The Opportunity Recognition Process:the mechanisms by which entrepreneurial opportunities are recognised and the role played by social networks in this process

Abstract

This research study is based upon the premise that in order for entrepreneurial opportunity to be exploited it must first be recognised. An exploration of the theory regarding entrepreneurial opportunity has uncovered two main strands of thought regarding the process of opportunity recognition. These have been termed deliberate search and entrepreneurial alertness. Deliberate search is based upon the theory of Drucker (1985) who proposes that in order for entrepreneurial opportunity to be recognised, the entrepreneur must conduct a deliberate and systematic search into particular areas in their business and social environment. ‘Entrepreneurial alertness’ is a phrase coined by Kirzner (1979) who explains opportunity recognition in terms of cognition and heuristics. Theory surrounding this notion of entrepreneurial alertness examines the role played by cognition with regards to the entrepreneur’s ability coordinate knowledge in a way that allows them to establish novel linkages and perceive new means-end relationships. Through the examination of 49 retrospective case studies, the opportunity recognition process is analysed with respect to these mechanisms and the common characteristics, behaviours and processes that are apparent in the successful recognition of an opportunity. Further to this is an examination of the role played by the creation and maintenance of social networks in facilitating this process. Entrepreneurship theory highlights the effectiveness of networking in supplementing resources and gaining access to knowledge, information and skills. This study looks at networks in terms of their ability to supplement the process of opportunity recognition. The case study analysis highlights the effectiveness of these mechanisms in the opportunity recognition process and the role played by networks. From this analysis a framework is devised highlighting the complementarity between the two mechanisms and an explanation is offered as to how these two mechanisms are both reliant upon the cognitive, behavioural and knowledge differences highlighted in the discussion.