Research on Entrepreneurial Alertness: Sampling, Measurement, and Theoretical Issues

Information undoubtedly plays a critical role in the development of new ventures (Hambrick and Crozier 1985; Smith et al. 1988). However, while some recent research suggests that entrepreneurs may process information differently than managers in large organizations (Manimala 1992; Busenitz and Barney 1996), a substantial amount of ambiguity exists in our understanding of how entrepreneurs search for information. In summarizing the history of economic research on entrepreneurs, Hebert and Link (1988) concluded that most neoclassical economists struggle to explain entrepreneurial thinking styles and behavior because information that leads to starting new businesses is rarely based on full and free market data. In a departure from the traditional neoclassical framework and in an important breakthrough, Kirzner (1973, 1979, 1982) developed the "entrepreneurial alertness" concept which assumes that entrepreneurship involves the discovery of opportunities and the resources to exploit them as the economy moves towards equilibrium. From this perspective, the entrepreneur is an opportunity-identifier who has the ability to spot underpriced products or factors of production in particular markets in anticipation of disequilibrium profit opportunities. Thus, Kirzner posited information and information-seeking behavior as the central tenants of entrepreneurial alertness. In what is believed to be the first empirical test of entrepreneurial alertness, Kaish and Gilad (1991) found some empirical support for this theory. Their results suggest that entrepreneurs heighten their alertness to possible business opportunities by using different types of information (information cues) to project the potential of new business opportunities. Their results further indicate that whereas entrepreneurs make a habit of scanning their environment for information that may lead to new business opportunities, managers tend to depend on more traditional economic analyses to determine the viability of a new opportunity. These findings, if true, give us a better understanding of the behavioral context out of which new ideas tend to emerge and of how entrepreneurs sometimes go about doing things differently. Given that research on entrepreneurial alertness is still in its infancy, the purpose of this study was to replicate and further develop this alertness concept. While the findings reported by Kaish and Gilad (1991) represent a potentially important breakthrough, further confirmations of their findings have yet to be reported. This is cause for concern, particularly since Kaish and Gilad noted that their results should be viewed with caution given a number of specified limitations. Aldrich (1992) specifically noted that more replication studies are necessary to substantiate initial findings, particularly in the entrepreneurship area. More specifically, this replication was deemed necessary because of sampling, measurement, and theoretical issues. First, the two samples that Kaish and Gilad chose leave several generalizability issues unanswered. Kaish and Gilad acknowledged that their sample of entrepreneurs was not strictly random, that no analysis was done with non-respondents, and that the sizes of their two samples were relatively small. Additionally, their sample of managers was drawn from only a single larger organization. These issues raise the possibility that the results reported by Kaish and Gilad are biased and need further examination. Second, reliability questions remain with some of the scales developed by Kaish and Gilad. For the scales replicated by this study, the internal reliability coefficients reported by Kaish and Gilad ranged from . 57 to . 74. These are very marginal since reliabilities in the . 70 range have generally emerged as the standard (Nunnally 1978). Combining these low reliabilities with the small sample sizes used by Kaish and Gilad significantly reduces the statistical power of their test (Kopriva and Shaw 1991). …