STATE THE PROCESS OF EXPLOITING OPPORTUNITY
ABSTRACT
Opportunity exploitation is a necessary step in creating a successful business in the entrepreneurial process, yet there has been little conceptual and empirical development of this issue in the literature. This study examines the decisions of entrepreneurs to begin exploiting business opportunities from a resource-based view. Our analysis of a sample of entrepreneurs whose businesses are located in incubators suggests that entrepreneurs are more likely to exploit opportunities when they perceive more knowledge of customer demand for the new product, more fully developed necessary technologies, greater managerial capability, and greater stakeholder support. Moreover, the findings of this study shed a light on a less emphasized aspect of the resource-based view: the new product’s anticipated lead time acts as an enhancing moderator in entrepreneurs’ exploitation decision policies. Implications for future research on opportunity exploitation are discussed.
BUSINESS OPPORTUNITY
From Wikipedia, the free encyclopedia
A business opportunity (or bizopp) involves sale or lease of any product, service, equipment, etc. that will enable the purchaser-licensee to begin a business. The licensor or seller of a business opportunity usually declares that it will secure or assist the buyer in finding a suitable location or provide the product to the purchaser-licensee. This is different from the sale of an independent business, in which there is no continued relationship required by the seller.
CONCEPT
The use of a toll-free telephone number makes it difficult for customers to immediately identify the company's geographical location. Moreover, a company can own several telephone numbers. In the event of consumer complaints, this thwarts investigators from recognizing the connection between biz-ops listings in various newspapers.
A common type of business opportunity involves a company that sells bulk vending machines and promises to secure suitable locations for the machines. The purchaser is counting on the company to find locations where sales will be high enough to enable him to recoup his expenses and make a profit. Because of the many cases of fraudulent biz-ops in which companies have not followed through on their promises, or in which profits were much less than what the company led the investor to believe, governments closely regulate these operations.
In the United States, the Federal Trade Commission receives complaints and helps coordinate enforcement action against fraudulent business opportunities.
Makeup of a business opportunity
A business opportunity consists of four integrated elements all of which are to be present within the same timeframe (window of opportunity) and most often within the same domain or geographical location, before it can be claimed as a business opportunity. These four elements are:
A need
The means to fulfill the need
A method to apply the means to fulfill the need and;
A method to benefit
With any one of the elements missing, a business opportunity may be developed, by finding the missing element. The more unique the combination of the elements, the more unique the business opportunity. The more control an institution (or individual) has over the elements, the better they are positioned to exploit the opportunity and become a niche market leader.
Entrepreneurial opportunities exist and individuals just need to recognize them. If they have the willpower and decide to exploit an existing opportunity, this will lead to economic growth. Stop – is it really that easy? There are at least two arguments which indicate that the relationship between opportunities, entrepreneurship, and economic growth is more complicated. Firstly, opportunities do not fall from heaven like manna – they need to be created. Secondly, an individual needs to make the decision about whether or not to exploit the opportunity. Demographic and psychological characteristics are a powerful influence on the individual’s decision (see Mueller 2006a for an overview of the literature).
The process of generating opportunities involves individuals, firms, universities, and research institutions. Their research and development activities not only create new knowledge, they are also the precondition for the ability to identify, absorb, and exploit knowledge. This knowledge may have also been generated by other actors in the same or different industry (Cohen and Levinthal, 1989). Entrepreneurial opportunities particularly arise if existing organizations do not capitalize knowledge to the full extent. Firms with abundant underexploited knowledge are a breeding ground for entrepreneurial opportunities, which may cause spin-offs (Agarwal et al., 2004; Franco and Filson, 2000).
This paper analyzes the relationship between the exploitation of entrepreneurial opportunities and regional economic growth. In particular, this paper explores if those regions that increased their new firm formation activity also experienced higher economic growth rates. The results of Mueller (2006b) indicate that regions with a higher start-up rate also have higher economic performance measured as labor productivity. Assuming that entrepreneurship challenges and displaces less innovative incumbents, entrepreneurship leads to a higher degree of economic growth (see Schumpeter, 1911; Baumol et al. 1988; Fritsch and Mueller, 2004; Audretsch et al., 2006).
New ventures are suggested to be a mechanism for knowledge diffusion and knowledge exploitation (see also Acs et al., 2005). New firms, founded to capitalize abundant underexploited knowledge, may also amplify innovation by introducing new products and processes to the market (Audretsch, 1995). However, the origin of opportunities is also driven by the presence of R&D intensive incumbent firms. The greater the presence of knowledge- and technology-intensive incumbent firms the more entrepreneurial opportunities may arise and exploited. Certainly, regional economic growth is only partly stimulated by entrepreneurship but mainly determined by research and development activities in existing firms, investments in physical capital stocks, and human capital. Knowledge generated through R&D activities of existing firms represents the knowledge stock for this particular region.
Consequently, regions with less research and development activities are characterized by a lower level of absorptive capacity and are expected to experience lower growth rates.
This paper is organized as follows. Section 2 presents the theoretical framework and links the exploitation of entrepreneurial opportunities to economic growth. The methodology and database is described in section 3. It is empirically tested if the development of start-ups is a mechanism to facilitate knowledge spillover and thus stimulate growth in economic output (section 4). Section 5 provides a summary and a conclusion.
Knowledge, Entrepreneurial Opportunities and Their Impact on Economic Growth With the new growth theory, knowledge is recognized as an essential driver of economic growth. However, it is rarely linked to economic growth in empirical analyses.
Knowledge may increase productivity by stimulating technological progress. Romer (1986, 1990) and Lucas (1988) explained economic growth through the accumulation and spillover of technological knowledge. New knowledge may lead to innovations and is capitalized by transforming it into
new products, processes, and organizations.
Private businesses, universities, and other research institutions generate new knowledge through research and development. The created knowledge may be exploited by the knowledge-producer or by other organizations; therefore, knowledge flows are crucial. These other organizations may be other existing firms in the same industry, related or different industries or disciplines, or individuals who decide to leave their current employer to start their own venture.
From Wikipedia, the free encyclopedia
A business opportunity (or bizopp) involves sale or lease of any product, service, equipment, etc. that will enable the purchaser-licensee to begin a business. The licensor or seller of a business opportunity usually declares that it will secure or assist the buyer in finding a suitable location or provide the product to the purchaser-licensee. This is different from the sale of an independent business, in which there is no continued relationship required by the seller.
CONCEPT
The use of a toll-free telephone number makes it difficult for customers to immediately identify the company's geographical location. Moreover, a company can own several telephone numbers. In the event of consumer complaints, this thwarts investigators from recognizing the connection between biz-ops listings in various newspapers.
A common type of business opportunity involves a company that sells bulk vending machines and promises to secure suitable locations for the machines. The purchaser is counting on the company to find locations where sales will be high enough to enable him to recoup his expenses and make a profit. Because of the many cases of fraudulent biz-ops in which companies have not followed through on their promises, or in which profits were much less than what the company led the investor to believe, governments closely regulate these operations.
In the United States, the Federal Trade Commission receives complaints and helps coordinate enforcement action against fraudulent business opportunities.
Makeup of a business opportunity
A business opportunity consists of four integrated elements all of which are to be present within the same timeframe (window of opportunity) and most often within the same domain or geographical location, before it can be claimed as a business opportunity. These four elements are:
A need
The means to fulfill the need
A method to apply the means to fulfill the need and;
A method to benefit
With any one of the elements missing, a business opportunity may be developed, by finding the missing element. The more unique the combination of the elements, the more unique the business opportunity. The more control an institution (or individual) has over the elements, the better they are positioned to exploit the opportunity and become a niche market leader.
Entrepreneurial opportunities exist and individuals just need to recognize them. If they have the willpower and decide to exploit an existing opportunity, this will lead to economic growth. Stop – is it really that easy? There are at least two arguments which indicate that the relationship between opportunities, entrepreneurship, and economic growth is more complicated. Firstly, opportunities do not fall from heaven like manna – they need to be created. Secondly, an individual needs to make the decision about whether or not to exploit the opportunity. Demographic and psychological characteristics are a powerful influence on the individual’s decision (see Mueller 2006a for an overview of the literature).
The process of generating opportunities involves individuals, firms, universities, and research institutions. Their research and development activities not only create new knowledge, they are also the precondition for the ability to identify, absorb, and exploit knowledge. This knowledge may have also been generated by other actors in the same or different industry (Cohen and Levinthal, 1989). Entrepreneurial opportunities particularly arise if existing organizations do not capitalize knowledge to the full extent. Firms with abundant underexploited knowledge are a breeding ground for entrepreneurial opportunities, which may cause spin-offs (Agarwal et al., 2004; Franco and Filson, 2000).
This paper analyzes the relationship between the exploitation of entrepreneurial opportunities and regional economic growth. In particular, this paper explores if those regions that increased their new firm formation activity also experienced higher economic growth rates. The results of Mueller (2006b) indicate that regions with a higher start-up rate also have higher economic performance measured as labor productivity. Assuming that entrepreneurship challenges and displaces less innovative incumbents, entrepreneurship leads to a higher degree of economic growth (see Schumpeter, 1911; Baumol et al. 1988; Fritsch and Mueller, 2004; Audretsch et al., 2006).
New ventures are suggested to be a mechanism for knowledge diffusion and knowledge exploitation (see also Acs et al., 2005). New firms, founded to capitalize abundant underexploited knowledge, may also amplify innovation by introducing new products and processes to the market (Audretsch, 1995). However, the origin of opportunities is also driven by the presence of R&D intensive incumbent firms. The greater the presence of knowledge- and technology-intensive incumbent firms the more entrepreneurial opportunities may arise and exploited. Certainly, regional economic growth is only partly stimulated by entrepreneurship but mainly determined by research and development activities in existing firms, investments in physical capital stocks, and human capital. Knowledge generated through R&D activities of existing firms represents the knowledge stock for this particular region.
Consequently, regions with less research and development activities are characterized by a lower level of absorptive capacity and are expected to experience lower growth rates.
This paper is organized as follows. Section 2 presents the theoretical framework and links the exploitation of entrepreneurial opportunities to economic growth. The methodology and database is described in section 3. It is empirically tested if the development of start-ups is a mechanism to facilitate knowledge spillover and thus stimulate growth in economic output (section 4). Section 5 provides a summary and a conclusion.
Knowledge, Entrepreneurial Opportunities and Their Impact on Economic Growth With the new growth theory, knowledge is recognized as an essential driver of economic growth. However, it is rarely linked to economic growth in empirical analyses.
Knowledge may increase productivity by stimulating technological progress. Romer (1986, 1990) and Lucas (1988) explained economic growth through the accumulation and spillover of technological knowledge. New knowledge may lead to innovations and is capitalized by transforming it into
new products, processes, and organizations.
Private businesses, universities, and other research institutions generate new knowledge through research and development. The created knowledge may be exploited by the knowledge-producer or by other organizations; therefore, knowledge flows are crucial. These other organizations may be other existing firms in the same industry, related or different industries or disciplines, or individuals who decide to leave their current employer to start their own venture.
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