1. Corporate Entrepreneurship and Innovation
Chapter 14
Corporate Entrepreneurship and Innovation
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
W. Glenn Rowe Jerry P. Sheppard
© Nelson Thompson Learning
Slides marked with an * contain images with a Copyright © 2001 Corel & Jerry Sheppard. All rights reserved. 1

2. The Strategic Management Process
Chapter 5
Bus. - Level
Strategy
Chapter 6
Competitive
Dynamics
Chapter 9
International
Chapter 10
Cooperative
Strategies
Chapter 8
Acquisitions &
Restructuring
Strategic
Inputs
Actions
Outcomes
Chapter 4
Internal
Environment
Chapter 3
External
Strat. Intent
Strat. Mission
Strategy Formulation
Strategic Competitiveness
Chapter 1
Above Average Returns
Chapter 2
Chapter 7
Corp. - Level
The Strategic Management . Process
Strategy Implementation
Chapter 11
Corporate
Governance
Chapter 12
Structure
& Control
Chapter 13
Strategic
Leadership
Chapter 14
Entrepreneurship
& Innovation
Chapter 14
Entrepreneurship
& Innovation
Feedback
The Strategic Management Process 2

3. Chapter Fourteen: Key Themes
Define and describe the importance of innovation, entrepreneurship, corporate entrepreneurship, and entrepreneurs
Discuss the stages of the innovation process
Discuss the 2 forms of internal corp. venturing: autonomous strategic behaviour and induced strategic behaviour
Discuss how the capability to manage cross-functional teams facilitates the implementation of internal corporate ventures *

4. Defining Entrepreneurship
Firm’s capabilities to develop new goods or services & manage the innovation process
Corporate Entrepreneurship
Creating or developing a new product or process idea
Invention
Creating a commercializable product from invention
Innovation
Adoption of innovation by a population of similar firms
Imitation * 6

5. Successful Entrepreneurship
The key to success with entrepreneurship and innovation is moving from the invention of ideas to effective commercialization and acceptance in the marketplace 7

6. Innovation & Competitive Advantage
Difficult for
competitors to imitate
Commercially exploitable
with present capabilities
Competitive
Advantage
Provides significant
value to customers
Timely 12

7. Fostering Entrepreneurial Innovation
Three approaches:
Internal Corporate Venturing
Create it!
Cooperating to Produce Innovation
Co-opt it!
Acquiring Innovative Capability
Buy it! 12

8. Internal Corporate Venturing
Corporate Intrapreneurship can occur as either a bottom-up process or as a top-down process
Autonomous strategic behavior is a bottom-up process through which Product Champions pursue new product ideas to commercialization
Product Champions are individuals who have an entrepreneurial vision for a new product & seek support for its commercialization 16

9. Model of Internal Corp. Venturing
Concept of Corporate Strategy
Structural Context
Induced
Strategic
Behaviour
Autonomous
Strategic
Behaviour
Strategic Context 19

10. Internal Corporate Venturing
Induced strategic behaviour is a top-down process in which the current strategy and structure foster product innovations that are closely associated with the current strategy
Environmental uncertainty makes developing entrepreneurship strategy highly complex
Requires a decision on which corp. resources to deploy for new technology development and (which innovative ideas to bring to market) 21

11. Appropriating Value from Innovation
The goal or end point is developing a system which allows the firm to extract value effectively from their internal innovative capabilities
HOWEVER there are
Barriers to Integration
Value Appropriation from Innovation
Different Time
Interpersonal
Different Goal
Formality of
Orientation
Structure 27

12. Barriers to Integration
Long time line: R&D
Different functional time orientation
Short time line: Production
Different functional time orientation
Different functional language and interpersonal orientation
Different goal orientation
Formality of structure
Qualitative: HRM
Different functional language and interpersonal orientation
Quantitative: Accounting
Customer satisfaction: Sales
Different goal orientation
Cost reduction: Production
Informal: R&D
Formality of structure
Formal: Manufacturing 27

13. Appropriating Value from Innovation
Barriers to Integration
Different Time
Interpersonal
Different Goal
Formality of
Orientation
Structure
Cross-Functional Integration/
Design Teams
Cross-functional design teams can help to break down barriers to entrepreneurship within firms
Value Appropriation from Innovation
Facilitators of Integration
Facilitators of Integration tend to increase the effectiveness of Cross-functional integration or design teams
Shared Values
Leaders’ Vision
Effective
Budget Allocation
Communication 27

14. Shared Values Shared Values
Should
Be framed around a firm’s core competencies
Be linked clearly with a firm’s strategic intent & mission
Reduce political conflict & promote functional unit coupling
Facilitators of Integration
Shared Values
Leaders’ Vision
Effective
Budget Allocation
Communication

15. New Product Vision provided by Leadership
Leaders’ Vision
New Product Vision provided by Leadership
Should
Remind organizational members continuously of the value of product innovations
Facilitators of Integration
Shared Values
Leaders’ Vision
Effective
Budget Allocation
Communication
Promote innovation as the basis for integration & management of functional department activities

16. to foster integrated design, goals & budgets
Budget Allocation
Budget Allocation
to foster integrated design, goals & budgets
Should
Be formulated such that budgetary resources can be allocated to accomplish goals
Be specific targets for the integrated design & production of new goods and services
Facilitators of Integration
Shared Values
Leaders’ Vision
Effective
Budget Allocation
Communication
Reinforce the importance of integrating activities across
functions in organizations

17. Effective Communication Systems
Should
Facilitate cross-functional integration
Fuel motivation & knowledge sharing among team members
Integrate individual functional activities to create synergy
Support the work of cross-functional product development teams
Facilitators of Integration
Shared Values
Leaders’ Vision
Effective
Budget Allocation
Communication

18. Appropriating Value from Innovation
Barriers to Integration
Different Time
Interpersonal
Different Goal
Formality of
Orientation
Structure
Facilitators of Integration
Shared Values
Leaders’ Vision
Effective
Budget Allocation
Communication
Cross-Functional Integration/
Design Teams
Facilitators & Teams help the firm improve
Time to Market
Value Appropriation from Innovation
Product Quality
Customer Value 27

19. Cooperating to Produce Innovation
Strategic alliances can help to foster innovation by combining the knowledge and resources of two or more partners
Firms must focus on building knowledge, identifying core competencies and developing strong human resources to manage these projects
Firms can also give away their core competencies by outsourcing to alliance partners rather than developing their own capabilities over time 30

20. Acquiring Innovative Capability
Many firms now use acquisitions of other firms as a substitute for developing innovations internally
This can reduce risk and lower costly R&D investments
The drawback is that firms can eventually lose their ability to generate innovations internally 34

21. Small Firms and Innovation
Small firms created most of the new jobs in North America in the 1990s and this will likely continue in the 21st century
While large firms account for over 80% of the world’s R&D spending, individuals or small firms are granted more than half of the patents
Many small firms are created when employees leave large firms to start their own businesses, often continuing to interact with their former firms to develop innovations and new products 37

22. The Strategic Management Process
Chapter 5
Bus. - Level
Strategy
Chapter 6
Competitive
Dynamics
Chapter 9
International
Chapter 10
Cooperative
Strategies
Chapter 8
Acquisitions &
Restructuring
Strategic
Inputs
Actions
Outcomes
Chapter 4
Internal
Environment
Chapter 3
External
Strat. Intent
Strat. Mission
Strategy Formulation
Strategic Competitiveness
Chapter 1
Above Average Returns
Chapter 2
Chapter 7
Corp. - Level
The Strategic Management . Process
Strategy Implementation
Chapter 11
Chapter 12
Structure
& Control
Chapter 12
Corporate
Structure
Governance
& Control
Chapter 13
Strategic
Leadership
Chapter 14
Entrepreneurship
& Innovation
Chapter 14
Entrepreneurship
& Innovation
Chapter 14
Entrepreneurship
& Innovation
Feedback
The Strategic Management Process 2

23. And that’s the Whole Enchilada
We hope you found the text & cases useful
…and we hope you’ve enjoyed the slides
Hitt, Ireland, Hoskisson, Rowe, and Sheppard
Strategic Management: Competitiveness & Globalization *