Academic journal article Academy of Entrepreneurship Journal

Creative Thinking or Concept Development? the Process of Recognizing Successful Opportunities for Technologically Complex New Ventures

Academic journal article Academy of Entrepreneurship Journal

Creative Thinking or Concept Development? the Process of Recognizing Successful Opportunities for Technologically Complex New Ventures

Article excerpt

ABSTRACT

What are the relationships among the stages of the opportunity recognition process, the new venture opportunities that entrepreneurs pursue and consider successes, and the level of technological complexity of new ventures? This study reviews the opportunity recognition literature to form research propositions, which are tested empirically with a sample of 189 Midwest entrepreneurs. Previous research (Manion, Hills, Lumpkin & Shrader, 2000) identifies four discrete stages within entrepreneurs' opportunity recognition process: idea discovery, creative thinking, concept development, and informal evaluation. On average, entrepreneurs pursue (i.e., spend time and money on) almost one new venture opportunity per year. Of every five opportunities that entrepreneurs pursue, they consider three successes. Concept development (i.e., the differentiation of entrepreneurs' product and market offerings) is the only process stage that does not directly affect either the number of opportunities that entrepreneurs pursue or those that they consider successes. Technological complexity (i.e., the innovativeness of entrepreneurs and their new ventures and the complexity of their products and production processes) does have a direct positive effect on the number of new venture opportunities that entrepreneurs pursue. However, it does not have a significant direct relationship with the number of opportunities that they consider successes. In relationship to the number of successes, technological complexity has a significant negative interaction with creative thinking and a significant positive interaction with concept development. That is, creative thinking (i.e., the commitment of time and energy to being creative) increases the number of successes with less technologically complex opportunities, but decreases the number of successes with more technologically complex new ventures. In practice, entrepreneurs are likely to pursue more opportunities as a result of the recognition process and their new ventures' technological complexity. However, they are likely to have more successes with the more technologically complex new ventures that they pursue by placing less emphasis on creative thinking and more on concept development. This study provides both a unique empirical exploration of the effects of the level of technological complexity on the recognition of opportunities and a practical prescription for entrepreneurs who wish to succeed with more technologically complex new ventures.

INTRODUCTION

This study explores the stages of the process that entrepreneurs use in recognizing new venture opportunities. It explains the determinants of the numbers of new venture opportunities that entrepreneurs pursue and consider successes and how the technological complexity of those opportunities affects the stages of the opportunity recognition process.

One unique skill of entrepreneurs is their ability to perceive opportunities that others do not see (Kirzner, 1979). In fact, Kaisch and Gilad (1991) show that entrepreneurs are more alert to opportunities than are managers employed by a business. Entrepreneurs' recognition of more opportunities is the result of a complex cognitive process:

"The challenge ... is recognizing an opportunity buried in the often contradictory data, signals, and inevitable noise and chaos of the marketplace, since the more imperfect the market (i.e., the greater the gaps, asymmetries, and inconsistencies of knowledge and information), the more abundant the opportunities." (Timmons, 1990, 1)

Because an opportunity-rich environment tends to be so chaotic, it is worthwhile to explore and map the process by which entrepreneurs recognize opportunities. The process maps are likely to depict more than one path through the opportunity recognition process, because not all entrepreneurs pursue opportunities in the same way (Bhave, 1994).

The growing body of entrepreneurship research encompasses the processes involved in new venture formation. …

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