Competing For Advantage Part IV – Monitoring and Creating Entrepreneurial Opportunities Chapter 12 – Strategic Entrepreneurship

The Strategic Management Process

International Strategy Key Terms Strategic Entrepreneurship – occurs as firms seek opportunities in the external environment that they can exploit through innovations Corporate Entrepreneurship – use or application of entrepreneurship within an established firm

Strategic Entrepreneurship and Innovation Key Terms Entrepreneurship – process by which individuals or groups identify and pursue entrepreneurial opportunities without the immediate constraint of the resources they currently control Entrepreneurial Opportunities – conditions in which new products or services can satisfy a need in the market, due to competitive imperfections and unevenly distributed information in the market

Entrepreneurial Firm Characteristics Risk takers Committed to innovation Proactive

National Interest in Entrepreneurship It promotes economic growth It increases productivity It creates jobs It drives the economies of the nations in which it exists

Types of Innovative Activity Key Terms Invention – act of creating or developing a new product or process Innovation – process of creating a commercial product from an invention Imitation – adoption of an innovation by similar firms

Invention v. Innovation Invention brings something new into being—technical criteria determine its success Innovation brings something new into use—commercial criteria determine its success

Results of Imitation Product or process standardization Products made with fewer features Products offered at lower prices

Entrepreneurs Key Terms Entrepreneurs – individuals throughout the organization, acting independently or as part of an organization, who create a new venture or develop an innovation and take risks by introducing it into the marketplace Entrepreneurial Mind-Set – viewpoint which values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations

Entrepreneurs – Characteristics Optimism High motivation Willingness to take responsibility Courage Passion for value Entrepreneurial mind-set

Challenge of Creating an Entrepreneurial Culture Identifying people with intellectual talent and entrepreneurial mind-set Managing the intellectual talent and knowledge to realize its potential Developing and expanding the knowledge base to foster entrepreneurship with tools such as: Information systems Training programs Cross-functional teams

International Entrepreneurship Key Terms International Entrepreneurship – process in which firms creatively discover and exploit opportunities that are outside their domestic markets in order to develop a competitive advantage

International Entrepreneurship – Risks Unstable foreign currencies Inefficient markets Insufficient infrastructures to support businesses Limitations on market size and growth

International Entrepreneurship - Dimensions Rates of entrepreneurship across countries Impact of national culture Entrepreneurship declines as collectivism increases Exceptionally high levels of individualism can be dysfunctional for entrepreneurship Balance between individual initiative and cooperative spirit versus group ownership of innovation is required Level of investment outside of the home country made by new ventures Top executives with international experience

Methods of Innovation Internal innovation Cooperative ventures Acquisitions

Internal Innovation Key Terms Internal Corporate Venturing – set of activities firms use to develop internal inventions and innovations Incremental Innovation – process of internal innovation achieved by building on existing knowledge bases and providing small improvements in well-defined current product lines Induced Strategic Behavior – top-down process whereby the firm’s current strategy and structure foster product innovations that are closely associated with that strategy and structure

Internal Innovation Key Terms Radical Innovation – process of internal innovation achieved by generating significant technological breakthroughs and creating new knowledge Autonomous Strategic Behavior – bottom-up process in which product champions pursue new ideas, often through a political process, to develop and coordinate the commercialization of a new good or service Product Champion – individual with an entrepreneurial vision of a new good or service who seeks to create support in the organization for its commercialization

Internal Innovation – Types Incremental innovation – induced strategic behavior Radical innovation – a utonomous strategic behavior

Factors that Influence Innovation in Established Firms

Encourage people to discuss new ideas and take risks Tolerate failure and encourage learning from mistakes Establish reward systems that encourage innovation Establish process and structures to effectively integrate the innovative process across functions

Cross-Functional Product Development Teams – Barriers to Success Independent frames of reference of members with distinct specializations Organizational politics that create competition for resources and interunit conflict

Dimensions of Functional Units Time orientation Interpersonal orientation Goal orientation Formality of structure

Facilitating Integration and Implementation Shared values Effective leadership High-quality communication systems

Creating Value from Internal Innovation Processes

Innovation through Cooperative Strategies Firms may need to cooperate and integrate knowledge and resources to successfully commercialize inventions Entrepreneurial new venture firms may need investment capital and distribution capabilities More established companies may need new technological knowledge possessed by newer entrepreneurial firms To innovate via cooperative relationships, firms must share their knowledge and skills

Innovation through Acquisitions Acquisitions Rapidly extend the product line Increase the firm’s revenues A key risk of acquisitions is that a firm may substitute the ability to buy innovations for an ability to produce innovations internally Firm may lose intensity in R&D efforts Firm may lose ability to produce patents

Creating Value Through Strategic Entrepreneurship Entrepreneurial ventures Produce more radical innovations Possess strategic flexibility and willingness to take risks Do more opportunity seeking

Creating Value through Strategic Entrepreneurship Larger, well-established firms Produce more incremental innovations Possess more resources and capabilities to exploit identified opportunities Do more advantage seeking

Ethical Questions Do managers have an ethical obligation to any of their stakeholders to ensure that their firms remain innovative? If so, to which stakeholders and why?

Ethical Questions What types of ethical issues do firms encounter when they use internal corporate-venturing processes to produce and manage innovation?

Ethical Questions Partners may legitimately seek to gain knowledge from each other. When does it become unethical for a firm to gain additional and competitively relevant knowledge from its partner? Is this point different when a firm partners with a domestic firm as opposed to a foreign firm? Why or why not?

Ethical Questions Discuss the ethical implications associated with quickly bringing a new product to market.

Ethical Questions Small firms often have innovative products. When is it appropriate for a large firm to buy a small firm for its product innovations and new product ideas?