Chapter 12 Strategic Entrepreneurship Robert E Hoskisson Michael

The Strategic Management Process Strategic Thinking Chapter 1 Introduction to Strategic Management Chapter 2 Strategic Leadership Strategic Analysis Chapter 3 The External Environment Chapter 4 The Internal Organization Strategic Intent Strategic Mission Chapter 5 Business-Level Strategy Chapter 6 Competitive Rivalry and Competitive Dynamics Chapter 7 Corporate-Level Strategy Chapter 8 Acquisition and Restructuring Strategies Chapter 9 International Strategy Chapter 10 Cooperative Strategy Creating Competitive Advantage Monitoring And Creating Entrepreneurial Opportunities Chapter 11 Corporate Governance Chapter 12 Strategic Entrepreneurship 2

Strategic Entrepreneurship l 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 l These actions can be taken by individuals or by corporations 3

Entrepreneurial Opportunities Entrepreneurial opportunities are conditions in which new products or services can satisfy a need in the market l Entrepreneurs or entrepreneurial managers must be able to: l – – – identify opportunities not perceived by others take actions to exploit the opportunities establish a competitive advantage 4

Innovation l 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 l Innovations produced in large established firms are often referred to as corporate entrepreneurship l 5

Entrepreneurs l 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 l Entrepreneurs – can be independent individuals – can surface in an organization at any level 6

International Entrepreneurship can – – – l 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 7

International Entrepreneurship l There must be a balance (in the culture) between – individual initiative and – the spirit of cooperation and group ownership of innovation l Successful entrepreneurial firms – – – provide appropriate autonomy incentives for individual initiative promote cooperation and group ownership of an innovation 8

Innovation Types: Incremental Innovation Incremental innovation most innovations are incremental l builds on existing knowledge bases l provides small improvements in the current product lines l 9

Innovation Types Radical Innovation Incremental innovation Radical innovation l l l 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 10

Internal Corporate Venturing Concept of corporate strategy Strategic context Autonomous strategic behavior Structural context Induced strategic behavior 11

Internal Corporate Venturing: Autonomous Strategic Behavior l 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 12

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 l Autonomous strategic behavior l – 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 13

Internal Corporate Venturing: Induced Strategic Behavior l 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 14

Internal Corporate Venturing: Induced Strategic Behavior l To be innovative and develop internal ventures requires – an entrepreneurial mindset – risk propensity – an emphasis on execution l Individuals with an entrepreneurial mindset – engage the energies of everyone in their domain – both inside and outside the organization 15

Cross-Functional Product Development Teams facilitate efforts to integrate activities associated with different organizational functions l design, manufacturing, marketing, etc. l new product development processes can be completed more quickly l products can be more easily commercialized when crossfunctional teams work effectively l Cross functional product development team 16

Cross-Functional Product Development Teams product development stages are grouped into parallel or overlapping processes l this approach allows the firm to tailor its product development efforts – unique core competencies – needs of the market l Cross functional product development team 17

Barriers to Cross-Functional Team Effectiveness l Different orientations and perceptions – individuals from separate functions have different orientations on issues – perceive product development activities in different ways l Organizational politics – aggressive competition for resources among different organizational functions – must achieve cross-functional integration with minimal political conflict 18

Creating Value Through Internal Innovation Processes Cross functional product development teams Entrepreneurial mindset Creating value through innovation Facilitating integration and innovation • Shared values • Entrepreneurial Leadership 19

Cooperative Strategies for Entrepreneurship and Innovation l 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 l To innovate through a cooperative relationship, firms must share their knowledge and skills 20

Acquisitions to Buy Innovation l Acquisitions – rapidly extend the product line – increase the firm’s revenues l 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 21

Capital for Ventures l Entrepreneurial 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 22

Capital for Ventures l Entrepreneurial 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 23

Creating Value Through Strategic Entrepreneurship Newer entrepreneurial firms often are more effective than larger firms in identifying opportunities l Larger and well-established firms often have more resources and capabilities to exploit opportunities l Firms can be simultaneously entrepreneurial and strategic regardless of their size and age l 24

Creating Value Through Strategic Entrepreneurship l 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 l Enterpreneurial firms can achieve competitive advantages and create value for their customers and shareholders 25