The Continued Misuse of the “Opportunity” Construct

I’ve been sharply critical of the “opportunity discovery” perspective in entrepreneurship studies (e.g., here, here, and here). A post by Thomas Eisenmann on today’s Harvard Business Review’s Blog Network reminded me of these criticisms. The post elaborates on Howard Stevenson’s famous definition, entrepreneurship as “the pursuit of opportunity beyond resources controlled.” There are many problems with this definition, some discussed in an earlier post by Per. Much of the research literature, including not only my stuff but also important contributions from Sharon Alvarez and Jay Barney, Saras Sarasvathy, Per Davidsson, and others challenges the idea the profit opportunities exist, objectively, waiting to be discovered. Entrepreneurs don’t pursue “opportunities,” they pursue goals, plans, ideas, or visions, which require real resources to pursue, and which may or may not be realized.

Actually the HBS working definition of opportunities, as elaborated by Eisenmann, sounds much like the subjectively perceived goals I have in mind:

“Opportunity” implies an offering that is novel in one or more of four ways. The opportunity may entail: 1) pioneering a truly innovative product; 2) devising a new business model; 3) creating a better or cheaper version of an existing product; or 4) targeting an existing product to new sets of customers. These opportunity types are not mutually exclusive. For example, a new venture might employ a new business model for an innovative product. Likewise, the list above is not the collectively exhaustive set of opportunities available to organizations. Many profit improvement opportunities are not novel–and thus are not entrepreneurial–for example, raising a product’s price or, once a firm has a scalable sales strategy, hiring more reps.

These are just Schumpeter’s examples of innovation. They describe the entrepreneur’s plans, not anything in the objective environment. They certainly have little to do with the notion of opportunity emphasized by Israel Kirzner and adopted by Scott Shane.

Fine, you say, this is just a terminological quibble. When the HBS entrepreneurship group says “opportunities,” they mean business plans. But this is an awkward and confusing usage, one that lends itself easily to misunderstanding. Consider dictionary definitions of “opportunity.” Merriam-Webster gives us

1. a favorable juncture of circumstances (the halt provided an opportunity for rest and refreshment)
2. a good chance for advancement or progress

Or, if you prefer the Oxford English Dictionary, try this:

1. a time or set of circumstances that makes it possible to do something (increased opportunities for export; the night drive gave us the opportunity of spotting rhinos)
2. a chance for employment or promotion (career opportunities in our New York headquarters)

These definitions clearly describe outside circumstances, objective and external to the actor, not the actor’s personal, subjective beliefs. But the only reasonable meaning of entrepreneurial opportunities refers to the latter. In plain English, opportunities are not at all like “opportunities” as used by HBS.

Isn’t it time we dump the “opportunity” construct altogether?