Presented by Sojourner Grace

Opportunity based approach to International Entrepreneurship

International entrepreneurship (IE) “the discovery, enactment, evaluation and exploitation of opportunities across

national borders to create future goods and services”. Oviatt and McDougall (2005).

OBA

An Opportunity Based Approach to IE

The opportunity-based approach (OBA), suggests that the process of internationalization itself may be viewed as the formation and exploitation of international entrepreneurial opportunities.

The OBA differs from the conventional IE approaches which emphasize the process of firm internationalization and stages of internationalization because the OBA focuses on the entire process of prospection, opportunity formation, decision, and exploitation, and regards internationalization as an end process.

It is the entrepreneur, using prospection, which forms entrepreneurial opportunities and makes the decision to exploit them through the firm

Cont…..

 

OBA Prospection Opportunity Formation

Opportunity Decision

Opportunity Exploitation

(Internationalization)

Prospection

The OBA recognizes the important role of the entrepreneur in the formation of, and the decision to, pursue entrepreneurial opportunities.

Prospection This entrepreneurial ability to create the imagined future. It is by prospection that the entrepreneur creatively

imagines the possible combinations of firm capabilities and market opportunities to form entrepreneurial opportunities.

Creative imagination This the imagination that creates or fabricates and

extrapolates from context, sifts out and disregards elements from the confusing welter of experience that would otherwise distract effort and blur focus.

Opportunity Formation

According to the Webster’s New World Dictionary (1990) an opportunity is a combination of circumstances favorable for the purpose.

In the context of an entrepreneurial opportunity, the combination of circumstances can be favorable for the purpose of formation of economic value such as: creation of future goods and services, inputs, resources, and ways of organizing and creating future economic artifacts.

Such circumstances must be located inside the firm from which the (potential) economic

value is formed (firm capabilities) and outside the firm i.e. in the market where the

economic value is realized (market opportunities).

Are opportunities like mountains just waiting to be discovered and exploited or mountains to be built?

Opportunity formation

Opportunity Formation

Discovery theory Creation theory (the creative view of

Venkataraman (2003) According to (Endres and Woods, 2007)

Opportunities, are not just discovered; they are created.

Topology of Entrepreneurial opportunity formation

Shows how an entrepreneur forms entrepreneurial opportunities through opportunity discovery and the dimensions of opportunity creation, namely: opportunity discovery, opportunity development, opportunity construction, and opportunity creation.

See table next slide

 

Market Opportunities

 Current New

Firm Capabilities Current

1

Opportunity Discovery

3

Opportunity

Construction

New

2

Opportunity

Development

4

Opportunity Creation

Entrepreneurial Opportunity Formation Quadrant

Opportunity discovery (quadrant 1). The perception by an entrepreneur of an existing entrepreneurial opportunity (where both firm capabilities and market opportunities exist) CBA, a New Zealand firm to Australia on account of Australian partners ready to distribute its products.Opportunity development (quadrant 2). The development of new firm capabilities to pursue a current market opportunity. (e.g. export order or market demand)

Opportunity Formation

Opportunity construction (quadrant 3). The construction of a new market opportunity

when a firm has the present ability e.g SPEA Software AG engaged in opportunity construction to venture abroad. Relying on its capabilities to manufacture computer graphic boards, it entered international markets without waiting for customer orders to be in place

Opportunity creation (quadrant 4) The creation of both new firm capabilities and a

new market opportunity.

The impact of entrepreneurial formation

On opportunity decision Quadrant 1-quick. Quadrant 2&3-medium. Quadrant 4-complex and overwhelming. On opportunity Exploitation(Speed) Quadrant 1-Rapid. Quadrant 2-differs(depends on complexities in

developing firm capabilities. Quadrant 3-differs ( depends on challenges in

constructing he market opportunity. Quadrant 4 Longer.

At the heart of firm internationalization is the formation and exploitation of entrepreneurial opportunities.

Firm internationalization

Opportunity Exploitation/Internationalization

OBA views firm internationalization as dynamic ,non deterministic and non linear.

Seeks to integrate all IE approaches. Stages/process approach (The Johanson/Vahine

1977/1990 Internationalization model). The Network approach (Johanson and Mattson

1988). The Resource based approach(Bloodgood et al.

1996). The Knowledge Approach(Autio et al. 2000;

McNaughton 2001).

Shortcomings and criticisms to the above approaches

Some firms do not always internationalize in a step-by-step fashion.

Firm internationalization is not always linear and deterministic. Firms adopt entry modes that suit the potential market opportunities

In order to overcome resource constraints, firms by internationalize only parts of their value chains (Oyson and Whittaker 2010),

Others internationalize by setting up an international office with just one sales staff, aggressively using the internet to solicit foreign accounts from their home countries.

Cont....

Some are pulled into foreign markets by foreign distributors/agents in an opportunistic manner with no experimental knowledge

In general the increasing emergence of international

new ventures (INV’s) that internationalize at or near inception and because of their newness they are typically not part of industrial networks, with no or limited resources and knowledge has led to the second theory of internationalization i.e. the international new venture theory -Born global. (McDougall et al. 1994; Oviatt and McDougall 1994).

conclusion

Other than focusing on the process of internationalization and its stages, the OBA goes beyond and looks at the whole process which includes Prospection, Opportunity Creation, Opportunity decision, and Opportunity Exploitation. Therefore there is a need to understand E in IE by bringing the entrepreneur back into international entrepreneurship, as there can be no international entrepreneurship without the entrepreneur for it is the entrepreneur who discovers, enacts, and evaluates opportunities, and who decides whether the firm should exploit international opportunities.