An exploratory study of entrepreneurial opportunity recognition of small and medium sized enterprises

As the result, a successful process of entrepreneurial opportunity recognition requires anaggregation of prior knowledge and network ties which have been nurtured for years before,along

An Exploratory Study of Entrepreneurial Opportunity Recognition of Small and Medium Sized Enterprises

Ngo Lien Thao Tran Tien Khoa Nguyen Van Phuong

International University, Vietnam National University HCMC, Vietnam

Abstract

Small medium sized enterprises (SMEs) have been playing a crucial role in enhancing theeconomic development and growth in most countries The ways in which SMEs recognize theirentrepreneurial opportunities need to be investigated This paper aims to explore differentpatterns in the processes of entrepreneurial opportunity recognition from SMEs’ founders Thestudy adopts qualitative method and conducts 16 semi-structured in-depth interviews with thefounders of currently operating SMEs to identify opportunity for entrepreneurship in Vietnam

As the result, a successful process of entrepreneurial opportunity recognition requires anaggregation of prior knowledge and network ties which have been nurtured for years before,along with the employment on either or both use of entrepreneurial alertness and marketanalysis This study proves that possessing an ability to analyze the market is as muchimportant as staying alert toward opportunities Besides, a level of creativity of entrepreneurswill be triggered to respond to situations in which the entrepreneurial opportunities arise.However, founders of SMEs generate more adaptive style of creativity than innovative onesince being market driven

Keywords: opportunity recognition; entrepreneurship; SMEs

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SMEs are an important part of an economy and bring undeniable welfare to the society InVietnam, they account for 97% of total enterprises, of which nearly 60% are small-sized enterprises(General Statistics Office, 2017) The Provincial Competitiveness Index (PCI) 2015 survey jointlymade by attempt of Vietnam Chamber of Commerce and Industry (VCCI) along the United StatesAgency for International Development (USAID) also presented the similar figures: Among the 8,335domestic private enterprises responding to the PCI survey, 97.3% are small and medium sized.Within such diverse business environment, SMEs are the engine of economic growth in the emergingmarkets and significantly contribute to national development SMEs in Vietnam occupy more than40% of gross domestic product (GDP), contribute 31% to the total national budget and provide morethan 50% of total employment (Oxford Business Group, 2017) Moreover, SMEs’ contribution tosocial welfare security and poverty reduction in Vietnam has been widely acknowledged SMEs arenot only major sources of employment opportunity, but also foster productivity and make theenvironment become more dynamic and competitive (Audretsch, Thurik, Verheul & Wennekers,2002; Westhead, Uchasaran, & Wright, 2009) Detecting and electing the appropriate opportunitiesare the vital activities to help create successful businesses (Stevenson, Roberts, & Grousbeck,1985)

During last 20 years, many scholars have conducted numerous researches about opportunityrecognition and development from a variety of theoretical perspectives and numerous aspects likebusiness, sociology, psychology, and economics They highly contributed to the understanding ofthis field; however, opportunity recognition has borne differences and conflicts causing theinhomogeneity (Ardichvili, Cardozo, & Ray, 2003) One of the reasons is that each solely focuses ononly one of the various elements affecting the recognition of entrepreneurial opportunity Forexample, Gaglio and Katz (2001) look into the entrepreneurial alertness involved in opportunityrecognition in terms of social psychology, while Shane (2000) concentrates on the essential priorexperience and knowledge for successful recognition, then Dyer, Gregersen, and Christensen (2008)investigate the impact of innovation on opportunity The fact that scholars pay attention to specificelements ensue many full-scale studies about singular factors while neglecting an overview of allequally crucial elements and how they may engage together in the same subject of study.Furthermore, there is little agreement on the main notions used to identify and operationalize theprocess (Hansen, Shrader, & Monllor, 2011) Vagueness around how founders of SMEs recognizeopportunities for their business growth still appears in academic research, especially when SMEs arenow confronting the fast-paced transformation of technology and the world economic integration(Thai & Chong, 2008)

Disclosure of the complex developing process of opportunities recognition is the centralsection of entrepreneurship research (Venkataraman, 1997) This study is dedicated to focus

on the phenomenon of entrepreneurial opportunity recognition by founders of SMEs at theinitial start phrase of their business venture in the area of Ho Chi Minh City In terms ofacademic, this paper seeks to explore and contribute a throughout the process ofentrepreneurial opportunity recognition by SMEs In term of practical application, this papershows what SMEs need to have in hands and how potential entrepreneurs can recognizeopportunities that can turn into a profitable business by raising deeper knowledge aboutdeterminants to opportunity recognition and its related process

Literature review

Entrepreneurial opportunity and opportunity-related process

For many years, researchers have been disputing what genuinely institutes an entrepreneurialopportunity They brought about a broad category of different notions, sometimes ambiguous oreven conflicting, which

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gives rise to a substantial extent of variety in prospects (McMullen, Plummer, & Acs, 2007) Forinstance, entrepreneurial opportunity has been identified as an idea (Davidsson, Hunter, & Klofsten,2006), as an unexploited project (Casson & Wadeson, 2007), or a potential venture or business form(DeTienne & Chandler, 2007), or a realistic endeavor (DeCarolis & Saparito, 2006; Mueller, 2007).The business opportunity is considered as an objective occurrence which is outward to SMEs andderives from the extraneous environment (Shane, 2003) In contrast, some defines opportunity as asubjective happening inseparably connect with and spring from the individual’s own perception andactivities (Edelman, & Yli-Renko, 2010; Sarason, Dean, & Dillard, 2006) And other scholars havesuggested an argument that business world offers multitudinous types of opportunity (Alvarez &Barney, 2007; Sarasvathy, Dew, Velamuri, & Venkataraman, 2003).

Additionally, opportunity recognition calls for not only the opportunity itself but also thediscovering process operated by the related person While some have expressed opportunity is

a sequel of fortuitous findings (Long & McMullan, 1984), others have said that the related process would come clear (Bhave, 1994; de Koning, 1999), after a meticulous searchingeffort (Fiet, Piskounov, & Patel, 2005) In the same vein, Baumol (1993) says that in order todiscover entrepreneurial opportunity, a process to detect new means-ends relationships must

opportunity-be set up by a given change That also means entrepreneurs have to analyze and brainstorm(Gaglio & Katz, 2001), like a cognitive process (Baron, 2004) Besides, the process which leadsone to opportunity has been identically considered as a process which one generates creativity(Ardichvili, Cardozo, & Ray, 2003; Dimov, 2007; Hansen & Hills, 2004), or as an extraordinaryaction to solve a particular problem (Harper, 2008) For instance, some operationalize businessopportunity as a recently novel idea subject (DeTienne & Chandler, 2007), while the restoperationalize it as the demand from the market for a product or service that have potential tosolve a particular problem (Eckhardt & Ciuchta, 2006) In some circumstances, certainentrepreneurs possess the competence to sense and spot or even create opportunities(DeTienne & Chandler, 2007; Kolvereid & Isaksen, 2006) Or some others have an innate traitlike alertness, a special individual competency to detect opportunistic situations (Busenitz,1996; Ozgen & Baron, 2007)

Determinants affecting the entrepreneurial opportunity recognition

With the objective to recognize opportunity and start a venture formation, SMEs mustproactively involve in entrepreneurial activities from scratch Founders of SMEs are likelyperceived as entrepreneurs in the process of pursuing new business and profit which will lead

to enterprise formation (DeTienne & Chandler, 2007; Gilmore, 2011) Approaching from thebehavioral aspect of entrepreneurs, entrepreneurial opportunity search includes knowledge,alertness, intuition, creativity and social interaction By searching the pattern of adoptedactivities of owners, the process evolves into opportunity recognition Since the more turbulentand complicated the marketplace is, the more opportunities entrepreneurs are granted;entrepreneurial opportunity recognition may also come into existence from a complex series ofphenomena with different distinct parts such as innovative insight, idea exploration, informalevaluation and concept development (Webb, Ireland, Hitt, Kistruck, & Tihanyi, 2011) Orthrough the argument by Ardichvili, Cardozo, and Ray (2003), entrepreneurs undergo a processfrom observing underemployed resource or market need to disclosing a ‘match’ betweenspecific market need and certain resources; then formulating a fresh ‘match’ between the needand resources in the specific context of their businesses And the main determinantsinfluencing the above processes as well as contributors to entrepreneurial opportunityrecognition that are in need of further exploration include prior knowledge, entrepreneurialalertness, market analysis, creativity, network ties and situational elements

Prior knowledge

Knowledge plays an indispensable role to reach any sound and substantial decision-making

as well as to spot business opportunities Shane (2000) claims that because of priorknowledge, owners can perceive the

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value of new information, which leads them to the recognition of new opportunity.Venkataraman (1997) also declares that entrepreneurs recognize opportunities which areconcordant with information that they have already possessed Since information is developedthrough singular life experiences, everyone owns different stocks of knowledge andinformation It is believed that distinctive pack of prior knowledge can form a “knowledgecorridor,” which enables one to spot some certain opportunities instead of the rest(Venkataraman 1997) Shane (2000) claims that there are three main aspects of priorknowledge which are customer problems, principles of the markets, and the means to benefitfrom the markets.

In another way of classification, two types of prior knowledge are postulated by Sigrist(1999) The first is knowledge in a field of entrepreneurs’ special interest so that they willspend a tremendous amount of time and effort learning, which helps advance and deepen theirabilities, thereby gain esoteric knowledge in that specified field The other type of knowledge,which is a result of rational choice, will be accumulated over the years, while owners constantlywork in a certain job Whether derived from education or working experience or by fluke andany other ways, prior information makes a huge difference in the ability of entrepreneurs toobtain, interpret and make the most of new information in the way which those in short of thatprior information cannot duplicate (Roberts, 1991)

Based on Austrian economists, the key to open, the entrepreneurial opportunity is within thecombination of knowledge and alertness (Murphy, 2011; Vaghely & Julien, 2010) Asmentioned, when and where disequilibrium between market needs and the means to satisfythose needs arises, opportunities are just around the corner For such reason, the Austrianbelieves that alert individuals can gain new opportunities when their knowledge about marketneeds to be aligned with knowledge about the means to meet those needs (Kirzner, 1997;Shane, 2000) However, even though numerous empirical evidence embodies that priorexperience have a substantial influence on the process of opportunity recognition anddevelopment, some entrepreneurs still successfully sense and go after opportunities that theypossess no related prior experience before (Cooper, 1990)

Entrepreneurial alertness

Kirzner (1979, 1985), who is the first one to present the term ‘alertness’ into theentrepreneurship literature, describes it as “the ability to notice, without search, opportunitiesthat have been hitherto overlooked” or as “a motivated propensity of man to formulate animage of the future.” It is implied in the first interpretation that one can spot opportunitieseven when the person doesn’t intentionally seek for those In fact, when individuals possesshigh alertness, they may experience “passive search,” a condition in which they are sensible ofopportunities, without conducting any formal, systematic search On the other hand, thesecond interpretation means ability to “connect the dots” that empowers one to notice thenexus among the changes or turbulence in the marketplace and to perceive those assignificant, regardless the fact that the cause and effect of opportunity at the moment are notevident yet (Leff Bonney, & Williams, 2009) Therefore, the comprehensive dimension ofalertness can be determined as the capacity of entrepreneurs to generate a holistic depiction

of the surrounding marketplace by assembling all of its constituents and knowing theirmeanings (Endsley, 1995)

In fact, entrepreneurial opportunities may be recognized and captured by some particularindividuals instead of the rest These dissimilarities result from the heterogeneity in people’ssensitiveness to opportunities to create as well as to deliver new solutions (Ardichvili, Cardozo, &Ray, 2003), which origins from differences in people’s innate ability, background and experience,and also the amount and sort of information they own in a specific scope aligned with theopportunity Endsley (1995) asserts that some individuals are so sensible of market gaps orproblems that in any environment they find themselves, they can constantly identify possibilities ofcreating new products or services Besides that, Gaglio and Kats (2001) also contribute to

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entrepreneurship literature that alert individuals possess a greater deal of knowledge andinformation within the marketplace than non-alert individuals who may neglect or disregardfluctuations within the marketplace.

Market analysis

Actively searching for information is broadly acknowledged as a vital step during the process

of entrepreneurial opportunity recognition Nevertheless, lately, many scholars have debated ifentrepreneurs seek for opportunities and how the process of value recognition due to theincoming of new information happens to them (Ardichvili, Cardozo, & Ray, 2003) Kirzner(1997) disclaims that “What differentiates discovery (related to hitherto unknown profitableopportunities) from successful search (related to the intentional generation of informationwhich one knew one had fallen short of previously) is that the former includes the unexpectedthat accompanies along the manifestation that one had omitted something in fact readilyavailable from the beginning.” Koller (1988) also affirms that most entrepreneurs “recognize,”rather than “look for” opportunities of their enterprises Still, the possession of being market-driven or a marketing orientation is believed to be crucial to business success (Hult, Ketchen, &Slater, 2005)

SMEs which intensely depend on the professional expertise and experiential knowledge ofthe founders, along with a limited operational budget, have to be flexible to adopt suitabletradition marketing procedure which is logical and well thought out, but not entail immensefunding (Hulbert, Gilmore, & Carson, 2015) From marketing literature, founders of SMEs cantake advantage of some tools such as PEST analysis (Fifield, 1992), situation analysis, SWOTanalysis (Ansoff, 1969), marketing audit, Ansoff’s (1975) product-market matrix, Porter’s(1979) five forces model… Cravens and Piercy (2003) perceive the benefit of such evaluationtools is to clarify opportunities and gap in performance as well as to commence activities tocapitalize on those opportunities Despite the confinement by impact and size, limitedresources, and expertise, founders of SMEs can still manage to run their business, make sounddecisions and present their market offerings to the marketplace by less formal, but moreintuitive and predictive strategic planning processes (Gilmore & Carson, 2007)

Network ties

Networking is an essential business aspect, especially when SMEs have to operate along theresource constraints and impediments (Deakins, 1991; Gilmore, Carson & Grant, 2001) Hills,Lumpkin, and Singh (1997) also say that the network ties of entrepreneurs are momentous toopportunity recognition In reality, networking activities revolve around the way thatentrepreneurs operate their businesses, which refers that it can be spontaneous, casual andopportunistic (Gilmore, 2011) Consequently, the network can also be haphazard anddisjointed, including bilateral or multilateral connections among different individuals in somespecific situations

Based on Granovetter’s argument (1977), network consists of both strong and weak ties Weakties, which comprise easygoing acquaintances, are more likely to yield distinctive knowledge andideas than close friends since most people tend to possess more weak ties than strong ones in theirlives Chetty and Holm (2000) express that entrepreneurs who have broad network can improvetheir chances to encounter various opportunities, receive new information, learn from other ones’experiences, and gain values from the reciprocal effect of knowledge and resource current.Moreover, social and business networks expand the horizon of SME owner-managers, offering themeans of approaching to new and different kinds of information that would otherwise be faced(Wilkinson & Young, 2005) They do not only support the access and co-function of differentresources for further development and exploitation on entrepreneurial opportunities but also helpback up on risks management as well as the uncertainties involved (Wilkinson & Young, 2005).Furthermore, maintaining interactions with individuals in social network and looking for informationexterior the close social group will also bring about creative or unconventional idea formation (Perry-Smith, 2006)

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Creativity has been seen as a central organizational competency and a ground-breaking factor tofuture business success, especially within SMEs (Palus & Horth, 2002; Bridge, O’neill & Cromie,2003) Amabile (1997) explains entrepreneurial creativity as “the construction and implementation

of novel, yet appropriate ideas to set up a new venture.” Individual creativity within a business pays

a tremendous contribution to organizational innovation as well as a general competitive advantage(Hirst, Van Knippenberg & Zhou, 2009) Creativity involves one’s sensitiveness to the environmentalchange, inducing promotion of a high or low frequency of creative effort However, for manyinstances, entrepreneurs have a tendency to get higher score results in different creativity teststhan other individuals Schumpeter (1934) is the first scholar to put forward the argument thatbecause of creativity, entrepreneurs can benefit from the opportunities that the rest cannot Inreality, creativity is best obtained while one is in the flexible and non-predetermined state (Amabile,1983)

Meanwhile, Fillis and Rentschler (2006) claim that creative solutions do not have to becomplicated since relatively primary responses are capable of leading to the business success.Timmons (1994) adopts a viewpoint that raising a good idea is the initial step in the process ofturning an entrepreneurial opportunity into an actual business Moreover, founders of SMEs arebelieved to display either an innovative or adaptive style of creativity (Filipczak, 1997).Innovative creativity refers to activities of inventing new and different ideas, while creativityrelates to the modification of existing ideas and concepts Besides that, an appropriateenvironment or climate can facilitate and flourish entrepreneurial creativity from interactionsbetween the situation and the individual (Lee, Florida & Acs, 2004; Hunter, Bedell & Mumford,2007)

Situational elements

In many cases, the situation that entrepreneurs involve around can be the game-changing factorleading the whole process of opportunity recognition Hulbert, Gilmore, and Carson (2015) say theseexternal factors include serendipity or luck when things happen at the right moment or the rightplace, which is favorable towards entrepreneurs Getzels and Jackson (1962) suggest thedifferentiation between entrepreneurial opportunities can be clarified by the origins and developinglevel Various sources for new opportunities emerge when there is an understanding of the market,along with the business climate in which that market functions To be more specific, sources ofbusiness opportunity can directly or indirectly derive from crisis or fluctuation in the macro-environments such as society, politics, economics or technological revolution and so forth or fromthe dynamic changes within the market that SMEs operate in (Hulbert, Gilmore, & Carson, 2015)

Methodology

Exploratory qualitative research is adopted to fully discover the determinants affecting theentrepreneurial opportunity recognition process by founders of SMEs and the inter-relationshipsamong those determinants The benefit of using a qualitative approach is from its capability toseize the most of the meaning and nature of opportunity recognition process from ways oflooking by the research participants instead of an assessment about the frequency of events orresponses This approach will accommodate a framework which is driven by the researchparticipants and allow researchers to explore the complexities and the depth of phenomenaand providing valuable and insightful material regarding the recognition of entrepreneurialopportunity (Bamberger, 2000; Bryant, 2006) Besides that, such type of study is implicitlycorrect to induce credible causal explanation for further extending managerial practice(Maxwell, 2005)

The method used for collecting primary data is a semi-structured in-depth interview Thistype of method is considered to be one of the best ways to explore an individual’s behavior andattitude (Tull & Hawkins, 1990) A sample of 16 respondents who are founders of SMEs isgathered primarily based on the definition

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and qualifying criteria of Small and medium-sized enterprises (SMEs) in Law of Enterprise:Article 3, Decree 56/2009/ND-CP by Vietnam government The companies of these owners arecurrently operating within various industries and scattering at different areas around Ho ChiMinh City Moreover, all selected companies must have been running under the management

of the initial founders and successfully functioning for at least three years

In addition, the interview guide is based on the key themes developed from the literaturereview and including a part about general background information of the companies andfounders There is a set of questions to pose as well as a clear idea about what each interviewhas to cover, however, the discussion is free to alter and subject to change substantially by thetalking flow of participant Following this method, researchers can be confident that theobtained results about research participants’ thoughts and experiences are reasonablyaccurate (Fylan, 2005) Data collection was undertaken in two months, and every interviewapproximately lasted about 50 minutes each time The recorded interviews are all transcribedinto English versions; then the data is analyzed and synthesized in accordance with the themesdetermined and discussed earlier in the literature review Identical cases, along with thebackground and nature of the businesses, would be grouped together to form patterns of inter-relationships among the determinants to discern how they cohesively influence theentrepreneurial opportunity recognition

Findings

The findings of this study demonstrate how prior knowledge, entrepreneurial alertness,market analysis and network ties are extremely essential for the process of entrepreneurialopportunity recognition In addition, the use of creativity and situational elements also plays acrucial role Nevertheless, these determinants portrayed divergent levels of importance in thecompanies studied

Prior knowledge, a crucial key component in recognition of entrepreneurial opportunities,evolved from actively spending time within some specific marketplace or field of activities.Prior knowledge from the education system and experiential learning about the development ofproduct and service was found to be highly relevant to the answers of the founders in terms oftheir operating territories This proved to uphold the overall thrust of preceding researches andthe literature associated with entrepreneurial opportunity recognition In fact, prior knowledgewas conceded to be a precisely foundational factor to the process of entrepreneurialopportunity recognition by 15 interviewed founders of SMEs

The value of prior knowledge was adjacent to the significance of maintaining entrepreneurialalertness to potential opportunities and executing market analysis along with strategicplanning While alertness was viewed as a major factor in 11 cases, market analysis was notany less important in 10 out of 16 cases Thus, both factors were found to link to theentrepreneurial opportunity recognition of SMEs closely Founders who showed high level onentrepreneurial alertness exhibited the ability to spot the problems or notice the gaps withinthe market, granted they were responsive to particular sorts of opportunities or working in thefield long enough to catch sight of its pattern

On the other hand, other entrepreneurs expressed that using analytic tools enabled them toperceive available resources obviously, and recognize their pros, and cons as well as evaluate theobjectives of entrepreneurial opportunities, although many of them did not think that the analyzingprocess had to be formal, over-organized or expensive These founders intuitively and informallycollected information which was helpful for the development of product offerings and the currentmarket Unlike being proved in previous researches, founders of SMEs either utilized entrepreneurialalertness or adopted market analysis; or in this study, four entrepreneurs employed and tookadvantages of both approaches to reach sound decisions on whether they should exploit theopportunity and how they should turn it into a profitable business

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From all positive responses in 16 interviews, it was evident that network ties were anindispensable factor to the process of entrepreneurial opportunity recognition The foundersacclaimed that network ties, both weak ties and strong ties, did not only provide the newinformation and insight, but also help update the market condition Through it is eitherintentional or unintentional, many admitted to be opportunity-driven, which meant they had atendency to make new acquaintances that were beneficial to their businesses Moreover, somefounders said they received monumental assistant from family ones or long-term relationshipswhom had professional knowledge or experience during the process of discovering, evaluatingand even developing their entrepreneurial opportunities Especially, possessing a broad social

as well as business network appeared to be a prominent factor that helped foundersconfidently decide to start off their own ventures

Directly affecting the process of entrepreneurial opportunity recognition, the fourdeterminants were also conjoined with one another and put in use by entrepreneurs Frominterviews, there are four main patterns of inter-relationships in terms of the perceived relativeimportance of prior knowledge, entrepreneurial alertness, market analysis and network ties.The analysis is further described in the context that was linked to each process of opportunityrecognition by each entrepreneur

Inter-relationships among prior knowledge, entrepreneurial alertness, market analysis and network ties Prior knowledge, entrepreneurial alertness and network ties are of high

importance; market analysis is of

low importance

Six cases illustrated the application and significance of prior knowledge, entrepreneurialalertness, and network ties, while implied that market analysis was marginalized Founders ofSMEs showed that they had years of various experiences which may directly or indirectlyassociate with the spheres of their business operation, but all prior experiences appeared to behelpful Since possessing meticulous observation, sensitiveness, and knowledge in hands, theywere alert to opportunities rising within the environment For such reasons, entrepreneurs werewell-perceived of opportunities and did not need any further analysis During the process ofopportunity recognition, founders of SMEs acknowledged that they did not only get supportfrom strong network ties such as family ones and close friends but also saw network in general

as a factor that helped generate sources of income for the business Specified cases from 6SMEs are shown in Table 1

Prior knowledge, market analysis and network ties are of high importance; entrepreneurialalertness is of low importance

Five cases displayed how essential prior knowledge, market analysis, and network ties are,while entrepreneurial alertness was a minor factor In this pattern, founders of SMEs referredthey were all experts having long-term experiences in their current industries Because of thefeature of the industry and the awareness on the importance of market analysis, founders ofSMEs conducted some evaluations and form strategies by using some marketing tools It wasproved that market analysis by SMEs was mostly informal but practical and helpful Moreover,these founders did not foresee or expect opportunities or exhibit alertness towards his/heropportunities Instead, they were confident with their professional skills, along with strongnetwork ties that they could successfully function in the right market with the right targetsegment Specified cases from 5 SMEs are shown in Table 2

All four elements prior knowledge, entrepreneurial alertness, market analysis and networkties are of high importance

Four cases exhibited the presence of prior knowledge, entrepreneurial alertness, market analysisand network ties during their processes of entrepreneurial opportunity recognition Founders ofthese SMEs expressed to carry their prior knowledge along from previous employment Only onefounder from company 16 did not get education aligned with his field of current business However,

he expressed the knowledge came handy, and a businessman should flexibly take advantage of allavailable resources Market analysis also played an important role that helped redefine theavailability of opportunities, even though founders were

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alert before Once again, network ties appeared as a fundamental factor that entrepreneursneeded to have before startup Specified cases from 4 SMEs are shown in Table 3.

Entrepreneurial alertness, market analysis and network ties are of high importance; priorknowledge is of low importance

One out of 16 cases illustrated that all elements served as critical factors to recognizeentrepreneurial opportunity, except prior knowledge Founder of SMEs studied and had asuccessful management career in another business field Still, he was alert to coffee issuearound the environment and conducted some market analysis to evaluate potentialdevelopment of his future business Founder indicated using similar strategic planning processwith his business in construction He also, like other founders of SMEs, expressed a level ofimportance of possessing network ties in the business world This specified case is shown inTable 4

Utilization of creativity to capitalize on sources of

opportunities The role of creativity

16 founders fostered various shades of creativity to generate distinctively, yet applicable ideas ofproblem-solving Those were embedded in products or services of these SMEs, becoming theircompetitive advantages that differentiated their businesses from the rest For such contribution,creativity can be believed to hold an important position in the process of entrepreneurialopportunity Through this study, creativity by SMEs is identified and evaluated in terms of adaptivestyle or innovative style (Filipczak, 1997) Table 5 and 6 will respectively demonstrate further thesetwo styles of creativity within the context of each SME’s opportunity

Adaptive creativity Adaptive creativity relates to the modification of already existing ideaand concept into a new one In this case, the founders of SMEs saw the span between whatthey knew from prior knowledge and the solution in need to grasp the opportunity And theydecided to remove the span by adapting their products or services to match the demand of themarket And through all the interviews, 12 founders of SMEs implied that they adopted thisstyle of creativity

Innovative creativity Innovative creativity refers to the activities to invent a new anddistinguishing idea and concept Only four out of 16 founders of SMEs indicated that theyadopted this style of creativity The common was that these founders were all the first ones intheir field to invent these distinguished products or services

The role of situational elements

As mention in the literature review, situations that entrepreneurs were involved in could bethe game-changing factor to their businesses If the founders were not at the right time or theright place to encounter the sources of opportunities, they could not manipulate other factorsand achieve such successes Table 5-6 respectively demonstrate a brief of situations thatentrepreneurial opportunities revolved around, along with the creativity generated by SMEs Inthe following section, eight special cases of 8 SMEs in which the situational elements werehighly important, are illustrated in details

Benefit from the dynamic market In a fluctuating market such as real estate, founder ofSME 07 grasped the opportunity right at the time that this market was vigorously active afterbeing gloomy for a long time A “fever” over villas and luxury apartments in the new urban waswidely outspread This led to the need of increasing demand for advertising and marketingactivities in real estate industry If the founder started off a year earlier, then it could not workout since the market was still stagnant And in the year after, market uncertainty increased

Benefit from changes in the environment Changes in the environment can also offer numerousentrepreneurial opportunities In the cases of SMEs 05, 08 and 12, these founders noticed theopportunities arising from politic and economic changes After Vietnam government issued oramended the law and regulation, these events induced and benefited more SMEs to flourish ForSME 11, founder established his construction venture after 1 year when Vietnam officially became amember of WTO This economic change allowed his business to receive benefit from the exceedingFDI influx into construction and real estate sectors As another major change affecting every otheraspect, new technology development was found to link to SMEs

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03, 09 and 13 closely These founders sensed the potential enlargement in demand forproducts and services related to computers and technology solution in both B2C and B2Bmarkets And it is crucial to choose the correct time interval since the market needed to reach

a level of maturity to be ready to accept technology into the daily life as well as businessoperation, while the entrepreneurs were still forerunners to catch the opportunities in theirfields

Conclusions

This study intends to explore the determinants and their inter-relationships that have animpact on the process of opportunity recognition of SMEs from the first place It can beconcluded that six determinants including prior knowledge, entrepreneurial alertness, marketanalysis, network ties and situational elements have their particular role during the process.Prior knowledge and network ties that founders accumulated from previous work and studyappear to be the fundamental determinants which all founders of SMEs have to possess beforestartup Then comes the practice of entrepreneurial alertness and market analysis Founders ofSMEs exhibit to tend to take advantage of either or both determinants Entrepreneurialopportunity can be recognized through a scrupulous market analyzing either the mechanism orbeing alert to turbulences within the environment or maybe by a combination of both twodeterminants, along with the help from expertise and network The process of entrepreneurialopportunity recognition also requires SMEs to employ a certain level of creativity Products orservices of SMEs tend to show more adaptive style of creativity than innovative style ofcreativity since being market driven And last but not least, sources of opportunities arisingfrom market dynamics and changes in the environment, so entrepreneurs who can quicklyapproach and respond to the situation will gain opportunity and bloom

Due to the complexity and the depth of this research, it hopes to contribute to theframework building of entrepreneurial opportunity recognition by SMEs However, furtherresearches with bigger sample size in different contexts of cultures as well as economies need

to be conducted to affirm, broaden and validate the findings

Limitation of research

Despite the attempt to avoid impediments, this study still bears some limitations Firstly, theresearch respondents are only SMEs within Ho Chi Minh City area, which is the most dynamicand prosperous city of Vietnam Secondly, this study is written in English Thus, transcriptionsfrom interviews in Vietnamese may not comprehensively convey all ideas and expressions ofthe respondents

Acknowledgement

Here is to acknowledge that this study received no support by any finding organization

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