Prior Knowledge, Potential Financial Reward, and Opportunity Identification

Abstract

The relationship between the level of prior knowledge of customer problems and potential financial reward in the identification of opportunities is examined in terms of both the number of opportunities identified and the innovativeness of these opportunities.Considered is whether prior customer knowledge is directly related to opportunity identification, whether potential financial reward is directly related to identification, and whether prior knowledge moderates the relationship between potential financial reward and the identification of opportunities. Research is based on Austrian economics and cognitive psychology, which are used to emphasize how an individual’s level of prior knowledge impacts the identification of opportunities.Based on an experimental study with78 MBA and executive MBA students in Colorado, results suggest that the relationship between potential financial reward and the identification of opportunities is moderated by prior customer knowledge. While prior knowledge of customer problems leads to the identification of more—and more innovative—opportunities, it also moderates the relationship between potential financial reward and opportunity identification. Financial reward motivates people with little prior knowledge of customer problems, but is not a major motivator for individuals with considerable customer knowledge. (JSD)