Entrepreneurship and innovation : a study on the fintech entrepreneur’s ability to recognize and implement innovation to increase business growth

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University of Amsterdam

‘Entrepreneurship and Innovation’

A study on the fintech entrepreneur’s ability to

recognize and implement innovation to increase business growth.

Author: Supervisor:

Zuhal Hayat Willem Dorresteijn

10183590

A thesis submitted in partial fulfilment of the

requirements for the degree of bachelor of Business Administration at the Faculty of Economics and Business

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Preface

This bachelor thesis is written to fulfil the partial graduation requirements of the study Business Administration at the University of Amsterdam. The research described herein was conducted under the supervision of Willem Dorresteijn. The thesis has been guided at the Faculty of Economics and Business, during the period of April 2016 to June 2016.

The way we have known financial services are changing. Where a bank needs six to eight weeks to deliver a mortgage, a fintech is able to inform a customer within ten minutes and deliver the actual mortgage within five days. These changes have increased my interest in entrepreneurship and innovation even more, and led me to the financial technology sector which is known as the fintech sector. I wondered to what extent entrepreneurs have the ability to recognize opportunities and come up with startups that deliver products and/or services in an innovative and faster way. When analysing preceding literature on entrepreneurship and innovation, I found out that there is an abundance of literature relating to the entrepreneur’s ability to recognize opportunities, but a paucity of research in the field of financial technology in relation to business growth. For this reason, I have decided to direct my focus on innovation in the field of financial technology in relation with business growth.

I would like to thank my thesis supervisor Willem Dorresteijn. I am appreciative for the valuable feedback and support during this process which has helped me writing my thesis. I also wish to thank Bouwe Kuik, Vedran Vego and Edwin Huijskens, who were willing to share their experiences, without whose cooperation I would not have been able to conduct this analysis. It has been an pleasant journey to study Business Administration.

Alkmaar, June 29, 2016

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Statement of Originality

This document is written by Zuhal Hayat, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

Recognizing and selecting the right opportunities are recognized as one of the most pivotal abilities of successful entrepreneurs (Ardichvili et al., 2003). Despite the abundance in literature relating to this subject, little is known about entrepreneurs in the field of financial technology in relation to the recognition and implementation of innovation opportunities, and business growth. This means that there is a clear need to focus on entrepreneurs in the field of financial technology, the ‘fintech sector’. Therefore, the following research question has been formulated: “To what extent do entrepreneurs in the field of financial technology have the ability to recognize and implement innovation opportunities, in order to increase their growth rate”.

In total four propositions were established and the study found evidence for all four. The following findings are found: A fintech entrepreneur’s prior knowledge of markets and customer problems positively influences his or her ability to recognize and implement innovative opportunities. Moreover, a fintech entrepreneur’s network positively influences his or her ability to recognize innovation opportunities and become successful in the fintech sector. Besides, findings indicate that recognizing and implementing innovative opportunities requires a different mindset and entrepreneurial skills. Furthermore, a fintech entrepreneur’s ability to recognize and implement innovation opportunities positively influences the growth rate of the fintech. Finally, fintech entrepreneurs high in self-efficacy lead to higher levels of revenue.

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3.7 Ethical Issues ... 26 3.7.1 Informed Consent ... 26 3.7.2 Confidentiality ... 26 4. Research Results ... 27 4.1 Findings ... 27 4.1.1 Entrepreneurs ... 27 4.1.2 Prior Knowledge ... 28 4.1.3 Technological innovation ... 30 4.1.4 Opportunity Recognition... 31 4.1.5 Approach to Exploitation ... 32 4.1.6 Business Growth ... 34 5. Discussion ... 36 5.1. Implications ... 36 5.1.1 Theoretical Implications ... 36 5.1.2 Practical Implications... 36 5.2. Limitations ... 37 6. Conclusion ... 38

6.1. Overview of the Findings ... 38

6.2. Future Research ... 39

7. References ... 40

Appendices ... 46

Appendix A: The Fintech Startups ... 46

Appendix B: Example of Interview Transcript ... 48

Appendix C: Memos ... 57

Appendix D: Topic List ... 58

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1. Introduction

Entrepreneurs are commonly associated with creating wealth, generating jobs, and increasing the level of innovation (Lim & Xavier, 2015). Because of their significance to the economy, entrepreneurs have long been the subject of intensive study. Identifying and selecting appropriate opportunities are recognized as one of the most pivotal abilities of successful entrepreneurs (Ardichvili et al., 2003). Therefore, understanding the nature of opportunity recognition has become the central focus of the literature (Baron, 2006). As a result, there is an abundance in literature relating to entrepreneurs and their ability to recognize opportunities. However, little is known about entrepreneurs in the field of financial technology in relation to recognizing and implementing innovative opportunities, and business growth.

Therefore, this thesis concentrates on fintechs. Fintech is an abbreviation for financial technology, an emerging field of the financial services sector (Investopedia, 2015), which is gaining attention fast. In 2015, global investment was 19.1 billion US dollars (KPMG global, 2016). Entrepreneurs postulate that financial technology innovation has the potential to reinvent the financial services sector, especially with the changing needs of digitally-dependent consumers (KPMG global, 2016). Nevertheless, it could become more difficult for entrepreneurs to be and remain successful as competition will grow. This makes recognizing and choosing the right opportunities to outdo competition challenging for entrepreneurs (Hmieleski & Baron, 2008).

Consequently, the following research question has been formulated: “To what extent do entrepreneurs in the field of financial technology have the ability to recognize and implement innovation opportunities, in order to increase their growth rate”.

The purpose of this bachelor thesis is to explore the entrepreneur’s ability to recognize and implement innovation opportunities in the financial technology sector, and is built on existing theories and studies of entrepreneurship, opportunity recognition, opportunity implementation, and business growth. This study believes to contribute to the literature by focusing on fintech entrepreneurs and their ability to recognize and implement opportunities, and business growth.

Moreover, it could be of importance to stress the right entrepreneurial factors for recognizing and implementing innovation opportunities for both startups and individual entrepreneurs. The study connects opportunity recognition, opportunity implementation and business growth, which is relevant for entrepreneurs seeking to expand their businesses and for startups in general. Therefore, the topic of opportunity recognition is not only important to the individual entrepreneur, but also to any startup who is in search of profit and innovation (Krueger, 2007). It is therefore essential for these startups, who are seeking to increase their entrepreneurial potential, to understand how individuals recognize and implement opportunities to increase their growth rate.

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7 This paper has the following outline: In section two, the literature review, the obtained literature will be extensively discussed. In the third section, the methodology is presented. Fourthly, the research results will be lengthily analysed and evaluated. In the fifth section, the discussion provides an overview of the implications and limitations of this research. In the last section, the conclusion, the research question will be answered and possibilities for future research will be provided.

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2. Literature Review

The literature review is performed to gather fundamental definitions and theories that are of relevance to research a fintech entrepreneur’s ability to recognize and implement innovation opportunities, in order to increase their growth rate. These definitions and theories are required to establish propositions, and eventually answer the research question. The literature review consists of seven sections.

2.1 Entrepreneurs

In the first section, the concept of entrepreneurs is elaborated to understand the subject of this research in more depth. While the term ‘entrepreneur’ is discussed extensively in prior research, there is a large array of contrasting definitions and theories. Therefore, various definitions and theories are highlighted in this section and a concluding summary relating to the term ‘entrepreneur’s is provided.

2.1.1 Defining Entrepreneurs

A frequently used description of entrepreneurs refers to independent ownership (Parker, 2009). This description is mainly based on the organizational status of the business and the ownership status of the individual, and not on his or her actions (Audretsch, Kuratko, & Link, 2016). In contrast, Shane (2000) defines entrepreneurship in relation to an individual’s actions. Shane’s definition can be proven by the recognition and exploitation of opportunities, and refers to the Classical School of Entrepreneurship, where the focus is on the process of doing rather than owning (Cunningham & Lischeron, 1991). Entrepreneurs realize new business opportunities by offering innovative products and/or services (Yetisen et al., 2015). Central to this view is the focus on changing products or services through innovation (Audretsch et al., 2016).

2.1.2 Theories Related to Entrepreneurship

There are a number of influential theories about entrepreneurship. Schumpeter’s (1942) process of creative destruction has been widely cited within the literature of entrepreneurship. Central to this view of Schumpeter is innovation, entrepreneur’s delivering something extraordinary and unexpected (Baumol, 1993). In other words, it is about finding new and more effective ways of doing things and introducing new and better products and/or services (Baumol, 1993). This means that the Schumpeterian entrepreneur is innovative and is determined to improve technology, finance, and the organization. The entrepreneur does so by introducing new products into the market, creating new markets, restructuring industries, and making former offerings become outdated (Schumpeter, 1942). To sum up, according to the Schumpeterian view, entrepreneurs create disruption in the current system that destroys the value of established companies and workers because of innovation.

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9 Another important theory is Kirzner’s (1985) theory on entrepreneurship. He claims that entrepreneurs initiate action to fill currently unsatisfied needs or to improve inefficiencies. Kirzner focuses on the entrepreneur’s speculative ability to look into the future (Bull & Willard, 1993). Central to this theory is entrepreneurial alertness. More precisely, the economy is in disequilibrium and entrepreneurs are able to earn profits by recognizing unknown opportunities to other market contributors and being alert to them (Kirzner, 1985). Baumol (1993) believes that entrepreneurs must proceed on the basis of Kirzner’s view which refers to alertness, instinct, hunch, and inspiration.

Finally, according to Knight (1921), the entrepreneur is an individual with typically a low level of uncertainty aversion (Bull & Willard, 1993). Central to this view is risk-taking, which is defined as the activity of intentional interaction with uncertainty. In order to develop an idea, entrepreneurs are willing to take risks and actions that have unknown future outcomes. The ability to take moderate risks and judge unknown situations is highly necessary in entrepreneurial activities (Bull & Willard, 1993). Moreover, entrepreneurs wish to take responsibility for solving problems, setting goals, and achieving goals through their own efforts. They are willing to accept moderate risks, not as a function of luck but of skill, and the need to know the consequences of their decisions (Bull & Willard, 1993).

2.1.3 Concluding Entrepreneurship

Throughout this study, entrepreneurs are defined as founders of startups who are able to recognize and implement innovative opportunities in the field of financial technology. This corresponds both to the proposed definition of ownership as well as the entrepreneur’s tasks. Hence, entrepreneurs who have the ability to change markets due to both finance and technology, and thereby creating innovation. The above mentioned descriptions will match entrepreneurs in the fintech sector, as the fintech sector consists of newcomers that change the traditional products and services of the financial industry.

2.2 Prior Knowledge

In the second section, the meaning of prior knowledge is explained and the main theories are discussed. The objective was to provide an overview of the various forms of prior knowledge in relation to an entrepreneur’s ability to recognize and implement innovative opportunities.

2.2.1 Defining Prior Knowledge

Why do some people discover entrepreneurial opportunities and others don’t? Venkataraman (1997) believes that people recognize opportunities related to information they already possess, which is known as prior knowledge. In line with this notion, Shane (2000) argues that people have different stocks of information as information is gathered through people’s personal life experiences. He claims that entrepreneurs locate opportunities as prior knowledge prompts recognition of the value of new information. Therefore, it enables entrepreneurs to recognize and determine the business value of an

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10 opportunity, based on their former knowledge and experience of solving problems in related markets (Shane, 2000). Likewise, Van Hippel (1994) states that people tend to notice information faster if is related to information they already have.

In their definition of prior knowledge, different theorists make different distinctions. For instance, Sigrist (1999) makes a distinction between knowledge in the area of special interest to an entrepreneur, and in the area of fun and fascination. Shane (2000) on the other hand, postulates that there are three types of prior knowledge, namely: prior knowledge of markets, prior knowledge of ways to serve markets, and prior knowledge of customer problems. Both distinctions of Sigrist (1999) and Shane (2000) will be taken into account in this paper. Although, the area of fun and fascination will be left out.

2.2.2 Theories Related to Prior Knowledge

Not only are there different definitions to prior knowledge but there are also different theories about how prior knowledge influences the entrepreneur’s ability. One of the important prior knowledge theories that is of historical relevance is Cohen and Levinthal’s (1990) theory of prior knowledge. They claim that entrepreneurs who possess relevant prior knowledge are likely to have a better understanding of new technology that can generate new ideas and develop new products. As a result, the level of relevant prior knowledge is essential in empowering a business to exploit new market opportunities (Cohen & Levinthal, 1990). They also postulate that prior knowledge contributes to the development of innovation, especially in fast-changing knowledge-environments. This indicates that organizations and individuals must have the capacity to absorb new knowledge into their operations to create innovation. Somewhat differently, Tsai (2001) states that the ability to integrate new external knowledge for commercial purposes contributes to the exploitation of opportunities.

Another influential theory is that of Hills and Shrader (1998), they argue that entrepreneurs believe that most business ideas originate from prior experience of customers and markets, which is often a result of a former response to a specific issue in the marketplace. As such, an entrepreneur who has worked in an industry for a long period of time, might have more knowledge and experience about the different players that are existent in that specific industry. Shane (2000), exemplifies this by explaining that an entrepreneur who has worked in a particular market might possess information that is not available to the general public, such as supplier relationships and sales techniques. Also, it could be easier for entrepreneurs with prior knowledge of markets and customer problems to recognize innovative opportunities, as they are aware of the market conditions. Shane (2000) concludes that individuals who lack familiarity with the customer’s problems find it difficult to recognize opportunities to solve current customer problems. This view of prior knowledge is connected to opportunity recognition.

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11 Prior knowledge relates to information people already possess. Literature suggests that people recognize opportunities because of their prior knowledge. People have contrasting stocks of information as information is collected through people’s own life experiences, whether developed from work, education, or either personal background. This influences the entrepreneur’s ability to comprehend and apply new information in ways that those lacking prior knowledge are not able to replicate (Shane, 2000). In particular, research focuses on prior knowledge of markets and customer problems and opportunity recognition. Given these arguments, the following proposition has been formulated: Proposition 1: A fintech entrepreneur’s prior knowledge of markets and customer problems positively

influence their ability to recognize and implement innovative opportunities.

2.3 Technological Innovation

In the third section, the relationship between finance, technology, and business growth is established by discussing the different definitions and theories. Moreover, the meaning of technological innovation for this study has been defined thoroughly.

2.3.1 Defining Technological Innovation

In order to fully understand the relationship between finance, technology and business growth, one must understand the true character of innovation (Mazzucato, 2003). The importance of innovation on productivity and economic growth has been recognized by economists and entrepreneurs (Frame & White, 2014). For instance, Schumpeter (1942) emphasizes how innovation drives firms to pull out, start, or reinvent themselves. Moreover, technological innovation lays the foundation for creating new processes, new markets, new ways of organizing, and entrepreneurship is fundamental to this process (Schumpeter, 1942).

In this research, technological innovation is defined as innovation related to financial technology. The relevance of finance in an economy and its significance for economic growth increases the meaning of financial innovation, especially in today’s society where fintechs are changing the financial industry (Frame & White, 2014). Frame and White (2014) describe financial innovation as creating something new that reduces costs or improves products and services that better satisfy the demands of the end-users. Additionally, they group financial innovation into new products or services, new production processes, or new organizational forms.

2.3.2 Theories Related to Technological Innovation

Tufano (2003) suggests that financial innovation is a constant process whereby firms attempt to differentiate their products and/or services, replying to both unexpected and gradual changes in the economy. This is linked to the theory of incomplete markets. Researchers suggest that there are

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12 motivations to create markets for which there are no substitutes (Tufano, 2003). He exemplifies this by referring to Grinblatt and Longstaff’s study (2000). This study states that entrepreneurs create new dimensions to make markets more complete, especially when the current offerings are not sufficient enough to meet customer needs. In other words, entrepreneurs focus on convenience and usability for their customers, and on continuous improvement. This is in line with the Kirznerian view, according to which entrepreneurs initiate action to fulfil currently unsatisfied needs or to improve inefficiencies (Kirzner, 1985). Moreover, markets being incomplete could be a consequence of the combination of prior knowledge and the importance of network. Furthermore, there is frustration among customers in the financial industry. Therefore, customers’ trust could encourage entrepreneurs to preserve values as customers are even more looking for new services (Formisano, Fedele, & Antonucci, 2016).

Formisano et al (2016) believe that innovation becomes a mindset and an entrepreneurial courage in those who recognize the importance of innovation for the industrial system. The changing conditions illustrate that the competitive field of modern markets involves all socioeconomic actor’s abilities to adapt (Formisano et al., 2016). More precisely, innovation is seen as an attempt to maintain their identity over time and make their value proposition sustainable. Thus, entrepreneurs need to become more competitive and enrich their own unique characteristics (Formisano et al., 2016).

Another theory focuses on value determination. According to Lusch et al (2007), firms can merely create proposals to offer to the market, but the actual value is determined by the customer. This involves customer choice and preferences, how customers use the product(s) or service(s), and the benefits customers receive from using the product(s) or service(s). For this reason, it is important for firms to realize customer needs as it requires to enhance the relationship with customers and customer’s perceptions (Formisano et al., 2016).

Furthermore, teamwork is vital for a firm to be innovative (Formisano et al., 2016). Entrepreneurs need to combine creativity, interaction, and effective methods, in order to create successful and sustainable innovation. This means that there is a continuous process of creative destruction that permits the firm to pursue new opportunities for growth and development (Schumpeter, 1942), or take advantages of firms existent in the market (Kirzner, 1979). According to Formisano et al (2016), this view emphasizes the importance of the entrepreneur’s ability to be innovative, which results in increasing competitive advantage, supporting harmony with the environmental trends, helping reduce competition and thus affects sectors (Schumpeter, 2010).

2.3.3 Concluding Technological Innovation

In this research, the definition of Frame and White (2014) is followed. Since, the focus is on new products and/or services, new production processes, or organizational forms. In relation to the definition of financial innovation, the different theories described in the above section are taken into account too.

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2.4 Opportunity Recognition

In the fourth section, the term opportunity recognition is covered. It consists of different theories and definitions. Also, a concluding summary of the term ‘opportunity recognition’ is provided.

2.4.1 Defining Opportunity Recognition

Opportunity recognition is acknowledged to be a fundamental element of entrepreneurial success (Baron, 2006), as identifying and selecting the right opportunities have been recognized as one of the most important abilities of successful entrepreneurs (Ardichvili et al., 2003). Likewise, Stevenson et al (1985) argue that the identification and selection of opportunities for new businesses is essential for entrepreneurs to become successful. Somewhat differently, Timmons and Spinelli (1994) suggest that entrepreneurs are comprehensive about whether they are capable of finding the correct set of entrepreneurial activities to become successful. Hence, an entrepreneur is able to recognize new perspectives, possibilities, and new ways of doing things, while others are not capable of recognizing these chances (Klemm, 2013).

Here, opportunity recognition is defined as the entrepreneur’s ability to recognize a potential venture or as an entrepreneur that recognizes opportunities in an existing venture by modernising a product or service (Singh, 2000). The far-reaching definition is chosen on purpose as opportunity recognition is equally important for entrepreneurs establishing a new venture as for entrepreneurs seeking to recognize opportunities throughout the whole lifespan of the venture (Klemm, 2013). Since, entrepreneurs intent to stay ahead of the competition by constantly growing and improving (Klemm, 2013). Besides, understanding how entrepreneurs successfully manage the process of recognizing opportunities is even more relevant today as new technology is either readily available or actively required.

2.4.2 Theories Related to Opportunity Recognition

Opportunity recognition has become an integral part of the scholarly study of entrepreneurship (Shepherd & DeTienne, 2005) as many academics have tried to answer why some entrepreneurs recognize opportunities that others fail to recognize (Baron, 2004). In particular, there are two types of opportunities that are regarded as central and have opposing views on where entrepreneurial opportunities come from (De Jong & Marsili, 2010). These two opportunities are the Kirznerian view and the Schumpeterian view of opportunity recognition (Shane, 2003).

Kirzner (1979) believes that the ability to discover opportunities is determined by the level of intellect and the ability to analyse information. He suggests that individuals lock entrepreneurial profits on the basis of knowledge gaps that arise between people in the marketplace. Thus, in contrast to Schumpeter (1942), Kirzner believes that innovation and new combinations are not necessary conditions to recognize opportunities (1979). Moreover, Kirzner’s view is in line with the school of Austrian economics, who

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14 argue that the possession of information allows people to recognize opportunities that others can’t (Shane, 2000). Likewise, Ardichvili et al (2003) state that prior knowledge influences the core process of opportunity recognition.

Opposing to Kirzner, Schumpeter (1942) believes that entrepreneurs initiate change through innovation and actively creating new opportunities, and identifies innovation as recognizing new combinations (De Jong & Marsili, 2010). Schumpeter (1942) claims that changes in technology, regulation, and social trends create new information that entrepreneurs use to recombine resources into more valuable forms. According to De Jong and Marsili (2010), individuals engaging in Schumpeterian opportunities are more likely to be innovative and ambitious to grow their business.

Furthermore, a distinction is made between actively and passively searching for opportunities. Kirzner (1979) argues that opportunities are recognized without search as some people have information that others don’t, which accentuates the importance of both prior knowledge and networks. Therefore, Kirzner’s view is related to the passive search concept as searching implies that entrepreneurs know what information is needed and therefore what to look for (Kaish & Gilad, 1991). More precisely, a passive search leads to discovering opportunities by accident (Ardichvili et al., 2003). Conversely, an active search is when an entrepreneur engages in a dynamic search for opportunities. However, Teach et al (1998) claim that businesses perform better in sales when opportunities were discovered by accident instead of actively searching for them.

Another subject that is widely discussed within the literature of opportunity recognition, is the importance of networks for entrepreneurs. An entrepreneur’s network includes all the people s/he knows, both personally and professionally (Arenius & De Clerq, 2005). In particular, research focuses on whether a greater social network contributes to a greater exposure of ideas, and qualifies an entrepreneur to recognize innovative opportunities. For instance, Hills et al (1997) argue that entrepreneurs with an extensive network recognize more opportunities than entrepreneurs with a relatively small network. They focus on how entrepreneurs vary in terms of personal contacts, and adopt the Kirznerian view to analyse how a network impacts an individual’s recognition of opportunities (Arenius & De Clerq, 2005). In addition, Arenius and De Clerq (2005) consider networks to be one of the most powerful assets that an entrepreneur can have, as it provides access to power, information, capital, and other networks. Besides, research shows a relationship between networks and growth. For example, Anderson et al (2010) argue that networks provide the basis for entrepreneurial growth. The nature of social interaction that occurs between an entrepreneur and his or her network is fundamental for building and growing businesses. Moreover, the importance of networks and opportunity recognition could be related back to prior knowledge as prior knowledge exists of information gathered from an individual’s idiosyncratic life experiences, including their network (Arenius & De Clerq; Elfring & Hulsink, 2003).

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2.4.3 Concluding Opportunity Recognition

To sum up, Schumpeter (1942) believes that entrepreneurs advance the possibility frontier of economic production by producing novel products, new methods of production, or changes to how products are bought and sold. He believes that entrepreneurs create even as they destroy. In contrast, Kirzner (1979) believes that the ability to discover opportunities is determined by the level of intellect and the ability to analyse information. Furthermore, a distinction is made between actively and passively searching for opportunities. Kirzner (1979) believes that opportunities are recognized without search as people hold different information. On the other hand, an active search is when an entrepreneur takes part in a proactive search for opportunities. Both views are taken into account throughout this research. Finally, the importance of networks and opportunity recognition are connected to prior knowledge as prior knowledge exists of information gathered from individual’s own life experiences, including their network (Arenius & De Clerq, 2005; Elfring & Hulsink, 2003). For the above mentioned reasons, the following proposition is formulated:

Proposition 2: A fintech entrepreneur’s network positively influences the ability to recognize and

implement innovation opportunities and to become successful in the fintech industry.

2.5 Approach to Exploitation

In the fifth section, the focus is on the concept of exploiting innovative opportunities. The difference between recognizing and implementing innovation opportunities is explained through the use of different definitions and theories.

2.5.1 Defining Approach to Exploitation

Research relating to entrepreneurship argues that recognizing opportunities is not enough. For instance, Ardichvili et al (2003) stress that opportunity recognition and opportunity development are not the same. They claim that the need or resource ‘recognized’ or ‘perceived’ cannot become a sustainable business without the implementation. Therefore, the evaluation and development of opportunities should be of higher relevance as success is not created without the implementation of opportunities. Shane (2000), states that the prior knowledge of entrepreneurs influences their discovery ability of new products and services, and also to exploit new technologies.

2.5.2 Theories Related to Approach to Exploitation

There are various theories related to opportunity exploitation throughout the literature. March’s (1991) theory of opportunity implementation is of great importance. He analyses the relationship between exploration and exploitation of opportunities. According to March (1991), exploration refers to risk-taking, experimentation, discovery, and innovation. Whereas, exploitation contains terms as refinement,

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16 choice, efficiency, selection, implementation, and execution. He concludes that an equilibrium needs to be achieved between exploration and exploitation as those are the key factors related to survival and prosperity. Venkataraman (1997) makes the same point by accentuating the importance of both the discovery and development of opportunities as it is essential to entrepreneurship. This suggests that entrepreneurs need different skills related to the recognition and implementation of innovation opportunities.

Opportunity exploitation is crucial in forming successful businesses in the entrepreneurial process. According to Choi and Shepherd (2004), entrepreneurs who have confidence in that customers will value their new product(s) or service(s) are more likely to continue with the exploitation. For that reason, entrepreneurs must not doubt their ideas and stand behind it. Furthermore, entrepreneurs who believe to possess technical skills and knowledge needed for a full-scale operation are more likely to proceed as well (Choi & Shepherd, 2004). This refers to entrepreneurs having the capability of serving a large volume of customers. Moreover, they discuss the timing of exploiting opportunities. Choi and Shepherd (2004) believe that the timing is vital in creating successful businesses. Thereby, they discuss activities prior to exploitation, such as market research and the further development and testing of products and technologies. These activities provide entrepreneurs with resources needed for opportunity exploitation. Similarly, Kahneman and Tversky (1979) argue that entrepreneurs must resolve some of the uncertainties associated with market demand before they can decide whether their new product is valuable enough to be exploited and implemented into the market. Thus, entrepreneurs determining whether there is enough potential to realize business growth in the market.

2.5.3 Concluding Approach to Exploitation

Opportunity recognition and opportunity exploitation are not the same (Ardichvili et al., 2003). Success cannot be realized without implementing opportunities into the market. This means that entrepreneurs need different skills related to the recognition and implementation. For example, March (1991) explains exploration using concepts as risk-taking, experimentation, discovery, and innovation. He explains exploitation using terms as refinement, choice, efficiency, selection, implementation, and execution. The study examines whether fintech entrepreneurs see opportunity recognition and opportunity implementation as one concept or two separate concepts, and whether they define exploration and exploitation the same way. As a consequence, the following proposition is established:

Proposition 3: Recognizing and implementing innovation opportunities requires a different mindset and

entrepreneurial skills.

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17 In the sixth section, the literature concerning business growth is presented. It consists of various studies and theories relating to the contrasting definitions of business growth, the challenges related to business growth, and measures regarding the success of businesses. Furthermore, the relationship between an entrepreneur’s ability to recognize and implement innovative opportunities and firm performance is established.

2.6.1 Defining Business Growth

Business growth is necessary for startups to survive and prosper, it relates to companies growing both nationally as well as internationally (Marko, 2010). Prior studies measured business growth using various factors. For example, some academics think that revenue and profitability are the main factors to measure business growth (Akerley, 2016). In contrast, others believe that entrepreneurs must look beyond revenue and profitability to achieve its growth goals (Akerley, 2016). An example is an entrepreneur’s propensity to take risks. Research indicates that taking risks is required to become a successful entrepreneur, because entrepreneurs who are able to take moderate risks will have the opportunity to grow, whereas an individual who is not prepared to take risks will not (Marko, 2010).

2.6.2 Theories Related to Business Growth

Prior research suggests that there is a positive relationship between an entrepreneur’s growth capabilities and growth itself. Growth capabilities refers to the resources, organizational processes, and the possible ways of increasing business growth (Koryak et al., 2015). Organizational processes depend on intangible resources such as knowledge, intellectual property, and human capital (Koryak et al., 2015). Organizational processes develop gradually as an outcome of trial and error, experimentation, and learning-by-doing (Zollo & Winter, 2002). Moreover, human capital increases an entrepreneur’s ability to recognize and implement business opportunities, and relates to the Kirznerian view (Shane, 2000). It prepares entrepreneurs to discover opportunities that are invisible to others who lack prior knowledge (Shane, 2000). According to Shane (2000), human capital affects entrepreneur’s approaches to exploitation of opportunities. Furthermore, human capital is a prerequisite for further learning and assists in the accumulation of new knowledge and skills (Koryak et al., 2015).

More specifically, the fintech sector considers innovation to be the primary determinant of business growth (Koryak et al., 2015). According to Freel and Robson (2004), new product innovation is connected to organizational growth in both revenues and employment. Likewise, Andreev Stoilov and Pérez Castrillo (2015) strongly relate innovation to growth. They believe that the relationship between innovation and entrepreneurship depends on an entrepreneur’s ability to recognize opportunities, which is the centre of the innovation process, and leads to business growth. Furthermore, Lindsay and Craig (2002) claim that successful entrepreneurs are opportunity focused. It involves perceiving a chance to create new businesses or to significantly improve the position of an existing business which, in both

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18 cases, results in new revenue possibilities. In the same way, Morrison et al (2003) claim that discovering the right opportunities can help to grow an entrepreneur’s business in the future. More importantly, they imply that no business growth can be achieved if the entrepreneur does not strive for new opportunities. In other words, there is a need for continuous improvement and coming up with new ideas in order to obtain business growth. Besides, Roper et al (2008) claim that new product innovation supports internationalization. The development of innovative products and services necessitates knowledge acquisition, knowledge creation, and knowledge integration. In the same way, Penrose (1995) states that knowledge acquisition is fundamental in enabling the continuous recognition and implementation of new opportunities. This is in line with the theories relating to prior knowledge and opportunity recognition.

Furthermore, one of the most widely accepted theories among motivation is the goal setting theory (Locke & Latham, 2002), in which the entrepreneur’s motivations are related to business growth. They claim that specific and challenging goals result in higher performance than vague and/or easy goals. Similarly, Rauch and Frese (2007) focus on achievement motive rather than broad categories of traits. In addition, Koryak et al (2015) state that an entrepreneur’s motivation to grow must be reflected in his or her growth intentions and goal setting. This also means that the entrepreneur’s motivation relates to entrepreneurs having different growth objectives.

However, an entrepreneur’s motivation also relates to an entrepreneur’s self-efficacy, the degree to which individuals think of themselves as being capable of successfully completing the roles and tasks related to entrepreneurship (Hmieleski & Baron, 2008). They believe that a certain level of entrepreneurial self-efficacy needs to exist, in order for entrepreneurs to be motivated to engage in a new venture creation process. Although, Ardichvili et al (2003) point out that confidence about one’s ability to achieve difficult goals is not related to optimism in the sense of higher risk-taking. Baum and Locke (2004) believe that self-efficacy is important for entrepreneurs as they must be confident in their capabilities to perform various tasks in uncertain situations. They conclude that entrepreneurial self-efficacy has the strongest direct effect on business growth among the predictors they have studied. This is linked to the goal oriented theory as individuals high in self-efficacy are more likely to set challenging goal and are more determined to achieve these goals, even under challenging circumstances (Hmieleski & Baron, 2008). In other words, entrepreneurial self-efficacy predicts eventual entrepreneurial behaviour (Park, 2005). More importantly, entrepreneurs high in entrepreneurial self-efficacy lead firms to higher levels of revenue and employment growth than those comparatively lower in entrepreneurial self-efficacy (Baum & Locke, 2004). These findings show how entrepreneurial self-efficacy transforms entrepreneurs’ beliefs into efforts which leads to an improved firm performance. This means that entrepreneurs high in self-efﬁcacy are likely to set challenging growth expectations for their ﬁrms and persist in their leadership efforts toward the accomplishment of those goals (Hmieleski & Baron, 2008).

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2.6.3 Concluding Business Growth

In this study, the focus is on task-related traits instead of revenue and profitability. The researcher believes that revenue and profitability are not accurate measures to assess growth rate, as these fintech startups do not have past years to build on. Moreover, the relationship between the entrepreneur’s ability and business growth will be examined. Therefore, the following propositions are formulated.

Proposition 4a: A fintech entrepreneur’s ability to recognize and implement innovation opportunities

positively influences their growth rate.

Proposition 4b: Fintech entrepreneurs high in entrepreneurial self-efficacy positively influences their

growth rate.

2.7 Conclusion

First, a list of the formulated propositions is provided. Secondly, a research framework is developed to provide an overview of this study.

Table 1: The Formulated Propositions Research Question:

“To what extent do entrepreneurs in the field of financial technology have the ability to recognize and implement innovation opportunities, in order to increase their growth rate?”

Proposition 1: A fintech entrepreneur’s prior knowledge of markets and customer problems

positively influence their ability to recognize and implement innovative opportunities.

Proposition 2: A fintech entrepreneur’s network positively influences the ability to recognize and

implement innovation opportunities and to become successful in the fintech industry.

Proposition 3: Recognizing and implementing innovation opportunities requires a different mindset

and entrepreneurial skills.

Proposition 4a: A fintech entrepreneur’s ability to recognize and implement innovation opportunities

positively influences their growth rate.

Proposition 4b: Fintech entrepreneurs high in entrepreneurial self-efficacy positively influence their

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20 In the figure below, the research framework is provided. The research framework offers an outline of this study and is derived from the literature. It elucidates the positive relationships between the different variables that are important to answer the research question. The research framework will be applied to the fintech sector and this research will analyse whether the theory holds for both cases.

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3. Methodology

This section describes the research methods which are used to collect and analyse the data that are necessary to answer the research question and propositions. The research design is explained and followed by the sample selection, data collection, the procedure, data analysis, and reliability and validity. This section concludes with the ethical issues of this study.

3.1 Research Design

This study has an explorative nature as the emerging field of financial technology has not yet been extensively examined. The lack of data induces the need to explore in-depth insights of which factors influence the fintech entrepreneur’s ability to recognize and implement innovation opportunities in relation to the growth of a startup. Therefore, qualitative research is conducted which is associated with an interpretative philosophy due to the researcher needing to make sense of the subjective and socially constructed meanings (Boeije, 2010). Boeije states that participants in qualitative research can properly express their feelings, opinions, and experiences (2010). Thus, instead of gathering statistical information, the focus is on finding underlying reasons. Likewise, Zietsma (1999) argues that many aspects of the occurrence of entrepreneurship are not very likely to be understood with quantitative and survey method techniques. The qualitative approach allows the researcher to examine the participants’ assessments of entrepreneurial opportunities in their own words, freeing respondents from the constraints of researcher-defined categories. Besides, qualitative research for entrepreneurs in the field of financial technology is meaningful as results contribute to theoretical knowledge. The research approach is a combination of both deduction and induction. The researcher works from the more general theory to the more specific area (top-down approach). However, interviews are held to test the theory. The research strategy consists of grounded theory, which is useful when prevailing theories that are either inadequate or non-existent (Creswell, 2008). Besides, the researcher has chosen to conduct a cross-sectional study due to time constraints. This means that the study is conducted only once and indicates a snapshot of a short period of time (Boeije, 2010).

3.2 Sample Selection

This qualitative study uses criterion sampling which, in contrast to quantitative studies, is not random. The sample contains characteristics that are relevant for answering the research question and propositions. Thus, participants are selected that closely match the criteria of the study. For this reason, entrepreneurs living in the Netherlands who are founders of fintech startups are interviewed. The criteria for selecting entrepreneurs had to be a (co)founder of a fintech startup in the Netherlands. In total, three entrepreneurs participated in the interviews. For reference, brief profiles of those fintech startups in the

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22 Netherlands are provided in Table 2. For a more detailed profile of the fintech startups, see Appendix A.

Table 2: The Fintech Startups and Dimensions of the Opportunities

Fintech Startup Entrepreneurs Opportunity Current Status

BijBouwe Bouwe Kuik

Tonko Gast Daan Potjer

Frits Korthals Altes BijBouwe provides residential mortgages to their customers through an online service Private company funded by founders Otly Lior Bornshtain Vedran Vego Otly provides a modern way of family banking into families’ households and teaches children the value of money

Private company funded by investors

ISEEMORE Edwin Huijskens

Kees Schaap ISEEMORE provides insight to entrepreneurs about the performance of a sector or country Private company funded by founders

3.3 Data Collection

This study pursues data triangulation by using multiple methods of data collection. Information is gathered through interviews and memos, which refers to primary data. Data triangulation leads to a higher reliability and quality of the collected data, and results in various perspectives (Baxter & Jack, 2008).

3.3.1 Interviews

The data is collected by conducting semi-structured interviews with three founders of three different fintech startups based in the Netherlands. According to Bryman (2012), semi-structured interviews

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23 empower researchers to respond to answers of interviewees without any constrictions. It also allows researchers to ask further questions which leads to more comprehensive answers. Consequently, participants are able to express their own opinion on different topics. A topic list with predetermined subjects and related key questions is developed. The development of a topic list involved linking the research question and propositions to the topics, checking the legitimacy of every single question on the topic list (Boeije, 2010). In this way, related questions are grouped into blocks making sure that important questions are not left out (Boeije, 2010). The topic list starts with general questions and then goes into more specific detail. The topic list reduced the amount of instant improvisation. Moreover, this instrument focused data collection. According to Boeije (2010), poorly prepared interviewers sometimes stray off focus and ask what they think is appropriate. This will lead to missing data on areas of interest and a high level of unnecessary information (Morse & Field, 1996). A lot of attention is directed towards fitting the questions into the interviewee’s frame of reference (Boeije, 2010).

The researcher deliberately chose not to impose the order of the topic list on the participants. This allows participants to have enough space in sharing their knowledge and experiences. Nonetheless, a limited number of standard questions have been asked to systematically compare the differences between participants (Patton, 2002), see Appendix B.

3.3.2 Memos

In addition to interviews, memos have been used as they function as a link between thinking and doing. According to Boeije (2010), memos provide a chronological overview of the decisions made and guide future actions of the researcher. This study used theoretical and methodological memos. Theoretical memos reflect how findings derive from data, and the methodological memos contain all thoughts relevant to the methods used. The memos in this research were kept systematically to provide an overview of the different insights, see Appendix C.

3.4 Procedure

The interviews were semi-structured and lasted from half an hour to one and a half hour. The interviews typically began with an invitation. The entrepreneur was invited to participate in the interview by e-mail. Before sending the invitation, the researcher decided how much information would be shared with the participants before conducting the interviews. In this research, general information regarding the research topic was provided. On top of this, the themes obtained in the topic list were stated. There is chosen deliberately not to share much information as participants have the ability to think in advance about certain questions which could result in unoriginal answers to questions. Since, the researcher was interested in pure feelings and opinions of the participant in order to reveal the underlying factors of opportunity recognition and business growth. Moreover, participants were told how long the interview would take and if allowed, it would be recorded.

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24 Most of the interviews were held face-to-face to explore the reactions of the interviewees to collect in-depth information about the influencing factors. However in one case, a face-to-face interview was not possible, therefore a telephone interview was held. The face-to-face interviews took place at the location of the fintech startups in Amsterdam, The Netherlands. This enabled entrepreneurs to connect to their own environment of innovation. In addition, each interview was recorded. In qualitative research, collaboration of interviews through the use of archival records is important to validate information (Yin, 1984).

The interview consisted of six themes: General Information, Prior Knowledge, Technological Innovation, Opportunity Recognition, Opportunity Exploitation, and Business Growth. The interviewer started with asking general questions to let the entrepreneur get used to the conversation. Examples of general and exploratory questions are: “Could you tell me more about your educational background?” and “What kind of a startup is this?”. According to Boeije (2010), a participant may feel uncomfortable if the interviewer starts with asking direct and personal questions. For example: “Do you consider to have above average knowledge about new ways to serve customers?”. However, it is important that following the provision of general and exploratory questions, more specific questions relating the research subject are asked. Therefore, each theme was linked to a central question. For example, the central question relating to Prior Knowledge was as follows: “Would you say that you have prior knowledge/experience related to the fintech sector?” Another example relating to the central question of Opportunity Exploitation was: “When was the turning point from recognizing the opportunity to actually implementing it? These themes were created using the literature review. There is no fixed order held during the interviews regarding the different themes to provide the participant with enough flexibility. By asking relevant questions, the entrepreneurs could be more easily profiled and linked to the literature. It is therefore of high importance that the researcher knows how certain variables are measured.

3.5 Data Analysis

The analysis consists of coding the interview transcripts. In the analysis phase of the research, the interview transcripts were sorted, named, categorized and connected. The purpose of data analysis is to transform data into findings. The data is dialectical as the data was stripped into elements and components which were examined for patterns and relationships, also in connection to ideas that were derived from literature and existing theories (Boeije, 2010). Throughout the research, the data was read in detail and eventually separated into meaningful parts using codes. This was done to create structure and order in the data. Coding means categorizing segments of data with a short name that simultaneously summarize and accounts for each piece of data (Boeije, 2010). This paper used open, axial, and ‘in vivo’ codes. After analysing each interview, the findings were taken to the next interview but also linked back to previous interviews and expectations.

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25 The coding process consists of different stages. The data analysis started with open-coding. Open-coding involved breaking down, examining, comparing, conceptualizing, and categorizing data (Strauss & Corbin, 2007). The fragments were compared among each other, grouped into categories dealing with the same subject, and labelled as a code. No selection was made in terms of relevance of the research material because it was unpredictable what information would be valuable or what not. The main questions answered in this section were: “What is this about?”, “What is the person trying to tell?”, “What else does this term mean”. Examples of open codes in this research are: “Startup description”, “Market segments”, “Educational Background”, “Definition of Success”, “Mindset”. Using open coding provided the researcher with new insights into the researched aspects, because it broke down the standard way of thinking. The list of open-codes are included in Appendix E.

The next step is an interim step in between open-coding and axial-coding and it involves putting the codes in a hierarchical order. This is done by looking at which codes are most common and which are less common. This is followed by axial-coding, it refers to a set of procedures whereby the data is put back together in new ways after open-coding, by creating categories and subcategories (Boeije, 2010). It reassembled the data that was fractured during initial coding to give coherence to the emerging analysis (Charmaz, 2006). Axial-coding was used to determine which elements in the research were the most dominant and which were the less important ones (Boeije, 2010). Thus, axial-coding helps researchers to get a deeper understanding of the data. Additionally, the second purpose was to reduce and reorganize the data set. This was achieved by crossing out synonyms, removing redundant codes, and selecting the best representative codes. The following themes are created: “Prior Knowledge”, “Fintech Industry”, “Business Growth”. “Recognizing opportunities”, “Innovation”.

Specific codes derived from the participant’s terminology are known as ‘in vivo’ codes or field-related concepts. In vivo codes were used as they show what is happening or what is the meaning of a certain experience or event. Examples of ‘in vivo’ codes are: “Bank Agnostic”, “Lean Startup Methodology”, and “Learning-by-doing”.

3.6 Reliability and Validity

This section is devoted to the methodological accountability of this research, so whether the researcher properly explains what is done, how it is done, and why it is done (Boeije, 2010). Two important indicators for the quality of the research are reliability, as well as, internal and external validity. Reliability refers to the consistency of measures used in social research (Boeije, 2010). As for validity, it refers to the use of correct measures (Bryman, 2008).

Reliability refers to the constancy of the measurements and the degree to which a study can be replicated by others (Bryman, 2008). To guarantee the reliability of this research, several steps are taken. To begin with, the interviews are recorded and transcribed. Second, the analysis of the data including the coding

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26 process are explained in detail. Consequently, other researchers can carry out the same study. Third, extensive methodological memos are included which document facts relevant to the researcher endeavour (Boeije, 2010).

Internal validity refers to whether causal relations are valid (Bryman, 2008). Semi-structured interviews were used which are appropriate to ask extra questions and to match answers to theoretical concepts. Despite this, semi-structured interviews poses a threat to the reliability of the research as it becomes more difficult for researchers to replicate this research. To compensate for this limitation, the topic list is added, see Appendix D.

External validity refers to the generalizability of this study to a wider population. In this research, the external validity is considered to be relatively low due to the relatively small sample of three interviews of fintech startups based in the Netherlands.

3.7 Ethical Issues

There are various ethical principles that should be taken into account when carrying out a bachelor level thesis research. These ethical principles relate to the need to be kind and not to cause any harm (Boeije, 2010). In the following section, the ethical issues of this research are discussed.

3.7.1 Informed Consent

Informed consent relates to the duty of a researcher to fully describe the purpose for which the data will be used in a language that is understandable for the people being studied (Boeije, 2010). For this reason, the invitation was sent by e-mail to allow the participant to understand the purpose of this research and consider it in their own time and at their own pace. Informed consent is intended to guarantee that the participants are placed in a situation where they are able to decide in full knowledge whether to participate (Boeije, 2010). To put it more simply, those who are researched should actively give their consent (Boeije, 2010). To ensure informed consent, it was made clear to participants that they had the right to refuse or withdraw from the research at any time.

3.7.2 Confidentiality

Confidentiality concerns data; digital recordings of interviews and transcripts, and agreement as to how the data are handled in the research in order to ensure privacy (Boeije, 2010). Therefore, approval is sought where voice recording instruments are used. To ensure confidentiality, it was made clear that entrepreneurs always had the right of refusal of use and the right to demand the take out of content from recordings.

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4. Research Results

In this chapter, the research findings obtained from the semi-structured interviews and memos are provided. The attention was directed towards analysing the similarities and contrasts between the literature provided in part two, and the findings from this study. Additionally, the focus was on finding out whether there was support for the propositions.

4.1 Findings

In order to provide a clear outline of the results, the findings are presented according to the same order held in the literature review.

4.1.1 Entrepreneurs

Results show that a fintech entrepreneur could be described as a mixture of the Schumpeterian, Kirznerian, and Knightian entrepreneur, described earlier in part two. A fintech entrepreneur is innovative and maintains its innovative character by constantly improving their offerings. In the case of BijBouwe, the focus is on improvement and coming up with new ideas on a daily basis. For instance, Bouwe Kuik states: “As we speak, our team is looking for different markets and segments to focus on. It will still be based on loans but there are a lot of different possibilities”. Additionally, Vedran Vego describes himself as a fintech entrepreneur that loves innovation the most. He states: “We are planning to introduce an additional service, which we call the ‘parent-defined’ product”. On top of this, Edwin Huijskens focuses on improving their product and continuously looks for possible ways to further develop it. He exemplifies this as follows: “We have a lot of innovative ideas. We want to combine our data with other data”. These examples are matched to the Schumpeterian entrepreneur.

On the other hand, all three cases are also related to the Kirznerian view. For instance, Bouwe Kuik improves inefficiencies in the mortgage market by focusing on new forms of advice, making the process faster and more convenient, and directing the product towards the future. Similarly, Otly improves inefficiencies between parents and children by improving a product that is beneficial for both. As regards to Edwin Huijskens, he improves inefficiencies by making performance-tracking for entrepreneurs easier and faster.

Furthermore, the three cases fit the description of the Knightian entrepreneur as well, in which risk-taking is central. Some examples are: “In 2014, I quit my job and invested all my money in this company” (Bouwe Kuik), “You have to be in a certain mindset that you want to take risks to successfully implement the opportunity into the market” (Vedran Vego), and “You must take calculative risks. I spend all my money in two years, investing it in this company” (Edwin Huijskens).

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4.1.2 Prior Knowledge

A fintech entrepreneur’s prior knowledge of markets and customer problems will positively influence their ability to recognize and implement innovative opportunities: Examining Proposition 1.

The data indicates that various forms of prior knowledge positively influence the fintech entrepreneur’s ability to recognize and implement innovative opportunities, which is in line with the findings of Venkataraman (1997). Venkataraman states that the source of prior knowledge that leads to opportunity recognition is based on an individual’s personal life, resulting from experiences in work, personal events, and education (1997). A more detailed description of the relationship between the dimensions of opportunities and prior knowledge is given in Table 3.

At first, the concept of prior knowledge, developed from work experience and solving customer problems in related markets is examined. Data shows that there are no differences between the three cases. In each case, the fintech entrepreneur recognizes and implements innovative opportunities and solves customer problems because of his prior knowledge in either the financial, fintech or technology sector. These findings resemble the results of Shane (2000), who postulates that entrepreneurs recognize and determine the business value of an opportunity based on their former experience of solving problems in comparable markets. In addition, an entrepreneur’s selection of the market, the way to serve the market, and the solutions to customer problems were influenced by the entrepreneur’s prior knowledge (Shane, 2000). In this study, fintech entrepreneurs believe that business ideas originate from prior knowledge of markets and customers, and from prior responses to issues in the industry. For instance, Bouwe Kuik has prior knowledge of the fintech sector through education and work experience in the financial and consultancy industry. He states that his motivation came from the financial industry as he recognized the problems that were occurring in the residential mortgage market, and felt the urge to fix it. Moreover, Vedran Vego believes that the exposure to the fintech sector or a relatable market is important to understand the current problems. He thinks that his prior work experience of seven years in the fintech sector helps him to recognize innovations faster in this particular sector. This is also the case for Edwin Huijskens, who believes that fintech entrepreneurs must have an eye to recognize customer problems and the corresponding customer needs. He claims that his technical and financial background made it easier for him to recognize opportunities in the fintech sector. For more detail about the entrepreneur’s prior knowledge of markets and customer problems, see Table 4. To sum up, prior knowledge of (related) markets and customers lead to successful opportunity recognition and implementation, and eventually results in a successful startup.

Furthermore, the entrepreneur’s educational background also played a role in recognizing and implementing opportunities. BijBouwe’s entrepreneur has a master degree in business administration which is related to the financial industry. In addition, Edwin Huijskens studied ICT and Information

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29 Science which is both relatable to the financial and the technological side of the fintech. He believes that his educational background contributed to the knowledge of the fintech sector, as his technological know-how helps him to create systems. Finally, Vedran Vego graduated in computer science which focuses on the technical side.

Table 3: The relationship Between the Dimensions of the Opportunities and Prior Knowledge

Fintech Startup Market Prior

Knowledge of Market Means to Serve Prior Knowledge of Means to Serve BijBouwe Residential Mortgages Education and work experience in the financial and consultancy industry Online service to provide customers with residential mortgages Experience in improving propositions and services for customers. Financial educational background Otly ISEEMORE Fintech Fintech Education and work experience in fintech Education and work experience in the financial industry Service to provide a modernized way of family banking Service to provide near real-time information. Experience in developing lean banking systems. Technological educational background Experience in developing systems and getting the information on the right place

Entrepreneurship and innovation : a study on the fintech entrepreneur’s ability to recognize and implement innovation to increase business growth