An Analogy Explanation for the Evaluation of Entrepreneurial Opportunities*

Abstract

Entrepreneurs evaluate opportunities under conditions of uncertainty; they make judgments. To understand these evaluations, I develop an analogical model that represents an entrepreneurial opportunity in the mind of an individual. The model proposes that an opportunity is an analogical knowledge transfer from a source business domain to a target business domain. According to the model, the cognitive distance between the domains influences the opportunity evaluation. Additionally, the inspiration behind the analogy construction influences the opportunity evaluation. The empirical design employs a hypothetical scenario experiment and the results show that the two analogical properties matter for evaluation.