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PowerPoint Presentation by Charlie Cook

The University of West Alabama

Strategic ManagementCompetitiveness and Globalization:

Concepts and CasesMichael A. Hitt R. Duane Ireland Robert E. Hoskisson

Seventh edition

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

2007 Thomson/South-Western.

All rights reserved.

CHAPTER 13

Strategic Entrepreneurship

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2007 Thomson/South-Western. All rights reserved. 132

KNOWLEDGE OBJECTIVES

1. Define strategic entrepreneurship and corporate

entrepreneurship.

2. Define entrepreneurship and entrepreneurial

opportunities and explain their importance.

3. Define invention, innovation, and imitation and describe

the relationship among them.

4. Describe entrepreneurs and the entrepreneurial mind-set.

5. Explain international entrepreneurship and its

importance.

Studying this chapter should provide you with the strategic

management knowledge needed to:

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KNOWLEDGE OBJECTIVES (contd)

6. Describe how firms internally develop innovations.

7. Explain how firms use cooperative strategies to

innovate.8. Describe how firms use acquisitions as a means of

innovation.

9. Explain how strategic entrepreneurship helps firms

create value.

Studying this chapter should provide you with the strategic

management knowledge needed to:

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Strategic Entrepreneurship

Strategic EntrepreneurshipTaking entrepreneurial actions using a strategic

perspective.

Engaging in simultaneous opportunity seeking and

competitive advantage seeking behaviors.Designing and implementing entrepreneurial

strategies to create wealth.

Strategic entrepreneurship actions can be taken

by: Individuals

Corporations

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Strategic Entrepreneurship and Innovation

Entrepreneurship is concerned with:The discovery of profitable opportunities

The exploitation of profitable opportunities

Firms that encourage entrepreneurship are:Risk takers.

Committed to innovation.

Proactive in creating opportunities rather than waiting

to respond to opportunities created by others.

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Entrepreneurial Opportunities

Entrepreneurial OpportunitiesConditions in which new products or services can

satisfy a need in the market.

Entrepreneurs or entrepreneurial managers mustbe able to:

Identify opportunities not perceived by others.

Take actions to exploit the opportunities.

Establish a competitive advantage.

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Innovation Process

The act of creating or developing anew product or process

Brings something new into being.

Technical criteria are used to

determine the success of aninvention.

Invention

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Innovation Process (contd)

The process of creating acommercial product from an

invention.

Brings something new into use.

Commercial criteria are used todetermine the success of an

innovation.

Invention

Innovation

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Innovation Process (contd)

The adoption of an innovation by

similar firms Usually leads to product or

process standardization.

Products based on imitation often

are offered at lower prices but withfewer features.

Invention

Innovation

Imitation

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The Importance of Innovation

Innovation Is a key outcome firms seek through

entrepreneurship.

Is often the source of competitive success.

Corporate Entrepreneurship Innovations produced in large established firms.

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Entrepreneurs

Entrepreneurs Individuals acting independently or as part of an

organization who create a new venture or develop an

innovation, take risks entering innovations into the

marketplace.

Can be any manager or employee in an organization.

Entrepreneurial capabilities include:

Intellectual capital

Entrepreneurial mind-set

Transfer of entrepreneurial competence to others

Effective human capital

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International Entrepreneurship

Entrepreneurship can:Fuel economic growth

Create employment

Generate prosperity for

citizens There is a strong positive

relationship between the rate

of entrepreneurial activity and

economic development in anation.

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International Entrepreneurship (contd)

There must be a balance(in the culture) between

Individual initiative and

The spirit of cooperation and

group ownership of innovation. Successful entrepreneurial firms:

Provide appropriate autonomy.

Offer incentives for individual initiative.

Promote cooperation and group ownership of

an innovation.

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Incremental and Radical Innovation

Incremental Innovation

Is the usual case for

innovation in

organizations.

Provides smallincrements in current

product lines.

Improves existing

knowledge and

processes.

Can create value.

Radical Innovation

Is rare because of

difficulty and risk.

Provides significant

technologicalbreakthroughs.

Creates new

knowledge and

processes.

Can create value.

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FIGURE13.1 Model 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.

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Internal Corporate Venturing

The set of activities used to create inventionsand innovations through internal means.

R&D spending is linked to success in internal

corporate venturing.

Product ChampionAn organizational member with an entrepreneurial

vision of a new good or service who seeks to create

support for the visions commercialization.

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Internal Corporate Venturing (contd)

A bottom-up process in which productchampions:

Pursue new ideas, often through a political process.

Develop and coordinate the commercialization of a

new good or service until it achieves success in themarketplace.

Forms of internal corporate venturing:

Autonomous strategic behavior Induced strategic behavior

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Venturing: Strategic Behaviors

Autonomous Strategic BehaviorBased on a firms knowledge and resources that are

the sources of the firms innovation.

A firms technological capabilities and competencies

are its basis for new products and processes.

Induced Strategic Behavior

A top-down process whereby the firms current

strategy and structure foster product innovations.The strategy in place is filtered through a matching

structural hierarchy.

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Implementing New Product Developmentand Internal Ventures

To be innovative and develop internal ventures

requires:

An entrepreneurial mindset

Risk propensityAn emphasis on execution

Individuals with an entrepreneurial mindset

Engage the energies of everyone in their domain both

inside and outside the organization.

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CrossFunctional Product Development Teams

Facilitate integration ofactivities associated withdifferent organizationalfunctions.

Design, manufacturing,marketing, etc.

New product developmentprocesses can be completedmore quickly.

Products can be more easilycommercialized when cross-functional teams workeffectively.

Cross-functional

Product DevelopmentTeam

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CrossFunctional Product Development Teams

Product developmentstages are grouped into

parallel or overlapping

processes, allowing the

firm to tailor its productdevelopment efforts

Unique core

competencies

Needs of the market

Cross-functional

Product DevelopmentTeam

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Barriers to Cross-Functional TeamsEffectiveness

Different orientations and perceptions

Individuals from separate functions have different

orientations on issues.

Create differing approaches to product developmentactivities.

Organizational Politics

Cause aggressive competition for resources among

different organizational functions. Organizations must achieve cross-functional integration withminimal political conflict.

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Facilitating Integration and Innovation

Shared ValuesAre framed around the firms strategic intent and

mission.

Become the glue that promotes integration between

functional units. Effective Leadership

Sets goals and allocates resources

Goals include integrated development and commercialization

of new goods and services

Effective Communication

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FIGURE13.2 Creating Value through Internal Innovation Processes

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Cooperative Strategies for Entrepreneurshipand Innovation

Cooperation and integration of knowledge andresources is required to successfullycommercialize inventions.

Entrepreneurial firms need investment capital anddistribution capabilities.

Established companies need the technologicalknowledge possessed by entrepreneurial firms.

Firms innovate through the sharing theirknowledge and skills in a cooperativerelationship.

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Acquisitions to Buy Innovation

AcquisitionsCan rapidly extend the product line.

Can quickly increase the firms revenues.

Key risks of acquisitions

The firm may substitute the ability to buy innovations

for an ability to produce innovations internally.

The firm may lose intensity in R&D efforts.

The firm may lose its ability to produce patents.

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Capital for Entrepreneurial Ventures

Venture Capital FirmsSeek high returns on their investment.

Value the competence of the entrepreneur or the

human capital in the firm.

Place weight on the expected scope of competitive

rivalry the firm is likely to experience.

Evaluate the degree of instability in the market

addressed.

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Capital for Entrepreneurial Ventures

Initial Public Offerings (IPOs)Are new stock priced to reflect the firms high

potential.

Often yield much larger equity investments than can

be obtained from venture capitalists.

Investment bankers frequently play major roles in the

development and offering of IPOs.

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

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2007 Thomson/South-Western All rights reserved 1329

Creating Value through StrategicEntrepreneurship

Be effective in identifying opportunities.

Be flexible and willing to take risks.

Have sufficient resources and capabilities to exploit

identified opportunities.

Sustain a competitive advantage while identifying and

exploiting opportunities.

Develop an entrepreneurial mind-set among managersand employees.

Seek to enter and compete in international markets.

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