Environmental Scanning and Organizational Learning in Entrepreneurial Ventures

Article excerpt

INTRODUCTION

Entrepreneurs' knowledge is critical to building sustainable competitive advantage in the 21st century (Lerner and Almor, 2002; Anand, Glick, and Manz, 2002). Because of increased globalization, rapid technological changes, and increased competition, entrepreneurs are facing new and unexpected challenges. These changes have significantly increased the quality and quantity of information that entrepreneurs must consider when making decisions. Entrepreneurs, therefore, must process and learn from the information, and use the new knowledge for improved decision making. "New knowledge is the key resource for creating a sustainable competitive advantage." (Inkpen, 1998, p. 69). Today, more than ever, competitive advantage resides in the capabilities i. e. expertise and skills that the entrepreneurs bring to the critical activities of the venture (Rastogi, 2000).

Despite the importance of the entrepreneurs' knowledge to new venture success, many are faced with a capability gap because of the discrepancy between their current knowledge and the information that is relevant to the current business environment. To deal with this capability gap and to have the most up-to-date information for decision making, entrepreneurs must increasingly acquire information from outside the organization. One way of acquiring and using outside information is through environmental scanning.

Most studies on environmental scanning were done with large organizations (Lang, Calantone, and Gudmundson, (1997), while those done with small firms focused mainly on scanning practices (Gudmundson, Tower, and Hartman, 2001). The lack of conceptual work on the relationship among environmental scanning, organizational learning, and entrepreneurial success is surprising. Scanning allows the entrepreneur to learn from the environment; and individual and organizational learning enhance the entrepreneur's' knowledge, and contributes to the firm's success. The purpose of this paper is to contribute to the discussion by examining the role of entrepreneurs environmental scanning and organizational learning in entrepreneurial success.

The paper presents a conceptual model that examines (a) how entrepreneurs gather information from the external environment--environmental scanning behavior, (b) how the information gathered is interpreted to create new knowledge--Interpretation, (c) what organizational learning occurs--organizational learning, and (d) how organizational learning leads to improved problem solving, strategic planning, and ultimately to entrepreneurial success. The model provides a conceptual framework to empirically test the relationship among environmental-scanning, organizational learning, and venture success.

There have been a few attempts made to shed new light on environmental scanning and related issues by means of organizational learning. Grant (1996) saw knowledge integration as a core competence in dynamic environments, and Drejer (2005) used learning to expand what we know about innovation in hyper-competitive environments. However, there has been no direct attempt at combining organizational learning and environmental scanning.

The need for this model is also supported by several researchers who have argued that gaining insights into entrepreneurs' environmental scanning behavior will add to the understanding of entrepreneurial behavior and therefore have implications for advising prospective entrepreneurs (Lang, Calantone, and Gudmundson, (1997). This article attempts to fill a need in the literature by presenting a model that links environmental scanning , organizational learning, and entrepreneurial success.

CONCEPT OF ENVIRONMENTAL SCANNING

In his ground-breaking work on environmental scanning, Aguilar (1967) defined the concept as "the way in which management gathers relevant information about events occurring outside the company in order to guide the company's future course of action. …