1/8/09

Discovering or creating opportunities?

In its most simplistic form the process to meet the unknown opportunities seems to be two-fold. Opportunities are discovered or their might be created. These different ends of entrepreneurial behavior have remarkably different background and outcomes. For example, their ontological assumptions are "from two different worlds".

If we choose to assume the opportunities are discovered, then we assume to opportunities are out there to be discovered - an assumption based on the realist philosophy (Alvarez & Barney 2007). Based on this we do expect that opportunities come from exogenous changes in an industry or market. Hence, the adaptation to and seizing of these opportunities is dependent on the abilities and alertness of entrepreneurial individuals and managers (Kirzner 1997). This also means that the decision making takes place under the context of risk. The decision maker is able to gather information on the possible outcomes (and their probability) associated with each decision to be made (Alvarez & Barney 2007). Similarly, the assumption of discovery lets us to expect that due to central role of active explorative search (Leiblein 2007) any firm trying to discover new opportunities has to have employers with diverse background and experience, who in addition, have possibilties for informal interaction (Kleinbaum & Tushman 2007).

On the other hand, if we choose to assume that opportunities are created by the actions and reactions to produce new products and services, then our view of the world is evolutionary realist (Alvarez & Barney 2007). Based on this, we expect that opportunities do not exist independent of entrepreneurial individuals or managers, but they are - of course - created. Under this assumption the context of decision making also differs from the discovery assumption. Here, decision making occurs under the context of uncertainty - decision maker is not able to gather enough information associated with the decisions and their outcomes (and their probability) (Alvarez & Barney 2007). At the firm level the assumption of opportunity creation leads us to expect that a firm has to obtain enough individuals with imaginative and iterative capabilities (Leiblein 2007) in order to be able create new opportunities.

Despite their differences, these alternatives lead to similar outcomes - innovations and potential success. But at the same time they are affected by the environmental as well as firm- and individual-level circumstances (Leiblein 2007). For instance, the pace of chance in the market or in an industry and hence the probability of unmet needs differ. Are the right opportunities discovered early enough or are the creation of new opportunities meeting the needs of the market? Furthermore, the aspirations, capabilities, resources and their un-filled combinations (Leiblein 2007) are related to the choices made in order to meet the prerequisites of firm growth and success.

Interestingly, among others the question remains: In which circumstances different innovation strategies and innovation types are more or less suitable to meet the chances in the competition environment?

References:
Alvarez, S. A., and J. Barney (2007). "Discovery and Creation: Alternative Theories of Entrepreneurial Action," Strategic Entrepreneurship Journal, 1 (1-2), 11-26.
Kleinbaum, A. M., and M. L. Tushman (2007). "Building Bridges: The Social Structure of Interdependent Innovation," Strategic Entrepreneurship Journal, 1 (1-2), 103-122.
Kirzner, I. M. (1997). "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, 35 (1), 60-85.
Leiblein, M. J. (2007). "Discussant Comments. Environment, Organization, and Innovation: How Entrepreneurial Decisions Affect Innovative Success," Strategic Entrepreneurship Journal, 1 (1-2), 141-144.