal deployment of resources may help an entrepreneur begin to develop an opportunity (which may or may not result in the formation of a business). But opportunity development also involves entrepreneurs’ creative work. Therefore, ‘‘opportunity development’’ rather than ‘‘opportunity recognition,’’ should be our focus. The need or resource ‘‘recognized’’ or ‘‘perceived’’ cannot become a viable business without this ‘‘development.’’ The creation of successful businesses follows a successful opportunity development process. This includes recognition of an opportunity, its evaluation, and development per se. The development process is cyclical and iterative: an entrepreneur is likely to conduct evaluations several times at different stages of development; evaluation could also lead to recognition of additional opportunities or adjustments to the initial vision. Major factors that influence this core process of opportunity recognition and development leading to business formation include:

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entrepreneurial alertness;
information asymmetry and prior...
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