article title

Serendipity in Entrepreneurship
Nicholas Dew

Abstract

Nicholas Dew This paper addresses the concept of serendipity in entrepreneurship, defined as search
Naval Postgraduate leading to unintended discovery. It conceptually delineates serendipity, showing how it is
School, Monterey, related to the entrepreneurship literature on prior knowledge and systematic search. The
USA paper also discusses how serendipitous entrepreneurship relates to some aspects of evo-
lutionary theory, socio-economic institutions, and social psychology. It is suggested that
serendipity may be a quite prevalent feature of entrepreneurship and thus has implications
for both research and practice.

Keywords: serendipity, entrepreneurship, opportunity

Introduction

‘Entrepreneurship is a series of random collisions. Sure, you start with a plan and follow
it systematically. But even though you start out in the alternative energy business, you
are just as likely to end up in real estate development.’ (David A. Padwa, founder of
Agrigenetics Corp., quoted by Silver 1985: 16)

Despite their significance, the serendipity of many events goes unrecognized

(and even denied) for long periods of time. Columbus, for instance, discovered
America’s shores while searching for a passage to India. Yet, all his life he
refused to recognize that the land he had found was not the land he had set out
to explore for; one unlikely consequence of this is that we still refer to native
Americans as ‘Indians’.
Columbus’ discovery of the ‘New World’ was, of course, an example of serendip-
ity: of making a discovery, by accident and sagacity, of things not in quest of.
Picasso’s Blue period is another well-known example of serendipity — a con-
fluence of situational factors that gave birth to a new genre of art that, though mar-
Organization
Studies velous, was quite unintended. So the story goes, Picasso had only blue paint to
30(07): 735–753 work with one day, but when he started to toy with the effects of painting with this
ISSN 0170–8406 one color, he found that interesting art could be made of it. Thus, Picasso took
Copyright © The
Author(s), 2009. what was initially a serendipitous constraint, and leveraged it into a creative result.
Reprints and In what follows, I want to suggest that serendipity also plays an important role
permissions: in entrepreneurship. For the purposes of this paper, I define serendipity as search
http://www.sagepub.
co.uk/journals leading to unintended discovery. Many entrepreneurship scholars, as well as many
permissions.nav entrepreneurs, intuitively conceptualize entrepreneurial opportunity in terms of

www.egosnet.org/os DOI: 10.1177/0170840609104815

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736 Organization Studies 30(07)

serendipity — some combination of search (directed effort), contingency (favorable

accidents), and prior knowledge (sagacity).1 Entrepreneurship scholars have identi-
fied roles for both systematic exploration and spontaneous recognition in the litera-
ture on the discovery of opportunities (Fiet 2002; Shane 2000). Serendipity lies
between these two concepts: individuals are involved in some kind of search effort
when they accidentally discover something that they were not looking for. In this
paper, I suggest that there are good theoretical reasons for supposing that serendip-
ity has a logical place in a taxonomy of opportunity discovery, based on a framework
that shows how the concepts of systematic exploration, spontaneous recognition,
and serendipity have related conceptual underpinnings. My suggestion is that a
theory of entrepreneurship is therefore likely to be incomplete without the concept
of serendipity and that, once a non-trivial place has been located for serendipity in
entrepreneurial behavior, several implications follow for research and practice.
The paper deals with these points as follows. The next section describes the
concept of serendipity and offers a framework that integrates serendipity within
the entrepreneurship literature. The following section discusses how serendipi-
tous entrepreneurship relates to some aspects of evolutionary theory, socio-
economic institutions, and social psychology. A subsequent section deals with
implications for research and practice. Brief concluding remarks follow.

The Concept of Serendipity

Serendipity is an ambiguous word. It combines the notions of (fortunate) ‘acci-

dent’ with ‘sagacity’, which means acute mental discernment and a keen practi-
cal sense. Modern Webster’s dictionaries define serendipity as ‘an aptitude for
making desirable discoveries by accident’, but this definition arguably just fol-
lows a modern trend which highlights the sagacity in serendipity and demotes
the equally important components of search and good fortune in the term
(Merton and Barber 2004).
A well-known and excellent example of serendipity in scientific discovery —
Fleming’s discovery of penicillin in 1928 — helps illustrate the meaning of the
term. Despite the fact that other researchers had noted the antibacterial effects
of penicillin, it was Fleming who is widely credited with its discovery. First,
Fleming was actively searching for a discovery when he found penicillin.
Second, the fortunate accident was that Fleming was cleaning up his laboratory
when he noticed how penicillin mold had contaminated one of his old experi-
ments — a completely unanticipated contingency. Third, sagacity enters the
story because Fleming had been experimenting with the antibacterial properties
of common substances for many years, and therefore had enough prior knowl-
edge about molds to find that particular petri dish anomalous, and immediately
begin to discern its potential implications.
The vast majority of research on serendipity involves scientific discoveries such
as Fleming’s. Both Merton and Barber (2004) and Roberts (1989) provide a com-
pendium of serendipitous discoveries in science. In addition, there are a very large
number of discussions of the nature of serendipity in a wide variety of papers on
scientific discovery (Van Andei 1994). Between 1950 and 2003 there were at least

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Dew: Serendipity in Entrepreneurship 737

832 publications across all branches of science with ‘serendipity’ or ‘serendipitous’

in their title (University of Pennsylvania 2004). In fact, the regularity with which
serendipitous discoveries are made in science has led some historians to describe
serendipity as a significant factor in the evolution of science (Kantorovich and
Neeman 1989). Over the years, a great many scientists have also directly expressed
their views about the importance of serendipity in scientific work, perhaps none
more colorfully than the 19th-century French physiologist Bernard:
‘Experimental ideas are often born by chance, with the help of some casual observation.
Nothing is more common: and this is really the simplest way of beginning a piece of sci-
entific work. We take a walk, so to speak, in the realm of science, and we pursue what
happens to present itself to our eyes. Bacon compares scientific investigation with hunt-
ing: the observations that present themselves are the game. Keeping the game simile, we
may add that, if the game presents itself when we are looking for it, it may also present
itself when we are not looking for it, or when we are looking for game of another kind.’
(Bernard 1865, quoted in Van Andei 1994: 635)

As well as the idea of serendipity, there is also the idea of pseudo serendipity, which
refers to a situation in which someone is looking for something in particular, but the
route by which they discover it is accidental and unanticipated. For instance, Charles
Goodyear made many attempts to stabilize natural rubber so that it could be made
useful, but it was only when he accidentally allowed a mixture of rubber and sulfur
to touch a hot stove that he discovered vulcanization (Roberts 1989: 54). Similarly,
Alfred Nobel had experimented extensively with ways of taming nitroglycerin, but
it was an accidentally cut finger that prompted him to experiment with a mixture of
collodion (commonly applied to wounds in Nobel’s day) and nitroglycerin, a com-
bination that was later patented as blasting gelatin, and is still used to this day.
There are diverse examples of serendipity in entrepreneurship. The founding
of Staples office supply retail chain provides one example of the serendipitous
discovery of an underserved market (Sarasvathy 2007). On the Thursday before
the Fourth of July weekend in 1985, Thomas Stemberg, who had recently lost
his job as division manager for a supermarket chain, was working on a business
plan for starting a new chain, when he ran out of the printer ribbon for his Apple
Imagewriter. When he went out to purchase a new ribbon, he simply could not
get it. Either stationery stores had closed early for the weekend, or the ones that
were open did not carry the ribbon. ‘It dawned on me’, he said in an interview
with CNN’s Stuart Varney, ‘that not only could small entrepreneurs not get sta-
tionery at the rate of bigger companies, sometimes they couldn’t get it at all.’ He
still had no ribbon to finish his business plan over the weekend, but he had found
the new venture he actually wanted to start in that contingency.
Honda’s discovery of a market for small motorcycles in the USA has also been
cited in the literature as an example of serendipity (Denrell et al. 2003; Van Andei
1994). In the late 1950s Honda sought to introduce large motorcycles into the US
market in competition with Harley Davidson and European importers. Its strategy
was based on its analysis of the US market, where big bikes were very popular.
However, members of Honda’s import staff used small 50cc bikes for their own
transport needs. According to Kihachiro Kawashima, Honda’s US president:
‘We used the 50s ourselves to ride around Los Angeles. They attracted a lot of attention.
One day we had a call from a Sears buyer … surprisingly, the retailers who wanted to sell
them weren’t motorcycle dealers, they were sporting goods stores.’ (Pascale 1984: 55)

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738 Organization Studies 30(07)

Thus Honda serendipitously discovered a latent market for small motorcycles in the
USA, in a classic example of searching for one opportunity and discovering another
through a contingent interaction — in this case, with a Sears buyer — what
Mintzberg (1996) has described as being ‘pleasantly surprised’ by a contingency.
Serendipity also sometimes occurs in the discovery of new combinations of fac-
tors of production (Schumpeter 1934). An example of this can be found in the his-
tory of J. R. Simplot, the potato magnate. Simplot built a business storing and sorting
potatoes and onions during the Great Depression. Silver (1985) recounts that:
‘in the spring of 1940, Jack Simplot decided to drive to Berkeley, California, to find out why
an onion exporter there had run up a bill of $8,400 for cull (or reject) onions without pay-
ing. … The girl in the office said the boss wasn’t in. Fine, said J. R., he would wait until the
man arrived.
‘Two hours later, at ten o’clock, a bearded old man walked in. Assuming this was his
debtor, Simplot accosted him. But he turned out to be a man named Sokol, inquiring why
he was not getting his due deliveries of onion flakes and powder. They sat together until
noon, but still the exporter failed to arrive.
‘As the noon hour passed, Simplot was suddenly struck with an idea. He asked the
bewhiskered old trader to a fateful lunch at the Berkeley Hotel. “You want onion pow-
der and flakes,” said J. R., “I’ve got onions. I’ll dry ‘em and make powder and flakes
in Idaho.”’

Thus, through a contingent meeting with Sokol, Simplot found an opportunity to

recombine his existing resources (storage and sorting facilities and access to a
large supply of onions) with new ones (onion-drying processes). This recombina-
tion was important because drying onions (and later potatoes and other foods)
increased the capital efficiency of Simplot’s traditional operations by reducing the
warehouse space required for storage by a factor of seven. Simplot thus discovered
synergies with his existing operations, an example of the serendipitous discovery
of strategic interactions between resources, described by Denrell et al. (2003).

Table 1.
Examples of Domains and overlaps Examples
Domains and
Overlaps in Figure 1 Contingency/accident J. R. Simplot’s chance meeting with Sokol (Silver 1985);
Peter Hodgson’s chance attendance of a party where kids
happened to be playing with Silly Putty as a toy (Van Andei 1994).
Prior knowledge Knowledge of technologies, markets, and customer needs learned
from working with users in their prior jobs. Bhidé (1996) found
that over 50% of HBS entrepreneurs he sampled started their firms
based on specific insights gained in prior employment.
Search activity Thomas Edison searched 6000 vegetable growths and ‘ransacked
the world’ for a suitable filament for his most important innovation:
the electric light bulb (Weitzman 1998).
Systematic exploration An entrepreneur’s periodic scrutiny of their storehouse of previously
shelved venture ideas; for firms, periodic scrutiny of previously
shelved technologies, patents, etc. (Wilson and Hlavacek 1984).
Spontaneous recognition Opportunities for commercializing. MIT’s 3DP technology was
spontaneously recognized by eight different entrepreneurs
(Shane 2000).
Pre-discovery Corning’s pre-discovery of technology for optical fibers
(Cattani 2006).
Serendipity Thomas Stemberg’s founding of Staples office supply retail chain
(Sarasvathy 2007).

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 Dew: Serendipity in Entrepreneurship 739

Figure 1. Serendipitous Discovery

Domains of – Search activity leading to the discovery
Opportunity Discovery of something the entrepreneur was not
looking for

Domain of Pre-discovery
Systematic Search – Hunch that something has
been discovered but lack of
Exploration pre-existing knowledge to
– Discovery of opportunities make an on-the-spot
is based on purposefully evaluation
searching knowledge
corridors

Domain of
Domain of
Prior
Contingency
Knowledge

Spontaneous
Recognition
– Sheer/utter surprise

Since serendipity is a somewhat elusive concept, I will examine a framework that

helps to tangibly locate it in relation to prior research in the entrepreneurship literature
on opportunity identification, discovery, and creation (Shane and Venkataraman
2000). The focus is on three conceptual building blocks that have been extensively
explored in the literature. In essence, serendipity involves the interaction of three ele-
ments: a resource (sagacity), an event (contingencies), and an activity (the individual
is already on a journey). Figure 1 uses a framework that captures these three elements
as three domains and relates them to different types of opportunity discovery.2 Table 1
illustrates this framework with examples from a variety of entrepreneurial endeavors.
The three domains in Figure 1 can be described as follows. First, within the entre-
preneurship literature the concept of prior knowledge captures the notion of
sagacity, i.e. the prepared mind. Prior knowledge is a stock of information known
to a particular individual. Because information is generated through idiosyncratic
life experiences, the stock of prior knowledge held by individuals differs consider-
ably (Venkataraman 1997). Empirical research has shown that prior knowledge is
influential in the discovery of entrepreneurial opportunities (Shane 2000).
The second domain is that of contingencies. Contingencies can be defined as
events that are not logically necessary, i.e. could not have occurred. They may
happen by pure chance, or without a known cause. In the model presented in
Figure 1, contingencies represent the influence of the exogenous environment on the
discovery of possible opportunities. Anecdotal evidence suggests contingent events
abound in entrepreneurship, and several papers in the literature ascribe an impor-
tant role to contingencies (Mintzberg and Waters 1982; Sarasvathy 2001).
The third domain is search. Search activity involves purposeful actions under-
taken to acquire new information. Because search is costly, it has been theorized
that differences in search costs may explain the propensity of some individuals
to become entrepreneurs rather than others (Stigler 1961). Prior research

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740 Organization Studies 30(07)

has suggested that heterogeneous search capabilities may be one kind of

individual-specific entrepreneurial resource (Alverez and Busenitz 2001).
Importantly, search activity may occur with or without invoking prior knowledge.
Because individuals forget things, they may even sometimes search for the same
things more than once (De Holan and Phillips 2004). Some possible examples of
search without prior knowledge include random search processes (Hayes 2001),
habitual search activity (Hodgson 2006), and playful search (March 1982).
The overlapping areas of the three domains of search, prior knowledge, and
contingency results in four fictional opportunity discovery ‘spaces’ in Figure 1:
a space where opportunities are discovered as the result of the systematic explo-
ration of knowledge corridors; a space where opportunities are discovered as a
result of spontaneous recognition; a space where search and contingency result
in pre-discoveries; and finally, a space where serendipities occur. The next sec-
tions of the paper describe each of these in turn.

Systematic Exploration

Several authors have suggested that the discovery of entrepreneurial opportunities

might be the result of purposeful search activity (Caplan 1999; Fiet 1996, 2002).
This search may involve looking for demand-side opportunities arising from
unserved or underserved market needs, or it may involve looking for supply-side
opportunities arising from the possibility of serving market needs with new
resource combinations. The former is sometimes conceptualized as search of an
exogenously given opportunity set, whereas the latter may be conceptualized as an
endogenous process (Weitzman 1998: 332).
In either case, two characteristics of the notional search space are important.
First, the number of possibilities that have to be searched is vast, which means
searching for opportunities is costly. Therefore the effectiveness of search
depends on entrepreneurs making cost-effective informational investments that
equilibrate the costs of search with the benefits it may potentially produce (Fiet
1996; Stigler 1961). Second, public areas of the search space are unlikely to be
especially fruitful because other entrepreneurs are likely to have already searched
there and thus picked all of the ‘low-hanging fruit’. Therefore the entrepreneur
may be better off searching areas where information asymmetries exist, i.e. where
it is possible that the entrepreneur may gain a competitive advantage because of
private information (Hayek 1945). This suggests that the entrepreneur should
constrain their search to a ‘consideration set’ that initially consists of their prior
knowledge resources (Fiet 2002). This overlap between the domain of search and
the domain of prior knowledge is captured in Figure 1 as the space where oppor-
tunity discovery is the result of systematic exploration of knowledge corridors.
The effectiveness of systematic exploration is a function of relative search costs
and the nature of prior knowledge. Heterogeneous search costs may explain why
some people discover opportunities while others do not. One explanation of
different costs is that individuals mostly search myopically, which suggests that
opportunity discovery is situational, because individuals are more likely to dis-
cover opportunities that are ‘cheap’ to find because they happen to be nearby, i.e.
close to their pre-existing knowledge. An alternative explanation is that entrepre-
neurs have better search processes than non-entrepreneurs, either because they

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Dew: Serendipity in Entrepreneurship 741

scan information better or have superior information-processing abilities, maybe

as a result of acquired expertise (Shaver and Scott 1991). Alverez and Busenitz
(2001:755) build on this explanation by suggesting that the prior knowledge and
cognitive ability of entrepreneurs may be conceptualized as a heterogeneous
resource, arguing that entrepreneurs ‘have individual-specific resources that
facilitate the recognition of new opportunities and the assembling of resources’.
They argue that these resources give entrepreneurs a relative advantage (over
non-entrepreneurs) in systematically exploring for opportunities.

Spontaneous Recognition

An alternative and complementary category of entrepreneurial opportunities are

those that involve spontaneous recognition. Obvious opportunities can be searched
for, but entrepreneurs cannot search for information that they do not know exists
(Kirzner 1997). In these cases, individuals are (initially) utterly ignorant of the exis-
tence of the possible opportunity. However, they may recognize an opportunity if
they happen to come across it contingently. Thus, some opportunities may be dis-
covered in the absence of any search activity. Figure 1 captures this space of oppor-
tunities as the space where the domains of contingency and prior knowledge overlap.
A good example that fits into this space is Shane’s study of eight entrepreneurs
who sought to commercialize a new technology, called 3DP, that was developed at
MIT (Shane 2000:451). Shane points out that the discovery of opportunity was
based on the contingent arrival of new information: ‘People do not discover oppor-
tunities through search, but through recognition of the value of new information that
they happen to receive through other means.’ In the case of Shane’s study, all eight
entrepreneurs he studied heard about 3DP technology from someone directly
involved in its development. None of the entrepreneurs had contacted MIT’s
Technology Licensing Office about the technology. Therefore, in these cases the dis-
covery of opportunity occurred because of a combination of two elements captured
in Figure 1. First, new information arrived contingently, i.e. the entrepreneurs were
all introduced to 3DP technology by social network contacts. Second, they com-
bined this new information with their prior knowledge of a possible use or applica-
tion of the technology. The result of this matching process was the discovery of a
possible opportunity. According to Shane, none of the eight entrepreneurs said they
found the commercial opportunity by searching for it. Instead, they each discovered
different opportunities to apply the new technology based on their prior knowledge.
The results of Shane’s study are very much in line with arguments made in the
literature about knowledge ‘corridors’ (Ronstadt 1988; Venkataraman 1997). Prior
knowledge captures the idea of a stock of knowledge, and the knowledge corridor
metaphor adds the hypothesis that this accumulation process typically occurs
along a narrow, probably path-dependent trajectory. Studies of habitual entrepre-
neurs have added the insight that much of the specific knowledge accumulated
by entrepreneurs occurs in the course of their prior entrepreneurial experiences
(Ucbasaran et al. 2008). Prior experience therefore generates specific knowledge
that is used in recognizing future opportunities, and thus may potentially fuel
future episodes of entrepreneurship in an individual’s career. Very experienced
entrepreneurs may be adept at recognizing several different opportunities in a
given invention such as the one described by Shane (Gaglio and Katz 2001).

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742 Organization Studies 30(07)

Pre-discovery

Figure 1 also reveals one space of opportunity discovery that has been less
studied in the literature. This is the space where contingency and search overlap,
but without prior knowledge (sagacity). In this space, unanticipated opportuni-
ties are ‘pre-discovered’, i.e. an entrepreneur may suspect that they have dis-
covered an opportunity but they lack the pre-existing knowledge that is needed
in order to immediately recognize what has been discovered. For example, peni-
cillin had been ‘pre-discovered’ by many bacteriologists who had observed the
growth of one bacterium inhibiting the growth of another. However, these indi-
viduals lacked the prior knowledge that was needed in order to make an on-the-
spot evaluation of what they had found (Merton and Barber 2004: 176).
In the literature on technology evolution, recent empirical research by Cattani
(2006) highlights that pre-discoveries are quite commonplace. Cattani uses the
term ‘pre-adaptation’ to describe some technology discoveries firms make: ‘that
part of a firm’s technological knowledge base that is accumulated without antic-
ipation of subsequent uses (foresight), but might later prove to be functionally
“pre-adapted” (i.e., valuable) for alternative, as yet unknown, applications’
(Cattani 2006: 286). One firm Cattani studied was Corning, where the technolo-
gies for optical fibers and flat-panel display glass were both pre-discovered
years before the complementary knowledge necessary to commercialize them
was developed. As emphasized by Garud and Nayyar (1994) in their framework,
such discoveries may be systematically explored for their knowledge character-
istics, and relevant knowledge about them may be stored for potential reactiva-
tion, synthesis, and use in the future.3

Serendipity

While systematic exploration, spontaneous recognition, and pre-discovery

highlight different combinations of search, prior knowledge, and contingency,
serendipity captures all three in a single combinational concept (see Figure 1).
Serendipity is distinct from exploration and recognition (two ideas debated vig-
orously in the literature — Alsos and Kaikkonen 2004; Gaglio & Katz 2001), yet
builds on elements common to both these concepts. It differs from systematic
exploration because it incorporates a significant role for contingent environmen-
tal factors in the discovery of opportunities. It differs from spontaneous recogni-
tion because it supposes that opportunity discovery involves a vigorous quest on
the part of the entrepreneur, rather than the discovery of opportunities that were
all along under the entrepreneur’s nose (Kirzner 1997: 72). It differs from pre-
discovery in that it incorporates a role for prior knowledge in the opportunity
discovery process.
This combinational conception of serendipity is also useful in distinguishing
serendipity from luck (Barney 1997; Demsetz 1983; Friedel 2001; Ma 2002).
Luck is captured in the domain of contingency (Figure 1). As described by
Denrell et al. (2003: 989):
‘While good luck may befall the inert or lazy, serendipitous discovery occurs only in the
course of an energetic quest — a quest in which lucky discoveries of an unanticipated
kind can be recognized through alertness and then flexibly exploited.’

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Dew: Serendipity in Entrepreneurship 743

For the purposes of this paper, I shall define pure luck as some kind of favorable
contingency or chance happening (i.e. an event completely beyond the entrepre-
neur’s control) that impacts the entrepreneur in a positive way. Luck is some-
thing that (sometimes) happens to you. It does not presuppose any search
activity or prior knowledge on the part of the entrepreneur. Also, by contrast with
luck, the role of contingencies in serendipity can come in more or less fortunate
forms, such that unlucky incidents may sometimes constitute the contingent
component of serendipity.
Having thus defined a framework in which serendipity can be understood as
an inclusive element of entrepreneurial opportunity, it may help to place this
framework in a broader context in which entrepreneurial discovery and creation
occur. To do this, I next turn to examining serendipity in an evolutionary and
institution-rich context. What emerges from this analysis is the sense that
serendipity occupies an important place in some widely used and powerful ideas
about social and economic dynamics.

Links between Serendipity and Evolutionary Theory,

Socio-economic Institutions and Social Psychology

The Evolutionary Logic of Serendipity

Human systems are complex and evolving, creatively open-ended, and subject to
several types of nonlinear behavior (Buchanan and Vanberg, 1990; Prigogine and
Stengers 1984). Dooley and Van de Ven (1999) highlight four patterns in such
dynamics (periodic, chaotic, white noise, or pink noise) which suggest different
underlying generative mechanisms. Their analysis points to differences in the
causes of complex behavior in evolving systems, and the necessity of using dif-
ferent process theories to understand and explain them. For some types of sys-
tems, seemingly innocuous and improbable serendipities may have far-reaching
consequences because the system sometimes amplifies small events into large
effects (Taleb 2007). That things could have turned out very differently in the face
of equally plausible serendipities, or without the surprises of serendipity, is a fact
that we will inevitably have to admit. In other types of systems, the vast majority
of serendipities may merely be ‘lost’ events that, in effect, are swallowed up by
other processes, eventually becoming errors of omission — just one more micro-
scopic element in the cloudy, confusing human comedy. These are the serendipi-
ties that went sufficiently unattended to in the flow of human experience that they
had no meaningful impact on the shape of future social artifacts (Garud and
Karnoe 2001). Indeed, because all human descriptions of events depend on social
processes that shape patterns of noticing and inattentiveness (Weick 1979), it is
also possible that the fraction of serendipities that we (collectively) pay attention
to are merely those few mindfully noted events that have been selected — perhaps
retrospectively — for their meaningfulness. This is to say, that the concept of
serendipity may sometimes be a useful tool for helping us generate good entre-
preneurial stories out of vaguely understood, highly complex situations.
Yet, serendipity is not just a product of our mental limitations, which mask
underlying processes that are deterministic in nature. Consistent with complex

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744 Organization Studies 30(07)

systems thinking, it involves contingent interactions that have real ontological

status in the world and are not just a matter of our inability to know the deeper
structures that determine outcomes (Gould 2002). The kind of contingent, acci-
dental, fortuitous features of history we commonly claim under the title ‘serendip-
itous’ are an irreducible and real property of evolutionary processes (Kantorovich
and Neeman 1989). In principle, there is unpredictability in these processes. This
does not necessarily mean that serendipity creates chaos in organizational histo-
ries. As noted by Dooley and Van de Ven (1999: 367), the common meaning of
chaos is extreme disorder and confusion but from a mathematical point of view the
opposite is true, and a large part of the work of chaos theorists has involved creat-
ing simple mathematical relationships that effectively model chaotic patterns
(Mandelbrot and Hudson, 2006). Thus viewed, the ‘accidental’ event may be
explained by prior interactions, and might perhaps be a recurring result of them,
though any particular instance remains unpredictable.4 Stephan Jay Gould, who
made a career in evolutionary biology as a champion of contingency, quotes Darwin
himself, saying, ‘I believe in no fixed law of development … variability … depends
on many complex contingencies’ (Gould 2002: 1335). According to Gould:
‘Over and over again, through the Origin [of Species], Darwin stresses that, for a large
class of problems about species and interacting groups, answers must be sought in the
particular and contingent prior histories of individual lineages, and not in general laws of
nature that must affect all taxa in a coordinated and identical way.’ (Gould 2002: 1335)

Since evolutionary theorizing is used so frequently in conceptualizing entrepre-

neurship, organizations, markets, and institutions, the same argumentation can
be applied to them. This means that the histories of our organizations, markets,
institutions, and other products of serendipitous entrepreneurship will tend to
have a contingent nature. One result is that any view of economic and social evo-
lution that gives a real place to serendipity implies that we cannot validate our
present institutions, markets, and organizations by general principles but only as
an outcome of contingent, historical processes (Rorty 1989). A careful appreci-
ation of the role of serendipity therefore attenuates some of our accepted notions
of how social and economic processes work, and has implications for how they
might best be designed to work. A striking example of this occurs in thinking on
socio-economic institutions, to which I turn next.

Socio-economic Institutions and Serendipitous Entrepreneurship

Few institutional thinkers have shown such a clear appreciation of the role of
serendipity and entrepreneurship as Hayek (1960). Hayek didn’t use the term
‘serendipity’ but he was clearly thinking about something very similar in the
following passage:
‘Humiliating to human pride as the insight may be, we must recognize that we owe the
advance and even the preservation of civilization to a maximum of opportunity for acci-
dents to happen.’ (Hayek, 1960: 29)

The implication is that serendipitous entrepreneurship belongs with a clutch of

ideas (i.e. unintended consequences and spontaneous orders) with a common
root in the limits to human knowledge (Hayek 1974). Hayek makes a powerful
argument for individual freedom based on this:

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Dew: Serendipity in Entrepreneurship 745

‘If there were omniscient men, if we could know not only all that affects the achievement
of our present wishes but also our future wants and desires, there would be little case for
liberty … Liberty is essential to leave room for the unforeseeable and unpredictable; we
want it because we have learned to expect from it the opportunity of realizing many of
our aims.’ (Hayek 1960: 29)

Important implications follow from this argument for the design (whether delib-
erate or evolutionary) of institutional frameworks that best leverage serendipities.
First, individual entrepreneurs must allow enough freedom in their own plans that
they might leverage serendipities. Relentless predefinition of entrepreneurial
ventures, either in the form of business planning or ‘vision’, restricts the entre-
preneur’s opportunity to harness serendipity (contra Witt 2007). Next, the institu-
tional constraints imposed by organizations on employees also need careful
examination so that employees are allowed sufficient autonomy to pursue
serendipitously discovered opportunities (Tsoukas 1996). In this regard, Hayek’s
arguments for freedom are just as relevant to private institutions as they are for
public ones (see, for example, Schlender 1992 on Sony’s practices). Furthermore,
institutions vary in how well they encourage the retention of knowledge that
might fund future serendipitous events. As noted by Garud et al. (1997: 348):
‘Institutions are not mechanisms to sanction individuals for “failed” efforts, but
are devices for the retention of knowledge from “experiments”.’ Institutions that
support the retention of prior knowledge help access (future, possible) serendipi-
ties. Thus, organizations that value serendipity are motivated to take a different
approach to ‘failure’ and ‘waste’, one that recognizes the option value inherent in
establishing a stock of prior knowledge, even when that is a product of creative
endeavors that ostensibly went ‘wrong’ (Garud et al. 1997).

Social Psychology of Serendipity in Entrepreneurship

Serendipity has an important role in the public image of entrepreneurship.

Indeed, it may not be going too far to say that in popular perception these two
concepts are tightly linked. The central issue is that, on the one hand, there is a
popular image of the entrepreneur (particularly strong in the USA) which cele-
brates the idea that people with merit win out in the entrepreneurial process. Yet,
on the other hand, there also appears to be an underlying popular hostility
towards the idea that merit alone won the day. People prefer the idea that ‘lady
luck’ also has an important role in the entrepreneurial process (regardless of the
scientific accuracy of this preference). From this, we can discern that the popu-
lar image of successful entrepreneurship implicitly identifies an important role
for serendipity in entrepreneurship, i.e. the social psychology of entrepreneur-
ship involves lucky accidents as well as individual effort and sagacity.
This issue — that public perceptions of classes of individuals sometimes
revolve around the concept of serendipity — prompted a fascinating discussion by
Merton with regard to scientists (Merton and Barber 2004: 169). What Merton
noticed was that, for reasons perhaps of threat, envy, or fairness, the public likes to
attribute advances in science to ‘the happy accident’, precisely because it tends to
pull the scientist off his/her pedestal and bring him/her back down to earth, thus
making the work of great scientists more congenial with both the average individ-
ual’s abilities and experiences of everyday life (in which serendipity plays a part).

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746 Organization Studies 30(07)

Serendipity — which might be thought of as a fancy word for ‘chance and smart
fellows’ (Merton and Barber 2004: 169) — thus has popular appeal precisely
because it is an equalizing factor that enables people to vicariously imagine them-
selves as the scientist, or entrepreneur, who discovers or creates the next big thing.
This social psychology might be traced to notions of fairness (Rawls 1971),
i.e. that whereas the lottery of birth may have treated people unfairly by gifting
them with unequal skills and motivations, contingency rebalances the scales
somewhat, precisely because of the synergistic interaction required between
contingency, sagacity, and effort that is required to yield serendipity. Accident
may be no use without effort and sagacity, but effort and sagacity are of little
value without being complemented by fortunate accidents which can be lever-
aged — and these may be randomly distributed. The attractiveness of this image
to the public psyche — that even the gifted need their lucky accidents — brings
to mind the image of Greek gods rolling dice to determine human destinies.
Thus, the popular appeal of entrepreneurship may be said to stretch just as far as
the concept of serendipity stretches: the public likes its entrepreneurial heroes
(popular figures like Bill Gates) to be worthy of their wealth by being meritori-
ous; but only insofar as they were also recipients of good fortune. This combi-
nation centers popular perceptions of entrepreneurship squarely on the concept
of serendipity, which serves to keep entrepreneurship both imaginatively acces-
sible and enables its outcomes to be perceived as ‘fair’ in the popular psyche.

Implications for Research and Practice

Research Implications

In a recent comment directed at the marketing community, Brown (2005) sum-

marized developments in what he called ‘the science of serendipity’ and urged
marketing scholars to pay more attention to the ‘incorrigible incalculability of
commercial life’, arguing that, ‘the history of management in general and mar-
keting in particular reveals that serendipity plays a significant part in the com-
mercial equation’ (Brown 2005). In this section of the paper, I suggest that
the framework developed in this paper carries two significant implications for
research in entrepreneurship that scholars might consider devoting more attention
to understanding.
The first implication that the concept of serendipity highlights is that the dis-
covery of some opportunities involves a genuine and non-trivial role for contin-
gency as a trigger event. Consider the role of the taller tree in the discovery of
trickle irrigation, the melting candy bar in the invention of microwave cooking,
or the set of circumstances that led Simplot to make the acquaintance of Sokol.
The importance of contingency in combination with other factors is easily under-
estimated (Gould 2002; Rorty 1989; Taleb 2002). Thus, of the three elements that
constitute serendipity, it is contingency that has the most profound implications
for how researchers think about entrepreneurial opportunity. The central issue is
that our models of entrepreneurial phenomena typically involve treating contin-
gencies as error terms that are essentially expunged from the analysis, controlled
for, or assumed away. But what if the error term is the regularity? The concept of

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Dew: Serendipity in Entrepreneurship 747

serendipity suggests that it is the chance conversation, the idiosyncratic outlier,

the unanticipated event, or the anomalous result that fund opportunity discovery
and creation. If we relegate these terms to the category of errors, it leads to a sys-
tematic underestimation of a phenomenon that may be important to our under-
standing of opportunity discovery and creation.
Of course, if we acknowledge an important role for contingency, we are left
with several difficult questions about drawing valid lessons based on scientific
principles that implicitly or explicitly apply deterministic frameworks. As
Denrell (2004) puts it:
‘Underestimation of the role of chance also makes it difficult for individuals to draw valid
lessons from history … there is always something special in the history of a firm, its strat-
egy, and its organization that could be used to explain its performance record. Thus, even
if success is the result of luck, it is possible to construct an “explanation” (Fischhoff 1975,
1982). The explanation may be entirely spurious, however.’ (Denrell 2004: 933)

Brown (2005) argues that this has been the case in marketing, where everyone is
familiar with serendipities in the history of Velcro, Corn Flakes, Band Aids, and
Post-it-Notes, but there remains a systematic and misleading underestimation of
the total impact of contingency (Pina E Cunha 2004). Marketing scholars have
used extremely sophisticated statistical analyses, ‘But for all this probabilistic
prowess, our concepts hardly capture the sheer capriciousness of commercial
life’ (Brown 2005: 1231). Dooley and Van de Ven further argue that, in organi-
zation studies, the value placed on generalizability of research findings is based
on ‘the assumption that knowledge about commonalities … are of more interest,
or value, than knowledge about differences … Aren’t practicing managers as
interested in what they cannot generalize, as well as what they can?’ (Dooley and
Van de Ven 1999: 370). The same arguments could be made for entrepreneurship
research. And so what remains to be done is to incorporate a systematic role for
contingency the way the literati, historians and biologists have married chance
and necessity in their disciplines. In entrepreneurship, we have to find the right
balance between attending to, and ignoring, contingencies. Serendipity might be
fashioned into a useful concept for exactly this purpose.
The notion that some serendipities become venues for action, and some not, raises
a second implication: when are serendipities more likely to occur and be acted upon
(or not)? As suggested by McMullen and Shepherd (2006: 132), entrepreneurship
involves acting on ‘the possibility that one has identified an opportunity worth pur-
suing’. In the framework presented in this paper, I have made no particular assump-
tions about the ‘hit rate’ of serendipities, i.e. the framework is agnostic about what
entrepreneurs do with their serendipitously discovered opportunities. However,
whether serendipities are acted upon might be important for them to be considered
serendipitous by others.5 Also, it does seem that some entrepreneurs may be more
exposed to serendipity and more likely to develop and create new businesses based
on a serendipitously discovered opportunity (Ardichvili et al. 2003). These points
beg questions about the process of generating and acting on serendipity.
While there are several frameworks one could use to examine this issue, one
attractive framework is effectuation, because it suggests that a predisposition to
flexibly exploit contingency is a central element in the behavior of expert entre-
preneurs (Sarasvathy 2001). According to Sarasvathy (2007: 87):

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748 Organization Studies 30(07)

‘Surprises are usually relegated to error terms in formal models. Instead an effectual logic
suggests they may be the source of opportunities for value creation, but only if someone
seizes upon them in an instrumental fashion and imaginatively combines them with
extant inputs to create new possibilities.’

In places, subjects in her experimental studies of expert entrepreneurs pointed

directly to the role of serendipity in their reasoning processes, suggesting
‘acknowledging and appropriating contingency rather than trying to avoid it’
was an important part of their cognitive processes (Sarasvathy 2007). Moreover,
effectual logic specifies that expert entrepreneurs take a particular approach to
leveraging serendipities, one in which the entrepreneur actively attempts to cre-
ate a context that attributes value to the conjectured opportunity in what Garud
et al. (1997) termed ‘tailoring fits’, i.e. engaging in the design and development
of market and institutional infrastructures (Sarasvathy et al. 2008; Garud et al.
2007). Of course, these actions highlight that the notion of discovery is some-
what different in the entrepreneurial realm than the scientific realm. In the sci-
entific realm, discovery is (at least by standard accounts) about finding new
phenomena and explaining them; in contrast, entrepreneurial discoveries involve
shaping and creating value in social settings, which involves action repertoires
such as interfering, orchestrating, tailoring, and so on.
What makes more experienced and expert entrepreneurs predisposed to har-
ness serendipity? One possibility is that there is a non-trivial linkage between
social network position and contingent events that roughly corresponds with
boundary-spanning, gate-keeping, and brokering activities (Burt 1992; Obstfeld
2005). To the extent that more experienced entrepreneurs tend to have richer
social networks, their network connections may expose them to information
flows that make them more likely to encounter contingencies. This suggests that
entrepreneurs may be able to engage in social networking behaviors that make it
more likely that contingencies (hence serendipities) happen to them, i.e. they may
deliberately engage in behaviors that semi-endogenize contingency. Sony’s ‘wan-
dering chairman’ serendipitously discovering a speaker system for the Walkman
exemplifies how certain networking activities may make contingencies more
likely (Garud et al. 1997). A second possibility is that the occurrence of serendip-
ity may vary with entrepreneurial experience because serendipity is a function of
prior knowledge, and more experienced entrepreneurs have larger pools of prior
knowledge and better ability to access and filter it (Baron and Ensley 2006).
Third, personality traits may play a role in receptiveness to serendipity and there-
fore the likelihood of leveraging it. Studies of entrepreneur psychology have
found that, in general, entrepreneurs score higher on the variable ‘openness to
experience’ than managers (Zhao and Seibert 2006). Openness to experience is
defined as someone who is intellectually curious and tends to seek new experi-
ences. Such individuals may be more receptive to, and welcoming of, contingent
events and information, and thus more likely to view these events as opportuni-
ties for action. These are individuals who display a taste for the unexpected, for
surprise (March 1982; Scitovsky 1976). The literature on expert cognition further
suggests that, because experts routinize many cognitive tasks, they are more
likely to have spare cognitive capacity available to handle non-routine tasks,
which may also increase their receptivity to contingencies (Feltovich et al. 2006).
Together these three factors suggest that future researchers might gain further

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Dew: Serendipity in Entrepreneurship 749

insight into entrepreneurial opportunity by examining to what extent experience

and expertise make entrepreneurs more likely to encounter and exploit serendip-
ities on their travels.

Implications for Practice

This study also has implications for several aspects of practitioner behavior.
Many of these implications are not new, but worth reiterating nonetheless. A few
of them are significantly different from existing literature, and worth considera-
tion. First, entrepreneurs might wonder whether they should follow recommen-
dations from the research on systematic exploration (Fiet 2002) or from research
on spontaneous recognition (Shane 2000). The former suggests that entrepre-
neurs should make carefully considered, cost-effective investments in informa-
tion that signals the value of opportunities (Fiet 2002: 3). By contrast, the latter
suggests that ‘people do not discover entrepreneurial opportunities through
search’ and that they can and will discover entrepreneurial opportunities without
actively searching for them (Shane 2000: 451). What should an entrepreneur do?
Serendipitous discovery suggests that both factors, in fact, matter. This is
because an active search process may lead to the recognition of an opportunity,
even though the opportunity is not what the entrepreneur set out to look for. This
perspective allows practitioners to see that there may be a coherent rationale that
unifies these otherwise conflicting perspectives.
A second implication of this paper concerns a long-running debate between com-
mitment and flexibility. Remember that serendipitous discovery suggests that the
entrepreneurial process will involve exploiting accidents and surprises that happen
in the course of developing a venture. This raises the question of the optimal choice
of, and investment in, systems and processes to detect and exploit serendipities. In
a sense, the issue is how much commitment the entrepreneur should make to flex-
ibility (Ghemawat and Costa 1994). This is a conundrum that many academics and
practitioners have stubbed their toes on, so while a solution is clearly beyond the
scope of this paper, a few remarks might be helpful. One is that the entrepreneur
should expect business plans to change; in fact, evolving business plans may be
something to strive for. It is also advisable that, early in the life of a new enterprise,
the entrepreneur should use vision — if it is to be used at all — as a flexible
umbrella under which serendipities may be incorporated (if they occur). The
remarks by David Padwa in the introduction section of this paper stand as a
reminder of how unwise it may be to let deterministic vision constrain the devel-
opment of a new enterprise early in its life. Furthermore, even in very early-stage,
resource-scarce enterprises, entrepreneurs need to find ways of cutting themselves
enough slack to fund some continuing search activity. It has to be remembered that
serendipity is a tripod that relies on some kind of resource-consuming search, as
well as prior knowledge and contingency. Serendipity is not free.

Conclusion

Serendipity has been given little systematic attention by entrepreneurship schol-

ars (Boussouara and Deakins 1999), yet it appears that it might be very relevant

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750 Organization Studies 30(07)

to the entrepreneurial process once its relationships with concepts already

employed in that literature are understood. To use an analogy, serendipity may
be just the difference between a forgotten ball or an immortal homerun, but
despite the fact that as a concept it exists on the knife edge of chance — and
therefore always appears to be in danger of dissolution — serendipity is a rich
idea that may be more central to the entrepreneurial process than so far has been
recognized. In serendipity is the delight of the strange moment. But this does not
make serendipity a residual, a leftover after the deterministic laws of the entre-
preneurial process have run their course. Instead, serendipitous events — though
by their nature individually unpredictable — may be worth understanding as a
central, recurring feature of entrepreneurship.

Notes The author would like to thank Raghu Garud and two anonymous Organization Studies reviewers
for their helpful remarks on earlier drafts of this paper. Thanks, as always, also go to my usual cast
of collaborators — you know who you are. The usual disclaimers apply.
1 Throughout the paper, I used the terms ‘accident’ and ‘contingency’ interchangeably.
2 Of course, whether the concept of ‘discovery’ is the most useful language for describing entre-
preneurial opportunity is a matter of debate in the field (McMullen and Shepherd 2006). In this
paper I take no particular position on this issue.
3 Throughout, I assume all opportunities are uncertain to some degree.
4 I would like to acknowledge the wisdom of an anonymous reviewer in pointing out the many dif-
ferent types of complex behaviors exhibited in evolving systems, and the possibility that a deeper
understanding of these different patterns of behavior may indicate that some cases of serendipity
are not, in fact, serendipitous, but may be predictable consequences of the behavior of the system.
5 I am grateful to Raghu Garud for pointing out this issue to me.

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Nicholas Dew Nick Dew is an Assistant Professor of Strategic Management at the Naval Postgraduate
School, Monterey. His research focuses on entrepreneurial cognition and industry evolu-
tion. He has a PhD in management from the University of Virginia and an MBA from the
Darden school. Before entering academia, he spent eight years working internationally in
the oil industry. His work has been published in several academic journals, including the
Journal of Marketing, Strategic Management Journal, the Journal of Business Venturing,
the Journal of Business Ethics and Organization Studies. He has received the Louis D.
Liskin award for teaching excellence at NPS.
Address: Graduate School of Business and Public Policy, Naval Postgraduate School,
Monterey, CA 93943, USA.
Email: ndew@nps.edu

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