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Opportunity Recognition and Exploitation in Highly Uncertain Environments

  • S. Ramakrishna Velamuri
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Abstract

How do organisations respond to the uncertainty that pervasive technological change produces in the environment? This question has been addressed by scholars in the areas of economics, strategy, organisation theory, organisational behaviour, and entrepreneurship either as a problem of imperfect information, to be resolved by the systematic search for further information, as a problem of exploration vs. exploitation, or as one of the difficulty faced by established firms in responding in a discontinuous way to changes already taking place. Several phenomena are evoked — the marginal productivity of information, the opportunity costs for established companies of exploration vis-à-vis exploitation, the limitations imposed by inertia on discontinuous behaviour, the problem of learning traps etc — to explain why established firms are less likely to identify new opportunities than new firms. Very few scholars have looked at opportunity recognition that results from the serendipitous discovery of information that the economic agent was unaware she lacked (for exceptions see Kirzner, 1997; Shane, 2000 and Venkataraman, 1997). This essay addresses this gap and looks at “sheer” ignorance — that is, when the economic agent is not aware of what she does not know — and how this impacts corporate venturing in firms of different characteristics. Some propositions are formulated to explain why firms in the New Economy (NE) industries discovered more opportunities than those in Old Economy (OE) industries in the late nineties, and why the firms in the NE industries have faced difficulty in profiting from these opportunities23.

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© Betriebswirtschaftlicher Verlag Dr. Th. Gabler GmbH, Wiesbaden 2002

Authors and Affiliations

  • S. Ramakrishna Velamuri

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