Adapted from Peng, 2006.Adapted from Peng, 2006. 11

Growing and Internationalizing the Growing and Internationalizing the Entrepreneurial FirmEntrepreneurial Firm

Dr. Ellen A. DrostDr. Ellen A. Drost

Adapted from Peng, 2006.Adapted from Peng, 2006. 22

Outline Entrepreneurship, entrepreneurs, and

entrepreneurial firms

Opportunities for the entrepreneurial firm

Three leading perspectives of strategy in relation to entrepreneurship

Implications for strategists

Adapted from Peng, 2006.Adapted from Peng, 2006. 33

Entrepreneurship, Entrepreneurs, and Entrepreneurial Firms

Entrepreneurship

– The identification and exploitation of previously unexplored opportunities.

Characteristics of Entrepreneurship

– Entrepreneurship is concerned with “the sources of opportunities; the processes of discovery, evaluation, and exploitation of opportunities; and entrepreneurs.”

Adapted from Peng, 2006.Adapted from Peng, 2006. 44

Small and Medium-sized Enterprises

Small and Medium-sized Enterprises (SMEs)

– Defined by the OECD and US regulations as firms with less than 500 employees.

SMEs generate the most jobs now, many students will join SMEs.

Given that some SMEs may become multinational enterprises (MNEs) in the future, current and would-be strategists will not gain a complete picture of the strategic landscape if they focus only on large firms.

Adapted from Peng, 2006.Adapted from Peng, 2006. 55

The entrepreneurial firm:Opportunities and Challenges

The Importance of Entrepreneurial Firms– They account for over 95% of the number of firms.– They create approximately 50% of total value added,

and generate 60-90% of employment (depending on the country).

Entrepreneurship: Rewards and Challenges– Many will try, many will fail – only few succeed

Approximately 60% of start-ups in the United States fail within 6 years, and only a small number will succeed.

Adapted from Peng, 2006.Adapted from Peng, 2006. 66

Entrepreneurs Entrepreneurs

– The set of individuals who discover, evaluate, and exploit opportunities.

– Some managers at large firms are entrepreneurial.

– Corporate entrepreneurship

International Entrepreneurship– A combination of innovative, proactive, and risk-

seeking behavior that crosses national borders and is intended to create wealth in organizations.

Adapted from Peng, 2006.Adapted from Peng, 2006. 77

The Costs of Starting Up a New Firm in 20 Countries

Source: Adapted from S. Djankov, R. La Porta, F. Lopez-de-Silanes, & A. Shleifer, 2002, The regulation of entry (pp. 18–20), Quarterly Journal of Economics, 67: 1–37. Drawing on a major World Bank study, the table is based on the ascending order of (1) the total number of procedures domestic entrepreneurs must fulfill, (2) the number of days to obtain legal status to start up a firm, and (3) the direct costs, as a percentage of per capita GDP, to do so. The measure, time direct costs, captures the monetized value of entrepreneurs’ time in addition to direct costs. Global average is based on the full sample of eighty-five countries, and this table reports on forty-two of them.

Adapted from Peng, 2006.Adapted from Peng, 2006. 88

One- and Four-Year Survival Rates by Firm Size

Source: Adapted from J. Timmons, 1999, New Venture Creation (p. 33), Boston: Irwin McGraw-Hill, based on US data.

Adapted from Peng, 2006.Adapted from Peng, 2006. 99

Internationalizing Entrepreneurial Firms

Entrepreneurship is global Encouragement to go global by government

Born global

Rates of entrepreneurship differ across countries

Why?

Adapted from Peng, 2006.Adapted from Peng, 2006. 1010

Corporate Entrepreneurship

How do firms innovate? Corporate entrepreneurship

–Internal versus external innovation

–Incremental versus radical innovation

–Autonomous versus induces innovation

How do they implement innovation?–Internal versus external processes

Adapted from Peng, 2006.Adapted from Peng, 2006. 1111

Views on Entrepreneurship Leading perspectives

– The industry-based view Entrepreneurial firms tend to choose industries with

lower entry barriers and often generate more innovative, competing or substitute products.

– The resource-based view Intangible resources (vision, drive, and willingness to

take risks) are what fuel entrepreneurship.

– The institution-based view Institutional frameworks explain differences in

entrepreneurial and economic development around the world.

Adapted from Peng, 2006.Adapted from Peng, 2006. 1212

Conclusion Why do firms differ?

– Entrepreneurs differ.

Why does entrepreneurial development differ?

– Institutional frameworks differ.

Culture and entrepreneurship

Capital and entrepreneurship

Government and entrepreneurship