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OPPORTUNITY RECOGNITION AND PRIOR KNOWLEDGE:

A STUDY OF EXPERIENCED ENTREPRENEURS

Gry Agnete Alsos Virpi Kaikkonen

Nordland Research Institute, University of Kuopio
Norway Finland
E-mail: gry.alsos@nforsk.no E-mail: virpi.kaikkonen@uku.fi

May 2004

ABSTRACT

This study investigates how opportunity generation is related to the prior knowledge
base of experienced entrepreneurs. The paper explores how prior knowledge is used
in the process of opportunity generation and whether this varies dependent on how
opportunities come into existence. Opportunities may be the result of serendipity or
deliberate search, and may be (objectively) discovered or (subjectively) created.
Combining these two axes gave four types of processes: opportunity discovery,
opportunity search, opportunity creation, and opportunity occurrence. Based on
interviews of farm-based entrepreneurs in Finland and Norway, it is detected that
different processes of opportunity generation related to the situations of the
entrepreneurs, their former experiences, and their social networks.

INTRODUCTION

Opportunities are central to entrepreneurial activities. Without opportunity there is no

entrepreneurship. Until recently this aspect has been offered quite little attention in
the literature. However, the last decade or so there has been a growing interest into the
process of opportunity generation, resulting in a number of published studies in the
area. This growing interest in opportunities has resulted in thoughtful discussions
about definitions of opportunity as a concept (Gartner, Carter, & Hills, 2003),
exploration of opportunity generation processes (Corbett, 2002; Craig & Lindsay,
2001; Shepherd & DeTienne, 2001; Shepherd & Levesque, 2002) and opportunity
exploitation processes (Samuelsson, 2001), as well as the value of the opportunity
concept to entrepreneurship research (Eckhardt & Shane, 2003; Gartner et al., 2003;
Kirzner, 1997). However, in spite of a growing amount of published work focusing on
entrepreneurial opportunities, there is by now offered little empirical exploration or
investigation in this area.

One of the main puzzles research relating to entrepreneurial opportunities have dealt
with is why, when and how some persons generate opportunities while others do not
(Shane & Venkataraman, 2000). Shane (2000) argues that entrepreneurs discover
opportunities related to their prior knowledge. This is in line with McGrath (1996)
and Ronstadt (1988) who both argue that existing entrepreneurs may have access to

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opportunities others could not detect because of the specific knowledge they have
generated from their entrepreneurial experiences. Recent literature on habitual
entrepreneurship also indicate that opportunity generation may be fuelled by
knowledge resulting from prior entrepreneurial experience (Ucbasaran, Howorth, &
Westhead, 2000; Ucbasaran & Westhead, 2002).

Two central debates within the opportunity literature are whether opportunities are the
result of serendipity or deliberate search (e.g. Chandler, Dahlquist, & Davidsson,
2002; Gaglio & Katz, 2001), and whether they are objectively discovered or
subjectively created (e.g. Gartner et al., 2003). Prior knowledge can be assumed to
affect both the ability to search for useful information and the ability to take
advantage of elements of coincidence or luck. Further, both discovery and creation of
opportunities may be supported by the prior knowledge of the discoverer/creator. We
argue that these two debates not solely represent different ontological views, but may
also be considered as illustrate the heterogeneity of opportunity detection processes.
Both elements of search and coincidence, as well as elements of discovery and
creation may be included in such processes. These four concepts may be viewed as
placed on different ends of two axes describing the variety of opportunity generation
situations.

The study of Chandler et al. (2002) indicates that the type of opportunity detection
process may impact the subsequent implementation processes. Studies have found
that prior knowledge impact opportunity generation (Shane, 2000; Shepherd &
DeTienne, 2001). We suggest that also this relationship may differ depending on the
type of opportunity generation process.

The aim of this paper is twofold. Firstly, taxonomy of opportunity generation

processes is developed. Secondly, the link between prior knowledge and new
opportunities is explored based on opportunity stories of experienced farm-based
entrepreneurs. Differences in use of prior knowledge depending on the type of
opportunity generation process are discussed.

The structure of the paper is as follows: First, the two axes of opportunity generation
processes are discussed in light of present literature. This discussion ends with the
development of taxonomy. Further, the relationship between prior knowledge and
opportunity generation is discussed. After a brief account of the method of the study,
the developed taxonomy is used to categorize the opportunity processes developed
from the empirical data. Then, an analysis of the use of prior knowledge relating to
the different types of opportunity processes is conducted. Finally, the conclusions and
implications of the study are discussed.

THEORETICAL FRAMEWORK

Business Opportunity

A business opportunity can be seen as a potential to serve customers differently and

better than they are being served at present (Wickham, 2001). Opportunity may
appear as an imprecisely-defined market need, or as un- or under-employed resources
or capabilities (Kirzner, 1997). Shane and Venkataraman (2000) argue that

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“Entrepreneurial opportunities are those situations in which new goods, services, raw
materials, and organizing methods can be introduced and sold at a greater price than
their cost of production”, and thereby linking their concept of opportunities both to
Schumpeter (1934) and Casson (1982).

Shane (2003:18) defines an entrepreneurial opportunity as “a situation in which a

person can create a new means-ends framework for recombining resources that the
entrepreneurs believes will yield a profit”. He emphasizes that opportunities are not
necessarily profitable, and may differ significantly in expected value. Viewing
opportunities ex ante an eventual exploitation, it is difficult to tell their value. For
opportunity to be a construct that can be examined, and even to exist, it must be
identifiable before it is exploited (Gaglio & Katz, 2001; Singh, 2001). Further,
entrepreneurs will act upon opportunities only if they themselves perceive them to be
(potential profitable) opportunities.

Opportunities begin unformed and become developed through time. They may begin
as simple concepts and become more elaborated as developed by the entrepreneur
(Ardichvili, Cardozo, & Ray, 2003). The opportunity detection process is a process of
forming and transforming, and change is a fundamental part of it (Hench & Sandberg,
2000). Opportunities can therefore best be described as processes of opportunity
generation or development. Such processes are the focus of this study.

Opportunities as Result of Active Search or Serendipity

One central question within the opportunity literature is whether entrepreneurial

opportunities are the result of serendipity or deliberate research (Gaglio & Katz,
2001). Some authors have emphasized information search as a central element of
opportunity generation. Based on the work of Stiegler (1952), Caplan (1999) argues
that opportunity identification is the outcome of a successful rational search process.
Shaver and Scott (1991) argue that entrepreneurs identify opportunities as a result of
superior information processing ability, search techniques or scanning behaviour.
Also Fiet (1996) places the investment in information at the centre of opportunity
discovery.

Kirzner (1997) argues that discovery of opportunities is neither a result of deliberate

search for information (relating to standard search theory) nor a result of pure chance.
In stead it is something in between: the result of alertness to possible opportunities:
“Without knowing what to look for, without deploying any deliberate search
technique, the entrepreneur is at all times scanning the horizon, as it were,
ready to make discoveries. Each such discovery will be accompanied by a
sense of surprise” (Kirzner, 1997:72).
The view of opportunity discovery as happening without deliberate search is shared
by several authors (Eckhardt & Shane, 2003; Gaglio & Katz, 2001; Kaish & Gilad,
1991; Shane, 2000).

According to this view, opportunity detection is seldom only the result of pure luck.
As Friedel (2001) put it: “serendipity is no accident”. However, it might be argued
that the process of opportunity generation may be more or less pushed by an actively
searching entrepreneur. Depending on the extent of search activity, we might identify

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different types of opportunity detection processes (Chandler et al., 2002). We see such
processes varying along an axis where active search and passive luck represent the
two extreme points.

Opportunities as Objective Realities or Subjective Creations

Another central de bate is whether opportunities are objective realities or subjective

creations, related to the questions: are opportunities discovered or created? Shane &
Venkataraman (2000) argue that opportunities themselves are objective phenomena
but that they are not known to all parties at all times. Some persons are more able to
recognize and/or exploit particular opportunities than others due to the heterogeneity
in individuals’ sensitivity to opportunities. These individual differences may come
from variations in individuals’ genetic makeup, background and experience, and/or in
the amount and type of information they possess (Ardichvili et al., 2003). According
to Casson (1982), individuals differ in their access to information, and that the
essence of the entrepreneur is to have a different perception of the situation (because
of perceived difference in the totality of information). The ability to discover
opportunities demands the possession of the necessary information as well as the
cognitive ability to evaluate the information. Opportunities are therefore both the
result of environmental conditions and the result of entrepreneurial ability as well as
access to and processing of information (Ucbasaran et al., 2000). In this perspective
entrepreneurial experience could be the source of relevant information needed to
discover an opportunity, and/or as a way of increasing the ability to process
information, and hence the alertness to opportunities.

Against this objectivistic view, Ardichvili et al. (2003) argue that while elements of
opportunities may be “recognized”, opportunities are made, not found. Also De
Koning (1999) holds the view that opportunities are formed, rather than discovered or
identified. Hench and Sanberg (2000) state that opportunities exist in the mind of the
entrepreneur as creative constructions. Gartner et al. (2003) argue that opportunities
are enacted. Building upon Weick (1979), they see opportunities as an outcome of the
sense-making activities of individuals. This follows a view of the environments as
socially constructed, subjective and a product of the actions of individuals.
Opportunities are seen as emerging, that is they “come into existence out of the day-
to-day activities of individuals.” (Gartner et al., 2003:109). Opportunities will be
occurring from activities that individuals are already involved with, and within a
stream of other events and activities.

These two views represent different ontological perspectives viewing the world as
consisting of objective facts or of subjective constructions. However, several authors
argue that opportunity generation processes may both include the recognition of
objective facts and construction of subjective believes. Emphasis is put on the
subjective perception of (objective) resources, marke t needs, etc. (Eckhardt & Shane,
2003; Shaver & Scott, 1991), or on (objective) information and the individuals
(subjective) ability to learn from this information (Corbett, 2002). Elements of
opportunities may be recognized, even if most of the process is about creation
(Ardichvili et al., 2003). We argue that opportunity generation processes may include
both discovering and creating elements. Opportunities may be seen as varying along

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an axis where pure objective discovery and subjective creation represent the two
extreme points.

Taxonomy of Opportunity Generation Processes

By now we have identified two axes describing the heterogeneity of opportunity

generation processes: the active-passive axis and the subjective-objective axis. The
combination of these two axes makes it possible to separate between four broad
categories of processes (Figure 1): opportunity discovery (passive-objective),
opportunity search (active-objective), opportunity creation (active -subjective) and
opportunity occurrence (passive -subjective). Opportunity discovery takes place when
the opportunity objectively exists, and it can be recognized by the entrepreneur even
though (s)he is not actively searching. Opportunity search supposes for more active
search for finding a business opportunity, considering that the opportunity can be
objectively recognized. Opportunity creation and opportunity occurrence on the other
hand are the opportunity generation processes in which the entrepreneur’s (subjective)
abilities, experiences, prior knowledge and actions make the opportunities to come
into existence. The opportunities are therefore formed rather than recognized. The
difference between these two categories lies in the extent of active search.
Opportunity creation takes place when the entrepreneur actively searches for a
business opportunity and uses her subjective capacity and resources to create the
opportunity. In some cases the opportunity can occur due to entrepreneur’s special
skills and resources, even though (s)he is not actively looking for (this particular)
opportunity, i.e. opportunity occurrence.

The Role of Prior Knowledge and Experience

Entrepreneur’s personality traits, social networks, and prior knowledge are seen as
antecedents of entrepreneurial alertness to business opportunities. Entrepreneurial
alertness, in its turn, is a necessary condition for the success of the opportunity
identification triad: recognition, development and evaluation (Ardichvili et al., 2003).
Shane argues that entrepreneurs discover opportunities related to the information that
they already possess. They discover opportunities because prior knowledge triggers
recognition of the value of the new information (Shane, 2000). Each person’s
idiosyncratic prior knowledge creates a “knowledge corridor” that allows him/her to
recognize certain opportunities, but not others (Ronstadt, 1988; Venkataraman, 1997).
According to Kirzner (1973), entrepreneurs are selling not just products, but, rather,
their knowledge, the ability to assemble resources, and the resources already available
to them. This perspective allows entrepreneurs to move away from analyzing what is
to discussion of what is possible, and opens an opportunity for entrepreneurial
discovery (Ardichvili et al., 2003).

Habitual entrepreneurs are stated to be particularly good at recognising and

developing opportunities (MacMillan, 1986; McGrath, 1996; McGrath & MacMillan,
2000). Founding and running of a business may give access to information and
knowledge which become the basis of new business ideas. Ronstadt (1988:31)
suggests that “the mere act of starting a venture enables entrepreneurs to see other
venture opportunities they could neither see nor take advantage of until they had

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started their initial venture”. McGrath (1996) argues that entrepreneurs with access to
a large end well-functioning network, for instance through an existing business,
probably will have access to a large number of good “shadow options”, i.e. latent
business ideas. Also Singh et al. (1999) state that a large social network with many
weak ties going beyond close friends and family, relates positively to idea
identification and opportunity recognition.

Further, entrepreneurial experience may also increase the cognitive capabilities to

evaluate this information. McGrath (1996) suggests that experienced entrepreneurs
often will have larger ability to recognize and take advantage of such latent ideas,
since their experience increases their sense-making ability. An existing business can
therefore be a source of new business ideas both in it self, through the entrepreneurs
experience with it, as well as through the network developed through the owner-
management of the business. Hence, existing owner-managers may possess
information about business opportunities that are hidden for others. In their view of
opportunity recognition as a creative process, Hills, Shrader and Lumpkin (1999),
argue that this process starts in the base of experience and knowledge of the
entrepreneur.

According to Shane (2000) three major dimensions of prior knowledge are important
to the process of entrepreneurial discovery: prior knowledge of markets, prior
knowledge of ways to serve markets, and prior knowledge of customer problems.
Prior entrepreneurial experience provides a source of information and skills which are
useful also to the pursuit of opportunity (besides the recognition of opportunity).
Shane (2003:95) argues that general business experience, industry experience,
functional experience in marketing, product development or management, and
previous start-up experience all provide some of the information and skills that
increase the likelihood of opportunity exploitation.

Overall, it seems that prior experience contributes to opportunity generation processes

in at least two ways: through the knowledge and skills gained from the experience,
and/or from a broadened social network. However, the heterogeneity of opportunity
generation processes as suggested above, encourage an exploration of a possible
variation between in the role of prior knowledge relating to the type of process in
question.

Research Questions

This exploratory study addresses the following broad research question: How is
opportunity recognition related to the prior knowledge base of experienced
entrepreneurs? More specifically, the study will explore:
§ Can the four suggested types of opportunity generation processes be identified
empirically?
§ What characterizes and differentiates the four types of processes?
§ In what way is prior knowledge and experience of the entrepreneur related to
the four types of processes?

METHOD

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The data for this study consist of qualitative long in-depth interviews (McCracken,
1988) of thirty-one farm-based entrepreneurs in Finland and Norway. The informants
were farmers who have started new business activities in addition to the farm, or are
seriously considering doing so. In the cases the farm household consisted of a couple
who both were involved in the farm and/or in the new business activity, both spouses
were interviewed when possible. During the interviews, they were asked how
business opportunities had come into existence in their lives. The stories revealed
several opportunity detection episodes where some of the opportunities were rejected,
some resulted in new ventures, and some are still being considered for the future.
These opportunities were included in the study regardless of the present outcome of
them, since focusing only on opportunities that are carried out may cause scholars to
overlook a large number of venture possibilities that were seriously considered by an
entrepreneur (Fiet, 1996:421).

The origin of this study is in two separate but similar studies conducted in Norway
and Finland, both focusing on rural micro firms. The interviewed farm-based
entrepreneurs were located in the Northern Savo region in Finland and the Nordland
and the Møre regions in Norway. These regions have many similarities, for instance
their rurality and their dependence on primary production and small businesses. But
there are also differences, not least regarding the different policy efforts of Finland, as
an EU member, and Norway.

In an analysis of farms in the UK using a small business approach, Carter and Rosa
(1998) found that farms share many of the characteristics of other rural enterprises.
They argued that the similarities are likely to increase over time, and that the farm
sector should not be excluded in analysis of rural small firms. Farmers have
experience, often through generations, from self employment, and they have
historically been known for commitment to independence and entrepreneurial ideals
(Carter, 1996). In accordance with these arguments, we see farmers as primarily
business owner managers. However, the restructuring of the farm sector as a result of
policy changes, may motivate farmers to considering new business opportunities.

The level of analysis for this study is the entrepreneurial opportunity. An opportunity
is defined as a perceived situation where a good and/or a service can be introduced
which the entrepreneur believes will yield a profit. One entrepreneur may detect
several opportunities, and therefore the interviews of thirty-one entrepreneurs (or
couples) gave us a data consisting of fifty-nine opportunity generation processes. The
opportunities were categorized according to the passive-active and objective-
subjective axes, using the following procedure: Each opportunity was first categorized
separately by each of the authors. Secondly the categorizations were compared. In the
cases of disagreement, the categorization was discussed between the authors until an
agreement was reached.

ANALYSIS

Identifying Types of Opportunity Generation Processes

Each of the fifty-nine opportunity generation processes identified from the stories of
thirty-one farm-based entrepreneurs were categorized according to the passive -active

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and the objective -subjective axes, and thereby to the four type taxonomy (Figure 2).
We found opportunity generation processes of each category from both Finnish and
Norwegian firms. In category opportunity discovery were placed 17 opportunity
generation processes (9 Finnish, and 8 Norwegian), in opportunity search category 17
(10 Finnish, 7 Norwegian), in opportunity creation category 13 (7 Finnish, 6
Norwegian), and in opportunity occurrence 12 (5 Finnish, 7 Norwegian). Thus, all
four types of opportunity generation processes from the developed taxonomy where
identified in the empirical data.

The opportunity stories also revealed that the opportunity generation process may
change, starting as one type of process and then moving to another type. In the
empirical data there were examples of generation processes starting as discovery or
search, and then moving more in the direction of creation. However, most of the
processes in this empirical data seemed to stay within the same category.

Characteristics of Opportunity Generation Categories

A more detailed investigation of the opportunity generation processes related to each

of the four categories, revealed that opportunities in each category have some similar
features which differ from opportunities in other categories. The detected
characteristics of each of the four categories are described below:

Opportunities in the category opportunity discovery are often related to pluriactive

farms, where new business opportunities are considered as a way to increase the
income for the owning family. Exploiting business opportunities are seen as an
alternative to searching for waged employment. The opportunities are typically
related to something which traditionally has been done in farms such as small-scale
food-processing and farm-tourism. The farm resources are often central also to the
new opportunities. Opportunities are often something generally talked about; pushed
by government policies or imitations of other local (farm-based) business activities.
Some of these opportunities were “given” to the entrepreneurs from others (group in
the down-corner). These opportunities are originally “seen” by someone else, and the
entrepreneur is asked whether (s)he would be interested in seizing it. Examples of this
are development organisation asking entrepreneur to start farm-based small scale care
institution, or bigger food-processing firm asking entrepreneur to make certain
products for them as a subcontractor. Opportunities in this category relate mainly to
local markets, and are often “low potential” opportunities when it comes to growth.

Opportunities in the category opportunity search are less related to the farms than the
discovery opportunities. They are often but not always related to other industries than
farm-based industries. Entrepreneurs searching for opportunities in this way are
typically the ones who have chosen the path of developing other business activities in
stead of growing their farm, as a response to policy demands of efficient large-scale
farming, or as a response to the need for more income than farming can give. These
opportunities are often imitations of other businesses locally or in other areas. The
active opportunity search has been conducted looking for “known” opportunities that
might fit the entrepreneur’s competence, resources and situation. Similar to the
discovered opportunities, the searched opportunities are mainly related to a small and
local market, and also often related to a small growth potential.

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Opportunity creation processes often seem to lead to opportunities related to areas

from which the entrepreneur has already got experience. This experience may be the
result of prior business ownership, due to a hobby, or work experience. The new
opportunity is therefore often a continuance of earlier practice. The opportunity often
seems to be created as a combination of the entrepreneur’s experience and a perceived
market need. These opportunities are generally more innovative that the ones resulting
from search or discovery, as they are tied to the specific competences and world
views of the entrepreneurs. Farm resources are seldom crucial to the opportunities, but
they may still make use of such resources. These opportunities are often, but not
always, related to larger growth potential (or ambitions) than the earlier described
categories. Further, they are usually related to regional or national markets, and
if/when successfully exploited they would have the potential of replacing the farm as
the main business activity of the owners.

In the category of opportunity occurrence the opportunities typically occurred due to

the entrepreneur’s special skills, unique knowledge or distinct resources, even though
(s)he has not actively searched for (this particular) opportunity. The opportunities
occurring seem to be more innovative than those resulting from the three other
categories of opportunity generation processes. They often involve relation to unique
competences or resources controlled by the entrepreneur. Further, they are typically
not or only marginally related to farm resources, and if/when they are successfully
exploited they would in most cases replace the farm as the main business activity and
also exceed the income and size of the farm cons iderably. These opportunities are
usually related to national or even international markets.

The Role of Prior Knowledge and Experience

After categorizing the opportunities according to the taxonomy and identifying the
characteristics of each category, we explored the role of prior knowledge in the four
types of opportunity generation processes.

Opportunities resulting from opportunity discovery typically utilize the prior

knowledge gained in farming, as they often are dependent upon farm resources. The
knowledge resulting from farming experience utilized is usually practical skills,
knowledge on production or raw materials, or knowledge on local markets. One
subgroup of opportunities in this category consists of opportunities suggested from
others. For these opportunities networks originated from earlier contacts are the main
source of opportunity information. Secondly, the reason why this opportunity is
“offered” is that the entrepreneur has some particular, but not unique, experience or
skills which are acknowledged by these network contacts.,

Opportunity search typically result in opportunities relying on knowledge on

production and small-scale services typical for the local area. In some cases, this
knowledge is newly acquired with the intent of searching for business opportunities.

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Knowledge of other local businesses also tends as a source of imitation opportunities.

However, the opportunity search processes seem to be more characterized with lack
rather than utilization of prior knowledge. For instance, knowledge on potential
markets and customer needs often seem to be insufficient. This usually leads the
search for opportunities in direction of what is typical and traditional for firms in the
same industry and local area.

Prior knowledge and experience play very critical role in the two more subjective
opportunity generation processes. The business opportunities in firms of both these
categories are in a way conducted from the earlier experiences of the entrepreneurs.
The processes of opportunity creation are often related to or directly resulting from
experiences from earlier business activities, employed work, or hobbies. Prior
knowledge of industry, markets, ways to serve markets and customers as well as
comprehensive knowledge or competence regarding the production process form a
basis of the opportunity generation. Furthermore, the competence to search for and
obtain new knowledge when needed, seem to be present among the entrepreneurs
creating opportunities in this category. Many of them develop the opportunity further
by searching for new knowledge. Moreover, they make use of networks going beyond
friends and relatives, which give them access to new information relevant to
opportunity generation.

In the category opportunity occurrence serendipity plays a visible role; entrepreneurs

have realized that the knowledge and experience which they have acquired (often for
totally different reasons) can be utilized to seize an occurred business opportunity,
which they have not earlier known to exist. These opportunities often occur from a
broad knowledge of a particular industry, markets, customers and/or competitors, and
from a variation of skills (e.g. practical, sales and organizing skills). However, the
knowledge is creatively transformed into something else from which quite innovative
business opportunities occur. Several of the entrepreneurs generating opportunities
this way, also rely on prior entrepreneurial experience other than farming. Further, the
entrepreneurs’ broad social network is an important source of information within the
opportunity generation process.

Several of the stories of the farm-based entrepreneurs revealed two or three separate
opportunities. These opportunities were not necessarily in the same category,
indicating that one person can conduct different types of opportunity generation
processes. In particular, we found examples of the opportunity generation processes
forming a continuum, where gaining knowledge and experience on business, industry,
markets and customers from generating and exploiting their first opportunities leads
entrepreneurs to generate more subjective opportunities the second or third time
around. This finding may have some connection to findings in Carter’s (2001) study
stating that the process of additional business activities in farm-based firms can be
viewed as a continuum, from monoactive farming, through relatively simple forms of
structural diversification, to the ownership of a portfolio of business interests.

A story of one entrepreneur describes well the continuum of opportunity generation

processes:
Helena is a Finnish female entrepreneur, who together with her husband
decided to give up cow farming in 1995 for two main reason: firstly, their
farm was not large enough to give sufficient income (Finland’s joining EU

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enforced the demand for efficiency in agriculture) and they did not want to
invest on growing it larger, and secondly, Helena had started to get allergic
symptoms while working with cows. In that situation Helena’s husband was
already working outside the farm, and Helena began to search for a business
opportunity for she wanted to have her own business. She had former
education on catering and she participated to a project for beginning food-
processing entrepreneurs. After that (1997) Helena found a firm which made
salad-sauces and marmalades, operating mainly in direct sales. She was
minded to develop her knowledge and skills further, and she attended a course
for cooks who arrange events and make food in woodlands (near Helena’s
home is one preserved woodland). This course was one of the very first in
Finland. Therefore she created a business opportunity by acquiring new skills
which together with her resources formed a basis for her new venture. After
she had operated in this business for some years a new business opportunity
occurred: she was asked to start acting as an instructor for new beginning
woodland-cooks, for she had gained experience on how to operate in this
business area, as well as general entrepreneurial experience. Nowadays the
main income to Helena’s firm comes from these teaching-services.

DISCUSSION

The results from this exploratory study indicate that there is a heterogeneity among
opportunity generation processes which needs to be taken into account when
discussing the relationship between prior knowledge and opportunity generation. A
taxonomy of opportunity generation processes based on the extent of which the
process includes active and deliberate search or more passive serendipity or
coincident, and on the extent of which the opportunity is objectively
discovered/recognized or subjectively created, was developed and found applicable to
empirical data on opportunity generation among farm-based entrepreneurs. The
processes were categorized as opportunity discovery, opportunity search, opportunity
creation or opportunity occurrence. The opportunity resulting from discovery and
particularly search processes were found to be more imitative and related to lower
growth potential. On the other hand, processes related to creation and particularly
occurrence processes were found to be more innovative and seem to have larger
potential for growth if successfully exploited.

An investigation of the role of prior knowledge and experience relating to four

categories of opportunity processes, gave several interesting findings. Firstly, prior
knowledge seems to play quite different roles depending on the type of process.
Opportunity creation and occurrence seem to be related to a more extensive
knowledge base of the entrepreneur than the other processes. Opportunity discovery
seem to be based on the farm-based knowledge or skills, while opportunity search to
some extent seem to stem from the lack of particular knowledge. Secondly,
entrepreneurs with extensive experience from other areas than farming, e.g. prior
employed work, prior business activities or hobbies, seem to be more able to
undertake generation processes which includes more subjective creation than less
experienced entrepreneurs. This finding supports the suggestions that experienced
entrepreneurs face an opportunity corridor (Ronstadt, 1988). Experienced
entrepreneurs have also often developed a broad social network, which can promote

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detecting opportunities (McGrath, 1996). Thirdly, the motivation of the entrepreneur

was found to have an impact on the type of process conducted. Entrepreneurs pushed
by the need for extra income or from the need to change their activities from farming
to something else, were more active in their opportunity generation processes. These
entrepreneurs were often also more objectively searching for opportunities, and
therefore their processes often fell in the category of opportunity search. Fourthly, it
seem that entrepreneurs when gaining experience from prior opportunity generation
and exploitation may move from opportunity discovery or search to more occurrence
or creation in their subsequent generation processes, indicating that there might be an
experience curve of entrepreneurial opportunity generation (see MacMillan, 1986).

This study represents an early exploration into the heterogeneity of opportunity

generation and influence of prior knowledge, and has given some insights which ask
for further investigation. This study has several limitations. The empirical base for
this study has been farm-based entrepreneurs in Norway and Finland, and further
studies into other industry and geographic contexts are needed to test the
transferability of our findings. Also longitudinal studies following entrepreneurs
through their opportunity generation processes can further illuminate the dynamics of
these processes. In this way, the problems related to retrospective reconstruction of
the processes can be dealt with. Despite the limitations, the findings from the present
study have implications for future research into this area. First, subsequent studies
should take into account the great variation among opportunity generation processes.
Secondly, the prior knowledge base of the entrepreneur should be considered as a
potentially important resource of entrepreneurs generating new opportunities. In the
cases where the knowledge base constitutes valuable, inimitable and rare resources, it
may give the entrepreneurs competitive advantages in generating and exploiting new
opportunities (Barney, 1991). Finally, this study has indicated that prior
entrepreneurial experience may be related to different types of opportunity generation
processes. This shows the relevance of studying the processes and characteristics
among experienced entrepreneurs (Ucbasaran & Westhead, 2002; Westhead &
Wright, 1998).

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Figure 1 Taxonomy of Opportunity Generation Processes

Subjective

Opportunity Opportunity
Occurence Creation

Passive Active

Opportunity Opportunity
Discovery Search

Objective

Figure 2 Categorization of Opportunity Generation Processes

subjective

Finnish firms
Norwegian firms

passive active

objective

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