Directive Deficiencies : How Resource Constraints Direct Opportunity Identification in SMEs

Previous studies show that resource constraints have mixed effects on innovation and opportunity identification by entrepreneurs. Sometimes, resource constraints lead to identifying more opportunities, whereas in other cases entrepreneurs rather see fewer opportunities. This study explores a new approach to reconcile this inconsistency. Using a sample of 219 small and medium-sized enterprises (SMEs), we explore relationships between supply and demand constraints and identifying supply and demand opportunities. The results show that supply constraints have a positive effect on identifying supply opportunities, but a negative effect on identifying demand opportunities. Similarly, demand constraints have a positive effect on identifying demand opportunities, but a negative effect on identifying supply opportunities. Thus, this study shows that resource constraints direct the entrepreneur's attention towards opportunities inside the constrained domain rather than outside the constrained domain. An important consequence for theory is that a complete explanation of the mixed effects should consider different types of resource constraints and different sources of opportunities simultaneously. For practicing entrepreneurs, being aware of this mechanism can prevent that they miss out on promising opportunities outside the constrained domains