Competing For Advantage

Part IV – Monitoring and Creating

Entrepreneurial Opportunities

Chapter 12 – Strategic Entrepreneurship

The Strategic Management Process

International Strategy

Key Terms

Strategic Entrepreneurship – occurs as firms seek opportunities in the external environment that they can exploit through innovations

Corporate Entrepreneurship – use or application of entrepreneurship within an established firm

Strategic Entrepreneurship and Innovation

Key Terms

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

Entrepreneurial Opportunities – conditions in which new products or services can satisfy a need in the market, due to competitive imperfections and unevenly distributed information in the market

Entrepreneurial Firm Characteristics

Risk takers Committed to innovation Proactive

National Interest in Entrepreneurship

It promotes economic growth

It increases productivity

It creates jobs

It drives the economies of the nations in which it exists

Types of Innovative Activity

Key Terms

Invention – act of creating or developing a new product or process

Innovation – process of creating a commercial product from an invention

Imitation – adoption of an innovation by similar firms

Invention v. Innovation

Invention brings something new into being—technical criteria determine its success

Innovation brings something new into use—commercial criteria determine its success

Results of Imitation

Product or process standardization

Products made with fewer features

Products offered at lower prices

Entrepreneurs

Key Terms

Entrepreneurs – individuals throughout the organization, acting independently or as part of an organization, who create a new venture or develop an innovation and take risks by introducing it into the marketplace

Entrepreneurial Mind-Set – viewpoint which values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations

Entrepreneurs – Characteristics

Optimism

High motivation

Willingness to take responsibility

Courage

Passion for value

Entrepreneurial mind-set

Challenge of Creating an Entrepreneurial Culture

Identifying people with intellectual talent and entrepreneurial mind-set

Managing the intellectual talent and knowledge to realize its potential

Developing and expanding the knowledge base to foster entrepreneurship with tools such as:

Information systems

Training programs

Cross-functional teams

International Entrepreneurship

Key Terms

International Entrepreneurship – process in which firms creatively discover and exploit opportunities that are outside their domestic markets in order to develop a competitive advantage

International Entrepreneurship – Risks

Unstable foreign currencies

Inefficient markets

Insufficient infrastructures to support businesses

Limitations on market size and growth

International Entrepreneurship - Dimensions

Rates of entrepreneurship across countries Impact of national culture

Entrepreneurship declines as collectivism increases

Exceptionally high levels of individualism can be dysfunctional for entrepreneurship

Balance between individual initiative and cooperative spirit versus group ownership of innovation is required

Level of investment outside of the home country made by new ventures

Top executives with international experience

Methods of Innovation

Internal innovation Cooperative ventures Acquisitions

Internal Innovation

Key Terms

Internal Corporate Venturing – set of activities firms use to develop internal inventions and innovations

Incremental Innovation – process of internal innovation achieved by building on existing knowledge bases and providing small improvements in well-defined current product lines

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

Internal Innovation

Key Terms

Radical Innovation – process of internal innovation achieved by generating significant technological breakthroughs and creating new knowledge

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

Internal Innovation – Types

Incremental innovation – induced strategic behavior

Radical innovation – autonomous strategic behavior

Factors that Influence Innovation in Established Firms

Factors that Influence Innovation in Established Firms

Encourage people to discuss new ideas and take risks

Tolerate failure and encourage learning from mistakes

Establish reward systems that encourage innovation

Establish process and structures to effectively integrate the innovative process across functions

Cross-Functional Product Development Teams – Barriers to Success

Independent frames of reference of members with distinct specializations

Organizational politics that create competition for resources and interunit conflict

Dimensions of Functional Units

Time orientation

Interpersonal orientation

Goal orientation

Formality of structure

Facilitating Integration and Implementation

Shared values

Effective leadership

High-quality communication systems

Creating Value from Internal Innovation Processes

Innovation through Cooperative Strategies

Firms may need to cooperate and integrate knowledge and resources to successfully commercialize inventions 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

Innovation through Acquisitions

Acquisitions

Rapidly extend the product line

Increase the firm’s revenues

A key risk of acquisitions is that a firm may substitute the ability to buy innovations for an ability to produce innovations internally

Firm may lose intensity in R&D efforts

Firm may lose ability to produce patents

Creating Value Through Strategic Entrepreneurship

Entrepreneurial ventures

Produce more radical innovations

Possess strategic flexibility and willingness to take risks

Do more opportunity seeking

Creating Value through Strategic Entrepreneurship

Larger, well-established firms

Produce more incremental innovations

Possess more resources and capabilities to exploit identified opportunities

Do more advantage seeking

Ethical Questions

Do managers have an ethical obligation to any of their stakeholders to ensure that their firms remain innovative? If so, to which stakeholders and why?

Ethical Questions

What types of ethical issues do firms encounter when they use internal corporate-venturing processes to produce and manage innovation?

Ethical Questions

Partners may legitimately seek to gain knowledge from each other. When does it become unethical for a firm to gain additional and competitively relevant knowledge from its partner? Is this point different when a firm partners with a domestic firm as opposed to a foreign firm? Why or why not?

Ethical Questions

Discuss the ethical implications associated with quickly bringing a new product to market.

Ethical Questions

Small firms often have innovative products. When is it appropriate for a large firm to buy a small firm for its product innovations and new product ideas?