Prior-knowledge and opportunity identification - Springer Link

Small Bus Econ (2013) 41:461–478 DOI 10.1007/s11187-012-9437-9

Prior-knowledge and opportunity identification Jason Arentz • Frederic Sautet • Virgil Storr

Accepted: 28 May 2012 / Published online: 19 June 2012 Ó Springer Science+Business Media, LLC. 2012

Abstract An entrepreneur’s prior knowledge and experience play a critical role in his ability to identify and exploit entrepreneurial opportunities. Although entrepreneurship research has acknowledged the role that prior information and prior knowledge play in opportunity recognition, few studies have explored their role in entrepreneurial discovery. We test the role of a particular prior knowledge in entrepreneurial discovery within a laboratory setting. Participants were randomly assigned to one of two treatment groups. Those in the propitious treatment were given prior knowledge that oriented them toward the arbitrage opportunity within the experiment, and those in the unpropitious treatment were given prior knowledge that oriented them away. As hypothesized, those

J. Arentz Sam M. Walton College of Business, University of Arkansas, Fayetteville, AR, USA e-mail: [email protected] F. Sautet (&) Department of Economics, Catholic University of America, Washington, DC, USA e-mail: [email protected] V. Storr Department of Economics, George Mason University, Fairfax, VA, USA e-mail: [email protected]

in the propitious treatment were significantly more likely to discover the arbitrage opportunity. Keywords Alertness Discovery Entrepreneurship Opportunity Prior knowledge JEL Classifications

D80 L26

1 Introduction In the last decade and a half, entrepreneurship research has increasingly focused on the origins of entrepreneurial opportunities and the reasons why some individuals recognize entrepreneurial opportunities and others do not (Venkataraman 1997). Drawing on the work of Israel Kirzner, entrepreneurship research from the alertness perspective has made important contributions regarding both the origins and identification of entrepreneurial opportunities. Research on the origin of opportunities has taken cues from the work of Hayek on dispersed knowledge, disequilibria, and false prices (Hayek 1945). The work on entrepreneurial discovery, on the other hand, has attempted to unearth the process by which these disequilibria come to be known in the market. While it is important to study the ways that entrepreneurs set up firms and which psychological characteristics are most conducive to successful entrepreneurship, it is also important to understand how opportunities come to be known in the first place. This article focuses on

123

462

opportunity identification, and tests Kirzner’s alertness perspective and the role of prior knowledge using a laboratory experiment.1 Traditionally, three determinants of entrepreneurship have been emphasized in the literature: institutions, social networks, and personal characteristics. Following the works of Venkataraman (1997) and Shane and Venkatarman (2000), however, it has become more and more difficult to define the field in purely behavioral terms, that is, in terms of who the entrepreneurs are and what they do. Instead, more research now regards as crucial understanding how entrepreneurs come to recognize the existence of opportunities (Eckhardt and Shane 2003). In other words, they turn to the fundamental question: ‘‘why are some entrepreneurial opportunities discovered and not others?’’ (Shane 2000). Our research draws on Kirzner’s (1973) postulate that there is a link between prior knowledge and the kind of profit opportunities to be discovered. An entrepreneur’s prior knowledge and experience play a critical role in his ability to direct his gaze to a specific field in which he may identify and exploit entrepreneurial opportunities. Stated another way, individuals will tend to be alert to what is in their interest to be alert to and this is related to (a) the profit (monetary or otherwise) that they may derive from the discovery and (b) the content of their prior knowledge, which may direct them to a certain field. In Kirzner’s view, entrepreneurial discovery is the result of both a pull 1

Kirzner (2005, p. 76) emphasizes a distinction between information and knowledge, which states that the former is an input in a process of learning that results in knowledge (i.e. subjectively perceived and processed information). By implication, any information an individual possesses is necessarily subjectively perceived and processed in one way or another (i.e. there is no such thing as a ‘‘raw datum’’ in the mind of an individual). While our focus is on how differences in information affect the kind of opportunity one may discover, we recognize that ultimately, we are examining how differences in knowledge matter across individuals for the kind of opportunities they discover. Indeed, entrepreneurship in Kirzner’s work is fundamentally a theory of perceived information (i.e. knowledge) that may lead to opportunity recognition through the process of alertness. In other words, some knowledge may lead to entrepreneurial discovery, while some other may not. In all cases, Kirzner focuses on knowledge (i.e. perceived information), not simply on ‘‘raw’’ information. Given the links between information (i.e. ‘‘raw data’’) and knowledge (i.e. subjectively perceived and processed information) and our goals in this paper, however, we do not need to emphasize the distinction between the two.

123

J. Arentz et al.

(profit) and a push (alertness); the two work together in concert. In that sense, Kirzner’s theory of entrepreneurial discovery echoes Louis Pasteur’s famous assertion that ‘‘chance only favors the prepared mind.’’ Kirzner does not see, however, alertness itself as being a function of prior knowledge. In other words, only the field in which discovery takes place may be related to prior knowledge, not alertness itself. Although entrepreneurship research has acknowledged the role that prior knowledge plays in opportunity recognition, few studies have explored its role in entrepreneurial discovery (see Shane 2000 for a notable exception). It is our goal in this paper to focus on the role of prior knowledge in entrepreneurial discovery. Following Shane (2000), we consider prior knowledge as the sum of all knowledge that an individual may (consciously or not) possess at a given moment in time (for convenience we label this KT, i.e. all the knowledge an individual acquires during the course of his life). It is, however, difficult, if not impossible, to test for the influence of all knowledge on entrepreneurial discovery. We have therefore constructed a means to identify and explore that role in a laboratory setting. In this paper, we focus on prior knowledge as defined as the receipt of information prior to a specific event (for convenience we label this Kt, i.e. the knowledge that an individual acquires in time period t, which for our purposes is during the experiment). Following Kirzner’s framework (1973), we model the entrepreneur as an economic agent who can perceive a profitable disequilibrium, or arbitrage opportunity. Participants were randomly assigned to one of two treatment groups engaged in a contextualized market simulation with a ‘‘hidden in plain sight’’ opportunity for arbitrage. Because we are working in a laboratory context, the design is much simpler than it would be in the actual world where entrepreneurial opportunities exist but are not often in plain sight. Since there is no way to control for all subject knowledge prior to entering the lab (KT), we instead randomize treatment assignment so that the distribution of relevant knowledge will be roughly the same for our two treatment groups, and then provide additional knowledge relevant to the opportunity in question, but that differs between the groups. Stated another way, we ensure that Kt differs slightly but in important respects across treatment groups. We find that small differences in prior knowledge (specifically, small differences in Kt) can result in

Prior-knowledge and opportunity identification

meaningful differences in the likelihood of opportunity identification. This article is among the first efforts to examine the role of prior knowledge in entrepreneurial opportunity identification using laboratory experiments. It is, thus, important because it offers an alternate approach to case studies in examining the role of prior knowledge in entrepreneurial discovery. Additionally, it adds to the small but growing literature that seeks to combine experimental economics and entrepreneurship studies (see, for instance, Fiet and Patel 2008), and it sheds some light on our understanding of the role of prior knowledge in opportunity identification. Indeed, the experimental setting helps us expand on Kirzner’s view, showing that, ex-post, alertness could also be seen as a function of prior knowledge. We show that prior knowledge (i.e. the perceived and processed information that individuals possess) may influence alertness. Our results show that prior knowledge may influence not only the kind of opportunities an individual may discover but also how alert an individual may be to these kind of opportunities. In our laboratory setting, individuals are not deliberately investing in prior knowledge in order to better identify entrepreneurial opportunities, as it is given to them, without them knowing the significance of the information that they are receiving. Rather than being a weakness of our design, however, this is a strength of our approach. In the real world the specific knowledge relevant for opportunity identification can only be established a posteriori (after the discovery has taken place). As such, for Kirzner, opportunity identification results from genuine discovery and not from deliberate search. Our experimental design thus offers a cleaner test of the claim about the importance of prior knowledge in directing an entrepreneur’s gaze. While there is a great deal of research on the role of deliberate search in opportunity discovery, the role of prior knowledge is underexplored. Our effort also offers a useful extension to the handful of existing discussions of the role of prior knowledge. Prior knowledge tends to be discussed as if it were a set of blinders limiting entrepreneurial vision. In other words, it acts as a flashlight aiming in a particular direction and illuminating some objects (i.e. opportunities) but not others. We find that prior knowledge also operates like a pair of glasses, where an entrepreneur’s vision (i.e. ability to identify opportunities) is actually improved; prior knowledge can actually result in a brighter and sharper flashlight.

463

Our analysis proceeds as follows. First, we discuss the research that has been done on prior knowledge and entrepreneurial discovery. Next, we develop and test our hypothesis regarding the relationship between prior knowledge and opportunity recognition using a laboratory experiment. Afterwards, we discuss our findings and the limits of our approach.

2 Prior knowledge and entrepreneurial discovery Although entrepreneurship scholars have acknowledged that understanding the origins and recognition of entrepreneurial opportunities should be at the core of entrepreneurship studies (Gaglio and Katz 2001), until recently most research investigated the entrepreneurial process after the opportunities have been created and identified (Shane 2000). Rather than focusing on the discovery of entrepreneurial opportunities, the emphasis has largely been on the factors affecting the exploitation of those opportunities. In this behavioral understanding of entrepreneurship the fundamental physical, cultural, and psychological attributes of people determine who becomes an entrepreneur. As such, emphasis has been placed on the need for achievement, the willingness to bear risk, self-efficacy, internal locus of control, masculinity, and tolerance for ambiguity (McClelland 1961; Hofstede 1980; Brockhaus and Horowitz 1986; Chen et al. 1998; Hayton et al. 2002). Research on entrepreneurial discovery from an alertness perspective, however, has grown in recent times.2 Kaish and Gilad (1991), for instance, attempted to test empirically the implications of the Kirznerian framework of alertness. They found that entrepreneurs tend to rely more on their own subjective impressions, gathering information during their on and off hours, and relying less on the conventional economics of projects. 2.1 Stages of entrepreneurial opportunity identification Kirzner (1973, 1979) sees alertness as the essence of entrepreneurial activity. For Kirzner, entrepreneurship

2 See, for instance, Ardichvili et al. (2003); Baron (2004); Buenstorf (2007); Dimov (2007a, b); Fiet and Patel (2008); Gaglio and Katz (2001); Kaish and Gilad (1991); Plummer et al. (2007); Shane (2000); Shane and Venkatarman (2000); Shepherd and DeTienne (2005); Tang et al. (2008).

123

464

J. Arentz et al.

consists primarily of the noticing of a new means-ends framework that was hitherto not part of the agent’s optimization set. Alertness, for Kirzner (1979), is distinct from search and is instead the ability to spot profit opportunities that have previously been overlooked. The alertness perspective on entrepreneurship and the market process assumes that people possess different knowledge (it is dispersed) and interpret the world differently (the perception of information is subjective). These two tenets combined with idiosyncratic life experiences mean that some entrepreneurs will know about particular market characteristics or will see the importance of some services to customers when others will not.3 According to the alertness perspective, then, discoveries do not primarily depend on individuals’ inner psychological entrepreneurial dispositions. Instead, there exist differences in the way people notice aspects of their environment. The entrepreneurial discovery process can be conceived as involving (at least) four steps: 1. 2. 3. 4.

Unnoticed entrepreneurial profit opportunities exist Entrepreneurs notice hitherto unexploited opportunities Entrepreneurs exploit the noticed opportunity (which may generate new opportunities) Entrepreneurs develop heuristics and accumulate knowledge that may help them identify new opportunities

As stated above, unnoticed entrepreneurial opportunities exist because we live in a world where knowledge is dispersed and the future is unknowable. Entrepreneurial opportunities, thus, exist because individuals neither have perfect knowledge (as described in standard microeconomics) nor do they share the same knowledge (Hayek 1945; Kirzner 1973; Buenstorf 2007; Plummer et al. 2007). In other words, prior knowledge is heterogeneous across individuals. Because knowledge is truly dispersed (i.e. KT differs across individuals), buyers and sellers make errors of over-optimism and over-pessimism. Because market participants are necessarily ignorant, Kirzner 3

See, for instance, Lavoie (1991), Chamlee-Wright (1997), Storr (2004, 2012), Tominc and Rebernik (2007) as well as Storr and Butkevich (2007) for a discussion of how culture affects the opportunity recognition.

123

(1999, p. 6) explains they can be led ‘‘(i) overoptimistically to insist on receiving prices that are ‘too high’ (to enable them to sell all that they would like to sell at those prices) [or on paying prices that are ‘too low’ (to enable them to buy all that they would like to buy at those prices)]; or (ii) over-pessimistically to enter into transactions that turn out to be less than optimal in the light of the true market conditions as they in fact reveal themselves (e.g., a buyer discovers that he has paid a price higher than that being charged elsewhere in the market; a seller discovers that he has accepted a price lower than that which has been paid elsewhere in the market).’’ These errors mean that there are entrepreneurial opportunities to buy low and sell high thus earning a profit. Alert entrepreneurs may notice these hitherto unexploited opportunities. Their ability to make these discoveries depends on their subjective perceptions (Kirzner 1979), their cognitive abilities (Baron 2004), their capacity for bisociative thinking (Ko and Butler 2006), the potential net gain that results from disequilibrium (Kirzner 1973; Eckhardt and Shane 2003), the networks they belong to (Arenius and De Clercq 2005), their openness to new options (Burmeister and Schade 2007), and their prior knowledge (see discussion below). Differences in these attributes lead individuals to see different opportunities in similar socio-economic circumstances. Entrepreneurs attempt to exploit the discovered opportunities. Their ability to be successful depends on the institutional context and their creative abilities. Although it is possible to distinguish between the discovery and exploitation of entrepreneurial opportunities conceptually, these stages are linked. If successful, entrepreneurs develop heuristics that may help them identify new opportunities. Stated another way, entrepreneurs develop rules of thumb about how to discover opportunities in the future based on their experience of what was successful in the past. This prior knowledge may become important when facing future situations. It does not guarantee, however, the discovery of new opportunities. Although Kirzner (1973, 1979) and others have written considerably about the discovery process, the critical role played by prior knowledge remains underexplored empirically. In particular, there is a dearth of research that tests how sheer differences in prior knowledge may be an explanatory element in opportunity discovery, while abstracting as much as possible from all other factors.


2.2 The role of prior knowledge The work of Kirzner (1973) aims originally at solving a fundamental void in standard microeconomics. In the traditional approach, within a given means-ends framework (i.e. the framework which links known individual ends and the corresponding known and available means within which individual choice is being hypothesized), the action of an individual can be easily determined; it is an optimization problem. This does not tell us, however, how means-ends frameworks are selected in the first place. In response, Kirzner stipulated that entrepreneurship is the element enabling individuals to discover, or notice, new means-ends frameworks. Two aspects are fundamental to this noticing process in Kirzner’s view. First, the entrepreneur’s interest is to be found in the promise of pure gain, which pulls entrepreneurial alertness in the direction of unknown gains from trade. Second, the entrepreneur’s interest is directly linked to the possession of relevant prior knowledge that may orientate him towards some kind of opportunities and not others (Kirzner 1973, 1979; Venkataraman 1997). These two aspects of the entrepreneurial discovery process are encapsulated in this quote from Kirzner: ‘‘human beings tend to notice that which it is in their interest to notice’’ (1985, p. 28). In Kirzner’s research, prior knowledge and discovery are related. An individual’s noticing potential is not a direct function of prior knowledge (i.e. one cannot invest in prior knowledge in order to positively affect the likelihood of future discovery), but prior knowledge may orientate one’s gaze at the world (i.e. it may affect the kind of opportunities one may notice). In other words, prior knowledge shapes what one may be alert to. If one is a surgeon, one may discover opportunities in the field of surgery, but being a surgeon per se does not make one more alert to opportunities. Two surgeons equally trained with similar work experiences may be alert to opportunities in surgery, but may not be equally alert to them. As Venkataraman (1997) writes, a potential entrepreneur’s prior knowledge directs his gaze toward certain opportunities and away from others.4 Despite the role of prior knowledge in the entrepreneurial discovery process (and because of the 4

Another way of stating it is to say that prior knowledge is about directing one’s gaze not enhancing alertness.

465

difficulty outlined above), only a few studies have attempted to demonstrate the importance of that concept and the role of prior knowledge through traditional empirical work (Shane 2000; Corbett 2007; Fiet and Patel 2008; Shepherd and DeTienne 2005). Prior knowledge generally refers to an individual’s distinctive knowledge about a particular subject matter and may be the result of different things such as work experience, education or unintentional experiential learning (Shepherd and DeTienne 2005).5 The standard typology can be found in Shane (2000) and Ardichvili et al. (2003), which present three propositions regarding knowledge and opportunity recognition. The likelihood of successful entrepreneurial opportunity recognition will increase through prior knowledge of markets, prior knowledge of customer problems, and prior knowledge of ways to serve markets. Shane (2000), for instance, explored in his empirical investigation of a three-dimensional printing process (3DP) the role of prior knowledge and found that because of differences in prior knowledge, different individuals recognized different opportunities based on the same technical innovation. Similarly, Ardichvili et al. (2003) present a theory of opportunity identification as a multi-stage process involving opportunity recognition, development and evaluation. Accumulating relevant prior knowledge appears to help entrepreneurs to think in a more intuitive way, which is possibly related to higher alertness. This is likely why some entrepreneurship research attempts to demonstrate that entrepreneurs rely more on heuristics than others and that entrepreneurs with some prior knowledge are likely to focus on the relevant information in their environment, which can encourage opportunity identification. As Shepherd and DeTienne (2005) explain, individuals with prior knowledge have an increased ability to recognize important connections between concepts, which increase their ability to recognize entrepreneurial opportunities. Moreover, prior knowledge is generally not effective in isolation. Cognitive properties necessary to value prior knowledge, for instance, are also seen as playing an 5

Shepherd and DeTienne (2005, p. 93) give the following example: ‘‘For example, Ed Pauls, the creator of NordicTrack, epitomizes how prior knowledge allows individuals to identify opportunities. Ed was a trained mechanical engineer whose passion revolved around cross-country skiing. His passion was unfulfilled when inclement weather prevented him from going skiing. Thus, he invented an indoor cross-country ski machine.’’

123

466

important role (Shane and Venkatarman 2000). Opportunities can only be identified if some relevant prior knowledge is possessed along with the cognitive properties for understanding its relevance. In conclusion of this section, it is important to emphasize that we define prior knowledge as the sum of all knowledge that an individual may possess (consciously or not) at a given moment in time (Shane 2000). Of course, one cannot aspire to measure and control for all prior knowledge that subjects possess. However, we can overcome this difficulty by using the powerful tool of randomly assigning subjects to one of the two treatments. This allows us to specifically test the effect of the controlled information subjects receive during the experiment. The reason is that random assignment can eliminate systematic differences in prior knowledge that we cannot control. For convenience, we label total prior knowledge as KT, and the specific knowledge that we give subjects as Kt. Therefore, by randomizing subject assignment, we eliminate any systematic differences in KT, and isolate the treatment effect of Kt. 2.3 Prior knowledge, entrepreneurial discovery and experimental economics While there is much work to be done on the role of prior knowledge in discovery, very few laboratory experiments have looked at this question in general and, to our knowledge, none have explored the effect of prior knowledge on awareness and arbitrage.6 Demmert and Klein (2003), for instance, engaged students in a quasi-lab experiment, with induced profit incentives in a physical environment. The task was to transport as much water as possible from point A to point B, where end payments scaled with the volume moved. The entrepreneurial discovery they were looking for was the realization that the table used in the experiment could be inverted and used as a larger, makeshift bucket. In particular, they wondered if this

6

We should also note that many, if not most, economic experiments involve some degree or component of alertness (entrepreneurship). Unfortunately, since the entrepreneurial process is so rarely studied explicitly, we can infer little by way of causal relationships in those experiments. For example, some of the discovery of specialization and exchange found in Kimbrough et al. (2008) must undoubtedly be entrepreneurial. Additionally, there have been several economic experiments endeavoring to tease out the characteristics of successful entrepreneurs (see, for instance, Burmeister and Schade 2007).

123

J. Arentz et al.

discovery would occur more often for higher payments per liter of transported water. Their results were inconclusive. Kitzmann and Schiereck (2005) replicate the Demmert and Klein (2003) experiment but likewise find the design difficult to control. Moreover, a difficulty with these studies is the lack of control or randomization of the relevant prior knowledge and experiences of the participants. This is also the case with the Shepherd and DeTienne (2005) experiment. Shepherd and DeTienne (2005) ran a quasi-experiment with 78 MBA students who read through a series of comments from focus groups regarding problems associated with footwear. The students were offered a potential financial reward and were asked to find solutions. The students also received various degrees of information regarding the problems at hand to evaluate the impact of prior knowledge on the solutions found. They were also given superfluous information to test their ability to recall the relevant information. The authors found that individuals with higher levels of relevant prior knowledge both identified more entrepreneurial opportunities and the opportunities identified were more innovative. Although their study adds to our understanding of how prior knowledge affects opportunity discovery and how financial rewards affects participants motivation in utilizing even minimal levels of prior knowledge, it does not control for the specific prior knowledge under consideration, nor randomize out other influences, and therefore makes causal identification problematic. Stated another way, it does not control for the specific knowledge students acquired during the experiment (Kt), nor does it eliminate the possibility that there are systematic differences in KT that is shaping the results. Thus, additional laboratory confirmation is desirable. Fiet and Patel (2008) also focus on discovery and the role of prior knowledge in a laboratory experiment. All 31 of their subjects participated in one of two intensive, eight-week training sequences. Sixteen were trained to be alert to opportunities in their environment and the remaining 15 were trained in a consideration set-based approach to search. Fiet and Patel (2008) found that the search approach was substantially more successful in its environment. There are several reasons to believe, however, that the authors’ test does not really compare alertness and search. Discovering that a particular search strategy is effective in identifying a particular kind of opportunity, for instance, is itself a profit opportunity that


potential entrepreneurs might be alert to. The fact that those participants who were given that knowledge outperformed those who were not given that knowledge is not necessarily a critique of alertness vis-a`-vis search. Moreover, participants were aware that they were expected to identify new opportunities, i.e. the search for new ventures is explicit. Consequently, the experiment could be thought of as one in which the entrepreneurial discovery has already occurred, so that the task at hand is optimization. Although these experimental studies have advanced our knowledge of entrepreneurship and specifically the role of prior knowledge in opportunity identification, there still remain some key ways that these studies can be extended or improved upon. The next section outlines the experimental approach that we pursued. 2.4 Extending and exploring the role of prior knowledge As argued above, the discussion of the role of prior knowledge in Kirzner’s work, as well as in that of others such as Shane (2000), traditionally links prior knowledge with the kind of opportunities one may discover, not with the likelihood of discovery. While we agree that one cannot deliberately engage in learning in order to increase one’s own capacity to discover opportunities, it may still be the case that sheer differences in prior knowledge may be an explanatory element in alertness and thus in opportunity identification. We believe that a laboratory experiment may be able to show that alertness can also be seen, a posteriori, as a function of prior knowledge. In other words, differences in prior knowledge may explain differences in opportunity identification. One’s noticing potential (i.e. alertness) would thus be itself a function of prior knowledge, even though no such link between specific prior knowledge and the likelihood of identifying some specific opportunity can ever be established a priori. Thus, our hypothesis can be stated as follows: H: The chance of discovering an opportunity for profit is positively correlated with relevant prior knowledge pointing towards the existence of such an opportunity. In particular, members of the propitious treatment group in our experiment are more likely to discover the opportunity than are members of the unpropitious treatment group.

467

3 Methodology We ran a controlled, computerized, laboratory experiment, using 64 paid student subjects from George Mason University, following standard experimental economics procedures. Each student was the sole human participant in a virtual market with two goods (one of which they produced), and three groups of potential consumers (themselves and two other groups). The primary unit of measurement was the simple, binary, discovery or absence of discovery that arbitrage was a profitable possibility. Participants were randomly assigned to either the propitious or the unpropitious treatment group. The randomization eliminated systematic differences in prior knowledge between subjects assigned to each group, particularly with regards to the levels of relevant prior knowledge (KT) they possessed before entering the lab, their capacity for bisociative modes of thinking, and other traits that might increase their alertness to the opportunity in the experiment. Our purpose in selecting this design was to ensure that any systematic output differences between the two treatment groups had to do with the differences in the treatment they received and not any other factors or characteristics that would affect entrepreneurial alertness. While assessing and measuring such characteristics may further our understanding, such measurements are not the in the purview of this work. The treatment occurs as soon as participants begin the experiment. Our purpose was to test whether an entrepreneur’s ability to identify profit opportunities was influenced by her prior knowledge acquired during the experiment (Kt). We emulated such knowledge with a one-paragraph story that sets the context for the experiment. The story places subjects in the role of a manufacturer, Mr. Green, from a small village who purchases fruit he has never seen before, but enjoys, on his first visit to a distant town. Those in the propitious treatment read a version of the story that suggests, but does not explicitly state, an opportunity for arbitrage within the experiment: Mr. Green grew up in a small village called Green Village, where he runs a small factory. Mr. Green has always been very similar to his fellow villagers. They usually like the same drinks, food, clothing and art that Mr. Green likes. On his 25th birthday, Mr. Green travels to

123

468

Brown Town, a small country town 150 miles away. He spends the day shopping in the local market and sampling the local food and drink. Most of what he finds he is familiar with from his home village, but that night he buys an exotic fruit that he’s never had before, and he absolutely loves it. Mr. Green thinks to himself that the other villagers would probably like this fruit. Mr. Green’s tastes are said to be very similar to his fellow villagers, even suggesting that other villagers might enjoy the fruit if they could try it. For the unpropitious treatment, however, the story framed participants (i.e. Mr. Green) as having very different tastes from the other villagers, so that the implication of an arbitrage opportunity is absent: Mr. Green grew up in a small village called Green Village, where he runs a small factory. Mr. Green has always been a little different from his fellow villagers. They usually do not like the same drinks, food, clothing and art that Mr. Green likes. On his 25th birthday, Mr. Green travels to Brown Town, a small country town 150 miles away. He spends the day shopping in the local market and sampling the local food and drink. Most of what he finds he is familiar with from his home village, but that night he buys an exotic fruit that he’s never had before, and he absolutely loves it. Kt differed in small but meaningful ways between the treatments. Notice there are two key differences between the stories. Stated another way, subjects in the propitious treatment are given two bits of prior knowledge relevant to the identification of the entrepreneurial opportunity that exists within our virtual market. First, they are told that Mr. Green’s tastes are similar to his fellow villagers, suggesting that if Mr. Green discovered something he enjoyed, his fellow villagers would also be interested in it. Subjects are told explicitly that they can use Mr. Green’s tastes as a barometer for the tastes of his fellow villagers. Second, they are told that Mr. Green both loved the exotic fruit that he has purchased and believes that his fellow villagers would enjoy it as well. Although they are not told explicitly that there is an opportunity for Mr. Green to purchase fruit in Brown Town and to sell that fruit in Green Village, the subjects in the propitious treatment group are given relevant prior

123

J. Arentz et al.

knowledge before engaging in activities in our virtual market that should make them more alert to that opportunity. So as to guard against convoluting session effects and possible experimenter demand effects, all sessions contained participants in both treatments, and all instructions and stories were read silently and privately. Once participants were seated, no instructions were read out loud. Questions raised by participants were answered quietly and privately. Instructions began with the story, and then advanced to interactive practice for the market processes of production and consumption. Comprehension was tested with a short quiz at the end of the instructions. Wrong answers sent participants to the beginning of the instructions to try again. When all answers were submitted correctly, the market phase began. The story treatment was the only difference between the two groups. All other aspects of play and payoff were identical. After reading the treatment stories, all participants experience identical instructions and game play. The virtual market appeared on the computer screen as a three by three grid, with image icons representing the participant’s factory, boxes produced by the factory, the village, the distant town, fruit purchased from the town, the participant (as Mr. Green), and the participant’s wealth and happiness. In the instructions, participants were trained to drag and drop icons to perform actions, much as one might drop a file into a folder. Dragable icons included money, boxes, and fruit, which could be dropped on the village, the town, or the player icon. They were trained in the instructions on ‘‘a few of the possible actions,’’ which were dropping money on the factory to produce boxes, dropping boxes on the village to earn money, dropping money in the town to buy fruit, and dropping fruit on the character icon to consume it for happiness points. The drag and drop structure allowed for unrestricted action combinations without overtly suggesting arbitrage. The salient portion of the experiment was the sum of money and happiness earned, which was paid out individually and privately to the participants in US dollars when the experiment ended.7 Participants are 7

Since the only action of interest to us is discovery, rather than profit maximization or total welfare, details of the cost functions and diminishing marginal valuations employed are not relevant, and have therefore been omitted for the sake of space, focus, and


explicitly trained to perform production, consumption and retail actions but are not shown explicitly that they are able to buy fruit in the town and sell it in the village. We claim that an entrepreneurial discovery has occurred if the participant thinks to buy fruit from the town and then sell it in the village, rather than consume it directly. 3.1 Procedure All experiment sessions occurred at the Interdisciplinary Center for Economic Science (ICES) at George Mason University. Participants were randomly recruited from the George Mason student body, and received $7 for arriving on time, in addition to earnings from the experiment. Participants spent about 40 min to an hour in the laboratory. Upon arrival, participants checked in, signed waivers and drew a random number assigning them to a computer station and treatment. Therefore both treatments ran in all sessions, with equal numbers (within one for odd turnouts) of each. Once logged in, participants read the instructions and the story corresponding to their treatment. Instructions included practice dragging and dropping icons to perform sample actions. Participants then took a short quiz, which either returned them to the instructions or allowed them to begin. Once the market loaded, instructions were no longer available. The experiment was not timed but ended if a participant ran out of experimental money or after 90 actions. They then completed a brief questionnaire, signed for and received their payments privately and individually, and exited the lab. 3.2 Further remarks on our hypothesis The discussion of the role of prior knowledge above suggests that sheer differences in prior knowledge may be an explanatory element in alertness and thus opportunity identification. We hypothesized that the fraction of participants who discovered the arbitrage

Footnote 7 continued simplicity. Selling fruit in the village did produce the highest profit, but that could not be known until after the discovery had occurred. Similarly, relative earnings depended on how early discovery occurred, if at all. Complete cost and payment schedule details are available by request.

469

opportunity would be higher in the propitious treatment than in the unpropitious treatment. More individuals in the propitious treatment group, we hypothesize, will think to buy fruit from the town and then sell it in the village, rather than consume it directly. With our design, we hope to isolate the prior knowledge treatment effect on entrepreneurial alertness. Although many other factors play important roles in the entrepreneurial process of discovery, we assert that the prior knowledge induced by the stories accounts for any difference in discovery rates between the treatment groups. If true, it would show that people tend to discover what their prior knowledge orients them towards. Admittedly, any difference among individuals within a group may be due to other factors such as cognition, knowledge asymmetries, and experiential learning (Shane 2000; Corbett 2007). Our design does not screen for participants who came to the experiment with prior knowledge or attitudes that might have made them more or less alert to the entrepreneurial opportunity but rather eliminates systematic effects from such factors by randomizing treatment assignments.8 We would expect that different subgroups of participants might discover the arbitrage opportunity at different rates. While this was not the focus of the experiment, we do check for, and find, gender effects on discovery rates, though we have no a priori reason to believe that males or females are more likely to discover the arbitrage opportunity.

4 Results The data do support our hypothesis. Significantly more people exhibited entrepreneurial discovery in the propitious than in the unpropitious treatment. We had 64 participants in total, evenly split between the treatment groups. Of the 32 in the unpropitious treatment, six discovered the arbitrage opportunity (19 %). Of the 32 in the propitious treatment, twelve discovered the arbitrage opportunity (38 %). A simple one-sided t test reveals a statistical significance of p \ 0.05 that sampling error is unlikely to account for

8

Although we did not screen for differences in KT, our design eliminates systematic effects resulting from differences in KT by randomizing treatment assignments.

123

470

J. Arentz et al.

Table 1 Treatment effect Outcome

Propitious

Discovery

Unpropitious

Total

12**

6

No discovery

20

26

18 46

Total

32

32

64

** indicates significance levels of p \ 0.05

higher discovery rates in the propitious treatment.9 See Table 1 for a summary. Furthermore, several questionnaire responses point towards the importance of prior knowledge in the identification of entrepreneurial opportunities.10 Consider, for instance, the response from one woman in the propitious treatment. ‘‘I remembered from the story that Mr. Green thought that the townspeople may like the fruit,’’ she writes, ‘‘so I tried selling it to them and saw that there was a bigger profit.’’ The role of prior knowledge in alertness here is clear. She did not take the presented framework as fixed and given, and was furthermore able to connect the seemingly unrelated story experience with her task at hand. Another woman, also from the propitious treatment, makes a similar connection, fueled by a frustration that the task she had learned in the instructions (producing and selling boxes) was not especially lucrative. She writes, ‘‘After realizing that the towns people only gave me so much money for the boxes and while knowing the towns people liked the same type of things as Mr. Green did I figured giving the towns people fruit would both make Mr. Green happy and get him more money.’’ Note also that their comments illustrate their alertness to the gains from trade and its

9

We use a t test here simply for its familiarity and robustness to non-normal distributions. For a non-parametric alternative, the Wilcoxen Mann–Whitney yields p = 0.049. Table 2 relies on the WMW because the sample sizes there are not large enough to justify the t test. All statistics were generated by STATA 10; code and data are available on request. 10 We do not provide formal content analysis here. Nor can we correct for the unfortunate fact that surveys done after the experiment are necessarily soliciting retrospection (Gaglio and Katz 2001). We cannot determine whether participants’ ex post discussions of why they behaved as they did actually map to ex ante motivation for their actions or if they are merely ex post rationalizations. As a matter of future research, we would like to have in-process descriptions of activity, though we expect such invasive observation will have strong effects on the observed. The full list of survey responses is available upon request.

123

relationship to their prior knowledge. In both cases, the realization was close to the surface. In contrast, one gentleman from the unpropitious treatment tried selling fruit back to the village in spite of the expectation that they would not like it. ‘‘Just because Mr. Brown did not like a lot of the same things as the villagers,’’ he writes, ‘‘does not mean that the villagers will not like the exotic fruit. After all, it is an exotic fruit that Mr. Brown just discovered. Selling the fruit to the villagers created a new craze, similar to Dippin Dots Ice Cream of the late 90s and Slider Burgers from the last 5 years. Since the village was 150 miles away from Brown Town, it created an exotic import for the town and a unique competitive advantage for Mr. Brown.’’ This subject left the room ecstatic, and wanted to know how many other people had made the same discovery. Note how his description demonstrates a larger leap of alertness. Even though this participant misnames Mr. Green, calling him Mr. Brown, he was able to see through to the opportunity. Additionally, we were surprised to find that the treatment effect primarily occurred among women. As seen in Table 2, two out of the ten (2/10) women in the unpropitious treatment discovered the arbitrage (20 %), while eight out of the 14 women in the propitious treatment did (57 %). By contrast, four out of the 22 men in the unpropitious treatment discovered the opportunity (18 %), but only four out of the 18 men in the propitious treatment discovered it (22 %). While the discovery rates for the two genders in the unpropitious treatment are statistically indistinguishable, in the propitious treatment group, women discover dramatically more often. We wish to remain cautious about overstating this finding, but it suggests that women might be more responsive to the priorknowledge difference, at least as experienced in this environment. More precisely, we had no a priori reason to expect a difference, but it would seem some factor that correlates with gender also correlates with sensitivity to our treatment design. Further research is needed to determine the underlying cause of this observation.11

11

Gender, being binary for our sample, is the only category variable with enough observations and variance for us to comment on. We could have added additional controls on group composition differences, but as we discussed earlier, we are not investigating a type identification algorithm, nor do we have any

Prior-knowledge and opportunity identification Table 2 Gender breakdown

** indicates significance levels of p \ 0.05

Discovery by gender

471

Propitious

Unpropitious

Difference (1-tail WMW)

Discovery female

8/14 = 57 %

2/10 = 20 %

p = 0.037**

Discovery male

4/18 = 22 %

4/22 = 18 %

p = 0.38

Difference (2-tail WMW)

p = 0.046**

p = 0.90

Importantly, our findings—that only a portion (albeit a greater portion in the treatment case) of subjects discovered the opportunity—enrich the alertness perspective concerning opportunity discovery. Every subject perceives the same reality differently. Rather than an opportunity being equally known to all, different people will have different information and interpretations of the world. Our results show that people who share some (even a minimal amount of) common prior knowledge may be more alert to a given profit opportunity than others. The psychological profile or the disposition of the entrepreneur does not seem to matter as much as her tendency to be alert to what is in her interest to be alert to. Ex-post, alertness can be seen as a function of prior knowledge. Again, in the laboratory experiment setting, individuals are not deliberately investing in prior knowledge, as it is given to them, without them knowing the significance of the information that they are receiving. Because our results show that prior knowledge (in the sense of Kt) has an effect on the discovery rate, it can be surmised that prior knowledge (in the sense of KT) influences not only the kind of opportunities an individual may discover but also how alert an individual can be to these kind of opportunities.12 These results give support to Shane’s (2000) findings that idiosyncratic prior knowledge rather than unique abilities make entrepreneurs better able to identify opportunities. It also supports Shepherd and DeTienne (2005) findings that individuals with higher levels of relevant prior knowledge (i.e. members of the treatment group) identified more entrepreneurial opportunities. While our study does not rule out completely the importance of special attributes, it does suggest that prior knowledge has a strong influence on the discovery process. Our results point to a direction of research that Footnote 11 continued theoretical impetus for what sorts of secondary observations might matter. With hundreds of additional data points, we might get away with some data mining, but we feel such an enterprise is better suited for a different type of study. 12 The inference may seem unwarranted, but since Kt is a part of KT, all else equal, we believe that it is logically correct to surmise that what is true for Kt is also true for KT.

emphasizes the cognitive approach to entrepreneurship studies and the role of prior knowledge. 5 Limitations Subjects were asked to participate in an environment with a series of explicit rules. Those who are strictly limited by the articulated rules may not discover that there is more that can be done in the environment than is addressed by the given rules. While the experiment is about prior knowledge, it also tests indirectly any bisociative mode of thinking through which individuals may combine already known ideas together to get an emergent concept (Ward 2004). Indeed, alertness may imply better capacity to put together unrelated ideas (Ko and Butler 2006). In this study we provide some background knowledge that may or may not create a new combination in the mind of the subject, but we do not specifically focus on bisociative modes of thinking. Additionally, there is a fine line between prior knowledge that may be relevant to the opportunity presented and prior knowledge that gives away the existence of that opportunity. Our goal was to test the former, which meant that the way the two treatment stories were presented was crucial. The effort was to change the level of relevant prior knowledge people possess without making them explicitly aware of the existence of an opportunity.13 13

As one reviewer pointed out, neither treatment would be considered a control group in the classic sense, in that both groups are given some sort of prior knowledge. Our experiment is therefore more analogous to a test of health effects from various levels of dietary salt intake. In such an experiment, one might be concerned that forbidding one group from having any salt at all over a prolonged period would likely have adverse effects. Therefore, the difference in salt intake between groups would be the variable of interest. Similarly, after careful consideration, we decided that reading no story at all would confound our results, since both the contextualizing aspect of a story and the prior knowledge itself would be at play. We opted instead for equivalent depths of story emersion, but with opposite vectors of relevant prior knowledge. It’s the difference that matters, though of course the difference is impossible to measure directly.

123

472

From the alertness perspective, many different types of prior knowledge may influence discovery. We use the laboratory advantage to administer one particular difference in prior knowledge between two treatment groups with regards to the existence of potential customers. This does not mean that it encompasses all the prior knowledge that will make people more alert to the opportunity that is presented to them. As Shane (2000) shows in his study on the discoveries of application of the 3D process, each discovery is related to its own market. Of the three major dimensions of prior knowledge that Shane (2000, p. 452) listed, we have mostly tested the hypothesis that prior knowledge of ways to serve markets may lead to opportunity discovery as well as that of prior knowledge of customer problems.14 Additionally, subjects are in the particular context of the laboratory, which may influence both the way they intuit and interpret the information that is given to them (Dimov 2007b; Shane 2000). Some individuals may not display the alertness in this context that they might in another. The design of our experiment, however, brings one particular dimension to bear: the role of prior knowledge. Similarly, as is the case for all laboratory and field experiments, and all econometric analysis, the question of generalizability remains unresolved. One can easily imagine real world markets where other factors such as risk or liquidity constraints might crush out the effect of a similar prior knowledge. However, the results of this experiment do contribute to the growing body of evidence and theory that prior knowledge is an important component of entrepreneurial discovery. While it was not our aim to test the importance of financial rewards, it is important to state again that the experiment involves the existence of financial rewards. Financial rewards are simply an aspect, albeit an important one, of the experiment. Participants were paid what they earned in the experiment in US dollars, and the hidden arbitrage opportunity was the most lucrative. It is because the opportunity is 14

‘‘Three major dimensions of prior knowledge are important to the process of entrepreneurial discovery: prior knowledge of markets, prior knowledge of ways to serve markets, and prior knowledge of customer problems’’ (Shane 2000, p. 452). Also Shepherd and DeTienne (2005, pp. 104–105) state that ‘‘it is important for entrepreneurship scholars investigating the relationship between prior knowledge and the identification of opportunities to distinguish between types of prior knowledge.’’

123

J. Arentz et al.

beneficial to the subject that it is an entrepreneurial opportunity (Kirzner 1973, 1979). The discovery of the opportunity is a discovery of a profitable entrepreneurial opportunity. While it is clear that the magnitude of monetary profit associated with real world opportunities may be a causal factor in their discovery, it is not what we tested in this experiment, since the profitability of the opportunity was identical for both groups. As noted above, Shane (2000) and Ardichvili et al. (2003) have used a typology of prior knowledge in their empirical work. While we believe that we have mostly focused on prior knowledge of the ways to serve the market and knowledge of consumer demand, our description of prior knowledge may be opened to criticism. Additionally, it can be said that only an aspect of entrepreneurship is being studied here, that is, entrepreneurship as the sheer recognition of an opportunity. The arbitrage opportunities exist in our experimental setting; they are objectively present irrespective of what the subjects may think or imagine. In other words, the type of discovery that is studied does not seem to involve a creative act. While this may be true at some level, participants nevertheless perform an act of creation by bringing an unknown (to them) opportunity to life. Moreover, from the subject’s perspective, Mr. Green is bringing a new product to the market and thus performs a creative act, even if the opportunity exists independently of the subject’s mind. In addition, our experiment was not about showing the creative potential of subjects but simply about testing the contention that prior knowledge plays a role in entrepreneurial discovery. We do not think, however, that this affects the quality of our findings, as we believe that our laboratory setting shows the influence of prior knowledge on the discovery of an opportunity. Additionally, the relationship between knowledge and opportunity discovery may be contingent not only on prior knowledge but on learning and cognition (Corbett 2005; Dimov 2007b; Shane and Venkatarman 2000; Politis 2005). Prior knowledge can become a constraint because it keeps individuals in the past and thus stops them from being alert to new possibilities (Ward 2004).15 While prior experience with computer 15

See Ward (2004, p. 175), for instance, ‘‘Sometimes knowledge provides a bridge to the next new development and sometimes it becomes a fence that blocks our path.’’


games may have inhibited some discoveries, we do not believe that our treatment caused a constraining effect. Rather, as we mentioned above, it is more likely that differences in subjective perceptions, cognition, or learning styles explain the differences of alertness within each treatment group.16

6 Concluding remarks We have shown that the alertness aspect of entrepreneurship is influenced by prior experience in a testable way, and is consistent with the alertness perspective on entrepreneurial discovery. Following our experiment, it can be assumed that prior knowledge not only influences the field in which a discovery can take place, but also how alert an individual can be to opportunities in a given field. Our two most important contributions, therefore, are controlled, laboratory confirmation of the alertness hypothesis, and a proof of concept for future controlled experiments on entrepreneurial building blocks. Rather than rely on new business creation, psychological profiles, or survey data as proxies for entrepreneurial activity, we can get at the meaning of entrepreneurship in the cognitive sense using controlled, replicable experiments. We encourage humility and caution when turning from any single experiment to policy implications. One should not conclude from the study that because prior knowledge is important to discovery, this might have consequences for practitioners of entrepreneurship and policy makers. While this experiment suggests there is reason to believe in a connection between prior knowledge and alertness, there is no reason to think that we know more about teaching people to discover opportunities. Even if we can show that a number of thought processes exist through which individuals may come to discover opportunities, it does not imply that these thought processes can be replicated in ways that systematically improve discovery of opportunities in the real world. In our experiment, the prior knowledge given to participants bore a relationship with the nature of the opportunity

16

See Dimov (2007a, p. 576) who state that ‘‘Individuals’ prior knowledge of the opportunity domain increases their likelihood of acting on their initial opportunity insights only when their style of learning is compatible with the situation at hand.’’

473

hidden in the experiment, but known to the experimenters. In real life, opportunities are unknown to all. Appendix Instructions and screen shots Welcome to today’s economics experiment! You will be taking part in a decision making study. We are interested in your decisions that you make on your own. That means, now that the experiment has started, no talking and no texting, please. Please turn off all electronic devices and place them in your bag, under the desk. If you have any questions at any time during the experiment, or have any trouble with the computer, please raise your hand, and we will come to you to answer your question. Please click the ‘‘Story’’ button to continue. Story We’ll begin with a short story. In this experiment, you will take the role of Mr. Green. Mr. Green grew up in a small village called Green Village, where he runs a small factory. Mr. Green has always been very similar to his fellow villagers. They usually like the same drinks, food, clothing and art that Mr. Green likes. On his 25th birthday, Mr. Green travels to Brown Town, a small country town 150 miles away. He spends the day shopping in the local market and sampling the local food and drink. Most of what he finds he is familiar with from his home village, but that night he buys an exotic fruit that he’s never had before, and he absolutely loves it. Mr. Green thinks to himself that the other villagers would probably like this fruit. Previous Next Instructions part 1 You earn money in this experiment by increasing Mr. Green’s wealth and happiness. At the end of the experiment, we will add up Mr. Green’s gold coins and happy points and pay you the total divided by 15. We will now guide you step by step through a few of the possible actions you can perform.

123

474

In this experiment, all actions are performed by dragging and dropping pictures, just like you might drag a file and drop it into a folder on your computer. Practice dragging the gold coin below, and drop it into the factory (then follow the instructions that appear below).

J. Arentz et al.

Instructions part 4 Good. Now drag the boxes of fruit to Mr. Green.

Instructions part 2 By spending money in the factory, one gold coin, you have created boxes. Now drag the boxes and drop them in Green Village.

Instructions part 3 Notice that by selling boxes in Green Village, you earned money. Now try spending money in Brown Town to buy fruit.

Instructions part 5 Notice that when Mr. Green eats the fruit, his happiness increases. Each week, Mr. Green’s happiness increases by 5 with his first box of fruit, by 3 with his second box, and by 1 with his third box. Each drag and drop counts as one action. You can perform 1 action per day, and there are 6 days per week. After 15 weeks, the experiment will end, and we will pay you your earning in this experiment plus your on-time bonus of $7. The experiment will also end if you run out of money. How you earn money: Remember, at the end of the experiment, we will add together Mr. Green’s happy points and gold coins, and pay you in US dollars ($) the total divided by 15. You may review the story and instructions now by clicking on ‘‘Story’’ below. When you are ready to begin, click ‘‘Go to Quiz’’. However, once the experiment begins, you will not be able to return to the instructions. Story Go to Quiz Quiz Here is a little test. Pass, and the experiment will begin. Otherwise, you will return to the story to try again. Be alert! If Mr. Green eats 2 boxes of fruit in 1 week, the total number of happy points increases by

123


(A) 4 (B) 8 (C) 10 (D) 6 How far is Brown Town from Green Village? (A) 75 Miles (B) 100 Miles

475

(C) 150 Miles (D) 200 Miles Mr. Green is generally (A) Similar to other people from Green Village (B) Different from other people from Green Village This first image is the starting screen for the market.

123

476

J. Arentz et al.

This second image shows the screen after a few turns and in which both boxes and fruit have been purchased.

post optimal strategy is to consume one and sell two boxes of fruit per week. We found that most subjects who discovered arbitrage either followed this strategy

The first box of fruit sold in the village earned 6 coins, the second 4, and the third 2. Since payment was based on the linear sum of coins and happiness, the ex-

or simply alternated between selling and consuming fruit, occasionally exploring other possible drag-drop combinations.

123


The End. Well, that about does it. Please raise your hand now, and the experimenter will come to check your earnings. Happiness: 59 Money: 108 Earnings from the experiment: $12 Ontime show-up bonus: $7 Total Earnings: $19 Age: Gender: Class: Major: Please explain why you did what you did in this experiment:

References Ardichvili, A., Cardozo, R., & Ray, S. (2003). A theory of entrepreneurial opportunity identification and development. Journal of Business Venturing, 18(1), 105–123. Arenius, P., & De Clercq, D. (2005). A network-based approach on opportunity recognition. Small Business Economics, 24, 249–265. Baron, R. A. (2004). The cognitive perspective: A valuable tool for answering entrepreneurship’s basic ‘‘why’’ questions. Journal of Business Venturing, 19(2), 221–239. Brockhaus, R. H., & Horowitz, P. S. (1986). The psychology of the entrepreneur. In D. Sexton & R. Smilor (Eds.), The art and science of entrepreneurship (pp. 25–48). Cambridge: Ballinger. Buenstorf, G. (2007). Creation and pursuit of entrepreneurial opportunities: An evolutionary economics perspective. Small Business Economics, 28, 323–337. Burmeister, K., & Schade, C. (2007). Are entrepreneurs’ decisions more biased? An experimental investigation of the susceptibility to status quo bias. Journal of Business Venturing, 22(3), 340–362. Chamlee-Wright, E. (1997). The cultural foundations of economic development: Urban female entrepreneurship in Ghana. New York: Routledge. Chen, C. C., Greene, P. G., & Crick, A. (1998). Does entrepreneurial self-efficacy distinguish entrepreneurs from managers? Journal of Business Venturing, 13(4), 295–316. Corbett, A. C. (2005). Experiential learning within the process of opportunity identification and exploitation. Entrepreneurship Theory & Practice, 29(4), 473–491. Corbett, A. C. (2007). Learning asymmetries and the discovery of entrepreneurial opportunities. Journal of Business Venturing, 22(1), 97–118. Demmert, H., & Klein, D. B. (2003). Experiment on entrepreneurial discovery: An attempt to demonstrate the conjecture of Hayek and Kirzner. Journal of Economic Behavior & Organization, 50(3), 295–310.

477 Dimov, D. (2007a). From opportunity insight to opportunity intention: The importance of person-situation learning match. Entrepreneurship Theory & Practice, 31(4), 561–583. Dimov, D. (2007b). Beyond the single-person, single-insight attribution in understanding entrepreneurial opportunities. Entrepreneurship Theory & Practice, 31(5), 713–751. Eckhardt, J., & Shane, S. (2003). Opportunities and entrepreneurship. Journal of Management, 29(3), 333–349. Fiet, J., & Patel, P. (2008). Entrepreneurial discovery as constrained, systematic search. Small Business Economics, 30(3), 215–229. Gaglio, C. M., & Katz, J. A. (2001). The psychological basis of opportunity identification: Entrepreneurial alertness. Small Business Economics, 16(2), 95–111. Hayek, F. (1945). The use of knowledge in society. American Economic Review, 35(4), 519–530. Hayton, J. C., George, G., & Zahra, S. A. (2002). National culture and entrepreneurship: A review of behaviour research. Entrepreneurship Theory and Practice, 26(4), 33–52. Hofstede, G. (1980). Culture’s consequence: International differences in work related values. Beverly Hills, CA: Sage. Kaish, S., & Gilad, B. (1991). Characteristics of opportunities search of entrepreneurs versus executives: Sources, interests, general alertness. Journal of Business Venturing, 6(1), 45–61. Kimbrough, E., Smith, V. L., & Wilson, B. (2008). Historical property rights, sociality, and the emergence of impersonal exchange in long-distance trade. American Economic Review, 98(3), 1009–1039. Kirzner, I. M. (1973). Competition and entrepreneurship. Chicago: University of Chicago Press. Kirzner, I. M. (1979). Perception, opportunity, and profit. Chicago: University of Chicago Press. Kirzner, I. M. (1985). Discovery and the capitalist process. Chicago: University of Chicago Press. Kirzner, I. M. (1999). Creativity and/or alertness: A reconsideration of the Schumpeterian entrepreneur. The Review of Austrian Economics, 11, 5–17. Kirzner, I. M. (2005). Information-knowledge and actionknowledge. Econ Journal Watch, 2(1), 75–81. Kitzmann, J., & Schiereck, D. (2005). Entrepreneurial discovery and the Demmert/Klein experiment: Another attempt at creating the proper context. The Review of Austrian Economics, 18(2), 169–178. Ko, S., & Butler, J. E. (2006). Prior knowledge, bisociative mode of thinking and entrepreneurial opportunity identification. International Journal of Entrepreneurship and Small Business, 3(1), 3–16. Lavoie, D. (1991). The discovery and interpretation of profit opportunities: Culture and the Kirznerian entrepreneur. In B. Berger (Ed.), The culture of entrepreneurship. San Francisco: ICS Press. McClelland, D. (1961). The achieving society. New York: The Free Press. Plummer, L., Haynie, J. M., & Godesiabois, J. (2007). An essay on the origins of entrepreneurial opportunity. Small Business Economics, 28, 363–397. Politis, D. (2005). The process of entrepreneurial learning: A conceptual framework. Entrepreneurship. Theory & Practice, 29(4), 399–424.

123

478 Shane, S. (2000). Prior knowledge and the discovery of entrepreneurial opportunities. Organization Science, 11(4), 448–469. Shane, S., & Venkatarman, S. (2000). The promise of entrepreneurship as a field of research. The Academy of Management Review, 25(1), 217–226. Shepherd, D. A., & DeTienne, D. R. (2005). Prior knowledge, potential financial reward, and opportunity identification. Entrepreneurship Theory & Practice, 29(1), 113–144. Storr, V. (2004). Enterprising slaves and master pirates: Understanding economic life in the Bahamas. New York: Peter Lang. Storr, V. (2012). Understanding the culture of markets. New York: Routledge. Storr, V., & Butkevich, B. (2007). Subalternity and entrepreneurship: Tales of marginalized but enterprising characters,

123

J. Arentz et al. oppressive settings and haunting plots. Entrepreneurship and Innovation, 8(4), 251–260. Tang, J., Tang, Z., & Lohrke, F. T. (2008). Developing and entrepreneurial typology: The roles of entrepreneurial alertness and attributional style. International Entrepreneurship and Management Journal, 4(3), 273–294. Tominc, P., & Rebernik, M. (2007). Growth aspirations and cultural support for entrepreneurship: A comparison of post-socialist countries. Small Business Economics, 28(2–3), 239–255. Venkataraman, S. (1997). The distinctive domain of entrepreneurship research. Advances in Entrepreneurship, Firm Emergence and Growth, 3, 119–138. Ward, T. (2004). Cognition, creativity, and entrepreneurship. Journal of Business Venturing, 19(2), 173–188.