Entrepreneurial Opportunity Identification and Development - Literature review Example

Opportunity Recognition Introduction Baron (2004) describes a model relating opportunity recognition to pattern recognition. Pattern recognition “isthe process through which individuals perceive emergent patterns among seemingly unrelated stimuli or events” (Baron 2004).Opportunity recognition is a major step in the entrepreneurial process. The study by Baron suggests that there are unique knowledge patterns among specific individuals. These patterns are then compared with existing business models. A close match to an existing model determines the next strategic step of a corporation. These corporate strategies are essential for an organization’s continued growth. Basically, the ability for the company to pinpoint certain opportunities paves the way for the creation of new and innovative ventures essential to the continued growth and success of the enterprise. Established in 2005, Verista Singapore Pte Ltd, led by Ceylon Aw, provides management solutions to technical infrastructures with operations across Asia, namely in Singapore, Malaysia, Brunie, Shenzhen and HongKong. Apart from technical infrastructure management, Verista Singapore Pte Ltd also provides medical and laboratory equipment and contract equipment manufacturing solutions. Veristas business spans from building technologies to the medical industry. Its operations cannot be assigned to a specific market. Since the business spans a wide array of industries, opportunity recognition establishes its role as a mediator of the companys flow of operations. The company basically operates thru its recognition of necessary services over a broad array industries. For Verista Singapore Pte Ltd, the ability of its team and founders to recognize and capitalize on opportunities was the basic blocks in which the whole business was built upon. Importance of Opportunity Recognition Dutta and Crossan (2005) explain the importance of opportunity recognition in an entrepreneurship. They state that “entrepreneurship serves as a linchpin between invention, innovation and introduction.” (Dutta and Crossan 2005). In accordance with this definition, the main problem that would face entrepreneurs would be assessing factors and characteristics of certain opportunities that would benefit the company. The highly theoretical and unempirical nature of entrepreneurial opportunities is the main problem that firm face in this aspect. Dutta and Crossan address the issue with the utilization of an organizational framework. The propensity to create new ventures from opportunities is seen to be directly proportional to organizational learning. Organizational learning encompasses intuition, interpretation, integration and institutionalization (Dutta and Crossan 2005). The ability of a company to grasp the whole concept and importance of an opportunity is that they must have the intuition to identify certain opportunities, interpret these opportunities as to how to create an innovative product that will appeal to the masses, integrate the concept into their workflow and institutionalize the practices involved. Opportunity recognition is essential to a company’s sustainability to the changing market. In addition to this, according to Lumpkin and Lichtenstein (2005), a critical issue facing corporations is the ability to advance in the venture-creation industry. The study by Lumpkin and Lichtenstein (2005) focused on how organizational learning has the ability to create certain patterns that make it easier for firms to create and capitalize on opportunities. Sustainable development is the ability of an enterprise or an economy to sustain the needs of a present population without comprising future needs of the next generation (Patzelt and Shepherd 2010). The need for sustainable development goes hand in hand with opportunity recognition. A firm must create ways in order to ensure the same or higher level of output and innovative quality for the future of a company. The paper by Shepherd and Patzelt (2010) studied the forms of prior knowledge and motivation of an individual towards the recognition of sustainable growth opportunities. A firm must realize or create a system that recognizes sustainable growth opportunities. Keh, Foo and Lim (2002), citing Bygrave and Hofer (1991), define the entrepreneurial process as the involvement of all functions, activities and actions associated with the perception of opportunities. Keh, Foo and Lim (2002) define an opportunity as a future situation that is favorable or desirable to a certain enterprises’ goals. The ability of firms to successfully recognize opportunities are mediated by certain risk factors. New ventures require a substantial amount of capital. Firms, therefore, require a certain level of understanding of venture opportunities in order to decrease risk. Furthermore, firms deal with the problem of the elusiveness of entrepreneurial opportunities (Dimov 2010). There is no set system to encounter or ensure entrepreneurial opportunities. Dimov, in his study, discussed three substantial premises for the empirical study of opportunities: opportunity as happening, opportunity as expressed in actions and opportunity as instituted in market structures. Dimov states that “without an operable convention about how an entrepreneurial opportunity can be known or observed, one is limited to the realm of pure theorizing, where one can comfortably assume an opportunity to be known “(Dimov 2010). In addition to this, Baron and Ensley (2006), again, describes the relation of opportunity recognition with pattern recognition that stems from the comparison between experienced and novice entrepreneurs. The elusiveness of opportunities as described by Dimov (2010) deters firms from creating concrete way to recognize opportunities. Baron and Ensley (2006) reiterate the importance of pattern recognition by concluding that more experienced entrepreneurs have a more detailed understanding of opportunities. The paper compared the ‘business opportunity’ prototypes of novice (first-time) and repeat (experienced) entrepreneurs – their cognitive representations of the essential nature of opportunities. As predicted, the prototypes of experienced entrepreneurs were more clearly defined, richer in content and more concerned with factors and conditions related to actually starting and running a new venture. (Baron and Ensley 2006) The paper suggests that first time entrepreneurs are not guaranteed instant success. In order to successfully recognize and capitalize on opportunities, a firm must gain experience and learn from patterns in order to obtain certain mastery for the concept. Furthermore, Ardichvili, Cardozo and Ray (2003) argue that an entrepreneur’s own personal traits, social networking and prior knowledge are all requisites to successful opportunity recognition and capitalization. The paper further reiterates the point that in order for a certain entrepreneur to successfully recognize and efficiently market an opportunity, he/she must possess a set of learned and organized skills. In addition to this, Ardichvili, Cardozo and Ray (2003) state that entrepreneurial alertness is a necessary trait for the success of opportunity identification. Furthermore, a certain firm must build on a social network to increase opportunity. The right mindset, network and knowledge based can be obtained thru an entrepreneur’s experiences. In addition to this, Park (2005) in a study that describes opportunity recognition with high-tech start-ups, states that more widespread use of the qualitative research can reveal new insights into the complex and interactive process of opportunity recognition in the high-tech start-up. (Park 2005) Park, therefore, also reiterates the concept of creating a pattern or system that can, on some level, capture market behavior in order to aid in the successful recognition of opportunities in order to create new products that can ensure a company’s future. The paper states that opportunity recognition is a complex interactive process that encompasses the founding entrepreneur, knowledge and the experience of the firm. These findings may lead to question how a start-up entrepreneur can successfully recognize business opportunities without the main arguable requisite- experience. The elusiveness, theoretical and unbalanced nature of opportunity assessment and recognition does not allow firms to ensure any future growth or sustained development in the company. Pattern recognition aided by experience is viewed as the main solution to efficiently capitalizing on business opportunities. Conclusion An entrepreneur thrives and is defined by his/her ability to recognize the needs of consumers and capitalize on unique and innovative products and services. The ability to efficiently recognize these opportunities are hurdled by inexperience and market risk. Entrepreneurship deals with the changing nature of human behavior and the ability to assess certain opportunities can never be quantified or be made certain. Firms must learn to recognize opportunities efficiently and create patterns in order to increase the chance of utilizing these opportunities for the creation of innovative and unique ventures. Bibliography Ardichvili, A., Cardozo, R, and Sourav Ray. (2003). A Theory of Entrepreneurial Opportunity Identification and Development. Journal of Business Venturing 18(1). Baron, Robert A. 2004. Opportunity Recognition: A Cognitive Perspective. Lally School of Management and Technology. Baron, Robert A. and Michael Ensley. 2006. Opportunity Recognition as the Detection of Meaningful Patterns: Evidence from Comparisons of Novice and Experienced Entrepreneurs. Management Science 52(9). Dimov, Dimo. 2010. Grappling with the Unbearable Elusiveness of Entrepreneurial Opportunities. Baylor University. Duta, Dev K. and Mary Crossan. 2005. The Nature of Entrepreneurial Opportunities: Understanding the Process Using the 41 Organizational Framework. Baylor University. Keh, Hean Tat, Foo, Maw Der and Boon Chong Lim. 2002. Opportunity Evaluation under Risky Conditions: The Cognitive Processes of Entrepreneurs. Baylor University. Lumpkin, G.T. and Benyamin Bergmann Lichtenstein. 2005. The Role of Organizational Learning in the Opportunity-Recognition Process. Entrepreneurship Theory and Practice 29(4). Park, John S. (2005). Opportunity Recognition and Product Innovation in Entrepreneurial High -Tech Start-ups: A New Perspective and Supporting Case Study. Technovation 21(7). Patzelt, Holger and Dean Shepherd.2010. Recognizing Opportunities for Cognitive Development. Baylor University. Appendix 1. Has the company developed any empirical means as to asses certain opportunities? 2. As an entrepreneur, what would you consider are the characteristics of a viable opportunity? 3. When would you consider an opportunity to be a sustainable option for the company? 4. What means is the company taking to broaden its prospects for the creation of new ventures? 5. How does your company asses, theoretically or empirically, the recognition and the implementation of a certain opportunity? Read More