Entrepreneurial Alertness and Opportunity Recognition in the Context of Institutional Voids-Model Questionnaire

Abstract

The Entrepreneurial Alertness and Opportunity Recognition in the Context of Institutional Voids-Model Questionnaire is an advanced psychometric instrument developed by Jennifer Franczak, Stephen E. Lanivich, and Samuel Adomako (2023) to examine the operational dynamics of cognitive entrepreneurial processes within volatile socioeconomic environments. Rooted in Austrian economics, cognitive psychology, and institutional theory, the scale captures how macro-level institutional friction interacts with individual cognitive capabilities to foster venture ideation. Specifically, the measurement model integrates three foundational constructs: Entrepreneurial Alertness, operationalized across three interrelated sub-dimensions (Scanning and Search, Association and Connection, and Evaluation and Judgment); Institutional Voids, measuring bureaucratic, infrastructural, and regulatory impediments; and Opportunity Recognition, assessing the individual capacity to identify viable commercial prospects. The composite instrument comprises 21 items administered using a 7-point Likert-type response format ranging from 1 (Strongly Disagree) to 7 (Strongly Agree). Psychometric validation was conducted using empirical data gathered from active entrepreneurs operating in Ghana (mean age = 48.04 years). Structural equation modeling and confirmatory factor analysis (CFA) demonstrated robust construct validity and statistical fit: Root Mean Square Error of Approximation (RMSEA) = 0.05, Comparative Fit Index (CFI) = 0.95, Tucker-Lewis Index (TLI) = 0.96, and Standardized Root Mean Square Residual (SRMR) = 0.07, significantly outperforming alternative unifactorial structures. Internal consistency was firmly substantiated across all dimensions, with Cronbach’s alpha (α) and Composite Reliability (CR) values exceeding the stringent threshold of 0.80. Convergent validity was affirmed through uniform, statistically significant factor loadings (p < 0.01) and Average Variance Extracted (AVE) values surpassing construct squared correlations, verifying robust discriminant validity. This scale represents a rigorous diagnostic and empirical instrument for investigating behavioral entrepreneurship, gender disparities, institutional economics, and cognitive psychology in emerging markets.

Keywords

Entrepreneurial Alertness, Opportunity Recognition, Institutional Voids, Emerging Economies, Cognitive Entrepreneurship, Gender Disparity, Ghana, Construct Validity, Confirmatory Factor Analysis, Psychometrics

Authors

The scale was developed and psychometrically validated by an international research team specializing in management, organizational behavior, and behavioral entrepreneurship:

• Jennifer Franczak, Ph.D. — Pepperdine University, Graziadio Business School, 24255 Pacific Coast Highway, Malibu, California 90263, United States. ORCID: 0000-0002-6326-3831. Email: [email protected].
• Stephen E. Lanivich, Ph.D. — Department of Management, Fogelman College of Business and Economics, University of Memphis, Memphis, Tennessee, United States. Email: [email protected].
• Samuel Adomako, Ph.D. — Department of Strategy and International Business, Birmingham Business School, University of Birmingham, Edgbaston, Birmingham, B15 2TT, United Kingdom. Email: [email protected].

Purpose

The primary purpose of the Entrepreneurial Alertness and Opportunity Recognition in the Context of Institutional Voids-Model Questionnaire is to empirically assess how external institutional voids and demographic factors, such as gender, serve as boundary conditions on the relationship between entrepreneurial alertness and opportunity recognition within emerging and developing markets. Entrepreneurship research has long debated why certain individuals identify profitable venture prospects while others exposed to identical environmental stimuli do not. While foundational scholarship in developed market contexts posited that entrepreneurial alertness is a direct cognitive catalyst for opportunity discovery, this direct nexus often fails to capture the intricate challenges faced by actors operating within resource-constrained, unstable, or highly regulated developing economies.

In developing nations, formal institutions frequently suffer from systemic voids, such as infrastructural breakdowns, ambiguous property rights, non-transparent tax assessments, and protracted bureaucratic customs procedures. These conditions either stifle enterprise or paradoxically present fertile soil for innovative problem-solving. This measurement system was constructed to capture these subtle interactions. By simultaneously assessing institutional voids, individual cognitive alertness (differentiated across informational search, combinatorial schema formation, and commercial evaluation), and concrete opportunity recognition capacity, the scale equips scholars to study entrepreneurial behavior in realistic settings.

From an applied research perspective, the scale fulfills several key roles:

• Investigating Moderating Structural Factors: It enables organizational behaviorists and institutional economists to test complex conditional process models, illuminating how varying levels of institutional dysfunction constrain or amplify cognitive abilities.
• Analyzing Socio-Demographic Disparities: It serves as a tool for evaluating gender disparities in entrepreneurship. By uncovering how institutional friction exerts asymmetric pressures on female versus male enterprise founders, researchers can identify distinct strategic adaptations employed across genders.
• Policy Evaluation and Enterprise Development: It assists policymakers, nongovernmental organizations, and economic development agencies in identifying whether small-to-medium enterprise (SME) development programs need to target structural external barriers (e.g., utility reliability, customs processing) or cognitive-behavioral competencies (e.g., information scanning, mental schema association).
• Organizational Diagnostic Benchmarking: It provides business incubators and venture accelerators in emerging regions with an empirical diagnostic tool to benchmark the opportunity recognition capabilities of founding teams, diagnosing vulnerabilities in information seeking, pattern matching, or regulatory adaptation.

Psychological Construct

The instrument operationalizes three multifaceted psychological and environmental constructs: Entrepreneurial Alertness, Institutional Voids, and Opportunity Recognition. Each construct corresponds to established conceptual literature adapted for empirical rigor.

1. Entrepreneurial Alertness

Alertness represents an individual’s cognitive ability to perceive, synthesize, and interpret non-obvious environmental patterns to identify commercial opportunities without formal search routines. Drawing from Tang, Kacmar, and Busenitz (2012), this construct is operationalized as a three-dimensional cognitive process:

• Scanning and Search (6 items): This dimension measures active and passive environmental monitoring. It assesses the behavioral frequency with which an individual reads trade publications, interacts across diverse social networks, navigates digital platforms, and systematically sweeps the broader environment for emergent information that might contain latent commercial utility.
• Association and Connection (3 items): This sub-construct measures higher-order cognitive schema integration, capturing an individual’s capacity to correlate disparate, seemingly unconnected streams of environmental information. It assesses the cognitive “dot-connecting” through which individuals discover complementary relationships between shifting consumer demands, technological breakthroughs, and unused resources.
• Evaluation and Judgment (4 items): This cognitive phase reflects the evaluative filtering mechanism through which an individual screens newly synthesized information to distinguish commercially viable, high-value opportunities from unprofitable or unfeasible concepts. It relies on both intuitive heuristic evaluation (“gut feeling”) and comparative commercial analysis.

2. Institutional Voids (3 items)

Institutional voids represent the absence, inefficiency, or unpredictability of formal institutional intermediaries, physical infrastructures, and regulatory bodies essential for market transactions (Kim & Cavusgil, 2020; Santangelo & Meyer, 2011). In this scale, the construct is conceptualized through the operational lens of the entrepreneur. Rather than measuring macroeconomic indicators in the abstract, it quantifies the substantive costs, systemic operational delays, and regulatory frictions that firms directly experience regarding:

• Basic public utilities (unreliable electricity and water provision requiring private workarounds),
• Customs procedures (delays and friction in importing materials or exporting products), and
• Tax assessment and payment infrastructure (opaque, corrupt, or cumbersome tax collection procedures).

3. Opportunity Recognition (5 items)

Opportunity recognition is conceptualized as the cognitive identification of actionable commercial prospects that can materialize into new goods, services, organizational models, or entire business enterprises. Grounded in cognitive psychology, this construct captures the psychological disposition toward business ideation during routine daily activities, distinguishing individuals who intuitively generate profitable business concepts from those who experience cognitive hesitation or conceptual scarcity.

Theoretical Framework

The theoretical architecture of the instrument integrates Austrian Economics, Cognitive Psychology, and Institutional Theory.

The primary foundation originates in Israel Kirzner’s (1973, 1979) theory of market dynamics and alertness. Kirzner argued that markets are inherently characterized by informational asymmetries, disequilibria, and imperfect coordination. In this milieu, the entrepreneur acts as an arbitrageur who notices market gaps before others. However, classical economic theory left the specific micro-mechanisms of alertness largely unexamined. To bridge this gap, contemporary organizational scholars introduced cognitive psychology to clarify how mental representations, schema development, and attentional processing yield Kirznerian alertness. This instrument builds directly on the cognitive re-conceptualization of alertness advanced by Tang et al. (2012), which models alertness not as a static trait, but as a sequential cognitive process involving environmental scanning, associative processing, and analytical evaluation.

This cognitive model is embedded within Institutional Theory (North, 1990; Scott, 1995). North posited that formal institutions (laws, regulations, property rights) and informal institutions (norms, cultural expectations) define the “rules of the game” in a society, structuring human interaction by reducing transaction costs and uncertainty. In emerging economies, however, the formal institutional architecture is often incomplete, characterized by what Khanna and Palepu (1997) termed institutional voids. In such settings, conventional transaction-cost economics break down. Operating in an institutional void imposes severe friction on venture creation, requiring heightened resourcefulness.

The scale integrates these paradigms into a unified framework: the cognitive ability to recognize opportunities is not an isolated psychological trait. Instead, it operates within external institutional conditions. In environments where formal infrastructures are deficient, institutional voids serve as an environmental contingency that alters how an entrepreneur’s cognitive scanning, association, and evaluation translate into opportunity discovery. Furthermore, this framework incorporates feminist institutional perspectives, recognizing that systemic institutional voids often compound the socio-cultural barriers encountered by female entrepreneurs, fundamentally shaping cognitive orientation and strategic adaptation.

Validity

The validity of the instrument was tested using rigorous statistical methodologies reported by Franczak et al. (2023) across a targeted sample of entrepreneurs operating within the sub-Saharan emerging market of Ghana.

Convergent Validity

Convergent validity was evaluated by assessing the statistical significance and magnitude of standardized factor loadings across all primary and secondary constructs, adhering to the criteria established by Bagozzi and Yi (1988). Structural equation estimation revealed that all standardized item loadings across the sub-dimensions of Entrepreneurial Alertness, Institutional Voids, and Opportunity Recognition were positive, robust, and statistically significant at p < 0.01. Furthermore, the Average Variance Extracted (AVE) for each specified construct surpassed the acceptable empirical benchmark of 0.50, demonstrating that the latent constructs account for a substantial majority of the variance observed across their respective indicator sets rather than measurement error.

Discriminant Validity

Discriminant validity was established using the Fornell and Larcker (1981) criterion. The AVE for each construct exceeded the squared bivariate correlation coefficients between that construct and any other construct within the theoretical structural model. This confirms that while the sub-dimensions of Entrepreneurial Alertness are intercorrelated, they remain empirically distinct from one another, from macro-environmental perceptions of Institutional Voids, and from the outcome construct of Opportunity Recognition.

Common Method Variance (CMV)

Because cross-sectional data collected via self-report measures carry the potential for common method bias, the authors conducted two diagnostic assessments:

• Marker Variable Technique: A theoretically unrelated marker variable was introduced into the estimation model. The observed correlations between this designated marker variable and the theoretical constructs within the research model were exceptionally low, fluctuating within a narrow band from -0.01 to 0.02.
• Exploratory Factor Analysis (EFA) First-Factor Control: An unrotated EFA was executed. When partialling out the influence of the first unrotated factor (which accounts for the greatest common variance across all indicators), the structural relationships among the substantive constructs remained statistically significant.

These empirical findings confirmed that common method variance did not bias the parameter estimates or model configuration.

Reliability

The internal consistency reliability of the instrument was examined across each multidimensional facet and overarching latent factor, utilizing both traditional coefficient alpha (Cronbach’s α) and Composite Reliability (CR) metrics.

The empirical thresholds across organizational research dictate that reliability coefficients exceeding 0.70 demonstrate adequate reliability, while scores exceeding 0.80 indicate strong psychometric consistency (Nunnally & Bernstein, 1994). The measurement model demonstrated strong statistical reliability:

• Entrepreneurial Alertness Dimensions:
  • Scanning and Search: Cronbach’s α > 0.80; CR > 0.80.
  • Association and Connection: Cronbach’s α > 0.80; CR > 0.80.
  • Evaluation and Judgment: Cronbach’s α > 0.80; CR > 0.80.
• Institutional Voids: Cronbach’s α > 0.80; CR > 0.80.
• Opportunity Recognition: Cronbach’s α > 0.80; CR > 0.80.

The convergence of Cronbach’s alpha and Composite Reliability values above the 0.80 criterion confirms that the measurement errors across individual items are minimal, ensuring stable parameter estimation across empirical replications.

Factor Analysis

The underlying factor structure of the scale was validated using both Exploratory Factor Analysis (EFA) and Confirmatory Factor Analysis (CFA), demonstrating high construct independence and overall model fit.

Confirmatory Factor Analysis (CFA) Fit Indices

A full measurement model was estimated using maximum likelihood structural equation modeling. The empirical fit was contrasted against an alternative single-factor common-method baseline model to determine whether the multifaceted dimensions collapsed into an undifferentiated generic response set. The full measurement model demonstrated strong empirical fit:

• Full Measurement Model:
  • Root Mean Square Error of Approximation (RMSEA) = 0.05
  • Comparative Fit Index (CFI) = 0.95
  • Tucker-Lewis Index (TLI) = 0.96
  • Standardized Root Mean Square Residual (SRMR) = 0.07
• Competing Single-Factor Model:
  • Root Mean Square Error of Approximation (RMSEA) = 0.08
  • Comparative Fit Index (CFI) = 0.56
  • Tucker-Lewis Index (TLI) = 0.50
  • Standardized Root Mean Square Residual (SRMR) = 0.13

The comparative indices indicate that the single-factor model fits the data poorly (CFI = 0.56; TLI = 0.50), while the multidimensional model satisfies the rigorous cutoffs recommended by Hu and Bentler (1999) (RMSEA ≤ 0.06; CFI/TLI ≥ 0.95; SRMR ≤ 0.08). This establishes that the 21 items reflect distinct, identifiable constructs.

Instrument / Measurement Tool

• Test Type: Multi-dimensional self-report survey instrument / psychometric inventory.
• Constructs Assessed: Institutional Voids (3 items), Entrepreneurial Alertness (13 items across 3 dimensions), Opportunity Recognition (5 items).
• Total Item Count: 21 items.
• Response Scale: 7-point Likert-type scale anchored from 1 (“Strongly Disagree”) to 7 (“Strongly Agree”).
• Administration Format: Standardized paper-and-pencil or secure digital survey administration. Suitable for independent field administration, enterprise incubator screening, or academic research contexts.
• Target Population: Active business owners, nascent entrepreneurs, corporate intrapreneurs, and SME managers, specifically validated within emerging market environments.
• Scoring and Transformation Rules:
  • Reverse Coding: Specific items indicate reverse-coded phrasing to attenuate acquiescence bias. Items designated with (r) must be reversed prior to computing composite metrics (i.e., 1 becomes 7, 2 becomes 6, 3 becomes 5, 4 remains 4, 5 becomes 3, 6 becomes 2, and 7 becomes 1). Specifically, reverse code:
    • Alertness – Evaluation and Judgment: Item 2 (“I cannot distinguish between profitable opportunities and not-so-profitable opportunities.”)
    • Opportunity Recognition: Item 2 (“I generally lack ideas that may materialize into profitable enterprises.”)
    • Opportunity Recognition: Item 5 (“Seeing potential new opportunities does not come very naturally to me.”)
  • Dimension Scoring: Subscale indices are derived by computing the mathematical mean or cumulative sum of the constituent items within that domain. Alertness can be analyzed as three independent continuous variables (Scanning/Search, Association/Connection, Evaluation/Judgment) or as a second-order latent aggregate construct.
  • Interpretation: Higher scores on the Alertness and Opportunity Recognition subscales indicate higher cognitive enterprise capabilities. Higher scores on the Institutional Voids subscale denote greater experienced bureaucratic and infrastructural impediment to business operations.

Permissions & Fee and Test Year

• Year of Publication: 2023.
• Academic Copyright: Jennifer Franczak, Stephen E. Lanivich, and Samuel Adomako; published by Elsevier Ltd. in the Journal of Business Research.
• Permissions and Usage: The instrument is available for non-commercial academic research, pedagogical, and educational evaluation purposes. Researchers are expected to appropriately cite the original authors and the 2023 baseline validation study.
• Commercial Licensing: Commercial applications, venture-capital diagnostic deployment, and proprietary corporate screening may require formal licensing clearance from the authors and the original publisher.
• Administration Fee: Free of charge ($0) for scholarly scientific investigations and higher education teaching activities.

References

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• Franczak, J., Lanivich, S. E., & Adomako, S. (2023). Filling institutional voids: Combinative effects of institutional shortcomings and gender on the alertness—opportunity recognition relationship. Journal of Business Research, 155(Part B), Article 113444. https://doi.org/10.1016/j.jbusres.2022.113444
• Hu, L. T., & Bentler, P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new alternatives. Structural Equation Modeling: A Multidisciplinary Journal, 6(1), 1–55. https://doi.org/10.1080/10705519909540118
• Khanna, T., & Palepu, K. (1997). Why focused strategies may be wrong for emerging markets. Harvard Business Review, 75(4), 41–51.
• Kim, N., & Cavusgil, E. (2020). The impact of institutional voids on the performance of multinational enterprises: The moderating role of dynamic capabilities. Journal of International Management, 26(4), Article 100787. https://doi.org/10.1016/j.intman.2020.100787
• Kirzner, I. M. (1973). Competition and Entrepreneurship. University of Chicago Press.
• Kirzner, I. M. (1979). Perception, Opportunity, and Profit: Studies in the Theory of Entrepreneurship. University of Chicago Press.
• North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press. https://doi.org/10.1017/CBO9780511808678
• Nunnally, J. C., & Bernstein, I. H. (1994). Psychometric Theory (3rd ed.). McGraw-Hill.
• Santangelo, G. D., & Meyer, K. E. (2011). Extending the internationalization process model: Institutional voids and the role of idiosyncratic capabilities. Journal of International Business Studies, 42(7), 894–909. https://doi.org/10.1057/jibs.2011.25
• Scott, W. R. (1995). Institutions and Organizations. SAGE Publications.
• Tang, J., Kacmar, K. M., & Busenitz, L. (2012). Entrepreneurial alertness in the pursuit of new opportunities. Journal of Business Venturing, 27(1), 77–94. https://doi.org/10.1016/j.jbusvent.2010.07.001

Items of the Scale