Knowledge that Transforms

It is often assumed that opportunities can be known ex ante in spite of the fact that the future is simultaneously acknowledged to be unknowable. This paper endeavors to resolve this epistemological paradox in a manner that facilitates a more meaningful treatment of the knowledge problems of entrepreneurship. To this end, we draw from linguistic philosophy and undertake three interrelated analytical steps at the conceptual foundations of entrepreneurship theory. First, we clarify subtle logical aspects underlying the meaningful use of the word “uncertainty” qua unknowability. When properly used, uncertainty reflects the epistemological assessment that enterprising actors may only believe – not know – that new ventures can succeed. When incorrectly used, uncertainty is misrepresented as an obstacle that can be overcome by some and not others. Second, we explain how prevalent linguistic practices (“opportunity discovery”, “opportunity recognition”) lie at the root of epistemological tensions in opportunity theory. They act as a distorting mirror that trivializes the unknowability of the future and nourishes impressions of mental agencies allowing entrepreneurs to know the unknowable. Third, we urge a more nuanced understanding of the knowledge problems of entrepreneurship. On the one hand, we submit that opportunities are ineliminably unknowable. On the other hand, however, we argue that there exist knowable Opportunity-Ingredients (OIs) whose knowability varies across contexts. These analytical developments further contribute to the ongoing “opportunity wars”, strengthen the epistemological foundations of opportunity-actualization, improve construct clarity, and reveal new possibilities for research.

Interest in applying the idea of co-creation to entrepreneurship is emerging through research on opportunity creation and entrepreneur heuristics. We place co-creation in the conceptual center of the entrepreneurship research discussion. Doing so requires relaxing the view of a central entrepreneur and adopting a view of stakeholders as peers in the venture, providing resources and deriving benefit. We formalize this insightinto a central proposition and derive implications of it for major themes ofentrepreneurship research, entrepreneurial outcomes, and three challenges unique to entrepreneurship. The sum of our work suggests moving the discussion in entrepreneurship research from the unit of analysis of the individual entrepreneur, venture, or opportunity to entrepreneurship as a collaborative process undertaken by aconstellation of stakeholders that come together to co-create novelty in the environment.

We exploit a policy change in the UK Help-to-Buy (HTB) equity loan scheme in order to identify the causal link between mortgage affordability and entrepreneurship activity at the local level. We contribute to the literature on the relationship between housing finance and entrepreneurship by demonstrating the impact of government equity loans on entrepreneurship through the release of trapped liquidity. When less equity is required to buy a house, households could use the ‘additional’ liquidity to start a business. We use a spatial discontinuity in treatment methodology to take advantage of the reform of the Help-to-Buy scheme in 2016, which increased the limit of equity loans provided in London. By using data on business population at the postcode sector level, we are able to measure the impact of the new policy by comparing similar areas on the opposite sides of the Greater London Authority boundary. Our results show that an increase in mortgage affordability fosters entrepreneurial activity in affected areas by 20%, resulting in 1 more start-up on average per postcode per year. The new businesses are mainly single-plant micro enterprises in capital intensive sectors with low income volatility.

Entrepreneurs often face the daunting task of predicting consumer demand before it exists—what consumers will want if and when the entrepreneur might make it available to them. Such alertness and judgment require an entrepreneur's vicarious imagination—the supposition of what a value experience would be like for another—such as empathy. Prevailing theories of empathy, however, are ill-suited for entrepreneurship theory as they are defined as and focused on an emotion-matching process. We propose that empathy be understood instead as a vicarious mental simulation of another's experience that, when accurate, produces similar emotions but also similar experiential knowledge. According to our ‘simulated empathy theory,’ empathy is a rational imagination process, intentional and knowledge-based. We connect this empathy process to contemporary entrepreneurship theory, namely opportunity recognition and evaluation processes. We also revise the concept of empathic accuracy accordingly, and derive therefrom some practical implications regarding how entrepreneurs can increase their empathic accuracy and, thereby, their chances of success.

A substantial body of research examines entry into and exit from self-employment. However, little is known about the career patterns of the self-employed, their transitions into and from self-employment and the success associated with different patterns of their careers. To address these issues, we examine the career patterns of individuals with self-employment experience and their relationship to objective and subjective career success using data from the German Household Panel (SOEP). Our results show that persistent self-employment careers have higher gross labor income and exhibit higher job and life satisfaction than all other self-employment career patterns.

We study how globalization can differentially affect financial inclusion through the lens of microfinance. Based on an institutional logics perspective, we argue that MFIs embody both social logic and market logic with regard to provision of affordable microfinance loans. Speicially, social logic is amplified by greater social globalization and the stronger presence of nonprofit organizations (NPOs) in the microfinance industry. In contrast, economic globalization catalyzes MFIs' market logic, leading to weaker or greater affordability of microfinance, depending on the relative strength of the profit-maximizing motive and real competition. We test these predictions by focusing on MFI interest-rate setting and using longitudinal data from 2030 MFI observations across 50 countries from 2002 to 2012. We find that country-level social globalization measure is negatively associated with the average MFI loan interest rates and that country-level economic globalization measure has an inverse U-shaped relationship with the average MFI loan interest rates. These results support our hypotheses and suggest a more nuanced view on how globalization affects affordability of microfinance.

To address challenges constraining prior research on evaluation of entrepreneurial projects, we develop the concept of Venture Idea Assessment (VIA) and validate an instrument to capture it. VIA concerns the assessment of Venture Ideas (VI) unbundled from assessment of any agents with whom they may be associated. The assessment can be performed by anybody at any stage of the venture development process, not just by potential founders at its outset. We develop and validate a parsimonious VIA measure across six empirical studies using a broad set of assessors and VIs using interviews, experiments and surveys following real-world start-up processes and decisions. In a research agenda we outline how the VIA platform—the concept and its operationalization—can be employed in novel research across various streams of entrepreneurship research.

Entrepreneurs regularly confront resource constraints as they attempt to bring their ideas to fruition. To overcome resource constraints, they often try to mobilize resources from external resource providers and use narratives as a critical tool to do so. We theorize that a particular type of narrative – a resourcefulness narrative – will significantly impact an entrepreneur's ability to mobilize support from resource providers. A resourcefulness narrative is a discursive, temporal account of past or ongoing entrepreneurial actions, whereby an entrepreneur is presented as using, assembling, or deploying resources in creative ways in order to overcome an impediment. We argue that a resourcefulness narrative generates positive emotional and cognitive reactions from external resource providers such that they are inclined to support a venture. Furthermore, these effects are contingent on the general level of resource scarcity or munificence in a venture's environment, the level of uncertainty underpinning the venture, the entrepreneur's experience, and the recency of the actions described within the narrative. By acting resourcefully and transforming that action into a narrative, entrepreneurs can resourcefully mobilize support.

This study examines a model linking organizational improvisation with new venture performance, via serendipity, at varying levels of resource constraints and informal organizational structure. Results from a national sample of 326 startups, based throughout the United States, indicate that the association of improvisation with serendipity is greatest when resource constraints are high, and—in turn—that serendipity is positively related to new venture performance when informal organizational structure is high. These findings highlight novel pathways and contingencies through which improvisation may prove to be a resourceful means for startups to identify new opportunities and gain performance advantages.

Integrating the attention-based view and entrepreneurial alertness perspective, we develop our theoretical framework to test the influence of CEO attention and alertness on rate of new product introduction (NPI). We propose that a firm's rate of NPI is predicted independently and jointly by attention and alertness, two different yet complementary cognitive characteristics of the CEO. Using a sample of 271 US-based small and medium size enterprises (SMEs) from 2004 to 2015, we show that CEO's attention to R&D, customers, and competitors positively influence NPI, while attention to organization negatively impacts the relationship. We also find that CEO alertness has positive impact on the rate of NPI; however, high alertness hurts the rate of NPI. Such theoretical elaboration and empirical illustrations contribute to a better understanding of the microfoundations of managerial cognition and its role in NPI. By adding alertness from entrepreneurship literature and explicating the nexus between alertness and attention, our study explains how some CEOs who are able to acquire novel information and stay focused are able to achieve higher rate of NPI.