Competing for Advantage

1
Competing for Advantage
PART IV MONITORING AND CREATING ENTREPRENEURIAL
OPPORTUNITIES

• Chapter 12
• Strategic Entrepreneurship

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The Strategic Management Process
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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

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Entrepreneurial Firm Characteristics

• Risk taking
• Commitment to innovation
• Proactiveness

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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

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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.

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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

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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.

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Results of Imitation

• Product or process standardization
• Products made with fewer features
• Products offered at lower prices

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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

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Entrepreneurs Characteristics

• Optimism
• High motivation
• Willingness to take responsibility
• Courage
• Passion for value
• Entrepreneurial mind-set

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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

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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

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Risks of International Entrepreneurship

• Unstable foreign currencies
• Inefficient markets
• Insufficient infrastructures to support
  businesses
• Limitations on market size and growth

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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

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Methods of Innovation

• Internal innovation
• Cooperative ventures
• Acquisitions

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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

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Internal Innovation

• Key Terms
• Induced strategic behavior
• Top-down process whereby the firms 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

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Types of Internal Innovation

• Incremental innovation induced strategic
  behavior
• Radical innovation autonomous strategic
  behavior

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Factors that Influence Innovation in Established
Firms
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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

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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

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Cross-Functional Product Development Team
Effectiveness

• Horizontal organizational structures
• Independent frames of reference
• Competition for resources
• Inter-unit conflict

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Dimensions of Functional Units

• Time orientation
• Interpersonal orientation
• Goal orientation
• Formality of structure

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Facilitating Integration and Implementation

• Shared values
• Effective leadership
• High-quality communication systems

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Creating Value through Internal Innovation
Processes
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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

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Innovation through Acquisitions

• Capital markets value growth
• Rapidly extend the product line
• Quickly increase the firms 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 RD efforts
• Firm may lose ability to produce patents

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Younger Entrepreneurial Ventures

• Produce more radical innovations
• Possess strategic flexibility and willingness to
  take risks
• Do more opportunity seeking

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Larger Well-Established Firms

• Produce more incremental innovations
• Possess more resources and capabilities to
  exploit identified opportunities
• Do more advantage seeking

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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

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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.

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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?

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Ethical Question

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

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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?

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Ethical Question

• Discuss the ethical implications associated with
  quickly bringing a new product to market.

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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?