Chapter 13
Strategic
Entrepreneurship
PowerPoint slides by:
R. Dennis Middlemist
Colorado State University
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All rights reserved.
Knowledge Objectives
• Studying this chapter should provide you with the
strategic management knowledge needed to:
 Define and explain strategic entrepreneurship.
 Describe the importance of entrepreneurial opportunities,
innovation, and entrepreneurial capabilities.
 Discuss the importance of international entrepreneurship.
 Describe autonomous and induced strategic behavior—the
two forms of internal corporate venturing.
 Discuss how cooperative strategies such as strategic
alliances are used to develop innovation.
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12–2
Knowledge Objectives (cont’d)
• Studying this chapter should provide you with the
strategic management knowledge needed to:
 Explain how firms use acquisitions to increase their
innovations and enrich their innovative capabilities.
 Describe the importance of venture capital and initial
public offerings to entrepreneurial activity.
 Explain how strategic entrepreneurship creates value in all
types of firms.
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12–3
The Strategic
Management
Process
Figure 1.1
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12–4
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
• Strategic entrepreneurship actions can be
taken by:
 Individuals
 Corporations
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12–5
Strategic Entrepreneurship and Innovation
• Entrepreneurship is concerned with:
 The discovery of profitable opportunities
 The exploitation of profitable opportunities
• 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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12–6
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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12–7
Innovation Process
Invention
• The act of creating or
developing 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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12–8
Innovation Process
Invention
Innovation
• The process of creating a
commercial product from an
invention
• Brings something new into use.
• Commercial criteria are used to
determine the success of an
innovation
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12–9
Innovation Process
Invention
Innovation
Imitation
• The adoption of an innovation
by similar firms
• Usually leads to product or
process standardization
• Products based on imitation
often are offered at lower
prices but with fewer features
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12–10
The Importance of Innovation
• Innovation
 Is a key outcome firms seek through
entrepreneurship
 Is often the source of competitive success
• Corporate Entrepreneurship
 Innovations produced in large established firms
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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
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12–12
Entrepreneurial Capabilities
• Entrepreneurial capabilities include:
 Intellectual capital
 Entrepreneurial mind-set
 Transfer of entrepreneurial competence to others
in the organization
 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
• 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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12–15
Incremental and Radical Innovation
• Incremental Innovation • Radical Innovation
 Most innovations are
 Are rare because of
incremental
difficulty and risk
 Provides small
 Provides significant
increments in current
technological
product lines
breakthroughs
 Improves existing
 Creates new
knowledge and
knowledge and
processes
processes
 Can create value
 Can create value
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Internal Corporate Venturing: A Model
SOURCE: Adapted from R. A. Burgelman, 1983, A model of the
interactions of strategic behavior, corporate context, and the concept of
strategy, Academy of Management Review, 8: 65.
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12–17
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
 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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12–18
Internal Corporate Venturing
• 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
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Venturing: Strategic Behaviors
• 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
 Innovations are associated closely with that
strategy and structure
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12–21
Implementing New Product Development
and Internal Ventures
• 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.
Cross-functional
Product Development
Team
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• New product development
processes can be
completed more quickly
 Products can be more easily
commercialized when crossfunctional teams work
effectively
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Cross–Functional Product Development Teams
• Product development
stages are grouped into
parallel or overlapping
processes, allowing the
firm to tailor its product
development efforts
Cross-functional
Product Development
Team
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 Unique core
competencies
 Needs of the market
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Barriers to Cross-Functional Teams
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
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Facilitating Integration and Innovation
• Shared values
 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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Creating Value from Innovation
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12–27
Cooperative Strategies for Entrepreneurship
and Innovation
• 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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Acquisitions to Buy Innovation
• Acquisitions
 Rapidly extend the product line
 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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12–31
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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