Chapter 13: Strategic Entrepreneurship
Research shows that because of its economic importance and individual motives,
entrepreneurial activity is increasing across the globe. Even large, well-known firms are
experiencing significant competition that requires them to innovate if they wish to
compete effectively and survive over time.
Teaching Note
Large firms can take several measures to act small and increase their innovative
capacity such as the following:
• Greater levels of individual autonomy can be created through the restructuring of a
firm into smaller and more manageable units (see Chapter 7).
ANSWERS TO REVIEW QUESTIONS
1. What is strategic entrepreneurship? What is corporate entrepreneurship?
Strategic entrepreneurship is taking entrepreneurial actions using a strategic perspective.
When engaging in strategic entrepreneurship, the firm focuses on finding opportunities in
Chapter 13: Strategic Entrepreneurship
2. What is entrepreneurship, and what are entrepreneurial opportunities? Why are
they important aspects of the strategic management process?
Entrepreneurship is the process by which individuals or groups identify and pursue
entrepreneurial opportunities without being immediately constrained by the resources
they currently control. Entrepreneurial opportunities are conditions in which new goods
3. What are invention, innovation, and imitation? How are these concepts
interrelated?
Peter Drucker argued that “innovation is the specific function of entrepreneurship,
whether in an existing business, a public service institution, or a new venture started by a
Chapter 13: Strategic Entrepreneurship
Innovation is a key outcome firms seek through entrepreneurship and is often the source
of competitive success, especially in turbulent, highly competitive environments. For
example, research shows that firms competing in global industries that invest more in
innovation also achieve the highest returns. In fact, investors often react positively to the
introduction of a new product, thereby increasing the price of a firm’s stock. Innovation,
then, is an essential feature of high-performance firms. Furthermore, innovation may be
required to maintain or achieve competitive parity, much less a competitive advantage in
many global markets. The most innovative firms understand that financial slack should
4. What is an entrepreneur, and what is an entrepreneurial mind-set?
Entrepreneurs are individuals, acting independently or as part of an organization, who
see an entrepreneurial opportunity and then take risks to develop an innovation to pursue
Chapter 13: Strategic Entrepreneurship
5. What is international entrepreneurship? Why is it important?
International entrepreneurship is the process of creatively discovering and exploiting
opportunities that lie outside a firm’s domestic markets in the pursuit of competitive
advantage. As suggested by this definition, entrepreneurship is a global phenomenon.
6. How do firms develop innovations internally?
Increasingly, successful R&D results from integrating the skills available in the global
workforce. Firms seeking internal innovations through R&D must understand that talent
Chapter 13: Strategic Entrepreneurship
7. How do firms use cooperative strategies to innovate and to have access to innovative
capabilities?
It is difficult for a firm to possess all the knowledge required to compete successfully in
its product areas over the long term. Complicating this matter is the fact that the
Because of the importance of alliances, particularly in the development of new
technology and in commercializing innovations, firms are beginning to build networks of
alliances that represent a form of social capital to them. This social capital (in the form of
Chapter 13: Strategic Entrepreneurship
8. How does a firm acquire other companies to increase the number of innovations it
produces and improve its capability to innovate?
Firms complete strategic acquisitions in an effort to continuously strengthen their ability
to innovate. By integrating the capabilities of acquisitions with those it already owns,
firms can continue producing and managing innovations in ways that create value for
9. How does strategic entrepreneurship help firms create value?
Newer entrepreneurial firms often are more effective than larger firms in identifying
opportunities. Some believe that these firms tend to be more innovative as well because
of their flexibility and willingness to take risks. Alternatively, larger and well-established
Chapter 13: Strategic Entrepreneurship
Furthermore, the knowledge learned can contribute to a firm’s innovations. Research has
shown that firms operating in international markets tend to be more innovative. Small and
large firms are now regularly moving into international markets. Both types of firms must
MINI CASE
What Explains the Lack of Innovation at American Express? Is It Hubris, Inertia, or
Lack of Capability?
Note: To prepare students for class discussion and to introduce them to the
fundamentals of the Strategic Management process, each chapter Mini-Case is
Chapter 13: Strategic Entrepreneurship
But perhaps an even greater challenge was AmEx’s failure to innovate. The firm had not
advanced its purchasing technologies in some time, which led to some of the company’s
Teaching Note
Ask students to identify and discuss other instances when large firms failed to innovate and
suffered substantial revenue loss as a result. Using AmEx as an example, ask them to
speculate on what firms could or should do to avoid such catastrophic loss of revenue.
Answers to Case Discussion Questions
1. This Mini-Case suggests that a lack of continuous innovation contributed to American
Express’s (AmEx) poor performance in 2014. Assuming this is true, what factors might
prevent a firm the size and scope of AmEx from being able to innovate continuously?
In an entrepreneurial corporation, top-level managers create an organizational culture that
2. Use material from Chapter 4 to identify the business-level strategy AmEx uses. What
dimensions do you believe AmEx should emphasize to use the strategy you identified
successfully across time?
In its heyday, American Express was all about prestige. The firm created a premium
credit card service for the affluent, which meant it was using a focused differentiation
Chapter 13: Strategic Entrepreneurship
3. What actions do you believe AmEx should take to establish an entrepreneurial mind-set
among employees throughout the company?
Certain key elements must be present in an organization’s culture in order to encourage
4. This Mini-Case includes descriptions of recent AmEx innovations. Do you anticipate that
most of these innovations resulted from autonomous strategic behavior or from induced
strategic behavior? Why?
AmEx employees are not accustomed to working in an entrepreneurial environment.
They have not been encouraged or incentivized to seek out opportunities and to develop
ADDITIONAL QUESTIONS AND EXERCISES
The following questions and exercises can be presented for in-class discussion or assigned as
homework.
Application Discussion Questions
1. Is the term corporate entrepreneurship an oxymoron? In other words, can corporations—
especially large ones—be innovative?
Chapter 13: Strategic Entrepreneurship
4. Have students use the Internet to find an example of two corporate innovations—one
brought about through autonomous strategic behavior and one developed through induced
strategic behavior. Which innovation seems to hold the most promise for commercial
success and why?
Ethics Questions
1. Is it ethical for a company to purchase another firm to gain ownership of its product
innovations and innovative capabilities? Why or why not?
INSTRUCTOR’S NOTES FOR MINDTAP
Cengage offers additional online activities, assessments and resources inside MindTap,
our online learning platform. Here is a comprehensive listing of the activities available
within each chapter of MindTap for Hitt, Ireland Hoskisson’s Strategic Management:
Competitiveness and Globalization, 13th edition:
Course Level Resource: Cornerstone to Capstone Diagnostic- features short quizzes in
Chapter Level Resources:
• What Would You Do Video
• MindTap Reader (eBook)
• Assignments:
Chapter 13: Strategic Entrepreneurship
o Guided Case
o You Make the Decision (every other chapter)
o Group Project
• Student Study Tools:
o Flashcards
Course Level Case Resources:
• Text Cases (Readings)
ADDITIONAL INFORMATION FOR SELECT MINDTAP RESOURCES:
WHAT WOULD YOU DO? RENT THE RUNWAY
This exercise introduces students to strategic decisions as they are made in the real world.
Students should come to class prepared to discuss this exercise, and why they chose the
answer they did. All answers are graded as correct – the point of the exercise is to engage
your student’s interest.
VIDEO QUIZ: RENT THE RUNWAY
The media quiz offers additional opportunities for students to apply the concepts in the
chapter to a real-world scenario as it is described in news reports.
Chapter 13: Strategic Entrepreneurship
Title: Rent The Runway
RT: 3:28
Topic Key: Rent The Runway, First Mover, Paradigm Shift, Product Life Cycle
The video discusses the start-up of a fashion rental organization. Two Harvard classmates
saw the success of companies such as Spotify, Airbnb, and Netflix and decided the same
Suggested Discussion Questions and Answers
• What prompted the founders to pursue this idea of fashion rental, and what made it
successful?
Observing successful “new–technology” approaches to consuming various items,
such as music (Spotify), lodging (Airbnb), and movies (Netflix), the founders
• What realization led the founders to the basis of Rent The Runway?
The founders noticed a “shift to a rental behavior” in the economy. They then
• What are some attributes that helped the founders make Rent The Runway successful?
The main attributes are those used in entrepreneurial pursuits, especially in dealing
with shifts in industry formats:
• Noticing a shift in consumer or economic behavior
Chapter 13: Strategic Entrepreneurship
Chapter 13: Strategic Entrepreneurship
• How did the founders of Rent The Runway realize first-move advantages?
They noticed a trend toward renting in many consumer behaviors and applied that
GUIDED CASE: AMERICAN EXPRESS
This auto-graded activity asks students to read the short end-of-chapter case on American
Express, and answer questions in the areas of Analysis, Strategy, and Implementation &
Performance.
The year 2014 turned out to be a year of losses for American Express (AmEx). In addition
to terminating two significant partnerships with Costco and JetBlue, the company also lost
a major court case, all of which resulted directly or indirectly in lower revenues and
diminished performance.
In answering the Guided Case Questions, students will review these concepts:
• Strategic entrepreneurship
Chapter 13: Strategic Entrepreneurship
GROUP PROJECT: THE SLIPPERY SLOPE OF STRATEGIC
ENTREPRENEURSHIP
Have students research and analyze both an established firm and an entrepreneurial firm