Opportunity Discovery, Problem Solving and a Theory of the Entrepreneurial Firm

23 Pages Posted: 9 Nov 2007

See all articles by Chihmao Hsieh

Chihmao Hsieh

Yonsei University

Jack A. Nickerson

affiliation not provided to SSRN

Todd Zenger

University of Utah


When should an entrepreneur employ a market to help discover and exploit opportunities, and when should the entrepreneur create a firm to do so? If a firm is created, how should it be organized? In this paper we argue that opportunities equate to valuable problem-solution pairings, and that opportunity discovery relates to deliberate search or recognition over this solution space. As problem complexity increases, experiential (or directional) search via trial-and-error provides fewer benefits, and cognitive (or heuristic) search via theorizing becomes more useful. Cognitive search, however, requires knowledge sharing, when knowledge is distributed among specialists, that is plagued by a knowledge appropriation hazard and a strategic knowledge accumulation hazard. Markets, authority-based hierarchy, and consensus-based hierarchy then have differential effects on the efficiency of opportunity discovery given the complexity of the associated problem. Those entrepreneurs with exceptional capabilities of opportunity recognition can efficiently adopt authority-based governance over a wider range of complexity. We thus combine the two major modes of opportunity discovery search and recognition onto one framework that can explain different entrepreneurial organizational forms, resulting in an entrepreneurial theory of the firm.

Suggested Citation

Hsieh, Chihmao and Nickerson, Jack A. and Zenger, Todd R., Opportunity Discovery, Problem Solving and a Theory of the Entrepreneurial Firm. Journal of Management Studies, Vol. 44, No. 7, pp. 1255-1277, November 2007, Available at SSRN: https://ssrn.com/abstract=1028404 or http://dx.doi.org/10.1111/j.1467-6486.2007.00725.x

Chihmao Hsieh (Contact Author)

Yonsei University ( email )

Korea, Republic of (South Korea)

Jack A. Nickerson

affiliation not provided to SSRN

No Address Available

Todd R. Zenger

University of Utah ( email )

David Eccles School of Business
1655 East Campus Center Drive
Salt Lake City, UT 84112
United States
801 585-3981 (Phone)
801 581-7939 (Fax)

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