CHAPTER 13 Strategic Entrepreneurship
K NOWLEDGE  O BJECTIVES <ul><li>Define strategic entrepreneurship and corporate entrepreneurship. </li></ul><ul><li>Define...
K NOWLEDGE  O BJECTIVES  (cont’d) <ul><li>Describe how firms internally develop innovations. </li></ul><ul><li>Explain how...
Strategic Entrepreneurship <ul><li>Strategic Entrepreneurship </li></ul><ul><ul><li>Taking entrepreneurial actions using a...
Strategic Entrepreneurship and Innovation <ul><li>Entrepreneurship is concerned with: </li></ul><ul><ul><li>The discovery ...
Entrepreneurial Opportunities <ul><li>Entrepreneurial Opportunities </li></ul><ul><ul><li>Conditions in which new products...
Innovation Process <ul><li>The act of creating or developing a new product or process </li></ul><ul><li>Brings something n...
Innovation Process (cont’d) <ul><li>The process of creating a commercial product from an invention. </li></ul><ul><li>Brin...
Innovation Process (cont’d) <ul><li>The adoption of an innovation by similar firms </li></ul><ul><li>Usually leads to prod...
The Importance of Innovation <ul><li>Innovation </li></ul><ul><ul><li>Is a key outcome firms seek through entrepreneurship...
Entrepreneurs <ul><li>Entrepreneurs </li></ul><ul><ul><li>Individuals acting independently or as part of an organization w...
International Entrepreneurship <ul><li>Entrepreneurship can: </li></ul><ul><ul><li>Fuel economic growth </li></ul></ul><ul...
International Entrepreneurship (cont’d) <ul><li>There must  be a balance  (in the culture) between  </li></ul><ul><ul><li>...
Incremental and Radical Innovation <ul><li>Incremental Innovation </li></ul><ul><ul><li>Is the usual case for innovation i...
FIGURE   13.1 Model of Internal Corporate Venturing Source:  Adapted from R. A. Burgelman, 1983, A model of the interactio...
Internal Corporate Venturing <ul><li>The set of activities used to create inventions and innovations through internal mean...
Internal Corporate Venturing (cont’d) <ul><li>A bottom-up process in which product champions: </li></ul><ul><ul><li>Pursue...
Venturing: Strategic Behaviors <ul><li>Autonomous Strategic Behavior </li></ul><ul><ul><li>Based on a firm’s knowledge and...
Implementing New Product Development and Internal Ventures <ul><li>To be innovative and develop internal ventures requires...
Cross–Functional Product Development Teams <ul><li>Facilitate integration of activities associated with different organiza...
Cross–Functional Product Development Teams <ul><li>Product development stages are grouped into parallel or overlapping pro...
Barriers to Cross-Functional Teams Effectiveness <ul><li>Different orientations and perceptions </li></ul><ul><ul><li>Indi...
Facilitating Integration and Innovation <ul><li>Shared Values  </li></ul><ul><ul><li>Are framed around the firm’s strategi...
FIGURE   13.2 Creating Value through Internal Innovation Processes
Cooperative Strategies for Entrepreneurship and Innovation <ul><li>Cooperation and integration of knowledge and resources ...
Acquisitions to Buy Innovation <ul><li>Acquisitions </li></ul><ul><ul><li>Can rapidly extend the product line. </li></ul><...
Capital for Entrepreneurial Ventures <ul><li>Venture Capital Firms </li></ul><ul><ul><li>Seek high returns on their invest...
Capital for Entrepreneurial Ventures <ul><li>Initial Public Offerings (IPOs) </li></ul><ul><ul><li>Are new stock priced to...
Creating Value through Strategic Entrepreneurship <ul><li>Be effective in identifying opportunities. </li></ul><ul><li>Be ...
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  1. 1. CHAPTER 13 Strategic Entrepreneurship
  2. 2. K NOWLEDGE O BJECTIVES <ul><li>Define strategic entrepreneurship and corporate entrepreneurship. </li></ul><ul><li>Define entrepreneurship and entrepreneurial opportunities and explain their importance. </li></ul><ul><li>Define invention, innovation, and imitation and describe the relationship among them. </li></ul><ul><li>Describe entrepreneurs and the entrepreneurial mind-set. </li></ul><ul><li>Explain international entrepreneurship and its importance. </li></ul>Studying this chapter should provide you with the strategic management knowledge needed to:
  3. 3. K NOWLEDGE O BJECTIVES (cont’d) <ul><li>Describe how firms internally develop innovations. </li></ul><ul><li>Explain how firms use cooperative strategies to innovate. </li></ul><ul><li>Describe how firms use acquisitions as a means of innovation. </li></ul><ul><li>Explain how strategic entrepreneurship helps firms create value. </li></ul>Studying this chapter should provide you with the strategic management knowledge needed to:
  4. 4. Strategic Entrepreneurship <ul><li>Strategic Entrepreneurship </li></ul><ul><ul><li>Taking entrepreneurial actions using a strategic perspective. </li></ul></ul><ul><ul><li>Engaging in simultaneous opportunity seeking and competitive advantage seeking behaviors. </li></ul></ul><ul><ul><li>Designing and implementing entrepreneurial strategies to create wealth. </li></ul></ul><ul><li>Strategic entrepreneurship actions can be taken by: </li></ul><ul><ul><li>Individuals </li></ul></ul><ul><ul><li>Corporations </li></ul></ul>
  5. 5. Strategic Entrepreneurship and Innovation <ul><li>Entrepreneurship is concerned with: </li></ul><ul><ul><li>The discovery of profitable opportunities </li></ul></ul><ul><ul><li>The exploitation of profitable opportunities </li></ul></ul><ul><li>Firms that encourage entrepreneurship are: </li></ul><ul><ul><li>Risk takers. </li></ul></ul><ul><ul><li>Committed to innovation. </li></ul></ul><ul><ul><li>Proactive in creating opportunities rather than waiting to respond to opportunities created by others. </li></ul></ul>
  6. 6. Entrepreneurial Opportunities <ul><li>Entrepreneurial Opportunities </li></ul><ul><ul><li>Conditions in which new products or services can satisfy a need in the market. </li></ul></ul><ul><li>Entrepreneurs or entrepreneurial managers must be able to: </li></ul><ul><ul><li>Identify opportunities not perceived by others. </li></ul></ul><ul><ul><li>Take actions to exploit the opportunities. </li></ul></ul><ul><ul><li>Establish a competitive advantage. </li></ul></ul>
  7. 7. Innovation Process <ul><li>The act of creating or developing a new product or process </li></ul><ul><li>Brings something new into being. </li></ul><ul><li>Technical criteria are used to determine the success of an invention. </li></ul>Invention
  8. 8. Innovation Process (cont’d) <ul><li>The process of creating a commercial product from an invention. </li></ul><ul><li>Brings something new into use. </li></ul><ul><li>Commercial criteria are used to determine the success of an innovation. </li></ul>Invention Innovation
  9. 9. Innovation Process (cont’d) <ul><li>The adoption of an innovation by similar firms </li></ul><ul><li>Usually leads to product or process standardization. </li></ul><ul><li>Products based on imitation often are offered at lower prices but with fewer features. </li></ul>Invention Innovation Imitation
  10. 10. The Importance of Innovation <ul><li>Innovation </li></ul><ul><ul><li>Is a key outcome firms seek through entrepreneurship. </li></ul></ul><ul><ul><li>Is often the source of competitive success. </li></ul></ul><ul><li>Corporate Entrepreneurship </li></ul><ul><ul><li>Innovations produced in large established firms. </li></ul></ul>
  11. 11. Entrepreneurs <ul><li>Entrepreneurs </li></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>Can be any manager or employee in an organization. </li></ul></ul><ul><li>Entrepreneurial capabilities include: </li></ul><ul><ul><li>Intellectual capital </li></ul></ul><ul><ul><li>Entrepreneurial mind-set </li></ul></ul><ul><ul><li>Transfer of entrepreneurial competence to others </li></ul></ul><ul><ul><li>Effective human capital </li></ul></ul>
  12. 12. International Entrepreneurship <ul><li>Entrepreneurship can: </li></ul><ul><ul><li>Fuel economic growth </li></ul></ul><ul><ul><li>Create employment </li></ul></ul><ul><ul><li>Generate prosperity for citizens </li></ul></ul><ul><li>There is a strong positive relationship between the rate of entrepreneurial activity and economic development in a nation. </li></ul>
  13. 13. International Entrepreneurship (cont’d) <ul><li>There must be a balance (in the culture) between </li></ul><ul><ul><li>Individual initiative and </li></ul></ul><ul><ul><li>The spirit of cooperation and group ownership of innovation. </li></ul></ul><ul><li>Successful entrepreneurial firms: </li></ul><ul><ul><li>Provide appropriate autonomy. </li></ul></ul><ul><ul><li>Offer incentives for individual initiative. </li></ul></ul><ul><ul><li>Promote cooperation and group ownership of an innovation. </li></ul></ul>
  14. 14. Incremental and Radical Innovation <ul><li>Incremental Innovation </li></ul><ul><ul><li>Is the usual case for innovation in organizations. </li></ul></ul><ul><ul><li>Provides small increments in current product lines. </li></ul></ul><ul><ul><li>Improves existing knowledge and processes. </li></ul></ul><ul><ul><li>Can create value. </li></ul></ul><ul><li>Radical Innovation </li></ul><ul><ul><li>Is rare because of difficulty and risk. </li></ul></ul><ul><ul><li>Provides significant technological breakthroughs. </li></ul></ul><ul><ul><li>Creates new knowledge and processes. </li></ul></ul><ul><ul><li>Can create value. </li></ul></ul>
  15. 15. FIGURE 13.1 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.
  16. 16. Internal Corporate Venturing <ul><li>The set of activities used to create inventions and innovations through internal means. </li></ul><ul><ul><li>R&D spending is linked to success in internal corporate venturing. </li></ul></ul><ul><li>Product Champion </li></ul><ul><ul><li>An organizational member with an entrepreneurial vision of a new good or service who seeks to create support for the vision’s commercialization. </li></ul></ul>
  17. 17. Internal Corporate Venturing (cont’d) <ul><li>A bottom-up process in which product champions: </li></ul><ul><ul><li>Pursue new ideas, often through a political process. </li></ul></ul><ul><ul><li>Develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace. </li></ul></ul><ul><li>Forms of internal corporate venturing: </li></ul><ul><ul><li>Autonomous strategic behavior </li></ul></ul><ul><ul><li>Induced strategic behavior </li></ul></ul>
  18. 18. Venturing: Strategic Behaviors <ul><li>Autonomous Strategic Behavior </li></ul><ul><ul><li>Based on a firm’s knowledge and resources that are the sources of the firm’s innovation. </li></ul></ul><ul><ul><li>A firm’s technological capabilities and competencies are its basis for new products and processes. </li></ul></ul><ul><li>Induced Strategic Behavior </li></ul><ul><ul><li>A top-down process whereby the firm’s current strategy and structure foster product innovations. </li></ul></ul><ul><ul><li>The strategy in place is filtered through a matching structural hierarchy. </li></ul></ul>
  19. 19. Implementing New Product Development and Internal Ventures <ul><li>To be innovative and develop internal ventures requires: </li></ul><ul><ul><li>An entrepreneurial mindset </li></ul></ul><ul><ul><li>Risk propensity </li></ul></ul><ul><ul><li>An emphasis on execution </li></ul></ul><ul><li>Individuals with an entrepreneurial mindset </li></ul><ul><ul><li>Engage the energies of everyone in their domain both inside and outside the organization. </li></ul></ul>
  20. 20. Cross–Functional Product Development Teams <ul><li>Facilitate integration of activities associated with different organizational functions. </li></ul><ul><ul><li>Design, manufacturing, marketing, etc. </li></ul></ul><ul><li>New product development processes can be completed more quickly. </li></ul><ul><ul><li>Products can be more easily commercialized when cross-functional teams work effectively. </li></ul></ul>Cross-functional Product Development Team
  21. 21. Cross–Functional Product Development Teams <ul><li>Product development stages are grouped into parallel or overlapping processes, allowing the firm to tailor its product development efforts </li></ul><ul><ul><li>Unique core competencies </li></ul></ul><ul><ul><li>Needs of the market </li></ul></ul>Cross-functional Product Development Team
  22. 22. Barriers to Cross-Functional Teams Effectiveness <ul><li>Different orientations and perceptions </li></ul><ul><ul><li>Individuals from separate functions have different orientations on issues. </li></ul></ul><ul><ul><ul><li>Create differing approaches to product development activities. </li></ul></ul></ul><ul><li>Organizational Politics </li></ul><ul><ul><li>Cause aggressive competition for resources among different organizational functions. </li></ul></ul><ul><ul><ul><li>Organizations must achieve cross-functional integration with minimal political conflict. </li></ul></ul></ul>
  23. 23. Facilitating Integration and Innovation <ul><li>Shared Values </li></ul><ul><ul><li>Are framed around the firm’s strategic intent and mission. </li></ul></ul><ul><ul><li>Become the glue that promotes integration between functional units. </li></ul></ul><ul><li>Effective Leadership </li></ul><ul><ul><li>Sets goals and allocates resources </li></ul></ul><ul><ul><ul><li>Goals include integrated development and commercialization of new goods and services </li></ul></ul></ul><ul><li>Effective Communication </li></ul>
  24. 24. FIGURE 13.2 Creating Value through Internal Innovation Processes
  25. 25. Cooperative Strategies for Entrepreneurship and Innovation <ul><li>Cooperation and integration of knowledge and resources is required to successfully commercialize inventions. </li></ul><ul><ul><li>Entrepreneurial firms need investment capital and distribution capabilities. </li></ul></ul><ul><ul><li>Established companies need the technological knowledge possessed by entrepreneurial firms. </li></ul></ul><ul><li>Firms innovate through the sharing their knowledge and skills in a cooperative relationship. </li></ul>
  26. 26. Acquisitions to Buy Innovation <ul><li>Acquisitions </li></ul><ul><ul><li>Can rapidly extend the product line. </li></ul></ul><ul><ul><li>Can quickly increase the firm’s revenues. </li></ul></ul><ul><li>Key risks of acquisitions </li></ul><ul><ul><li>The firm may substitute the ability to buy innovations for an ability to produce innovations internally. </li></ul></ul><ul><ul><li>The firm may lose intensity in R&D efforts. </li></ul></ul><ul><ul><li>The firm may lose its ability to produce patents. </li></ul></ul>
  27. 27. Capital for Entrepreneurial Ventures <ul><li>Venture Capital Firms </li></ul><ul><ul><li>Seek high returns on their investment. </li></ul></ul><ul><ul><li>Value the competence of the entrepreneur or the human capital in the firm. </li></ul></ul><ul><ul><li>Place weight on the expected scope of competitive rivalry the firm is likely to experience. </li></ul></ul><ul><ul><li>Evaluate the degree of instability in the market addressed. </li></ul></ul>
  28. 28. Capital for Entrepreneurial Ventures <ul><li>Initial Public Offerings (IPOs) </li></ul><ul><ul><li>Are new stock priced to reflect the firm’s high potential. </li></ul></ul><ul><ul><li>Often yield much larger equity investments than can be obtained from venture capitalists. </li></ul></ul><ul><ul><li>Investment bankers frequently play major roles in the development and offering of IPOs. </li></ul></ul><ul><ul><li>Firms that have previously received venture capital backing usually receive greater returns from IPOs. </li></ul></ul>
  29. 29. Creating Value through Strategic Entrepreneurship <ul><li>Be effective in identifying opportunities. </li></ul><ul><li>Be flexible and willing to take risks. </li></ul><ul><li>Have sufficient resources and capabilities to exploit identified opportunities. </li></ul><ul><li>Sustain a competitive advantage while identifying and exploiting opportunities. </li></ul><ul><li>Develop an entrepreneurial mind-set among managers and employees. </li></ul><ul><li>Seek to enter and compete in international markets. </li></ul>
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