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Business opportunity is defined as the driving force that creates entrepreneurship, change and growth in both SMEs and multinational firms. Business networks provide opportunities and competitive advantage but they also impose constraints on firms. This volume connects opportunity detection with business networks to explore the impact of this combination on the competitive strategies of firms. It will be of use to researchers and PhD candidates working in the field of entrepreneurship, networks, and competitive strategies and advantages.



Introduction: Opportunity Development in Business Networks

Introduction: Opportunity Development in Business Networks

During the last few decades entrepreneurship has attracted a growing interest in both the business world and academia. It seems to be a general agreement that accelerating technological development and globalization require that national economies and industries grow rapidly enough to be competitive in this new world order. It is also believed that entrepreneurship is critical in promoting the necessary industrial growth and development. Opportunity is one of the core concepts in the entrepreneurship literature since it is generally assumed that opportunity seeking has a central role in entrepreneurship. The objective of this volume is to explore some issues in the landscape of business opportunity. Our exploration aims at examining business opportunity in a network perspective. The reasons are that cooperative inter-firm networks are frequently said to be effective in managing the forces of technological development and globalization, and that research has demonstrated that firms are engaged in networks of interconnected relationships.
Amjad Hadjikhani, Pervez Ghauri, Jan Johanson

Opportunity Development in Business Networks: Conceptual Development


1. Opportunities, Relational Embeddedness and Network Structure

The thesis of this chapter is that the characteristics of the business network surrounding the firm have a profound impact on how the firm finds and exploits opportunities. Characteristics of networks and relations between network actors have been increasingly researched during recent decades (see e.g. Dyer and Chu, 2000; Grabher, 1993; Granovetter, 1985, 1992; Gulati, 1998, 1999; Gulati et al., 2000; Håkansson and Snehota, 1995; Halinen and Törnroos, 1998; Kogut, 2000; McEvily and Zaheer, 1999; Rowley et al., 2000; Uzzi, 1996, 1997; Zukin and Di Maggio, 1990). In parallel, a wide and strong tradition of research has emerged on the nature of opportunity, especially among entrepreneurship researchers (see e.g. Ardichvili et al., 2003; Eckhardt and Shane, 2003; Shane, 2000). We aim to combine these two traditions and seek to develop a model for analyzing the relation between different types of opportunities and different types of relationships and networks. Entrepreneurial behavior and social networks have previously been explored (Ardichvili et al., 2003; Ellis, 2000; Jack and Anderson, 2002; Kenney and Goe, 2004; Simsek et al., 2003). These studies have observed that there seems to be a relation between finding an opportunity and the characteristics of the social network, but to our knowledge there are no studies investigating the character of relationships and network configurations and how it influences the firm’s way of finding and exploiting opportunities.
Ulf Andersson, Desireé Blankenburg Holm, Martin Johanson

2. The Importance of Competition and Cooperation for the Exploration of Innovation Opportunities

The business landscape is continuously changing. Markets as well as technologies develop, sometimes rapidly, as innovations destroy old technologies and disrupt markets, at times incrementally, while products and processes are adjusted and refined (see e.g. D’Aveni, 1994; Hamel and Prahalad, 1994; Makadok, 1998; Nagarajan and Mitchell, 1998). Consequently, the ability to explore new opportunities and develop new technology has become increasingly important. Technological development is crucial for business and market opportunities and for the competitiveness of firms in many industries (cf. Rice, et al., 2001). In this chapter, we focus on the exploration of opportunities related to technological innovations.
Maria Bengtsson, Jessica Eriksson, Sören Kock

3. International Entrepreneurial Culture, International Opportunity Perception and Pattern of International Exploitation: Towards an Integrated Model

Currently topical in international business research is the emergent field of international entrepreneurship. Interest in this topic has gained momentum in recent years, with an increasing number of articles appearing in journals and dedicated special issues (Coviello and Jones, 2004). Following the definition advanced by McDougall and Oviatt (2000) international entrepreneurship deals with the innovative, proactive and risk-seeking behavior of firms across borders. Its relevance in the modern era of globalization, wherein firms seek to achieve a competitive advantage worldwide, has escalated. It appears that Wright and Ricks (1994) could not have been more correct when they predicted that this area would become one of the most topical areas in international business.
Pavlos Dimitratos, Marian V. Jones

4. Subsidiary Business Networks and Opportunity Development in Multinational Enterprises: A Comparison of the Influence of Internal and External Business Networks

The objective of this paper is to make a contribution to understanding the nature of opportunity development within the multinational enterprise (MNEs). As explained in Chapter 1, opportunity development is broadly understood as new technological resource combinations and capability development.
Mohammad Yamin

5. Value Processes in Industrial Networks: Identifying the Creation and Realisation of Value

Production of value is an important topic among business researchers (i.e. Ramirez, 1999; Kale et al., 2001). In imperfect markets characterised by differentiation and heterogeneity, which often take the form of a network (Håkansson and Snehota, 1995), the ability to create value and then realise the value potentials can be the key to growth and well-being for the business firm, as this ability is imperfectly spread among the actors. However, in contrast to Barney (1986), Denrell et al. (2003) and Kirzner (1997), who argue that finding opportunities and producing value in relation to other actors is a result of luck, serendipity and the firm’s alertness, we maintain that the industrial network has its own logic, which is understandable to those who participate in, or otherwise have experience with, the network. Taking not only the firm or the dyad into consideration but also the network of firms and relationships, we argue that the mechanism behind what produces value is better understood if we separate the value process into two parts: value creation and value realisation. Creating and realising value is not a random process experienced only by the lucky few, nor is it a process that is isolated from other actors in the network. Rather, it is a process for those who have patience, experience in relations with other actors, and knowledge about the use of complex resource constellations.
Martin Johanson, Torkel Strömsten

Opportunity Development in International Business


6. Business Opportunities, Subsidiaries and Interpreneurial Activity

Although the concept of opportunity is frequently used, it is still rather vague. In the introductory chapter it was suggested that ‘opportunities should be studied as some kind of process in which the opportunity is found and realized’ (p. 3) and that business network theory might have something important to say about this. It was also indicated that this concept could be seen as a new and advantageous combination of resources. In this chapter we will discuss how subsidiaries within multinational companies (MNCs) may detect and exploit business opportunities. In order to detect and exploit such opportunities, two antecedent conditions are necessary: specific market knowledge that is novel and relevant to the subsidiary’s technological knowledge, which include both embodied (specific technology such as innovations, production processes, and products) and un-embodied form of knowledge. When these two conditions are fulfilled, a business opportunity might be detected and subsequently exploited. Below, we will further discuss this by drawing on both entrepreneurial theories and business network theories.
Cecilia Pahlberg, Magnus Persson

7. International Experience and the Recognition of Business Opportunities in Foreign Markets — A Study of SME’s International Experiences and Choice of Location

International expansion of business firms has often been seen as a choice among various international investment opportunities (e.g. Young, 1989). These investment opportunities are characterised by different probability distributions of returns that are initially unknown. As the firm acts, more information about returns is gathered and the firm gains a clearer picture of the alternatives (Arrow, 1974; Radner, 1979; Radner and Rotschild, 1975). The decision maker is supposed to choose the investment opportunity with the highest expected return, unless that opportunity poses a higher risk. Risk is a variation in outcome that can be calculated and considered when deciding. There are, however, several problems with this view of optimal decision-making behaviour. For example, managers do not consider all alternatives; they tend to search in the vicinity of the current problem (Cyert and March, 1963). Moreover, people assess the same situation differently which means that risk is in the eye of the beholder.
Jukka Hohenthal, Jessica Lindbergh

8. Opportunities of Being Multinational: A Study of Organizational Rejuvenation, Relationships and Knowledge

In the global environment of this century, numerous multinational enterprises (MNEs) across practically all industries consider the pursuit of entrepreneurial opportunities by taking entrepreneurial actions as the critical means of competitive advantage (Kuratko et al., 2001). When taking place within large established enterprises, these actions are labelled corporate entrepreneurship (Covin and Miles, 1999; Dess et al., 2003; Sharma and Chrisman, 1999).
Maria Adenfelt, Katarina Lagerström

9. Learning across the Border? Innovations, Knowledge Sharing, and Business Opportunities in MNCs

Much has been written on the importance, benefits and pitfalls of inter-organisational learning and knowledge management (KM) among networked organisations that aim to enhance their competitive advantage through complementary inter-organisational relationships and activities. These networked organisations typically include suppliers, clients and competitors who are related to each other through their involvement, often at different stages, in a certain product, service, or business process. By comparison, little attention has been given to issues related to knowledge transfer and intra/inter-organisational learning among multinational corporations (MNCs) as a specific networked organisational form. This is despite the fact that MNCs, be they in the manufacturing or service sectors, make up an increasingly large proportion of business forms in today’s globalising economy. There is insufficient understanding on, for example, what MNCs do to plug into local centres of technological competence; what strategies and processes they use to co-ordinate and manage their dispersed subsidiaries across both national and organisational borders for the globalisation of locally held knowledge; and the extent to which establishment managers display corporate entrepreneurship by exploiting innovations taken place elsewhere in the MNC and turn them into business opportunities for their own establishment.
Fang Lee Cooke

10. Network Opportunities and Obstacles in Mergers and Acquisitions: The Role of Resource Embeddedness

Firms engage in mergers and acquisitions (M…As) in order to exploit and realise profit opportunities (Kirzner, 1997). According to the literature on M …As, these opportunities can implicitly be divided into Run-related opportunities and industry-related opportunities. Firm-related opportunities are concerned with exploiting managerial synergies, such as redundant functions or activities once two firms have merged (Sudarsanam et al., 1996). Industry-related opportunities concern the positive effects that a firm can obtain by changing or stabilising the structure of its industry: for example, taking over a firm producing a hostile substitute product (Porter, 1980, 1985).
Enrico Baraldi, Torkel Strömsten

11. Reputation as Opportunity and Risk

For years, Enron was the peacock of Wall Street. In the era of deregulation, Enron was transformed from a boring pipeline operator to a risk-taking, worldwide trader of many different products. Enron was hailed as the business model of the future and Arthur Andersen was its auditors and supporters. On 16 October 2001, Enron released its disastrous third-quarter financial report, revealing more than $600 million in losses and a $1.2 billion reduction in shareholder equity. When the market learned that Enron made great losses and top managers had been profited for years at the company’s expense, Enron’s stock price and credit rating spiraled downward. Enron was soon filed for bankruptcy.
Carin Eriksson, Jan Lindvall

Opportunity Development and Networks


12. The Role of Business Opportunity Mediators in the Entrepreneurial Process

The dynamics of economic development in society stems from the actions of entrepreneurs starting new firms or make existing firms grow. Entrepreneurs are often depicted as strong individualists with an exceptional vision for profitable ventures or business opportunities (Baron, 1998; Stewart et al., 1998). As omnipotent observers, entrepreneurs are seen as choosing wisely from amongst various business proposals and proceeding to exploit clearly defined business opportunities from the most promising ventures. Even when the entrepreneur deviates from the original plan, they adjust to changes in the environment (Das and Teng, 1997). The classic idea of the entrepreneur is that of the self-made man, who started doing business at a young age and, by taking calculated risks, is able to turn almost any venture deemed worth pursuing into a winner (Smilor, 1997). However, this image is a myth, in stark contrast with how business opportunities are identified and exploited in real life.
Björn Berggren, Lars Silver

13. Opportunity Development for Ongoing Business Relationships

Seizing the opportunity often takes the key role in innovation, change and long-term success in business. The opportunity is, in that respect, something valuable occurring in the market which can be discovered and put to use by a company with the capability to do so. For a company, this means being active in the market and employing the entrepreneurial function to realize the opportunity and to change its operations accordingly. We argue that certain opportunity development can only be achieved through ongoing business relationships. Opportunity development means change in business relationships. Continuous change in ongoing business relationships is thus fundamental for opportunity development. But opportunity development is also contingent on input from the wider network of business relationships. Without change induced by the network connection, the ongoing business relationship risks stagnation and becoming routine, making opportunity development impossible. Against this background, the purpose of this chapter is to expand on the continuous opportunity development process in ongoing business relationships. More specifically, the aim is to explore the links between connection and change that provide the basis for opportunity development for the ongoing business relationship.
Cecilia Pahlberg, Peter Thilenius

14. Opportunities and Obstacles in Using IT Systems: Embedding Movex in Edsbyn’s Resource Network

Few technologies have been surrounded by so high expectations as Information Technology (IT). Visionaries, business consultants and academics alike regularly attributed to IT the power to open opportunities for firms to achieve efficiency and development. All this started 50 years ago, with the first applications of computers to Operations Research (Diebold, 1953; Herrman and Magee, 1953). Then, in the 1970s, IT-based ‘integrated information systems’ (Ramström, 1973: 15) offered the opportunity to monitor any contingency within a firm. However, these opportunities were not fully concretized because of social resistance to panoptical control (Zuboff, 1988: 320–4), irrelevant IT-borne information (Mintzberg, 1972) or excessive rigidity in computerized information systems (Hedberg and Jönsson, 1978).
Enrico Baraldi

15. Creating New Opportunities from Old Resources through Contextually Determined Information Asymmetries

Last time you used a credit card, did you stop to think about all the necessary activities performed, resources used and actors involved in order for you to get your money? Probably not. There are many services that we use every day without giving them a moment’s thought, and using our credit cards, either to withdraw money from an ATM-machine or to pay for our purchases in a shop, is one of them. Every time you use your card it triggers a process involving a number of activities, resources and actors. A technological change that makes your daily performance easier in small and almost unnoticeable ways — for example the fact that the electronic payments are nowadays mostly on-line, meaning that the line behind you at the register does not add up due to your choice of paying by card — can have a substantial effect on things we, as consumers, do not notice. Some of the changes that arise in a technological area, for instance electronic payments, are based on change processes started to exploit opportunities that are found because of the way the resources controlled by involved actors are combined. The necessary resources (and often even the industrial actors) behind a service of this type are normally black-boxed (Latour, 1987; Rosenberg, 1994).
Anna Bengtson, Susanne Åberg

16. The Emergence and Exploitation of Opportunities in Business Networks

Economic organization concerns the coordination and exchange of resources. An “opportunity” is commonly understood as a chance, often a product of luck, to actively coordinate so as to generate above-normal rents that would not be forthcoming without such coordination. But somewhat of a logical conundrum is inherent in the equilibrium market hypothesis, evident in the following joke: Two economists were walking down the street. One of them spotted a hundred dollar bill and told his friend, who promptly replied “Nonsense! If there were, it would already have been picked up!”. In other words, since the equilibrium market hypothesis assumes that markets are complete — that is, that with perfect information and homogenous resources, the value and price of a resource will always be correctly determined by supply and demand. This means that opportunities do not exist. Acquiring resources in the present that generate an above-normal rent stream in the future can only be attributable to luck (cf. Barney, 1989). This chapter, like this book, challenges this assumption by looking at inter-organizational interaction, the “space” where opportunities are realized.
Benjamin Ståhl

Epilogue: Opportunity Development in Business Networks

This book project was initiated by thoughts on firms’ growth and development on one hand and networks on the other. The connection is based on the belief for a need for deeper notion to understand network dynamic. Dividing the network relationship into the standardized/institutionalized which pertains to stability and the new uncertain interactions which relates to change and fluidity, the book relates entrepreneurship to the business network study. Entrepreneurship, creating new ventures, is generally assumed to be the central element in the dynamics of the market economy. The point of departure was, as Penrose (1959) states, that firms’ business activities are of two kinds, standardized and entrepreneurial. The first is to administrate the prevailing business and generate stability and the second concerns the business dynamic and change in the firms’ activities. The first one administrates market uncertainties and the next one creates new ones. Studying such behaviour is essential to understand how firms develop new markets or positions in the market. In line with these thoughts, the book focuses on business opportunity which the contributing authors have studied from different angles launching new notions. The initial idea was that the study of opportunity development should not only concern aspects like characteristics of sole individuals, as opportunity development is driven rather by interactions between individuals, groups and organizations. Actors — firms, organizations, organizational units or individuals — have previous knowledge and contribute different resources. This process contains the interrelated phases of opportunity development: recognition and exploitation.
Amjad Hadjikhani, Jan Johanson


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