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Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 5 Growing and Internationalizing the Entrepreneurial Firm
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Outline Entrepreneurship and entrepreneurial firms A comprehensive model of entrepreneurship Five entrepreneurial strategies Internationalizing the entrepreneurial firm Debates and extensions The savvy entrepreneur Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Entrepreneurship and Entrepreneurial Firms Entrepreneurship: The identification and exploitation of previously unexplored opportunities Entrepreneurs: Set of individuals who discover, evaluate, and exploit opportunities Founders and owners of new businesses or managers of existing firms Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Entrepreneurship and Entrepreneurial Firms (continued) Not the exclusive domain of small, young firms Small and medium-sized enterprises (SMEs) globally 95% of all firms Create 50% of total value added Generate 60–90% of all employment Only a small number of entrepreneurial firms survive Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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A Comprehensive Model of Entrepreneurship Industry-based considerations Intensity of inter-firm rivalry Fewer incumbents, more likely to collude to keep out newcomers Entry barriers: Capital intensive Bargaining power of suppliers: How to reduce it Bargaining power of buyers: How to reduce it Threat of substitute products/services Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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A Comprehensive Model of Entrepreneurship (continued) Resource-based considerations Entrepreneurial resources must create VRIO (have value and be rare, inimitable, and organizationally embedded) Institution-based considerations Formal institutions govern new ventures Striking differences in government regulations of start-ups Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Five Entrepreneurial Strategies Growth Innovation Network Financing/governance Harvest/exit A sixth strategy, internationalization, will be covered in the next section Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Entrepreneurial Strategies: Growth The excitement of growing a new company is often what attracts entrepreneurs in the first place Attempt to utilize resources and capabilities Entrepreneurial vision Entrepreneurial drive Entrepreneurial leadership Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Entrepreneurial Strategies: Innovation An innovation strategy is a specialized form of differentiation strategy Advantages of an innovation strategy Creates a more sustainable competitive advantage Technological breakthroughs and organizational innovations (new ways of doing business) Owners, managers, and employees at entrepreneurial firms are more innovative and risk-taking than those at large firms Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Entrepreneurial Strategies: Network Intentionally construct and tap into relationships, connections, and ties that individuals and organizations have developed Translate personal networks into value-adding organizational networks Distinguishing characteristics Needed to overcome liability of newness Intensity of relationships is important Networks represent significant resources and opportunities May lead to successful entrepreneurial performance Centrally located network positions are most helpful Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Entrepreneurial Strategies: Financing and Governance Outside investors usually demand collateral or some other assurance Odds for survival during crucial early years are significantly correlated with firm size Faster a new start-up can reach a certain size, the more likely it will survive Entrepreneurs often choose to accept more outside investment in order to reach a large size Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Entrepreneurial Strategies: Harvest and Exit “Selling out” does not necessarily mean failure Routes for entrepreneurial harvest and exit Selling an equity stake Selling the business Merging with another firm Going public with an initial public offering (IPO) Declaring bankruptcy Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Internationalizing the Entrepreneurial Firm Entrepreneurs are challenging myths about internationalization Transaction costs are higher International strategies for entering foreign markets Direct exporting Licensing or franchising Foreign direct investment (FDI) Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Internationalizing the Entrepreneurial Firm (continued) International strategies for staying in domestic markets Indirect exporting through domestic-based export intermediaries Become supplier of a foreign firm doing business in that firm’s home country Become licensee or franchisee of foreign brands Become alliance partner of foreign a direct investor Harvest and exit through sell-offs to foreign firms Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Debates and Extensions Traits versus institutions Slow internationalizers versus born global start-ups Anti-failure biases versus entrepreneur-friendly bankruptcy laws Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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The Savvy Entrepreneur Entrepreneurs are engines of creative destruction Insights on entrepreneurship by the three leading perspectives on strategy: Industry, Resource, and Institution views Four fundamental questions in strategy provide insight Copyright © 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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