Despite the importance of entrepreneurship in changing the economic landscape of many countries, the identification of the entrepreneurial opportunity is still in its early stages. So far, the researches that have been done are full of dichotomous interpretations. These differences could be due, in part, to the fact that there is no unitary conceptualisation and functional definitions of the construct. Nevertheless, the prevalent interpretations are that entrepreneurial opportunities are either stemming from discovery or deliberate search. To reveal the nature of these opportunities, the entrepreneur's traits and personality have been analysed. Evaluation strategies have also been elaborated. Finally, mapping the entrepreneurial processes has emerged to shape these opportunities (Gaglio, 2001). This report is intended to contribute to the development of the entrepreneurial opportunities identification by addressing the role of two pillars of entrepreneurship – creativity and innovation – as the sources of these entrepreneurial opportunities.

1. 2014
Student number: 21202244
Module Leader: David Mackrory
Module Code: MS70074E
Entrepreneurship
Figure 1 – (Source: Google, Adapted from Jason Tozer, 2014)

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Contents
ABSTRACT ..................................................................................................................................................2
1. INTRODUCTION ...................................................................................................................................2
2. LITERATURE REVIEW.............................................................................................................................3
2.1. ENTREPRENEURIAL CREATIVITY & INNOVATION IN RELATION TO THE ENTREPRENEURIAL OPPORTUNITY...........3
3. DISCUSSION AND DEVELOPMENT OF A PROPOSED MODEL...........................................................................4
4. CONCLUSION ......................................................................................................................................6
5. BIBLIOGRAPHY ....................................................................................................................................8

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ABSTRACT
Despite the importance of entrepreneurship in changing the economic landscape of many
countries, the identification of the entrepreneurial opportunity is still in its early stages. So
far, the researches that have been done are full of dichotomous interpretations. These
differences could be due, in part, to the fact that there is no unitary conceptualisation and
functional definitions of the construct. Nevertheless, the prevalent interpretations are that
entrepreneurial opportunities are either stemming from discovery or deliberate search. To
reveal the nature of these opportunities, the entrepreneur's traits and personality have
been analysed. Evaluation strategies have also been elaborated. Finally, mapping the
entrepreneurial processes has emerged to shape these opportunities (Gaglio, 2001).
This report is intended to contribute to the development of the entrepreneurial
opportunities identification by addressing the role of two pillars of entrepreneurship –
creativity and innovation – as the sources of these entrepreneurial opportunities.
1. INTRODUCTION
Drawing from the definition of Timmons and Spinelli (2004 cited in Stokes & Wilson, 2010)
of entrepreneurship as ‘opportunity-based’, it can be argued that identifying lucrative
opportunities for new businesses is one of the distinct attributes of the entrepreneurial
behaviour that yields into a successful venture (Ardichvili et al, 2003). In this context,
entrepreneurial opportunity serves as the backbone for the existence of entrepreneurship
and entrepreneurial activities (Shane et al, 2000).
Thereof, the notion of opportunity occupies a central place in entrepreneurship literature,
wherein researchers in their attempt to tap on the perception of the entrepreneurial
opportunity have identified creativity and innovativeness as key attributes (Heinonen et al,
2011). In this sense, research literature depicts an entrepreneur as an individual with
innovative and creative traits that tie up to solve a problem, to search for new ideas or to
create new information (Kirzner, 2009).
Given the inherent interrelatedness between entrepreneurship, innovation, and creativity,
this research tries to shed the light on the entrepreneurial opportunity to capture this
interrelatedness between these premises. Hence, this study is an attempt to answer the
proposed question: What is the role of creativity and innovation as a source of the
entrepreneurial opportunity?
In this paper, we will demonstrate a framework for understanding how creativity and
innovation impact on the entrepreneurial opportunity perception – identifying, recognising,
and discovery activities. Moreover, to explain this perception, related disciplines and
theories from entrepreneurship and psychology are reviewed (Renko & Shrader, 2012).
The following section reviews some literature on the subject. In the penultimate
section, we discuss the contribution of the study and the proposed model. Finally, a
summary the study is presented.

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2. LITERATURE REVIEW
Innovation, creativity and entrepreneurial opportunity are three of the buzzwords of the
early 21st
century, whereas the entrepreneurial opportunity identification lies at the heart of
entrepreneurship (Stephen, 2012). Opportunity has been viewed from different
perspectives; on one hand, it could be a phenomenon that is derived from external
environmental conditions such as market demands and demographics changes. On the
other hand, it could be driven by the individual’s cognition to discover new ideas. Often, the
definition of the opportunity emanates from its context (Renko et al, 2012).
2.1. ENTREPRENEURIAL CREATIVITY & INNOVATION IN RELATION TO THE ENTREPRENEURIAL
OPPORTUNITY
Despite the broad term of opportunity, there is a consensus that a successful
entrepreneurial opportunity is one that will trigger a new venture creation or expand
market share of an existing venture. Creativity is the evolution of this opportunity by
generating new ideas and novel solutions that fit with it whereas innovation is the
successful exploitation of these new ideas (Stokes et al, 2010). Given the fact that new
business creation is a key issue in entrepreneurship, navigating these strands can help unveil
the entrepreneurial construct and give a better understanding of the entrepreneurship field.
The neoclassical economic theory is based on the notion of equilibrium mechanisms of the
market demand and supply. In this context, entrepreneurial opportunities spring from
under-employed resources, market inefficiencies and temporary gaps. Furthermore, Joseph
Schumpeter – one of the pioneering entrepreneurship theorists – has argued that
opportunities are driven by temporary innovation that destabilizes the economic
equilibrium, referring to ‘creative destruction’ theory (Renko, 2012). On the other hand,
drawing from the ideas of the neo-Austrian economists, Shane and Venkataraman (2000,
cited in Carter et al, 2012) argue that disequilibrium is the dominated premise where not all
market participants know about these opportunities. Therefore, Shane (2003 cited in Ko,
2012) defines entrepreneurial opportunity as a situation in which entrepreneurs can create
new commercially viable products and/or services by reassembling resources that will yield
into entrepreneurial profit. In addition, Gaglio (1997 cited in Hansen, 2007) suggests, based
on Kirzner work, that an idea is considered as an opportunity when it creates a value.
Thereof, she conceives an opportunity as an entity that evolves out of an idea. This view
suggests that an opportunity is an outcome of the opportunity recognition process. Once
the idea is recognized to be both possible and having some potential value, it becomes an
opportunity.
Noticeably, Hansen (2010) argues that identification of the opportunity is fragmented. On
one hand, it is viewed as an objective phenomenon wherein the entrepreneurial
opportunity is endogenously created, hence these opportunities are constructed by
knowledgeable entrepreneurs who capitalize on prior information to identify them (Vaghely
& Julien, 2010). On the other hand, opportunity is also viewed as a subjective phenomenon
that is created and incorporated from the entrepreneur's creative cognition and actions.
Thus, it is left to the reader to unfold the perceived interpretation of the scholars.
Whatever the typology of the opportunity construct is, it must be recognized, discovered,
identified, or crafted in order to form an entrepreneurial venture (Hansen et al, 2011). In

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this sense, entrepreneurs need to generate valuable ideas for new products and services
that will appeal to an identifiable market and they must figure out how to bring their
projects to fruition (Chen et al, 2009). Timmons (1999) further argues that the dominant
thrust behind a highly dynamic entrepreneurial process is the opportunity force by which
entrepreneurs can creatively identify opportunities and deploy appropriate resources.
Consequently, the subjectivist view of the entrepreneurial opportunity is linked to the
creative attributes of the enterprising individuals. This is driven by the entrepreneurial act of
discovering and exploiting profitable opportunities (Shane et al, 2000).
Moreover, Schumpeter (1942) and Kirzner (1999 - cited in Hansen, 2007) agree that
entrepreneurial opportunity recognition is a creativity-based process. Further, de Bono
(1978) claims that this process employs a creative thinking which is ‘thinking out of the box.’
Even though the consensus is that opportunity recognition is a creative process, there is
very little empirical evidence of opportunity recognition in a creativity context (Hansen,
2007). Based on Baumol’s (1993 – cited in Puhakka, 2011) argument, entrepreneurial
alertness is regarded as an innovative and a non-routine activity which is triggered by the
entrepreneur’s internal qualities. Therefore, entrepreneurial behaviour adopts an
innovative approach in the search for new opportunities, or in the way in which ideas are
developed to result in a new market offer (Puhakka, 2011).
Based on this above reasoning, both creativity and innovation have a pivotal role as sources
of entrepreneurial opportunity and thus the existence of entrepreneurial venture.
3. DISCUSSION AND DEVELOPMENT OF A PROPOSED MODEL
From the foregoing discussion, the notion of creativity is associated with opportunity
recognition either as it is a characteristic of the entrepreneur or as outcome of the creative
opportunity recognition process (Walton, 2003). The person and product represent two of
the “four P’s” of the creativity categories; the other two refer to press – the environmental
pressures that influence this creativity and process (Runco, 2004). Creativity is adopted in
Ardichvili et al (2003) model for opportunity recognition as a characteristic of the
entrepreneur. In this context, creativity presents one of two distinct personality traits in the
opportunity recognition process (Hansen, 2010).
Accordingly, the notion of entrepreneurial opportunity creation embodies individual
creative cognition and interior psychological attributes – the environmental conditions and
the association of these elements. These elements have remarkable impact on the
innovativeness of the business opportunity. In conjunction with this, knowledge, alertness
and cognitive processes will be illustrated into this developed research model (Puhakka,
2011).
The model depicted in Figure 2 embraces the above discussion in which “Pre-vision stage”
emerges as the first stage which pertain to preliminarily prepare for the opportunity
recognition process. This stage embraces the entrepreneur’s characteristics which are the
essential assets for seizing or crafting entrepreneurial opportunities. In an attempt to
reconcile the two dichotomies of the opportunity identification – objective or subjective – a
creative behaviour is promoted for a new opportunity search attitude. One of this creative
behaviour’s distinct elements is knowledge as creativity springs from deep wells of expertise.

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In addition, creative thinking pertain to combining areas of knowledge and come up with new
ideas (Ahmed & Shepherd, 2010).
The second element is the entrepreneurial alertness. Based on the Kirzner (1997) theory on
entrepreneurial alertness, it is defined as the entrepreneur’s receptiveness to possible
opportunities (Renko, 2012). In expanding on his work, capturing the entrepreneurial
opportunity due to the entrepreneur’s alertness is driven by creative attitude that is drawn
from the entrepreneur’s creative interactions with the external environment (Puhakka,
2011). Hence, these interactions, influenced by an alert behaviour and cognitive skills,
embed a creative base as illustrated in Figure 2. Moreover, the extent to which the
entrepreneurial opportunity can be profitable depends on the level of this base’s creativity.
These interactions concern the release of hidden opportunities and the discovery of
potential ones. Thus, this creative base yields the potential opportunities that will be
formulated into the creative cognitive process.
The cognitive process developed in this model is adopted from the work of Hesselbein and
Johnston (2000, cited in Ahmed & Shepherd, 2010). It emphasis that the “Innovation
Opportunity” is defining an opportunity or a problem to focus the creativity activity on it.
Ultimately, the perceived value from this solution is derived from addressing, efficiently, the
definition of the problem. Thus, in this phase, the entrepreneur will define, out of the
emerged potential opportunities from the creative base, the ones that have value. While
divergent thinking in the cognitive process implies coming up with new ideas, convergent
thinking concerns with selecting and narrowing these ideas to a single or few ones to be
taken further.
In addition, incubation is the time and space required for better formulation of the solutions
or considerations that may not be obvious yet. With regards to evaluation, it involves
determining whether the idea is viable or not. Though elaboration is the final process, it
continues after the pre- launch to address any changes that are found in the interaction
with the market. The final outcome is the economic entrepreneurial opportunity that is
good enough to set up a new venture (Ahmed & Shepherd, 2010). According to creative
destruction theory, these new innovative entrepreneurial products and services will bring
change and cause disequilibrium which will be the source for other new opportunities to be
captured (Renko, 2012). Also these changes will influence the entrepreneur’s personality
that is why, in the model, there is a link back to the pre-vision stage as entrepreneurs
enhance their skills and ability from their interactions with the environment.
Notably, both the potential opportunity and the cognitive process need to be located
between the two model components – Pre-vision and Formation – because of the ongoing
mechanism between them and creative behaviour. The developed model frames the
opportunity recognition pattern to deepen the understanding of this vital process into the
existence of entrepreneurial ventures.
One of the most notable examples that illustrates our research premise is the world well-
renewed entrepreneur, Coco Chanel, who is one of the names that we associate with
designer clothing and perfumes. Her fame, stemming from her creativity in the fashion
industry, makes her one of the most successful entrepreneurs of all time. With her fashion
acumen, she adapted her taste and skills to create a new fashion that changed the whole
industry landscape. Although she started her business at the war time, that did not stop her.
She spotted untapped opportunities and addressed these hidden needs in the market to

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bank on them for founding her business that was later diversified and grew worldwide
(Dunlop, 2014). She is the best example to illustrate that the entrepreneurs’ stance is based
on how they see a problem as an opportunity rather than a threat and capitalize on this to
turn it around and benefit the individual as well as the society.
4. CONCLUSION
This paper attempted to provide a framework into entrepreneurial opportunity
identification based on the role of creativity and innovation as the sources of these
opportunities to lead to a better understanding and development of the entrepreneurial
opportunity literature. From this research, the crux lies in that successful entrepreneurs
utilize and deploy a range of entrepreneurial skills and qualities in their search. Whether this
search is an active or a reactive one, these skills and qualities are the main tools to identify,
craft, solve a problem and finally deliver a successful business with an economic value. Thus,
unfolding the entrepreneur’s creativity and innovation underpins the creation of remarkable
opportunities that convey into business ventures. Many of which have changed the business
domains such as the world renowned entrepreneurs – Richard Branson, Mark Zuckerberg,
Figure 2: Creativity and Innovation Holistic Model as a source of Entrepreneurial Opportunities

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Anita Roddick and Bill Gates, and more will make other changes. Finally, we can indeed
deduce that creativity and innovation are the main pillars in the process.

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5. BIBLIOGRAPHY
Ahmed, P. & Shepherd, C. (2010) Innovation Management: Context, Strategies, Systems and
Processes, 1st
ed. Financial Times/Prentice Hall
Carter, S. & Jones-Evans, D. (2012) Enterprise and small business, 3rd
ed.
Chen, M. & Yang, Y. (2009) Typology and performance of new ventures in Taiwan - A model
based on opportunity recognition and entrepreneurial creativity, International Journal of
Entrepreneurial Behaviour & Research, 15 (5), 398-414
Dimov, D. (2007) Beyond the single-insight, single-person, attribution in understanding
entrepreneurial opportunities, Entrepreneurship Theory and Practice, 31(5), 713-731
Dunlop, J. (2014) 30 Most Influential Entrepreneurs Of All Time [Accessed on 08 Jan 2014]
www.incomediary.com/30-most-influential-entrepreneurs-of-all-time-2#_28_Coco_Chanel
Gaglio, C. & Katz, J. (2001) The Psychological Basis of Opportunity Identification:
Entrepreneurial Alertness, Small Business Economics, 16(2), 95-111
Hansen, D. (2007) Using the creativity model of opportunity recognition to understand the
front end of product innovation. PhD thesis, University of Illinois, Chicago
Hansen, D. (2010) A multidimensional examination of a creativity-based opportunity
recognition model, Journal of Entrepreneurial Behaviour & Research, 17(5), 515-533
Heinonen, J., Hytti, U. & Stenholm, P. (2011) The role of creativity in opportunity search and
business idea creation. Education + Training, 53 (8/9), 659–672
Kirzner, I.M. (2009) The Alert and Creative Entrepreneur: A Clarification, Small Business
Economics, Vol. 32
Ko, S. (2012) Entrepreneurial Opportunity Identification: A Motivation-based Cognitive
Approach, Journal of Applied Management and Entrepreneurship, 17(2), 23-37
Morrison, A. (2006) A Contextualisation of Entrepreneurship, International Journal of
Entrepreneurial Behaviour & Research, 12(4), 192-209
Puhakka, V. (2011) Developing a Creative-Cognitive Model of Entrepreneurial Alertness to
Business opportunities, Journal of Management and Strategy, 2(4), 85-94
Renko, M. & Shrader, R. (2012) Perception of entrepreneurial opportunity: a general
framework, Management Decision, 50(7), 1233-1251
Runco, M.A. (2004), Creativity, Annual Review of Psychology, 55, 657-687
Shane, S. & Venkataraman, S. (2000) The promise of entrepreneurship as a field of research,
Academy of Management Review, 25(1), 217-226
Stephen, K. (2012) Entrepreneurial Opportunity Identification: A Motivation-based Cognitive
Approach, Journal of Applied Management and Entrepreneurship, 17(2), 1077-1158
Stokes, D. & Wilson, N. (2010) Small business management and entrepreneurship, England:
Cenage Learning EMEA.
Thompson, J. (2004) The facets of the entrepreneur: identifying entrepreneurial potential,
Management Decision, 42(2), 243-258

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Vaghely, I. & Julien, P. (2010) Are opportunities recognized or constructed? An information
perspective on entrepreneurial opportunity identification, Journal of Business Venturing, 25
73-86
Walton, A. (2003) The impact of interpersonal factors on creativity, International Journal of
Entrepreneurial Behavior and Research, 9(4), 146-162
Yusuf, S. (2009) From creativity to innovation, Development Economics Research Group, The
World Bank, 1818 H Street, NW, Washington, D.C. 20433, USA
Zampetakis, L. (2008) The role of creativity and proactivity on perceived entrepreneurial
desirability, Thinking Skills and Creativity, 3(2), 154-162.
Zampetakis, L. & Moustakis, V. (2006) Linking creativity with entrepreneurial intentions: A
structural approach, Springer Science + Business Media, LLC 2006
Word count excluding Bibliography: 2139