Discovery Theories

What are the theories about Entrepreneurial Discovery?

How do entrepreneurs find new business ideas? Do they find them lying around (Discovery), or do they build them from scratch (Creation)? The following theories explore the mechanism of Opportunity Recognition.

Individual-Opportunity Nexus Theory

Shane & Venkataraman (2000).
This framework argues that entrepreneurship cannot be explained by the individual alone or the external environment alone. Instead, it occurs at the "nexus" (intersection) where an enterprising individual meets a lucrative situation.

Alertness Theory (Kirzner)

The Arbitrageur.
Israel Kirzner’s theory posits that markets are not always in equilibrium. Entrepreneurs possess a unique "alertness"—the ability to notice profit opportunities (buy low, sell high) that others have simply overlooked, without actively searching for them.

External Enabler Theory

The Environmental Trigger.
Proposed by Davidsson, this theory suggests that opportunities are often triggered by distinct external changes—such as new technologies, regulatory shifts, or demographic changes—that "enable" new ventures to exist.

Actualization Theory

Opportunity as Propensity.
Ramoglou & Tsang argue that opportunities are not "lost luggage" waiting to be found, nor are they purely created by imagination. They exist as "propensities" (market potentials) that must be actualized through entrepreneurial action.

X-Efficiency Theory

Closing the Gap.
Harvey Leibenstein’s theory focuses on the inefficiency of existing firms. It suggests that opportunities exist because established companies are not working at peak efficiency ("X-inefficiency"), leaving room for an entrepreneur to enter the market and do the job better or cheaper.