In this paper, authors reviewed the existing ideas about entrepreneurial opportunities. First of all they indicated several problems in the dominant theories in entrepreneurship. It was found that these theories "have sought to explain entrepreneurship as a function of types of people engaged in entrepreneurial activity and, as a result, have largely overlooked the role of opportunities" (p. 334). In particular, the authors demonstrated four "strict constrains" within equilibrium model of entrepreneur theory (p. 335).
Following Venkataraman (1997), they define entrepreneurship as the discovery, evaluation, and exploitation of future goods and services (p. 336). About entrepreneurial opportunities, they defined it as situations in which new goods, services, raw materials, markets and organizing methods can be introduced through the formation of new means, ends, or means-ends relationships. Entrepreneurs are different from non-entrepreneurs in that they created or identified the new ends and means previously undetected by market participants.
Towards entrepreneurial opportunities, they further argued why prices are incomplete indicators. First, it is because entrepreneurs had to believe the price of their resources would have value in the future rather than at a given point in time. "Prices fail to provide all of the necessary information to make all decisions about resources" (p. 337). Second, "in the absence of futures markets for goods and services, there is no way to use current prices to determine if there would be an opportunity to serve a market that is not yet in existence" (p. 337). The similar situation would repeat at the introduction of different innovations.
Thus, entrepreneurial profit and loss lies not in the information by the price change, but in the entrepreneurial conjecture as to the cause of that information. In these situations, individuals must make decisions based on information not incorporated in prices, and do so through mechanisms other than optimization. "Entrepreneurs bring new means-ends decision making frameworks into the price system by forming perceptions and beliefs about how to allocate resources better than they are currently allocated" (p. 338). And formulating a profitable conjecture about an opportunity is far from the trivial exercise of optimizing within existing means-ends frameworks since it requires forming expectations about the prices at which goods and services that do not yet exist will sell (p. 339). The individual must conjecture that a positive probability exists that the future price of the item will exceed its costs and that future demand will exist. Predicting such things with certainty is not possible, as it requires individuals to possess information that does not yet exist at the time of individual discovery. The only reliable confirmation that a previously unseen or unknown valuable opportunity does in fact exist occurs when a market has been created for the new item.
After the opportunity has been discovered, the entrepreneurial profit that opportunity generated is likely to be transient due to external and internal factors (e.g., competition). So, there needs to be certain mechanisms to make opportunity life longer (e.g., patent).
Entrepreneurial opportunities manifest themselves in a variety of different ways. First and foremost, they can occur as a result of changes in a variety of parts of the value chain. Opportunities also vary as to their resources: in prior research there are four important ways of categorizing opportunities by sources:
1. information asymmetry vs. exogenous shocks. Here, Kirzner and Schumpeter disagreed over where exogenous shocks of information are the primary catalyst of entrepreneurship.
2. the state of research on exogenous shift-based opportunities. There are usually several different types of exogenous shift exist - say, shifts in social demographics; the creation of new knowledge; and the shift in the properties of technology regimes (opportunity conditions, appropriability conditions, cumulative conditions, and the nature of the knowledge).
3. supply vs. demand side changes. "In general, the entrepreneurship literature implicitly focuses on supply side changes. [...] But changes in demand alone can generate opportunities. Customer preferences influence the allocation of resources because producers need to respond to the preferences and purchasing habits of customers" (p. 343).
4. productivity-enhancing vs. rent-seeking opportunities. As economics are made more efficient owing to the entrepreneurial activity, most researchers thought that entrepreneurship is productive entrepreneurship. However, it is also possible to think that entrepreneurial actions as private rent-seeking. It means that the opportunity generate personal value but no social value.
5. initiator of the change. Most studies focused on the technological opportunities which included two sets of actors: specialized knowledge creating agencies and firms within the industrial chain.
In the end, the authors emphasized that the study of opportunity-based perspective should use the tools like the longitudinal process studies, experiments, simulation models, and historical studies. This is because the dynamic processes that occur over time is crucial to the opportunity discovery.
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