ch12 discussion blue
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2004 by South-Western/Thomson Learning 1
Strategic EntrepreneurshipStrategic Entrepreneurship
Robert E. Hoskisson
Michael A. Hitt
R. Duane Ireland
Chapter 12Chapter 12
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Chapter 2Chapter 2Strategic LeadershipStrategic Leadership
Chapter 4Chapter 4
The InternalThe Internal
OrganizationOrganization
Chapter 6Chapter 6
Competitive Rivalry andCompetitive Rivalry and
Competitive DynamicsCompetitive Dynamics
Chapter 9Chapter 9
International StrategyInternational Strategy
Chapter 1Chapter 1
Introduction toIntroduction to
Strategic ManagementStrategic Management
Chapter 3Chapter 3
The ExternalThe External
EnvironmentEnvironment
Chapter 5Chapter 5
BusinessBusiness--LevelLevel
StrategyStrategy
Chapter 8Chapter 8Acquisition andAcquisition and
Restructuring StrategiesRestructuring Strategies
Chapter 11Chapter 11
Corporate GovernanceCorporate Governance
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
Chapter 7Chapter 7
CorporateCorporate--Level StrategyLevel Strategy
Chapter 10Chapter 10
Cooperative StrategyCooperative Strategy
Chapter 12Chapter 12
Strategic EntrepreneurshipStrategic Entrepreneurship
Strategic
Analysis
StrategicThinking
Creating
Competitive
Advantage
Monitoring
And Creating
Entrepreneurial
Opportunities
The Strategic Management ProcessThe Strategic Management Process
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Discussion QuestionsDiscussion QuestionsClick
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More discussion questions
1. What is strategic entrepreneurship
and why is it important?
2. What are the two major types ofinnovation?
3. What are the two central processes
associated with internal corporate
venturing?
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Discussion Questions (cont.)Discussion Questions (cont.)Click
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4. Will horizontal organization in general
and cross-functional teams in
particular facilitate appropriation ofvalue from innovation?
5. Are strategic alliances a viable way to
get innovations? What are the tradeoffs
with strategic entrepreneurshipthrough alliances?
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Discussion Questions (cont.)Discussion Questions (cont.)6. How do acquisitions affect innovative
inputs (R&D) and outputs (patents)?
How does a firm prevent innovationproblems associated with the
acquisition process?
7. How can venture capital be used as an
external approach to strategicentrepreneurship?
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Discussion Question 1Discussion Question 1
What is strategic entrepreneurshipand why is it important?
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Strategic EntrepreneurshipStrategic Entrepreneurship Strategic entrepreneurship:Strategic entrepreneurship: takingtaking
entrepreneurial actions using a strategicentrepreneurial actions using a strategic
perspectiveperspective engaging in simultaneous opportunity seekingengaging in simultaneous opportunity seeking
and competitive advantage seeking behaviorsand competitive advantage seeking behaviors
designing and implementing entrepreneurialdesigning and implementing entrepreneurial
strategies to create wealthstrategies to create wealth
These actions can be taken by individualsThese actions can be taken by individuals
or by corporationsor by corporations
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Entrepreneurial OpportunitiesEntrepreneurial Opportunities Entrepreneurial opportunities areEntrepreneurial opportunities are
conditions in which new products orconditions in which new products or
services can satisfy a need in the marketservices can satisfy a need in the market Entrepreneurs or entrepreneurialEntrepreneurs 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
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InnovationInnovation Three types of innovative activityThree types of innovative activity
invention brings something new into beinginvention brings something new into being
innovation brings something new into useinnovation brings something new into use
imitation is the adoption of an innovation byimitation is the adoption of an innovation bysimilar firmssimilar firms
Innovation is a key outcome firms seekInnovation is a key outcome firms seekthrough entrepreneurship and is often thethrough entrepreneurship and is often the
source of competitive successsource of competitive success Innovations produced in large establishedInnovations produced in large established
firms are often referred to as corporatefirms are often referred to as corporateentrepreneurshipentrepreneurship
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EntrepreneursEntrepreneurs Entrepreneurs are:Entrepreneurs are:
individuals acting independently or as part ofindividuals acting independently or as part of
an organizationan organization
who create a new venture or develop anwho create a new venture or develop an
innovation and take risks entering them intoinnovation and take risks entering them into
the marketplacethe marketplace
EntrepreneursEntrepreneurs
can be independent individualscan be independent individuals
can surface in an organization at any levelcan surface in an organization at any level
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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 relationshipThere is a strong positive relationship
between the rate of entrepreneurialbetween the rate of entrepreneurial
activity and economic development in aactivity and economic development in anationnation
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International EntrepreneurshipInternational Entrepreneurship There must be a balanceThere 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 innovationgroup ownership of innovation
Successful entrepreneurial firmsSuccessful entrepreneurial firms
provide appropriate autonomyprovide appropriate autonomy
incentives for individual initiativeincentives for individual initiative
promote cooperation and group ownership ofpromote cooperation and group ownership of
an innovationan innovationClick
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Discussion Question 2Discussion Question 2
What are the two major types ofinnovation?
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Innovation Types:Innovation Types:
most innovations are incrementalmost innovations are incremental
builds on existing knowledge basesbuilds on existing knowledge bases
provides small improvements in theprovides small improvements in the
current product linescurrent product lines
IncrementalIncremental
innovationinnovation
Incremental InnovationIncremental Innovation
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RadicalRadicalinnovationinnovation
Innovation TypesInnovation Types
provides significant technologicalprovides 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 bestradical innovations are often best
developed in separate units thatdeveloped in separate units that
start internal venturesstart internal ventures
IncrementalIncremental
innovationinnovation
Radical InnovationRadical Innovation
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Discussion Question3
Discussion Question3
What are the two central
processes associated with internal
corporate venturing?
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Internal Corporate VenturingInternal Corporate VenturingConcept of corporate strategyConcept of corporate strategy
Strategic contextStrategic context
AutonomousAutonomous
strategicstrategic
behaviorbehavior
Structural contextStructural context
InducedInduced
strategicstrategic
behaviorbehavior
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Internal Corporate Venturing:Internal Corporate Venturing:
Autonomous strategic behavior is aAutonomous strategic behavior is a
bottombottom--up process in which productup process in which product
champions:champions:
pursue new ideas, often through a politicalpursue new ideas, often through a political
processprocess
develop and coordinate the commercializationdevelop and coordinate the commercialization
of a new good or service until it achievesof 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 organizationalA product champion is an organizational
member with an entrepreneurial vision ofmember with an entrepreneurial vision of
a new good or service who seeks to createa new good or service who seeks to create
support for its commercializationsupport for its commercialization
Autonomous strategic behaviorAutonomous strategic behavior
based on a firms wellsprings of knowledgebased on a firms wellsprings of knowledge
and resources that are the sources of theand resources that are the sources of thefirms innovationfirms innovation
a firms technological capabilities anda firms technological capabilities and
competencies are the basis for new productscompetencies 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 topInduced strategic behavior is a top--downdown
process wherebyprocess whereby
the firms current strategy and structure fosterthe firms current strategy and structure fosterproduct innovationsproduct innovations
innovations are associated closely with thatinnovations 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 internalTo 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 entrepreneurialIndividuals with an entrepreneurial
mindsetmindset engage the energies of everyone in theirengage the energies of everyone in their
domaindomain
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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Discussion Question4
Discussion Question4
Will horizontal organization in
general and cross-functionalteams in particular facilitate
appropriation of value from
innovation?
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CrossCross--Functional ProductFunctional Product
Development TeamsDevelopment Teams facilitate efforts to integratefacilitate efforts to integrate
activities associated with differentactivities associated with different
organizational functionsorganizational functions
design, manufacturing, marketing,design, manufacturing, marketing,etc.etc.
new product developmentnew product development
processes can be completed moreprocesses can be completed more
quicklyquickly products can be more easilyproducts can be more easily
commercialized when crosscommercialized when cross--
functional teams work effectivelyfunctional teams work effectively
Cross functionalCross functional
productproduct
development teamdevelopment team
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CrossCross--Functional ProductFunctional Product
Development TeamsDevelopment Teams product development stages areproduct development stages are
grouped into parallel orgrouped into parallel or
overlapping processesoverlapping processes
this approach allows the firm tothis approach allows the firm totailor its product developmenttailor its product development
effortsefforts
unique core competenciesunique core competencies
needs of the marketneeds of the marketCross functionalCross functional
productproduct
development teamdevelopment team
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Barriers to CrossBarriers to Cross--FunctionalFunctional
Team EffectivenessTeam Effectiveness Different orientations and perceptionsDifferent orientations and perceptions
individuals from separate functions haveindividuals from separate functions have
different orientations on issuesdifferent orientations on issues perceive product development activities inperceive product development activities in
different waysdifferent ways
Organizational politicsOrganizational politics
aggressive competition for resources amongaggressive competition for resources amongdifferent organizational functionsdifferent organizational functions
must achieve crossmust achieve cross--functional integration withfunctional integration with
minimal political conflictminimal political conflict
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Creating Value Through InternalCreating Value Through Internal
Innovation ProcessesInnovation Processes
Creating valueCreating value
through innovationthrough innovation
EntrepreneurialEntrepreneurial
mindsetmindset
Cross functionalCross functional
product developmentproduct development
teamsteams
Facilitating integrationFacilitating integrationand innovationand innovation
Shared valuesShared values
EntrepreneurialEntrepreneurial
LeadershipLeadership
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Questions
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Discussion Question5
Discussion Question5
Are strategic alliances a viable
way to get innovations? What arethe tradeoffs with strategic
entrepreneurship through
alliances?
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Cooperative Strategies forCooperative Strategies for
Entrepreneurship and InnovationEntrepreneurship and Innovation Firms may need to cooperate and integrateFirms may need to cooperate and integrate
knowledge and resources to successfullyknowledge and resources to successfully
commercialize inventionscommercialize inventions
entrepreneurial new venture firms may needentrepreneurial new venture firms may need
investment capital and distribution capabilitiesinvestment capital and distribution capabilities
more established companies may need newmore established companies may need new
technological knowledge possessed by newertechnological knowledge possessed by newer
entrepreneurial firmsentrepreneurial firms
To innovate through a cooperativeTo innovate through a cooperative
relationship, firms must share their knowledgerelationship, firms must share their knowledge
and skillsand skills
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Discussion Question6
Discussion Question6
How do acquisitions affect
innovative inputs (R&D) and outputs
(patents)? How does a firm prevent
innovation problems associated with
the acquisition process?
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Acquisitions to Buy InnovationAcquisitions to Buy Innovation AcquisitionsAcquisitions
rapidly extend the product linerapidly extend the product line
increase the firms revenuesincrease the firms revenues
A key risk of acquisitions is that a firmA key risk of acquisitions is that a firm
may substitute the ability to buymay substitute the ability to buy
innovations for an ability to produceinnovations 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
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Discussion Question7
Discussion Question7
How can venture capital be usedas an external approach tostrategic entrepreneurship?
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Capital forCapital 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 thevalue competence of the entrepreneur or the
human capital in the firmhuman capital in the firm
place weight on the expected scope ofplace weight on the expected scope of
competitive rivalry the firm is likely tocompetitive rivalry the firm is likely to
experienceexperience
evaluate degree of instability in the marketevaluate degree of instability in the market
addressedaddressed
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Capital forCapital for
Entrepreneurial VenturesEntrepreneurial Ventures Initial public offerings (IPOs)
new stocknew stock
firm needs high potential in order to sell newfirm needs high potential in order to sell new
stockstock
often quite larger than the amounts obtainedoften quite larger than the amounts obtained
from venture capitalistsfrom venture capitalists
investment bankers frequently play major rolesinvestment bankers frequently play major roles
in the development and offering ofIPOsin the development and offering ofIPOs
firms that have also received venture capitalfirms that have also received venture capital
backing usually receive greater returns frombacking usually receive greater returns from
IPOsIPOs
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Creating Value ThroughCreating Value Through
Strategic EntrepreneurshipStrategic Entrepreneurship Newer entrepreneurial firms often are
more effective than larger firms in
identifying opportunities
Larger and well-established firms often
have more resources and capabilities to
exploit opportunities
Firms can be simultaneouslyentrepreneurial and strategic regardless of
their size and age
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Creating Value ThroughCreating Value Through
Strategic EntrepreneurshipStrategic Entrepreneurship To be entrepreneurial firms must
develop an entrepreneurial mindset among
managers and employees
emphasize the development of their resources,
especially human and social capital
seek to enter and compete in international
markets
Enterpreneurial firms can achieve
competitive advantages and create value
for their customers and shareholders