STUDY SESSION 10: ENTREPTRENEURIAL OPPORTUNITIES

10.1 Introduction

In this study session, you will be introduced to the subject titled entrepreneurial opportunities.

Nigeria as a nation is well endowed with a young workforce and a common desire among young

people for access to opportunities. Within the context of entrepreneurship, we are more interested

in the nature and sources of entrepreneurial opportunities. We are also interested in how

opportunities are discovered and exploited for the purpose of value creation. Therefore, we are

going to learn the various definitions of entrepreneurial opportunities. As common as the word is,

it would interest you to know that it lacks a unified definition globally. The quest to have a common

definition has brought about diverse views and schools of thought. In this study session, we will

explore two common schools of thought. That is, the Schumpeterian school of thought and the

Kirznerian school of thought. Both schools relied on the basic principles of microeconomics to

explain how entrepreneurs discover entrepreneurial opportunities within a given entrepreneurial

ecosystem. This study session concludes with a discussion of the sources of entrepreneurial

opportunities. Hence, given your depth of understanding of the nature and sources of

entrepreneurial opportunities, you will grow in knowledge to become an expert entrepreneur as

you continue your sojourn on this entrepreneurial journey.

10.2 Learning Outcomes for Study Session 10

At the end of this study session, you should be able to:

1. Define entrepreneurial opportunities.

2. Differentiate between a Schumpeterian entrepreneur and a Kirznerian entrepreneur;

3. Explain the relationship between entrepreneurial mindset and entrepreneurial

opportunities.

4. Discuss the relationship between entrepreneurial motivation and entrepreneurial

opportunities

5. Identify the sources of entrepreneurial opportunities

10.3 What is an Entrepreneurial Opportunity?

Opportunity is a broad concept that you all are familiar with irrespective of your discipline. This

is so because it is one of the elements of human choice as discussed in Study Session 1 of this

module. Recall that we emphasized the promise of development of human welfare. A desire

welfare will cease from being complete without opportunities. As such, it is not out of place to

discuss opportunities in the final study session of this module.

Literarily, human beings desire opportunities for a healthy life, quality education, habitable home,

decent work, etc. Although the Human Development Index (HDI) may not have captured

perception of opportunity explicitly, the mere fact that it emphasizes the need for credible

platforms for individuals to achieve their vision and goals shows that it appreciates the role of

opportunity is human welfarism. The Global Entrepreneurship Monitor (GEM) observed this gap

and has since been measuring perception of opportunity as a basis for comparing entrepreneurship

development among countries. Interestingly, evidences available show that there is negative

relationship between perception of entrepreneurial opportunities and the level of development. For

instance, series of the GEM reports affirm that perception of an entrepreneurial opportunity is

higher in Sub-Saharan Africa relative to other continents of the world.

The GEM reports allude to the growing population of young workforce as a key factor driving the

growing positive perception of entrepreneurial opportunities among Africans. Another factor

driving positive perception of entrepreneurial opportunities in Africa is our strong belief in the

existence of social capital. For instance, an average Nigerian believes that whom you know

determines the volume of opportunities an individual has access to. The stronger one’s network of

friends, the brighter one’s chances of having access to opportunities. Besides, there are growing

beliefs that developing challenges are not all bad because they come with inherent opportunities.

Followers of this paradigm see opportunities in every challenge. When the Federal Government of

Nigeria banned the importation of rice, even though critics complained, those who see challenges

as opportunities saw the opportunities for rice farming, rice milling, and fill the necessary gaps

along the rice value-chain.

At this juncture, it is pertinent to know that even though development challenges come with

opportunities, scholars of entrepreneurship have come to terms with the reality that not all

opportunities are entrepreneurial opportunities. There are opportunities and there are

entrepreneurial opportunities. This makes it necessary for us to define entrepreneurial opportunity

as distinct from everyday opportunities. Despite recognizing the need to differentiate

entrepreneurial opportunities from all other forms of opportunities, it is rather unfortunate that

scholars of entrepreneurship have not been able to agree on a common definition. The reasons are

not far-fetched.

There are different schools of thought as well as different perspectives of entrepreneurial

opportunities. In Sarasvathy, Dew, Velamuri, and Venkataraman (2003), three views of

entrepreneurial opportunities were identified. These include the allocative view, the discovery

view, and the creative view. Each of these views can be further explored along nine (9) different
 dimensions. Table 10.3.1 summarizes the three views of entrepreneurial opportunities and the nine

dimensions.

Table 10.3.1: Comparison of three views of entrepreneurial opportunities

Possibility of putting
Possibility
resourcesoftocorrecting errors in a
Possibility of creating new means as
is an opportunity? good use for the purpose
given system
of achieving
and creating new ways
of achieving set goals
heThis
system
focuses on theThis
process
focuses on decision-making
Recognizes opportunities
Discovers
through
opportunities
Createsthrough
opportunities through

Both demand and supply

When either
must be
demand
When
or supply
neitherisdemand nor supply is
application

Complete information available at the

Only partial information available.
Complete information
aggregate
is available
level only.
at At individual
mptions of information Ignorance is a key determinant of
the aggregate and individual
levels, information
levels is imperfectly

Expectations are the

Expectations
same at bothare similar
Expectations
at the macro-
are different at both
mption of expectation
levels
level but different at the micro-levels levels

Source: Sarasvathy, et al (2003: 146)

The first dimension is of particular relevance to this section. According to the allocative view,

opportunity is defined in line when the paradigm opportunities are recognized. In other words,

entrepreneurial opportunities are recognized depending on the available demand and supply. This

view, in particular, focuses on exploitation of opportunities in an existing market. For the discovery

view, entrepreneurial opportunities have to be discovered depending on which side of the market

that is available. If the demand side is available, then the absence of the supply side has inherent

opportunities that must be discovered, vice versa. The creative view states that entrepreneurial

opportunities must be created because there is neither a supply nor demand side available. Unlike
the allocative view and the discovery view, the creative view advocates more investment and

commitments for opportunities to be created.

In short, entrepreneurial opportunity may not have a common definition but it connotes having

chances to identify, discover, or create new means to end from existing resources or markets. It

does not exist in a vacuum. It requires a set of belief in a particular idea and willingness on the

part of entrepreneurs to take action. This action comes either in the form of allocation, discovery,

or creation. And the end results of the actions lie in the creation of value in the form of goods and

services.

10.3.1 In-Text Question (ITQ)

Briefly describe an entrepreneurial opportunity.

10.3.2 In-Text Answers (ITAs)

Entrepreneurial opportunity is a multi-dimensional construct that signifies a gap waiting to be

filled within the market place for the purpose of creating value, earning profit, or even getting

more incentive depending on the vision and aspiration of the entrepreneur who discovers the

opportunity.

10.4 Schumpeter and Kirzner’s Views of Entrepreneurial Opportunity

Although we have discussed three different views earlier in the previous section, in this section,

we shall explore the views of entrepreneurial opportunities as espoused by Joseph Schumpeter and

Isreal Kirzner. One the one hand, Schumpeter advocates that entrepreneurial opportunities exist

outside of the price system. Using the demand and supply analogy, there is equilibrium when
demand is equal to supply. In economic jargons, this refers to market stability. Schumpeter, of

course, is an advocate of disruptive innovation. He is of the view that the urge to innovate is the

motivating factor the search for entrepreneurial opportunities. According to Schumpeter, when a

market enjoys stability, innovative entrepreneurs are worried and they seek for opportunities to

disrupt the peace. They do this by looking for the possibilities to create something new that will

ensure that market equilibrium does not subsist. As part of the need to disrupt the equilibrium lies

the Schumpeterian entrepreneurial opportunities.

On the other hand, Isreal Kirzner is of the view that entrepreneurial opportunities exist within the

price system. Just like Schumpeter, Kirzner also used the demand and supply analogy where he

advocated that disequilibrium in the market breeds room for entrepreneurial opportunities. There

is disequilibrium when demand is not equal to supply. For Kirzner, not all entrepreneurs have the

capability to discover inherent opportunities in the market place, except those who are alert. This

implies that entrepreneurial alertness is an important attribute for the discovery of entrepreneurial

opportunities. Are you, entrepreneurial alert?

Besides the capability for research and development (i.e. Schumpeterian entrepreneurs) and

entrepreneurial alertness (i.e. Kirznerian entrepreneurs), experiences have shown that there are

other attributes an entrepreneur must possess in order to be able to identify an entrepreneurial

opportunity, discover an entrepreneurial opportunity, or even create an entrepreneurial

opportunity. These include prior knowledge, experience, information processing skills, and social

interaction. These all combined into two broad determinants. That is, having the appropriate

entrepreneurial mindset and having the right entrepreneurial motivations.

10.4.1 In-Text Question (ITQ)

What makes a Schumpeterian entrepreneur different from a Kirznerian entrepreneur?

10.4.2 In-Text Answers (ITAs)

Although there are diverse views of entrepreneurial opportunities, the views expressed by

Schumpeter and Isreal Kirzner stands out. According to Schumpeter, an entrepreneurial

opportunity is borne out of the desire of entrepreurs to disrupt the peace in the market place.

According to this school of thought, there is peace when the market in a state of equilibrium. Thus,

Schumpeterian entrepreneurs operate from outside the market but are rich in knowledge and

capacity for research and development (R&D). Their goal is to disrupt the stability enjoyed in the

market and create new entrepreneurial opportunities.

On the other hand, Kirznerian entrepreneurs operate within the market place and they seek to

discover entrepreneurial opportunities in the market. They pay more attention to the causes of

disequilibrium in the market because they believe that there are opportunities hidden in the

challenges that come with such instabilities. As such, Kirznerian entrepreneurs are committed to

acquiring skills related to information search, information processing, and capabilities for the

exploitation of entrepreneurial opportunities.

10.5 Entrepreneurial Mindset and Entrepreneurial Opportunities

In the words of Peter Drucker, entrepreneurs and innovation are the hearts of entrepreneurship.

This implies that there will not be entrepreneurship without entrepreneurs. There are usually two

types of entrepreneurs. The novice entrepreneurs and the expert entrepreneurs. Generally, many

students on our campus today are novice entrepreneur. They are either aware of entrepreneurship

but have little requisite skills needed to succeed as entrepreneurs or they have very little
understanding of entrepreneurship as alternative career path. This makes it imperative for us to

discuss entrepreneurial mindset and how it fosters the discovery/creation of entrepreneurial

opportunities.

Entrepreneurial mindset refers to having the mind of becoming an entrepreneur and working hard

consciously to possess necessary attributes that enhance entrepreneurial success. Entrepreneurial

mindset, just like entrepreneurial opportunities do not have a specific definition but it can be

explained along five (5) dimensions. These include needs for achievement, individualism, locus

of control, focus, and optimism.

Needs for achievement

Building on the knowledge management, needs for achievement refers to an entrepreneur’s

preference for challenges as well as the willingness to accept personal responsibilities for outcomes

associated with a particular action. The act of discovering or creating entrepreneurial opportunities

is not an easy one. It requires taking actions. Entrepreneurs who are lacking in personal drive may

not be able to discover entrepreneurial opportunities or create one.

Individualism

This is the second dimension of entrepreneurial mindset. This refers to the ability of an

entrepreneur to take action on a solo level if the need be. This is not to say that team building is

irrelevant. What we are trying to preach here is that there are cases when an entrepreneur will have

to work solo. In line with the spirit of individualism, aspiring entrepreneurs seeking entrepreneurial

opportunities must be comfortable working alone when the need arises. In short, entrepreneurs
who ranks high on the individualism scale have high levels of initiative and high level of

achievement.

Locus of control

There are two dimensions of locus of control: internal locus of control and external locus of

control. Aspiring entrepreneurs with internal locus of control usually have a strong sense of

independence and this makes them to be very alert to entrepreneurial opportunities. They are less

subjective to external influences unlike those who are strong on the external locus of control. For

novice entrepreneurs aspiring to be successful entrepreneurs tomorrow, work harder on building a

strong internal locus of control. It implies having necessary control over one’s destiny. Should you

build a strong internal locus of control, it means that you have control over your destiny on your

path to entrepreneurship as an alternative career choice.

Focus

There is a saying that millennials have low concentration span. This is why we consider focus an

important dimension of entrepreneurial mindset. It would interest you to know that not all

entrepreneurial activities are equally important and necessary. If you agree with this, then it is very

important to prioritize that which is important and focus on it. This can be in the form of resources

(i.e. material or time) or even in the form of goals and aspirations. Focus can also be described as

having the appropriate concentration when carrying out the task of entrepreneurship. This

description is necessary because there will be plenty of distractions on your way to the top. In

addition, goal setting without focus will results in effort in futility. In order to retain focus, your

goal must be specific, measurable, achievable, realistic, and time-bound (SMART).

Optimism

This emphasizes the importance of belief in entrepreneurship as well as in entrepreneurial

opportunities. Within the context of entrepreneurial mindset, it implies that as a novice

entrepreneur, you must have belief in the entrepreneurial opportunities that come your way. It also

implies that you must have the self-belief in your abilities to start an entrepreneurial task and follow

it through to conclusion. In other words, you have a strong belief in your ability to deliver,

especially as and when due. Be warned, however, that excess optimism destroys because it breeds

over-confidence, which is very destructive.

In summary, entrepreneurial mindset comprises achievement and needs for achievement,

individualism, locus of control, focus, and optimism. For the purpose of entrepreneurship, these

five elements are important because of their respective implications for entrepreneurial decision-

making and the management of risks and uncertainty in the face of entrepreneurial opportunities.

10.5.1 In-Text Questions (ITQs)

State four dimensions of entrepreneurial mindset.

1.5.2 In-Text Answers (ITAs)

There are four dimensions of entrepreneurial mindset. These include:

(i) Need for achievement

(ii) Individualism

(iii) Locus of control

(iv) Focus
 (v) Optimism

10.6 Entrepreneurial Motivation and Entrepreneurial Opportunities

Lee Iacocca, a one-time President and CEO of Chrysler, once said that motivation is everything.

Within the context of entrepreneurship, we are more interested in entrepreneurial motivations. By

definition, entrepreneurial motivations are goal-directed behaviours that energize an entrepreneur

and make him/her maintain focus all through the entrepreneurial journey or till the end of a given

entrepreneurial task. Building on the teachings of James Green (2016), entrepreneurial motivation

can be explained along three (3) dimensions: entrepreneurial self-efficacy, cognitive motivation,

and tolerance for ambiguity.

Entrepreneurial self-efficacy

Entrepreneurial self-efficacy is a compound word from two different fields – entrepreneurship and

Sociology. In some references, it is usually said that scholars if entrepreneurship borrowed the

concept of self-efficacy from the field of Sociology. Self-efficacy means capability to carry on a

particular task. In a similar manner, entrepreneurial self-efficacy means the belief of an

entrepreneur in his/her ability to take on an entrepreneurial task and deliver on it accordingly. If

you observe carefully, you would see that entrepreneurial self-efficacy is quite similar to optimism

discussed earlier on under entrepreneurial mindset. Both entrepreneurial self-efficacy and

optimism are not the same. Unlike optimism, entrepreneurial self-efficacy is task dependent and it

is a key determinant of entrepreneurial performance.

Cognitive motivation
Cognitive motivation aligns with thinking about entrepreneurship. From the perspective of

entrepreneurial opportunities, cognitive motivation refers to the ability of entrepreneurs (i.e. both

novice and expert entrepreneurs) to think regularly about opportunity discovery, opportunity

creation, opportunity exploitation and the creation of value. Steve Jobs had a strong cognitive

motivation. Till he had his last breadth, he was always thinking on how to create new opportunities

for the Apple brand. He can be described as one of the few with high cognitive motivation. He was

always carrying research with a view to solving hard riddles within the consumers of Apple phones

and iPad. In short, a high cognitive motivation is an indicator of entrepreneurial success.

Tolerance for ambiguity

Entrepreneurs who have tolerance for ambiguity believe in the saying that change is the only

constant thing in life. As such, they are always to accept change as it comes and are willing to run

with each new expectation. Common changes abound from the market, consumers, competition,

and even from regulatory point of view. Recall in recent time that the use of “okada” (i.e.

motocycle) and “keke marwa” (i.e. tri-cycle) have barred from plying selected roads in Lagos

State. The ban came at a time when innovation firms, such as “Gokada” are about to stabilize in

Lagos transportation sector. This is a case of a regulatory change and entrepreneurs must learn to

adapt to these changes, risk, and uncertainties.

Aspiring entrepreneurs like you must always endeavour to examine your tolerance level for

ambiguity. Simply ask yourself a few of the following questions at regular intervals and compare.

Are you comfortable with uncertainty? Are you comfortable with uncertainties? Or are you

comfortable with unfamiliar situations? Having tolerance for ambiguity is an important

entrepreneurial skill that aspiring entrepreneurs must possess. It is necessary for nuance decision-

making, especially complex decision-making.

In summary, entrepreneurial motivations are important factors driving the search, discovery, and

exploitation of entrepreneurial opportunities. They also drive entrepreneurial behaviours,

especially when the entrepreneur is goal-bound (i.e. either for survival, to succeed, or even to avoid

failure). The inherent power of entrepreneurial motivation lies in the fact that it activates a person;

it influences entrepreneurs’ choice of behaviour; and it also predicts entrepreneurs’ response to

stimuli. Entrepreneurial motivation is an embodiment of energy, direction, and persistence for

activation and intention. In short, travelling through an entrepreneurial journey is generally laden

with distractions, challenges, and indeed, new entrepreneurial opportunities.

10.6.1 In-Text Questions (ITQs)

Differentiate between entrepreneurial self-efficacy and cognitive motivation.

10.6.2 In-Text Answers (ITAs)

There are four dimensions of entrepreneurial mindset. These include:

(i) Need for achievement

(ii) Individualism

(iii) Locus of control

(iv) Focus

(v) Optimism
10.7 Summary of Study Session 10

In this study session, you have explored the concept of entrepreneurial opportunities. There is a

general saying that without entrepreneurs, there will be no entrepreneurship. First, we examined

the definition of entrepreneurial opportunities and you have observed that entrepreneurial

opportunities are an inter-disciplinary concept that is applicable to all the students reading this

module. Whether you are from the Faculties of Engineering, Arts, or even the Faculty of Dentistry,

entrepreneurial opportunities have no boundary. Second, we have examined the three fundamental

views of entrepreneurial opportunities. You have learned that entrepreneurial opportunities can be

discovered or created depending on the capabilities of the aspiring entrepreneurs. In the spirit of

hands-on experiences, Schumpeters and Kirzner broadly classified entrepreneurs either as

Schumperian entrepreneurs and Kirznerian entrepreneurs. You have learned the differences

between these two categories of entrepreneurs. We concluded this study session with a discussion

of entrepreneurial mindset and entrepreneurial motivations and the respective implications for

discovery/creation of entrepreneurial opportunities.

1.7.1 Self-assessment Questions (SAQs)

1. A Schumpeterian entrepreneur is also called an ______________.

A. An entrepreneur

B. Corporate entrepreneurs

C. An innovator

D. A blessing in disguise

2. Unlike the Schumpeterian entrepreneurs, Kirzner’s entrepreneurs are ______.

 A. Goal oriented

B. Appreciative of opportunities from within the market place

C. Appreciative of opportunities from outside of the market placce

D. A category

3. __________ is a factor of entrepreneurial mindset that crave for individual decision-

making whenever the need arises.

A. optimism

B. locus of control

C. individualism

D. focus

4. Who among the following scholars sees entrepreneurs as an innovator? _______________

A. Hayek

B. Schumpeters

C. Kirzner

D. All of the above

5. ________ motivated the establishment of the Small-Scale Industries Credit Scheme (SSIC)

in Nigeria.

A. To foster home-grown entrepreneurship

B. To boost micro-entrepreneurship

C. To promote advanced technology entrepreneurship

D. To finance small-scale business development

10.7.2 References/Suggestions for Further Reading

Barringer, B.R. & Ireland, R.D. (2008). Entrepreneurship: successfully launching new venture,

Pearson, New Jersey, USA.

Drucker, P.E. (1993). Innovation and entrepreneurship. First Harper Business, New York, USA.

Green, J.V (2016). The opportunity analysis canvas for corporate entrepreneurs. Venture Artisans

LLC, Middletown DE, USA.

Meredith, G.G., Nelson, R.E., & Neck, P.A. (1991). The practice of entrepreneurship. University

of Lagos Press, Lagos, Nigeria.

Stokes, D., Wilson, N., & Mador, M. (2010). Entrepreneurship. South-Western Cengage Learning,

United Kingdom.

Should you require more explanation on this study session, please do not hesitate to contact

your e-tutor via the LMS.