Conceptual illustration of entrepreneurship development at the pre-startup stage: a hospitality industry context.

• Author: Austin, Nathan K.
• Position: Report

1. INTRODUCTION

   The discovery, evaluation, and exploitation of opportunity characterizes the nature of entrepreneurship (Eckhardt and Shane, 2003; Shane and Venkatarman, 2000). Essentially, the discovery stage involves the entrepreneur's ability to recognize an opportunity which is subsequently verified at the evaluation stage, leading to exploitation and possibly the formation of a successful enterprise. Tang, 2010 suggests that individual entrepreneur skills influence the extent of opportunity recognition activities undertaken which may lead to the formation of an enterprise. However, people differ in their ability to recognize opportunity due to their different properties of cognition (Shane and Venkataraman, 2000) and the fact that entrepreneurs with no confidence are more prone to firm failure (Singh, 2008). Moreover, external factors within the context of a specific industry the entrepreneur seeks to establish, may influence the nature of opportunity verification that occurs.

   The continuing growth in the service sector in many economies and its importance for job creation, and economic growth through the establishment of small and medium sized businesses (Wagener et al, 2010), has generated many studies on entrepreneurship in the service sector e.g. Doban and Ribeiro Soriano, 2008). The hospitality industry, as part of the service sector, is a host-guest relationship, characterized by generosity and staged performances (Jayawardena, 2000), through the provision of accommodation, and/or food and drink (Brotherton and Wood, 2000). In many ways similar to the larger service sector, a significant sector of the hospitality industry is composed of small family businesses with limited entry or exit costs and limited professional expertise.

   Thus, the study therefore asks whether the nature of the opportunity recognition and verification that occurs, and the circumstances under which they occur (i.e. level of entrepreneurial confidence), may be distinctive and critical to eventual entrepreneurial success.

   The contribution of the study to existing literature is as follows: (1) a critique of the commonly recognized and critical role of opportunity recognition in entrepreneurship; (2) development of a theoretical model of critical pre-startup entrepreneurship activities; and (3) suggestions for empirically testing the model.

   The rest of the paper begins with a brief review of the literature on opportunity, verification and entrepreneurial confidence. The hospitality industry as the context of the study is also discussed followed by the theoretical framework including the propositions and the proposed model. Thereafter, the intended methodology, expected results, limitations of the research and future research directions are discussed.

2. LITERATURE REVIEW

   Entrepreneurial opportunity recognition entails identifying the possibility for new profit potential through the formation of a new venture or the improvement of an existing one (Christinsen and Peterson, 1990). It describes how individuals acting alone, or within firms, perceive of a previously unseen or unknown way to create a new means-ends framework (Eckhardt and Shane, 2003). Shane and Venkataraman (2000) argue that one of the factors influencing the probability of opportunity recognition is the cognitive properties necessary to value the opportunities. Mitchell, Busenitz et al., (2002) characterizes these cognitive properties as entrepreneurial recognition, describing them as knowledge structures for assessments, judgments or decisions involving evaluation and venture creation and growth. Similarly, Baron, (2004) explains opportunity recognition from a cognitive...