Discovery and Exploitation

Entrepreneurship is concerned with the discovery and exploitation of opportunities for economic value creation. The opportunity can be in the form of new goods, services, raw materials, business models, or different organizing methods that can be exploited for profit. The term discovery implies the awareness or realization of potential opportunities and is based on two primary modes: search and recognition. Exploitation implies that the entrepreneur realizes a means-end relationship to utilize the discovered opportunity for profit. An embedded causal relationship exists between discovery and exploitation.

Entrepreneurial opportunities and their discovery are often distinguished from opportunities in general, since entrepreneurial opportunities are typically restricted to novel and/or new approaches to relationships and business models. Hence the refinement of existing models, improvements in processes to increase efficiency, and the like do not fall under the purview of entrepreneurial opportunities. An entrepreneurial opportunity, when discovered and exploited, typically results in a new means, ends, or means-end relationship.

Scott Shane and S. Venkataraman suggest that the discovery of entrepreneurial opportunities materializes as a result of (1) the existence of prior information regarding the opportunity or similar opportunities, and (2) individuals or teams that possess the necessary cognitive properties to evaluate the opportunity. Prior information, as referred to above, includes experience of the individual or the firm, the stock of knowledge acquired by the firm through market interactions, and research and developmental expenses incurred in the past. The discovery of an opportunity can also be due to a deliberate search for an opportunity. That opportunities exist and can be openly discovered implies that entrepreneurs know ex ante what they are seeking. The existing capabilities of a firm enable the discovery of new entrepreneurial opportunities and the exploitation of these discoveries in novel ways. In addition, the idiosyncratic information and experience allow certain individuals or firms to evaluate and exploit information more fully and better determine if and how to exploit the opportunity. Essentially, these opportunities enable the firm to create the means, ends, or both in the process of exploitation.

Adequate cognitive capabilities enable the entrepreneur or firm to assess the potential value to be created through an opportunity and/or the opportunity's (un)attractiveness. It is this combination of prior information and the cognitive capabilities of the entrepreneur that enables the evaluation and exploitation of these opportunities. This prior knowledge enables the entrepreneur to make sense of the patterns that emerge in the external environment and assimilate the new information. Jointly, the processes of discovery, evaluation, and exploitation allow the creation of new products and services.

Discovery is realized in multiple ways. The various types of discovery include the identification of valuable products and services, new markets (geographic or demographic), new ways of organizing and/or structures, new methods of production, and new raw materials. In addition, while theoretically achievable at the individual level, the process of opportunity discovery normally stems from the mutual contribution of various actors. Thus, the discovery process is a function of numerous resources (tangible and intangible) that are effectively identified and combined, resulting in the recognition of market opportunity.

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