An entrepreneurial opportunity differs from “the larger set of all profit opportunities” because of novelty (Shane & Venkataraman, 2000). However, all opportunities are not equal in terms of the novelty they imply. The conceptual model advances a hierarchical tree structure that captures existing business practices and, concomitantly, where the novelty lies. In order to represent the existing business practices, I draw on tools advanced by the evolutionary and knowledge-based theories of the firm: business models, routines, and subroutines.

Then, entrepreneurial opportunity can imply change at any of the three levels of the knowledge hierarchy. I propose that a similar hierarchical structure of existing business knowledge exists in the mind of an entrepreneur when she is engaged in entrepreneurial judgment

If this hierarchical tree structure has any corresponding cognitive structure in the minds of the prospective entrepreneurs, they should react differently to changes in different levels of the tree. The novelty evaluation associated with an opportunity should differ according to the level of the tree change is occurring. In other words, if the hierarchical tree structure has no validity, the opportunities based on different levels of the tree should be evaluated no differently from each other.