Actualization Theory of Entrepreneurial Opportunities
Actualization Theory: Bridging the Gap in Entrepreneurial Opportunity
The Actualization Theory of entrepreneurial opportunities, introduced by Ramoglou and Tsang (2016), is intended to resolve one of the biggest debates in the field: the gap between Discovery and Creation theories.
The Great Debate: Discovery vs. Creation
To understand Actualization, we must first understand the two opposing views it attempts to reconcile. The debate centers on whether business opportunities exist objectively (realism) or are imagined subjectively (constructionism).
1. The Discovery Perspective
This view argues that opportunities exist "out there" in objective reality, waiting to be found and exploited. This implies that if an opportunity does not exist, no amount of effort will be fruitful.
The Edison Analogy: Denying objective existence is like arguing that if Thomas Edison had died early, we might not have electric light today because only he could "construct" the notion of it. Discovery theory argues this is a stretch; independent invention is likely because the physics of electricity exists regardless of the inventor.
2. The Creation Perspective
This view suggests that opportunities do not exist outside of the entrepreneur. Instead, they are created by the entrepreneur's cognition and actions.
The Edison Analogy: This suggests Edison could have succeeded in any field had he directed his efforts there. However, critics note this borders on "Great Man" theory, ignoring that even Edison was constrained by the realities of general-purpose technology (electricity).
The Solution: Actualization Theory
Ramoglou and Tsang (2016) propose a middle ground known as Actualization Theory.
They argue that opportunities are real, but they exist as propensities. They are objective possibilities that remain worthless unless they are actualized by an entrepreneur with the right care and skill.
| Theory | Nature of Opportunity | Role of Entrepreneur |
|---|---|---|
| Discovery | Objective (It is hidden) | To search and find. |
| Creation | Subjective (It is imagined) | To act and build. |
| Actualization | Propensity (It is potential) | To cultivate and realize. |
The "Flower Seed" Metaphor
The most effective way to understand Actualization theory is through the metaphor of a garden:
"Like flower seeds hidden under the surface of the ground, opportunities may remain unborn for some time before the conditions are just right. The entrepreneur comes around to find the seed, water it, and ensure it receives adequate drainage and light."
Thus, the distinction is clear: Opportunities exist objectively as potential, but it is not guaranteed they will be exploited, nor that they will become profitable without human agency.
Conceptual Origins: Why "Actualization"?
The name of the theory draws a conceptual parallel to Maslow's hierarchy of needs and Self-Actualization—the process of making one's potential a reality. Just as a person has the potential to be great but must work to actualize it, a market opportunity has the potential for profit but must be actualized by a founder.
Video: Understanding the concept of Actualization (Maslow's Context)
Sources
- Ramoglou, S., and Tsang, E. W. (2016). A realist perspective of entrepreneurship: Opportunities as propensities. Academy of Management Review, 41(3), 410-434.
