Entrepreneurship and Opportunity Recognition: The
influencing factors for novice entrepreneurs
Master Thesis, MSc. BA Small Business & Entrepreneurship 20th June, 2017
Eleni Goniotaki S3053008 Oosterstraat 19
ABSTRACT
The process of opportunity recognition is an important theme of research in entrepreneurship. Most researchers try to answer: “why some people can recognize business opportunities and some cannot?” in order to discover the influencing factors in the process of identification of the opportunities to start a business (Baron, 2006). It has been shown in the literature that alertness plays an important role, and people who possess it have more possibilities to recognize business opportunities. At this point, in my research I am going to explore whether people who are alert and influenced by their social networks and by their prior knowledge have the advantage, the ability to identify more business opportunities than others. The power of information is the key aspect in the process. This study aims to broaden our understanding of opportunity recognition, by analyzing the influencing role of social networks and prior knowledge in the identification process of a sample of 116 novice entrepreneurs in Greece, in the hospitality industry. According to the empirical findings of my study, alertness has a positive effect to the opportunity recognition, thus confirming the previous literature on the topic. On the other hand, social networks and prior knowledge do not influence the relationship. This finding is surprising. I conclude by discussing potential reasons and implications of the results of this study.
AKNOWLEDGEMENTS
Yet another academic chapter is coming to an end in my student life. I am happy and at the same time sad because one part of my life coming in end. Nevertheless, I feel grateful since I had the chance to meet so many wonderful people and share these moments with them. Regarding my academic studies, I would like to express my very great appreciation to my supervisor Olga Belousova for her kindness and positive support as a person and thus, for sharing her academic knowledge and support on my research. I am so thankful, owing to my supervisor, that I discovered a new world of academic research in the entrepreneurship field, the exploration of the influencing factors in the process of business opportunity recognition. Moreover, I am appreciative for the support of my coordinator of my master program, Evelien Croonen since she was always willing to be supportive whenever I asked for her help and thus, I truly admire her honestly gentleness as a human.
TABLE OF CONTENTS
1. INTRODUCTION ... 5
2. THEORETICAL DEVELOPMENT ... 7
2.1 Opportunity Recognition ... 7
Opportunity Recognition for Novice Entrepreneurs ... 9
2.2 Alertness ... 10
2.3 The Moderating effect of Social Networks... 11
2.4 The moderating effect of Prior Knowledge ... 13
2.5 Conceptual Model... 14
3. METHODOLOGY ... 15
3.1 Data Collection ... 15
3.2 Measurements ... 15
3.2.5 Reliability Test ... 18
Table A: Socio-demographics Results for Novice Entrepreneurs... 19
Table B: Work experience before recognizing the business idea (shows only high scores)... 19
Table C: Types of Relations of support for the business idea ... 20
3.3 Method of Analysis ... 21
3.4 HYPOTHESIS TESTING ... 22
4. DISCUSSION OF THE RESULTS AND THEORETICAL CONTRIBUTIONS ... 26
5. LIMITATIONS AND FUTURE RESEARCH ... 27
6. CONCLUSION ... 28
REFERENCES ... 29
APPENDICES ... 32
1. INTRODUCTION
Why some people can recognize business opportunities and others cannot? “To have entrepreneurship, you must first have entrepreneurial opportunities”, (Shane and Venkataraman, 2000). Shane and Venkataraman, define entrepreneurship as the process in which some individuals discover, evaluate, and exploit business opportunities. The process is, therefore, connected to the individual’s ability to recognize opportunities, where some people have the ability to make connections between apparently independent events and trends and this ability might lead them to recognize business opportunities (Baron and Esley, 2006). Baron and Shane (2006), suggest that recognition of business opportunities occurs when individuals identify a chance for creating something new through the observation of complex patterns of events in the environment.
Among entrepreneurship theories, there are different views on what drives recognition of opportunities. For example, according to popular psychological theories, people with higher risk propensity or need for achievement will be likely to identify entrepreneurial opportunities. In this thesis I follow the Austrian school of thought, which suggests that the power of information exceeds the power of the individual’s traits and the possession of information can determine who can be an entrepreneur. Indeed, to make these connections between diverse events and trends, an entrepreneur must have access to information about them (Shane and Venkataraman, 2000). Thus, information becomes an important aspect in the entrepreneurship as an influencing factor in discovering opportunities. In particular, the possession of information stored in the memory can create mental schemas or cognitive frameworks for recognizing new information. This gives Shane (2000) a reason to state that “Information is essential to the entrepreneurial process because the richer the information, the better opportunities that could be recognized by the entrepreneur”.
when they identify business opportunities. For that reason, I propose that social networks and prior knowledge can add value on the ability of the alert novice entrepreneurs to identify opportunities.
The intention of this study is to examine empirically the effect of social networks and prior knowledge on opportunity recognition. This study highlights new insights on the relationship of entrepreneurial opportunity recognition and alertness. In particular, I propose that the social sources such as informal networks, mentors and strong ties might have positive impact for novice entrepreneurs in opportunity recognition. For instance, family and close friends, has a positive impact for alert novice entrepreneurs when recognizing business opportunities. The majority of studies supports, the opposite that i.e. weak ties positively affect the entrepreneurs in opportunity recognition (Ozgen and Baron, 2007; Singh. 1999) and for that reason this topic needs further investigation. Another factor that requires more in depth research is the role of prior knowledge for novice entrepreneurs, i.e. the impact of previous working experience, learning and educational background in opportunity recognition. Based on the discussion above, the aim of the study is to explore how individuals with entrepreneurial alertness recognize their business idea, if they influence by their social networks and their prior knowledge. Therefore, this study addresses the following research question:
“Do social networks and prior knowledge reinforce the effect of alertness on novice entrepreneur opportunity recognition?”
To answer this question, I will investigate the effect of social networks and prior knowledge on the relationship between alertness and business opportunity recognition. In particular, this research is conducted by a sample of novice entrepreneurs who are already identified their first business.
The paper is structured as follows. Firstly, it will give an overview of the relevant literature on opportunity recognition, alertness, social networks and prior knowledge. Moreover, the hypotheses will be formulated and explained. After that, there will be a section dedicated to the methodology applied to this research; this implies the definition of the data and sample and an explanation of the measures of analysis used. Subsequently, the results and the tables are shown and interpreted. In the end, the discussion of the results and theoretical contributions part will reveal the thought about the findings and its meaning. It also will include the limitations and future research for entrepreneurs.
2. THEORETICAL DEVELOPMENT
The following chapter explores and describes the already existing literature, opportunity recognition and novice entrepreneurs. It is followed by the examination of opportunity recognition and alertness. The eventual objective is to point out the guidelines which define the possible moderating effect of the social networks and prior knowledge.
2.1 Opportunity Recognition
What is opportunity recognition? Baron (2006) defines opportunity recognition as “the cognitive process (or processes) through which individuals conclude that they have identified an opportunity. “ Opportunities exist until someone can discover them and that’s the reason the majority of studies trying to answer: “why is it that some individuals, but not others, can recognize business opportunities?” Shane and Venkataraman (2000) define opportunities as the creation of new economic value and it exists because of competitive imperfections in the markets or the changes in the technology. Therefore, it is important in order to discover and exploit opportunities entrepreneurs to have access to the resources i.e. information about the new trends of the market. McMullen et al. (2007) suggests that business opportunities are often the unintended consequence of human activities motivated by other incentives.
business opportunity prototypical features focusing on its potential profit based on the nature or context of the business opportunity. Moreover, in the paper of Baron and Esley (2006), they present the role of pattern recognition in identifying new business opportunities of the cognitive framework of novice entrepreneurs using the prototypes models. Entrepreneurs trying to compare ideas for new products, services, means of production, or markets with their existing prototype for business opportunity that they stored in their memory focus more on newness, uniqueness and novelty of the business idea. Undoubtedly, prototypes have a determining role in the opportunity recognition and in particular for novice entrepreneurs in order to identify their business idea.
Another aspect in opportunity recognition is to understand if entrepreneurial opportunities exist, independent of the perceptions of entrepreneurs and just waiting to be discovered or these are opportunities created by the actions of the entrepreneurs. Alvarez and Βarney (2006), introduce in their article Teleological theories of entrepreneurial action and trying to offer an answer. Firstly, in discovery theory, opportunities are already exist and are unrelated with the entrepreneur’s action. On the other hand, in creation theory, opportunities which do not exist are independent of the entrepreneur since they do not exist until they are created. Both theories, analyze differently the importance or not of the information in the entrepreneurial action, a key with different aspects in the process of discovering and exploiting opportunities. In this paper, Ι try to understand why some entrepreneurs might have the ability to discover business opportunities and one possible explanation might be that the relationship alertness and opportunity recognition influenced by the power of information. (Ozgen and Baron, 2007; Tang et al. 2012).
Additionally, Ardichvili et. al (2003), mention that to have a successful business it’s necessary to have a successful opportunity development process which includes recognition of an opportunity, its evaluation, and development. The key elements that can affect the process of opportunity recognition and development leading to business formation can be entrepreneurial alertness, social networks and prior knowledge. Moreover, the creation of a business idea concept that matches market needs with resources must follow in the way of the needs and the resources, in order to create and deliver value superior to that currently available.
Opportunity Recognition for Novice Entrepreneurs
In entrepreneurship filed, someone who recognizes his/her business opportunity for the first time is called novice entrepreneur. Politis (2008), state that “the term of novice, refers to their limited experience of taking on the task of launching a new business venture”. Shepherd et al. (2000), suggest that the main attribute of novice entrepreneurs when they launch a new business idea is the “liabilities of newness” which are for instance, scarcity of administrative routines, high costs for learning new organizational tasks, lack of developed informal structures in the new organization. Furthermore, most studies are trying to investigate factors influencing opportunity recognition of novice entrepreneurs. Baron and Esley (2006), report that every person has a unique life experience, has different cognitive frameworks and consequently different prototypes. For example, someone who is working in the hospitality industry and someone else who is working in the IT industry possess by different working experience based on their field and therefore different cognitive frameworks. Use of prototypes in the pattern recognition depend on the experience, which means different experience leads to different use of prototypes and thus, to recognizing different opportunities. Pattern recognition suggests that the cognitive frameworks such as the prototypes have a determining role on individual’s experience. (Baron, 2006). Moreover, in Baron and Esley (2006) study, according to the sample, the highest percentage of the respondents was men and average age of 31 years old. These findings might demonstrate some specific demographic traits particular for the novice entrepreneurs in the opportunity recognition studies and for that reason need further research. Sahinidis et al. (2014) are proposing that demographic features as the gender, education have an impact in the desire for venture creation. Therefore, they found on their research that males Greek novice entrepreneurs have greater desire to create a new business than females. Another attribute which was examined was education, the level of education degree can show that knowledge and skills that entrepreneurs possess when they recognize business opportunities.
2.2 Alertness
An important influencing factor in the opportunity recognition process, which is identified in many studies, is alertness. Kirzner (1973) was the first who introduced alertness into the entrepreneurship literature, defining it as “alertness to changed conditions or to overlooked possibilities.” In few years later, Kirzner (1979), redefined alertness as "the ability to notice without search opportunities that have hitherto been overlooked’’. Most studies are trying to understand the role of entrepreneurial alertness and answer the questions of how alert and non-alert market actors behave in the process of opportunity recognition, (Gaglio and Katz, 2001). In addition, Yu (2001) underlines the role of entrepreneurial alertness in the process of identification, the chance for the entrepreneurs to discover and exploit situations in which these potential opportunities can be profitable.
Additionally, Baron (2006) states that “opportunities can sometimes be recognized by individuals who are not actively searching for them” but who possess “a unique preparedness to recognize them” which can referred as alertness. The foundations of entrepreneurial alertness are based in cognitive capacities possessed by individuals’ i.e. high intelligence and creativity might help entrepreneurs to identify new solutions to market for the customer needs in existing information. They imagine new products and services that might not currently exist. Alertness determines the number and the variety of opportunities which can be recognized. Regarding this definition, this study suggests that opportunities can be noticed even by people who are not actively searching for them but they make the right connections based on the information they possess.
According to Tang et al (2012), there are three dimensions of the alertness: (a) alert scanning and searching, (b) Alert association and Connection and (c) Evaluation and Judgment:
Alert scanning and Searching for new information: This dimension is related to entrepreneur’s access to information, their ability to search and scan the information which they receive from their surrounding environment. It is based on the knowledge of someone holds, the explicit knowledge (knowledge acquired by information which is easily access from the environment and can be shared with others) and tacit knowledge (knowledge acquired by his/her particular experience). Overall, this dimension shows the influencing role of broader knowledge/information in the process of opportunity recognition and how affective are his/her cognitive frameworks (prototypes, learning and life experience).
Alert association and Connection: is about of how someone can apply the information which received trough associations and make the right ‘connections”. Every information someone receives needs to make the relevant matches in the way to discover an existing opportunity in his/her environment, it is the ability of the human mind to “connect the dots” to make the final picture of the puzzle of information.
opportunity exist for only one person because has the capacities to recognize it) and the stage of evaluation and first-person opportunity (through another evaluation process the entrepreneur will decide if he will act to exploit the opportunity).
Therefore, individuals who possess information and follow these three dimensions in order to recognize business opportunities then may characterize as alert. Thus, the Hypothesis1 is proposed as such:
Hypothesis1: “The higher someone’s alertness, the more business opportunities he or she will recognize”
2.3 The Moderating effect of Social Networks
Ozgen and Baron (2007) refer to the social networks as the social sources of information. They highlight the importance of the influencing role of social networks in the opportunity recognition. Moreover, Singh et al. (1999), refer to social networks as the exchange or creation of new information and new ideas that may lead entrepreneurs to discover potential business opportunities. Arenius and Clereq (2005) defined social networks as the most significant source of knowledge for an entrepreneur. Thus, social networks can provide access to knowledge that is not currently possessed by individuals. Social networks might be the most important source of knowledge for the entrepreneurs to discover business opportunities and spread of information among their members (Singh, 2000; Johanisson, 1990). Why is social capital important in opportunity recognition? Nieto and Alvarez (2016), state that social capital can be seen as “a means of enforcing norms of behavior among of individual or corporate actors and thus acts as a constraint, as well as a resource”.
In the same line, Ozgen and Baron (2007) are highlighting the great importance of information for the process of opportunity recognition and the key role of information to pattern recognition. For instance, the guidance from a mentor, an experienced entrepreneur can be useful for novice entrepreneurs to identify business opportunities. In this research, based on the paper of Ozgen and Baron (2007), in order to understand the role of social networks in the relationship between alertness and opportunity recognition, I consider as influencing factors in the process of opportunity recognition the reliance of informal industry networks, mentors and the family/close friends.
business idea (e.g. contacts or discussions with bankers, investors, and venture capitalists). This information can be a successful key on the process of opportunity recognition. Singh (1999), confirm that informal industry network had a positive relation of entrepreneurs’ alertness to new opportunities. Moreover, previous literature identifies the importance of the influencing role of mentors in the process of the opportunity recognition. For example, someone who is older and have experienced this process can be useful as an advisor to other people. In our life we constantly learn from the story/ life experience from others. In opportunity recognition studies mentors are a valuable source of information and knowledge, a useful tool to others to identify easier and faster new potential opportunities. According to Kaish and Gilad (1991), the information which a mentor offers to a potential entrepreneur can make him/her alert in the way to identify his/her business idea (e.g. mentors from different industries might be helpful to recognize business opportunities). Furthermore, a significant role as a social source of information in the opportunity identification is the family members and close friends. It is well-known in entrepreneurship that family and close friends as strong ties has a strong influence as advisors and most times are used as financial support for the business idea. Most studies supported that strong ties are less helpful compare to weak ties in the process of opportunity recognition (Singh et al. 1999; Ozgen and Baron 2007). I propose that strong ties have positive impact as a source of information in opportunity recognition. Furthermore, when novice entrepreneurs have access to these sources of information can identify business opportunities
Based on the above we can hypothesize, that networks will have positive influences on one’s ability to recognize opportunities.
Hypothesis 2a: “The broader is the social network, the more opportunities will the entrepreneur recognize”
In this research, I further propose that social networks will be more beneficial for alert entrepreneurs, as they will be able to extract more information from the network and, consequently, recognize more opportunities. Strong ties positively affect an alert entrepreneur to identify his/her business opportunity even may he be lacking the specific industrial knowledge. Maybe, family and close friends are not relevant with the specific industry of entrepreneurship but their discussions and the emotional support might be a reason for someone to “connect the dots” and discover his/her business idea.
In conclusion, social sources of information can have many different aspects and effects in the process of opportunity recognition. Each social source has a different impact in the process and might positively influence to someone who is alert. Matching different information might lead someone to recognize opportunities. According to the above literature, I hypothesize:
2.4 The moderating effect of Prior Knowledge
Another influencing factor in the process of opportunity recognition is prior knowledge which helps to explain why some individuals are able to recognize specific opportunities and others cannot (Gregoire et al. 2010a). Therefore, Baron (2006) assumes that prior knowledge is the information that someone obtains through his work and life experience and might be the main component in the process of opportunity recognition. Also, Kirzner (1979) argues that prior knowledge is accumulated from the everyday life experience which can help you to identify opportunities. For example, knowledge about the new innovative products, new market trends or awareness about consumers’ needs. Shane (2000) refers to prior knowledge into three dimensions: prior knowledge of markets, ways to serve the market, and customer problems. All three dimensions lead individuals to discover opportunities and penetrate into the markets, providing solutions. Individuals with prior knowledge have the ability to recognize important connections between concepts and subsequently increase their ability to recognize entrepreneurial opportunities (Shepherd and DeTienne, 2005). Based on the study of Hajizadeh and Zali (2016), they conclude that “entrepreneurs only discover opportunities that draw on their prior knowledge”, they mean that an entrepreneur with a broad prior knowledge had higher probabilities and a positive impact to the process of opportunity recognition. Entrepreneurial alertness allows an individual to acquire (scan and search for information), organize (associate and connect information) and interpret (evaluate and judge) information from different aspects which can lead him/her recognize business opportunities In the article of Ozgen and Baron (2007), social source of information can be connected with the prior knowledge of someone and can be the evolvement with the professional forums. An entrepreneur who seeks information through seminars, workshops, conferences might help him/her to make the connection of information and recognize his/her business idea. For example, an entrepreneur who actively participate in business events even his educational background is different. Moreover, a mechanism of using information, stored in the memory is called schemas which are mental frameworks, developed through accumulating experience. Schemas as organized information in our memory are useful because they help the entrepreneur to make the right connections, in the right time and identify business opportunities. Gaglio and Katz (2001), proposed that alertness in connected to schemas. If someone possesses those mental schemas, he or she can easier identify changes in the environment and rebuild new schemas, organizing the information in the way to recognize his/her business opportunity. Prior knowledge is the information we received in the past but it generates new information for the future, opportunities which can be seen only based on our previous knowledge.
Hypothesis 3a: “The more prior knowledge possess an entrepreneurs, the more opportunities will entrepreneur recognize”
Hypothesis 3b: “Prior knowledge positively moderates the relationship between alertness and opportunity recognition”
2.5 Conceptual Model
The conceptual model shows the relationships that will be investigated in this research. A positively effect of alertness is assumed to impact opportunity recognition. Therefore, alertness is more likely to have a higher influence to opportunity recognition since the role of social networks and prior knowledge moderate the relationship.
3. METHODOLOGY
This chapter will first explain the regression analysis, followed by the definition of the dependent and independent variables, as well as the control variables and their measurement. Next, a description of how the data for this research has been collected is given.
3.1 Data Collection
In order to analyze the main relationship between alertness and opportunity recognition, primary data have been gathered from 116 novice entrepreneurs in the hospitality industry in Greece (hotels, bars, restaurants, tourist shops etc.). The questionnaires have been sent to the novice entrepreneurs by email or through social networks (Facebook, WhatsApp). Firstly, the questionnaire was translated in the Greek language for a better understanding. It was used the method suggested by Douglas and Craig (1983) in order to which to translating, back translating and refinement until they were context equivalent and tested first by some external participants. Concerning the validity of the study the variables was measured based on previous studies measurements of the same variables. (Yin, 1994; Gibbert et al. 2008)
In the first part, I introduce the main topic of this study which is “business opportunity recognition” in order to make clear the purpose and address their contribution on this research. Then, it follows the questionnaire which contains the variables of the conceptual model of this paper, opportunity recognition, alertness, social networks, prior knowledge and the control variables (age, gender and education). Moreover, further specific questions are introduced to the novice entrepreneurs concerning the working experience they had before they identified business opportunities. Also, another question was included about asking from which type of relation i.e. family, asked to support their business idea.
3.2 Measurements
3.2.1 The Dependent Variable: Opportunity Recognition
According to Singth et al. (1999) and Baron & Ozgen (2007), opportunity recognition can be measured through 4 items. In the first 4 questions, the related answers categories ranged from in a 4-point Likert Scale, “strongly disagree” to “strongly agree”. In this way, questions such as “I enjoy thinking about new ways of doing things” or “How many ideas for new businesses did you think of in the past month?” clarify how novice entrepreneurs in the sample think about business opportunities.
3.2.2 The Independent Variable: Alertness
In order to define alertness data have been gathered from the questions which are part of the study of Tang et al. (2012), assessed by 13 items from three dimensions: (a) scanning and research (e.g. “I have frequent interactions with others to acquire new information”), (b) association and connection (e.g. “I often see connections between previously unconnected domains of information”) and (c) evaluation and judgment (e.g. “When facing multiple opportunities, I am able to select the good ones”) . The participants had the option to answer the questions on a five-point Likert scale ranging from: 1= “strongly agree” to 5=“strongly disagree”. In this study alertness measured by these three dimensions and it is considered suitable because of the relation and connection with the sources of information in order novice entrepreneurs to identify business opportunities.
3.2.3 Moderators
Social Networks:
this study. In addition, I further investigated the role of mentors in order to understand whether this may influence the process of opportunity recognition by asking “Having a mentor entrepreneur helped me to recognized business opportunities”. It was measured in 3items. Finally, in the social networks variable were include 2 items which trying to show the impact of strong ties such as family and close friends on opportunity recognition. For example, “Discussions with my family and relatives helped me to recognize opportunities” or “Discussions with my close friends helped me to recognize opportunities”.
Prior Knowledge:
The moderating variable prior knowledge has been measured by 9 items. It was used the dimension of schema. The predictor variable is based on Baron and Ozgen (2007), where the authors used “I believe my experience and my educational background helps me to "connect the dots"” as relevant answer. According to the model of entrepreneurial alertness developed by Ardichvili (2003), prior knowledge refers as a factor that has an influence on entrepreneurial alertness and the ability to identify new entrepreneurial opportunities.
Ozgen and Baron (2007) measured the dimension of professional forums (seminars, workshops, consortium or conferences) and can be used as the possession of prior knowledge for entrepreneurs. For example, “Getting information or feedback from instructional seminars, workshops or training programs helped me to recognize business opportunities”. The participants had the option to answer the questions on a five-point Likert scale ranging from: 1= “strongly agree” to 5=“strongly disagree”.
3.2.4 Control Variables
Concerning the demographics part and following the study of Tang et al. (2012), age was measured with five categories: (1) <25, (2) 25–34, (3) 35–44, (4)45–54, and (5) >55 years old. Then, gender was measured with a dummy variable (female = 0; male = 1). Education was coded as 1:”high school degree”; 2: “Bachelor; degree”, 3: “master degree”; 4:”Phd Degree” and 5:”Other”.
3.2.5 Reliability Test
Reliability is the degree to which an assessment tool produces stable and consistent results. In order to check the statistical correlation of items replicate each other’s findings, I used the reliability test of Cronbach Alpha and if it is sufficiently high (more than 0.6), the Likert scale is a reliable measuring instrument.
Table: Scales of variables and Reliability Results
Construct and Items Likert Scale Reliability Results: Cronbach Alpha Opportunity Recognition:
4-items (Singth et al. 1999; Ozgen and Baron, 2007)
5-points Likert scale
ranging from
strongly disagree to strongly agree
,600
Alertness:
13-item scale, dimensions (a)scanning,(b)association,(c) evaluation and judgment Tang et. al (2012)
5-points Likert scale
ranging from
strongly disagree to strongly agree
,903
Social Networks: 8-items scale (Ozgen and Baron, 2007)
5-points Likert scale
ranging from
strongly disagree to strongly agree
,747
Prior Knowledge:
9-items scale,(Ozgen and Baron, 2007)
5-points Likert scale
ranging from
strongly disagree to strongly agree
,838
Table A: Socio-demographics Results for Novice Entrepreneurs
Attribute Levels Total Respondents=116
Gender Female 52 Male 64 Age <25 0 25 to 34 93 35 to 44 15 45 to 54 5 >54 3
Education High School 7
Bachelor Degree 74
Master Degree 34
PhD Degree 1
Other 0
Table B: Work experience before recognizing the business idea (shows only high scores)
Work Experience in Years: Respondents:
5 37
4 19
6 12
3 11
The highest percentage of the respondents have work experience five years before they discovered their business idea and that might be because 93 out of 116 of the total respondents, there age is between 24 and 35.
Table C: Types of Relations of support for the business idea Relations: 1.Spouse or life-partner Total Respondents: 13 2.Parents 64 3.Relatives 8 4.Friends 23 5.Business Partners 5 6. Former co-workers 3
Overall, this table shows that 64 out of 116 of the entrepreneurs first choose to ask support from their parents and then as a second choice decided to ask for support to their friends. In particular, this table indicates the support of different types of relations of novice entrepreneurs who received for their business idea.
3.3 Method of Analysis
In order to measure whether there is a significant direct relationship between alertness and opportunity recognition, testing the first hypothesis it was used Univariate ANOVA. The analysis has been chosen as the analytical tool, by considering dummy variables for the independent variable alertness and for the moderators which are social networks and prior knowledge. Moreover, control variables like gender, age, and education will be taken into consideration into the regression analysis (Table A). The regression analysis is represented as follows: 𝐷𝐼 = 𝛼 + 𝛽𝐺 + 𝛽2𝐴 + 𝛽3E + 𝜀 𝐺 = 𝐺𝑒𝑛𝑑𝑒𝑟 𝐴 = 𝐴𝑔𝑒 E=Education 𝜀 = 𝑒𝑟𝑟𝑜𝑟 𝑡𝑒𝑟𝑚
The control variables gender, age, education where regressed on the dependent variable in order to check which variables should be considered in the ANOVA or in the main and moderation effect. However, regression analysis results showed that there is no any effect between opportunity recognition and the control variables. As a consequence, the control variables are not of significance and therefore will not be included in the ANOVA.
3.4 HYPOTHESIS TESTING
In this part of the research, in order to decide which variables must be included in the ANOVA, all the control variables are regressed on the dependent variable opportunity recognition. Table A, Model 1 presents the regression results. The model yields an R-Square=.033 and a p.value=.396 which means that the model can capture only the 3.3% of the variance. Since the p.value is above every level of significance (1%, 5%, 10%), the control variables are not influencing opportunity recognition.
Table A Model 1
Regression Analysis Unst. B ST. Beta Sig Control Variables Gender Age Education -.100 .158 .006 -.071 .503 .163 .125 .007 .950 R2 .033 R2 Change .033 F-value P Value 1.001 .396 Unst. B= Unstandardized Coefficients B, St. Beta = Standardized Coefficients Beta
p < 0.05 p < 0.01
social networks yields a sig =.277 and also the moderation, alertness*social networks, shows sig=.286. Social networks do not have any influence to alertness and thus, to opportunity recognition. The hypotheses 2a and 2b are not supported.
Finally, ANOVA analysis was used to test hypothesis3a “The more prior knowledge possess an entrepreneurs, the more opportunities will entrepreneur recognize” and hupothesis3b “Prior knowledge positively moderates the relationship between alertness and opportunity recognition”. The model has a significance =.475 and an R Squared =.852 indicating an explanatory value of 85.2%. The moderator variable prior knowledge has sig =.683 and the moderation relation, alertness* prior knowledge has a significance=.544 (Table C, Model 3). According to the results the model prior knowledge doesn’t influence alertness and opportunity recognition, subsequently hypotheses 3a and 3b are rejected.
Table B Model 2 Regression Analysis St. Beta Sig Dependent Variable Opportunity Recognition .000 Independent Variable Alertness .524 .000 R2 .275 P Value .000 St. Beta = Standardized Coefficients Beta
p < 0.05 p < 0.01
Table C Model 3 Anova
Moderation Effect
TABLE: Results by hypothesis
Hypotheses Support Hypothesis1:
The higher someone’s alertness, the more business opportunities he or she will recognize.
Supported
Hypothesis2a:
The broader is the social network, the more opportunities will the entrepreneur recognize. Hypothesis2b:
Both Not Supported Network diversity positively moderates the
relationship between alertness and opportunity recognition.
Hypothesis3a:
The more prior knowledge possess an entrepreneurs, the more opportunities will entrepreneur recognize.
Hypothesis 3b:
Prior knowledge positively moderates the relationship between alertness and opportunity recognition.
Both Not Supported
4. DISCUSSION OF THE RESULTS AND THEORETICAL
CONTRIBUTIONS
The present research aimed at offering and testing some influencing factors in the relationship between alertness and opportunity recognition for novice entrepreneurs. The majority of past studies points out that social networks and prior knowledge do not affect the relationship of alertness and opportunity recognition, specifically for novice entrepreneurs. Thus, these two factors can be seen as obstacles in opportunity recognition for novice entrepreneurs. Consistently with the findings of previous studies, alertness was found to be directly related to opportunity recognition. (Tang et. al 2012; Ozgen and Baron (2007); Gaglio and Katz, 2001). In this study alertness was explained and measured based on three dimensions: systematically or non-systematically scan the environment and search information, associate or connect together previously unconnected information and make evaluations and judgments about the feasibility of the idea (Tang et al. 2012). These three dimensions have a strong interaction to each other which might be the starting point for someone to recognize opportunities. In their article it is stated that alertness represents “an individual’s capability that can be learned and improved, and thus, may offer guidance to aspiring entrepreneurs in how to mindfully discover opportunities with business potential.” In light of this research finding, the novice entrepreneurs show that they use these three dimensions of alertness to recognize business opportunities.
Moreover, social networks do not influence the relationship of alertness and opportunity recognition. Social networks comprised the power of information, received by the mentors, informal networks, family and close friends which can influence the entrepreneurs. In social networks’ literature it is stated that strong ties have a positive influence on opportunity recognition. Contrarily to my hypotheses, the research results supported previous literature’s view that strong ties have a negative effect on opportunity recognition. In previous literature, in fact, individuals’ weak ties are considered as bearing more opportunities because they belong to an environment and sphere of knowledge that is more distant to the individual’s usual ones and therefore can provide him/her with new insights and opportunities. Ozgen and Baron (2007) and Sighth (1999) confirmed that strong ties do not have any influence in the process of opportunity recognition. They supported that family or friends most times are not relevant with the industry/market. Indeed, they showed that their ties are mostly of an emotional nature and do not help or advise them positively in the direction to discover business opportunities.
workshops, seminars) increasing the possibilities to recognize business opportunities. Thus, they supported that the framework of alert schemas positively help individuals to assess information and identify opportunities.
Analyzing further the results concerning the control variables and related to the characteristics of novice entrepreneurs age, education and gender have an important role in the opportunity recognition. The majority of the novice entrepreneurs of this study has an age ranging from 24 to 35 years old. Concerning the gender, most of the entrepreneurs are men and more than 60% have bachelor’s degree. In the paper of Esley and Baron (2006), the demographic characteristics for novice entrepreneurs indicate the same findings. It is justified that novice entrepreneurs emphasize more newness and uniqueness in entrepreneurship. Therefore, the entrepreneurs found that they are alert but the social networks and prior knowledge do not have any impact in the opportunity recognition. These finding might be because of the fact they don’t have many years of working experience and consequently they don’t have many social contacts or have the chance to have a mentor who can guide them or advise them based on their experience. Since the role of the age can have a significant impact in the opportunity recognition especially for the strong ties, young people tend to be more impulsive and not follow advices from family/friends.
Overall, it is supported that individuals who possess entrepreneurial alertness are more likely to recognize business opportunities. This study aims at understanding which are the pieces of the puzzle for novice entrepreneurs when they “connect the dots” in order to identify their business opportunity. Clearly, alertness is a key factor in this puzzle. However, in this research social networks and prior knowledge as an aspect of information in several dimensions might contribute for new insights in the process of opportunity recognition, particularly for novice entrepreneurs.
Opportunity recognition will always be an interesting and timeless topic of investigation in entrepreneurship.
5. LIMITATIONS AND FUTURE RESEARCH
identification of opportunity recognition compare to other studies. However, another limitation could be that in the methodology part might not use the appropriate measurement of items regarding other previous studies. Furthermore, social networks and prior knowledge have been used in the literature of opportunity recognition with a broad extension of meanings. In particular, this study focuses more on Greek novice entrepreneurs using the three dimensions of alertness and influenced by theirs social contacts, mentors, family/friends, professional forums and working/life experience in order to recognize business opportunities. Thus, given the age and the work experience, was noted that the sample of the novice entrepreneurs were ranging from 24 to 30 years old and thus, before identified their business opportunity had five years of working experience. This facts might mean that were too young to influenced by the factors social networks and prior knowledge, as the possession of prior information and know-how of connecting new information in order to identify opportunities. Moreover, the sample of the current study is focuses only on hospitality industry and for that reason we can’t have a clear view. Regarding to suggestions for future studies should, focus more on to understand how the source of information can be combined in terms of social networks and prior knowledge and why these two factors influence the relationship of alertness and opportunity recognition, in particular for novice entrepreneurs. Therefore, future entrepreneurship studies could investigate in more depth about the characteristics of novice entrepreneurs; if the age and work experience related to access and possession of information might be considered as a barrier in the process of opportunity recognition.
6. CONCLUSION
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APPENDICES
OPPORTUNITY RECOGNITION
Please, think about "business opportunity recognition" and answer the following questions 1. Strongly agree . 2. Somewhat agree . 3. Neither agree nor disagree 4. Somewhat disagree 5. Strongly disagree
Q1: I enjoy thinking about new ways of doing things
Q2; I frequently identify opportunities to start-up new businesses (even though I may not pursue them).
Q3: I frequently identify ideas that can be converted into new products or services (even though I may not pursue them).
Q4: I generally lack ideas that may materialize into profitable enterprises.
ALLERTNESS
Strongly agree (1), Somewhat agree (2), Neither agree nor disagree, (3)Somewhat disagree (4), Strongly disagree (5)
1. I have frequent interactions with others to acquire new information.
2. I always keep an eye out for new business ideas when looking for information. 3. I read news, magazines, or trade publications regularly to acquire new information. 4. I browse the Internet every day.
5. I am an avid information seeker.
6. I am always actively looking for new information.
7. I see links between seemingly unrelated pieces of information. 8. I am good at “connecting dots.”
11. I can distinguish between profitable opportunities and not-so-profitable opportunities. 12. I have the ability for telling high-value opportunities apart from low-value opportunities. 13. When facing multiple opportunities, I am able to select the good ones.
SOCIAL NETWORKS
Please answers, how helpful were the below items in the process to identify your business idea...
Strongly agree (1) Somewhat agree (2) Neither agree nor disagree (3) Somewhat disagree (4) Strongly disagree (5)
1. My contacts or discussions with potential or existing customers helped me to recognize opportunities.
2. My contacts or discussions with bankers, investors, and venture capitalists might help me to recognize business opportunities.
3. My social contacts helped me to recognize business opportunities.
4. Having a mentor entrepreneur helped me to recognize business opportunities. 5. I think having a faculty mentor is very helpful in the process to recognize business opportunities.
6. I think having more than one mentors from different industries are helpful to recognize business opportunities.
7. Discussions with my family and relatives helped me to recognize opportunities 8. Discussions with my close friends helped me to recognize business opportunities.
No Support (1) Somewhat no Support (2) Neither no support or support (3) Somewhat support (4) Full support (5) 1.Spouse or life partner ! ! ! ! ! 2.Parents ! ! ! ! ! 3. Friends ! ! ! ! ! 4. Relatives ! ! ! ! ! 5. Business Partners ! ! ! ! ! 6.Acquaintances ! ! ! ! ! 7. Former Employers ! ! ! ! ! 8. Former Co-workers ! ! ! ! ! PRIOR KNOWLEDGE
Strongly agree (1), Somewhat agree (2), Neither agree nor disagree, (3) Somewhat disagree, (4), Strongly disagree (5)
1. I believe my experience and my educational background helps me to "connect the dots". 2. I believe without having education you cannot reach information.
3. New ideas come up because of my educational studies.
4. While going day-to-day activities, I try to look for new business ideas.
5. I regularly seek information from new business development resource centers. (e.g. small business committee).
6. Getting information or feedback from instructional seminars, workshops or training programs helped me to recognize business.
7. Getting information or feedback from industry-related meetings and joining associations helped me to recognize business opportunities.
8. Thanks to the extensive knowledge and experience that I had in the industry I was able to recognize business opportunities.
-How many years of work experience did you have when you recognized your business opportunity? (indicate in numbers) ………
Demographic Questions What is your age? 1. Under 24 2. 25 - 34 3. 35 - 44 4. 45 - 54 5. More than 55
What is your gender? 1. Male
2. Female
