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© 2007 Thomson/South-Western.© 2007 Thomson/South-Western.All rights reserved.All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

Strategic Strategic ManagementManagementCompetitiveness and Globalization: Competitiveness and Globalization: Concepts and CasesConcepts and Cases Michael A. Hitt • R. Duane Ireland • Robert E. Hoskisson

Seventh edition

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

CHAPTER 13CHAPTER 13

Strategic Strategic EntrepreneurshipEntrepreneurship

© 2007 Thomson/South-Western. All rights reserved. 13–2

KKNOWLEDGENOWLEDGE O OBJECTIVESBJECTIVES

1.1. Define strategic entrepreneurship and corporate Define strategic entrepreneurship and corporate entrepreneurship.entrepreneurship.

2.2. Define entrepreneurship and entrepreneurial Define entrepreneurship and entrepreneurial opportunities and explain their importance.opportunities and explain their importance.

3.3. Define invention, innovation, and imitation and describe Define invention, innovation, and imitation and describe the relationship among them.the relationship among them.

4.4. Describe entrepreneurs and the entrepreneurial mind-Describe entrepreneurs and the entrepreneurial mind-set.set.

5.5. Explain international entrepreneurship and its Explain international entrepreneurship and its importance.importance.

Studying this chapter should provide you with the strategic management knowledge needed to:


KKNOWLEDGENOWLEDGE O OBJECTIVES BJECTIVES (cont’d)(cont’d)

6.6. Describe how firms internally develop innovations.Describe how firms internally develop innovations.

7.7. Explain how firms use cooperative strategies to Explain how firms use cooperative strategies to innovate.innovate.

8.8. Describe how firms use acquisitions as a means of Describe how firms use acquisitions as a means of innovation.innovation.

9.9. Explain how strategic entrepreneurship helps firms Explain how strategic entrepreneurship helps firms create value.create value.

Studying this chapter should provide you with the strategic management knowledge needed to:


Strategic EntrepreneurshipStrategic Entrepreneurship

• Strategic EntrepreneurshipStrategic Entrepreneurship Taking entrepreneurial actions using a strategic Taking entrepreneurial actions using a strategic

perspective.perspective. Engaging in simultaneous opportunity seeking and Engaging in simultaneous opportunity seeking and

competitive advantage seeking behaviors.competitive advantage seeking behaviors. Designing and implementing entrepreneurial Designing and implementing entrepreneurial

strategies to create wealth.strategies to create wealth.

• Strategic entrepreneurship actions can be taken Strategic entrepreneurship actions can be taken by:by: IndividualsIndividuals CorporationsCorporations


Strategic Entrepreneurship and Strategic Entrepreneurship and InnovationInnovation• Entrepreneurship is concerned with:Entrepreneurship is concerned with:

The discovery of profitable opportunitiesThe discovery of profitable opportunities

The exploitation of profitable opportunitiesThe exploitation of profitable opportunities

• Firms that encourage entrepreneurship are:Firms that encourage entrepreneurship are: Risk takers.Risk takers.

Committed to innovation.Committed to innovation.

Proactive in creating opportunities rather than waiting Proactive in creating opportunities rather than waiting to respond to opportunities created by others.to respond to opportunities created by others.


Entrepreneurial OpportunitiesEntrepreneurial Opportunities

• Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Conditions in which new products or services can Conditions in which new products or services can satisfy a need in the market.satisfy a need in the market.

• Entrepreneurs or entrepreneurial managers must Entrepreneurs or entrepreneurial managers must be able to:be able to:

Identify opportunities not perceived by others.Identify opportunities not perceived by others.

Take actions to exploit the opportunities.Take actions to exploit the opportunities.

Establish a competitive advantage.Establish a competitive advantage.


Innovation ProcessInnovation Process

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

• Brings something new into being.Brings something new into being.• Technical criteria are used to Technical criteria are used to

determine the success of an determine the success of an invention.invention.

InventionInvention


Innovation Process (cont’d)Innovation Process (cont’d)

• The process of creating a The process of creating a commercial product from an commercial product from an invention.invention.

• Brings something new into use.Brings something new into use.• Commercial criteria are used to Commercial criteria are used to

determine the success of an determine the success of an innovation.innovation.

InventionInvention

InnovationInnovation


Innovation Process (cont’d)Innovation Process (cont’d)

• The adoption of an innovation by The adoption of an innovation by similar firmssimilar firms

• Usually leads to product or Usually leads to product or process standardization.process standardization.

• Products based on imitation often Products based on imitation often are offered at lower prices but with are offered at lower prices but with fewer features.fewer features.

InventionInvention

InnovationInnovation

ImitationImitation


The Importance of InnovationThe Importance of Innovation

• InnovationInnovation Is a key outcome firms seek through Is a key outcome firms seek through

entrepreneurship.entrepreneurship. Is often the source of competitive success.Is often the source of competitive success.

• Corporate EntrepreneurshipCorporate Entrepreneurship Innovations produced in large established firms.Innovations produced in large established firms.


EntrepreneursEntrepreneurs

• EntrepreneursEntrepreneurs Individuals acting independently or as part of an Individuals acting independently or as part of an

organization who create a new venture or develop an organization who create a new venture or develop an innovation, take risks entering innovations into the innovation, take risks entering innovations into the marketplace.marketplace.

Can be any manager or employee in an organization.Can be any manager or employee in an organization.

• Entrepreneurial capabilities include:Entrepreneurial capabilities include: Intellectual capitalIntellectual capital Entrepreneurial mind-setEntrepreneurial mind-set Transfer of entrepreneurial competence to othersTransfer of entrepreneurial competence to others Effective human capitalEffective human capital


International EntrepreneurshipInternational Entrepreneurship

• Entrepreneurship can:Entrepreneurship can: Fuel economic growthFuel economic growth Create employmentCreate employment Generate prosperity for Generate prosperity for

citizens citizens

• There is a strong positive There is a strong positive relationship between the rate relationship between the rate of entrepreneurial activity and of entrepreneurial activity and economic development in a economic development in a nation.nation.


International Entrepreneurship (cont’d)International Entrepreneurship (cont’d)

• There must be a balance There must be a balance (in the culture) between (in the culture) between Individual initiative andIndividual initiative and The spirit of cooperation andThe spirit of cooperation and

group ownership of innovation.group ownership of innovation.

• Successful entrepreneurial firms: Successful entrepreneurial firms: Provide appropriate autonomy.Provide appropriate autonomy. Offer incentives for individual initiative.Offer incentives for individual initiative. Promote cooperation and group ownership of Promote cooperation and group ownership of

an innovation.an innovation.


Incremental and Radical InnovationIncremental and Radical Innovation• Incremental InnovationIncremental Innovation

Is the usual case for Is the usual case for innovation in innovation in organizations.organizations.

Provides small Provides small increments in current increments in current product lines.product lines.

Improves existing Improves existing knowledge and knowledge and processes.processes.

Can create value.Can create value.

• Radical InnovationRadical Innovation Is rare because of Is rare because of

difficulty and risk.difficulty and risk. Provides significant Provides significant

technological technological breakthroughs.breakthroughs.

Creates new Creates new knowledge and knowledge and processes.processes.

Can create value.Can create value.


FIGUREFIGURE 13.113.1 Model of Internal Corporate VenturingModel of Internal Corporate Venturing

Source: Adapted from R. A. Burgelman, 1983, A model of the interactions of strategic behavior, corporate context, and the concept of strategy, Academy of Management Review, 8: 65.


Internal Corporate VenturingInternal Corporate Venturing

• The set of activities used to create inventions The set of activities used to create inventions and innovations through internal means.and innovations through internal means. R&D spending is linked to success in internal R&D spending is linked to success in internal

corporate venturing.corporate venturing.

• Product ChampionProduct Champion An organizational member with an entrepreneurial An organizational member with an entrepreneurial

vision of a new good or service who seeks to create vision of a new good or service who seeks to create support for the vision’s commercialization.support for the vision’s commercialization.


Internal Corporate Venturing (cont’d)Internal Corporate Venturing (cont’d)

• A bottom-up process in which product A bottom-up process in which product champions:champions: Pursue new ideas, often through a political process.Pursue new ideas, often through a political process.

Develop and coordinate the commercialization of a Develop and coordinate the commercialization of a new good or service until it achieves success in the new good or service until it achieves success in the marketplace.marketplace.

• Forms of internal corporate venturing:Forms of internal corporate venturing: Autonomous strategic behaviorAutonomous strategic behavior

Induced strategic behaviorInduced strategic behavior


Venturing: Strategic BehaviorsVenturing: Strategic Behaviors

• Autonomous Strategic BehaviorAutonomous Strategic Behavior Based on a firm’s knowledge and resources that are Based on a firm’s knowledge and resources that are

the sources of the firm’s innovation.the sources of the firm’s innovation.

A firm’s technological capabilities and competencies A firm’s technological capabilities and competencies are its basis for new products and processes.are its basis for new products and processes.

• Induced Strategic BehaviorInduced Strategic Behavior A top-down process whereby the firm’s current A top-down process whereby the firm’s current

strategy and structure foster product innovations.strategy and structure foster product innovations.

The strategy in place is filtered through a matching The strategy in place is filtered through a matching structural hierarchy.structural hierarchy.


Implementing New Product Implementing New Product Development and Internal VenturesDevelopment and Internal Ventures• To be innovative and develop internal ventures To be innovative and develop internal ventures

requires:requires: An entrepreneurial mindsetAn entrepreneurial mindset Risk propensityRisk propensity An emphasis on executionAn emphasis on execution

• Individuals with an entrepreneurial mindsetIndividuals with an entrepreneurial mindset Engage the energies of everyone in their domain both Engage the energies of everyone in their domain both

inside and outside the organization.inside and outside the organization.


Cross–Functional Product Development Cross–Functional Product Development TeamsTeams

• Facilitate integration of activities Facilitate integration of activities associated with different associated with different organizational functions.organizational functions. Design, manufacturing, marketing, Design, manufacturing, marketing,

etc.etc.

• New product development New product development processes can be completed processes can be completed more quickly.more quickly. Products can be more easily Products can be more easily

commercialized when cross-commercialized when cross-functional teams work effectively.functional teams work effectively.

Cross-functionalCross-functionalProduct DevelopmentProduct Development

Team Team


Cross–Functional Product Development Cross–Functional Product Development TeamsTeams

• Product development Product development stages are grouped into stages are grouped into parallel or overlapping parallel or overlapping processes, allowing the processes, allowing the firm to tailor its product firm to tailor its product development effortsdevelopment efforts

Unique core Unique core competenciescompetencies

Needs of the marketNeeds of the marketCross-functionalCross-functional

Product DevelopmentProduct Development Team Team


Barriers to Cross-Functional Teams Barriers to Cross-Functional Teams EffectivenessEffectiveness• Different orientations and perceptionsDifferent orientations and perceptions

Individuals from separate functions have different Individuals from separate functions have different orientations on issues.orientations on issues.

• Create differing approaches to product development Create differing approaches to product development activities.activities.

• Organizational PoliticsOrganizational Politics Cause aggressive competition for resources among Cause aggressive competition for resources among

different organizational functions.different organizational functions.• Organizations must achieve cross-functional integration with Organizations must achieve cross-functional integration with

minimal political conflict.minimal political conflict.


Facilitating Integration and InnovationFacilitating Integration and Innovation

• Shared Values Shared Values Are framed around the firm’s strategic intent and Are framed around the firm’s strategic intent and

mission.mission. Become the glue that promotes integration between Become the glue that promotes integration between

functional units.functional units.

• Effective LeadershipEffective Leadership Sets goals and allocates resourcesSets goals and allocates resources

• Goals include integrated development and commercialization Goals include integrated development and commercialization of new goods and servicesof new goods and services

• Effective CommunicationEffective Communication


FIGUREFIGURE 13.213.2 Creating Value through Internal Innovation Creating Value through Internal Innovation ProcessesProcesses


Cooperative Strategies for Cooperative Strategies for Entrepreneurship and InnovationEntrepreneurship and Innovation• Cooperation and integration of knowledge and Cooperation and integration of knowledge and

resources is required to successfully resources is required to successfully commercialize inventions.commercialize inventions. Entrepreneurial firms need investment capital and Entrepreneurial firms need investment capital and

distribution capabilities.distribution capabilities.

Established companies need the technological Established companies need the technological knowledge possessed by entrepreneurial firms.knowledge possessed by entrepreneurial firms.

• Firms innovate through the sharing their Firms innovate through the sharing their knowledge and skills in a cooperative knowledge and skills in a cooperative relationship.relationship.


Acquisitions to Buy InnovationAcquisitions to Buy Innovation

• AcquisitionsAcquisitions Can rapidly extend the product line.Can rapidly extend the product line.

Can quickly increase the firm’s revenues.Can quickly increase the firm’s revenues.

• Key risks of acquisitionsKey risks of acquisitions The firm may substitute the ability to buy innovations The firm may substitute the ability to buy innovations

for an ability to produce innovations internally.for an ability to produce innovations internally.

The firm may lose intensity in R&D efforts.The firm may lose intensity in R&D efforts.

The firm may lose its ability to produce patents.The firm may lose its ability to produce patents.


Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures

• Venture Capital FirmsVenture Capital Firms

Seek high returns on their investment.Seek high returns on their investment.

Value the competence of the entrepreneur or the Value the competence of the entrepreneur or the human capital in the firm.human capital in the firm.

Place weight on the expected scope of competitive Place weight on the expected scope of competitive rivalry the firm is likely to experience.rivalry the firm is likely to experience.

Evaluate the degree of instability in the market Evaluate the degree of instability in the market addressed.addressed.


Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures

• Initial Public Offerings (IPOs)Initial Public Offerings (IPOs)

Are new stock priced to reflect the firm’s high Are new stock priced to reflect the firm’s high potential.potential.

Often yield much larger equity investments than can Often yield much larger equity investments than can be obtained from venture capitalists.be obtained from venture capitalists.

Investment bankers frequently play major roles in the Investment bankers frequently play major roles in the development and offering of IPOs.development and offering of IPOs.

Firms that have previously received venture capital Firms that have previously received venture capital backing usually receive greater returns from IPOs.backing usually receive greater returns from IPOs.


Creating Value through Strategic Creating Value through Strategic EntrepreneurshipEntrepreneurship

• Be effective in identifying opportunities.Be effective in identifying opportunities.

• Be flexible and willing to take risks.Be flexible and willing to take risks.

• Have sufficient resources and capabilities to exploit Have sufficient resources and capabilities to exploit identified opportunities.identified opportunities.

• Sustain a competitive advantage while identifying and Sustain a competitive advantage while identifying and exploiting opportunities.exploiting opportunities.

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

• Seek to enter and compete in international markets.Seek to enter and compete in international markets.

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