Chapter 13

Strategic Entrepreneurship

PART 3 Strategic Actions: Strategy Implementation

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Learning Objectives
Studying this chapter should provide you with
the strategic management knowledge needed to:
1. Define strategic entrepreneurship and corporate entrepreneurship.
2. Define entrepreneurship and entrepreneurial opportunities and
explain their importance.
3. Define invention, innovation, and imitation, and describe the
relationship among them.
4. Describe entrepreneurs and the entrepreneurial mind-set.
5. Explain international entrepreneurship and its importance.
6. Describe how firms internally develop innovations.
7. Explain how firms use cooperative strategies to innovate.
8. Describe how firms use acquisitions as a means of innovation.
9. Explain how strategic entrepreneurship helps firms create value.

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 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.
• Corporate entrepreneurship
– Is the use or application of entrepreneurship within an
established firm.

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 Entrepreneurship and
Entrepreneurial Opportunities

• Entrepreneurship
– The process by which individuals, teams, or
organizations identify and pursue entrepreneurial
opportunities without being immediately constrained
by the resources they currently control.
• Firms that encourage entrepreneurship are:
– Risk takers committed to innovation.
– Proactive in creating opportunities rather than waiting
to respond to opportunities created by others.

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 Entrepreneurial Opportunities

• Entrepreneurial Opportunities
– 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.

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 The Innovation Process

• The act of creating or developing

Invention a new product or process
• Brings something new into being.
• Technical criteria are used to
determine the success of an
invention.

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 The Innovation Process (cont’d)

• The process of creating a commercial

Invention
product from an invention.
• Brings something new into use.
• Is a key outcome firms seek through
entrepreneurship.
Innovation
• Is often the source of competitive
success.
• Commercial criteria are used to
determine the success of an
innovation.

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 The Innovation Process (cont’d)

Invention

• The adoption of an innovation

by similar firms
Innovation
• Usually leads to product or
process standardization.
• Products based on imitation
often are offered at lower
Imitation prices but with fewer features.

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 Entrepreneurs

• Entrepreneurs
– 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.
– Can be any manager or employee in an organization.
• Entrepreneurial capabilities include:
– Intellectual capital
– Entrepreneurial mind-set
– Transfer of entrepreneurial competence to others
– Effective human capital

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 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.

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International Entrepreneurship (cont’d)

• 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.
– Offer incentives for individual initiative.
– Promote cooperation and group ownership
of an innovation.

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 Incremental and Radical Innovation

• Incremental Innovation • Radical Innovation

– Is the usual case – Is rare because of
for innovation in difficulty and risk.
organizations. – Provides significant
– Provides small technological
increments in current breakthroughs.
product lines. – Creates new
– Improves existing knowledge and
knowledge and processes.
processes. – Can create value.
– Can create value.

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Figure 13.1 Model of Internal Corporate Venturing

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 Internal Corporate Venturing

• The set of activities used to create inventions

and innovations through internal means.
– R&D spending is linked to success in internal
corporate venturing.
• Product Champion
– An organizational member with an entrepreneurial
vision of a new good or service who seeks to create
support for the vision’s commercialization.

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Internal Corporate Venturing (cont’d)

• 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.
• Forms of internal corporate venturing:
– Autonomous strategic behavior
– Induced strategic behavior

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 Venturing: Strategic Behaviors

• Autonomous Strategic Behavior

– Based on a firm’s knowledge and resources that are
the sources of the firm’s innovation.
– A firm’s technological capabilities and competencies
are its basis for new products and processes.
• Induced Strategic Behavior
– A top-down process whereby the firm’s current
strategy and structure foster product innovations.
– The strategy in place is filtered through a matching
structural hierarchy.

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 Implementing Internal Innovations

• 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.

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 Cross–Functional Product
Development Teams
• Facilitate integration of
activities associated with
different organizational
functions.
– Design, manufacturing,
marketing, etc.
• New product development
processes can be completed
Cross-functional
more quickly.
Product Development – Products can be more easily
Team commercialized when cross-
functional teams work
effectively.

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 Cross–Functional Product
Development Teams (cont’d)

• Product development
stages are grouped into
parallel or overlapping
processes, allowing the
firm to tailor its product
development efforts
– Unique core competencies
Cross-functional
Product Development – Needs of the market
Team

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 Barriers to Cross-Functional Teams
Effectiveness

• Different orientations and perceptions

– Individuals from separate functions have
different orientations on issues.
• Create differing approaches to product
development activities.
• Organizational Politics
– Cause aggressive competition for resources
among different organizational functions.
• Organizations must achieve cross-functional
integration with minimal political conflict.

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Facilitating Integration and Innovation

• Shared Values
– Are framed around the firm’s strategic intent
and mission.
– Become the glue that promotes integration
between functional units.
• Effective Leadership
– Sets goals and allocates resources
• Goals include integrated development and
commercialization of new goods and services
• Effective Communication

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Figure 13.2 Creating Value through Internal Innovation Processes

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 Innovation through
Cooperative Strategies

• Cooperation and integration of knowledge and

resources is required to successfully
commercialize inventions.
– Entrepreneurial firms need investment capital and
distribution capabilities.
– Established companies need the technological
knowledge possessed by entrepreneurial firms.
• Firms innovate through the sharing their
knowledge and skills in a cooperative
relationship.

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 Innovation through Acquisitions

• Acquisitions
– Can rapidly extend the product line.
– Can quickly increase the firm’s revenues.
• Key risks of acquisitions
– The firm may substitute the ability to buy innovations
for an ability to produce innovations internally.
– The firm may lose intensity in R&D efforts.
– The firm may lose its ability to produce patents.

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 Capital for Entrepreneurial Ventures

• Venture Capital Firms

– Seek high returns on their investment.
– Value the 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 the degree of instability in the market
addressed.

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 Capital for Entrepreneurial Ventures

• Initial Public Offerings (IPOs)

– Are new stock priced to reflect the firm’s high
potential.
– Often yield much larger equity investments than
can be obtained from venture capitalists.
– Investment bankers frequently play major roles in
the development and offering of IPOs.
– Firms that have previously received venture capital
backing usually receive greater returns from IPOs.

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 Creating Value through
Strategic Entrepreneurship

• Be effective in identifying opportunities.

• Be flexible and willing to take risks.
• Have sufficient resources and capabilities to
exploit identified opportunities.
• Sustain a competitive advantage while
identifying and exploiting opportunities.
• Develop an entrepreneurial mind-set among
managers and employees.
• Seek to enter and compete in international
markets.
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