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The Opportunity Recognition Process

Perhaps the most important finding was that 91 percent of the survey respondents agreed that "identifying opportunities is really several learning steps over time, rather than a one time occurrence" (see Table 5). Also consistent, more than half disagreed that "the idea behind the business just seemed to suddenly appear." Yet, there are several results which appear to be conflicting. About one third of both groups of entrepreneurs indicated that their business idea did just suddenly appear.

There were a number of differences between the two types of entrepreneurs. It should be noted that SEs were significantly more likely to have undertaken a deliberate search for an idea to start a business than were NEs. In addition, SEs believed that "immersion" was more important for identifying opportunities than NEs and were also more likely to develop business ideas based on prior employment. These findings illustrate potentially important differences between entrepreneurs who get their ideas from their social networks and those who do not. They provide further support for the idea that networked individuals can take advantage of opportunities in areas in which they have no direct expertise. NEs can benefit from not having to search out opportunities; they can let the opportunities come to them. In addition, it is not surprising that SEs were significantly more likely to get their ideas from prior employment and that they believed in immersion in an industry. NEs can rely on reliable network contacts to provide information on entrepreneurial opportunities that they may not have direct knowledge or experience in and social contacts can be used to fill in their information gaps.

The results summarized in Table 5 also provide some support for the basic idea underlying Ronstadt's Corridor Principle (1988). Over 90 percent of the entrepreneurs agreed that, once in the market, one must be prepared to quickly adjust a new product or service to what the market requires, and less than one fifth of the entrepreneurs did not make major changes based on customer feedback. In addition, approximately 80 percent of entrepreneurs believe it is easier to see real opportunities after entering a new market; however, NEs were significantly more likely to believe this. NEs may not have direct experience and may enter more time critical markets (i.e., technology-based) and may learn once in the market and make adjustments accordingly. SEs on the other hand, may be more likely to enter markets in which they have prior experience or in which they have been immersed.

TABLE 5

Opportunity Recognition Process Characteristics

ITEM

TYPE1

MEAN

SA

PA

N

PD

SD

Identifying opportunities is really several learning steps over time, rather than a one-time occurrence.

S

N

1.48

1.42

59%

68

34

23

5

7

2

2

0

0

The idea behind this business just seemed to suddenly appear.

S

N

3.65

3.64

5

7

24

24

10

5

25

27

36

37

I/We made a deliberate effort to search for an idea to start a new business.

S

N

3.08*

3.69*

27

12

11

13

20

7

10

29

32

39

Identifying good opportunities usually requires "immersion" in a particular industry and marketplace.

S

N

2.06**

2.69**

35

21

40

31

14

15

6

23

5

10

Our business/venture idea was developed in connection with employment with another firm.

S

N

2.25*

3.04*

46

25

23

23

10

10

3

9

18

33

Once in the market, one must be prepared to quickly adjust a new product/service to what the market requires.

S

N

1.39

1.31

71

69

23

31

3

0

3

0

0

0

Upon entering the market with a new venture, I made major changes based on customer feedback.

S

N

2.53

2.22

20

29

37

41

23

14

10

13

10

3

It is easier to see real opportunities after you begin to enter a new market (as compared to before you start).

S

N

2.06*

1.69*

36

44

41

44

12

10

3

2

8

0

SA=Strongly Agree=1 PA=Partially Agree=2 N=Neutral=3 PD=Partially Disagree=4 SD=Strongly Disagree=5

1 S=Solo Entrepreneur/N=Network Entrepreneur * Significant at p<.05 level ** Significant at p<.01 level

Evaluation of Opportunities

Finally, Table 6 presents the results on the evaluation of new business opportunities. It may be seen that the entrepreneurs consider intuitive judgment or "gut feel" to be an important part of judging market potential. Most of the entrepreneurs also agreed that "the most important thing is to believe in the idea." There was ambivalence about the value of formal customer surveys with fewer than half indicating that they were important.

It is interesting to note that SEs were more likely to indicate that believing in the idea is the most important part of a potential new business opportunity. For SEs they may not have anyone to rely on to convince them of the potential advantage of an idea. They may feel the need to know everything about an idea more than a NE. However, NEs may not require as much personal confidence in the idea to move ahead with a potential opportunity. It is possible that while they may not personally know enough about the potential market or industry, their network source of the opportunity may provide assurance for the feasibility and potential of the opportunity. 

TABLE 6

Evaluation Of New Business Opportunities

ITEM

TYPE1

MEAN

SA

PA

N

PD

SD

The most important thing is to believe in the idea.

S

N

1.63*

2.21*

49%

31

40

34

9

21

2

8

0

5

One's own intuitive (or "gut feel") is often the most important part of judging market potential for a new product.

S

N

2.28

2.57

20

10

55

45

6

27

14

15

5

3

In-depth, formal customer surveys are usually more costly than can be justified.

S

N

2.94

3.00

13

16

31

16

21

30

21

27

14

11

SA=Strongly Agree=1 PA=Partially Agree=2 N=Neutral=3 PD=Partially Disagree=4 SD=Strongly Disagree=5

1 S=Solo Entrepreneur/N=Network Entrepreneur * Significant at the p<.001 level

Opportunity Recognition Factors

In the second part of the data analysis we ran an exploratory factor analysis on 11 survey questionnaire items. These items all dealt with aspects of opportunity recognition perceptions and behaviors and were explored using varimax rotation. Prior to running the factor analysis it was our belief that the items would fall into two distinct factors -- one for solo entrepreneurs and one for network entrepreneurs. We placed primary emphasis on interpretability and were left with a three factor solution that combined explained 48.2 percent of the variance. All three factors had eigenvalues over 1.0 and were above the point where the scree diagram flattened out. Table 7 shows the rotated principal factors solution and summarizes the three factors and the factor loadings of individual items.

TABLE 7

Results Of Factor Analysis Of Opportunity Recognition Items

ITEM FACTORS:*

1

2

3

I have a special alertness or sensitivity toward opportunities.

.76

   
I would describe myself as opportunistic.

.59

   
I am not a very creative person.

-.58

   
"Seeing" potential new business opportunities does not come very naturally for me.

-.50

   
The business idea was strictly my idea alone.

.57

   
The business opportunities I have identified over the years have been largely unrelated to one another.  

.69

 
Our venture idea came from an accidental process that just happened to uncover the concept.  

.61

 
I have found that the consideration of one opportunity rarely leads to other opportunities.  

.63

 
I often think of new business ideas when I am totally relaxed, doing something unrelated to business.    

.55

One's own intuitive (or "gut feel") is often the most important part of judging market potential for a new product.    

.79

It is easier to see the real opportunities after you begin to enter a new market (as compared to before you start).    

.75

Eigenvalue

2.1

1.6

1.5

Percentage of Variance Explained

19.4

14.7

14.1

* Loadings with an absolute value of .50 were considered significant

Unfortunately, none of the factors had a very high internal reliability; however, for our exploratory analyses they did show some interesting trends. The first factor (5 items, alpha=.56) consisted of individuals who had gotten the business idea themselves, and who considered themselves opportunistic, creative, and alert to opportunities. This first group also felt that they could "see" opportunities naturally. We felt the first factor captured entrepreneurs who we considered to be solo entrepreneurs. They were individuals who demonstrated confidence in themselves and indicated that they were the sole provider of the idea behind their business.

Although neither the second or third factors clearly demonstrated support for a unique "network entrepreneur" type, the individual items that made up the second factor (3 items, alpha=.43) were items that earlier in the paper have been argued to be characteristic of network entrepreneurs. This factor captured entrepreneurs who recognized a wide range of ideas that were largely unrelated to each other. In addition, the second type of entrepreneurs indicated that their business venture ideas had come from an accidental process. From the discussion of Table 5, we know that solo entrepreneurs were significantly more likely to indicate that prior experience and immersion in an industry or market were important sources of opportunities. Contrasting those findings with the items loading on Factor 2 we can see that entrepreneurs who fall into Factor 2 are certainly different from solo entrepreneurs and consistent with network entrepreneurs. This may suggest that Factor 2 entrepreneurs are more likely to recognize opportunities in a network rather than a solo context.

The third factor (3 items, alpha=.49) was difficult to interpret using the network-solo typology. It demonstrates characteristics of the solo entrepreneur (having the ability to perceive opportunities) and the network entrepreneur (not requiring the entrepreneur to know the market prior to founding). We classified this type of entrepreneur as the "informal" entrepreneur. The venture idea just pops into his/her head and he/she knows it is good based on "gut feel." This entrepreneur does not need to fully understand the market and believes in just getting the business up and running. We might speculate that the idea or opportunity became apparent from a conversation with a social network tie, but further exploration might reveal alternative hypotheses.

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