A Study India And Other Economies Business Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

May 1, 2006 will go down in the history books of information technology, communication and business as an onset of the era of new form of business, namely Virtual Business. It was on this day that Business Week's cover page, read "Virtual World, Real Money". The cover page further stated, "She's fictional, lives inside an online game but earns thousands of actual dollars there. And she's not alone" (Hof, 2006). The person in question is Ailin Graef, popularly known as Anshe Chung in virtual world (henceforward VWs), Second Life® (henceforward SL). A Chinese by birth and German by citizenship, who converted her $10 investment into a million dollar corporate in short span of 30 months. What Ailin Graef did is not a story of a single entrepreneur.

As of now, there are uncountable examples of how people have given up their Real Life (henceforward RL) jobs to realize their entrepreneurial dreams in the VWs. Those, who already have entrepreneurial ventures in the RL, are now exploring the opportunities in VWs additionally.

To gain a better insight into the concept of the Entrepreneurial Opportunities in Virtual World, there is a dire need to understand the basic concepts surrounding entrepreneurship and virtual worlds.


The term entrepreneurship in simplest language means the act of being an entrepreneur. This leads us to next question as to what exactly is entrepreneur. The term popular all over the world in English language has its origin in the French roots. The word "entrepreneur" was first defined and coined by the Irish-French economist, Richard Cantillion (1730). He defined entrepreneur as someone who pays a certain price for a product to resell it at an uncertain price, thereby making decisions about obtaining and using the resources while consequently admitting the risk of the enterprise. Time and now, various scholars, economists and management advocates have come out with their definition of "entrepreneurship". Schumpeter (1965) defined "entrepreneurs as individuals who exploit market opportunity through technical and/or organizational innovation". According to Onuoha (2007), entrepreneurship "is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities."

The Concept of Virtual Organization & Virtual World

To understand virtual world, one first needs to understand the meaning of the virtual organization. The increasing applications of the information, communication and technology have resulted in the emergence of the new organizational structures. One such new organizational structure is Virtual Organization (henceforward VO). In simplest terms, VO can be defined as an organization which uses telephone and internet to communicate and fulfill the organizational objectives and to connect to geographically dispersed workplaces. A Marketing Manager sitting in UK based office interacting and conducting business with Production & Operations Manager in India through internet is an example of VO.

VW is an extension rather an application of the VO. VW popular amongst tech geeks as Massively Multi-Player Online Role Playing Games (henceforward MMORPG) is an internet based environment or game that can be accessed by multiple users across the world simultaneously over internet. The users or players select an online representation of themselves called avatar. They spend their time in-world completing the tasks or objectives, consuming the "virtual goods", engaging in the meaningful and purposeful transactions while communicating with other avatars and forming "Virtual Organization". But every MMORPG is not a video game as they are most commonly called. Many people consider VWs as an extension of their real life. They approach the VW as an alternative reality rather than entertainment.

Though there is a thin line of distinction between game and VW, the MMORPG can be divided into two on the basis of the purpose they are being used for. A MMORPG with an objective to accomplish is a "game" while a MMORPG with no particular objective to achieve and wherein the users or avatars themselves decide on the objective is a VW. The World of Warcraft is an example of game while Second Life® is an example of VW. The participants in the VW are not confined within a geographical boundary. The participants of the VW are from different countries. For example, SL has active user base from all the countries of North & South America, Asia, Africa, Europe etc.

Virtual Entrepreneurship

Any entrepreneur who makes an effective use of opportunities in the virtual organization is a virtual entrepreneur. Virtual entrepreneurship (henceforward VE) can be defined as the use of a computer generated environment where the people interact with each other and carry out the business transactions in a business simulated environment. VE builds on the existence of the particular structures and structured processes on the internet, that when utilized results in the creation of the firm in a virtual world. de Roode (2009) argues that it is the improved understanding of the possibilities of information technology, new innovations, lowered costs of information processing and coordination, globalization and the possibilities of the Internet that made it feasible to create new types of organizations like the Virtual Organization.

Rationale for Choosing VW as Focus of Dissertation

Because virtual worlds seem to be a market where people can make real money, several of them like avatar Anshe Chung have started to exploit this very new technology in the search of profitable opportunities. Can this been related to entrepreneurship, someone who innovates and can hopefully alter in a positive way the economy (Schumpeter, 1950)? The European commission (Commission of the European Communities, 2003) highlighted that entrepreneurship is important as it contributes to job creation, growth and competitiveness, and it unlocks personal potential. Therefore as entrepreneurship is important, what can be entrepreneurship in virtual worlds?

The present paper proposes to study entrepreneurship of individuals in the Massively Multiplayer Online Role-Playing Games (MMORPG) Second Life® and Entropia Universe® platforms and to assess if entrepreneurship in those two games exists with the help of Park's model which links entrepreneurs, knowledge and experience, and technology. Furthermore, for those two MMORPG platforms, the possible key attributes of growth are investigated (Barringer's model) and the venture creation process evaluated.

Purpose of the Study

The traditional literature on Virtual Organization generally lacks the element of VW in them. They most of the time overlook as to how the VWs can be leveraged for the purpose of business transactions more fruitfully than the common virtual organizations. In similar manner, the literature on the entrepreneurship advocates the need of an entrepreneur to establish a business venture in the traditional brick and mortar system or a business with physical presence. There is significant amount of gap about virtual entrepreneurship. Though with the changing trends and technological development, they include the impact of virtual organization on the entrepreneurial endeavors, the importance and benefits of VW are not emphasized.

This study will try to identify the reasons behind success and failure of entrepreneurial ventures in the VWs. Further attempt will be made to find out the various entrepreneurial opportunities available in the VWs as well as the challenges and risk faced by virtual entrepreneurs while trying to establish themselves in VW, a domain ignored most of the times by researchers.

To explain the importance of Virtual Entrepreneurship in corporate world, here is what John Sculley (1993), the then chairman of Apple Computer Inc. said once. "Ten or 20 years from now, you'll see an explosion of entrepreneurial industries and companies that will essentially form the real virtual corporations. Tens of thousands of virtual organizations may come out of this." He knew what the future of business looked like before it came into being.

The next chapter will discusses the review of the earlier work done in the domain of the virtual world, the origins of entrepreneurship, the background work of entrepreneurial opportunities and virtual entrepreneurship.


The previous chapter gave a bird's eye view of the concept of Virtual World and Entrepreneurial opportunities present in VW. While more and more companies are using VWs to leverage the opportunities present for the business expansion, it is important to understand how the concept of Entrepreneurship and Virtual World came into being. This chapter provides a detailed insight into the concept of entrepreneurship and Virtual World.



In simpler terms, entrepreneurship can be defined as the a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and leadership balanced for the purpose of value creation and capture. Though the concept has been in existence ever since existence of mankind, its formal existence is widely credited to Richard Cantillon (1680s - 1734), an Irish-French Economist, who authored "Essai sur la Nature du Commerce en Général" (Essay on the Nature of Trade in General) somewhere around 1730. However it was not formally published until 1755 by Willian Stanley Jevons. Jevons (1931) considered the book is regarded as "more emphatically than any other single work, the cradle of political economy".

The word entrepreneur coined by Cantillon, is derived from French and first appeared in French Dictionary "Dictionnaire Universel de Commerce" of Jacques des Bruslons published in 1723. In his essay, he defined entrepreneur as someone who pays a certain price for a product to resell it at an uncertain price, thereby making decisions about obtaining and using the resources while consequently admitting the risk of the enterprise (Cantillon 1730).

According to Cantillon, there are majorly three main actors in an economy viz. the landowners (capitalists), the entrepreneurs (the arbitrageurs) and the wage workers. Often considered as the "father of enterprise economics" (Hébert & Link, 2006), it can be assumed that the concept of entrepreneurship by Catillon was described in relation to the economic system present at that time where certain individuals played a central and dominating role in the economy and had unfixed income and the other actors who lived on fixed wages/income and the "middlemen" who exploited the gap between the unfixed income and the fixed income actors. Cantillon's theory is defined in narrow terms but is widely applicable. According to him "anyone who invests (in sense of acquiring and employing resources) with the purpose of selling goods in the future at an uncertain price is an entrepreneur" (Brown 2011).

Originally, Jean-Baptiste Say (1803) was attributed to the coining of term "entrepreneur"; however, it is now a commonly known fact that Cantillon was the "first significant writer to make frequent and obtrusive use of the term in a semblance of its modern form" (Hébert & Link, 2006).

Over the period of time, different scholars have defined the term entrepreneur in different way. However, it was not until late 19th century that an entrepreneur was viewed from the economic perspective. The entrepreneur has been defined as an "economic agent who unites all the means of productions for higher productivity and greater yield" (Say 1803), as "an innovator" (Schumpeter 1934); as "a person for high need of achievement" (McClleland 1961); as "an innovator who searches for change, responds to it and exploit the opportunity" (Drucker 1964); as "an imitator who imitate technologies innovated by others" (Kilby 1971) an important aspect in context of developing economies; as "a risk taker" (Shapero 1975) and as "an intrapreneur who is an entrepreneur within an established organization" (Pinchot 1983). The Entrepreneur, besides a risk bearer can also be described as "a decision maker who is acting innovative upon information and knowledge in order to reduce costs, maximize profits, employ workers and accumulate wealth" (Heertje 2005).

Many scholars defined entrepreneurship as "process of creating value by bringing together unique package of resources to exploit an opportunity (Stevenson & Jarillo 1990). Entrepreneurship is "an act of launching new ventures by a new company or an existing company" (Lumpkin 1996) and "a process of discovery, evaluation and exploitation of opportunity" (Venkatraman 2000).

Entrepreneurial Opportunities

"When one door closes another door opens; but we often look so long and so regretfully upon the closed door, that we do not see the ones which open for us."

Alexander Graham Bell

The above quote by Alexander Graham Bell is like sermon for the entrepreneurs. A business if it wants to survive needs to recognize the new trends and exploiting them. This process of discovering new trends and exploiting them defines the opportunity recognition. Shane (2003) defines an entrepreneurial opportunity as "a situation in which a person can create a new means-ends framework for recombining resources that the entrepreneur believes will yield a profit."

Israel Meir Kirzner (1930-Present), a leading economist at Austrian School, has done an extensive work in the field of opportunities for entrepreneurs and is referred to as "Kirznerian opportunities" in General Theory of Entrepreneurship by Shane (2003). An opportunity can also be defined as "a possibility to satisfy market needs trough a new combination of resources that will offer added value" (Kirzner 2009). According to him, the concept of entrepreneurship as alertness to profit opportunities is one of the most influential modern interpretations of the entrepreneurial function. He further suggested that the entrepreneurs have a certain capabilities which could be used to recognize and exploit the opportunities. Hills and Shrader (1998) and Zietsma (1999) advocated that high level of entrepreneurial alertness (being alert to value creating opportunities) is enjoyed by the entrepreneurs as compared to the managers.

Often people use the terms opportunity creation, recognition and discovery interchangeably. However, there is a difference between three considering them from the existence of the demand and supply (Sarasvathy, Venkataraman, Dew, Velamuri 2002).

When both demand and supply are obvious, and one just needs to bring them together and implement, it is an "Opportunity Recognition".

Licensing and franchising being the examples of opportunity recognition.

When either supply or demand exists, and the other needs to be discovered it is a case of an "Opportunity Discovery".

A perfect example is cure for cancer, where disease exists (demand) but without permanent cure (supply).

When neither supply nor demand is present, it is a case of an "Opportunity Creations". Generally, market disruptions due to technological breakthroughs and inventions fall in this category.

Traditionally, an opportunity can arise out of the (i) unfulfilled market needs, (ii) inefficiently used resources or (iii) a match or connection between specific unfulfilled market needs and with the corresponding specific resources. Ardichvili, Cardozo & Ray (2003) in their journal, "A Theory of Entrepreneurial Opportunity Identification and Development" have clearly spelled out the types of the opportunities based on the value sought by an entrepreneur and the value creation capability.

Figure 2.1 Types of Opportunities - Source: Ardichvili, A., Cardozo, R., Ray, S. (2003). A Theory of Entrepreneurial Opportunity Identification and Development, Journal of Business Venturing







Problem Solving


Technology Transfer

Business Formation

In this matrix, an entrepreneur looks forward to create some value (value sought) and then tries to match the resources with the value sought (value creation capability). If an entrepreneur is aware of the value he/she is seeking the value has been identified and if that he/she is able to channelize or create some value with the identified value, the value creation capability has been defined. Once the value has been identified and capability to channelize is defined, an entrepreneur has been able to successfully identify the opportunity and thus proceed to form the business.

External environment plays an important role in the opportunity recognition. In fact, Michael E. Porter's "Five Forces Analysis" lays an emphasis on the importance of the external environment on the business. Porter (1980) indicates that businesses can cut down costs, take differential strategy or find a niche in the market to promote the firm's competitive advantages while facing different threats or bargaining power. This "finding a niche" indicates the innovation and points towards the importance of opportunity recognition in the existing businesses.

Though entrepreneurs operating in different businesses sectors face different challenges, the potential of opportunity recognition, discovery and creation is extremely high when it comes to the IT and ITES sector. According to Christensen (1997) "opportunity recognition is a skill highly relevant in the field of technology where some huge product innovations have largely involved the transfer of a 'low-value' technology from one business sector to another where it becomes 'high-value'".

However, opportunity recognition, discovery and creation alone are not enough. How an entrepreneur is able to manage and exploit is the essence of the entrepreneurial opportunity. For this purpose, one need to identify the opportunity from various perspectives to weigh its pros and cons. Ozgen (2003) spells out the factors in entrepreneurial opportunity recognition process from three different perspectives viz. social, environmental and personal context. The environmental context mainly concerns with the importance of the knowledge acquisition for the purpose of the opportunity creation. The major emphasis here is on the gathering the industry related information to update individual's knowledge base and gain insight into new opportunities recognition (Huang & Wang 2011). The social context mainly includes the interpersonal network of the entrepreneur consisting of the mentors, guides, partners who could be important for the business formation and execution. The personal context personal traits like analytical skills, mental process of an individual, education, training etc.

To be precise, not all individuals can recognize, discover or create the opportunities. Only those who are able to recognize, discover or create can exploit them to earn the profits. Hence, the factors which influence the entrepreneurial opportunities differ for different scholars.


"I really believe that the virtual world mirrors the physical world."

Marissa Mayer (Yahoo Inc. CEO)

Virtual World

What is common between MySpace, Orkut and Facebook? All three of them changed the way people communicate with each other. What is common between the Sims Online, Zynga Facebook Games and World of Warcraft? All of them have an element of real life simulation in them. The simulation goes beyond the routine physical activities to include the element of the economy in them commonly called as "Virtual Economy" or "Synthetic Economy". This combination of the communication and transaction exchange between different people beyond geographical boundaries has paved the way for a new environment called "Virtual World".

The term Virtual Worlds can best be defined as the online "game like" experience where the participants engage in socialization and communication, simulation, education and business or simply for the purpose of entertainment. As a genre, these environments are classified as "Massively-Multiplayer-Online (henceforward MMO) virtual environments". A new category of the "game like experience" which has grown in demand is the "Massively Multiplayer Online Social Games" (henceforward MMOSGs) (Lester, Konsynski, & Townsend 2007). They are also referred to as Multi User Virtual Environments (henceforward MUVEs).

Digital Economy Papers by OECD (2011) defines a VW as "a persistent computer-simulated environment allowing large numbers of users, who are represented by avatars, to interact in real-time over a computer network such as the Internet."

Categories of Virtual Worlds

The VW can be categorized into three categories on the basis of content creation by the user. These are game worlds, social worlds and user generated worlds (Dougherty & Lastowka 2008). Game worlds are focused on the game play with proper story and task achievement. Hence in many respects, they are similar to traditional video games. World of Warcraft and City of Heroes are some examples of game worlds. Social worlds are VW where the main focus is on the "communication" aspect of the user. Some opportunities are available for the content creation but are regulated by the owners of the VW. Habbo Hotel, Sims Online are best examples. User generated worlds, which are focus of this research are those VWs where the user has full freedom to create any virtual item they want as long as intellectual property rights are honored (Dougherty 2008). Second Life (the VW in research) is the best example.

Virtual World vs. Video Games

What Often people confuse virtual world with the video games. However, there are various factors which distinguish the VW from a traditional video game. The major factors which distinguish the two are their structure of environment, task accomplishment, the economy, the virtual goods and level of freedom enjoyed by the user (Zyda 2005). The VWs are more flexible as compared to the video games in the sense that they do not have any structured story lines or plots and definitely do not have any specific tasks to achieve. Also, in a traditional video game, one earns the money by task completion. However, in VW a user simply earns the money by either sale or purchase of the goods or simply by engaging in a purposeful and meaningful transaction with other user by rendering some services (MOVES Institute 2004).

Timeline for Virtual World

Although VWs are a new concept and have gained popularity recently, they have been in existence in one form or other since 1990s. Following is the time line of the virtual worlds (See Figure 1).

Figure 2.2 Virtual World Timeline, Source - Forrester Research Inc. 2007


"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."

- Winston Churchill

The dot com boom the last century witnessed paved way for new generation tech entrepreneurs and established owners alike. While new business owners looked to cash on the opportunity, the established ones saw this as an expansion plan for their businesses. With "low overhead costs" and even "lower fixed asset investment" (de Roode 2009), the potential for "higher margins" thereby "higher profits" seemed too lucrative to ignore. Though the entire idea of the online business was alien to many, entrepreneurs were willing to take risk. The stories of rags-to-riches courtesy the dot com boom attracted more people to take notice of this new emerging sector. It is in this background that the era of new form of entrepreneurship began.

From "knowledge entrepreneur" (Halal 1996 & Skrezessewski 2006) or like "social entrepreneur" (Swedberg 2000), due to dot com boom, emerged a new form of entrepreneurship, the "virtual entrepreneurship". In simple terms, a virtual entrepreneur is one who utilizes the business opportunities over internet through the concept of "virtual organization" (non-physical organizations existing over internet through by leveraging the use of ICT).

VE can be defined as the use of a computer generated environment where the people interact with each other and carry out the business transactions in a business simulated environment. VE builds on the existence of the particular structures and structured processes on the internet, that when utilized results in the creation of the firm in a virtual world. Roode (2009) argues that it is the improved understanding of the possibilities of information technology, new innovations, lowered costs of information processing and coordination, globalization and the possibilities of the Internet that made it feasible to create new types of organizations like the Virtual Organization in the VWs. Virtual Worlds offer the firms new opportunities for managing the convergence among technology, organization and business (Cagnina & Poian 2010).

Elements for Success of VE in VW

To understand the broader aspects of the entrepreneurship and the culture in the VW, the book, Synthetic Worlds: Business and Culture of the Online Games (Castronova 2005 & Journal of VW Research 2010) highlights the "7 Dimensions" that need to be present in the VW for Virtual Entrepreneurship to shine. These dimensions are as follows:

An active economy with gains/presence from/of consumable goods.

A publicized and well located economic activity via easy transportations, distributed resources over the virtual world and open communication.

The generation of earnings and investments with production functions.

The generation of value with the presence of seller and buyers.

The control of the per capita capital stock and value of the currency.

A social mobility based on risks and progressive taxations.

The recovery from breakdowns.

Existence of Entrepreneurship in VW

According to Journal of Virtual World Research 2010, in 2002, the online game EverQuest, in terms of the per capita GDP became 77th richest nation in the world, just after Russia and far ahead of Asian economic giants India and China. This was possible due the trade of the virtual items between the users of EverQuest. They even auctioned the virtual items on the popular site eBay.

Since the dot com bubble burst in mid 2000s and the growing concerns about the sustainability of the VWs profitability, various scholars and researchers have raised suspicions over its long term profitability. Even the entrepreneurs did a careful analysis before entering the VW.

However, ever since the worst world economic crisis since The Great Depression of 1929 in nearly 80 years, the phenomenal growth enjoyed by the VWs such as Second Life, the popularity of the VW has once again increased. The crisis which rendered many people jobless turned them into virtual entrepreneurs. The successful ones who turned their ventures into profit making adopted the "part-time entrepreneurship" into full time profession.

Furthermore, Castronova (2005) and Bloomfield (2007) have proved that the VWs do have a potential to be a profitable economy. Their main argument is that the existence of an economy will automatically cultivate the businesses and if these businesses turn profitable, they will eventually contribute to the GDPs of the economies where these entrepreneurial ventures exist.


Before jumping to cash the profitability through virtual entrepreneurship, one needs to understand the major elements of the virtual world that gives rise to the virtual entrepreneurship. For the purpose of simplification, the elements of the VW will be discussed in context the of the popular VW i.e. Second Life (focus of the study), created by San Francisco based company, Linden Lab, the makers of shared spaces. These elements are important for understanding the business and legal considerations of the concept of virtual entrepreneurship.

Users or Participants

Based on the level of engagement, the ownership and the role played in the VW, there are various users and participants that need to be considered.

Operators & Developers:

The makers of the creators of the VW are called "developers" or "operators" (Dougherty 2008). They are called operators because they are the VW police which govern the activities in the VW. They are the default government of VW. In case of SL, the Linden Lab is the government and has final say. Besides these, there are various independent and third party companies and individuals that provide the services to develop the VW hired to "develop" and not "regulate".

Users or Players

The customers of the VW who generate and create the content, who drive the economy of the VW are the users or players. They engage in the communication, entertainment activities, simulation, role play, collaboration, content development, business etc. Different VW operators refer to the users in different terms. In SL, the Linden Lab refers to its users as residents or avatars.

Virtual Good

The goods in question are not the goods in physical sense. They have no existence in real world. By virtual goods we mean digital goods that exist online. Some of the virtual goods are like 3D car models for simulation, the house owned by the user, clothing worn by the user, piece of land purchased by the user, trees and rocks etc. Second Life, a popular MUVE has one of the largest collections of virtual good mostly created by its residents or avatars as they are called. Many virtual worlds also empower users to create virtual items (User Created Content, henceforward UCC) in collaboration and to exchange these virtual assets for virtual or real-life currencies (OECD 2009). The users or participants create the content and put them for sale for other users to purchase thereby engaging in the Customer-to-Customer (C2C) or Business-to-Customer (B2C) transaction.

Virtual Currency

Facebook has allowed its users to purchase the goods through its internal currency called Facebook Credits which can be exchanged for the real money value. This internal currency is called virtual currency. Virtual currencies are like the tokens in an arcade which have some notational value that can be exchanged (Glenbrook 2011).

One of the most popular VW, Second Life uses Linden Dollars as its internal currency which can be exchanged for real money value in multiple currencies like US, Canadian, Australian Dollars. This currency mainly is used to sell or purchase the functional goods (like special character/user ability such as fly); self expression artifacts (clothes & accessories for user); gifted goods; digital goods (music, videos) (Glenbrook 2011) or a server space (virtual land). The exchange rate for virtual with real currency is either fixed (Entropia Universe) or is regulated/managed (Second Life). The exchange rates are monitored mainly by the creators of the VW.

Legal Issues

Since the VWs are accessible to everyone beyond geographical boundaries, the legal issues altogether become even more important. Different Real World economies have different legal system. There can be disputes between the operators and resident (Brag vs. Linden Lab litigation in 2006) or between the residents which is normally resolved by operators of VW unless legal court case is filed for intellectual property rights by either of the party involved.

Hence, in case of any dispute, there is a need for the commonly accepted guidelines which will help in the dispute resolution. For this purpose, each VW has its own Terms of Service (TOS) and End User License Agreements (EULAs). The TOS & EULA are the mandatory contract requirements for any participant who wishes to take part in the VW. These contracts spell out the legal definitions and the obligations and rights of everything which is virtual in the respective VW. These contracts provide a wall of defense to the operators against any legal action and give them authority to ban any resident and cancel the account without refunds or reimbursements.

Virtual Marketplace

Like real world, the residents need the place to sell and purchase their products.

On Virtual Economies paper pg 24 castranov


Different techniques and procedures can be used to study and do the research. This chapter outlines the main research problem, the objectives and the purpose of the research, the research methodology adopted and the overview of the sources of the research. This chapter basically contains the structure of the entire research and forms the backbone of dissertation.


The advent of the technology and the growing number of entrepreneurs who are willing to experiment in non-traditional businesses is opening the new business platforms. The entrepreneurial opportunities in virtual world are one of the new emerging business platforms. However, the acceptance of virtual world in world as compared to India is fairly low though the opportunities are same.

With that in mind, the research problem is "A comparative analysis of the entrepreneurial opportunities & challenges in virtual world for India and rest of the economies".


The virtual worlds currently in existence are like starts in a single galaxy. There are millions of virtual worlds across the globe with their own reasons for existence and varied purposes. However, not all are successful and developed as Second Life is. Second Life with over millions of the users and about concurrency of 50,000 residents at any given point of time speaks for its success. It is due to this reason that, the Virtual World for the purpose of the research is Second Life. The objectives of the research are as follows:

To study emerging opportunities available for entrepreneurs in Second Life in different sectors

To study the challenges faced by the entrepreneurs while starting their ventures in Second Life

To study the factors critical for the survival of the business ventures in virtual world Second Life

To study the factors critical for the profitability of the business ventures in virtual world Second Life


The research so conducted is descriptive research. It is a statistical research which will help in understanding the characteristics of the population (virtual entrepreneurs). Besides this, the research is being done to gain a better understanding of the entrepreneurial opportunities and challenges faced by virtual entrepreneurs and thus help in explaining the pitfalls to avoid and strategies to embrace while venturing into virtual world business.


The people or users who are part of the virtual world are scattered across the globe. Internet is what connects the entire population of the globe into a "single unified continent". To better explain this, the owner and creator of Second Life, Philip Rosedale has proudly stated about Second Life, "I am not building a game. I am building a new continent." (Philip Rosedale to Daniel Terdiman Wired Magazine, 2008).

Hence, the best way to reach out to the respondents to collect the genuine response is via internet or in technical terms "electronically mailed questionnaire". The respondents are from the various sectors within Second Life (sectors being architecture, scripting/technical solution providers, animation, media & advertisement, land management etc). The research is therefore, a result of the first hand data collection and series of interviews with successful entrepreneurs in Second Life.

This research will try to explain that the various entrepreneurial opportunities and challenges in virtual world are similar to the ones faced in real world and the same real world economic mechanisms involved in virtual world as in physical businesses in real world.


Primary Resources Used

Electronically Mailed Questionnaire

Interviews with successful Second Life Virtual World Entrepreneurs

Forum Discussions by Virtual World Entrepreneurs on Official Second Life Forum

Secondary Resources Used

Published Resources such as Journal of Virtual World Research

Research papers

Journals & articles

Other electronic resources such as blogs, news etc.


As there are thousands of entrepreneurs in Second Life, the technique used is "Simple Random Sampling". This type of technique is unbiased sampling technique. Every entrepreneur has equal chance of being selected.


The proposed sample size is 50.


Since the users/virtual world entrepreneurs in Second Life as geographically scattered, the main limitation during data collection is the time differences between the respondents and the researcher. Besides this, the other limitation is the reluctance of the respondents to reveal numeric absolute financial information. Hence, the range had to be used.


Anshe Chung Becomes First Virtual World Millionaire, 2006, Press Release (www.anshechung.com)

Arakji, Reina Y. and Lang, Karl Reiner, Avatar Business Value Analysis: A Method for the Evaluation of Business Value Creation in Virtual Commerce. Journal of Economic Commerce Research, 2008.

Bartle, Richard, Virtual Worlds: Why People Play, University of Essex

Bloomfield, Robert J., Worlds for Study: Invitation - Virtual Worlds for Studying Real-World Business (and Law, and Politics, and Sociology, and....) (May 25, 2007)

Bragg v. Linden Lab - Confidential Settlement Reached; 'Marc Woebegone' Back in Second Life | Virtually Blind | Virtual Law | Benjamin Duranske". Virtuallyblind.com. Retrieved 2008-10-27.

Bray, David A. and Konsynski, Benn, Virtual Worlds: Multi-Disciplinary Research Opportunities. The DATA BASE for Advances in Information Systems, Special Issue on Virtual Worlds, Vol. 38, No. 4, 2007

Byrne, John A., Brandt, Richard. (1993) The Virtual Corporation, Retrieved February 7, 1993, Business Week Archives (http://www.businessweek.com)

Cagnina, Maria Rosita and Poian, Michele, How to Compete in the Metaverse: The Business Models in Second Life.

Cardozo, R., Ray, S. (2003). A Theory of Entrepreneurial Opportunity Identification and Development, Journal of Business Venturing

Carutasu, George, Botezatu, Cezar and Botezatu, Cornelia , Virtual Enterprise - Past and Future. The XII International Conference of Economics Cibernetics, November 2006.

Castronova Edward (2002); Synthetic Worlds: The Business and Culture of Online Games

Castronova, Edward, On Virtual Economies (July 2002). CESifo Working Paper Series No. 752.

Chesney, Thomas and Noke, Hannah, Virtual World Commerce: An Exploratory Study (October 17, 2008). Nottingham University Business School Research Paper No. 2008-03.

Chesney, Thomas and Noke, Hannah, Virtual World Commerce: An Exploratory Study (October 17, 2008). Nottingham University Business School Research Paper No. 2008-03.

Cleary, Austin, Examining Real World Correlates in the Virtual World (October 21, 2009).

Cooper, Karen (2011) Survey of Virtual Worlds with Focus on Learning and Instruction, Innovation in E-Learning Symposium, Nav Air, NAWCAD

Crowley, John. (2006) Napster's Second Life: The Regulatory Challenges of Virtual Worlds, Northwestern University School of Law Review. Northwestern University School of Law. Volume 100 No. 4

Dougherty, Candidus and Greg Lastowka. (2008). Virtual Trademarks. __ Santa Clara Comp. & High Tech. L.J.

Dougherty, Candidus, Some Business and Legal Considerations for the Virtual World Entrepreneur (August 18, 2008)

Entrepreneur (http://en.wikipedia.org/wiki/Entrepreneur)

Fox, J., Arena, D., Bailenson, J.N., (2009) Virtual Reality A Survival Guide for the Social Scientist, Journal of Media Psychology, Stanford University, Volume 21 (3) 95-113

Freitas, Sara de. (2008) Serious Virtual Worlds, A Scoping Study. JISC e-Learning Programme

Fuduric, Nikolina (2008), The Sources of Entrepreneurial Opportunities: Individuals & the Environment, Doctoral Research Paper, Aalborg University

Gervautz, M., Mazuryk T., Virtual Reality: History, Applications, Technology and Future, Institute of Computer Graphics, Vienna University of Technology

Halloway, David. (2010) Virtual Worlds and Business: 2010 Overview. The Metaverse Journal

Hamari, Juho, Virtual Goods Sales: New Requirements for Business Modelling? (December 9, 2009).

Hamari, Juho, Virtual Goods Sales: New Requirements for Business Modelling? (December 9, 2009).

Harrison, Glenn W., Haruvy, Eman, Rutstrom E.E. (2010) Remarks on Virtual worlds and Virtual Reality Experiments, Forthcoming, Southern Economic Journal

Hof, R.D. (2006, May 1). Virtual World, Real Money. Business Week, New York, coversheet.

Holcombe, Randall G, The Origins of Entrepreneurial Opportunities (2003) The Review of Austrian Economics, Florida State University

Jackson, Paul. (2007) The Real Business of Virtual World. Market Overview, Forrester Research Inc.

Jiwa, Salim, Lavelle, Dawn and Rose, Arjun, Netrepreneur Simulation: Enterprise Creation for the Online Economy (2004). International Journal of Retail and Distribution Management, Vol. 32, Issue 11/12, p. 587-596 2004.

Kane, Sean F., Duranske, Benjamin T. (2008) Virtual Worlds, Real World Issues. American Bar Association, Landslide, Volume 1 Number 1

Karlkapp (2011), Gamification, Virtual Worlds and The Gartner Hype Cycle, Kapp Notes. (http://www.uleduneering.com)

Kossecki, Pawel, Valuation of Business in Virtual Reality (September 14, 2011).

Lehdonvirta, Vili , Real-Money Trade of Virtual Assets: New Strategies for Virtual World Operators (2008). VIRTUAL WORLDS, Ipe, Mary, ed., pp. 113-137, ICFAI University Press, Hyderabad, India, 2008.

Louis, Tristan (2006) Top 10 Opportunities in Virtual World (http://www.tnl.net)

Lukes, Martin (2011) Opportunity Recognition

Mennecke, Brian, Roche, Edward M., Bray, David A., Konsynski, Benn, Lester, John, Rowe, Michael and Townsend, Anthony M. , Second Life and Other Virtual Worlds: A Roadmap for Research (December 11, 2007). 28th International Conference on Information Systems (ICIS), 2007

OECD (2011), Virtual Worlds: Immersive Online Platforms for Collaboration, Creativity and Learning. OECD Digital Economy Papers, No. 184, OECD Publishing.

Osman, E., Murat, P. (2011) Entrepreneurship, National Culture and Turkey, International Journal of Business and Social Science. Dicle University

Owens, D., Davis, A., Murphy, John D., Khazanchi D., Zlgurs, I. (2009) Real World Opportunities for Virtual World Project Management, Published by IEEE Computer Society, University of Nebraska at Omaha.

Poian, Michele and Cagnina, Maria Rosita. (2010) Business Models and Virtual Worlds: The Second Life Lesson. Department of Economics, University of Udine

Pollitzer, Ben K., Serious Business: When Virtual Items Gain Real World Value (December 1, 2007).

Roode, Timothy De. (2009). Virtual Entrepreneurship: Strategies for Entrepreneurship in a Virtual Organization; Thesis; Afdeling Business Studies, Universiteit van Amsterdam.

Thomas, D., Brown, J.S., (2009) Why Virtual Worlds Can Matter. Forthcoming: International Journal of Media & Learning, Volume 1 No. 1

Virtual Economies, Virtual Goods and Service Delivery in Virtual Worlds (2010). Journal of Virtual World Research, Volume 2 Number 4

Wolfshead (2012) Gartner Hype Cycle: Virtual Worlds in the Trough of Disillusionment. (www.wolfsheadonline.com)

Yanto Chandra, Mark A.A.M. Leenders (2012) User innovation and entrepreneurship in the virtual world: A study of Second Life residents. Original Research Article

Technovation, Volume 32, Issues 7-8, July-August 2012, Pages 464-476