Chapter 13 – Strategic Entrepreneurship

1. Chapter 13 –Strategic Entrepreneurship

2. 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, entrepreneurial capabilities, and innovation. • Describe autonomous and induced strategic behavior – the two forms of internal corporate venturing. • Discuss how strategic alliances and M&A are used to develop and commercialize innovations. • Discuss the importance of international entrepreneurship.

3. The Strategic Management Process Strategy Implementation Chapter 10CorporateGovernance Chapter 11OrganizationalStructure andControls Chapter 13StrategicEntrepreneurship

4. Agenda • Introduction to Corporate Entrepreneurship • Innovation • Organizing for Corporate Entrepreneurship • International Entrepreneurship

5. Corporate Entrepreneurship SOURCE: “How failure breeds success”, Business Week, July 10, 2006: 44-45.

6. Entrepreneurship • Entrepreneurial Opportunities • Conditions in which new products or services can satisfy a need in the market • Entrepreneurship is concerned with • the discovery of profitable opportunities not perceived by others, • the exploitation of profitable opportunities, and • establish a competitive advantage based on opportunities

7. Corporate Entrepreneurship • Entrepreneurs • Individuals acting independently or as part of an organization who create a new venture or develop an innovation and take risks entering innovations into the marketplace • Can be any manager or employee in an organization • Corporate entrepreneurship • Process whereby an individual or a group in an existing organization creates a new venture or develops an innovation

8. Entrepreneurial Capabilities • Firms that encourage entrepreneurship are: • Risk takers • Committed to innovation • Proactive in creating opportunities rather than waiting to respond to opportunities created by others • Entrepreneurial capabilities include: • Intellectual & human capital • Entrepreneurial mind-set • Transfer of entrepreneurial competence to others in the organization

9. Agenda • Introduction to Corporate Entrepreneurship • Innovation • Organizing for Corporate Entrepreneurship • International Entrepreneurship

10. 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 Invention Innovation Process

11. 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 Invention Innovation Innovation Process – cont’d

12. 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 Invention Innovation Imitation Innovation Process – cont’d

13. Incremental Innovation Most innovations are incremental Provides small increments in current product lines Improves existing knowledge and processes Can create value Radical Innovation Are rare because of difficulty and risk Provides significant technological breakthroughs Creates new knowledge and processes Can create value Incremental & Radical Innovation

14. Incremental & Radical Innovation Fiber-optic cable Internet browser Bubble wrap Online auction exchanges Radical Innovation Incremental Innovation Laparoscopic “keyhole” surgery Speech recognition software Polyester Enterprise resource planning (ERP) Frozen yogurt

15. Innovation Pyramid Source: Kanter, E. R., cited in: Business Week, March, 2007: 3.

16. Agenda • Introduction to Corporate Entrepreneurship • Innovation • Organizing for Corporate Entrepreneurship • International Entrepreneurship

17. Internal Corporate Venturing • Set of activities used to create inventions and innovations through internal means • Spending on R&D is linked to success of internal corporate venturing • Successful entrepreneurial firms • Provide appropriate autonomy • Offer incentives for individual initiative • Promote cooperation and group ownership of an innovation

18. Strategic Venturing 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 • Autonomous Strategic Behavior • Bottom-up process based on a firm’s wellsprings of knowledge and resources • A firm’s technological capabilities and competencies are its basis for new products and processes

19. Internal Corporate Venturing: A Model Source: Adapted from Burgelman, R. A. (1983). “A model of the interactions of strategic behavior, corporate context, and the concept of strategy”, Academy of Management Review, 8: 65.

20. Product Champion • Organizational member with an entrepreneurial vision of a new product or service and who seeks to create support for its commercialization • Play critical role in moving innovations forward • “Sell” new business ideas to the organization • Particularly important for autonomous strategic behavior

21. Facilitate integration of 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-functionalProduct Development Team Cross–Functional Product Development Teams The Firm

22. 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

23. Cooperative Strategies & M&A • Unlikely that firms possess all the knowledge and resources required for it to be entrepreneurial and innovative in a dynamic, competitive market • To gain access to other organization’s knowledge and resources and to commercialize innovations, firms • Enter into strategic alliances and/or networks of alliances • Engage in acquisitions of other organizations

24. Agenda • Introduction to Corporate Entrepreneurship • Innovation • Organizing for Corporate Entrepreneurship • International Entrepreneurship

25. International Entrepreneurship • Entrepreneurship can: • Fuel economic growth • Create employment • Generate prosperity for citizens • There is a strong positiverelationship between the rate ofentrepreneurial activity and economic development in a nation • While entrepreneurship is a global phenomenon, the rate of entrepreneurship differs across countries

26. International Entrepreneurship Source: Global Entrepreneurship Monitor (07/01/2007).

27. International Entrepreneurship • There must be a balance (in the culture) between • individual initiative and • the spirit of cooperation and group ownership of innovation