A set‐theoretic investigation into the origins of creation and discovery opportunities

• Author: Adam W. Smith,Stephen E. Lanivich,Kaveh Moghaddam
• DOI: http://doi.org/10.1002/sej.1299
• Published date: 01 March 2019
• Date: 01 March 2019

RESEARCH ARTICLE

A set-theoretic investigation into the origins of

creation and discovery opportunities

Adam W. Smith

1

| Kaveh Moghaddam

2

| Stephen E. Lanivich

3

1

Department of Management, Middle

Tennessee State University, Jennings A. Jones

College of Business, Murfreesboro, Tennessee

2

Department of Management, University of

Houston-Victoria, School of Business

Administration, Katy, Texas

3

Department of Management, Old Dominion

University, College of Business and Public

Administration, Norfolk, Virginia

Correspondence

Adam W. Smith, Department of Management,

Middle Tennessee State University, Jennings

A. Jones College of Business, 145 N Business

and Aerospace Building, 1301 East Main

Street, Murfreesboro, TN 37132.

Email: adam.smith@mtsu.edu

Research Summary:This study employs textual coding techniques

to investigate 25 creation and discovery opportunities using entre-

preneurs' start-up interviews. Based on Austrian economics and

social constructionism theoretical arguments, we identified four

casual conditions: social bonds, social bridges, prior knowledge, and

past start-up experience. These causal conditions are analyzed

using qualitative comparative analysis. Results indicate that crea-

tion opportunities are associated with social bonds, prior knowl-

edge, and lack of prior entrepreneurial experience. Alternatively,

discovery opportunities are associated with prior knowledge, social

bonds, and social bridges. Our empirical findings demonstrate the

differences in social and human capital configurations associated

with forming creation and discovery opportunities.

Managerial Summary:In an effort to better understand how crea-

tion and discovery opportunities arise, we investigated and com-

pared likely factors including: close relationships, distant

relationships, prior knowledge about related markets and indus-

tries, and past start-up experience. Results show that creation

opportunities are associated with close relationships, prior knowl-

edge about related markets and industries, and lack of prior entre-

preneurial experience. Discovery opportunities are associated with

prior knowledge about related markets and industries, close rela-

tionships, and distant relationships. Our findings begin to describe

how different types of opportunities are realized. Specifically, par-

ticular forms of human and social capital may be needed for gener-

ating differing types of opportunities.

KEYWORDS

Austrian economics, creation vs. discovery, opportunity

formation, qualitative comparative analysis, social

constructionism

Received: 6 May 2016 Revised: 10 March 2018 Accepted: 28 May 2018

DOI: 10.1002/sej.1299

Strategic Entrepreneurship Journal. 2019;13:75–92. wileyonlinelibrary.com/journal/sej Copyright © 2018 Strategic Management Society 75

1|INTRODUCTION

A distinction between two types of entrepreneurial opportunities, creation and discovery opportunities, and their

respective start-up processes has arisen in the literature. Recently, the scholarly consensus beginning to emerge is

that some opportunities are discovered while others are created (Alvarez, Barney, & Anderson, 2013; Garud & Giu-

liani, 2013; Suddaby, Bruton, & Si, 2015). Discovery opportunities are formed by exogenous economic shocks in mar-

ket processes stemming from faulty pricing, new technology, or changing consumer preferences. Alert individuals

then discover these exogenous market artifacts and subsequently attempt to exploit them (Eckhardt & Shane, 2003).

The creation model, however, describes opportunities that do not exist independently of entrepreneurs and only

arise iteratively because entrepreneurs undertake search-driven creative actions that arise in response to other eco-

nomic actors' responses (Alvarez & Barney, 2007).

Although a substantial literature has made headway in exploring the antecedents and consequences of discovery

opportunities, (e.g., Shane, 2000; Singh, Hills, Lumpkin, & Hybels, 1999), few investigations (e.g., Welter & Alvarez,

2012) provide empirical evidence regarding the conditions associated with the creation of opportunities and how

those conditions might be different than those associated with the discovery of opportunities. This could be for good

reason; the existence of specific identifiable conditions that lead to the creation process is subject to debate. Alvarez

et al. (2013) suggest that a broad and diverse range of difficult to qualify knowledge and experiences may be required

to enact creation opportunities due to their inherent novelty. In fact, earlier work goes so far as to suggest that due

to their socially constructed nature, the roots of creation opportunities are so causally ambiguous that there are likely

no observable ex ante differences between entrepreneurs pursuing creation opportunities and other individuals

(Alvarez & Barney, 2007). Consequently, the current understanding of the origins of creation opportunities, in com-

parison to discovery opportunities, is obscure at best.

Scholars linking entrepreneurial opportunities with strategy's resource-based view suggest that entrepreneurs

who are able to form valuable, rare, and inimitable resource bundles are best positioned to form opportunities

(Alvarez & Barney, 2001; Alvarez et al., 2013; Barney, Wright, & Ketchen, 2001; Short, Ketchen, Shook, & Ireland,

2010). These scholars argue that such resource bundles range from causally complex to causally ambiguous. In an

effort to investigate these resource bundles, we used a set-theoretical perspective because causal conditions likely

act in concert to facilitate creation and discovery processes. Accordingly, we asked the following research question:

What, if any, are the identifiable differences between combinations of conditions associated with creation opportuni-

ties and discover opportunities?

To explore this question, we contrasted insights gained from social constructionism (e.g., Burr, 2003) against a

more traditional Austrian economics paradigm (e.g., Kirzner, 1997). Traditionally, scholars such as Shane (2000, 2003)

and Kirzner (1997) have used Austrian economics to describe how entrepreneurs garner prior knowledge and idio-

syncratic information from prior experiences to enable them to discover opportunities. In contrast, scholars exploring

the creation process have utilized a social constructionism framework to describe how actors' shared interpretations

of reality come together to create an economic opportunity (e.g., Alvarez & Barney, 2007; Alvarez, Young, & Woolley,

2015; Fletcher, 2006; Jennings, Edwards, Jennings, & Delbridge, 2015; Miller, 2007; Singh, Corner, & Pavlovich,

2015; Zahra, 2008). Using both these lenses as means for variable selection, we explore the entrepreneurs' use of

their social connections and prior idiosyncratic experiences in the opportunity formation processes.

Data regarding the nature and genesis of opportunities were taken from 25 entrepreneurs' start-up stories

recorded by the Kauffmann Foundation in 2011. By investigating these interviews with start-up founders, we were

able to inductively piece together a profile of some of the causal conditions associated with creation and discovery

opportunities. The results indicate that the entrepreneurs who created opportunities relied on close social bonds

(rather than bridges). They did not have prior entrepreneurial experience, but did utilize prior knowledge. Individuals

who discovered opportunities, however, relied on social bridges, social bonds, and prior knowledge.

76 SMITH ET AL.