Entrepreneurial Information Search and its Impact on the Discovery and Exploitation of New Venture Opportunities

Dax K. Basdeo and Patrick G. Maggitti

Acknowledgement and Disclaimer

This material is based upon work supported by the National Science Foundation under Grant No. 0115147. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation.

Introduction

Entrepreneurs and the new ventures they create are often credited with being the engines that drive society (Schumpeter, 1934). Entrepreneurial activity contributes greatly to the growth of national economies, both in terms of per capita income as well as employment levels. In fact, it is estimated that new business ventures contribute one quarter or more of gross job growth in an economy (Reynolds and White, 1997). In addition, a growing portion of entrepreneurs are undertaking new ventures aimed at practical solutions to social issues. These social entrepreneurial ventures can be doubly beneficial by bringing both job growth and social benefit without taxing already overburdened governmental resources. Clearly, supporting and nurturing entrepreneurial activity can have far-reaching advantages for society. Unfortunately, the success and survival of new ventures is tenuous at best, with success rates optimistically placed at less than 50% (Aldrich, 2000). In this paper, we propose ways in which entrepreneurs can search for information in an effort to increase venture performance and the likelihood of venture survival. In addition, we suggest how governments can foster successful information search and, ultimately, increase the formation and survival rate of new ventures.

Entrepreneurial activity involves the discovery, evaluation, and exploitation of opportunities to introduce new goods, new services, new ways of organizing, new markets, new processes, and new raw materials through organizing efforts that previously had not existed (Shane & Venkataraman, 2000; Venkataraman, 1997). Opportunities for entrepreneurship arise when these new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production (Casson, 1982). The discovery of entrepreneurial opportunities is primarily due to differences and asymmetries in information and beliefs among individuals (Hayek, 1945; Shane & Venkataraman, 2000). These asymmetries may either be the result of the introduction of new information or differential access to existing information with regards to the 'best use' of resources (Kirzner, 1973; Schumpeter, 1934). To the extent that the 'best use' of resources differs from existing uses, exploiting such asymmetries requires some degree of conjecture on the part of an individual or group of individuals due to the uncertainty involved in utilizing a new means-end framework (Baumol, 1993; Kirzner, 1997). This entails an understanding of the specific actions (means) required to achieve this 'best use' (ends). For an entrepreneur, this process is one of "revealing ... the worthwhileness of emerging opportunities hitherto ... shrouded in the fog of uncertainty" (Kirzner, 1992: 90) through the configuration of 'physical possibilities' and the anticipation of the interplay between the entrepreneur's actions and those of others (Kirzner, 1992). Despite this fog of uncertainty, entrepreneurs establish new ventures in an effort to capitalize on their ideas for using resources. However, they do not enter the fog completely blind. Central to their activity is their search for information to reduce uncertainty, solve problems as they arise, and discover opportunities to create value within a given market domain.

In this paper, we examine the characteristics of entrepreneurial search processes and their effects on the development and performance of entrepreneurial ventures. We build upon work in the technology search literature (e.g. Greve, 2003; Katila, 2002; Katila & Ahuja, 2002; Rosenkopf & Nerkar, 2001; Stuart & Podolny, 1996). This research has demonstrated the importance of search to the innovation process and firm performance through the use of search proxies such as R&D expenditure and patent citations. In addition, we combine this perspective with the more limited research on entrepreneurial information search (e.g. Cooper, Folta & Woo, 1995; Johnson & Kuehn, 1987; McGee & Sawyer, 2003; Pineda, Lerner, et al. 1998) that has focused on entrepreneurial behaviors with regards to information use. Our approach therefore allows for a more detailed understanding of this crucial entrepreneurial activity. Gaining insights into the search behaviors of entrepreneurs allows for the identification of critical success factors in entrepreneurial venture formation, provides a means of assessing the activities of entrepreneurs, and has implications for advising both prospective and novice entrepreneurs. In an entrepreneurial society such as the Cayman Islands, the creation and survival of new ventures is crucial. Therefore, developing an understanding of entrepreneurial search behavior and assessing the importance of information available to entrepreneurs are vital steps in promoting and fostering both economic and social development.

The following section presents our theoretical framework, briefly reviewing the literature on the discovery and exploitation of entrepreneurial opportunities, and the importance of search behaviors for resolving the uncertainties hindering the creation of a successful new venture. In the third section, we present our current research framework, outlining several propositions that relate the search behaviors of entrepreneurs to venture performance. Finally, we conclude with an overview of our current research methodology and a discussion of the implications of this work for Government policy and private sector development within the context of the Cayman Islands.

Theoretical Background

Entrepreneurial Opportunities: From Discovery to Exploitation

Exploitation of an entrepreneurial opportunity begins with the discovery (or recognition) by an individual that such an opportunity exists. In its initial state, the opportunity is crudely defined due to incomplete knowledge of the future market for the opportunity (Arrow, 1974). From this initial conception, a nascent entrepreneur initiates actions to exploit the opportunity that are intended to culminate in a viable business startup (Carter, Gartner & Reynolds, 1996; Gartner, Bird & Starr, 1992; Reynolds, 1994). These actions involve the mobilization of resources, the establishment and control of organizational boundaries, and the occurrence of transactions across and within these boundaries (Aldrich, 2000; Katz & Gartner, 1988). Such actions lead to the establishment of a fledgling firm, bringing the entrepreneur closer to realizing his/her goals. However, it is difficult for an entrepreneur to know, a priori, which actions are correct and appropriate because he/she lacks complete knowledge - a problem stemming from the nonexistence of a current market for the opportunity (Arrow, 1974). Without this knowledge, the entrepreneur is faced with uncertainty about key aspects of bringing the opportunity to fruition (e.g. customer demand, product characteristics, price points, etc.). In response to this uncertainty, an entrepreneur must attempt to consider alternative means of exploiting the opportunity. Each alternative is comprised of a set of issues, decisions, and resource commitments that have to be evaluated in terms of their contribution to venture success. An entrepreneur must search for information that will shed light on the best alternative to pursue, thus maximizing the venture's potential value given available resources. Further, an entrepreneur needs to continue his/her information search in order to overcome problems encountered along the way. For example, searching for information on potential customers, suppliers, competitors, etc., is imperative in order to formulate an appropriate venture strategy. Clearly, search is an essential set of behaviors that enable an entrepreneur to deal more effectively with uncertainty in new venture formation (cf. Herron & Sapienza, 1992).

As new ventures transition and mature into established firms, the implication is that organizational routines are established. These routines can be viewed as a set of actions that have been selected from alternatives and solutions generated through search, and which are repeated as necessary without further search activities. If the initial search processes have been successful, these routines should contribute to the performance of the venture (e.g. profitability, sales growth, and long-term venture survival).

Search Theory

As a general term, search refers to the way in which individuals acquire or gather information. The concept of search has been examined through a variety of theoretical lenses. Economic theories of search (e.g. Kohn & Shavell, 1934; Reinganum, 1982; Sonnemans, 1998) explore issues such as searcher rationality and the marginal costs and benefits of search processes. Entrepreneurial views on search have been more limited, focusing more on the antecedents to search behavior and the emphasis that entrepreneurs place on different types of information (e.g. Cooper, Folta & Woo, 1995; Johnson & Kuehn, 1987; Pineda, Lerner, et al., 1998). However, within this perspective, a focus on performance outcomes for new businesses is relatively lacking. In contrast to these theoretical orientations, the innovation literature has focused on a 'level of aspiration' theory of search (Cyert & March, 1963; March & Simon, 1958). More specifically, Cyert and March (1963) proposed a theory of search that focused on search as a behavior stimulated by a problem, where a problem is generally defined as a shortfall between the level of achievement and a stated goal (aspiration target). The outcome of the search process is an innovation, which in essence, is a defining characteristic of an entrepreneurial venture (Carland, Hoy, et al. 1984; Schumpeter, 1934). This theory of problem-oriented (problemistic) search is therefore ideally suited for application in the context of new venture creation.

Theoretically, there are three assumptions underlying problemistic search (Cyert & March, 1963):

• search is motivated;
• search is simple-minded;
• and search is biased.

Search is motivated to the extent that a goal is not met or there is anticipation that the goal will not be met in the future. This stimulates search until either a solution is discovered that satisfies the problem, or the goal is revised to make current alternatives acceptable. The greater the difference between achievement and goals, the greater an individual's motivation to search. For an entrepreneur, the motivation for search stems from the aspiration surrounding the formation of a new venture and the vision they have of that venture functioning within a given market.

Cyert and March's (1963) next assumption, the simplemindedness of search, affects the direction and objective of search. First-order (initial) response to a problem stimulus is to search in the region of the problem symptom or current alternatives ("local search"). If a solution is not found, search behavior adapts, becoming increasingly complex ("distant search"). This second-order response involves changes in goals, as well as greater consideration of other alternatives. This distinction has also been described in terms of refinement (efficiency-oriented) search and innovation search (Levinthal & March, 1981) and relates to March's (1991) distinction between exploitation and exploration. The terms exploitation and exploration are used in this context to illustrate that search may be focused on refining (exploiting) current resources or finding (exploring) new resource combinations. The ability of a searcher to increase the complexity of search, changing from an efficiency orientation to an innovation orientation, will therefore be a function of their ability to continuously adapt previous experiences and changing conditions. Entrepreneurs are more adaptive if they are not wedded to an initial idea, but instead allow their objectives to evolve into more viable venture possibilities as they gather information concerning an opportunity.

Finally, the bias of searchers arises primarily from differences in training or experience of searchers or differences in the goals and expectations among searchers. Specialization within a given knowledge domain typically influences the emphasis of the search and the type of information most readily noticed by the searchers. This form of bias is reflected in the early work of Dearborn and Simon (1958) who found that, given the same problem circumstances, individuals are predisposed to attend to different issues based on their functional background and areas of expertise - a phenomenon that they referred to as 'selective perception'. The existence of selective perceptions suggests that individuals faced with a particular problem will interpret the problem based on their experience and background, and hence search for solutions from a biased perspective. This work is consistent with the findings that prior knowledge (e.g. customer knowledge, market knowledge, or technological knowledge) has a significant influence on the form of the business opportunity pursued by entrepreneurs (Shane, 2000).

Characteristics of Search

Building upon extant research on problemistic search (e.g. Cyert and March, 1963; Greve, 2003), decision-making (e.g. Mintzberg, Raisinghani & Th‚orˆt, 1976), and entrepreneurial search (e.g. Johnson & Kuehn, 1987; Kaish & Gilad, 1991), we categorized the search behavior of entrepreneurs into two choice sets - terrain and process.

Search terrain refers to the domain of information sources that may provide information (including solutions and alternatives) that may satisfy the reason for the search. Metaphorically, the terrain is the location in which the search takes place, and includes the objects and people with whom an entrepreneur interacts in order to resolve uncertainties surrounding their new venture. In considering the search terrain, it is important to distinguish between the type of information utilized in the search and the source of the information. Table 1 outlines this distinction and gives examples of both information sources and information types. Information types reflect different aspects of a businesses external environment - the economy, government policy, consumer demand, competitor actions, and business resources. Information sources reflect the range of both interpersonal contacts and published media from which information can be gathered. It is important to note that while the focus of a search may be to acquire a particular type of information, this cannot be done without contact with one or more sources of information. Further, information sources may provide information that overlaps with one another. This is particularly true of sources that are homogeneous and similar in areas such as function or background. Therefore, by assessing the breadth or range of sources utilized in an entrepreneur's search terrain, it is possible to gain some insight into the extent to which an entrepreneur has access to valuable information.

The search process utilized by entrepreneurs concerns the way in which the search of the terrain is conducted. The search process is dictated by three factors: the extent of an entrepreneur's motivation to search the terrain, the degree to which the search adapts based on information gathered from the terrain, and the extent to which an entrepreneur is biased in his/her utilization of the terrain. Motivated search processes are reflected by the effort and persistence with which entrepreneurs pursue information sources in order to gather pertinent information. More highly motivated entrepreneurs would be inclined to exert more effort and persistence in the search process. Adaptive search processes are reflected by the degree to which an entrepreneur is not constrained by formal procedures and uses an iterative style when searching for information. Overall, more adaptive search processes are characterized by less formal and more iterative approaches. Finally, a biased search process reflects the extent to which an entrepreneur is overly dependent upon familiar information sources.

Entrepreneurial Search Behavior

Given that the fundamental problem facing new ventures is related to risk and uncertainty stemming from a lack of information, it is incumbent upon an entrepreneur to gather enough information to make informed decisions regarding the means by which an opportunity is exploited. This information is necessary for formulating businesses plans, convincing investors of the viability of the new venture, selecting the appropriate resources (both human and physical capital) to be utilized, dealing with competitors, and informing the strategic choices that the entrepreneur needs to make.

In contrast to managers in large established organizations, entrepreneurs in small businesses often have to handle and deal directly with issues that pertain to several functional areas within their business. For example, they typically need to make decisions with regards to, among others, marketing, operations, finance, administration, and personnel, with little reliance on the range of experts with which established organizations operate. Clearly, if entrepreneurs are to survive based on anything more than luck, they must have access to a wide range of information in order to make all of the decisions necessary for the venture's performance and survival. This may be a problem given that individuals are inclined to search locally for solutions to problems (March, 1991) and tend to be myopic by overlooking distant information (Levinthal & March, 1993). Entrepreneurs in particular have a tendency to rely on information sources internal to their venture and not pursue outside expertise where appropriate (Pineda, Lerner, et al., 1998).

Research in the decision-making literature has suggested that decision-making comprehensiveness is related to organizational performance (Fredrickson, 1984; Fredrickson & Mitchell, 1984). Comprehensiveness can be defined as the "extent to which an organization (or individual) attempts to be exhaustive or inclusive in making and integrating strategic decisions" (Fredrickson & Mitchell, 1984: 402). In the context of an entrepreneurial venture, the breadth of information sources utilized by the entrepreneur in a problem situation is reflective of decision-making comprehensiveness. Smith et al. (1988) found evidence that entrepreneurs who made extensive use of both internal and external information gathering (i.e. they were comprehensive in their information search) had the best performing ventures.

From a social network perspective, nascent entrepreneurs depend on the persons to whom they are linked for access to social, emotional, and material support (Aldrich, 2000). For example, an entrepreneur with a close circle of friends is better able to obtain feedback and advice on their venture, and perhaps access to start-up capital through personal loans. Further, greater diversity in personal networks is crucial to nascent entrepreneurs because it provides access to a wider variety of information regarding issues such as potential markets, new business locations, sources of capital, etc. (Aldrich, 2000). These arguments suggest that the breadth of information sources available to the entrepreneur through their social network is an important source of support contributing to venture success.

Given the range of challenges facing a new venture, these arguments suggest that it is important for entrepreneurs to make full use of their search terrain. The broader the search terrain, the greater the entrepreneurs access to valuable information, and the greater their ability to deal with problems and challenges.

Proposition 1: The greater the breadth of the entrepreneurs search terrain, the greater the performance of the new venture.

Obviously, entrepreneurs face a plethora of difficulties and challenges when starting a new venture. The level of motivation possessed by an entrepreneur plays a large part in determining a venture's success. Search theory would suggest that the greater the aspirations of the entrepreneur, the greater their motivation to search for solutions to the challenges facing the new venture. Similarly, expectancy theorists (e.g. Vroom, 1964) would suggest that the more the entrepreneur values an outcome, the greater the effort they will expend to achieve the desired outcome. Research into venture startup activities has shown that entrepreneurs who approach their ventures with greater effort and intensity are more likely to get their businesses off of the ground (Carter, Gartner & Reynolds, 1996). Furthermore, persistence in the face of uncertainty is a hallmark of high self-efficacy,¹ a contributing factor for entrepreneurial success (Krueger & Brazeal, 1994)

Successful entrepreneurs are therefore likely to be individuals motivated to exert effort in the search process in order to gather the information needed to achieve the outcome of establishing a new business, despite the roadblocks they encounter along the way. Without this motivation, an entrepreneur would be more likely to give up when confronted with difficult situations or fail because of poor decision-making that results from an absence of needed information.

Nascent enterprises are typically characterized by low levels of cash flow and often face difficulties raising financial capital (Bhide, 1992). As a result, entrepreneurs are often unable or unwilling to draw large salaries from their new ventures. It follows that these individuals possess a high level of intrinsic motivation - i.e. they are motivated to engage in work primarily for its own sake, because the work itself is interesting or in some way satisfying. As intrinsic motivation has been linked to creative performance (Amabile, 1997; Ryan & Deci, 2000), highly motivated entrepreneurs may be better able to find creative solutions to the challenges facing their ventures.

At first glance, it appears that high levels of motivation are tantamount to new venture success. However, excessive search motivation may be detrimental to an entrepreneur's efforts. The greater the motivation of entrepreneurs to pursue search, the greater their attention will be focused on acquiring information. However, due to limits to entrepreneurs' attention, over-emphasizing the search for information may detract from a focus on developing and exploiting existing ideas in the venture (cf. Koput, 1997). Further, given human limitations in information processing ability (Simon, 1955), the greater the amount of information that an entrepreneur has to process, the less likely they will be able to do so in an effective manner, eventually resulting in a decline in decision making performance (O'Reilly, 1980). Excessive search motivation is therefore likely to have a negative impact on the performance of a new venture.

Proposition 2: There will be a curvilinear (inverted-U) relationship between the level of (a) effort and (b) persistence in an entrepreneur's search motivation and the performance of the new venture.

As mentioned earlier, there is a distinction between the type of information for which one can search and the sources of that information. Similarly, the process of search may be viewed as involving two iterative efforts (Carlile & Rebentisch, 2003). The first is the identification of potentially useful information sources, and the second is the assessment of the value of the information provided by the identified source. Indeed, the search terrain may evolve over time as the assessment of each source suggests other useful sources to be targeted. The increasing complexity of the search that results is reflective of the adaptability of the searcher to previous experience and a potential reframing or more accurate understanding of the issue stimulating the search. If, however, the searcher adheres to formal routines or set protocol, there is less likelihood that they will adapt to changing circumstances. On the other hand, search which is more iterative in the sense that there is less of an emphasis on sequential and systematic examination of elements in the search terrain, has greater potential to be adaptive.

As argued above, search that is more adaptive is less likely to focus on efficiency considerations and will be more likely to lead to innovative ideas. An entrepreneur that demonstrates adaptive search behavior is better able to guide the development of the venture according to changing market demand conditions and information that emerges through the search process. Adaptive search behavior also allows the entrepreneur to have greater flexibility to pursue novel ideas that may contribute to venture success. Finally, an entrepreneur that can adapt to changing circumstances while searching may be less committed following a failing course of action, and thus refine their activity so that there is a greater chance of venture survival.

Proposition 3: The greater the (a) level of iteration and (b) informality in an entrepreneur's search adaptiveness, the greater the performance of the new venture.

The innovation literature provides evidence of the benefits of exploring new and unfamiliar knowledge bases. Searching in unfamiliar territory has been shown to positively affect the number of innovations discovered (e.g. Katila & Ahuja, 2002), as well as the extent to which new innovations are considered radical or novel (e.g. Rosenkopf & Nerkar, 2001). Entrepreneurs that are not biased to search only within familiar areas are therefore more likely to discover useful information that enhances the opportunity that they are trying to exploit. Through combining information from a number of different knowledge domains, an entrepreneur may gain insight into new and useful innovations that will stimulate interest in their venture. Such innovations are also more likely to have a wide ranging impact both within and outside of the venture's current market, depending upon the extent to which knowledge domains are spanned (Rosenkopf & Nerkar, 2001).

While unfamiliarity in the search terrain may expose entrepreneurs to novel information that may suggest new innovations, this is an inherently uncertain and risky choice if the terrain becomes too unfamiliar. In fact, in order to absorb or interpret the importance of new information, entrepreneurs must typically begin with some basic understanding of this information (Cohen & Levinthal, 1990). As entrepreneurs depart from familiar knowledge domains, difficulties may arise due to reduced applicability of their schema.² As such, their appreciation for the value of unfamiliar information is reduced (Fiske & Taylor, 1991), and the less likely that the search will prove fruitful (cf. Cooper, Folta & Woo, 1995). Individuals are also limited in their ability to process information (Simon, 1955). Therefore, as they are exposed to new and unfamiliar information they will reach a point beyond which they will be unable to process the information effectively.

Proposition 4: There will be a curvilinear (inverted-U) relationship between the level of unfamiliarity in the entrepreneurs search terrain and the performance of the new venture.

Discussion and Conclusion

Building off of prior findings in the entrepreneurship and search literatures, we have developed four propositions that we believe provide prescriptions for effective information search and its relationship to the performance of entrepreneurial ventures. In particular, entrepreneurs that have access to a broad range of information sources will be better able to find the information they need to effectively run their venture. However, having access to a broad terrain is not the only factor contributing to venture performance. The process by which entrepreneurs search this terrain is also an issue. Here we argue for the importance of search behaviors that are motivated and adaptive, and which incorporate some degree of novel information. Subject to cognitive demands, effective search processes allow entrepreneurs to search their terrain and discover new ideas, decision alternatives, and solutions that enable them to select a means-ends framework conducive to a successful entrepreneurial venture.

Currently, we are undertaking research across the northeastern United States to empirically demonstrate how the search behaviors of top managers in high technology companies influence the success of the opportunities they pursue. This research, while not limited to entrepreneurial firms, will establish the importance of studying the characteristics of information search beyond the utilization of coarse-grained proxies such as R&D expenditures. Further, to the extent that this research focuses on drawing conclusions about search and its connection to opportunities and innovation, the study will directly shed light on entrepreneurial search and opportunity exploitation.

Given that search is a fundamental aspect of decision-making (Mintzberg, Raisinghani & Théorêt, 1976), and is especially important under conditions of uncertainty, the study of the search behaviors of managers and entrepreneurs is undoubtedly essential. The unique approach of our research combines both qualitative interviews with managers/entrepreneurs with quantitative data collection through self-administered surveys. This comprehensive approach therefore allows the careful probing of issues underlying managers/entrepreneurs perceptions of business success factors and performance outcomes, combined with statistical rigor in determining the key relationships between search behaviors, individual and organizational characteristics, and performance outcomes.

Implications for the Cayman Islands

Entrepreneurship and entrepreneurial behavior continue to be core social and economic aspects of society in the Cayman Islands. The propositions we present in this paper illustrate that the study of entrepreneurial search behaviors, and their impact on venture performance, is an area of potentially great importance. Consequently, extending this research within the Cayman context may have several benefits to entrepreneurial development with the Cayman Islands.

Two immediate sets of benefits are clear. First, the qualitative/quantitative approach utilized in our research method has great potential for developing an understanding of entrepreneurship within the Cayman Islands. The qualitative approach lends itself to building case studies of entrepreneurial ventures that can be used to shed light on the venture development process. Understanding this process within the unique context of the Cayman Islands is a necessary step in determining the extent to which global research findings on entrepreneurial issues can be applied within this context. The quantitative approach is designed to assess venture performance - venture growth, profitability, and survival. Gathering such data will enable the estimation of the economic impact that entrepreneurial ventures have within the Cayman Islands, quantifying the importance of development in this important sector of the economy. Highlighting the entrepreneurial process and its importance is a necessary educational step in ensuring that adequate attention is given to such issues by all stakeholders in the Cayman economy.

The second set of implications for this research has direct bearing on Government policy. Providing entrepreneurs with the basic tools that they need to succeed is an obvious, but difficult task facing the Government. In the following sections, we detail some possible areas in which this is particularly salient, and make several recommendations for Government sponsored programs that will benefit entrepreneurial development within the Cayman Islands.

Information Systems

As suggested by the propositions developed in this paper, the breadth of the information available to entrepreneurs is important not just to the formation of new ventures, but also to venture survival. More specifically, the availability of all six types of information outlined in Table 1 and networking opportunities for entrepreneurs with a broad range of information sources can contribute to successful entrepreneurial ventures. The accessibility and quality of information systems available to entrepreneurs are therefore significant factors that can promote and encourage entrepreneurial activity in the Cayman Islands.

While the Cayman Islands Government is not responsible for providing all types of information, the provision of both economic and regulatory information, and to a more limited extent, market information, are areas of concern. In particular, information regarding basic economic indicators of growth and consumer demand can be used by entrepreneurs to form the basis for understanding trends in the general environment that affect the decisions that they have to make. Assessing the quality and availability of these types of information should underlie any government policy aimed at fostering entrepreneurship in the Cayman Islands.

With regards to information sources, the existence of various trade associations and networking events held by the Cayman Islands Chamber of Commerce provide entrepreneurs with access to valuable contacts that enable them to improve the likelihood their ventures will survive and thrive. Importantly, efforts should be made to continuously assess the effectiveness of these types of events. That is, to determine the degree to which entrepreneurs utilize them and the extent to which information is disseminated among the participants. It may also prove useful for the Cayman Islands Government to work in partnership with these organizations to facilitate conferences and trade shows that showcase tools that entrepreneurs can use to improve their businesses. Such events provide excellent networking opportunities and facilitate the kind of information sharing that is of benefit to entrepreneurial ventures. Government involvement may be necessary in such cases due to the cost of such events and the limited budgets of entrepreneurs.

Through the combined efforts of both the Cayman Islands Government and the various private sector associations, there are other initiatives that may be implemented in order to improve information flows for the benefit of entrepreneurship in the Cayman Islands. One extremely powerful, yet cost effective suggestion would be greater use of the Internet as an information dissemination medium. The Internet has the potential to act as a consolidated source of information, accessible when needed, and providing an organized way for entrepreneurs to search for required information. The use of the Internet as an accessible medium for information dissemination is particularly important given research that has shown that accessibility and not quality tends to affect decision makers use of information sources (O'Reilly, 1982).

Use of the Internet for basic economic, regulatory, and market information is an obvious suggestion. A more complex undertaking might be the use of the Internet as a medium for cataloging and tracking business ventures within the Cayman Islands. Such a database would enable entrepreneurs to observe the successes and failures of past ventures. This could be important to overcome the fact that entrepreneurs are often more greatly influenced by successful ventures because they are easily observed. However, there may be a tremendous amount that can be learned through the failure of other ventures. Unfortunately, venture failure means that they no longer exist, can not readily be observed, and potential lessons from their failure may easily be forgotten. By tracking and providing access to information pertaining to business ventures, it is possible to preserve this knowledge and allow entrepreneurs to obtain a better sense of the acceptance of ideas within society. This concept is very similar to the 'lessons learned' database utilized by U.S. Armed Forces that facilitates training and the development of tactics for future use.

Additionally, such a venture database would provide an ideal tool for promoting investment in entrepreneurial ventures. Foreign or local investors could utilize such a database to research investment opportunities. This would increase the level of funding available to entrepreneurs, and therefore increase the survival rates of viable ventures.

Entrepreneurial Assessment

Thorough assessment of an entrepreneurial venture is of significant concern to lending agencies. While evaluating a business plan is a common assessment procedure, this does not provide an assessment of an entrepreneur's capabilities. Experienced entrepreneurs, those that have developed businesses in the past, are relatively easy to evaluate in terms of their skills and abilities. However, first-time entrepreneurs have no track record for lenders to assess. The search instrument developed as part of this research may provide a framework for developing an assessment tool that would enable lending agencies to get a sense of an entrepreneur's capabilities for solving problems and dealing with uncertainty. With better assessment techniques, lending agencies may be more willing to offer the financing many entrepreneurs desperately need in order to exploit the opportunities that they discover.

Government policy may also play a significant part in fostering riskier ventures, those in which entrepreneurs seek to pursue radical innovations (such as those arising from new technology, or next-generation products and services). Historically, it has been difficult to assess the potential value of these types of groundbreaking innovations and the ventures formed to pursue them. As a result, such ventures are less likely to receive private funding due to their high levels of uncertainty and risk. This is unfortunate because these types of innovations often represent significant potential for contribution to economic growth and development in society. In such cases, it may be beneficial for the Government to get involved.

An example of government policy in this area is the U.S. National Institute of Standards and Technology (NIST) Small Business Innovation Research (SBIR) program. This program offers small businesses up to $75,000 to establish the feasibility of innovative ideas that appear to have commercial potential. Entrepreneurs then become eligible to receive additional funding for their ideas if scientific or technical merit can be established. Advanced innovation opportunities are particularly salient for economic development due to the level of technological innovation introduced and the potential for cost benefits through greater efficiency. However, given their high levels of risk, programs such as the SBIR in the U.S. are essential to their promotion.

Governments with limited resources for these types of investments are faced with a challenge when deciding which technologies to support. Clearly, these types of innovations involve greater uncertainty and thus necessitate greater levels of search and information gathering. Our study instrument may make it possible to reduce the risk in these investments if, along with evaluation of the technology, the entrepreneurs can be assessed for the likelihood that they will be effective in searching for information to make the innovation successful.

Entrepreneurial Skill Development

Understanding how successful entrepreneurs search for information, deal with uncertainty, and solve problems may also form the basis of a training program that would benefit individuals considering an entrepreneurial career choice. It may also be of benefit to existing entrepreneurs who are unsatisfied with their venture's performance. Such training is likely to be prohibitively costly for these entrepreneurs if conducted through the private sector. Given the economic and social benefits of entrepreneurship, the Government may choose to implement such training programs. Additionally, such training programs would provide an ideal setting to educate entrepreneurs about Governmental resources that would benefit new venture development.

Training for entrepreneurs and small business managers is an often overlooked area of human resource development. The common assumption is that the head of a business only needs training for handling staff, and not in macro areas such as organizational development, strategy formulation, and strategy implementation. Macro issues such as these are often more important to an entrepreneurial venture's survival in that such business often employ very few (if any) employees. Entrepreneurs and small business managers must have an adequate grasp on issues such as business strategy if they are to have a chance at competing with larger businesses or competition from overseas (e.g. through imports). Further, training in this area is likely to have the added benefit of increasing entrepreneurial self-efficacy. Entrepreneurs that have training to deal with uncertainty through effective search behaviors may feel more confident in their abilities to succeed at a new venture, exert the effort needed to make their ventures a success, and persist in the face of the invariable obstacles to venture survival. By providing this type of training to existing and potential entrepreneurs, the Government can lower the level of difficulty entrepreneurs face in setting up and operating their ventures. This allows the entrepreneurs to spend time searching for information in areas that may increase new venture survival rates and performance.

Conclusion

The purpose of this paper has been to explore the significance of entrepreneurial information search for the discovery and exploitation of opportunities through new ventures. Building on established literature in the fields of decision-making, innovation and entrepreneurship, several propositions have been developed to demonstrate the importance of entrepreneurial search behavior. While research on this topic is currently underway in the United States, the Cayman Islands would be an ideal setting for extending this study. To that extent, we have offered several implications of this research within the context of the Cayman Islands. In particular, we highlight the importance of Government policy and private sector partnerships in developing information systems as a basic tool for entrepreneurs. Further, we discuss applications for this work in the area of venture financing and business training which can have a significant impact on fostering and advancing entrepreneurial development in the Cayman Islands.

Endnotes

¹ Self-efficacy is defined as an individual's perception of their ability to execute a target behavior, and is an attribution of personal competence and control in a given situation (Bandura, 2000).

² Schema may be defined as cognitive structures that influence the encoding of new information (Fiske & Taylor, 1991).

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