Prior studies in entrepreneurship have indicated that entrepreneurs make decisions about opportunities by comparing them with an ideal image of an opportunity, that is, an image of what constitutes an opportunity for ‘me’. For example, Mitchell and Shepherd (2010) suggest that an entrepreneur’s images of himself or herself impact one’s images of opportunity. More specifically, they argue that an individual’s image of his/her own vulnerability (fear of failure) and capability (human capital and entrepreneurial self-efficacy) impact his/her individual opportunity image and thereby what he/she considers as an opportunity for him/her. In general, Mitchell and Shepherd (2010) find that entrepreneurs prefer opportunities that are valuable (profitability dimension), that are based on knowledge similar to their own (feasibility dimension), and that have wide opportunity windows with many choices, but the view of an ideal opportunity (what is out there) also builds on the entrepreneur’s view of his/her own vulnerability and capability (what he/she brings to it). Thus, they argue that individuals’ attitudes and beliefs about themselves impact their images of opportunities and thereby opportunity recognition, evaluation, and pursuit. Hence, they acknowledge that the opportunity recognition and evaluation process entails multiple images of the self and an image of an ideal opportunity, against which the confronted situation is mirrored.
Maitland and Sammartino (2015) employ the mental model concept in studying how senior decision-makers in multinational enterprises think through and make sense of their surroundings in making internationalisation decisions. Drawing on extant international business models, they identify seven knowledge domains that constitute the decision-makers’ mental models that are utilised in making sense of foreign direct investment opportunities – in other words, the
group of issues that they must cognitively deal with when evaluating and determining a location and expansion form. These knowledge domains comprise (1) firm-specific advantages, (2) capacity, (3) governance architecture, (4) operational aspects, (5) location, (6) value proposition, and (7) the overall opportunity consideration, involving the strategic resolution of how and whether the opportunity can be designed to deliver sufficient value and advantage to the firm. Maitland and Sammartino (2015) suggest that these knowledge structures or mental models and the managers’ related sensemaking processes can impact internationalisation decisions during the screening of feasible locations, the collection and assessment of information, determining a preferred strategic option, and post-entry evaluation. Hence, in comparison with Mitchell and Shepherd (2010), Maitland and Sammartino (2015) present a more detailed construct of the potential elements constituting a mental image relevant to internationalisation decisions, involving both the opportunity context as well as the self through knowledge of the advantages and capacities of the focal firm. However, their study focuses on sensemaking differences between individuals when they make international business decisions, not at the point when a manager or entrepreneur is only about to recognise an initial opportunity for going international. Nevertheless, their study argues that ‘as managers attempt to interpret and understand host locations, their mental models are consistently framing what information is sought, how and when it is collected and analyzed, and which information influences the final strategic decision’ (Maitland & Sammartino 2015, 756).
Focusing also on opportunity evaluation, and on how that evolves over time, Williams and Wood (2015) suggest that rule-based reasoning is a key mechanism by which entrepreneurs form personal mental representations of opportunities. The authors discuss the rules that entrepreneurs use as they decide which opportunities are attractive for them and their firms. Based on the rules, individuals cognitively compare the degree to which images of current circumstances or events fit with images of an ideal opportunity. Williams and Wood (2015) divide the rules into environmental factors (e.g. window of opportunity, number of opportunities, industry rates, and technological change), opportunity-related cues (e.g. magnitude, novelty, rarity, and riskiness), and individual differences (emotions, illusion of control, fear of failure, and prior knowledge). These factors determine the images of ideal opportunities as well as the images of actual opportunity; and once an opportunity has been recognised, these factors are used as rules to evaluate the attractiveness of the opportunity. The rules are inferences made from past experience, or learning from the experiences of others, and applied to the circumstances at hand, whereby they are subjective, contextual, and interpretive. Thus, along with Maitland and Sammartino (2015), Williams and Wood (2015) present a more fine-grained yet
different view of what the complex mental images relevant to opportunity evaluation are all about.
Moreover, to add to the complexity, Maitland and Sammartino (2015), Williams and Wood (2015), and even Baron and Ensley (2006) before them indicate that the mental models evolve over time through the experience gained by the individual. Baron and Ensley (2006) suggest that the opportunity prototypes (i.e. cognitive representations of the essential nature of opportunities) of experienced entrepreneurs were more clearly defined, richer in content, and more concerned with factors related to actually starting and running a new venture than those of novice entrepreneurs. In line with this, Maitland and Sammartino (2015) suggest that the variance in the richness and connectedness of the elements in decision- makers’ mental models is related to the extent of international experience; more internationally experienced individuals draw on more detailed and extensive knowledge, which affects how they make sense of connections that are central to internationalisation decisions. Baron and Ensley (2006) state that experienced entrepreneurs may ‘connect the dots’ in their environment very differently from their novice colleagues, which influences their identification of business opportunities. Simultaneously, this also indicates that entrepreneurs may not see opportunities directly, but rather they see changes in variables that may lead to the identification of an opportunity. Hence, opportunity recognition is a complex, fine-grained, and dynamic cognitive process.
Providing another perspective to the complexity, opportunities are not recognised in isolation but in a world full of simultaneously existing multiple, even countless, potential opportunities that are more or less concrete in the mind of an entrepreneur. Referring to this, Hill and Birkinshaw (2010) introduce ‘idea sets’, referring to the complete stock of entrepreneurial ideas an individual has accessible within his/her memory at a given time. Hence, they take into account ideas that are well developed (towards opportunity recognition) as well as ideas that represent just the initial spark of possibility. The ideas within an idea set can be characterised by the content, volume, stage of development, strategic value logic, and novelty. Hill and Birkinshaw (2010) suggest that over time, new ideas enter the set, while others will be disregarded due to infeasibility or undesirability, or they will just fade away due to attention shifting to new stimuli. Focusing on attention, in turn, Shepherd, McMullen, and Ocasio (2017) study how the allocation of attention impacts the recognition of changes in the environment and the formation of opportunity beliefs. As a part of their findings, they discuss the role of knowledge structures in attention allocation; they define knowledge structures as mental templates that allow managers to give meaning and subjective representation of information about the environment and generate strategic action. Shepherd, McMullen, and Ocasio (2017) suggest that the likelihood of
noticing architectural change (a change that alters the way in which the components of a product are integrated and linked together, for instance) is higher when top managers’ knowledge structures are more complex rather than less complex. Complex knowledge structures contain deep and rich connections that allow the individual to understand and notice architectural change, which is more difficult to see than incremental and discontinuous changes. Once a change has been noticed through transient attention, the manager must allocate sustained attention to it in order to form opportunity beliefs for strategic action. Hence, their study complements the prior findings in that through determining attention allocation, knowledge structures have an important role not only in the evaluation of changes but also in noticing them in the first place. On this basis, mental images influence not only how individual opportunities are recognised but also whether they are noticed in an environment full of changes and alternative opportunities.
When it comes to understanding collective opportunity recognition, it is fair to note that entrepreneurial cognition has also been studied at the team level. Based on a review of the extant literature on entrepreneurial cognition, Mol, Khapova, and Elfring (2015, 243) define it as ‘an emergent state that refers to the manner in which knowledge is mentally organized, represented and distributed within the team and allows entrepreneurial team members to approach problem-solving and make assessments, judgements or decisions concerned with milestones and outcomes relevant to the entrepreneurial process, such as identifying and evaluating different opportunities, or defining and implementing launch and growth strategies’. A recent stream of research has also focused on team mental models. Lim and Klein (2006) describe how when team members organise their knowledge of team tasks, equipment, roles, goals, and abilities in a similar fashion, they share mental models that then constitute team mental models. Team mental models allow the team members to anticipate each other’s actions and to coordinate them, particularly when chances for joint extensive communication and strategising are limited.
Cannon-Bowers, Salas, and Converse (1993) suggest that team members share the following four mental models: (1) the equipment model, capturing the shared understanding of the possessed technology and equipment; (2) the task model, referring to the shared perceptions of the team procedures, strategies, and environment; (3) the team interaction model, which refers to the shared understanding of the members’ responsibilities, norms, and interaction patterns; and (4) the team model, reflecting the members’ understanding of each other’s knowledge, skills, strengths, and weaknesses. Mathieu, Heffner, Goodwin, Salas, and Cannon-Bowers (2000) synthesise these four models under two – the task work mental model and the teamwork mental model. Later on, in studying the role of these two team mental models, Lim and Klein (2006) propose that the team members’ mental model similarity and accuracy enhance team performance.
However, it must also be noted that findings from team-level research may not be directly applicable to inter-organisational groups of people, although they do provide some indication of how cognitive processes and mental images operate at the collective level between individuals.
To summarise, entrepreneurs’ mental images play an important role in opportunity recognition. Prior literature suggests that images related to self, opportunity, and context, all comprising knowledge of various aspects, affect how entrepreneurs make sense of their environment and the potential opportunities within it. The role of this sensemaking in opportunity recognition will be discussed in detail next.