Abstract

The distinctive trademark of an entrepreneur is the recognition of and the action upon profit opportunities (Kirzner, 1997). In this paper I focus on cognitive factors as determinants of opportunity judgment.

Two broad categories of reasons are offered to explain the variance in opportunity judgment: individual differences and the nature of the opportunity (Shane, 2000). I focus on novelty to analyze the nature of the opportunity. An idea is novel in an entrepreneurial sense when it suggests a new means/ends framework to make decisions (Langlois, 1982). I propose to model the means/ends framework as the link between a customer need and the firm routine. From that perspective, an entrepreneur’s function in fact, is to propose a new routine.

Analogy is a mechanism that we use to create novel ideas (Gentner, et al., 2001). An individual recognizes an established routine in one domain and proposes the use of it in another domain; hence becomes a novel routine-need combination. That model gives rise to two dimensions. First is the similarity of the domains in the analogy. The second dimension is the original inspiration behind the analogy.

Furthermore, I borrow from psychology to differentiate among individuals based on their cognitive styles (Riding & Cheema, 1991). I propose hypotheses that predict the evaluation of an opportunity based on the individual’s cognitive style and the two opportunity characteristics mentioned above.

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