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Essay: Is discovery or creation theory is more significant in opportunity identifications?

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  • Subject area(s): Business essays
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  • Published: 22 September 2015*
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  • Words: 909 (approx)
  • Number of pages: 4 (approx)

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The goal of entrepreneurs is to form and exploit opportunities (Shane and Venkatraman, 2000; Shane, 2003; Casson and Wadesson 2007).An entrepreneurial opportunity consists of a set of ideas, beliefs, and actions that enablethe creation of future goods and services in the absence of current markets for them (Venkataraman, 1997).
Although some researchers argue that the subjective or socially constructed nature of opportunity makes it impossible to separate opportunity from the individual (Shane 2003; Zahra 2008), others contend that opportunity is an objective construct visible to or created by the knowledgeable or attuned entrepreneur (Alvarez and Barney2007; Alvarez et al 2013). Either way, according to Alvarez and Barney ( 2007), a set of weakly held assumptions about the nature and sources of opportunity appear to dominate much of the discussion in the literature of management and organizational studies.Regarding entrepreneurial opportunity research, McClen et al (2007) argue that “most of the literature has centered on the recognition and exploitation of opportunities rather than on the existence or emergence of opportunities themselves’. That is, most entrepreneurial research focused on the discovery, exploitation of opportunities without much attention to the nature and source of opportunity itself (Aldrich and Reuf, 2006; Alvarez and Barney, 2005; Gartner, 1985; Baker and Nelson, 2005; Sarasvathy, 2001). Recently, explaining the formation of opportunities has become vital in entrepreneurship research (Alvarez and barney 2007; Baron, 2008; Venkataramn, 1997; Dimov 2008).
Alvarez and Barney (2007) distinguish between the discovery versus the creation of entrepreneurial opportunities, starting with the metaphor of “mountain climbing” versus “mountain building”. Discovery theory asserts that entrepreneurial opportunities are like mountains just waiting to be discovered or searched and exploited, whereas for the creation theorists, entrepreneurial opportunities are created by the actions of the entrepreneurs- they build the mountains. As opposed to discovery theory, opportunities are created, endogenously, by the actions, reactions, and enactment of entrepreneurs exploring ways to produce new products or services in creation theory. (Gartner, 1985; Sarasvathy, 2001; Baker and Nelson, 2005), i.e., opportunities cannot be understood until they exist, and they only exist after they are enacted in an iterative process of action and reaction (Alvarez and Barney, 2007).
Clearly the informal discussion summarized at the opening of this introduction is with an entrepreneur who may be considered primarily as a mountain builder, the lobbying for more roads in Southern Ethiopia for further development is a clear example of his mountain building strategy. More generally, this entrepreneur developed such radically different tours that it is likely that he created a service for satisfying needs that were previously very uncommon. A discovery oriented entrepreneur would have chosen to offer more conventional tours for the more commonly travelled northern tracks in Ethiopia, discovering opportunities to satisfy commonly existing tourist needs in Ethiopia and gaining ideas from established tour operating practices.
Most previously conducted studies in Western economies concentrated on the application of discovery strategies (Shane, 2003). It can be argued that entrepreneurial actions in a developing country situation are quite different from the developed economies (Kiggundu, 2002) where a discovery theory has received much more attention in the literature (Gaglio and Katz, 2001; Shane, 2003; Venkataraman, 2003). Hence, creation theory can be regarded as a logical theoretical alternative to discovery theory for explaining the actions that entrepreneurs take to form and exploit opportunities (Alvarez and Barney, 2007; Venkataraman, 2003). Unlike discovery theory, creation theory is the least studied theory and thus, has to be articulated as a single coherent theory in the literature, particularly in a developing country context like Ethiopia. To suffice this purpose, formally established tour operators business are considered.
The aim of this study is threefold: to develop scales to measure the extent to which entrepreneurial actions fall under either discovery and creation theory; second, to test whether discovery or creation theory is more significant in opportunity identifications in a developing country context and third to segment entrepreneurs on the basis of their entrepreneurial actions so as to assess implications of these theories on entrepreneurial performance, in terms of multiple self-reported perceived growth indicators. Thus, we enhance knowledge on the use of entrepreneurial discovery and creation strategies in the context of a developing marketing.
To the best of our knowledge, our study is the first to empirically research entrepreneurial creation strategies. We chose to conduct this study in a developing economy, as we expect that creation strategies are more likely to be found in such a context. Consecutive studies can assess whether the creation strategies found in the developing economy context also are applied by entrepreneurs in developed markets. Thus, another novel aspect of our paper is that instead of following the more regular approach of first conducting research in developed countries and testing generalizability to the developing markets, we start by doing the research in a developing economy, as this seems the most plausible context to gain insight into the constructs under investigation. Furthermore, our paper is one of the few that provides data on formal businesses in Africa, most previous studies concentrated on smaller petty tradespersons (Garoma 2011; Nsubili 2012), which are more common and more easy to approach. The somewhat larger firms with medium sized entrepreneurs also deserve attention due to their contribution to the economy and employment. The paper also has policy making implications for the government of the country, Ethiopia, in which the empirical study was conducted and for other developing countries. These implications will be addressed in the discussion section of the paper. As for the organization of the paper, in the next section we discuss the relevant theories in more detail. Then we present a quantitative empirical study and conclude with a discussion and conclusions.

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