The potential of collective intelligence for decision augmentation

August 31, 2021
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Introduction

In the era of digital economy, IT is becoming the enabler of novel products, serv might reduce an entrepreneur’s chances to receive reasonable feedback and persuade a reasonable number of stakeholders of the viability of the opportunity to gain access to further valuable resources that support the entrepreneur in enacting the opportunity (Alvarez et al. 2013). Furthermore, the demand-side knowledge of potential customers is frequently not accessible (Nambisan and Zahra 2016). 

One solution is the use of collective intelligence. This approach enables socially constructed co-creation by providing scalability, diversity, and flexibility beyond the boundaries of an entrepreneur’s social network (Jeppesen and Lakhani 2010; Leimeister et al. 2009). While current literature seems to suggest that crowdsourcing as a concrete mechanism for accessing collective intelligence is a powerful tool to discover innovative ideas, I argue that crowdsourcing can also be applied to entrepreneurial opportunity creation. Thus, crowdsourcing might serve entrepreneurs in co-creating opportunities with potential market stakeholders and observing how consumers respond to their actions as well as giving them more flexible access to human resources or financial support (Mollick and Robb 2016). I propose accessing collective intelligence through crowdsourcing as a suitable mechanism to opportunity creation by providing access to social resources, reducing uncertainty about the objective value of an opportunity, and ensuring iterative development, learning, and resource support.

The contribution of my work is threefold. First, I contribute to research on how opportunities emerge from interactions between entrepreneurs and their social environment (e.g. Alvarez and Barney 2007; Alvarez et al. 2013; Tocher et al. 2015) and on the cognitive perspective of opportunity creation and enactment (Grégoire et al. 2011) by highlighting the role of leveraging external heterogeneous social resources in objectifying and enacting an opportunity. I therefore, provide a theoretical rational for why and how crowdsourcing can accelerate entrepreneurial processes. Second, I contribute to the emerging literature stream of digital entrepreneurship (e.g. Nambisan 2017) by showing how the affordances of digital infrastructures make the boundaries and agency of entrepreneurial processes less bound. I therefore introduce a new sub field for digital entrepreneurship research, which requires further consideration due to its enormous potential: crowdsourcing for supporting entrepreneurship by expanding the scope of collective intelligence to entrepreneurship research. Finally, my research contributes to the literature stream of crowdsourcing by emphasizing the potential role of a crowd in entrepreneurship. I put a constructivism lens on the entrepreneurial process by proposing that crowdsourcing cannot only be the source of creative ideas, as in previous studies, but also serve the purpose of sense making between the entrepreneur and the social environment to further develop and construct opportunities via social interaction.

A Creation Perspective on Entrepreneurship Decisions

The opportunity construct is one of the most pivotal concepts in the field of entrepreneurship (Davidsson 2015; McMullen and Shepherd 2006). In general, an opportunity is defined as a desirable future situation (Stevenson and Jarillo, 1990). Researchers in the academic field of entrepreneurship, however, have different notions of the nature of such opportunities. The literature distinguishes between two perspectives, the discovery view (Shane and Venkataraman 2000) and the creation view (Alvarez et al. 2013; Alvarez and Barney 2007; Alvarez et al. 2014) on opportunities. 

The discovery perspective uses a critically realistic view to perceive opportunities as objective and formed by exogenous shocks to existing markets and industries (Shane and Venkataraman 2000). Opportunities are therefore discovered by the alert entrepreneur who aims at creating wealth (Kirzner 1979; Kauppinen and Puhakka 2010). From such a perspective, decision-making is risky. This means that both, outcomes, and their probabilities can be derived from the information that objectively exists in the environment, for example through customer surveys (Alvarez et al. 2014). For instance, approaches such as idea sourcing (e.g. Leimeister et al. 2009) help the entrepreneur in revealing an opportunity that is “waiting to be recognized” and tools such as customer surveys support the assessment of the probability of an opportunity’s success. Outside actors and the environment therefore function as a source for novel and creative ideas.

On the other hand, opportunity creation theory (OCT) (Alvarez and Barney 2007/2010; Alvarez et al. 2013) applies an evolutionary realism lens and is based on the view that reality is socially constructed (Weick 1993). This perspective implies that opportunities are not existing independently of the entrepreneur but emerge from the iterative actions undertaken to create novel ways to achieve wealth (Sarasvathy 2001). Market disruptions are therefore not caused by exogenous changes but created endogenously by the actions of entrepreneurs (Wood and McKinley 2010). The opportunity creation perspective proposes that entrepreneurs should follow multiple and iterative developmental stages to fully enact an opportunity (Haynie et al. 2009). First, during the opportunity objectification stage, entrepreneurs start a sense-making process to validate the viability of their conceptualized idea by gaining feedback (Wood and McKinley 2010). Second, in the opportunity enactment stage, the entrepreneur builds stakeholder support by signaling the value of the opportunity and persuading the social environment of the value of the opportunity (Alvarez and Barney 2007; Tocher et al. 2015). Entrepreneurs create opportunities based on their individual beliefs and perceptions, imagination, and social interaction with the environment (Alvarez and Barney 2014). Contrary to the discovery view, the decision-making context is highly uncertain and requires incremental and intuitive decision-making as entrepreneurs create context-specific knowledge where none previously existed (Alvarez et al. 2013). The probability of future success is unknown as neither information about supply nor demand exists before the opportunity is enacted (Sarasvathy et al. 2003). Thus, opportunities are emerging as entrepreneurial actors wait for a response from their actions (e.g. testing it in the market) and then adjust their beliefs accordingly. Therefore, they are co-created by the entrepreneur, customers, and other stakeholders (Alvarez et al. 2013). 

The opportunity creation process thereby starts when an entrepreneur conceptualizes a potential future business idea based on individual social experiences and the formation of its cognitive evaluation of such reality (Wood and McKinley 2010).

 

Opportunity Creation Process

After the entrepreneur imagined an opportunity idea, the objectification as an act of sense making starts by interacting with the social environment to verify initial beliefs (Weick 1993). In this early stage of opportunity creation, the entrepreneur is confronted with a high level of uncertainty regarding the prospect of a business idea. To reduce such uncertainty, the entrepreneur aims at validating her or her beliefs by enacting with the social environment. During this phase, the entrepreneur interacts with peers to test the viability of the idea and reduce uncertainty. Typically, entrepreneurial actors rely on peers such as friends, family members, or other contacts within their direct social network due to their instant availability. However, the value of feedback from peers that is provided in the process of sense making is highly dependent on their experience in this field, industry, or entrepreneurial practice in general (Dubini and Aldrich 1991). Feedback from peers may be both informal, for instance when provided in conversations, or formal by using meetings. Independent from the form of feedback, entrepreneurs attempt to create consensus within these social interactions to gather information about whether their initial idea and beliefs represent a real and viable opportunity. This process transforms an idea that was previously formed in the mind of the entrepreneur into an objectified opportunity or abandons it if consensus cannot be achieved. Thereby, the objectification of an opportunity reduces an entrepreneur’s perceived uncertainty (Wood and McKinley 2010). 

Once the opportunity is objectified, the entrepreneurs minimize their individual uncertainty regarding the value of the business idea. Therefore, their beliefs and actions will become guided by the opportunity idea. In the next step, the entrepreneur actively explores and leverages ways to capitalize on the opportunity (Alvarez et al. 2013). To this end, the potential founder needs to engage and gain solid traction among stakeholders. In doing so, they expand their scope beyond the directly related peer group and obtains access to further resources, for instance financial or human capital that allow them to fully exploit the envisioned opportunity and are critical for the opportunity creation process (Wood and McKinley 2010). 

At the heart of opportunity enactment, an entrepreneur needs to create a shared understanding of the future idea among all involved stakeholders. This can take on several forms such as negotiations with investors, contacting employees, surveying potential customers, or searching for new technologies that might help to fulfil the opportunity. In this process, the entrepreneur needs to convince stakeholders of the potential idea, thereby increasing the odds of opportunity enactment (Alvarez and Barney 2010). Thus, the value of an opportunity can only be observed and understood after the entrepreneur has acted and thereby stimulated reaction from the market and gained validation from the market (Alvarez et al. 2013). In doing so, an entrepreneur can observe customer responses to products and services, which allows him to identify a divergence between an idea and actual customer perceptions and needs (Alvarez and Barney 2007). If an entrepreneur finds significant divergence, she may change the idea in a process of iterative actions and reactions until she receives a market fit or she might abandon the idea altogether. Furthermore, entrepreneurs draw on their social contacts to gain access to key resources such as potential employees or investors that support their idea. Such resources are crucial to fully turn the opportunity idea into a new venture (Wood and McKinley 2010).

Entrepreneurial Actions for Making Decisions

The central concept within the opportunity creation process is uncertainty. Uncertainty in this context regards the objective value of an idea, the needs of stakeholders, and the outcome of this iterative process (Alvarez et al. 2013). Contrary to risks, where decision makers can estimate the outcomes and the probability of such outcomes associated with a decision, uncertainty implies neither the outcomes associated with a decision nor their probability to occur (March and Zur Shapira 1987; Knight, Frank, H. 1921). Uncertainty has a dual role. For instance, the entrepreneur has only insufficient information about responses from the market or other stakeholders regarding a novel technology-based value proposition. On the other hand, stakeholders such as potential investors perceive uncertainty or doubts about the actual value of the idea (McMullen and Shepherd 2006). For a successful opportunity creation process, entrepreneurs should reduce both their individual uncertainty to objectify an opportunity and the uncertainty of their stakeholders to further develop the initial idea and get potential stakeholders on board. Reducing the uncertainty of the environment enables the creation of a potential market as well as provides access to further resources, for instance human capital or investments (Haynie et al. 2009).

OCT indicates three central concepts to reduce uncertainty in the entrepreneurial process: social interaction, iterative development, and learning. The starting point of each creation process is uncertainty. Therefore, entrepreneurs use social interaction with their peers, customers, and other stakeholders to reduce such uncertainty by gathering feedback. The uncertainty about their opportunity is reduced until opportunities can be objectified (Wood and McKinley 2010). Next, these social interactions lead to iterative changes in the beliefs and mental models about the initial opportunity and finally enable the entrepreneur to create wealth. Therefore, the opportunity emerges, and ideas, products, or entire business models are continuously reassessed, pivoted, or even abandoned (Ojala 2016). Creation theory assumes that the entrepreneur should rely on experiments, gathering feedback, remaining flexible, and learning rather than focus on pre-existing knowledge (Mintzberg, 1994). In the context of the opportunity creation process, learning from feedback and the iterative development of the idea is more important than strategic planning. Therefore, tacit learning in a path-dependent process becomes the major source of competitive advantages for entrepreneurs (Alvarez and Barney 2007).

To leverage these approaches to reducing uncertainty, entrepreneurs engage in several entrepreneurial actions (Wood and McKinley 2010). During the opportunity objectification stage, entrepreneurs focus on their individual sense making of the viability of their idea and the iterative development based on the responses from their actions, usually from the market. In the next step, entrepreneurs persuade interested stakeholders of the viability of their idea and mobilize resources to enact an opportunity (Alvarez and Barney 2007).

Previous research in the context of opportunity creation emphasized the value of an entrepreneur’s social resources to objectify and enact an opportunity (Wood and McKinley 2010). The actions of an entrepreneur are therefore heavily influenced by the creativity and judgment gathered through social interaction (Foss et al. 2008). 

Limitations of Entrepreneurial Decision-Making

Leveraging the entrepreneur’s individual social capital to fully exploit the value of social interaction has its limits for several reasons that can be explained through cognitive bounds and cognitive constraints. Most obviously, a lack of social capital or competence, which previous research proposes as crucial resource for opportunity creation (e.g. Tocher et al. 2015), is therefore a common threat for entrepreneurs that prevents them from making sense of the viability of an opportunity or gaining access to external resources that are required to transform an opportunity idea into a novel venture. Following this logic, it would be impossible to objectify and enact an opportunity if entrepreneurs lack social competence or capital.

Second, if entrepreneurs explain their ideas to their related peers and ask for feedback on the value of the opportunity, they will face several cognitive traps. For instance, the entrepreneurs might encounter a self-selection bias by choosing peers that are very likely to support their thoughts and beliefs. Moreover, direct associates will more likely tend to overestimate the viability of an opportunity and therefore lead to biased results of the feedback process (Burmeister and Schade 2007). This fact can create a misleading sense of security that might result in the threat of wrong market moves (Lechner et al. 2006). On the other hand, closely related stakeholders might also face severe biases in the phase of enactment. Previous studies showed that, for instance, venture capitalists tend to evaluate start-ups with a high level of similarity regarding their industry, educational background, or personal characteristics more favourably, bias can potentially lead to disastrous funding decisions (Franke et al. 2008, 2006).

Third, during the objectification process, entrepreneurs need access to experienced experts who are also capable of further evaluating and developing initial ideas (Foss et al. 2008). Therefore, an entrepreneur needs social ties to experts who support the process of confirming if a conceptualized idea is viable to adopt it to a potentially viable idea or even completely reject the opportunity (Wood and McKinley 2010). The major constraint that entrepreneurs face here is the fact that they frequently only have social capital. Moreover, the peers within their direct networks might not necessarily be experts in the required field. For instance, they might not have enough business knowledge, technological expertise, or simply not enough domain experience. This problem is particularly important if the entrepreneurs attempt to converge industry boundaries with their ideas and therefore require experts from various branches (Tocher et al. 2015). Without access to such social resources, an entrepreneur has only little chances to reduce uncertainty and finally objectify the idea (Haynie et al. 2009).  However, even if they have access to a small network of social contacts, they might face representativeness bias by relying on and generalizing from small samples rather than comprehensively surveying a huge number of experts (Fischhoff et al. 1977). Limited access to social resources can further have crucial effects on the success of the opportunity enactment as entrepreneurs tend to recruit employees or obtain funding from their individual social network (Mikkola and Gassmann 2003; Hsu 2004).

Fourth and directly related to this fact is the problem of strong ties in the entrepreneur’s network, which might lead to a limited heterogeneity of knowledge (Burt 2004; Granovetter 1985). To successfully enact an opportunity, the deep prior experience within one field needs to be balanced with heterogeneous knowledge and insights to enable valuable feedback and learning (Alvarez et al. 2013; Weick 1993). In creating opportunities, closely relying on knowledge and experts from directly related industries or markets may make it difficult to gather valuable feedback. For instance, novel ideas that diminish traditional industry boundaries or disrupt markets require evaluation/information from heterogeneous sources and therefore social interaction with experts from various fields (DiMaggio 2012). However, previous research provides strong evidence that entrepreneurs tend toward interacting with contacts from closed networks that often provide only little additional information to the entrepreneur’s beliefs during the objectification of an idea (Ruef et al. 2003). Therefore, information about customers’ needs and desires is frequently not accessible as well (Nambisan and Zahra 2016).

Finally, the flexibility of required resources represents a certain issue in the creation context of fully enacting an opportunity (Alvarez and Barney 2007). Such a flexibility of resources is particularly manifested in human resource practices and financing. First, entrepreneurs frequently do not know which skills they finally require for exploiting their opportunity as the outcome of the process is highly blind or myopic (Campbell 1960). Therefore, hiring individuals becomes challenging as the requirements can expand or change in a short time exceeding the human capital of employees (Alvarez and Barney, 2007). Second, entrepreneurs must obtain financial resources to realize an opportunity. However, the context of creating opportunities is highly uncertain due to the lack of information. Therefore, it is difficult to explain the nature and value of the opportunity that is being exploited to traditional sources of capital such as banks and venture capital firms (Bhide 1992). Consequently, using peers and potential stakeholders within an entrepreneur’s social network might be insufficient in providing the required flexibility of resources for creating an opportunity.

Therefore, this approach provides only limited support for reducing uncertainty and socially constructing an idea during opportunity objectification and enactment. Lacking proper social resources during the opportunity creation process therefore represents the major reason many entrepreneurial efforts fail (Tocher et al. 2015).

To overcome the limitations of previous approaches the concept of collective intelligence and the mechanism of IT-mediated crowdsourcing offers tremendous possibilities to enable interaction with potential customers, experts, and other stakeholders by minimizing transaction costs and providing broad access to heterogeneous social resources, thus, reducing cognitive constraints and bounded rationality. I therefore propose that crowdsourcing, which has proven to be a valuable concept in other contexts, is a valuable approach for entrepreneurs to reduce uncertainty and interact with their social environment as it provides access to heterogeneous knowledge from diverse sources and flexible resources. 

Previous Work on Crowdsourcing

One special instantiation of interacting with a firm’s environment during the process of developing new products and services is crowdsourcing (Priem 2007). Crowds define an anonymous group of individuals, ideally domain experts or customers, which can provide dispersed knowledge (e.g. demand-side knowledge, supply-side knowledge etc.). Crowdsourcing was originally considered as a new form of organizing work and denotes the act of taking a task once performed inside an organization and broadcasting it via an open call to individuals outside the organization (Howe 2008). More recent research suggests that crowdsourcing contains much more than outsourcing single tasks to a broad and unknown group of people. Thus, on a broader level crowdsourcing can be considered as a mechanism that allows a firm to attain previously unattainable resources to build a competitive advantage. Since this notion is based on the theoretical considerations of the resourced based view, the crowd is viewed as a valuable resource so called crowd capital, that must be leveraged for resource creation purposes. For an entrepreneur to be able to efficiently utilize this crowd capital she must develop so called crowd capabilities. These capabilities include developing an adequate understanding about the contributions she is seeking (e.g. money, ideas etc.), the IT structure best suited to obtain these contributions (episodic vs. collaborative) as well as strategies on how to process/evaluate these contributions. Depending on these considerations, an entrepreneur can make use of different types of crowdsourcing such as —crowd voting, micro-task, idea, and solution crowdsourcing (Prpic and Shukla 2013, 2014). 

The value of crowdsourcing as a mechanism can be explained through gaining access to collective intelligence. Such collective intelligence underlies two basic principles: error reduction and resource/knowledge aggregation (Mannes et al. 2012; Mannes et al. 2014). Error reduction is achieved as although an individual decision maker might be prone to biases and errors (such as individual entrepreneurs or mentors in my context), the principle of statistical aggregation minimizes such errors by combining multiple perspectives (Armstrong 2001). Second, resource aggregation describes the diversity of external resources that can be integrated. For instance, supply-side knowledge that can be aggregated by combining multiple decision makers and enables a user to capture a fuller understanding of a certain context (Keuschnigg and Ganser 2016). Moreover, demand-side (i.e. market) knowledge can be accessed and is most frequently applied for user innovation (Priem 2007; Soukhoroukova et al. 2012).

Firms that apply crowdsourcing benefit from the heterogeneous and diverse crowd, which can provide the ability to discover creative solutions or solve problems. Interaction with a crowd enables firms to discover novel customer requirements and user input for ideas, thereby representing a “voice of the customer” (Dahan and Hauser 2002; Griffin and Hauser 1993). Therefore, crowdsourcing provides both need-based information (i.e. what is the problem?) as well as solution-based information that guides companies in finding out what a potential new product or service should do (Afuah and Tucci 2003, 2012; Terwiesch and Ulrich 2009). On the other hand, a crowd can be used to gain access to external resources, such as human capital, to recruit freelancers with a specific expertise (e.g. expertise in PHP or Java) to fulfil a certain job (e.g. programming a webpage) or to finance products, investment projects, or entire companies (Mollick 2014). 

However, research so far has dealt with crowdsourcing at a surface level. Thus, crowdsourcing has been considered as a tool for ideation, commenting, and voting. One aspect that has been frequently ignored is that crowdsourcing can also be used as an idea development tool that can effectively support idea evolution through various stages of entrepreneurial maturity (i.e. from idea to prototypes and business models) by offering collective intelligence. I argue that applying crowdsourcing to entrepreneurial challenges requires an entirely different perspective that can do more than just helping companies with problems at the fuzzy front end of innovation (i.e. for example ideation). Therefore, a crowd should ideally consist of domain experts and customers that possess the required demand and supply-side knowledge.

Crowdsourcing for Entrepreneurial Actions

Based on this argumentation, I build on the process model of opportunity creation by Wood and McKinley (2010). This process includes the stages opportunity conceptualization, opportunity objectification, and opportunity enactment. During the conceptualization of an opportunity, entrepreneurs rely on their individual beliefs and experiences (Wood and McKinley 2010). The term “search” as applied in idea communities has little or no meaning in OCT as the agency of an individual entrepreneur is essential during this phase (Alvarez and Barney 2007). This contrasts with a discovery view on crowdsourcing that might obviously leverage a crowd for discovering novel ideas (e.g. Afuah and Tucci 2012). 

Building on previous work on the role of social resources in this process (e.g. Tocher et al. 2015), I argue that crowdsourcing facilitates opportunity objectification by providing entrepreneurs with social resources to engage in a sense-making process. I show that such heterogeneous feedback provides several benefits compared to the knowledge of peers and facilitates the iterative development of an opportunity. After the opportunity is objectified, I argue that crowdsourcing supports the opportunity enactment by signaling the market viability of an opportunity, therefore reducing stakeholders’ opportunity-related uncertainty, which arises in the consensus-building stage. Finally, I posit that crowdsourcing facilitates extended access to resources such as human capital or funding to fully enact an opportunity.

Sense Making

The objectification of an opportunity is a sense making process through which entrepreneurs validate the value of an imagined business idea by interacting with knowledgeable peers (Tocher et al. 2015; Wood and McKinley 2010). This sense making activity supports an entrepreneur in developing an initially vague idea into an articulable vision (Weick 1993). Therefore, social interaction provides feedback from peers that might either confirm the viability of the idea, help the entrepreneur to adapt it, or even reject the envisioned opportunity (Alvarez et al. 2013; Ojala 2016). Thus, the opportunity objectification process highly depends on an entrepreneur’s access to social resources such as a group of experienced peers who provide feedback (Foss et al. 2008). If access to such social resources is missing, entrepreneurs lack criticism and advice from their social environment that would reduce individual uncertainty and objectify an opportunity (Haynie et al. 2009). The limited social capital or social competence of entrepreneurs thus makes it difficult to objectify an opportunity idea (Tocher et al. 2015). In this case, using a crowd provides several benefits for entrepreneurs. Crowdsourcing provides access to social resources through scalable IT infrastructures such as platforms (Howe 2008). Therefore, using crowdsourcing for the sense making process of objectification offers a cost-efficient and rapid way to gain access to the social environment while the anonymity of a crowd supports the entrepreneurs in enlarging their social contacts without any high demand for the ability to effectively interact with others (Baron and Markman 2003). Crowdsourcing enables entrepreneurs to test assumptions about their idea with a potential market and therefore enables gathering feedback on the viability of an opportunity (Poetz and Schreier 2012). In this context, crowdsourcing platforms (e.g. Amazon Mechanical Turk) can be leveraged to extend an entrepreneur’s social network, which can be used for sense making and idea objectification. Thus, I argue:

Proposition 1: Crowdsourcing provides access to social resources to engage in sense making, thus enhancing opportunity objectification.

To objectify their opportunity idea during the sense making process, entrepreneurs strongly rely on directly related peers (Ruef et al. 2003; Stam and Elfring 2008). Previous research shows that entrepreneurs tend to interact with social networks consisting of bonding ties to family members or friends (Tocher et al. 2015). Trust and common norms within such closed networks frequently lead to biased decision-making (Carolis and Saparito 2006). Furthermore, feedback by such homogenous networks provides only limited additional insights that help entrepreneurs to validate their assumptions (Lechner et al. 2006). Therefore, entrepreneurs need access to so-called bridging ties (Putnam 2001), which provide heterogeneous knowledge and feedback (Tocher et al. 2015). In this context, crowdsourcing provides a suitable way to bridge the interface of an entrepreneur’s existing social network for accessing heterogeneous valuable knowledge (Howe 2008; Leimeister et al. 2009). Integrating a heterogeneous crowd into the entrepreneurship process therefore provides access to social resources that are characterized by both strong heterogeneity and anonymity. This enables the entrepreneurs to create their opportunity by using the “wisdom of crowds” and related benefits (Surowiecki 2004). The access to such social resources via crowdsourcing provides potential support for the opportunity creation process by enabling evaluation and feedback from potential customers and other stakeholders, therefore reducing uncertainty. Previous research in the field of new product development shows users’ appropriateness as “raters” for new product and service ideas (Magnusson et al. 2016; Magnusson 2009). Therefore, one highly important benefit of crowdsourcing is a crowd’s ability to provide both user needs (i.e. demand-side knowledge) and product trends (i.e. supply-side knowledge) (Ozer 2009), which is central for opportunity creation (Nambisan and Zahra 2016).

Therefore, a crowd does not only provide access to social resources that are not limited to the entrepreneur’s peers but also to the benefits of the heterogeneity of a crowd’s knowledge (Jeppesen and Lakhani 2010). Apart from access to further social resources that extend the entrepreneur’s social network, using a heterogeneous and anonymous crowd instead of peers provides further valuable benefits for the opportunity creation process (Poetz and Schreier 2012). A crowd is more suitable in preventing self-selection biases as their anonymity ensures more valid and objective feedback on the opportunity idea compared to peers, individual experts, or start-up consultants within closed social networks. The feedback of the heterogeneous crowd represents the “voice” of a potential market and therefore results in a higher level of validity that reduces the threat of an entrepreneur’s overestimation of the value of an idea (Magnusson et al. 2016). Approaches such as crowd voting or crowd testing on IT platforms enable entrepreneurs to gather feedback on the viability of an idea by leveraging bridging ties. While individual entrepreneurs have limited social capital, leveraging IT platforms allows interaction with reduced transactions costs and enlarge one´s network. Furthermore, social resources from a crowd support an entrepreneur’s sense-making process by reducing representativeness biases (Burmeister and Schade 2007). By challenging their assumptions and beliefs with potential users, the entrepreneurs gather information about the value of their opportunity, the demand-side, and the level of the product-market fit, therefore reducing their individual uncertainty. As crowdsourcing enables the entrepreneurs to use feedback from a huge number of people, the threat that they must generalize and make decisions based on small samples is minimized. Thus, the access to social resources from a heterogeneous and anonymous crowd has tremendous potential to support the opportunity creation process, thus enhancing opportunity objectification. Therefore, I argue: 

Proposition 2: Crowdsourcing provides access to heterogenous and diverse knowledge to engage in sense making, thus enhancing opportunity objectification.

Iterative Development

Apart from validating an entrepreneur’s individual beliefs, the objectification process requires the continuous modification of the opportunity idea until consensus on the viability of an opportunity is achieved (Alvarez et al. 2013). To obtain consensus among the social environment, entrepreneurs must adapt their initial opportunity idea based on the feedback gathered from social interactions (Dimov 2011; Haynie et al. 2009). Although the entrepreneur might be confident that the idea is valuable, this belief might not be shared by the social environment, leading to iterative changes and adaptions of the idea based on the input from the social environment. This iterative and evolving process of idea feedback, adjustment, and rejection or adoption continues until consensus is achieved and the opportunity idea is finally objectified during complex social interactions between entrepreneurs and their social environment (Dimov 2011; Wood and McKinley 2010). Thereby, crowdsourcing provides support for further developing an idea by testing the opportunity idea in the market and iteratively co-creating it with a crowd. Testing allows the entrepreneurs to gather information about the “voice of the customer” (e.g. Dahan and Hauser 2002; Griffin and Hauser 1993). In the context of opportunity creation, it provides a rapid and cost-efficient way to aggregate data about the reactions of the market, feedback of functionality, or the customers’ perception of a solution. This allows the entrepreneurs to integrate feedback and further develop an initial idea or prototype to fully enact the opportunity (Breland et al. 2007). Moreover, entrepreneurs might actively engage a crowd of potential stakeholders in the co-creation process of the opportunity. Contrary to previous approaches that focus on the initiation of innovation efforts by a crowd and a linear flow back to the firm (e.g. Leimeister et al. 2009), the starting point of crowdsourcing for entrepreneurship lies with the entrepreneur and leads to an iterative exchange to further develop the opportunity together with a crowd. Interaction with potential stakeholders might relate to solution-based information and enable the entrepreneur to understand what a potential new product or service should do and therefore complements the entrepreneur’s technological knowledge (Hippel 2005). For the context of entrepreneurship, it is particularly important that such co-creation does not only lead to creative solutions but to achieving a high level of market fit and viability to create a successful new venture. Thus, during the selection of a crowd for feedback and co-creation, the entrepreneur should balance expert knowledge that can assess the feasibility of an opportunity and supply-side knowledge to provide a high level of customer benefits (Poetz and Schreier 2012). Unlike traditional crowdsourcing efforts that discover novel product ideas, the testing and co-creation of an opportunity is not limited to early-stage ideas or even products. Rather, the development of an opportunity includes different stages ranging from an initial idea to a minimum viable product, a business model, and finally a novel venture (Ojala 2016). Thus, the integration of crowdsourcing is required during various phases of this process. In this context, previous research showed that apart from the co-creation potential for ideas or prototypes, a crowd is also capable of designing and developing novel business models (Ebel et al. 2016). Consequently, crowdsourcing is a valuable approach to validate, co-create, and iteratively develop an opportunity through multiple stages of the process. I thus assume: 

Proposition 3: Crowdsourcing facilitates an entrepreneurs’ ability to maintain continuous dialogue with social resources to co-create the opportunity through multiple iterations of development.

Stakeholder Persuasion

Once an entrepreneur’s opportunity-related uncertainty is reduced during the sense-making process, the entrepreneur will start to obtain resources that are required to enact the opportunity (e.g. Alvarez and Barney 2007; Tocher et al. 2015). During the opportunity enactment, the entrepreneur aims at building stakeholder support to transform the objectified business idea into a new venture (Wood and McKinley 2010). Therefore, it is important for the entrepreneur to reduce the uncertainty of potential stakeholders (e.g. customers, investors, suppliers) regarding the viability of the opportunity to gain solid traction and achieve resource commitment (Im Jawahar and McLaughlin 2001). To reduce such stakeholder uncertainty, entrepreneurs share the knowledge about their opportunity, signal the value of their proposed idea, and create a shared understanding among their environment (Alvarez and Barney 2014; Alvarez et al. 2013). In this context, leveraging a crowd provides several benefits to enact an opportunity. Apart from reducing the entrepreneurs’ uncertainty about the value of their beliefs, crowdsourcing enables minimizing potential stakeholders’ uncertainty and persuades them of the true value of an opportunity idea. The feedback of a crowd functions as a “voice” from the potential market (Dahan and Hauser 2002). Therefore, mechanisms such as crowd voting signal the responses and thoughts of potential customers and reduce the stakeholders’ uncertainty if the idea is objectively valuable (Magnusson et al. 2016). In this context, crowdfunding has proven to be a common mechanism applied in the entrepreneurship context. From the perspective of OCT, however, crowdfunding grants benefits beyond access to financial resources (Lipusch et al. 2018). The funding behaviour of investors, in this case a crowd, may function as a gatekeeper that provides an early evaluation of the opportunity idea. For instance, (Mollick and Nanda 2015) showed that the funding of democratic individuals is equal to the expert evaluation of ideas and therefore provides valuable insights to reduce stakeholders’ uncertainty regarding an opportunity. Crowdsourcing supports the opportunity enactment process by reducing potential stakeholders’ uncertainty about the viability of an opportunity, building a shared understanding within a potential market environment, and thus gaining traction among stakeholders by signaling the value of the opportunity. I therefore propose:

Proposition 4: Crowdsourcing supports the entrepreneur to reduce stakeholder uncertainty and persuade stakeholders to support by signaling the value of the opportunity.

Resource Mobilization

As I noted before, opportunity enactment calls for social resources that are larger in size and more diverse than the peers who helped the entrepreneur objectify the idea (Wood and McKinley 2010). Thus, for an entrepreneur to successfully realize an idea, access to a wide and varying base of actors is of crucial importance (Tocher et al. 2012).

In a creation context, entrepreneurs are often confronted with a very dynamic environment that makes the exploitation of opportunities difficult to accomplish. For example, due to the high uncertainty inherent to opportunities, entrepreneurs often need to adapt their product and service offers at short notice in line with dynamic market developments. This presents entrepreneurs with the challenge to hire certain employees flexibly and for short periods of time. Because of this, entrepreneurs need new organizations of work that allow them to hire people with a special expertise periodically and flexibly. This becomes even more important if ventures face monetary constraints, as it is typical for start-ups. One way to address entrepreneurs’ needs for more flexible and short-term employment relationships is crowd work (Durward et al. 2016). Thus, platforms such as Freelancer allow to look for a whole variety of skills without incurring the high costs that are associated with the rigidity of long-term employment relationships.   

Similarly, dynamic environments, as usually encountered during opportunity creation, are usually associated with high risks. However, in such situations of high risks, traditional external sources of capital—including banks and venture capital firms—are unlikely to provide financing for entrepreneurs (Bhide 1991). Under these conditions, the problem of finding sources of capital is not information asymmetries, it is simply the lack of information. Thus, entrepreneurs in such situations are not capable of reliably presenting economic facts, such as the risks associated with an opportunity, which are required by external capital providers to assess the viability of a new business and therefore a start-up’s probability to repay its debts.    

One way to address these capital shortages that entrepreneurs inadvertently face is crowdfunding. Crowdfunding is thereby a very versatile tool that through the distributed collection of small sums among many funders can amount to large investment sums granted to the entrepreneur. Even more, crowdfunding is a form of financing that is characterized by a low degree of informational requirements, which makes financing accessible even to entrepreneurs who undergo opportunity creation. In addition to that, crowdfunding provides several other advantages. Thus, it can be used as a method of market research to validate consumer demands as well as a method to gather valuable user feedback to align the product with existing market demands (Lipusch et al. 2018). 

Proposition 5: Crowdsourcing facilitates access to a diverse base of prospective stakeholders to mobilize resources. 

Crowdsourcing provides a rapid and cost-efficient way to aggregate data about the reactions of the market, feedback of functionality, or the customers’ perception of a solution (Ries 2011; Blank 2013). Thereby, crowdsourcing helps the entrepreneur overcome limitations such as limited access to or homogeneity of social resources. Furthermore, crowdsourcing provides valuable potentials for the iterative development of the opportunity by offering access to flexible resources (see Table 7).

Conclusion

In this paper, I argue that integrating crowdsourcing into the entrepreneurial opportunity creation process provides access to heterogeneous social resources. Crowdsourcing therefore offers entrepreneurs the possibility to gain access to collective intelligence and leverage supply-side knowledge (Ozer 2009), demand-side knowledge about customer needs and desires (Nambisan and Zahra 2016), flexible external resources (Howe 2008), and reduce the cognitive bounds and constraints of individual decision makers. Entrepreneurs are thus able to objectify their opportunity idea by starting a sense-making process and iteratively developing their opportunity. Furthermore, entrepreneurial agents can enact the opportunity by applying crowdsourcing to persuade interested stakeholders and mobilize external resources. 

The aim of my research is not to discriminate the discovery view of opportunities (e.g. Shane and Venkataraman 2000; Shane 2003) or the potential role crowdsourcing might play in identifying market imperfections through idea sourcing (e.g. Leimeister et al. 2009). Rather, I argue that the emergence of new digital infrastructures (Nambisan 2016) provides a promising approach to opening the boundaries of entrepreneurial processes and integrating the social environment into the iterative and evolutionary creation process of emergent opportunities (Garud and Karnoe 2003; Alvarez and Barney 2007; Alvarez et al. 2013). Therefore, my discussion shows applications of crowdsourcing during different stages as well as entrepreneurial actions to support the creation process and points toward interesting themes for further research.   

My contribution is noteworthy for several reasons. First, I contribute to the discourse in entrepreneurship how opportunities emerge from the interactions between entrepreneurs and their social environment (e.g. Alvarez and Barney 2007; Alvarez et al. 2013; Tocher et al. 2015; Kauppinen and Puhakka 2010). I also contribute to the cognitive perspective of opportunity creation and enactment (e.g. Gregoire et al. 2011) by highlighting the role of leveraging external heterogeneous social resources in objectifying and enacting an opportunity. I, therefore, provide a theoretical rational for the value of collective intelligence in the cognitive processes of entrepreneurial agents. For this purpose, I show how crowdsourcing may overcome the cognitive constrains and bounds of previous approaches, such as interacting with peers to open the boundaries of entrepreneurs’ existing social networks or integrating demand-side knowledge (e.g. Nambisan and Zahra 2016) into the creation of entrepreneurial opportunities and provide applications during different stages of the creation process.

Second, I introduce the topic of crowdsourcing for opportunity creation as a promising field for further research in the field of digital entrepreneurship (e.g. Nambisan 2016) and propose a research agenda that may guide future efforts. I particularly argue for interdisciplinary research that might include the fields of strategy, information system, as well as cognitive entrepreneurship scholars and suggest design-oriented research (e.g. Hevner et al. 2004) on crowdsourcing for opportunity creation. Such design-oriented research might be especially interesting to ensure the practical relevance of the entrepreneurship discourse.

Finally, I provide very practical applications of crowdsourcing in the creation process that may guide both institutions that support entrepreneurial talent (e.g. incubators, accelerators) and entrepreneurs themselves to use novel, customer-centric, and cost-efficient approaches across the interface to gather rapid feedback and flexible skills to create wealth. 

See references

Original paper published in International Journal of Entrepreneurial Venturing