Identifying the tacit entrepreneurial opportunity of latent customer needs in an emerging economy: The effects of experiential market learning versus vicarious market learning

• Author: Yongchuan Bao,Anthony Di Benedetto,Zelong Wei
• Date: 01 September 2020
• DOI: http://doi.org/10.1002/sej.1350
• Published date: 01 September 2020

SPECIAL ISSUE ARTICLE

Identifying the tacit entrepreneurial opportunity

of latent customer needs in an emerging economy:

The effects of experiential market learning versus

vicarious market learning

Yongchuan Bao

1

| Zelong Wei

2

| Anthony Di Benedetto

3

1

Department of Management, Marketing, and Information Systems, College of Business, University of Alabama in Huntsville,

Huntsville, Alabama

2

Department of Innovation, Entrepreneurship, and Strategy, School of Management, Xi'an Jiaotong University, Xi'an, Shaanxi, China

3

Department of Marketing, Fox School of Business and Management, Pennsylvania

Correspondence

Zelong Wei, Department of Innovation,

Entrepreneurship, and Strategy, School of

Management, Xi'an Jiaotong University, Xi'an,

710049, Shaanxi, China.

Email: wzlxjtu@mail.xjtu.edu.cn

Funding information

National Natural Science Foundation of China,

Grant/Award Number: 71572142

Abstract

Research Summary: Focusing on latent customer needs as

the essential substance of entrepreneurial opportunities,

this study examines the determinants of the identification

of such opportunities. Based on organizational learning the-

ory, we explore the effects of experiential market learning

(EML) and vicarious market learning (VML), and the contin-

gency of such effects on different dimensions of environ-

mental uncertainty in an emerging economy: demand

uncertainty of the task environment and legal inefficiency of

the institutional environment. The model was tested

through survey among 238 firms in China. We find that

both EML and VML facilitate the identification of latent cus-

tomer needs, while they interact with environmental uncer-

tainty in different ways. This study makes substantial

contributions to the extant literature on opportunity identi-

fication, strategic entrepreneurship, and the origin of entre-

preneurial opportunities.

Managerial Summary: Latent customer needs, which cus-

tomers are not aware of or unable to articulate, serve as a

catalyst for firm growth and are integral to the business

model design. How can firms identify such essential

Received: 14 February 2019 Revised: 9 February 2020 Accepted: 10 February 2020 Published on: 7 April 2020

DOI: 10.1002/sej.1350

© 2020 Strategic Management Society

444 Strategic Entrepreneurship Journal. 2020;14:444–469.wileyonlinelibrary.com/journal/sej

entrepreneurial opportunities? We investigate this question

in an emerging economy in which latent needs are more fre-

quently encountered and find that both learning from direct

market experience (EML) and learning from other firms'

market experience (VML) increase the likelihood of identify-

ing latent needs, while VML is more influential than EML.

Facing high demand uncertainty, firms should rely more on

VML than EML to identify latent needs, whereas in an

uncertain institutional environment with a weak legal sys-

tem, firms should place less emphasis on VML and more on

EML in the identification of latent needs.

KEYWORDS

entrepreneurial opportunity, environmental uncertainty,

experiential learning, latent customer needs, vicarious learning

1|INTRODUCTION

Identification of entrepreneurial opportunity has long been considered the most important entrepreneurship task

(Ardichvili, Cardozo, & Ray, 2003; Ozgen & Baron, 2007; Shane & Venkataraman, 2000). While most prior research

of entrepreneurship is premised on the basic concept of entrepreneurial opportunities, that is, “new means-ends

relationships,”a growing body of research recognizes that customer needs lie at the heart of entrepreneurial oppor-

tunities (McMullen & Dimov, 2013; Prandelli, Pasquini, & Verona, 2016; Ramoglou & Tsang, 2016; Shane, 2000).

Recent literature on the interface between firm strategy and entrepreneurship strongly advocates a shift of focus

back to customer needs, arguing that theories of strategic entrepreneurship should incorporate consideration for

customer needs, because customer needs signal opportunities to create value and are integral to business model

design and entrepreneurship (Amit & Zott, 2012, 2015; Demil, Lecocq, Ricart, & Zott, 2015; Priem, Li, & Carr, 2012).

In contrast to explicit needs that are communicated by customers, latent customer needs –which customers do

not know they want or are unable to articulate (Blocker, Flint, Myers, & Slater, 2011; Narver, Slater, &

MacLachlan, 2004)—play a critical role in entrepreneurship and firm growth. Shane (2000) points out that entrepre-

neurial opportunities arise when “users cannot articulate easily their needs for not-yet-developed solutions to prob-

lems”(p. 452). Ries(2011), in his groundbreaking thesison lean start-ups, stresses that understanding what customers

cannot tell but truly want precedesthe success of new business venturing. Demil et al. (2015)argue that identification

of latent needs,as a part of the entrepreneurial view of strategy,acts as a catalyst of firm growth and renewal.

Despite the significance of latent needs for strategic entrepreneurship, there is a relative paucity of scholarly

research to investigate what factors drive firms to identify latent needs. Although prior research has unearthed

numerous determinants of opportunity recognition and creation, such as work experience, affect, alertness, cogni-

tion, and network ties, these variables mainly reflect the human endowment and social capital of individual entrepre-

neurs (e.g., Ardichvili et al., 2003; Baron, 2008; Baron & Ensley, 2006; Dencker, Gruber, & Shah, 2009; Foo,

Murnieks, & Chan, 2014; Goss & Sadler-Smith, 2018; Gruber, MacMillan, & Thompson, 2012; Shane, 2000; Shep-

herd & DeTienne, 2005; Smith, Moghaddam, & Lanivich, 2019; Tang, Kacmar, & Busenitz, 2012).

One particular research stream directs attention to the role of entrepreneurial learning—a process of acquiring

and transforming experiences into knowledge—in opportunity identification (Corbett, 2005, 2007; Holcomb, Ireland,

BAO ET AL.445