When assessing whether a new product and/or new market are sufficiently attractive to be worth exploiting and developing, an entrepreneur partly depends on the level of information available on a new entry. Why is prior knowledge important and what are the limits of an information search? Also, briefly define a window of opportunity.

Question

What will be an ideal response?

Answer 1

More prior knowledge means that the entrepreneur starts from a position of less ignorance about the assessment task at hand. Less information needs to be collected to reach a threshold where the entrepreneur feels comfortable making a decision to exploit or not to exploit. Knowledge can be increased by searching for information and the search is streamlined by prior knowledge. Costs associated with searching for additional information include both money and time.

The window of opportunity is the period of time when the environment is favorable for entrepreneurs to exploit a particular new entry. When the window is open, the environment is favorable to exploit a particular new product or to enter a new market. Once the window of opportunity is closed, the environment for exploitation is unfavorable. While more information is desirable, the time spent collecting additional information increases the likelihood that the window of opportunity will close.