Chapter 12 Strategic Entrepreneurship Robert E. Hoskisson Michael A. Hitt R. Duane Ireland ©2004 by South-Western/Thomson Learning
The Strategic Management Process Chapter 1 Introduction to Strategic Management Chapter 2 Strategic Leadership Strategic Thinking Chapter 3 The External Environment Chapter 4 The Internal Organization Strategic Intent Strategic Mission Strategic Analysis Chapter 5 Business-Level Strategy Chapter 6 Competitive Rivalry and Competitive Dynamics Chapter 7 Corporate-Level Strategy Creating Competitive Advantage Chapter 8 Acquisition and Restructuring Strategies Chapter 9 International Strategy Chapter 10 Cooperative Strategy Monitoring And Creating Entrepreneurial Opportunities Chapter 11 Corporate Governance Chapter 12 Strategic Entrepreneurship
Discussion Questions • What is strategic entrepreneurship and why is it important? • What are the two major types of innovation? • What are the two central processes associated with internal corporate venturing? Click Here Click Here Click Here Click Here More discussion questions
Discussion Questions (cont.) • Will horizontal organization in general and cross-functional teams in particular facilitate appropriation of value from innovation? • Are strategic alliances a viable way to get innovations? What are the tradeoffs with strategic entrepreneurship through alliances? Click Here Click Here Click Here More discussion questions
Discussion Questions (cont.) • How do acquisitions affect innovative inputs (R&D) and outputs (patents)? How does a firm prevent innovation problems associated with the acquisition process? • How can venture capital be used as an external approach to strategic entrepreneurship? Click Here Click Here
Discussion Question 1 What is strategic entrepreneurship and why is it important?
Strategic Entrepreneurship • Strategic entrepreneurship: taking entrepreneurial actions using a strategic perspective • engaging in simultaneous opportunity seeking and competitive advantage seeking behaviors • designing and implementing entrepreneurial strategies to create wealth • These actions can be taken by individuals or by corporations
Entrepreneurial Opportunities • Entrepreneurial opportunities are conditions in which new products or services can satisfy a need in the market • Entrepreneurs or entrepreneurial managers must be able to: • identify opportunities not perceived by others • take actions to exploit the opportunities • establish a competitive advantage
Innovation • Three types of innovative activity • invention brings something new into being • innovation brings something new into use • imitation is the adoption of an innovation by similar firms • Innovation is a key outcome firms seek through entrepreneurship and is often the source of competitive success • Innovations produced in large established firms are often referred to as corporate entrepreneurship
Entrepreneurs • Entrepreneurs are: • individuals acting independently or as part of an organization • who create a new venture or develop an innovation and take risks entering them into the marketplace • Entrepreneurs • can be independent individuals • can surface in an organization at any level
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 a nation
International Entrepreneurship • 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 • incentives for individual initiative • promote cooperation and group ownership of an innovation Return to Discussion Questions Click Here
Discussion Question 2 What are the two major types of innovation?
Incremental innovation Innovation Types: Incremental Innovation • most innovations are incremental • builds on existing knowledge bases • provides small improvements in the current product lines
Radical innovation Incremental innovation Innovation Types Radical Innovation • provides significant technological breakthroughs • creates new knowledge • is rare because of difficulty and risk • requires substantial creativity • radical innovations are often best developed in separate units that start internal ventures Return to Discussion Questions Click Here
Discussion Question 3 What are the two central processes associated with internal corporate venturing?
Concept of corporate strategy Strategic context Structural context Autonomous strategic behavior Induced strategic behavior Internal Corporate Venturing
Internal Corporate Venturing: Autonomous Strategic Behavior • Autonomous strategic behavior is a bottom-up process in which product champions: • pursue new ideas, often through a political process • develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace
Internal Corporate Venturing: Autonomous Strategic Behavior • A product champion is an organizational member with an entrepreneurial vision of a new good or service who seeks to create support for its commercialization • Autonomous strategic behavior • based on a firm’s wellsprings of knowledge and resources that are the sources of the firm’s innovation • a firm’s technological capabilities and competencies are the basis for new products and processes
Internal Corporate Venturing: Induced Strategic Behavior • Induced strategic behavior is a top-down process whereby • the firm’s current strategy and structure foster product innovations • innovations are associated closely with that strategy and structure
Internal Corporate Venturing: Induced Strategic Behavior • To be innovative and develop internal ventures requires • an entrepreneurial mindset • risk propensity • an emphasis on execution • Individuals with an entrepreneurial mindset • engage the energies of everyone in their domain • both inside and outside the organization Return to Discussion Questions Click Here
Discussion Question 4 Will horizontal organization in general and cross-functional teams in particular facilitate appropriation of value from innovation?
Cross functional product development team The Firm Cross-Functional Product Development Teams • facilitate efforts to integrate activities associated with different organizational functions • design, manufacturing, marketing, etc. • new product development processes can be completed more quickly • products can be more easily commercialized when cross-functional teams work effectively
Cross functional product development team The Firm Cross-Functional Product Development Teams • product development stages are grouped into parallel or overlapping processes • this approach allows the firm to tailor its product development efforts • unique core competencies • needs of the market
Barriers to Cross-Functional Team Effectiveness • Different orientations and perceptions • individuals from separate functions have different orientations on issues • perceive product development activities in different ways • Organizational politics • aggressive competition for resources among different organizational functions • must achieve cross-functional integration with minimal political conflict
Cross functional product development teams Creating value through innovation Entrepreneurial mindset • Facilitating integration • and innovation • Shared values • Entrepreneurial • Leadership Creating Value Through Internal Innovation Processes Click Here Return to Discussion Questions
Discussion Question 5 Are strategic alliances a viable way to get innovations? What are the tradeoffs with strategic entrepreneurship through alliances?
Return to Discussion Questions Click Here Cooperative Strategies for Entrepreneurship and Innovation • 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 through a cooperative relationship, firms must share their knowledge and skills
Discussion Question 6 How do acquisitions affect innovative inputs (R&D) and outputs (patents)? How does a firm prevent innovation problems associated with the acquisition process?
Acquisitions to Buy Innovation • 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
Discussion Question 7 How can venture capital be used as an external approach to strategic entrepreneurship?
Capital for Entrepreneurial Ventures • Venture capital firms • seek high returns on their investment • value 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 degree of instability in the market addressed
Capital for Entrepreneurial Ventures • Initial public offerings (IPOs) • new stock • firm needs high potential in order to sell new stock • often quite larger than the amounts obtained from venture capitalists • investment bankers frequently play major roles in the development and offering of IPOs • firms that have also received venture capital backing usually receive greater returns from IPOs
Creating Value Through Strategic Entrepreneurship • Newer entrepreneurial firms often are more effective than larger firms in identifying opportunities • Larger and well-established firms often have more resources and capabilities to exploit opportunities • Firms can be simultaneously entrepreneurial and strategic regardless of their size and age
Creating Value Through Strategic Entrepreneurship • To be entrepreneurial firms must • develop an entrepreneurial mindset among managers and employees • emphasize the development of their resources, especially human and social capital • seek to enter and compete in international markets • Enterpreneurial firms can achieve competitive advantages and create value for their customers and shareholders