2.1 Schumpeter's theory of innovation
Joseph Alois Schumpeter is among one of the greatest economists who took part in the economic debate. His theory of innovation is the most distinctive contribution to economics (Hanusch & Pyka, 2007). According to Schumpeter, innovations are the fundamental factor of economic competitiveness and are the centre of economic change as they trigger the gales of "CD" (Schumpeter, 2013). Schumpeter defined CD as a process of industrial transformation, which alters the economic structure from inside, i.e., through constant destruction of the old one and continued creation of a new one. Schumpeter believed that "entrepreneur" plays an essential role in the process of innovation as they make the possible implementation of new combinations in business in the form of new products, new markets, and new methods of production. The purpose of entrepreneurs is to transform the production process by exploiting the creation and opening of new sources of raw materials, or a new aperture for products, by rearranging a business. For this, the TO is considered an essential factor. By considering Schumpeter's view of innovation, i.e., the implementation of new combinations is an entrepreneurial activity, numerous researchers have observed that innovations play a crucial role in CE (Ireland et al., 2009; Schumpeter & Backhaus, 2003). His theory provides a clear theoretical justification for the relationship between TO, CD, and CE and motivates us to work in the engineering industry framework in Pakistan. The present study extends Schumpeter's theory of innovation by incorporating the role of MO.
2.2 Corporate entrepreneurship
- Schumpeter (1934) defined that entrepreneurs are the ones who carried out the new combinations in a business. He stated that "the entrepreneurial function is the vehicle of a continual reorganisation of the economic system" (pp. 155-156). The initial step to explain CE is to define those aspects of ENT that explicate to the CE. Covin and Slevin (1991) stated that CE depends on product modification, risk-taking tendency, and dedication. Jennings and Lumpkin (1989) defined CE as the extent to which new products are developed. CE comprises two types of phenomena, such as the development of new products within existing organisations and the restoration of the organisation through the revival of new ideas (Guth & Ginsberg, 1990). It is perceived as an organisational process that transforms individual thoughts into corporate action (Chung & Gibbons, 1997).
2.3 Entrepreneurial and technical opportunity
Opportunity recognition is defined as: "the process by which entrepreneurs see something that has the potential value" (Ardichvili et al., 2003)". Schumpeterian (creation) and Kirznerian (discovery) views are dialectics that are relevant to TO in engineering firms. Few researchers (e.g., Blaug, 2000) describe these views as complementary rather than opposing, but many scholars debated these views as opposing (Barney, 1991; Buenstorf, 2007). Kirzner (1997) advocates access to existing information while J. Schumpeter (1934) stressed acquiring new information in the market to recognise the entrepreneurial opportunity. The Discovery view of entrepreneurial opportunity recognition assumes that individuals and firms discover opportunities by recognising the value of new information instead of searching (Kirzner, 1997). The creation view assumes the possibility of innovative products and service by creating innovative opportunities through search (J. Schumpeter, 1934).
Where individual internal factors of organisation impact entrepreneurial opportunity recognition, various research studies have stressed the importance of external environmental factors (Singh, 2000). Accordingly, consumer economics, political action, social values, technology, and regulatory standards instigate firms and individuals to pursue the opportunity. Shane (2003) and J. Schumpeter (1934) have viewed entrepreneurial opportunity emergence as a result of social and demographic changes, political and regulatory changes, and technological changes.
2.4 Market orientation and corporate entrepreneurship
The foundation of corporate entrepreneurs is to create an environment that validates the innovative business capacity (Antoncic & Hisrich, 2001; Goosen et al., 2002). CE retains business's strategic renewal, thus assuring its innovation and profitability (Drucker, 2007). Businesses have to participate in entrepreneurial action to work efficiently in competitive markets (Zimmerman, 2010). The linkage between CE and MO is perceived as the centre of business innovation and competitiveness (Barrett & Weinstein, 2015; Karlin et al., 2010).
MO refers to the continuous search for market opportunities and consistent reaction strategies that facilitate the firms to improve their performance. MO occurs through the sequential process of intelligence generation, intelligence dissemination, and responsiveness of the firms (Kohli & Jaworski, 1990). It is visualised as a direct connection between marketing and CE as the basis of the company's value creation (Barrett & Weinstein, 2015). MO is an arrangement of openness, and receptiveness of market intelligence (Jaworski & Kohli, 1996; Kohli & Jaworski, 1990), which implies the exploitation of inventive things in response to market conditions (Narver & Slater, 1990; Slater & Narver, 1994). An efficient MO specifies a conviction to adjust to customers' unpredictable future needs (Atuahene‐Gima et al., 2005) and thus improve the conservation of competitive strategies and initiates innovative inducements (Zachary et al., 2011; Zortea-Johnston et al., 2012).
Considering the importance of MO, businesses researchers have started investigating the empirical relationship between MO and CE. For instance, the study of Barrett and Weinstein (2015) has shown a significant association between MO and CE as it provides the basis of innovation and competitive advantage. González‐Benito et al. (2009) revealed a strong and positive relationship between MO and CE. Sciascia et al. (2006) indicated MO as an essential determinant of CE. A business should involve similar practical approaches to be successful in this vigorous era (Renko et al., 2009). The continuous search for market acquaintance demands maintaining an additional entrepreneurial alignment (Bojica et al., 2011). Therefore, the present study proposes that:
H1: MO relates significantly and positively to CE.
2.5 Technical opportunity, Market orientation, and Corporate entrepreneurship
Alsos and Kaikkonen (2002) defined the opportunity as the possibility of introducing new products. It is an essential concept in entrepreneurship as it is perceived as an ability of entrepreneurs to discover the solution of a problem (Chandler et al., 2002). An entrepreneur is always searching for an opportunity through which he can implement his ideas for developing new products or upgrading existing products. The existing literature of entrepreneurship has specified that the achievement of entrepreneurial opportunity can be divided into opportunity, identification, and exploitation (Choi et al., 2008; Eckhardt & Shane, 2003; Shane, 2012; Shane & Venkataraman, 2000; Williams & Wood, 2015).
Different views (e.g., cultural-cognitive and economic) emerged to explain the entrepreneurial opportunity identification process. The economic view describes that opportunity exists in the environment as an objective phenomenon (Companys & McMullen, 2007). As a result of this view, entrepreneurs are likely to recognise opportunities as a result of better prior knowledge (Shane & Venkataraman, 2000; Shepherd & DeTienne, 2005), being more alert (Gaglio & Katz, 2001) and with better information (Hayek, 1945; Shane & Venkataraman, 2000). These antecedents of opportunity recognition are useful after the gradual learning process (Dimov, 2002). The cultural-cognitive view describes the entrepreneurial opportunity as a subjective phenomenon in which individuals create opportunity. Accordingly, the entrepreneurial opportunity exists when created and recognised by firms or individuals (Companys & McMullen, 2007, p. 305).
The present study, therefore, considers that entrepreneurial opportunity comes from the MO. MO refers to the persistent search for opportunities. Any opportunity which arises in an organisation or market gives the path of exploitation by someone. It is an approach to business that identifies the customer's need and tries to develop the products according to their needs. Schumpeter and Backhaus (2003) believed that an entrepreneur requires TO through which he can develop new products for which technical change is required. Technological change is an essential factor of entrepreneurial opportunity, which makes the possible allocation of resources in more productive ways of developing new products or upgrading existing products (Casson, 1995). According to Bhide (2003), about half of the founders of private companies (fortune 500) in the US indicated that change in technology or external factors was the reason for business initiation. Also, the increase in the technological change rate has resulted in a rise in entrepreneurial start-ups (Blau, 1987).
The present study shifts focus from the entrepreneurial opportunity to TO as CE's in engineering firms always look for a TO. The concept of TO is drawn from Schumpeter's theory of innovation. Schumpeter specified that opportunity requires the development of new knowledge that comes from technological change. García-Morales et al. (2014) empirically tested the relationship between technological change and CE and showed that technological change tends to increase CE. Therefore, the present study proposes that:
H2. TO relates significantly and positively to CE.
H3. MO relates significantly and positively to TO.
2.6 The mediating role of Technical opportunity
For individuals why, when, and how people discover opportunities is adequately addressed in research (e.g., Shane & Venkataraman, 2000), but especially for firms dealing with some engineering related products or services, opportunity recognition literature is scarce.
The present study contends that MO is the prime cause of the creation of TO's in engineering firms, which is identified and exploited through the firm's inner processes (CE). From the discussion above, it is proposed that TO, MO, and CE are interlinked. CE's in engineering firms are always in search of TO, which comes from MO. Till present, TO's mediating role on the association between MO and CE has not been tested empirically. Therefore, the present study proposes that:
H4. TO mediates the relationship between MO and CE.
2.7 The moderating role of creative destruction
Various researchers stressed entrepreneurs to discover opportunities in the external environment, e.g., Drucker (1998). However, J. Schumpeter (1934, p. 65) suggests that it is the producer who initiates an economic change resulting education of consumers towards the adaptation of new things.
The present study proposes that CD intensifies the relationship between MO and TO as it plays a significant role in developing new opportunities. Opportunities usually come from the needs of customers. MO is an approach to business that identifies the customer's need and tries to develop the products according to their needs. It also becomes a means of the CD because once a consumer uses a product, then he/ she can be able to recommend that how this product should be improved, which provides a TO to the corporate entrepreneur in the process of product improvement. Thus, we hypothesised that
H5. CD intensifies the relationship between MO and TO.
The proposed research model from above-hypothesised relationships is as under: