Chapter 13
Strategic Entrepreneurship
CHAPTER OVERVIEW
LEARNING OBJECTIVES
LECTURE NOTES
13-7 INNOVATION THROUGH COOPERATIVE STRATEGIES
13-8 INNOVATION THROUGH ACQUISITIONS
13-9 CREATING VALUE THROUGH STRATEGIC ENTREPRENEURSHIP
Chapter 13: Strategic Entrepreneurship
CHAPTER OVERVIEW
This final chapter explores how organizations of all types can maintain a spirit of
entrepreneurship and innovation. Entrepreneurship is a process used by individuals, teams,
and organizations to identify entrepreneurial opportunities without being immediately
In the second section of the chapter, students learn to distinguish among three types of
innovative activities:
• Invention, which is the act of creating a new good, process, or service

The next section covers international entrepreneurship, or the process of identifying and
exploiting entrepreneurial opportunities outside the firm’s domestic markets. Evidence
suggests that firms capable of engaging effectively in international entrepreneurship
generally outperform those competing only in their domestic markets.
Chapter 13: Strategic Entrepreneurship
strategy and structure drives induced strategic behavior, while autonomous strategic
behavior can result in a change to the firm’s current strategy and structure.
In the next section, students learn how firms may form a cooperative relationship to gain
access to the specialized knowledge required to innovate in the global economy. Such a
relationship may take the form of a strategic alliance with other companies, some of which
may be competitors.
LEARNING OBJECTIVES
1. Define strategic entrepreneurship and corporate entrepreneurship.
2. Define entrepreneurship and entrepreneurial opportunities and explain their importance.
Chapter 13: Strategic Entrepreneurship
Lecture Notes
Chapter Introduction: This chapter helps identify ways in which entrepreneurial insights
and activities can be harnessed in large firms. The principles identified here may certainly
OPENING CASE
Today It Is Gas and Diesel: Tomorrow It Is Likely to Be Electric Vehicles, Plug-In
Hybrids, and Driverless Cars and Trucks
Firms that strive to practice strategic entrepreneurship are often challenged by competing
areas of focus: finding competitive advantage with their existing products while
simultaneously seeking to identify opportunities for innovations in the future. One
Teaching Note
Review with students some of the global trends that could affect the external
environment for many types of organizations, such as a growing population, an aging
population, economic downturns, stricter regulations on pollution and emissions, etc.
What types of industries might be affected by these trends, and how could
Entrepreneurship is the economic engine driving many nations’ economies in the global
competitive landscape. Entrepreneurship and innovation have become important for young
and old, large and small organizations in all types of industries.
Chapter 13: Strategic Entrepreneurship
Teaching Note
Research conducted by the Center for Entrepreneurial Leadership at the Kauffman
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.
13-1 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,”
Entrepreneurial opportunities represent conditions in which new products or services can
satisfy a need in the market. The essence of entrepreneurship is to identify and exploit
13–2 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.
Teaching Note
Innovation has long been recognized as vital to competitive success. For example,
Henry Ford, founder of Ford Motor Company, observed that, “The competitor to be
Innovation has an impact on firm outcomes.
• Innovation is a key source of competitive success for firms competing in turbulent,
competitive markets.
Schumpeter suggested that firms generally engage in three types of innovative activity:
• Invention, the act of creating or developing a new product (good or service) or process
idea
Chapter 13: Strategic Entrepreneurship
In the United States in particular, innovation is the most critical of the three types of
4
13–3 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.
Top-level managers should try to establish an entrepreneurial culture that inspires
individuals and groups to engage in corporate entrepreneurship. For example, Steve Jobs
of Apple Inc. believed one of his key responsibilities was to help Apple become more
entrepreneurial and more like a start-up.
Chapter 13: Strategic Entrepreneurship
5
13-4 INTERNATIONAL ENTREPRENEURSHIP
Entrepreneurship is a top priority in many countries of the world (e.g., India, Turkey,
United States), and international entrepreneurship is a process in which firms creatively
discover and exploit opportunities that are outside their domestic markets. A recent report
reveals that there is a strong positive relationship between the rate of entrepreneurial
activity and economic development in the country.
The probability of entering international markets increases when the firm has top executives
with international experience. Furthermore, the firm has a higher likelihood of successfully
competing in international markets when its top executives have international experience.
6
Describe how firms internally develop innovations.
13–5 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).
Chapter 13: Strategic Entrepreneurship
13-5a 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
13-5b Autonomous Strategic Behavior
Autonomous strategic behavior is a bottom-up process in which new product champions
pursue new product ideas—often through a political process—where they develop and
coordinate the commercialization of a new good or service until it reaches marketplace
success.
The model in Figure 13.1 illustrates the two approaches to internal corporate venturing.
• Autonomous strategic behavior is a bottom-up process that enables product champions
to pursue new product ideas and sponsor them through a political process until they
Chapter 13: Strategic Entrepreneurship
Whichever process is followed takes place within and is affected by the structural and
strategic context of the organization.
Teaching Note
Using state-of-the-art technology and relying in part on autonomous strategic behavior
among some of its personnel, Callaway Golf Co. is known for reinventing industries.
STRATEGIC FOCUS
Seeking Innovation through Autonomous Strategic Behavior at the Country Level
Many nations set up sovereign wealth funds that use their reserves to invest in businesses they
hope will yield benefits for their economy and people. Saudi Arabia, for example, has
established a sovereign wealth fund called the Public Investment Fund (PIF). Fund managers
Teaching Note
Ask students why an investor, such as a sovereign wealth fund, would prefer to invest
in firms that exhibit strong autonomous strategic behavior. Why would an investor
believe that scenario is more advantageous than a company with induced strategic
behavior? What does the presence of autonomous strategic behavior suggest about an
organization’s culture?
13-5c Induced Strategic Behavior
The second approach to creating internal corporate venturing is induced strategic behavior, a
Chapter 13: Strategic Entrepreneurship
13–6 IMPLEMENTING INTERNAL INNOVATIONS
Having processes and structures in place through which a firm can successfully implement
the outcomes of internal corporate ventures and commercialize innovations is critical.
13-6a Cross-Functional Product Development Teams
Cross-functional teams facilitate efforts to integrate activities associated with different
organizational functions (e.g., design, manufacturing, and marketing). In addition, new
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.
Some of the core horizontal processes that are critical to innovation efforts are formal;
they may be defined and documented as procedures and practices. More commonly,
Research suggests that functional departments vary along four dimensions: time
orientation, interpersonal orientation, goal orientation, and formality of structure. Thus,
Chapter 13: Strategic Entrepreneurship
13-6b 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
13-6c 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
Figure Note
Figure 13.2 illustrates relationships discussed in the chapter that enable the firm to
appropriate value from innovation: barriers to integration, integration facilitating
FIGURE 13.2
Creating Value through Internal Innovation Processes
The model in Figure 13.2 shows how firms can create value from the internal processes
they use to develop and commercialize new goods and services.
Chapter 13: Strategic Entrepreneurship
• An entrepreneurial mind-set is necessary so that managers and employees will
consistently try to identify entrepreneurial opportunities the firm can pursue by
developing new goods and services and new markets.
7
13–7 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.
Teaching Note
An alternative to internal innovation is to tap the resources available in other
organizations for the following reasons:
• Knowledge is increasing rapidly, making it difficult for firms to remain up to date.
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 introduce one of their innovative products to the market. Alternatively, more
Chapter 13: Strategic Entrepreneurship
Alliances formed for the purpose of innovation are not without risks. One important risk is
that a partner will appropriate a firm’s technology or knowledge and use it to enhance its
own competitive abilities. To prevent or at least minimize this risk, firms, particularly new
ventures, must select their partners carefully.
8
Describe how firms use acquisitions as a means of innovation.
13–8 INNOVATION THROUGH ACQUISITIONS
Firms sometimes acquire companies to gain access to their innovations and innovative
capabilities. Companies may do this because the capital markets value growth;
STRATEGIC FOCUS
Will These Acquisitions Lead to Innovation Success or to Strategic Failure?
Investors are usually encouraged by organizations that are making acquisitions. It is a sign
that the organization is dedicated to innovation, even if it means acquiring innovative
Chapter 13: Strategic Entrepreneurship
Teaching Note
Discuss with students the difference between internal innovation, innovation through
9
Explain how strategic entrepreneurship helps firms create value.
13–9 CREATING VALUE THROUGH STRATEGIC
ENTREPRENEURSHIP
Newer entrepreneurial firms often are more effective than larger firms in identifying
opportunities. These firms tend to be more innovative as well because of their flexibility
and willingness to take risks. Alternatively, larger and well-established firms often have
more resources and capabilities to exploit opportunities. In general, entrepreneurial
ventures need to improve their advantage-seeking behaviors, whereas larger firms need to
improve their opportunity-seeking skills.
Teaching Note
Individual entrepreneurs and small firms are responsible for a significant amount of
innovation as measured by the ratio of R&D input to R&D output. To wit:
To be entrepreneurial, firms must develop an entrepreneurial mind-set among their managers
and employees. Managers must emphasize the management of their resources, particularly
human capital and social capital. The importance of knowledge to identify and exploit
opportunities as well as to gain and sustain a competitive advantage suggests that firms must