Competing for Advantage

1. Competing for Advantage Chapter 12 Strategic Entrepreneurship PART IV MONITORING AND CREATING ENTREPRENEURIAL OPPORTUNITIES

2. The Strategic Management Process

3. Strategic Entrepreneurship • Key Terms • Strategic entrepreneurship Occurs as firms seek opportunities in the external environment that they can exploit through competitive advantages that are framed around innovations • Corporate entrepreneurship Use or application of entrepreneurship within an established firm

4. Entrepreneurial Firm Characteristics • Risk taking • Commitment to innovation • Proactiveness

5. Strategic Entrepreneurship and Innovation • Key Terms • Entrepreneurship Process by which individuals or groups identify and pursue entrepreneurial opportunities without the immediate constraint of the resources they currently control • Entrepreneurial opportunities Conditions in which new products or services can satisfy a need in the market, due to competitive imperfections in markets and among factors of production used to produce them, and when information about these imperfections is distributed unevenly among individuals

6. National Interest in Entrepreneurship • It promotes economic growth. • It increases productivity. • It creates jobs. • It drives the economies of the nations in which it exists.

7. Types of Innovative Activity • Key Terms • Invention Act of creating or developing a new product or process • Innovation Process of creating a commercial product from an invention • Imitation Adoption of an innovation by similar firms

8. Invention v. Innovation • Invention brings something new into being – technical criteria determine its success. • Innovation brings something new into use – commercial criteria determine its success.

9. Results of Imitation • Product or process standardization • Products made with fewer features • Products offered at lower prices

10. Entrepreneurs • Key Terms • Entrepreneurs Individuals, acting independently or as part of an organization, who create a new venture or develop an innovation and take risks by introducing it into the marketplace • Entrepreneurial mind-set Viewpoint which values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations

11. Entrepreneurs’Characteristics • Optimism • High motivation • Willingness to take responsibility • Courage • Passion for value • Entrepreneurial mind-set

12. Challenge of Creating an Entrepreneurial Culture • Identifying people with intellectual talent and an entrepreneurial mind-set • Managing intellectual talent and knowledge to realize its potential • Developing and expanding the knowledge base to foster entrepreneurship • Expand access to new knowledge • Link new knowledge to existing knowledge

13. International Entrepreneurship • Key Terms • International entrepreneurship Process in which firms creatively discover and exploit opportunities that are outside their domestic markets in order to develop a competitive advantage

14. Risks of International Entrepreneurship • Unstable foreign currencies • Inefficient markets • Insufficient infrastructures to support businesses • Limitations on market size and growth

15. Dimensions of International Entrepreneurship • Impact of national culture • Entrepreneurship declines as collectivism increases. • Exceptionally high levels of individualism can be dysfunctional for entrepreneurship. • Balance between individual initiative and cooperative spirit and group ownership of innovation is required. • Level of investment made by new ventures outside of the home country • Top executives with international experience

16. Methods of Innovation • Internal innovation • Cooperative ventures • Acquisitions

17. Internal Innovation • Key Terms • Internal corporate venturing Set of activities firms use to develop internal inventions and innovations • Incremental innovation Process of internal innovation achieved by building on existing knowledge bases and providing small improvements in well-defined current product lines • Radical innovation Process of internal innovation achieved by generating significant technological breakthroughs and creating new knowledge

18. Internal Innovation • Key Terms • Induced strategic behavior Top-down process whereby the firm’s current strategy and structure foster product innovations that are closely associated with that strategy and structure • Autonomous strategic behavior Bottom-up process in which product champions pursue new ideas, often through a political process, to develop and coordinate the commercialization of a new good or service • Product champion An individual with an entrepreneurial vision of a new good or service who seeks to create support in the organization for its commercialization

19. Types of Internal Innovation • Incremental innovation – induced strategic behavior • Radical innovation – autonomous strategic behavior

20. Factors that Influence Innovation in Established Firms

21. Factors that Influence Innovation in Established Firms • Encourage people to discuss new ideas and take risks • Tolerate failure, and encourage learning from mistakes • Establish reward systems that encourage innovation • Establish processes and structures to effectively integrate the innovative process across functions

22. Advantages of Product Development Teams • Produce cross-functional integration • Quicken new product development processes • Improve commercialization processes • Coordinate to maximize innovation • Can be used to dismantle unsuccessful projects

23. Cross-Functional Product Development Team Effectiveness • Horizontal organizational structures • Independent frames of reference • Competition for resources • Inter-unit conflict

24. Dimensions of Functional Units • Time orientation • Interpersonal orientation • Goal orientation • Formality of structure

25. Facilitating Integration and Implementation • Shared values • Effective leadership • High-quality communication systems

26. Creating Value through Internal Innovation Processes

27. Innovation through Cooperative Strategies • Access to resources and knowledge required for continuous innovation • Shared knowledge, skills, and other resources • Alliance networks – particularly important to develop new technology and to commercialize innovations • Social capital through collaboration • Supplier representatives on cross-functional innovation teams • Risks of conflict and appropriation of proprietary knowledge/technologies

28. Innovation through Acquisitions • Capital markets value growth • Rapidly extend the product line • Quickly increase the firm’s revenues • A key risk 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

29. Younger Entrepreneurial Ventures • Produce more radical innovations • Possess strategic flexibility and willingness to take risks • Do more opportunity seeking

30. Larger Well-Established Firms • Produce more incremental innovations • Possess more resources and capabilities to exploit identified opportunities • Do more advantage seeking

31. Creating Value throughStrategic Entrepreneurship • Balance between gaining competitive advantage and identifying entrepreneurial opportunities • Importance of human and social capital • Importance of a global perspective for innovation strategies • Advantage of setting technology standards • Contribution that strategic entrepreneurship makes to nations' economic development

32. Importance of Strategic Entrepreneurship • Entrepreneurial activity is increasing across the globe. • Women and seniors are among the fastest-growing groups of entrepreneurs. • Entrepreneurial activity contributes to national wealth. • Strategic entrepreneurship is a winning strategy for the current competitive landscape.

33. Ethical Question Do managers have an ethical obligation to any of their stakeholders to ensure that their firms remain innovative? If so, to which stakeholders and why?

34. Ethical Question What types of ethical issues do firms encounter when they use internal corporate-venturing processes to produce and manage innovation?

35. Ethical Question Firms that are partners in a strategic alliance may legitimately seek to gain knowledge from each other. At what point does it become unethical for a firm to gain additional and competitively relevant knowledge from its partner? Is this point different when a firm partners with a domestic firm as opposed to a foreign firm? Why or why not?

36. Ethical Question Discuss the ethical implications associated with quickly bringing a new product to market.

37. Ethical Question Small firms often have innovative products. When is it appropriate for a large firm to buy a small firm for its product innovations and new product ideas?