Potential for Opportunity Recognition of Pre-early- and Late-Stage Entrepreneurs
Wasdani, Kishinchand Poornima
MetadataShow full item record
All small business owners are not necessarily entrepreneurial. A small business owner starts a venture as a means of earning a living. An entrepreneurial business owner will convert an opportunity into a venture and would seek further opportunities to grow the business. It appears that the difference between the two lies in their potential for opportunity recognition, which is an essential constituent of entrepreneurship (Shane and Venkataraman, 2000). Stevenson and Jarillo (1990) claim that the skill of opportunity recognition, irrespective of the availability of resources, is the “heart of entrepreneurship”. According to several authors, the potential for opportunity recognition (ORP) represents the skill of the entrepreneur to recognize those ideas which have commercial viability, evaluate them in the context of customer needs, understand the availability of resources, and finally convert them into business ventures (Singh et al., 1999; Krueger, 2001; Shane et al., 2003, and Sarason et al., 2006). The entire process of opportunity identification, opportunity evaluation and opportunity implementation is influenced by both the entrepreneur’s personal and interpersonal attributes (Shane and Venkataraman, 2000; Short et al., 2010). Shane and Venkataraman (2000), distinguished between those entrepreneurs who had higher ORP and those entrepreneurs who had lower ORP on the basis of characteristics such as possession of financial capital, social ties with resource providers, greater self-efficacy and motivation to achieve. Variability amongst the entrepreneurs on these attributes was found to decide their performance in terms of recognizing profitable opportunities (Alvarez and Busenitz, 2001). In addition to the steps in opportunity recognition and differences in the characteristics of entrepreneurs that provide for variation in ORP, the stage of entrepreneurship has also been found to add to this variation (DeTienne, 2010). Entrepreneurship follows a cycle of three phases, which begins with the planning to create a venture, is followed by the creation of an enterprise and ends with ensuring sustenance and growth of the enterprise (Reynold and Curtin, 2009). Current research has named these phases as pre-stage, early-stage and late-stage of entrepreneurship. Prior research studies on ORP of entrepreneurs were limited to its examination in the initial phase of entrepreneurship (idea generation) and that each strand of research was confined to the influence of a particular attribute on ORP. There was a lack of studies that integrated both the attributes and the stages to examine the influence of the attributes on ORP of entrepreneurs along the different stages of entrepreneurship. Thus, the objectives of this research study are to find whether the stages of entrepreneurship affect ORP of entrepreneurs, the attributes that would influence ORP of entrepreneurs, and how their influence on ORP of entrepreneurs would differ across the stages. The attributes considered for this study were social capital, cognitive styles, self-efficacy and motivation of entrepreneurs. Each of these attributes was further divided into their sub-types, i.e., bridging and bonding for social capital, intuitive, adaptive and analytical for styles of cognition, hope of affiliation or fear of rejection for affiliation motivation, hope for success or fear of failure for achievement motivation and hope of power or fear of loss of power for power motivation. To attain these objectives, this study hypothesized and tested for several relationships. To begin with, the presence of ORP for entrepreneurs in the different stages of entrepreneurship and variations in these attributes which influenced ORP of entrepreneurs who were in different stages of entrepreneurship were hypothesized for in H1 and H2. The next attempt was to identify those attributes which affected the potential for opportunity recognition in those entrepreneurs who were found to have high and low ORP, and this was hypothesized in H3. This comparison would help delineate those attributes which would contribute to higher ORP of entrepreneurs. The scope of the study was then extended to explore if differences in personal and interpersonal attributes of entrepreneurs would lead to differences in their ORP. Hence, this research study tested if those attributes which would significantly influence ORP of entrepreneurs who were found to have high social capital and self-efficacy were different from those attributes which would significantly influence ORP of those entrepreneurs who were found to have low social capital and self-efficacy. The study also intended to find if ORP of entrepreneurs and the attributes influencing their ORP differed for those entrepreneurs who were found to use different styles of cognition and different types of motivations. These relationships were stated in hypotheses H4. Before examining the above stated hypotheses, a preliminary study was conducted to critically assess the clarity of items in the existing ORP scale. Data was collected for this preliminary study from 251 students and 24 entrepreneurs (a total of 275 ). All the students were second year post-graduates of the Business Administration programme after having done an undergraduate programme in engineering. These students have a higher probability of starting their own business and can be used as surrogates for entrepreneurs (Khera & Benson, 1970, Gaglio & Katz, 2001). An analysis of the preliminary study using item-to-total correlations and Cronbach’s alpha values was then done to revise the ORP questionnaire. The analysis of the preliminary study helped trim down 11 items in the ORP questionnaire. The original scale consisting of 24 items was thus revised to 13 items. This 13-item revised questionnaire was used to collect responses from entrepreneurs in the main study. The main study considered those entrepreneurs who were at different stages of venture creation, i.e., pre-stage (118), early-stage (73) and late-stage (88). Pre-stage entrepreneurs were potential entrepreneurs who were either enrolled for a two-year full-time programme in entrepreneurship or enrolled for elective courses in entrepreneurship as part of their postgraduate programme in management. Early-stage entrepreneurs were business owners who had started their business and their business was less than 3 years old (Korunka et al., 2003). Late-stage entrepreneurs were business owners who had businesses which were more than 3 years old (Korunka et al., 2003). The hypotheses H1, H2, H3 and H4 were tested using ANOVA, correlations and multiple linear regressions. The results of the ANOVA did not show sufficient evidence to support H1, i.e. ORP was not found to increase linearly but was instead, found to follow a ‘U’ shaped curve. The results obtained by correlation and regression analyses showed that hypotheses H2a and H2b were not supported and that both bridging social capital and self-efficacy did not influence the ORP of pre-stage entrepreneurs but that both types of social capital were important for ORP of pre-stage entrepreneurs. The hypotheses H2c and H2d were supported, which meant that the ORP of pre-stage entrepreneurs was significantly influenced by their cognition style and their motivation by hope and not motivation by fear. The study did not find evidence sufficient enough to support the hypotheses H2e, H2f and H2h about the early-stage entrepreneurs, but found sufficient evidence to support hypothesis H2g. These results indicated that ORP of early-stage entrepreneurs was influenced only by bonding social capital (instead of the expectation that they would be influenced by both types of social capital) and cognitive style. A frequency analysis of early-stage entrepreneurs indicted that their cognition style was analytical. The hypotheses H2j and H2k were not supported whereas H2i was supported and H2l was partially supported. This indicated that ORP of late-stage entrepreneurs was influenced by bonding social capital and that they were motivated by hope, particularly by hope for power. A frequency analysis of late-stage entrepreneurs indicated that their cognitive style was predominantly analytical. Among the demographic attributes, the age of the pre-stage and of the late-stage entrepreneurs and gender of the early-stage entrepreneurs were found to influence their ORP respectively. These findings further revealed that pre-stage entrepreneurs were found to be optimistic about their ORP and it was found to be significantly influenced by their social capital (both bridging and bonding) and cognitive style. The early-stage entrepreneurs were realistic and bonding social capital and their cognitive style were found to significantly influence their ORP. Late-stage entrepreneurs were experienced and thus their ORP was found to be significantly influenced by their bonding social capital and motivation by hope for power. These results have been described in Chapter 4. The study then used quartiles to divide entrepreneurs into four groups. Entrepreneurs who had scores less than and equal to quartile one-46 (Low-ORP) were compared with those entrepreneurs who had scores greater than and equal to the third quartile-55 (High-ORP). A binary logistic regression (BLR) analysis was conducted to examine if the division of potential for opportunity recognition (ORP) based on the quartiles was powerful enough to predict the effect of the independent variables on the dependent variable (ORP). The Chi-square values showed that the classification was robust enough to predict the ORP of entrepreneurs. The third set of hypotheses H 3 was then tested using the multiple linear regression and results revealed that the evidence was insufficient to support H3a, H3b, H3c and H3d. Bonding social capital was found to significantly influence the ORP of those entrepreneurs who had high ORP and cognitive style was found to significantly influence the ORP of those entrepreneurs who had low ORP. An F-test was used to investigate whether the difference in personal and interpersonal attributes of entrepreneurs could lead to difference in attributes affecting ORP of entrepreneurs. Later, a K-mean cluster analysis was used to identify homogenous groups of entrepreneurs with high dissimilarity between clusters, based on both the personal and interpersonal attributes that were found to significantly influence their ORP. The F-test scores showed that the attributes which divided the entrepreneurs into three groups were ORP, social capital, cognition style and self-efficacy. The F-test scores did not show motivation as an attribute that could significantly distinguish between entrepreneurs of the three groups. These results have been described in Chapter 5. The study further obtained new groups using quartiles to divide the entrepreneurs who had high (28 and 29) and low social capital (24) and high (30) and low (24) self-efficacy. The chi-square values of the binary logistic regression indicated that the models were robust enough to distinguish between those entrepreneurs who were found to have high and low self-efficacy and those entrepreneurs who were found to have high and low social capital. The results of multiple linear regressions found evidence to support hypotheses H4a, H4b and H4d. The demographic attributes age and education, were found to significantly influence the ORP of those entrepreneurs who had high bridging social capital. Cognitive style was found to significantly influence the ORP of those entrepreneurs who had high bonding social capital. Self-efficacy, cognitive style and age were found to significantly influence the ORP of entrepreneurs who had low bridging social capital. Cognitive style, work experience and age were found to significantly influence the ORP of entrepreneurs who had low bonding social capital. Bonding social capital and motivation by hope for success were found to significantly influence ORP of entrepreneurs who had high self-efficacy. Cognitive style and work experience were found to significantly influence ORP of entrepreneurs who had low self-efficacy. Subsequently, an analysis was done to identify attributes which significantly influenced the ORP of entrepreneurs who were found to use adaptive and analytical styles of cognition by using multiple linear regressions. Based on the results, the study found sufficient evidence to support the hypothesis H4c. The attributes that significantly influenced ORP of those entrepreneurs who used adaptive style were bridging social capital, and motivation by hope for success, work experience and age and attributes found to significantly influence ORP of those entrepreneurs who used analytical style of cognition were bonding social capital and gender. To conclude, the results of the study highlighted the importance of social capital, cognitive style and age for ORP of entrepreneurs from across all the stages and groups. There was very little evidence to support the role of self-efficacy and no evidence to support the role of motivation in influencing the ORP of those entrepreneurs who were in any stage and in any of the high and low groups. This study has developed a theoretical perspective on the role of ORP of entrepreneurs who are in different stages of entrepreneurship. It has also suggested a rationale for the use of social capital by entrepreneurs. The findings of this study would assist in guiding pre-stage entrepreneurs to develop realistic expectations while implementing their projects, and would help early-stage entrepreneurs persist with their ventures against any initial setbacks therefore findings of this study can be judiciously used for training potential entrepreneurs in the field of opportunity recognition.