Copyright © 2008 Strategic Management Society

Strategic Entrepreneurship JournalStrat. Entrepreneurship J., 2: 171–173 (2008)

Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/sej.52

OPPORTUNITIES, ORGANIZATIONS, AND ENTREPRENEURSHIP

SHARON A. ALVAREZ* and JAY B. BARNEYFisher College of Business, The Ohio State University, Columbus, Ohio, U.S.A.

Phenomena, theories, phenomena—the focus of research in an emerging fi eld often evolves through these three different phases as it grows and becomes established.

Initially, scholars in these emerging fi elds focus on describing a phenomena that doesn’t seem to fi t with pre-existing paradigms (Kuhn, 1970). This descriptive work is essential if the dimensions along which these phenomena vary are to be understood. Good science often begins with good description.

Over a period of time, after the phenomenon in question becomes more completely described, schol-ars shift their attention from simply describing phenomenon to explaining their existence and behavior. Early on, this is usually done by borrowing and modifying theories and frameworks developed elsewhere and applying them in this new emerging fi eld. But this borrowing and modifying is usually not fully satisfactory. If it was possible to fully explain new phenomena with borrowed and modi-fi ed theories, it would not have been necessary for scholars to leave those pre-existing paradigms in the fi rst place.

Thus begins an often long search for theories and models that, while not necessarily inconsistent with prior work, are nevertheless distinct enough to be clearly identifi ed with the emergence of a new fi eld. After many years of development and refi nement, these new theories and models take on many of the attributes of a paradigm (Kuhn, 1970).

Ironically, once a paradigm is well established, questions of theory and theory development are less important. Rather, the fi eld shifts its attention to studying phenomena, fi rst, to examine the subtle and nuanced implications of a paradigm, and, later, to test the boundaries of a paradigm. As phenomena emerge that don’t seem to fi t well with the received view, a new fi eld or area of research may emerge, and the process of scientifi c renewal begins again.

Different fi elds in the study of business are in different stages of this development process. For example, it can be argued that organizational behav-ior and fi nance—with their emphases on careful measurement, replication, and rigorous methodol-ogy—have many of the attributes of fi elds that are in the third phase of development. Strategic manage-ment, over the last 20 years or so, has moved from the fi rst to the second phase of development, and is currently developing theories that are more uniquely strategic in nature.1

Entrepreneurship, on the other hand, seems to be moving from the fi rst to the second phase—from an emphasis on describing entrepreneurial phenomena to an emphasis on developing theories to explain entrepreneurship and its implications. First signaled in Gartner’s (1988) seminal article, Who Is the Entrepreneur? is the Wrong Question, this transition became even more clearly stated in Venkataraman’s (1997) article titled The Distinctive Domain of Entre-preneurship Research. In that article, Venkataraman suggests that the central question in entrepreneurship

*Correspondence to: Sharon A. Alvarez, Fisher College of Business, The Ohio State University, 2100 Neil Avenue #850, Columbus, OH 43210, U.S.A. E-mail: Alvarez_42@cob.osu.edu

1 For a different view of the fi eld of strategic management, see Hambrick (2004) and Hambrick and Chen (2008).

172 S. A. Alvarez and J. B. Barney

Copyright © 2008 Strategic Management Society Strat. Entrepreneurship J., 2: 171–173 (2008) DOI: 10.1002/sej

is ‘seeking to understand how opportunities to bring into existence future goods and services are discov-ered, created, and exploited, by whom, and with what consequences’ (Venkataraman: 120).

Not surprisingly, as the fi eld of entrepreneurship has begun this transition from the description of phenomena to the development of theory, scholars in the fi eld have tended to rely on either classical contributions by well-established scholars (e.g., Hayek, Mises, Schumpeter, Knight, Kirzner) or have tested theories originally developed in other fi elds (e.g., strategic management) in an entrepreneurial context. Only recently have entrepreneurial scholars begun to develop theories that could be character-ized as more uniquely entrepreneurial in nature.

One area where this kind of theory has begun to develop concerns the formation of different kinds of entrepreneurial opportunities—where do they come from, how do they differ, and do these differences have implications for those who seek to exploit them?

One approach to answering these questions focuses on the role of exogenous shocks to a market or industry that lead to the formation of competitive imperfections in those markets or industries (Brealey and Myers, 1988; Evans and Jovanovic, 1989; Khilstrom and Laffont, 1979). Such shocks can come from any of a variety of diffi cult to anticipate changes in technology, consumer preferences, or some other attributes of the context within which a market or industry exists (Kirzner, 1979). If discov-ered and then exploited, these exogenously formed opportunities can sometimes generate economic profi ts (Casson, 1982).

From the perspective of those seeking to exploit them, opportunities created by exogenous shocks to a market or industry appear as real and objective phenomena—like lost luggage in a train station—just waiting to be discovered and exploited. Indeed, these discovery opportunities play such a central role in this view of the opportunity formation and exploitation process that this view, in the entrepre-neurship literature, has been labeled discovery theory (Shane, 2003).

Another view about where opportunities come from suggests they are created endogenously by those seeking to generate economic profi ts who act to create them (Aldrich and Ruef, 2006; Alvarez and Barney, 2007; Gartner, 1985; Miller, 2007; Weick, 1979). That is, in this view, actors themselves can be the source of competitive imperfections in a market or industry. Far from being lost luggage in a

train station waiting to be discovered and exploited, in this perspective, opportunities that are exploited may not have existed until they were created by the actions of those seeking to generate economic profi ts. This view of opportunity formation has been labeled creation theory (Alvarez and Barney, 2007).

The purpose of this special issue, Opportunities, Organizations, and Entrepreneurship, is to further understand the implications of the study of opportu-nities for the broader literature on organizations. The fi ve articles in this issue include a variety of approaches to understanding opportunities.

The fi rst article, by Klein, Opportunity discovery, entrepreneurial action, and economic organization, reviews and critiques the discovery approach to opportunities by examining the microfoundations that led to the discovery approach. The article then goes on to suggest that more grounded approaches to understanding entrepreneurial action might be a more fruitful way of examining entrepreneurship.

The second article, by Foss and Foss, Understand-ing opportunity discovery and sustainable advan-tage: the role of transactions costs and property rights, suggests that opportunity discovery should be integrated with strategic management theory and builds a framework to this end. The key argument in this article is that property rights and transactions costs are important antecedents of opportunity discovery.

The third article, by Eckhardt and Ciuhta, Selected variation: the population-level implications of mul-tistage selection in entrepreneurship, examines the population-level implications of micro level theories of entrepreneurship. The actions of those who seek to organize opportunities, as well as the hurdles they must overcome to successfully exploit them, give rise to an evolutionary multistage selection process. The article indicates that the consideration of selec-tion events and how they relate leads to a more complete understanding of the entrepreneurial process.

The fourth article by Mitchell, Mitchell, and Smith, Inside opportunity formation: enterprise failure, cognition, and the creation of opportunities, focuses on creation types of opportunities and exam-ines how entrepreneurs cognitively frame the fail-ures that are an essential part of this process. In this way, these authors link the emerging literature on entrepreneurial cognition with research on the formation and exploitation of opportunities.

The fi nal article by Zahra, The virtuous cycle of discovery and creation of entrepreneurial

Introduction 173

Copyright © 2008 Strategic Management Society Strat. Entrepreneurship J., 2: 171–173 (2008) DOI: 10.1002/sej

opportunities, focuses on entrepreneurial activities within technology-based established companies and shows how and why certain contexts are more con-ducive for discovery while others promote the dis-covery and creation of opportunities. The article suggests a virtuous and dynamic cycle where dis-covery enriches creation which, in turn, fosters the discovery of new opportunities.

The goal of this and the next special issue is an ambitious one—to help complete the transition of entrepreneurship from a phenomenon-driven fi eld to a fi eld with its own theoretical debates. We have chosen work on opportunities—where they come from, how they are exploited, and their impli-cations for entrepreneurial actions and organiza-tions—as a way to continue to facilitate this evolution. Not all the articles in this issue agree. But, that is the point. To mature as a fi eld, entrepreneurship needs to experience the spirited debates that are likely to characterize its academic adolescence. Let the debates begin.

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