CHAPTER 13ENTREPRENEURIAL IMPLICATIONS FOR STRATEGY

KNOWLEDGE

OBJECTIVES● Define strategic entrepreneurship and corporate entrepreneurship.

● Define entrepreneurship and entrepreneurial opportunities and explain their importance.● Define invention, innovation, and imitation, and describe the relationship among them.

● Describe entrepreneurs and the entrepreneurial mind-set.

● Explain international entrepreneurship and its importance.

IMPORTANT

DEFINITIONS • Organizational culture: the complex set of

ideologies, symbols, and core values shared throughout the firm and that influence how the firm conducts business• The social energy that drives—or fails to

drive—the organization• Strategic entrepreneurship: entrepreneurial

actions (exploiting found opportunities in the external environment) through a strategic perspective (innovation efforts)• Entrepreneurship dimension: identifying

opportunities to exploit through innovations• Strategic dimension: determining the best

way to manage the firm’s innovation efforts

IMPORTANT

DEFINITIONS • Strategic entrepreneurship

actions can be taken by:• Individuals• CorporationsCorporate entrepreneurship: the use or application of entrepreneurship within an established firm

ENTREPRENEURSHIP AND

ENTREPRENEURIAL OPPORTUNITIES

• Entrepreneurship is concerned with:• The discovery of profitable

opportunities• The exploitation of profitable

opportunities

Entrepreneurship: the process by which individuals or groups identify and pursue entrepreneurial opportunities without the immediate constraint of the resources they currently control

ENTREPRENEURSHIP AND

ENTREPRENEURIAL OPPORTUNITIES Purpose of entrepreneurship:

• To create wealth

Firms that foster entrepreneurship are:

• Risk takers• Committed to innovation• Proactive in creating

opportunities rather than waiting to respond to opportunities created by others

ENTREPRENEURSHIP AND

ENTREPRENEURIAL OPPORTUNITIES Entrepreneurial opportunities:

• Are opportunities others do not see or for which they do not recognize the commercial potential

• Are conditions in which new products or services can satisfy a need in the market

• Exist due to competitive market imperfections and unevenly distributed information

• Are studied at the level of the individual firm

• May be the economic engine driving many nations’ economies in the global competitive landscape

ENTREPRENEURSHIP AND

ENTREPRENEURIAL OPPORTUNITIES Creative Destruction

(Schumpeter)• Entrepreneurship, as a process,

results in the ‘creative destruction’ of existing products (good or services) or methods of producing them, and replaces them with new products/production methods

• Entrepreneurial firms value individual innovations and the ability to continuously innovate across time

KEY CHAPTER POINTS THREE ‘I’sThree types of innovation activities according to Schumpeter

● Invention● Innovation● Imitation

THREE WAYS TO INNOVATE● Internal - autonomous vs. induced● Cooperative strategies (e.g.,

strategic alliances)● Acquisitions

INNOVATION

• Innovation is the “specific function of entrepreneurship” (Drucker) It is “the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth” (Drucker)

• It is a source of competitive success, especially in turbulent and highly competitive environments

• For global markets, innovation is key for competitive parity at a minimum, much less for competitive advantage

INNOVATION

Invention • The act of creating or developing a new product or process

• Brings something new into being

• Technical criteria determine the success of an invention

INNOVATION

Invention

Innovation

• Process of creating a commercial product from an invention

• Brings something new into use

• Commercial criteria determine the success of an innovation

INNOVATION

Invention

Innovation

Imitation

• Adoption of an innovation by similar firms

• Usually leads to product or process standardization

• Products based on imitation often are offered at lower prices and without as many features

• Results of imitation• Product or process

standardization• Products made with fewer

features• Products offered at lower

prices

INTERNATIONAL

ENTREPRENEURSHIP ● Firms creatively discover and exploit

opportunities outside their domestic markets in order to develop a competitive advantage

● Entrepreneurship has become a global phenomenon as internationalization typically leads to improved firm performance

● EXAMPLE - Large multinational companies (MNCs) generate roughly 54% of their sales outside their domestic market, and more than 50% of their employees work outside of the home country

INTERNATIONAL

ENTREPRENEURSHIP

Risks include:• Unstable foreign

currencies• Inefficient markets• Insufficient infrastructures

to support businesses• Limitations on market size

and growth

INTERNAL INNOVATION

Firms take deliberate efforts to develop inventions and innovations within the organization, selecting from several types of innovation and the specific processes through which each type is produced.

• Most innovation is due to research and development (R&D):• Investments are uncertain • Often not achieved in the short

term

INTERNAL INNOVATION

• Bottom-up process

AUTONOMOUS

STRATEGIC BEHAVIOR

•Top-down process

INDUCED STRATEGIC BEHAVIOR

Internal Corporate Venturing refers to the set of activities firms use to develop internal inventions and innovations: autonomous and induced

INTERNAL INNOVATION

• Bottom-up process

AUTONOMOUS STRATEGIC

BEHAVIOR■ Bottom-up process in which product champions pursue new ideas, often through a political process, to develop and coordinate the commercialization of a new good or service ■ Product champion: individual with an entrepreneurial vision of a new good or service who seeks to create support in the organization for its commercialization■ Autonomous strategic behavior is focused on firm’s knowledge and resources ■ Knowledge must be continuously diffused throughout the firm

INTERNAL INNOVATION

•Top-down processINDUCED

STRATEGIC BEHAVIOR

Induced strategic behavior• Top-down process whereby the

firm’s current strategy and structure foster product innovations that are closely associated with that strategy and structure

INNOVATION THROUGH

COOPERATIVE STRATEGIES• To successfully commercialize

inventions, firms may need to cooperate and integrate knowledge and resources• Entrepreneurial new venture firms may need

investment capital and distribution capabilities• More established companies may need new

technological knowledge possessed by newer entrepreneurial firms

• To innovate via cooperative relationships, firms must share their knowledge and skills – strategic alliances and joint ventures allow this to occur

INNOVATION THROUGH

ACQUISITIONS• Rapidly extend the product line• Increase the firm’s revenues• KEY RISK: a firm may substitute its ability

to buy innovations for its ability to produce innovations internally

• A firm may:• Lose its intensity in R&D efforts• Lose its ability to produce patents

• Research demonstrates that subsequent to acquisitions, firms introduce fewer new products into the market

• This is because firms focus on the financial controls at the expense of strategic control

CREATING VALUE

THROUGH STRATEGIC ENTREPRENEURSHIPEntrepreneurial ventures:

• Produce more radical innovations• Possess strategic flexibility and

willingness to take risks• Do more opportunity seeking• Must learn how to gain a competitive

advantage (advantage-seeking behaviors)Larger, well-established firms:

• Produce more incremental innovations• Possess more resources and capabilities

to exploit identified opportunities• Must relearn how to identify

entrepreneurial opportunities (opportunity-seeking skills)

CREATING VALUE

THROUGH STRATEGIC ENTREPRENEURSHIPObjective is to help firms develop successful

incremental and radical innovations• Be flexible and willing to take risks.• Identify and exploit opportunities with sufficient

resources and capabilities to launch strategic actions.

• Sustain a competitive advantage while identifying and exploiting opportunities.

• Foster an entrepreneurial mind-set among managers and employees.

• Emphasize resource management, particularly human capital and social capital.

• Seek to enter and compete in international markets.