Chapter 14
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This document discusses strategic entrepreneurship and innovation. It defines key terms like entrepreneurship, innovation, and invention. It describes two forms of internal corporate venturing: autonomous and induced strategic behavior. Cross-functional teams can help integrate activities to facilitate new product development. Cooperative strategies like strategic alliances can help firms develop innovations. Acquisitions can help firms buy innovations, but may reduce internal innovation efforts. Venture capital and IPOs provide funding for entrepreneurial ventures. Strategic entrepreneurship can create value for firms of all sizes.
Chapter 14
- 1. Strategic Entrepreneurship Chapter 14 © 2006 by Nelson, a division of Thomson Canada Limited. 14-1
- 2. Chapter 3 External The Strategic Strategic . Inputs Environment The Strategic Management Strat. Intent Management Process . Chapter 4 Strat. Mission Internal Environment Process Strategy Formulation Strategy Implementation Strategic Actions Chapter 5 Chapter 6 Chapter 7 Chapter 11 Chapter 12 Bus. - Level Competitive Corp. - Level Corporate Structure Strategy Dynamics Strategy Governance & Control Chapter 8 Chapter 9 Chapter 10 Chapter 13 Chapter 14 Acquisitions & International Cooperative Strategic Entrepreneurship Restructuring Strategy Strategies Leadership & Innovation Outcomes Strategic Chapter 2 Chapter 1 Feedback Above Average Strategic Returns Competitiveness © 2006 by Nelson, a division of Thomson Canada Limited. 14-2
- 3. Strategic Entrepreneurship Knowledge objectives 2. Define & explain strategy. 3. Describe the importance of entrepreneurship. 4. Discuss the importance of international entrepreneurship & describe why its practice is increasing. 5. Describe the two forms of internal corporate venturing: autonomous and induced strategic behaviour. © 2006 by Nelson, a division of Thomson Canada Limited. 14-3
- 4. Strategic Entrepreneurship Knowledge objectives (continued) 5. Discuss how cooperative strategies, such as strategic alliances are used to develop innovation. 6. Explain how firms use acquisitions to increase their innovations and enrich their innovative capabilities. 7. Describe the importance of venture capital & initial public offerings to entrepreneurial activity. 8. Explain how the practice of strategic entrepreneurship creates values for customers & shareholders of all types of firms, large and small, new & established. © 2006 by Nelson, a division of Thomson Canada Limited. 14-4
- 5. Strategic Entrepreneurship The use of entrepreneurial actions based on a strategic perspective. © 2006 by Nelson, a division of Thomson Canada Limited. 14-5
- 6. Defining Entrepreneurship Corporate Entrepreneurship An individual or a group in an organization creates a new venture or develops an innovation. Invention Creating or developing a new product or process. Innovation Creating a commercial product from an invention. Imitation Adoption of innovation by a population of similar firms. © 2006 by Nelson, a division of Thomson Canada Limited. 14-6
- 7. Successful Entrepreneurship The key to success with entrepreneurship and innovation is moving from the invention of ideas to effective commercialization and acceptance in the marketplace. © 2006 by Nelson, a division of Thomson Canada Limited. 14-7
- 8. Innovation • Innovation is the process of creating a commercial product from an invention. • invention brings something new into being • innovation brings something new into use • Innovation is a key outcome firms seek through entrepreneurship and is often the source of competitive success. • Innovations produced in large established firms are often referred to as corporate entrepreneurship. © 2006 by Nelson, a division of Thomson Canada Limited. 14-8
- 9. Entrepreneurs • Entrepreneurs – are individuals acting independently or as part of an organization – create a new venture or develop an innovation and take risks entering them into the marketplace • Entrepreneurs – can be independent individuals – can surface in an organization at any level © 2006 by Nelson, a division of Thomson Canada Limited. 14-9
- 10. International Entrepreneurship • Entrepreneurship can – fuel economic growth – create employment – generate prosperity for citizens • There is a strong positive relationship between the rate of entrepreneurial activity and economic development in a nation. © 2006 by Nelson, a division of Thomson Canada Limited. 14-10
- 11. International Entrepreneurship • There must be a balance (in the culture) between – individual initiative and – the spirit of cooperation and group ownership of innovation • Successful entrepreneurial firms – provide appropriate autonomy – incentives for individual initiative – promote cooperation and group ownership of an innovation © 2006 by Nelson, a division of Thomson Canada Limited. 14-11
- 12. Innovation Types: Incremental Innovation • most innovations are incremental Incremental innovation • builds on existing knowledge bases • provides small improvements in the current product lines © 2006 by Nelson, a division of Thomson Canada Limited. 14-12
- 13. Innovation Types Radical Innovation Incremental • provides significant technological innovation breakthroughs • creates new knowledge Radical innovation • is rare because of difficulty and risk • requires substantial creativity • radical innovations are often best developed in separate units that start internal ventures © 2006 by Nelson, a division of Thomson Canada Limited. 14-13
- 14. Internal Corporate Venturing Corporate Entrepreneurship can occur as either a bottom-up process or as a top- down process. Autonomous strategic behaviour is a bottom-up process through which Product Champions pursue new product ideas to commercialization. Product Champions are individuals who have an entrepreneurial vision for a new product & seek support for its commercialization. © 2006 by Nelson, a division of Thomson Canada Limited. 14-14
- 15. Model of Internal Corporate Venturing Concept of Corporate Strategy Strategic Context Structural Context Autonomous Induced Strategic Strategic Behaviour Behaviour © 2006 by Nelson, a division of Thomson Canada Limited. 14-15
- 16. Internal Corporate Venturing: Autonomous Strategic behaviour • Autonomous strategic behaviour is a bottom- up process in which product champions: – pursue new ideas, often through a political process – develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace © 2006 by Nelson, a division of Thomson Canada Limited. 14-16
- 17. Internal Corporate Venturing Autonomous Strategic • behaviour champion is an organizational A product member with an entrepreneurial vision of a new good or service who seeks to create support for its commercialization. • Autonomous strategic behaviour is – based on a firm’s wellsprings of knowledge and resources that are the sources of the firm’s innovation – a firm’s technological capabilities and competencies are the basis for new products and processes © 2006 by Nelson, a division of Thomson Canada Limited. 14-17
- 18. Internal Corporate Venturing Induced Strategic Behaviour • Induced strategic behaviour is a top-down process whereby – the firm’s current strategy and structure foster product innovations – innovations are associated closely with that strategy and structure © 2006 by Nelson, a division of Thomson Canada Limited. 14-18
- 19. Internal Corporate Venturing Induced Strategic Behaviour • To be innovative and develop internal ventures requires – an entrepreneurial mindset – risk propensity – an emphasis on execution • Individuals with an entrepreneurial mindset – engage the energies of everyone in their domain – both inside and outside the organization © 2006 by Nelson, a division of Thomson Canada Limited. 14-19
- 20. Cross-Functional Product Development Teams • Facilitate efforts to integrate activities associated with different organizational functions. • Design, manufacturing, marketing, etc. • New product development processes can be completed more quickly. Cross-functional • Products can be more easily commercialized when cross- product functional teams work effectively. development team © 2006 by Nelson, a division of Thomson Canada Limited. 14-20
- 21. Cross-Functional Product Development Teams • Product development stages are grouped into parallel or overlapping processes. • This approach allows the firm to tailor its product development efforts. – unique core competencies – needs of the market Cross functional product development team © 2006 by Nelson, a division of Thomson Canada Limited. 14-21
- 22. Barriers to Integration Long time line: Different functional Short time line: R&D time orientation Production Qualitative: Different functional language Quantitative: HRM and interpersonal orientation Accounting Customer Cost satisfaction: Different goal reduction: Sales orientation Production Informal: Formality of Formal: R&D structure Manufacturing © 2006 by Nelson, a division of Thomson Canada Limited. 14-22
- 23. Barriers to Appropriating Value From Integration Different Time Innovation Orientation Cross-functional design teams can Interpersonal help to break down barriers to Orientation entrepreneurship within firms Different Goal Orientation Cross- Formality of Functional Value Structure Appropriation Integration/ from Facilitators of Design Innovation Integration Teams Shared Values Leaders’ Vision Facilitators of Integration tend to Budget Allocation increase the effectiveness of Effective Cross-functional integration or Communication design teams © 2006 by Nelson, a division of Thomson Canada Limited. 14-23
- 24. Creating Value through Internal Innovation Process © 2006 by Nelson, a division of Thomson Canada Limited. 14-24
- 25. Barriers to Appropriating Value from Integration Different Time Innovation Orientation Facilitators & Teams Interpersonal help the firm improve Orientation Time to Different Goal Orientation Cross- Market Formality of Functional Value Structure Integration/ Product Appropriation Quality from Facilitators of Design Innovation Integration Teams Shared Values Customer Leaders’ Vision Value Budget Allocation Effective Communication © 2006 by Nelson, a division of Thomson Canada Limited. 14-25
- 26. Cooperative Strategies for Entrepreneurship and Innovation • Firms may need to cooperate and integrate knowledge and resources to successfully commercialize inventions. – entrepreneurial new venture firms may need investment capital and distribution capabilities – more established companies may need new technological knowledge possessed by newer entrepreneurial firms • To innovate through a cooperative relationship, firms must share their knowledge and skills. © 2006 by Nelson, a division of Thomson Canada Limited. 14-26
- 27. Acquisitions to Buy Innovation • Acquisitions – rapidly extend the product line – increase the firm’s revenues • A key risk of acquisitions 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 © 2006 by Nelson, a division of Thomson Canada Limited. 14-27
- 28. Capital for Entrepreneurial Ventures • Venture capital firms – seek high returns on their investment – value competence of the entrepreneur or the human capital in the firm – place weight on the expected scope of competitive rivalry the firm is likely to experience – evaluate degree of instability in the market addressed © 2006 by Nelson, a division of Thomson Canada Limited. 14-28
- 29. Capital for Entrepreneurial Ventures • Initial public offerings (IPOs) – new stock – firm needs high potential in order to sell new stock – often quite larger than the amounts obtained from venture capitalists – investment bankers frequently play major roles in the development and offering of IPOs – firms that have also received venture capital backing usually receive greater returns from IPOs © 2006 by Nelson, a division of Thomson Canada Limited. 14-29
- 30. Creating Value through Strategic Entrepreneurship • Newer entrepreneurial firms are often more effective than larger firms in identifying opportunities. • Firms must develop an entrepreneurial mindset among their managers & employees. • Managers must emphasize the development of their resources, particularly human capital & social capital. • Firms should seek to enter & compete in International markets. • Firm that seek to establish their technology as a standard are engaging in strategic entrepreneurship as creating a standard produces a sustainable competitive advantage for the firm. © 2006 by Nelson, a division of Thomson Canada Limited. 14-30