Entrepreneurial experience and opportunity identification : the role of intuition and cognitive versatility

Abstract

The issue of “why, when and how” some people, but not others, discover opportunities is central to our understanding of entrepreneurship. Although there is a growing body of research in this area, opportunity identification remains an ongoing phenomenon of interest as many questions remain unanswered. One important question concerns the effects of experience on opportunity identification. Research suggests that entrepreneurs become more adept at identifying opportunities as they gain experience, but the cognitive processes underlying this relationship remain unclear. This study explores this gap in the literature by addressing the following research question: To what extent can the relationship between entrepreneurial experience and opportunity identification be explained by cognitive strategy? Guided by sound theoretical principles (Cognitive-Experiential Self- Theory) and by a critical review of the scholarly literature, this study argued first, that intuition is a key process that links experience to an enhanced ability for opportunity identification, and second that intuition is most effective when used together with analysis in a versatile cognitive strategy – an approach characterised by high levels of both intuition and analysis, and an ability to switch between them as needed. Building on these arguments, this study develops and tests a model in which intuition and cognitive versatility are hypothesised to mediate the relationship between experience and opportunity identification. Seventy-four technology-entrepreneurs completed a think-aloud protocol analysis exercise in which they generated potential business ideas for three innovative technologies. In addition, they completed an online survey that was designed to control for factors which may influence intuition, cognitive versatility and/or opportunity identification, namely cognitive style, risk perception, risk propensity, and entrepreneurial experience. The model was tested by integrating the survey data with the coded and quantified protocol data in a series of regression and mediation analyses. Consistent with prior research, this study found that experienced entrepreneurs are more proficient than novices at identifying opportunities. Extending previous research, this study shows that intuition and cognitive versatility mediate the relationship between experience and opportunity identification. Not only do experienced entrepreneurs use their intuition to help them identify potentially lucrative opportunities, they also employ a process of analysis to complement their intuition and to ensure that this intuition is not leading them astray. Overall, these results suggest that scholars need to consider cognitive versatility, rather than simply looking at intuition or analysis in isolation, and to think about how this can be shaped to benefit opportunity identification