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1.14 Opportunity Recognition

However, there is a common understanding that an opportunity exists when there are competitive imperfections on a market (Venkatarman 1997). While Schumpeter (1934) and Kirzer (1973) explicitly recognized that opportunities are at the core of entrepreneurship, they had different views on how opportunities and the entrepreneur were linked. Schumpeter argued that market imperfections (opportunities) were created when the entrepreneur introduced new innovations. Kirzner’s (1973) entrepreneur is alert, discovers some imbalance in the market (imperfection), and seeks equilibrium through entrepreneurship. Kirzner’s entrepreneur does not have to create anything new but will have to be able to recognize and exploit what is already there. In other words, it is fine to be a copycat.

Put differently, Schumpeter’s entrepreneur is on the edge of the production curve and seeks to push the curve outward, thereby creating personal and societal economic wealth. Kirzner’s entrepreneur is within the curve and seeks to reach the edge of the production curve by way of entrepreneurship (Landström 2005). We discuss opportunity recognition in greater detail later in this book. What is important here is how stories in the media easily ignore these theoretical differences, but they are there when we look at cutting-edge technology firms and those who are in more traditional industrial sectors.

Academics love to argue in the tradition of which came first, the chicken or the egg. This is played out in academic circles with the ongoing debate of whether opportunities exist out there for everybody to discover and then exploit or whether opportunities are created or formed by the entrepreneur (Alvarez and Barney 2013). In the former case, the existence of opportunities is taken as given and that how opportunities are formed has no impact how an entrepreneur exploits them. The latter is a recent realization that opportunities can be formed in very different ways and that the formation process may actually impact the process by which the opportunities are exploited.

The practical implications of these differences are, however, important. One approach says that anyone can see an opportunity if they are vigilant. The other sees the opportunity as being unique to the individual. It is possible that both are correct but that the opportunities differ. We hope we have not bored you with this academic discourse, but we feel that often the popular press has tended to think that all entrepreneurs are the same and yet the research indicates something far different.

An interesting encounter of attitudes toward life and the pursuit of opportunities is offered by Birch (1987: 91):

  • America is a nation of immigrants, but this does not mean we are a cross section of Europe and Africa—and, increasingly, Latin America and the Orient. Rather, this country has always attracted malcontents, who chafed at feudal restrictions in the 18th century and the lack of economic and religious freedom and opportunity in their old countries in the 19th and 20th centuries. Wariness regarding governmental restrictions on these freedoms and opportunities could be seen in colonial unwillingness to follow British imperial policy, which led to the Revolution.

Some have argued this melting pot view of the United States is why Americans are so entrepreneurial vis à vis more homogeneous countries like Japan. Clearly context and culture play a part in how entrepreneurial goals are expressed. In this book we make every effort to show examples of entrepreneurs from around the world we have worked with or are familiar with.

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