Organizations and Markets

How is What is an Opportunity a Valuable Research Question?

24 April 2007 at 2:06 pm hsiehc 2 comments

| Chihmao Hsieh |

In introducing the April 2007 Special Issue of Small Business Economics, guest editors Jeffery McMullen and Lawrence Plummer, and Zoltan Acs ask “What is an Entrepreneurial Opportunity?” First, the abstract:

The nature and source of entrepreneurial opportunity are important issues for understanding how markets function and come into being. In addition to describing the forum held on the topic and summarizing the contributions of the articles that appear in the special issue, this article shares a number of lessons learned during the workshop and the editorial process. We explore three of the most important reasons for confusion about the opportunity construct: (1) the “objectivity” of opportunity, (2) the perceived importance of one particular individual in determining the direction of the social world and (3) what distinguishes the sub-class of “entrepreneurial” opportunity from the broader category of opportunity in general. Finally, we offer some directions for future research by illuminating important issues that emerged from the workshop but that remain largely unanswered by the papers of this special issue.

Needless to say, the authors courageously untangle some fundamental concepts (i.e. different types of ‘objectivity’ as it might relate to the notion of opportunity). Yet a sentence in the article’s second paragraph gave me pause: “…without a clear understanding of the nature of opportunity, formulating logically consistent prescriptions for both policy and practice is problematic because any theoretical basis of empirical results would be incomplete” (p. 273).

My take is that the problem and incompleteness have less to do with any kind of unclear understanding, and more to do with recent explosion of the use of the term as it closely aligns with one oft-cited definition. Namely, Scott Shane and colleagues define an (entrepreneurial) opportunity as a “situation in which a person can create a new means-ends framework for recombining resources that the entrepreneur believes will yield a profit” (2003: p. 18, emphasis in original) and furthermore in such a way that explicitly-speaking, “entrepreneurial opportunities are not always profitable” (same page).

If entrepreneurial opportunities are not always profitable, and all its discovery takes is mere belief (i.e. some crazed fool who has no understanding of economics believes [incorrectly] that he has discovered a profitable set of choices, and therefore has indeed “discovered an opportunity”), then what is the point of prescribing for discovery?

It appears that the point of prescribing for the discovery of that type of opportunity is that it would help to explain behavior of all prospective entrepreneurs (i.e. firm founding and choice to become self-employed, including those such choices that ultimately end in failure). Unfortunately, that particular concept of opportunity doesn’t get us much closer to prescribing the types of decisions and choices (or individual traits) likely leading to value creation, contingent on different and general types of conditions.

In order to do that, shouldn’t a more restrictive definition of opportunity be considered? How about one that relates opportunity to “a set of decisions and choices that if selected will yield a profit”? Is the cost of advancing entrepreneurship research reduced if we use one type of definition (or class) of opportunity for matters of building positive theory, and another type of definition (or class) for matters of building normative theory?

Entry filed under: Entrepreneurship, Former Guest Bloggers.