©2003 Southwestern Publishing Company 1 Strategic Entrepreneurship Michael A. Hitt R. Duane Ireland...
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Transcript of ©2003 Southwestern Publishing Company 1 Strategic Entrepreneurship Michael A. Hitt R. Duane Ireland...
©2003 Southwestern Publishing Company 1
Strategic EntrepreneurshipStrategic Entrepreneurship
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
Chapter 13Chapter 13
2
Strategy ImplementationStrategy Implementation
Chapter 11Chapter 11OrganizationalOrganizationalStructure and Structure and
ControlsControls
Chapter 10Chapter 10CorporateCorporate
GovernanceGovernance
Chapter 12Chapter 12StrategicStrategic
LeadershipLeadership
Strategy FormulationStrategy Formulation
StrategicStrategicCompetitivenessCompetitivenessAbove-AverageAbove-Average
ReturnsReturns
Strategic IntentStrategic IntentStrategic MissionStrategic Mission
Chapter 2Chapter 2The ExternalThe ExternalEnvironmentEnvironment
Chapter 3Chapter 3The InternalThe InternalEnvironmentEnvironment
The Strategic The Strategic Management Management ProcessProcess
FeedbackFeedback
Str
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Chapter 13Chapter 13StrategicStrategic
EntrepreneurshipEntrepreneurship
Chapter 6Chapter 6Corporate-Corporate-
Level StrategyLevel Strategy
Chapter 9Chapter 9CooperativeCooperative
StrategyStrategy
Chapter 5Chapter 5Competitive RivalryCompetitive Rivalry
and Competitiveand CompetitiveDynamics Dynamics
Chapter 8Chapter 8InternationalInternational
StrategyStrategy
Chapter 4Chapter 4Business-LevelBusiness-Level
StrategyStrategy
Chapter 7Chapter 7Acquisition andAcquisition andRestructuringRestructuring
StrategiesStrategies
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Strategic EntrepreneurshipStrategic Entrepreneurship Strategic entrepreneurship:Strategic entrepreneurship: taking taking
entrepreneurial actions using a strategic entrepreneurial actions using a strategic perspectiveperspective– engaging in simultaneous opportunity seeking engaging in simultaneous opportunity seeking
and competitive advantage seeking behaviorsand competitive advantage seeking behaviors– designing and implementing entrepreneurial designing and implementing entrepreneurial
strategies to create wealthstrategies to create wealth
These actions can be taken by individuals These actions can be taken by individuals or by corporationsor by corporations
4
Entrepreneurial OpportunitiesEntrepreneurial Opportunities Entrepreneurial opportunities are Entrepreneurial opportunities are
conditions in which new products or conditions in which new products or services can satisfy a need in the marketservices can satisfy a need in the market
Entrepreneurs or entrepreneurial Entrepreneurs or entrepreneurial managers must be able to:managers must be able to:– identify opportunities not perceived by othersidentify opportunities not perceived by others– take actions to exploit the opportunitiestake actions to exploit the opportunities– establish a competitive advantageestablish a competitive advantage
5
InnovationInnovation Innovation is the process of creating a Innovation is the process of creating a
commercial product from an inventioncommercial product from an invention– invention brings something new into beinginvention brings something new into being
– innovation brings something new into useinnovation brings something new into use
Innovation is a key outcome firms seek Innovation is a key outcome firms seek through entrepreneurship and is often the through entrepreneurship and is often the source of competitive successsource of competitive success
Innovations produced in large established Innovations produced in large established firms are often referred to as corporate firms are often referred to as corporate entrepreneurshipentrepreneurship
6
EntrepreneursEntrepreneurs Entrepreneurs are:Entrepreneurs are:– individuals acting independently or as part of individuals acting independently or as part of
an organizationan organization– who create a new venture or develop an who create a new venture or develop an
innovation and take risks entering them into innovation and take risks entering them into the marketplacethe marketplace
Entrepreneurs Entrepreneurs – can be independent individuals can be independent individuals – can surface in an organization at any levelcan surface in an organization at any level
7
International EntrepreneurshipInternational Entrepreneurship Entrepreneurship canEntrepreneurship can– fuel economic growthfuel economic growth– create employmentcreate employment– generate prosperity for citizensgenerate prosperity for citizens
There is a strong positive relationship There is a strong positive relationship between the rate of entrepreneurial between the rate of entrepreneurial activity and economic development in a activity and economic development in a nationnation
8
International EntrepreneurshipInternational Entrepreneurship There must be a balance There must be a balance (in (in
the culture) betweenthe culture) between– individual initiative andindividual initiative and– the spirit of cooperation and the spirit of cooperation and
group ownership of innovationgroup ownership of innovation
Successful entrepreneurial firmsSuccessful entrepreneurial firms– provide appropriate autonomyprovide appropriate autonomy– incentives for individual initiative incentives for individual initiative – promote cooperation and group ownership of promote cooperation and group ownership of
an innovationan innovation
9
Innovation Types:Innovation Types:
most innovations are incrementalmost innovations are incremental builds on existing knowledge basesbuilds on existing knowledge bases provides small improvements in the provides small improvements in the
current product linescurrent product lines
IncrementalIncrementalinnovationinnovation
Incremental InnovationIncremental Innovation
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RadicalRadicalinnovationinnovation
Innovation TypesInnovation Types
provides significant technological provides significant technological breakthroughsbreakthroughs
creates new knowledgecreates new knowledge is rare because of difficulty and riskis rare because of difficulty and risk requires substantial creativityrequires substantial creativity radical innovations are often best radical innovations are often best
developed in separate units that start developed in separate units that start internal venturesinternal ventures
IncrementalIncrementalinnovationinnovation
Radical InnovationRadical Innovation
11
Internal Corporate VenturingInternal Corporate Venturing
Concept of corporate strategyConcept of corporate strategy
Strategic contextStrategic context
AutonomousAutonomousstrategicstrategicbehaviorbehavior
Structural contextStructural context
InducedInducedstrategicstrategicbehaviorbehavior
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Internal Corporate Venturing:Internal Corporate Venturing:
Autonomous strategic behavior is a Autonomous strategic behavior is a bottom-up process in which product bottom-up process in which product champions:champions:– pursue new ideas, often through a political pursue new ideas, often through a political
processprocess– develop and coordinate the commercialization develop and coordinate the commercialization
of a new good or service until it achieves of a new good or service until it achieves success in the marketplacesuccess in the marketplace
Autonomous Strategic BehaviorAutonomous Strategic Behavior
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A product champion is an organizational A product champion is an organizational member with an entrepreneurial vision of member with an entrepreneurial vision of a new good or service who seeks to create a new good or service who seeks to create support for its commercializationsupport for its commercialization
Autonomous strategic behavior Autonomous strategic behavior – based on a firm’s wellsprings of knowledge based on a firm’s wellsprings of knowledge
and resources that are the sources of the and resources that are the sources of the firm’s innovationfirm’s innovation
– a firm’s technological capabilities and a firm’s technological capabilities and competencies are the basis for new products competencies are the basis for new products and processesand processes
Internal Corporate Venturing:Internal Corporate Venturing:Autonomous Strategic BehaviorAutonomous Strategic Behavior
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Induced strategic behavior is a top-down Induced strategic behavior is a top-down process wherebyprocess whereby– the firm’s current strategy and structure foster the firm’s current strategy and structure foster
product innovationsproduct innovations
– innovations are associated closely with that innovations are associated closely with that strategy and structurestrategy and structure
Internal Corporate Venturing:Internal Corporate Venturing:Induced Strategic BehaviorInduced Strategic Behavior
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To be innovative and develop internal To be innovative and develop internal ventures requiresventures requires– an entrepreneurial mindsetan entrepreneurial mindset
– risk propensityrisk propensity
– an emphasis on executionan emphasis on execution
Individuals with an entrepreneurial mindset Individuals with an entrepreneurial mindset – engage the energies of everyone in their domainengage the energies of everyone in their domain
– both inside and outside the organizationboth inside and outside the organization
Internal Corporate Venturing:Internal Corporate Venturing:Induced Strategic BehaviorInduced Strategic Behavior
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Cross-Functional Product Cross-Functional Product Development TeamsDevelopment Teams
facilitate efforts to integrate facilitate efforts to integrate activities associated with different activities associated with different organizational functionsorganizational functions
design, manufacturing, marketing, design, manufacturing, marketing, etc.etc.
new product development new product development processes can be completed more processes can be completed more quicklyquickly
products can be more easily products can be more easily commercialized when cross-commercialized when cross-functional teams work effectivelyfunctional teams work effectively
Cross functionalCross functionalproductproductdevelopment teamdevelopment team
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Cross-Functional Product Cross-Functional Product Development TeamsDevelopment Teams
product development stages are product development stages are grouped into parallel or grouped into parallel or overlapping processesoverlapping processes
this approach allows the firm to this approach allows the firm to tailor its product development tailor its product development effortsefforts– unique core competenciesunique core competencies– needs of the marketneeds of the market
Cross functionalCross functionalproductproductdevelopment teamdevelopment team
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Barriers to Cross-Functional Barriers to Cross-Functional Team EffectivenessTeam Effectiveness Different orientations and perceptionsDifferent orientations and perceptions
– individuals from separate functions have individuals from separate functions have different orientations on issuesdifferent orientations on issues
– perceive product development activities in perceive product development activities in different waysdifferent ways
Organizational politicsOrganizational politics– aggressive competition for resources among aggressive competition for resources among
different organizational functionsdifferent organizational functions
– must achieve cross-functional integration with must achieve cross-functional integration with minimal political conflictminimal political conflict
19
Creating Value Through Internal Creating Value Through Internal Innovation ProcessesInnovation Processes
Creating valueCreating valuethrough innovationthrough innovation
EntrepreneurialEntrepreneurialmindsetmindset
Cross functionalCross functionalproduct developmentproduct development
teamsteams
Facilitating integrationFacilitating integrationand innovationand innovation• Shared ValuesShared Values• EntrepreneurialEntrepreneurial
LeadershipLeadership
20
Cooperative Strategies for Cooperative Strategies for Entrepreneurship and InnovationEntrepreneurship and Innovation
Firms may need to cooperate and integrate Firms may need to cooperate and integrate knowledge and resources to successfully knowledge and resources to successfully commercialize inventionscommercialize inventions– entrepreneurial new venture firms may need entrepreneurial new venture firms may need
investment capital and distribution capabilitiesinvestment capital and distribution capabilities– more established companies may need new more established companies may need new
technological knowledge possessed by newer technological knowledge possessed by newer entrepreneurial firmsentrepreneurial firms
To innovate through a cooperative relationship, To innovate through a cooperative relationship, firms must share their knowledge and skillsfirms must share their knowledge and skills
21
Acquisitions to Buy InnovationAcquisitions to Buy Innovation AcquisitionsAcquisitions– rapidly extend the product linerapidly extend the product line– increase the firm’s revenuesincrease the firm’s revenues
A key risk of acquisitions is that a firm A key risk of acquisitions is that a firm may substitute the ability to buy may substitute the ability to buy innovations for an ability to produce innovations for an ability to produce innovations internallyinnovations internally– firm may lose intensity in R&D effortsfirm may lose intensity in R&D efforts– firm may lose ability to produce patentsfirm may lose ability to produce patents
22
Loss of Innovative Capability Loss of Innovative Capability Following Large AcquisitionsFollowing Large Acquisitions
Fir
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Ind
ustr
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irm
Min
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R&
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Years Before and After AcquisitionsYears Before and After Acquisitions
0 2 4-2-4AfterAfterBeforeBefore
-.012
-.010
-.008
-.006
-.004
-.002
-.000
23
Loss of Innovative Capability Loss of Innovative Capability Following Large AcquisitionsFollowing Large Acquisitions
Years Before and After AcquisitionsYears Before and After Acquisitions
0 2 4-2-4AfterAfterBeforeBefore
Pat
ent I
nten
sity
Pat
ent I
nten
sity
.018
.020
.022
.024
.026
.030
.032
.028
24
Capital for Capital for Entrepreneurial VenturesEntrepreneurial Ventures Venture capital firmsVenture capital firms– seek high returns on their investmentseek high returns on their investment– value competence of the entrepreneur or the value competence of the entrepreneur or the
human capital in the firmhuman capital in the firm– place weight on the expected scope of place weight on the expected scope of
competitive rivalry the firm is likely to competitive rivalry the firm is likely to experienceexperience
– evaluate degree of instability in the market evaluate degree of instability in the market addressedaddressed
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Capital for Capital for Entrepreneurial VenturesEntrepreneurial Ventures Initial public offerings (IPOs)– new stock new stock
– firm needs high potential in order to sell new firm needs high potential in order to sell new stock stock
– often quite larger than the amounts obtained often quite larger than the amounts obtained from venture capitalistsfrom venture capitalists
– investment bankers frequently play major roles investment bankers frequently play major roles in the development and offering of IPOsin the development and offering of IPOs
– firms that have also received venture capital firms that have also received venture capital backing usually receive greater returns from backing usually receive greater returns from IPOsIPOs