What you know or who you know? The role of intellectual and social capital in opportunity recognition

The recognition of business opportunities is the first stage in the entrepreneurial process. This article analyses the effects of individuals' possession of and access to knowledge on the probability of recognizing good business opportunities in their area of residence. The authors use an eclectic theoretical framework, consisting of intellectual and social capital concepts. In particular, they analyse the role of individuals' educational level, their perception that they have the right knowledge and skills to start a business, whether they own and manage a firm, their contacts with other entrepreneurs, and whether they have been business angels. The hypotheses proposed here are tested using data collected for the GEM project in Spain in 2007. The results show that individuals' access to external knowledge through the social networks in which they participate, is fundamental for developing the capacity to recognize new business opportunities.