INNOVATIVE ENTREPRENEURS IN HANDICRAFT BUSINESSES Unintentional opportunity discovery and motivation for exploitation

Alexander Fust1, University of St. Gallen Swiss Research Institute of Small Business and Entrepreneurship (KMU-HSG) Dufourstrasse 40a CH-9000 St. Gallen Switzerland [email protected]

ABSTRACT Analyzing the opportunity discovery and exploitation processes is of utmost importance for entrepreneurship and small business researchers as well as for practitioners. This article aims at shedding light on the discovery and exploitation processes of innovative opportunities. In doing so, two exploited entrepreneurial opportunities in the handicraft industry are studied. Both opportunities are discovered rather unintentionally due to customer interactions. Furthermore, the ambition to solve a technical problem is the main motivation for exploitation rather than financial outcomes. In exploiting the opportunity both entrepreneurs use experimentations in their own homes in order to experience the benefits and disadvantages of the solution.

Keywords: Demand-side opportunity discovery, motivation for opportunity exploitation, experimentation, SME

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The author would like to thank three anonymous reviewers for their very helpful and encouraging comments on a short version of this article.

INTRODUCTION

Although entrepreneurial research focuses often on newly founded ventures (e.g. Elfring & Hulsink, 2003), opportunity discovery is highly relevant in existing small- and medium sized businesses as well (Shane & Venkataraman, 2000). Entrepreneurs are challenged by discovering a second, third or fourth opportunity to gain future competitive advantage. These entrepreneurs are embedded in networks with customers and suppliers which are important for the transfer of relevant information for opportunity discovery (e.g. Hills & Shrader, 1998). In this regard, interactions with customers can lead to the transfer of information about their problems and needs which can be relevant for opportunity discovery (Priem, Li, & Carr, 2012; Yli-Renko, Autio, & Sapienza, 2001). Innovative customers such as lead users (Lettl, Hienerth, & Gemuenden, 2008; von Hippel, 1986) transfer knowledge about their needs to an existing firm due to their high motivation of solving their problems. Despite the importance of demand side entrepreneurship only a few studies could be found researching how information about customer needs is obtained by the entrepreneur. Hence, I intend to shed further light on this phenomenon by exploring how entrepreneurs discover innovative demand side opportunities. In addition, entrepreneurs are confronted with different customer requests wishing to satisfy their needs. However, entrepreneurs are only able to exploit a limited amount of opportunities from these needs due to scarce timely and financial resources. Therefore, it is relevant to address the motivational aspects why entrepreneurs take an effort to exploit some opportunities while neglecting others. Surprisingly, only a few small business studies could be found which address the motivation of entrepreneurs to exploit opportunities solving customer needs. It is that surprising because there is an increasing number of studies analyzing the motivation of customers to transfer such information about their needs (Bogers, Afuah, & Bastian, 2010; Lettl et al., 2008; von Hippel, 1986). Furthermore, there is a vast amount of studies analyzing why entrepreneurs found a new venture (e.g. Kuratko, Hornsby, & Naffziger, 1997). Other studies research why small business owners are prone to growth (e.g. Gray, 2006). To conclude, there is a lack of understanding about the reasons of entrepreneurs to invest in costly efforts to develop technical solutions solving requested customer problems. Thus, I aim at

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researching why entrepreneurs exploit innovative opportunities in order to solve customer problems. The exploitation of an innovative opportunity is stated to be uncertain because the context of use and technologies are often new to the individuals involved (Ravasi & Turati, 2005). In addition, opportunities can feature a rather undefined up to a precisely set form (Ardichvili, Cardozo, & Ray, 2003) and thus, they can be modified during the exploitation process. Especially when technical solutions for an indicated customer need are searched, entrepreneurial learning is relevant. Entrepreneurial learning researchers analyze how knowledge is created by transforming experience through experiential learning (e.g. Politis, 2005), how prior knowledge affects learning (e.g. Dimov, 2007) or which learning styles can be differentiated (e.g. Dimov, 2003; Kolb, 1984). In this regard, it would be of value to further explore how entrepreneurs learn to find innovative technical solutions through techniques of experimentation. Hence, it is analyzed in this study, how entrepreneurs find means (technical development) to defined ends (customer needs). To answer these three questions I analyze two extreme cases of entrepreneurs in Swiss handicraft industry using case study methodology. This industry is characterized by a high proportion of small- and medium-sized enterprises and a strong competition often leading to low margins for companies in general. This article aims to make several contributions to research. First, unintentional opportunity discovery processes are analyzed in-depth in order to advance our understanding about similar contexts such as the accidental opportunity discovery of user entrepreneurship (Shah & Tripsas, 2007). Second, as the transfer of information about customer needs through customer interactions is researched this study sheds further light on phenomena relying to the current research stream of demand side entrepreneurship (Priem et al., 2012). This is especially relevant in small businesses due to their existing networks consisting of suppliers and customers. Thus, this study also contributes to opportunity discover literature in small business contexts. Third, this study advances research about motivational aspects why entrepreneurs exploit opportunities. Particularly small business owners, who are often occupied with operative tasks in the firm, experience challenges to exploit innovative opportunities. Developing a new product involves a timely investment of an entrepreneur’s spare time. Therefore, this study is an advancement of

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research about entrepreneurial motivations for opportunity exploitation (e.g. Shook, Priem, & McGee, 2003). Fourth, I contribute to entrepreneurial learning literature (e.g. Dimov, 2007) as entrepreneurial experimentation is analyzed in more detail:

THEORY

Entrepreneurship and small business researchers highlight the importance of understanding the whole process of opportunity discovery, evaluation and exploitation (Eckhardt & Shane, 2003).

Discovery of opportunities

Entrepreneurship and small business scholars are interested in the analysis of how and by whom entrepreneurial opportunities are discovered (Shane & Venkataraman, 2000; Venkataraman, 1997). There are different attempts and perspectives to define these opportunities. Hansen, Shrader and Monllor (2011) show that there are diverse and heterogeneous conceptual definitions. Thus, it is important to define and conceptualize how an opportunity is used in this study. I define an entrepreneurial opportunity as a possibility to introduce a new product or service to the market for a higher price than its costs of production. The entrepreneurial opportunity can appear as rather abstract and imprecise up to a precisely defined (technical) solution (means) for a clearly described customer segment and its needs (ends) (Ardichvili et al., 2003; Scott & Eckhardt, 2003). Demand side research is a stream of research which emerged in the last years (Priem et al., 2012). Priem et al. (2012) differentiate between opportunity signaling (e.g. Yli-Renko et al., 2001) and user entrepreneurship (Shah & Tripsas, 2007). Opportunity signaling assumes that information asymmetries exist between customers and entrepreneurs. Customers own private knowledge about their needs which entrepreneurs only receive if a knowledge transfer takes place (Kirzner, 1973; Priem et al., 2012). This customer knowledge is also called sticky as it is often tacit in nature (e.g. von Hippel, 1994). Such knowledge about customer needs can be a breeding ground for opportunity 3

discovery (Priem et al., 2012). User entrepreneurs themselves have already this knowledge about customer needs. They improve the properties of products they used according to their own needs (Shah & Tripsas, 2007). As friends, family and colleagues also demand this improved products these user entrepreneurs commercialize their improved products and found a new venture. This phenomenon can be observed amongst others in the type setting or juvenile products industry (Shah & Tripsas, 2007; Tripsas, 2007). These user entrepreneurs did not discovered and exploited this opportunity due to financial reasons but primarily for satisfying their own needs.

Motivation for exploitation of entrepreneurial opportunities

The discovery of opportunities is accompanied with evaluation and exploitation (Shane & Venkataraman, 2000). Evaluation of opportunities is a multi-dimensional phenomena which can include individual motivational aspects as well (McMullen & Shepherd, 2006). Entrepreneurship scholars study the motivation factors of entrepreneurs starting new ventures: financial rewards, wish for independence and autonomy, intrinsic rewards, family security (e.g. Hamilton, 2000; Kuratko, Hornsby, & Naffziger, 1997) or the absence of other employment opportunities are outlined in the literature (Reynolds, Camp, Bygrave, Auto, & Hay, 2002). The motivation of small business owners to exploit a second or a third entrepreneurial opportunity can therefore be stated as being either extrinsic (e.g. financial reward or necessity driven due to market pressure) or intrinsic (e.g. self-fulfillment, joy).

Means for exploitation

Entrepreneurs often purposefully search for information after opportunity discovery and evaluation (Kirzner, 1973). This search can include information seeking about technological capabilities in order to solve customer problems. In addition, other resources such as financial means are searched. This process is often accompanied with complex learning situations. Entrepreneurial learning scholars analyse which activities and cognitive processes entrepreneurs conduct in order to exploit opportunities (e.g. Corbett, 2007; Politis, 2005). Such processes are 4

often complex in nature and outcomes are uncertain due to imperfectly defined customer problems (Ravasi & Turati, 2005). Thus, entrepreneurs face a high degree of ambiguity because of imperfect knowledge about the means, the ends and the connection between them (Garud & van de Ven, 1992). The experience of the use of a newly developed concept is limited and also the context of use is complex (Clark, 1985). Furthermore, as there are no long-term experiences with newly developed solutions the acceptance and appropriateness of the concept is rather uncertain. Satisfying customer needs by finding the right technical means is often a creative process which goes beyond repetition or incremental improvements (Ravasi & Turati, 2005).

Resource acquisition

Ravasi and Turati (2005) show in their case study that a consequent allocation of time, attention and resources is important for entrepreneurial learning in innovation projects. Entrepreneurs are often the driving force behind opportunity discovery and exploitation especially in small businesses (Ravasi & Turati, 2005). As owner managers are frequently solely (or together in a small team) responsible for strategic planning they decide about financial or timely efforts to invest in opportunity exploitation. However, as timely resources of entrepreneurs are constrained due to their often operative engagement in the firm, it is challenging for these entrepreneurs to invest a significant amount of time in the discovery and exploitation of opportunities. Hence, if entrepreneurs decide to exploit an opportunity a great deal of their time has to be invested for this project. They decide how much of their personal time has to be used for the project (Gifford, 1998). Furthermore, by definition, small firms have limited resources. Hence, possible financial investments are carefully evaluated. As entrepreneurs often work operatively and have a technical educational background, they have first a broad understanding about the market and second technical expertise, which allows to discover opportunities to meet demand (customer needs) and supply (technical solutions). The conceptualization of a technical solution requires timely and financial investments as well as competencies, abilities and skills in order to solve customer problems by means of an adequate technical solution. Researchers state different ways for entrepreneurs in order to acquire these skills. First, entrepreneurs’ human capital can include technical or procedural 5

knowledge which facilitates problem solving. This includes an understanding of functional implications of alternative solutions and contexts of use (Ravasi & Turati, 2005). This understanding could be acquired through formal education or on the job training. Small business owners often have a technical education as their tasks are frequently operative in nature depending on the size of the firm. Second, entrepreneurs attain complementary knowledge from their social capital if they lack this distinct knowledge: e.g. from industrial, commercial and research partners, consultants, members of other business networks (Aldrich & Zimmer, 1986; Birley, 1985; Davidsson & Honig, 2003; Larson, 1991; Ravasi & Turati, 2005). Ravasi and Turati (2005) show in their case study that entrepreneurs dedicate an immense amount of time into development activities. In addition, they complement their knowledge with actors from their social network.

Experimentation

In uncertain contexts experiential learning might be a useful mode to tackle mentioned challenges. Corbett (2005) applied Kolb’s model of experiential learning to opportunity exploitation: Individuals learn through experience, reflection, thought and experimentation (Kolb, 1984). Accommodators are stated to use their strengths adequately in exploitation stage: Through active experimentation and concrete experience working prototypes are exploited (Corbett, 2005). Weick (1995) and Ravasi and Turati (2005) argue that experimentation is a means for gradually make sense of the connections between the satisfaction of customer needs and the developed functions of the technical solution. Experimenting leads to an experienced use of the product and a trial and error procedure until the technical solution meets demand. In this process social interactions can take an important role as trustworthy individuals are asked for honest feedback. It can be argued that due to interactions and the subjective interpretations of entrepreneurs these experimentation phenomena are socially constructed and “situated” (Dutta & Crossan, 2005; Lave & Wenger, 1991). In this context entrepreneurial learning researchers often state that learning from prior failures is important (McGrath, 1999; Minniti & Bygrave, 2001; Ripsas, 1998; Stokes & Blackburn, 2002). Entrepreneurs perform new actions which are different to the ones already 6

taken in order to get more insights about possible technical solutions (Minniti & Bygrave, 2001). Therefore, new possibilities are explored leading to a broader variety of a solutions which is able to reduce uncertainty (March, 1991; McGrath, 1999; Minniti & Bygrave, 2001; Sarasvathy, 2001). Politis (2005) differentiates “intelligent failures” which are most effective at fostering learning. These failures give new information which possibly alters future actions taken by entrepreneurs to find a technical solution (Sitkin, 1992). This information would not be acquired without experimenting and experiencing the outcomes of the experiments. However, it depends on past experiences of entrepreneurs with failures from experimenting if they perform this distinct strategy (of experimentation) or not. If successful in the past, entrepreneurs continue to find technical solutions basing on learning from failure out of experiments (Sitkin, 1992). Therefore, past experiences can also alter the way entrepreneurs learn from failure or define which learning technique (e.g. experimentation) they use (Politis, 2005). Hence, active experimentation can be an appropriate technique in order to deal with ambiguity and to find a technical solution to satisfy a distinct customer need.

METHODS

Qualitative research methods are beneficial in research fields which are in their infancy (Edmondson & Mcmanus, 2007). A fine-grained understanding about processes of phenomena is often needed in these contexts. As demand side entrepreneurial opportunity research is a young field qualitative research methods are an appropriate means to find out more about these complex phenomena. I use a case study methodology as it is useful in such contexts in order to grasp indepth insights about underlying processes (Hartley, 1994).

Case selection

I use case study methodology to analyze two extreme cases which were selected carefully due to the following four theoretical reasons. First, these companies have discovered opportunities which were successfully introduced to the market. These exploited opportunities 7

reflect a significant portion of turnover and company success of these two companies after three years from initial market introduction. Therefore, these opportunities correspond to the mentioned definition of entrepreneurial opportunity as the possibility to gain a financial profit from exploitation is given. These two cases are extreme comparing to other ones in the same market as the opportunities have a high profit potential due to their innovativeness. Second, selected opportunities have to be discovered due to opportunity signaling from demand side. Therefore, only opportunities are selected which are discovered from an information transfer from customer interactions. Third, the selected cases are small businesses: Entrepreneurs often work operatively and interact with their customers frequently. Furthermore, the entrepreneur has the strategic responsibility to decide if an opportunity is to be exploited or not. Fourth, exploiting the opportunity is reflected by finding a technical solution to customers’ needs and thus, entrepreneurial learning takes place.

Data collection

The author conducted formal and informal interviews with the owners along with an analysis of internal and external documents. The semi-structured interviews lasted from 86 to 158 minutes. They were hold in German by the author and included questions such as: How did you hit on this specific opportunity? What happened after the initial discovery? How did you find a technical solution to this problem? Why did you decide to exploit this opportunity? Table 1 summarizes the characteristics of the interviews. Furthermore, the two companies are compared. Both companies are owner managed and the firm in the metal construction industry has more hierarchical levels than the electrician firm.

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Hierarchical structure (2011)

Employees (2011) Interview partner Length of formal interviews Interview questions (selection)

Case metal construction Case electrician 1st level: entrepreneur 1st level: entrepreneur nd 2 level: management board 2nd level: employees 3rd level: department manager 4th level: employees 80 7 Owner Manager Owner Manager 86 158 How did you hit on this specific opportunity? What happened after the initial discovery? How did you find a technical solution to this problem? Why did you decide to exploit this opportunity?

Table 1: Description of both firms and the interview characteristics The interviews were tape recorded and transcribed verbatim. In addition, data was studied using a software for analyzing qualitative data (atlas.ti) and it was coded according to categories from extant literature (e.g. opportunity discovery, demand-side opportunity signaling, opportunity exploitation, experimentation) or new ones which emerged from the data (e.g. technical ambition). A second coder has coded the data as well and the results were compared to the author’s classification. Variations in classifications were discussed intensively by the two coders and classified due to a shared understanding.

Results

Description of the opportunity

Both opportunities are outlined separately and compared afterwards. The entrepreneur in the metal construction industry has developed a new solution for an aesthetic window profile which features a highly efficient insulation. Introduced to the market 2003 it is now responsible for more than half of the turnover of the whole firm. The amount of employees grew from less than 20 in 2003 to 80 in 2011. This growth rate is reflected by the attitude of the entrepreneur. Growth is seen as a positive outcome (see table 2).

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The second entrepreneur introduced a new solution to minimize electromagnetic radiation in a room. The exploited opportunity is responsible for approximately one third of the turnover of the firm. Despite the potential of the opportunity the entrepreneur prefers to lead a small company in a defined region and does not intend to grow significantly. “I don’t exploit this business how I could. For this purpose I am persuaded that this topic has to be provocatively promoted with pressure and presentations in a nearby city. Then I would have enough [work] to do. But this is not coercively my aim. I want to live from my business, but I don’t live for my firm. This is my philosophy and the one of my employees.”

Case metal construction

Case electrician

Description of the Opportunity

A new profile for sliding windows

Minimization of electromagnetic radiation in a room

Strategic Importance of the Opportunity

The exploited opportunity is responsible for more than half of the turnover of the firm

The exploited opportunity is responsible for approximately one third of the turnover of the firm

Growth

From less than 20 (2003) to 80 employees (2011)

Limited growth in the last 10 years

Attitude towards growth

“If I get the chance to employ 50 people today and I can employ them for 5 or 7 years and I am forced to reduce it afterwards, then I did a glad job in these 5 years.”

“I am content how I am working now and also about the responsibility I have. I know that I could grow my business but I don’t want to.”

Table 2: Description of the opportunity and its outcomes

Opportunity discovery

Before opportunity discovery the entrepreneur in the metal construction industry distributed a similar profile for sliding windows for a producer. This solution, however, had some disadvantages. These disadvantages made it difficult to sell this product. Having told the producer about this difficulty the entrepreneur got the answer that there is a lack of his selling abilities. The producer and other actors of the metal construction industry were persuaded about the impossibility of improving the product due to different technical difficulties.

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It was his own architect, who was also his customer, who pushed the entrepreneur to build this sliding window for his personal use in their newly built house. However, the architect had to insist that the entrepreneur considers building the producer’s solution. “First I said: ‘Are you kidding? I don’t want such a rubbish in my house.’ […] the architect has forced me to do it.” After seeing the problems at the own house, the entrepreneur went to the producer with a request for improvements: “And the first reaction was not that I told myself, I do it by myself. I went to the producer and told them where [improvement possibilities] they had to further develop the product. ‘I see that this doesn’t function at our place. We lose too many [customer] orders. We only get the orders when the builder and the architect fall in love with the design and when they turn a blind eye to the technology.’ Their [producer] reaction was that I am a bad seller. They don’t have any problems with that [disadvantage of the product]. This was a provocation for me. I told myself: Ok, I am a bad seller, but I am good at technics. I want to know that. Then I was stimulated and I began [developing a solution].”

The entrepreneur felt confident about the potential of a new solution as diverse customers indicated that they would buy the product without the disadvantages. Furthermore, people who bought the producer’s product were happy during the first months. Therefore, the wish of the architect to develop it for the entrepreneur’s personal use and the inability of the producer to develop a better solution were the initialization of opportunity discovery. The electrician entrepreneur discovered the opportunity through a customer request. The customer wished to have his room protected from electromagnetic radiation. However, the entrepreneur lacked some expertise to develop a technical solution to this problem. Furthermore, other market actors were critical about the exploitation as it is technically challenging. Hence, the entrepreneur discovered the opportunity due to a customer request.

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Discovery of opportunity

Case metal construction

Case electrician

Own experiences as the producer’s product was built in the own house.

A customer interacted with the entrepreneur because he wanted his problem to be solved.

Provocation by the producer: technical improvements are not possible. Customers would buy it, if the disadvantages are eliminated. Properties of the customer

An architect who insisted to have a solution. Furthermore he likes experiments and new solutions.

“A customer told me some years ago that he had a problem with this.”

“He is like that. I have worked a few times with him. He has an idea and carries his point. He is relatively persistent.” Table 3: Opportunity discovery

There are different similar patterns. Opportunity discovery mainly occurred as information about customer needs was transferred through customer interactions. In both cases the request of a customer initiated the search for a technical solution (exploitation). Therefore, through the customer request an opportunity is signaled as customer’s private knowledge is exchanged to the entrepreneur (see Priem et al., 2012). Through the interaction with customers having distinct needs and the motivation to share this information, entrepreneurs get information which is relevant for opportunity discovery. In both cases this knowledge transfer was rather unintentional in the perspective of the entrepreneurs.

Proposition 1: The transfer of knowledge through customer request is essential for unintentional opportunity discovery by entrepreneurs.

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Motivation for exploitation

Although other market actors and the producer of the sliding window profile with disadvantages neglect the availability of a solution, the entrepreneur of metal construction began to find a solution. Although seeing the market potential it was not the first motivation factor for exploitation. It was rather the provocation of the producer and the challenge to find a technical solution. The electrician entrepreneur tried to find a solution despite the fact that other market actors were critical. The motivation was not based on financial profit but on tackling the challenge of finding a technical solution to the problem. “[decision to start the study] It was my personal interest. Because I have learned electrician and afterwards I studied at a technical school. After that I had the feeling, I want to have something which challenges me a little bit more and which needs maybe another way of thinking, where more problems could be solved and experienced.” “This was just happening. There was not the idea that this could be a main business area. It has just become one.”

Motivation for exploitation

Case metal construction

Case electrician

Provocation of the producer that it is not possible to create a technical solution.

Ambition to learn something new. Personal interest.

Table 4: Motivation for exploitation

Both entrepreneurs were driven by the prospect for finding a technical solution. Therefore, in both cases it is rather the ambition to find a technical solution rather than the potential financial profit to be the incentive for exploitation. Hence, it is the self-fulfillment in order to tackle the challenge of finding a technical solution to the indicated problem which is primarily relevant for opportunity exploitation in these two cases.

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Proposition 2: Entrepreneurs with a technical background are rather motivated by technical challenges than by financial rewards in order to invest their spare time for solving a distinct customer problem.

Means for exploitation

The exploitation process was initiated by the experiment in the own house. In the beginning the entrepreneur of metal construction was challenged by operatively leading the company and by finding a solution during spare time (evening or at the weekends). “Basically, I was working 150%. The idea development and the refinement of the invention were a hobby: In the evenings, at nights or on the weekends. […] I have made money the whole day for 1012 hours in order to work on the idea in the evening or at night.”

Furthermore, the process of finding a technical solution was accompanied by uncertainty. As no long-term experiences were available it was not clear if any of the developed solutions met the quality standards. “It was often that I didn’t have the certainty if it [technical solution] functions without any problems. I have developed something on a paper and we produced it [a certain component] for the first time where we didn’t have any experiences.” “It was a point, where I found it [connection of two technical components] a hard nut to crack for a long time. It was difficult for me. I was not sure anymore if I had done everything right. This was a relatively long time with less effort.” “We didn’t have any long-term experiences. […] And I had to tell myself what happens if something pops up which I couldn’t predict?”

Drawings were made using trial and error processes. If a drawing did not meet the criteria, a new one was drawn. Therefore, the entrepreneur learned from failures of past drawings. As the entrepreneur experienced years in the metal construction industry, he had the technical expertise to develop a new technical solution in this field. “It was a technique which I learned from my studies at the technical school: Draw until you don’t come any further with a solution, then begin from scratch.”

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Although he had to use a lot of time to find a solution, there was no interaction with other people besides the own employees or the architect in order to conceptualize the solution in the beginning. Complementary knowledge was acquired when building a prototype. The entrepreneur used his social network in order to produce technical components where he lacked expertise. “I needed technical assistance from other experts where I did not have any experiences [production of technical components]. I was lucky that I had [found] the right ones.”

The electrician entrepreneur found information in the internet especially about solutions of other markets which were technologically more advanced in this field. In addition, he attended further education in order to complement his expertise in this field. “[after the customer request ] I had to say: I reach my limits. Then I studied this field.”

Also interactions with other actors – especially friends in the same industry – helped him finding a technical solution. Mostly spare time was invested in order to develop the solution, whereby the personal house was the first object to experience if the solution is appropriate. “Afterwards I have begun to experience in the own four walls: with measurements in the own residence and in the firm I tried possible restorations in order to experience in a protected area at home.” “I have experienced physically what could be done with minimization of electromagnetic radiation and this motivated me extremely.”

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Case metal construction

Case electrician

Activities under uncertainty

It was unclear if the technical solution was sustainable. Other people like the producer did not believe in the existence of a technical solution.

The entrepreneur had only little knowledge before the studies. Therefore, in the beginning uncertainty about a possible solution was high.

Financial resources

Particularly time invested by the entrepreneur.

Particularly time invested by the entrepreneur.

Financial investment in the own private house.

Financial investment in the own private house and the studies.

Technical background of the entrepreneur.

Technical background of the entrepreneur.

Acquisition of technical abilities

The entrepreneur draws different Due to a lack of knowledge, the concepts and solutions. entrepreneur attended further Some technical components had studies in this field. to be produced by other firms due to a lack of knowledge of the entrepreneur. Experimentation

Experiment in building the producer’s solution in the own house. Experiencing the disadvantages of the solution.

Possibility to experiment in the own house and experiencing the advantages and disadvantages.

Trial and error with drawings. Role of entrepreneurs

The entrepreneur developed technical solutions in the evenings, at nights or on the weekends. He was operatively working 10-12 hours a day.

The solution was developed mainly in the spare time.

Table 5: Means for exploitation

Both cases showed that experimentation in an own context (house) and learning from failures (e.g. drawings) are important for finding a technical solution. Both of the entrepreneurs took a customer perspective as the solution was applied at their own house. This has led to the insight about the real benefits of the technical solution. As there are time constraints mainly spare time was invested by both entrepreneurs in order to develop the new technical solution.

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Hence, experimenting with a personal object is a good mean to learn from failures and experiencing the benefits and disadvantages of the newly developed solution.

Proposition 3: Experimentation in the own context leads to knowledge about the specification of the solution for customers (ends).

CONCLUSION

Three different patterns could be found in the data: First, opportunity discovery was in both cases induced by a request of a customer. It was a private customer telling the entrepreneur about his problems with electromagnetic radiation in the case of the electrician business and it was an architect informing the entrepreneur about his needs in the case of metal working industry. Therefore, opportunity discovery took place due to knowledge transfer from customer interaction. It was rather unintentional in the entrepreneur’s perspective. Second, both entrepreneurs were not primarily motivated by the potential financial profit they would earn but rather from the technical and professional ambition to find a solution and to perform it with persistence. They were both fascinated about the technical problem and about finding an appropriate solution. In addition, the first case showed that provocations can function as another motivation factor. Third, learning in the exploitation process occurred as both entrepreneurs first tried technical solutions in their own homes. Therefore, they had the possibility to experiment and experience the effects directly. Additionally they got the user’s perspective about useful specifications as the solution was built for their own homes.

Implications for research

This article contributes to existing research in various ways. First, it sheds further light on the process of opportunity discovery and exploitation in small businesses. The unintentional discovery induced by customer requests sheds further light on the growing literature about

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demand side entrepreneurship (Priem et al., 2012) as well as accidental opportunity discovery (Shah & Tripsas, 2007). Especially small business owners interact with customers almost daily where (private) customer information is transferred. Furthermore, the insights of this study advances research about motivation factors for opportunity exploitation. The motivation to find a technical solution due to personal ambition rather than financial profit despite high opportunity costs of these entrepreneurs might be an underestimated factor in existing entrepreneurship and small business research. This can also contribute to research about innovative opportunities: It can be stated that these technically motivated entrepreneurs need a provocation or a challenge for exploitation. Finally, entrepreneurial learning research is advanced as one form of active experimentation is analyzed. Due to experiments in their own homes the entrepreneurs get direct feedback about the benefits and disadvantages of their solutions. Hence, they take a customer perspective for the specification of the solution. Characteristics of accommodators can be further advanced with the insights of this study in mind (Corbett, 2005).

Implications for practice

Entrepreneurs of existing companies might be challenged by their customers in order to find technical solutions which fit their needs. Although it is important to know customer needs in detail it is costly and risky to satisfy every single need of these customers. Technical developments involve an immense amount of time to be invested which could lead to a negligence of daily business activities of the main market. Hence, entrepreneurs should frame appropriate criteria when they should exploit an opportunity induced by customer requests and when not. The appropriate technical expertise might be one criteria, the personal joy to learn new knowledge might be another one. It could be of value for entrepreneurs to interact with specific customers at the edge of the market in order to sense their needs and problems. These customers experience needs long before the bulk of the market (von Hippel, 1986). Hence, it is beneficial that these customers transfer their private knowledge about their needs to the entrepreneur. These users might be tempted to transfer their knowledge if the entrepreneur has a reputation of solving problems of customers effectively. 18

Challenging the entrepreneurs was an important impulse for them to exploit the opportunity. Especially small business owners who often have daily interactions with customers can discover latent needs due to problems which these customers experience. Additionally, not only customers can play the role of a challenger, but also other actors of an entrepreneur’s social network. On the other hand especially the first case has shown that producers neglect feedback of their distribution partners missing a great opportunity. Producers can instead collect all improvement ideas and even work together with these customers and distribution partners in order to find a technical solution.

Limitations

There are different limitations to this study. First, I selected successful examples of opportunity exploitation. Therefore, it might be biased as unsuccessful opportunities are not included. Second, as cases were purposefully selected this study does not aim to fulfill the condition of statistical representation. In addition, the study analyzed the special context of handicraft businesses. It has to be analyzed if it is also applicable to other industries as well.

Suggestions for further research

I suggest further exploring the processes of opportunity discovery and exploitation in the small business context. Especially the often daily operative activities are the reasons why small business owners usually have a sensibility for their markets, needs and problems of their customer base. This can be beneficial for the discovery of entrepreneurial opportunities. Therefore, further research could analyze the opportunity discovery of small business owners in other contexts in more detail. Furthermore, this type of entrepreneurs (technically motivated) could be compared to other types, which would advance research about the characteristics of different types of entrepreneurs (e.g. Miner, Smith, & Bracker, 1992). In this respect, it is of interest how these entrepreneurs evaluate opportunities and why they exploit some opportunities while they neglect others. In 19

addition, entrepreneurial learning literature could be advanced by analyzing other learning modes than experimentation (accommodators). In this study differences in entrepreneurial orientation of entrepreneurs are found. Hence, it would be of value to investigate small business orientation comparing to entrepreneurial orientation and how this affects decision processes of entrepreneurs to exploit opportunities (Carland, Hoy, Boulton, & Carland, 1984; Runyan, Droge, & Swinney, 2008; Stewart, Watson, Carland, & Carland, 1998). The propositions can be tested using quantitative measurements and experiments. For example, literature about the characteristics of innovative customers (e.g. von Hippel, 1986) can give hints how proposition 1 could be measured. Additionally, proposition 2 could be measured by conducting an experiment. One group consists of entrepreneurs motivated by technical challenge and the other group is motivated by potential profit. In order to measure proposition 3 an experiment might be of value. It could be researched if there is a difference for exploitation and motivation of entrepreneurs if the experimentation takes place at their own homes or not. I am persuaded that this study lays the basis for further fruitful research in opportunity discovery and exploitation in small businesses.

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