Chapter 10: How Knowledge Affects Opportunity Discovery and Exploitation Among New Ventures in Dynamic Markets

One of the most central discussions in entrepreneurship concerns the importance of knowledge in opportunity discovery and exploitation. Austrian economics suggests that prior knowledge is related to successful discovery and exploitation. This stream of thought implicitly assumes that opportunity discovery is instantaneous and/or that opportunities remain constant over time. In dynamic markets where change is frequent and sometimes erratic, opportunities become more elusive and rapidly appear, disappear or change. We discuss two longitudinal case studies in order to demonstrate the functioning, integration, and utilization of knowledge in successful and failed opportunity discovery and exploitation. The cases involved are new ventures and we focus on their original business opportunity and their subsequent metamorphoses in the discovery and exploitation processes. Our findings show that while prior knowledge may be of great importance, constantly gaining new market knowledge and adapting strategies in accordance with this new knowledge is essential to the successful discovery and exploitation of opportunities. These findings challenge the common assumption that entrepreneurs first discover opportunities and then exploit them. Instead, entrepreneurial opportunity discovery and exploitation are closely entwined and exploitation influences discovery just as discovery influences exploitation.