Entrepreneurship and Epistemology: The Philosophical Underpinnings of the Study of Entrepreneurial Opportunities

Abstract

Two approaches to studying opportunities have emerged in the entrepreneurship literature. This paper shows that the first of these approaches—which focuses on how alert entrepreneurs discover objective opportunities formed by exogenous shocks in an existing market—adopts a critical realist perspective. The second approach—which focuses on opportunities that are endogenously enacted by the actions of entrepreneurs themselves and do not have an existence independent of those human actions—adopts an evolutionary realist perspective. Differences between these epistemological assumptions have an important impact on opportunity research in the field of entrepreneurship, and thus are likely to have an important impact on the evolution of research, practice, and teaching in the field of entrepreneurship as a whole.

Notes

1. There have been different labels used for these opportunity types, such as found or made. In this paper, we use the traditional labels, discovery and creation, first proposed by Venkataraman (1997).

2. A third type of opportunity has also been identified in the literature: recognition (Miller, 2007). Recognition opportunities exist when there is a mismatch between prices in separate markets. For this reason, this type of opportunity has also been called “entrepreneurial arbitrage.” However, in the context of this paper, the epistemological assumptions of recognition opportunities are the same as discovery opportunities, and so recognition opportunities will not be considered separately here.

3. The term critical realism was not initially used by Bhaskar. Instead, his original approach was called “Transcendental Realism” in his book, A Realist Theory of Science (1975).

4. This paper uses a contemporary critical realist approach adopted by management scholars such as Godfrey and Hill (1995), Tsang and Kwan (1999), and so forth. There are several streams of critical realist philosophy, such as the British, American, theological, and so forth. For a more complete review of critical realism, see The Philosophy of Social Science: An Introduction (Hollis, 1994).

5. One reason that critical realism dominates much of the management literature is its close connection to logical positivism. See Baum (1996) and Popper (1979) for a discussion of these issues.

6. Note, this does not mean that the decision maker actually knows the outcome, just that there is a range—including profit and loss—that can be anticipated.

7. For example, in Barney (2007), identifying opportunities is covered in chapter 4, identifying attractive industries is covered in chapter 3, and gaining competitive advantages is covered in chapter 5.