Identifying the tacit entrepreneurial opportunity of latent customer needs in an emerging economy: The effects of experiential market learning versus vicarious market learning

Abstract Research Summary Focusing on latent customer needs as the essential substance of entrepreneurial opportunities, this study examines the determinants of the identification of such opportunities. Based on organizational learning theory, we explore the effects of experiential market learning (EML) and vicarious market learning (VML), and the contingency of such effects on different dimensions of environmental uncertainty in an emerging economy: demand uncertainty of the task environment and legal inefficiency of the institutional environment. The model was tested through survey among 238 firms in China. We find that both EML and VML facilitate the identification of latent customer needs, while they interact with environmental uncertainty in different ways. This study makes substantial contributions to the extant literature on opportunity identification, strategic entrepreneurship, and the origin of entrepreneurial opportunities. Managerial Summary Latent customer needs, which customers are not aware of or unable to articulate, serve as a catalyst for firm growth and are integral to the business model design. How can firms identify such essential entrepreneurial opportunities? We investigate this question in an emerging economy in which latent needs are more frequently encountered and find that both learning from direct market experience (EML) and learning from other firms' market experience (VML) increase the likelihood of identifying latent needs, while VML is more influential than EML. Facing high demand uncertainty, firms should rely more on VML than EML to identify latent needs, whereas in an uncertain institutional environment with a weak legal system, firms should place less emphasis on VML and more on EML in the identification of latent needs.