Towards a Process Theory of Opportunity Development

Abstract

We address a critical question concerning the process of innovation that entrepreneurs are often involved in: How are novel opportunities developed? Building on institutional theory, we answer this question by theorizing about a dynamic and iterative process, during which an opportunity is repetitively translated and transformed vis-à-vis a set of actors. Through this development process, incongruities between the opportunity and various actors involved are reduced in such a way that both the content of the opportunity and the expectations of the actors evaluating it are altered. We elaborate our process model using several illustrations from a case study dealing with the emergence of peer-to-peer lending in the US over the last decade. We identify three factors affecting the speed of this process: the degree of opportunity novelty, misaligned actor expectations, and the temporal distance between cycles of translation and transformation. We discuss the implications of our model for entrepreneurship research and practice.