Internal and External Factors Affecting the Perception of Entrepreneurial Opportunities

By Mitchell, David T. | American Journal of Entrepreneurship, June 2015 | Go to article overview

Internal and External Factors Affecting the Perception of Entrepreneurial Opportunities


Mitchell, David T., American Journal of Entrepreneurship


McMullen and Shephard (2006) point out that while economists may not care who acts as to as long as someone does, entrepreneurship scholars care about the actors. We care about ways in which actors perceive the world. It is not only differing motivations and differing worlds, but different individual perception of the opportunities that matters. These perceptions are based on psychological characteristics, social networks, culture, and the actual outside world that we live in.

We think of entrepreneurship as the recognition and exploitation of opportunities (De Carolis and Saparito 2006). The ability to perceive and recognize opportunities depends on both internal and external factors. Entrepreneurial perception depends on the outside world (or the institutions and structures that build provide opportunities) and heterogeneous motivation, personality traits, and motivations of the individual entrepreneurs themselves. (Herzberg et. al 1993 and Shane et. al. 2003). This issue presents five articles that focus on the interaction between internal and external factors on entrepreneurial action.

There are two papers on the entrepreneurial motivation perspective. The first analyzes the beginning of the entrepreneurial process and the second looks at the motivation to take an entrepreneurial firm public. The internal focus of an entrepreneur matters. People who prefer challenges and rewards are more likely to become entrepreneurs than people who seek happiness by avoiding punishment. Subjective expectations of success matter as well. "A person will carry out a new combination, causing discontinuity, under conditions of task-related motivation, expertise, expectation of personal gain, and a supportive environment" Bull and Willard (1993 p. 186 emphasis added). It is worth looking at both early and later experiences of entrepreneurs because we know that entrepreneurial motivation can change over time (Kuratko et. al. 1997)

Social context whether by family, social network, or ethnicity affect motivation and the way we see challenges (Dunn and Liang 2014). The paper by Perry et. al. on ethical human resources practices focuses the ways that internal motivation to benefit family members with both pay and prestige has both ethical and practical considerations. The paper by Lee et. al. focuses on differing entrepreneurial perceptions in different cultures. Using data from the National Minority Business Owners Surveys, Lee et. al. find that different ethnicities perceive legacy planning differently. In family businesses this is especially important.

Expectancy theory means that people perceive that actions lead to results and they take action based on those perceptions (Vroom 1964). In the article by Brandi and Kemelgor an effort - performance linkage is added to the model of the entrepreneurial process suggested in both Vroom 1964 and Shane and Venkataraman 2000). In "The Impact of Contracting and Property Rights institutions on entrepreneurship in the United States," Dove points out that certain external institutional rules affect the effort - performance linkage. Those institutional norms are the societal factors and institutional environment in which the potential entrepreneur perceives and acts upon the potential opportunity. These guidelines may be formal-such as laws, court rulings, written regulations, and public programs-or they may be informal-such as social norms, general expectations of personal conduct, we see effort linked to performance we build more establishments and more (Shane & Venkataraman, 2000, p. 219)

In terms of implications of these articles, we know that family businesses have difficulty surviving beyond the second generation. …

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