Knowledge that Transforms

This article reviews and critiques the opportunity discovery approach to entrepreneurship and argues that entrepreneurship can be more thoroughly grounded, and more closely linked to more general problems of economic organization by adopting the Cantillon‐Knight‐Mises understanding of entrepreneurship as judgment. The article begins by distinguishing among occupational, structural, and functional approaches to entrepreneurship and distinguishing among two influential interpretations of the entrepreneurial function—discovery and judgment. It turns next to the contemporary literature on opportunity identification and argues that this literature misinterprets Kirzner's instrumental use of the discovery metaphor and mistakenly makes opportunities the unit of analysis. The article then describes an alternative approach in which investment is the unit of analysis and link this approach to Austrian capital theory. I close with some applications to organizational form and entrepreneurial teams.

This article examines the population level implications of microlevel theories of entrepreneurship. The actions of those who seek to organize opportunities, as well as the hurdles that they must overcome to successfully exploit them, give rise to an evolutionary multistage selection process. The article indicates that the consideration of selection events leads to a more complete understanding of the entrepreneurial process and how microlevel theories influence important outcomes in entrepreneurship. Other theoretical and empirical implications of staged selection for research in entrepreneurship are discussed.

This study examined the influence of genetic factors on the tendency to engage in entrepreneurship. We found that, in the particular sample we examined, between 37 and 42 percent of the variance in the tendency of people to engage in entrepreneurship is accounted for by genetic factors. A substantial part of this variance was mediated by the psychological trait of sensation seeking, suggesting that genes affect the tendency of people to engage in entrepreneurship by affecting the distribution of sensation seeking across people.

This study examines how private enterprises in emerging economies politically respond to government bureaucracy they face. With an emphasis on two political responses, engagement and influence, we propose that private enterprises react to bureaucracy differently, depending on their entrepreneurial traits, and this leads to different susceptibilities to bureaucracy. Our analysis of 9,123 private enterprises in 72 emerging economies suggests that political engagement and influence are positively associated with bureaucracy for all firms, but the levels of political engagement and influence vary according to a firm's entrepreneurial type (new vs. established venture; venture of entrepreneurial origin vs. other private) and governance (family vs. nonfamily; with vs. without government or foreign ownership). Firms in different groups of emerging economies also display some different propensities to political engagement and influence.

To add insight in new value creation, opportunity discovery should be integrated with strategic management theory. Based on the resource‐based view and the economics of property rights, we build a framework that accomplishes this. Our key argument is that property rights and transaction costs are important antecedents of opportunity discovery. We identify two mechanisms that establish this influence and examine alternative ways in which knowledge, transaction costs, and property rights influence opportunity discovery and sustainable advantage.

The challenge of organizational adaptation is often presented in terms of the tension between the exploration of new possibilities and the exploitation of existing accomplishments. Whether framed in the language of invention versus refinement or local search versus long jumps, the spirit of the argument is of an explicit trade‐off that resource‐constrained organizations must make to secure their survival and success. While we do not dispute the fundamental truth that underlies this tension, we do believe this dominant characterization of the process of exploration may be masking key drivers of this tension and potential paths towards its resolution. We argue that, from the perspective of an actor, all activities are inherently exploitative in their nature, in the sense that they are undertaken with the explicit expectation that they may achieve meaningful progress on some dimension of performance. The key distinction regards the extent to which the dimension of performance is recognized and legitimated from the perspective of the organizational context in which the actor is operating. Acts perceived as ‘exploratory’ are, thus, more accurately characterized as acts of exploitation directed along new performance dimensions. We consider the organizational challenges that such exploratory action poses and the implications for entrepreneurial initiatives. From the perspective of the focal actor engaged in the exploratory initiative, the challenge is to identify ‘projections’ of the payoff of the initiative they are pursuing, either onto those dimensions of performance that are of interest to the organization, or onto more concrete measures of product‐market acceptance and financial return. Low‐dimensional representations of the business landscape are an inevitable by‐product of bounded rationality and the need for organizations and their strategies to coordinate and direct collective action. In this regard, the most powerful form of entrepreneurship may be the initiation of the cognitive shifts that offer a different topology of the competitive landscape.

This article contributes to the emerging theory of opportunity creation by examining how organizations (including entrepreneurial ones) create and transform their niches. Using insights from contemporary evolutionary theory, the article classifies types of niche construction activities along dimensions of governance and the nature of the strategic actor. It then focuses on mechanisms of niche construction governed by the focal organization or entrepreneur to explain how competitive imperfections can be induced within industries and markets. The central role of communicative strategies in niche construction is emphasized.

To better understand opportunity creation, we investigate the extent to which recognition of failure impacts the new transaction commitment mindset of entrepreneurs. In a PLS model, we utilize data gathered from a sample of 220 entrepreneurs, and augment these results with an ANOVA analysis that provides a deeper exploration of the theory. In this article, we: (1) elaborate on the critical dimensions that represent a multi‐construct view of the new transaction commitment mindset and describe ways that these dimensions can be measured; (2) examine the extent to which the recognition of new venture failure impacts the new transaction commitment mindset; and (3) explore the implications of the interaction between failure recognition and the new transaction commitment mindset for an entrepreneur's decision to continue or abandon opportunity creation efforts. Our results suggest that recognition of failure does indeed impact the new transaction commitment mindset and, by extension, can enable opportunity creation.

Researchers have debated whether entrepreneurial opportunities are discovered or created. However, they have often overlooked the importance of the contextual variables that stimulate, shape, and define the entrepreneurial act. This article focuses on entrepreneurial activities within technology‐based established companies and shows how and why certain contexts are more conducive for discovery, while others promote the discovery and creation of opportunities. The article suggests a virtuous and dynamic cycle where discovery enriches creation which, in turn, fosters the discovery of new opportunities. The focus on the context and key features of entrepreneurial search contributes to the behavioral theory of and the debate on the origins of opportunities.