Introduction
The origins and nature of entrepreneurial opportunities are difficult to underspend. Theorists of economics and entrepreneurs have been puzzled by this question for a very long time. There are two opposing points of view that dominate the scientific discussion on the subject. One of these approaches suggests that opportunities exist in the environment and can be discovered by enterprising individuals, and the other says that it is entrepreneurs who create opportunities.
Although there is a utility to both theories, and they have made a substantial contribution to the modern understanding of the subject, the contradictions integral to the two approaches are hard to resolve. New theoretical perspectives on the matter and empirical data show that entrepreneurial opportunities cannot be considered purely created or discovered and should be viewed as a complex phenomenon with mixed characteristics.
Main body
Understanding of underlying mechanisms that lead some businesses to success and others to failure is critical for developing a framework for studying and implementing new enterprises. As the concept of entrepreneurial opportunities is central for all economic theories, the debate over their origins has been drawing the attention of the scientific and business communities for many decades. The two dominant views on the subject are predicated on the assumption that sources of all entrepreneurial outcomes consist of actor and non-actor components (Sarooghi, Hornsby, Libaers, and Abolfathi, 2017).
The actor component is mostly investigated as the individual entrepreneurs, whereas the non-actor part is studied as the opportunity. The conclusions of both theories find their basis in this assumption and are derived from it. Thus, studying entrepreneurship and opportunities as the two components that determine the success of an enterprise provides a useful framework that can be applied to further elaborate on the subject.
The point of view that suggests that opportunities for businesses exist on their own and are waiting to be discovered by entrepreneurs puts more emphasis on the non-actor component. This approach to entrepreneurship was first formalized during the last decades of the twentieth century by British economist Israel Kirzner (Korsgaard, Berglund, Thrane, and Blenker, 2016). According to this way of thinking, entrepreneurship is facilitated by external stimulation and is reactive in nature.
Even the most innovative enterprises that created new, unexpected products such as electricity in the nineteenth century, or personal computers and smartphones, can be seen as satisfying basic human needs. For example, smartphones are created to satisfy the basic need people have for communication, and electricity exploits the need for comfort, light, and warmth Thus, according to this theory even the most innovative enterprises are successful, because they managed to find a way to create a value that meets an existing need.
The opposing take on the matter considers opportunities as created by business people as a result of their activity and interaction with markets. The opportunity creation theory treats the entrepreneurial actor as the only driving force of innovation and sees opportunities as a product of the activity of entrepreneurs. This vision is associated with the name of Austrian economist Joseph Schumpeter who dedicated a substantial amount of his work to studying the relationship between innovation and entrepreneurship (Hagemann, 2015).
Unlike the discovery theory that suggests that new opportunities can be found by chance, the creation theory implies that prior knowledge is required for the entrepreneurial process (Canavati, Libaers, Sarooghi, Burkemper, and Hornsby, 2016). This attitude towards the nature of business opportunities is shared by other scholars, and the list of proponents of the idea includes many names. The followers of this vision claim that it stimulates economic growth (Block, Fisch, and Van Praag, 2017). This idea is based on the assumption that the creation of new opportunities is a proactive process, and it facilitates technical innovation and the creation of new workplaces and, thus, is good for society as a whole.
Both theories, in their pure form, show some weak points describing extreme cases. For instance, the discovery theory faces difficulties working with untaken opportunities and future development, as they are undiscovered and therefore unknown by definition. The creation model, on the other hand, does not emphasize that new opportunities are predicated on existing needs and limitations, and, thus, cannot be considered entirely created. These shortcomings suggest that a scientific conversation between proponents of both approaches is needed to improve and complete the theories.
Choosing working definitions for the terms that are discussed is necessary for a constructive discussion, as it allows avoiding any potential vagueness. Lack of clear and paradox-free definitions that would allow unambiguously separate created and discovered opportunities is a major factor that creates a hindrance to studying the subject. A methodological framework that would allow to objectively study opportunities, in the face of the subjective nature of their actualization, is necessary for a productive scientific discussion (Ramoglou, and Tsang, 2016). Most of the existing businesses exhibit a mixture of characteristics associated with both created and discovered opportunities (Welter, Mauer, and Wuebker, 2016).
This fact implies that using one-sided oversimplified approaches and nomenclature might create contradictions between theoretical frameworks aimed at studying the matter and the actual data from the market.
Multifaceted approaches to the subjected with the help of philosophical reasoning might help improve the understanding of the nature of opportunities. A pragmatist perspective on the subject suggests looking at opportunities as an emergent and dynamic phenomenon that is experienced by an entrepreneur (Rubleske and Berente, 2017). Such a perspective provides an alternative to the dichotomy of the creation and discovery theories and uses the elements of both approaches to study the nature of entrepreneurship. The philosophic school of critical realism can also make its contribution to the discussion suggesting a new perspective on the discovery theory and its framework.
This new methodology allows scholars to broaden the definitions that are used by the traditional theories of opportunities and reinvestigate their central principles (Martin and Wilson, 2016). Thus, different philosophy schools can provide new ways to approach the question about the nature of opportunities, and, to some extent, help to find common ground between the creation and discovery theories.
In addition to the theoretical discussion, investigating examples of real-world businesses provides a better understanding of the nature of entrepreneurship. Research of small firm’s entries to foreign markets has shown the dual nature of the opportunities that they take during the process (Karami and Martín, 2018). Another study supports this claim by showing interdependencies between different types of opportunities and mechanisms by which entrepreneurs use them to create values (Suddaby, Bruton, and Si, 2015). These findings indicate that both kinds of opportunities are present in the market and are deeply interconnected with each other.
Moreover, some characteristics of a particular business might influence its probability to exploit opportunities of a certain type. A study of the distribution of Kirznerian and Schumpeterian opportunities suggests that there is a relationship between the size of a business and the characteristics of opportunities it exploits (Jong and Marsili, 2015). Smaller ventures on average tend to be more inclined to explore markets looking for already existing needs.
At the same time, larger businesses exhibit more characteristics associated with the Schumpeterian vision of opportunities, as they have a tendency to focus on future needs. Large ventures can have an impact on the economic environment and the needs of their customers, and such businesses approach the market in a strategic way. The researchers use extended statistical data to support this relationship, but also emphasize that created and discovered opportunities in their pure form are extremely rare (Jong and Marsili, 2015). Thus, although the majority of real-world opportunities are mixed by their nature, small businesses are more likely to discover opportunities, and large ventures often try to influence the market.
Social dimensions, such as economic and technological development, also may have an impact on opportunities. Technology plays a big role in the process, influencing the business environment in a particular country. A study of the impact of technological progress on economic situation suggests that, contrary to Schumpeterian theory, innovation and the creation of new ventures are separate phenomena (Mrożewski and Kratzer, 2017).
Another research suggests that Kirznerian opportunities are associated with low value-adding businesses, whereas and supporting the Schumpeterian approach is linked with innovation (Lafuente, Acs, Sanders, and Szerb, 2019). In other words, it can be concluded that elements of the opportunity discovery theory can be used to describe patterns of business activity intrinsic to the more conservative entrepreneurs. The creation theory, on the other hand, is more suitable to study high-risk and high-return enterprises that are aimed at inventing new products.
Although neither theory provides sufficient methodology to study processes in modern economics, the two approaches provide useful insights regarding entrepreneurship. Despite the fact that these visions are opposing each other and are based on mutually exclusive assumptions, some of their elements can be complementary (Foss and Klein, 2017).
For instance, traditional Kirznerian ideas are focused on existing opportunities, and thus, using this framework and understanding its principles will allow businesses to be more efficient in meeting the needs of the people. The Schumpeterian vision of opportunities, on the other hand, emphasizes the importance of the creation of opportunities. This school of thought emphasizes the importance of innovation and encourages entrepreneurs to create new products in services that are not yet known to the public. As both kinds of enterprises are beneficial for society, a balance between the two theories is needed for sustainable economic growth.
Conclusion
Thus, studying the phenomena of entrepreneurship and opportunity and developing complex multifaceted frameworks to investigate processes in business is essential to understand the modern economy. Entrepreneurial opportunities in real-world circumstances exhibit mixed characteristics and can be viewed as partially discovered and partially created.
Despite their predicament on mutually exclusive theoretical assumptions, both theories have their own validities and provide useful frameworks that can help study and implement different approaches to commercial activity. Depending on a particular type of entrepreneurial endeavor, for some enterprises, the discovery theory is more applicable, whereas other businesses show more signs associated with the creation model. Different philosophy schools provide a theoretical framework that can broaden and complement the two models and help find common ground between them.
Reference List
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