Opportunity recognition efficiency of small Chinese firms: findings from data envelopment analysis

Abstract

Purpose Small firms in China anticipate entrepreneurial opportunities for continual growth. However, they may fail to recognize opportunities because of their inefficiency in managing their knowledge. Design/methodology/approach In this explorative paper, the authors assess the opportunity recognition efficiency of 168 small Chinese firms using data envelopment analysis (DEA). Supplementary Tobit regressions were conducted for further exploring the factors that influence the firms’ efficiency in opportunity recognition. Findings Results from the DEA suggest that most respondents recognize significantly fewer opportunities than those with equivalent knowledge stock. Moreover, many firms have low levels of pure technical efficiency but high levels of scale efficiency, indicating insufficient use of knowledge as a major reason for inefficiency in opportunity recognition. The Tobit regressions show that sales and research and development intensity are relevant to a firm’s opportunity recognition efficiency. Research limitations/implications This study calls for the investigation of efficiency issues in opportunity recognition and suggests that managers guard against unwarranted loss of opportunities owing to inefficient use of existing knowledge elements. Originality/value First, the authors introduce the concept of opportunity recognition efficiency within the entrepreneurial process. Second, they manifest the role of knowledge management in opportunity recognition. Third, they introduce DEA to investigate the relationship between knowledge stock and opportunity recognition. Fourth, this study reveals that inefficient use of knowledge is a disadvantage of small Chinese firms in terms of opportunity recognition.

Entrepreneurial orientation and new venture performance in emerging markets: the mediating role of opportunity recognition

“…Our findings are in line with Miocevic and Morgan (2018) who observed that strong abilities of opportunity recognition ensure high growth and efficiency in emerging markets. Moreover, our findings align with Guo et al (2019b) who observed that small ventures are engaged in discovering opportunities to compete in emerging markets and respond to external pressures.…”

“…It has been shown that opportunity recognition a substantial predictor of SMEs' performance, success and growth in emerging economies (Guo et al 2017). Due to resource constraints and poor support, the majority of SMEs in emerging economies look for favorable opportunities that present a low level of risks and costs (Guo et al 2019b). Due to fast changes in market demands, customer preferences, and the strong competition in markets, firms increasingly rely on novel opportunities in order to survive and achieve success (Hamel 2012;Hansen et al 2011).…”

“…There is ample evidence of the benefits of EO in new and matured ventures in both emerging and developed economies (Marom et al 2019;Jin et al 2017;Parida et al 2016;Yang and Meyer 2019). Research also highlights the advantages of opportunity recognition for enterprises (Guo et al 2019b;Gielnik et al 2012;Hamel 2012;Hansen et al 2011). However, there is little evidence that demonstrates how a newly established venture creates and exploits an opportunity (e.g., Cai et al 2016;Nambisan and Zahra 2016;Vogel 2017).…”

Configuration analysis of influencing factors of operating efficiency based on fsQCA: evidence from China’s property insurance industry

“…Efficiency can be defined as the extent to which a decision-making unit (DMU) can increase its outputs without increasing its inputs or reduce its inputs without reducing its outputs CMS 15,5 (Guo et al, 2019). In recent years, efficiency measurement has captured a great deal of attention.…”

Editorial

“…Specifically, the creation, transfer, diffusion and application of knowledge-enabled firms to reshape the competitive landscape in opportunity recognition, radical innovation and business operation. Guo et al (2019) assessed the opportunity recognition efficiency of 168 small Chinese firms and found that most respondents recognize significantly fewer opportunities than those with an equivalent knowledge base. Critically they found that sales and R&D intensity are relevant to a firm’s opportunity recognition efficiency.…”