Entrepreneurial Alertness for Everybody

Entrepreneurship is essential to economic development and prosperity.

Entrepreneurs create jobs and wealth, fuel income and economic growth, increase productivity and market competition, respond to unmet market needs, change how we live and work, and drive innovation.

But for entrepreneurship to contribute so much to the economy, entrepreneurs first have to recognize opportunity. The ability to see opportunity where others don’t is sometimes referred to as entrepreneurial alertness.

Entrepreneurial alertness suggests that entrepreneurs are better than the average person at spotting opportunities.

Beyond that, though, the concept is ill-defined.

Are entrepreneurs better at searching for opportunity, or just better at recognizing it when they stumble upon it? What specific factors affect varying levels of alertness between individuals? Is superior alertness due more to personal characteristics or environmental conditions? Is it an innate cognitive ability, or can it be developed?

Entrepreneurial alertness theories

Economist Israel Kirzner introduced the concept of entrepreneurial alertness, which he initially described as “the ability to notice without search opportunities that have hitherto been overlooked.”[1]

It has subsequently been suggested that, if Kirzner is correct, entrepreneurially alert people must have more accurate mental models than the average person. They may be habitually activating a chronic schema that gives them the ability to “notice without search.”[2]

Whereas non-alert individuals either do not detect, or ignore, or discount cues that could represent opportunity, alert individuals are prompted by a schema to recognize that changing environmental cues require situational reassessment to figure out what is really going on, and whether opportunity exists.[3]

Expanding on the schema theory approach, Dave Valliere suggests that rather than invoking a single “alertness” schema, alert entrepreneurs likely develop and apply a suite of schemata to make sense of things. Their schemata are simply different than the mental models used by the less alert.

The schemata of alert individuals are richer in value-creation attributes (schematic richness), are more strongly associated with stimuli (schematic association), and are intentionally primed for activation (schematic priming).[4]

Other research suggests that entrepreneurial alertness is largely a matter of pattern recognition. Alert individuals use mental models to “connect the dots” between changes in demographics, government policies, markets, technologies, and so on. The pattern recognition perspective does help integrate various opportunity recognition factors such as active search, alertness, and prior knowledge.[5]

Another model proposes that entrepreneurial alertness comprises three distinct elements: scanning and search, association and connection, and evaluation and judgment.[6]

The general trend seems to be toward taking a broader view of entrepreneurial alertness than Kirzner’s original definition. This allows researchers to isolate some discrete components of entrepreneurial alertness, determine some antecedents, and construct models and frameworks.

Possible determinants of entrepreneurial alertness

One of the criticisms of the concept of entrepreneurial alertness is the lack of clearly identifiable antecedents. What factors, exactly, determine whether or not we are entrepreneurially alert?

Since there is no single accepted definition or theory of entrepreneurial alertness, we will have to compile a set of possible determinants from several theories.

Some of these factors – as well as entrepreneurial alertness generally – are also discussed in my 6 Factors That Impact Opportunity Recognition post.

Many of the other factors were compiled and indicated in a systematic literature review conducted by Chavoushi et al.[7]

  • Personality traits. Optimism, creativity, self-efficacy, risk tolerance, need for achievement, need for independence, and locus of control are all traits that have been shown to affect opportunity recognition.
  • Prior knowledge. We are likely to be more alert to opportunities that relate to things we already know. Prior knowledge can spark our recognition of the opportunity value of new information.
  • Social capital. The people in our networks help us identify opportunities we might otherwise miss, and help position us to encounter more opportunities than we likely would have on our own. It’s been shown that solo entrepreneurs encounter significantly fewer opportunities than entrepreneurs with extended networks.[8]
  • Business training. At least one study has shown that business students demonstrate more confidence in their ability to be innovative and opportunity alert than non-business students.[9]
  • Entrepreneurial personality and competencies. One study found entrepreneurial alertness to be an expression of an entrepreneurial personality structure. It further found that entrepreneurial alertness could be predicted by several underlying competencies such as self-esteem, leadership, creativity, and proactivity motivation.[10]
  • Market and technical knowledge. Specialized market and technical knowledge – even when learned at the organizational level – has been shown to positively influence individual opportunity alertness.[11]
  • Cultural constraints and perceptions. Cultural constraints can strongly impact the individual’s response to opportunity. Perception of opportunity – and therefore any individual’s alertness to it – can vary widely from one culture to the next.[12]
  • Market disequilibrium. Disruptive changes brought about by new technologies, knowledge, shifting demographics, policy changes, and other market factors may trigger alertness in some individuals.[13]
  • Accuracy vs. timeliness. Opportunity recognition is time limited, so there is often more pressure to act than to be entirely accurate. This inherent tradeoff between accuracy and timeliness can impact our alertness to certain opportunities.[14]
  • Counterfactual thinking.We often engage in counterfactual thinking in response to unexpected events. We can use counterfactuals to either mentally undo unexpected events in an attempt to shift back to the usual, or we can use them to accommodate novel events. How we use counterfactual thinking can affect our alertness to opportunity.
  • Frame-breaking. Alert individuals must use their insights about disequilibrium to reconfigure their understanding of the market, industry, or society.[15]
  • Sensitivity to profit potential. Entrepreneurially alert individuals are likely more sensitive to the commercial value or profit potential of new ideas than the average person. Recognizing the future value of something may significantly impact whether it is viewed as an opportunity at all.[16]

Any number of factors aside from the dozen I discuss above might affect entrepreneurial alertness.

We all go through life with our own dreams, visions, aspirations, motivations, and mental models. Opportunities that relate to those are likely to be the ones that we are most alert to at any given time.

On the other hand, some opportunities may not relate to us much at all, but just seem so obvious that they hit us like a ton of bricks, and we can’t ignore them.

Either way, there are likely a number of factors – conscious or nonconscious, personal or situational – that contribute to a state of alertness and precede opportunity recognition.

Benefits of entrepreneurial alertness

Probably the biggest benefit of entrepreneurial alertness is that it is a prominent factor in opportunity recognition.

Lucille Ball once said, “Luck to me is hard work, and realizing what is opportunity and what isn’t.”

Highly alert people can identify opportunities with or without actively searching for them.

They are capable of recognizing disequilibria. They are willing to modify their own mental models, reframe, and change their own thought process in order to “accurately accommodate, predict, and profit from new information.” Correctly assessing new information and its implications is a goal for the fully alert.[17]

Aside from its impact on opportunity recognition, entrepreneurial alertness has several other benefits.

Here are a few of the other benefits of entrepreneurial alertness, as compiled in the Chavoushi et al. literature review:

  • Higher entrepreneurial alertness can enhance the intention to become an entrepreneur.
  • Self-perceptions of alertness are related to the number of ideas and opportunities recognized by entrepreneurs.
  • Entrepreneurial alertness is related to people’s confidence in innovation and their entrepreneurial capabilities.
  • Entrepreneurial alertness can increase entrepreneurial growth expectations.
  • Entrepreneurial alertness can increase the positive relationship between entrepreneurial passion and entrepreneurial orientation.[18]

Can entrepreneurial alertness be learned?

Robert Baron suggests that rather than simply being taught how to be more “alert” to opportunities, people can be taught to search for opportunity in the best places and in the best ways.

People can also be taught to identify important market changes, as well as ways in which such shifts and changes are linked or connected. Focusing on highly relevant factors and the connections between them will allow people to spot emergent patterns within specific domains.[19]

Also, any personal attributes that we can isolate as being relevant to entrepreneurial alertness, we can work on.

We can learn to be more optimistic, we can expand our personal and professional networks, we can gain knowledge, we can receive specialized training, we can transcend cultural constraints, and we can change our thinking and our perspective.

Opportunity recognition is key for serendipity, and entrepreneurial alertness significantly impacts opportunity recognition. If we can become more fully alert individuals, we will become more serendipitous.

Notes

1. Israel M. Kirzner, Perception, Opportunity, and Profit: Studies in the Theory of Entrepreneurship (Chicago: University of Chicago Press, 1979), 48.

2. Connie Marie Gaglio and Jerome A. Katz, “The Psychological Basis of Opportunity Identification: Entrepreneurial Alertness,” Small Business Economics 16, no.2 (March 2001): 97-98. https://doi.org/10.1023/A:1011132102464

3. Ibid, 98.

4. Dave Valliere, “Towards a Schematic Theory of Entrepreneurial Alertness,” Journal of Business Venturing 28, no. 3 (May 2013): 430. https://doi.org/10.1016/j.jbusvent.2011.08.004

5. Robert A. Baron, “Opportunity Recognition as Pattern Recognition: How Entrepreneurs ‘Connect the Dots’ to Identify New Business Opportunities,” Academy of Management Perspectives 20, no. 1 (February 2006): 104. https://doi.org/10.5465/amp.2006.19873412

6. Jintong Tang, K. Michele (Micki) Kacmar, and Lowell Busenitz, “Entrepreneurial Alertness in the Pursuit of New Opportunities,” Journal of Business Venturing 27, no. 1 (January 2012): 77. https://doi.org/10.1016/j.jbusvent.2010.07.001

7. Zohreh Chavoushi et al., “Entrepreneurial Alertness: A Systematic Literature Review,” Journal of Small Business and Entrepreneurship, (June 2020): 10-11. https://doi.org/10.1080/08276331.2020.1764736

8. Gerald E. Hills and Robert P. Singh, “Opportunity Recognition,” in Handbook of Entrepreneurial Dynamics: The Process of Business Creation, ed. William B. Gartner et al., 263-264. Thousand Oaks, CA: Sage Publications, 2004.

9. Justin B. L. Craig and Debra Johnson, “Establishing Individual Differences Related to Opportunity Alertness and Innovation Dependent on Academic-Career Training,” Journal of Management Development 25, no. 1 (2006): 36. https://doi.org/10.1108/02621710610637945

10. Martin Obschonka et al., “Entrepreneurship as a Twenty-First Century Skill: Entrepreneurial Alertness and Intention in the Transition to Adulthood,” Small Business Economics 48, (2017): 487. https://doi.org/10.1007/s11187-016-9798-6

11. Rong Ma and Yen-Chih Huang, “Opportunity-Based Strategic Orientation, Knowledge Acquisition, and Entrepreneurial Alertness: The Perspective of the Global Sourcing Suppliers in China,” Journal of Small Business Management 54, no. 3 (2016): 964. https://doi.org/10.1111/jsbm.12222

12. Leo-Paul Dana, “Self-employment in the Canadian Sub-Arctic: An Exploratory Study,” Canadian Journal of Administrative Sciences 13, no. 1 (2009): 75. https://doi.org/10.1111/j.1936-4490.1996.tb00102.x

13. Bahare Ghasemi and Aligholi Rowshan, “Early Warning: The Role of Market on Entrepreneurial Alertness,” Journal of Intelligence Studies in Business 6, no. 2 (2016): 36. https://doi.org/10.37380/jisib.v6i2.171

14. Ibid, 37.

15. Ibid, 38.

16. Ibid, 39.

17. Gaglio and Katz, “Psychological Basis,” 105.

18. Chavoushi et al., “Literature Review,” 16-17.

19. Baron, “Opportunity Recognition,” 116.

Scroll to Top