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Chapter 13
Strategic Entrepreneurship
LEARNING OBJECTIVES
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.
CHAPTER OUTLINE
Opening Case: Entrepreneurial Fervor and Innovation Drive Disney’s Success
ENTREPRENEURSHIP AND ENTREPRENEURIAL OPPORTUNITIES
INNOVATION
ENTREPRENEURS
INTERNATIONAL ENTREPRENEURSHIP
INTERNAL INNOVATION
Incremental and Novel Innovation
Strategic Focus: Innovation Can Be Quirky
Autonomous Strategic Behavior
Induced Strategic Behavior
IMPLEMENTING INTERNAL INNOVATIONS
Cross-Functional Product Development Teams
Facilitating Integration and Innovation
Creating Value from Internal Innovation
INNOVATION THROUGH COOPERATIVE STRATEGIES
INNOVATION THROUGH ACQUISITIONS
Strategic Focus: What Explains the Lack of Innovation at American Express?
CREATING VALUE THROUGH STRATEGIC ENTREPRENEURSHIP
SUMMARY
KEY TERMS
REVIEW QUESTIONS
MINI-CASE: An Innovation Failure at JCPenney: Its Causes and Consequences
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ADDITIONAL QUESTIONS AND EXERCISES
MINDTAP RESOURCES
LECTURE NOTES
OPENING CASE
Entrepreneurial Fervor and Innovation Drive Disney’s Success
Teaching Note
The Opening Case makes the argument that strategic entrepreneurship can foster
innovation. Through strategic entrepreneurship, companies find ways to create and/or
improve products in ways that customers value. Strategic entrepreneurship and the
innovations it leads to are recognized as an extremely important leadership activity.
Ask students to identify examples of innovations from different industries and how
they increase customer value. Students should realize that information obtained from
environmental analysis is often an important input into the strategic
entrepreneurship/innovation process.
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1
Define strategic entrepreneurship and corporate
entrepreneurship.
Teaching Note
Research conducted by the Center for Entrepreneurial Leadership at the Kauffman
Foundation has shown that in recent years almost 100 percent of the new jobs in the
US have been created by entrepreneurial firms of less than two years of age.
Strategic entrepreneurship is taking entrepreneurial actions using a strategic perspective.
More specifically, it involves engaging in simultaneous opportunity seeking and competitive
advantage seeking behaviors to design and implement entrepreneurial strategies to create
wealth.
2
Define entrepreneurship and entrepreneurial opportunities and
explain their importance.
ENTREPRENEURSHIP AND ENTREPRENEURIAL OPPORTUNITIES
Entrepreneurship is the process by which individuals or groups identify and pursue
entrepreneurial opportunities without being immediately constrained by the resources they
currently control.
Teaching Note
According to Schumpeter, entrepreneurship is a process of “creative destruction,”
through which existing products or methods of production are destroyed and replaced
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with new ones. Thus, entrepreneurship is concerned with discovering and exploiting
profitable opportunities.
3
Define invention, innovation, and imitation and describe the
relationship among them.
INNOVATION
Peter Drucker argues that innovation is a function of entrepreneurship, as well as the means
that an entrepreneur uses to create wealth-producing resources or enhance the potential of
existing resources for creating wealth.
Innovation has an impact on firm outcomes.
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• Research shows that firms in global industries that invest more in innovation also achieve
greater returns.
4
Describe entrepreneurs and the entrepreneurial
mind-set.
ENTREPRENEURS
Entrepreneurs are individuals, acting independently or as part of an organization, who create
a new venture or develop an innovation and take on the risks involved in introducing it to the
marketplace.
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Computer believed one of his key responsibilities was to help Apple become more
entrepreneurial and more like a start-up.
In most cases, knowledge must be transferred to others in the organization (even in smaller
ventures) to enhance the entrepreneurial competence of the firm. The transfer is likely to be
5
Explain international entrepreneurship and its importance.
INTERNATIONAL ENTREPRENEURSHIP
Entrepreneurship is a top priority in many countries of the world (e.g., India, Turkey, United
States).
A recent report reveals that there is a strong positive relationship between the rate of
entrepreneurial activity and economic development in the country.
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6
Describe how firms internally develop innovations.
INTERNAL INNOVATION
Most innovation is developed through Research and Development (R&D). In fact, R&D may
be the most critical factor in gaining and sustaining a competitive advantage in some
industries (e.g., pharmaceuticals).
Incremental and Novel Innovation
Most innovations are incremental. That is, they build on existing knowledge bases and
provide small improvements in the current product lines. Alternatively, novel or
Figure 13.1
Model of Internal Corporate Venturing
STRATEGIC FOCUS
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Innovation Can Be Quirky
Quirky is a unique new venture founded in 2009 that has been described by some as an
innovation machine—their mission is to commercialize new product ideas. The company
built a social network of inventors and others who were used to evaluate new products for
Teaching Note
The Strategic Focus should make obvious the point that there is often considerable risk
associated with innovation. Students should realize that innovation needs to be focused
on those things that have a compelling customer value proposition that can be verified by
market research. Ask students to identify companies that rushed products to market. Then
ask them to speculate about why the innovations were introduced and what the company
could or should have done before the innovations were introduced into the marketplace.
Autonomous Strategic Behavior
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FIGURE 13.1
Model of Internal Corporate Venturing
This model illustrates the two approaches to internal corporate venturing:
Teaching Note
The following is another useful example on the topic. Using state-of-the-art
technology and relying in part on autonomous strategic behaviors among some of the
firm’s personnel, Callaway Golf Co. is known for reinventing industries. Callaway
invented the oversize club segment of the golf club industry when it introduced its
“Big Bertha” club, but the firm has also been seeking to reinvent the golf ball
segment of the golfing industry.
IMPLEMENTING INTERNAL INNOVATIONS
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Having processes and structures in place through which a firm can successfully implement
the outcomes of internal corporate ventures and commercialize innovations is critical.
Indeed, the successful introduction of innovations into the marketplace reflects
implementation effectiveness.
Cross-Functional Product Development Teams
Cross-functional teams facilitate efforts to integrate activities associated with different
Teaching Note
Cross-functional teams group product development stages into parallel or overlapping
processes, which allows the firm to tailor its product development efforts to its unique
core competencies and to the needs of the market.
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Facilitating Integration and Innovation
Shared values and effective leadership are important to achieving cross-functional integration
and implementing innovation. Highly effective shared values are framed around the firm’s
Creating Value from Internal Innovation
The model in Figure 13.2 shows how value can be created for the firm from internal
processes designed to develop and commercialize new goods and services. An
entrepreneurial mind-set must be developed so that managers and employees will seek to
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The model in this figure shows how firms can create value from the internal processes they
use to develop and commercialize new goods and services.
7
Explain how firms use cooperative strategies to innovate.
INNOVATION THROUGH COOPERATIVE STRATEGIES
Virtually all firms lack the breadth and depth of resources (e.g., human capital and social
capital) in their R&D activities to develop internally a sufficient number of innovations.
services.
• Some countries may have access to resources and capabilities that enable firms
located there to create specialized products.
Both entrepreneurial ventures and established firms use cooperative strategies (e.g., strategic
alliances and joint ventures) to innovate. Entrepreneurial ventures, for example, may seek
investment capital as well as established firms’ distribution capabilities to successfully
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introduce one of its innovative products to the market. Alternatively, more established
companies may need new technological knowledge and can gain access to it by forming a
cooperative strategy with entrepreneurial ventures.
8
Describe how firms use acquisitions as a means of innovation.
INNOVATION THROUGH ACQUISITIONS
Firms sometimes acquire companies to gain access to their innovations and to their
innovative capabilities. One reason companies do this is that the capital markets value
STRATEGIC FOCUS
What Explains the Lack of Innovation at American Express?