Although an opportunity may exist, entrepreneurs will not be able to take advantage of it unless they are first able to identify the opportunity. Research suggests, though, that opportunities do not appear in a standard form and that individuals differ in their abilities to identify opportunities.16 Intuitively, these differences in discernment are a good thing: If all individuals were equally able to identify opportunities, then they might all rush to exploit the same opportunities.

Which factors help determine whether individuals are able to identify opportunities? In the remainder of this section, we describe four such factors: entrepreneurial alertness, information asymmetry, social networks, and the ability to establish means–ends relationships.

First, individuals vary in terms of entrepreneurial alertness, which refers to an individual’s ability to notice and be sensitive to new information about objects, incidents, and patterns of behavior in the environment.17 When individuals have high levels of entrepreneurial alertness, they are likely to identify potential entrepreneurial opportunities. In contrast, when individuals have low levels of entrepreneurial alertness, they are likely to dismiss or ignore new information and overlook potential opportunities.

Entrepreneurial alertness helped Pennsylvania farmers Amos and Jacob Miller identify a valuable opportunity. Years ago, from conversations with their customers, 32-year-old Amos and his dad, Jacob, spotted a trend in the making: Americans’ interest in nutrient-dense food was growing. As a result, the Millers began expanding their farm’s product line to include such foods—for example, grass-fed beef, milk-fed pork, and fermented vegetables. At a time when it’s become more difficult to make a living from farming, Miller Farm revenues have topped $1.8 million. The key: recognizing a trend and acting on it.18

Second, individuals vary in terms of the information to which they have access, which is known as information asymmetry. This variation in information involves both new information and old information, and no two people share all of this information at the same time.19 Two individuals, for example, may have access to new market information regarding a potential entrepreneurial opportunity; however, only one of these individuals has access to additional information suggesting that other people are already moving to exploit this opportunity. As such, only one of these individuals will correctly identify this opportunity.

Third, individuals vary in terms of their social networks, which represent individuals’ patterns of social relationships. Some individuals have extended social networks (i.e., many social relationships), whereas other individuals have narrow social networks (i.e., few social relationships). Research suggests that individuals with extended networks are more likely to identify potential entrepreneurial opportunities than are those with narrow social networks.20 Moreover, the type of social network may influence opportunity identification. An individual with entrepreneurial family members, for example, may be better able to identify opportunities than an individual with family members who are not entrepreneurial.21

Fourth, individuals vary in terms of their abilities to assess means–ends relationships. In this context, the ability to assess means–ends relationships refers to understanding how to turn a new technology into a product or service that will be desired by consumers. For example, individuals may have access to technology but be unable to understand the potential commercial applications associated with the technology. When individuals are unable to see these associations, they are unable to identify the opportunity. In an effort to help establish these means–ends relationships, several universities are working with individuals and researchers to identify the commercial applications associated with new technologies.22

Taken together, these different factors influence opportunity identification. Figure A2.2 summarizes these different factors.