Discuss whether the term ‘corporate entrepreneurship’ is an oxymoron. Can corporationsespecially large onesbe innovative? Support your answer with examples. Use the Internet to find an

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Narration

1

Introduction

Welcome to Senior Seminar in Business Administration.

In this lesson we will discuss Strategic Entrepreneurship.

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Objectives

Upon completion of this lesson, you will be able to:

Analyze strategic entrepreneurship and corporate entrepreneurship.

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Supporting Topics

In order to achieve this objective, the following supporting topics will be covered:

Entrepreneurship and entrepreneurial opportunities;

Innovation;

Entrepreneurs;

International entrepreneurship;

Internal innovation;

Implementing internal innovation;

Innovation through cooperative strategies;

Innovation through acquisitions; and

Creating value through strategic entrepreneurship.

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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.

Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market. These opportunities exist because of competitive imperfections in markets and among the factors of production used to produce them or because they were independently developed by entrepreneurs. Entrepreneurial opportunities come in a host of forms such in a new market. Firms should be receptive to pursuing entrepreneurial opportunities whenever and wherever they may surface.

The essence of entrepreneurship is to identify and exploit entrepreneurial opportunities; that is, opportunities others do not see or for which they do not recognize the commercial potential.

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Innovation

Innovation is a key outcome firms seek through entrepreneurship and is often the source of competitive success, especially in turbulent, highly competitive environments.

Firms engage in three types of innovative activity:

Invention is the act of creating or developing a new product or process.

Innovation is the process of creating a commercial product from an invention. Innovation begins after an invention is chosen for development. Thus, an invention brings something new into being, while an innovation brings something new into use. Accordingly, technical criteria are used to determine the success of an innovation.

Finally, imitation is the adoption of a similar innovation by different firms. Imitation usually leads to product or process standardization, and products based on imitation often are offered at lower prices, but without as many features. Entrepreneurship is critical to innovative activity in that it acts as the linchpin between invention and innovation.

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Check Your Understanding

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Entrepreneurs

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 it. Entrepreneurs are found throughout an organization, from top-level managers to those working to produce a firm’s goods or services.

Evidence suggests that successful entrepreneurs have an entrepreneurial mind-set. The person with an entrepreneurial mind-set values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations. Because it has the potential to lead to continuous innovations, an individual’s entrepreneurial mind-set can be a source of competitive advantage for a firm.

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International Entrepreneurship

International entrepreneurship is a process in which firms creatively discover and exploit opportunities that are outside their domestic markets in order to develop a competitive advantage. In general, internationalization leads to improved firm performance. However, the decision to internationalize exposes firms to various risks, including:

Unstable foreign currencies;

Problems with market efficiencies;

Insufficient infrastructures to support businesses; and

Limitations on market size.

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Internal Innovation

In established organizations, most innovation comes from successful research and development through the integration of skills available in the global workforce.

Increasingly, in the twenty-first century, R&D is becoming the most critical factor in gaining and sustaining a competitive advantage. Although critical to long-term corporate success, the outcomes of R&D investments are uncertain and often not achieved in a short term.

Most innovations are incremental; that is, they build on existing knowledge bases and provide small improvements in the current product lines. In contrast, radical innovations usually provide significant technological breakthroughs and create new knowledge.

Autonomous strategic behavior is a bottom up process in which product champions pursue new ideas. This is often done through a political process in which they develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace. A product champion is an organizational member with an entrepreneurial vision of a new good or service who seeks to create support for its commercialization. Product champions play critical roles in moving innovations forward. Autonomous strategic behavior is based on a firm’s wellspring of knowledge and resources that are the sources of the firm’s innovation.

The second of the two forms of internal corporate venturing, induced strategic behavior, is a top- down process whereby the firm’s current strategy and structure foster innovations that are closely associated with that strategy and structure. In this form of venturing, the strategy in place is filtered through a matching structural hierarchy. Induced strategic behavior results in internal innovations that are highly consistent with the firm’s current strategy. As a result the top management team plays a key role in induced strategic behavior, suggesting that the composition and the effectiveness of the team are important.

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Implementing Internal Innovation

An entrepreneurial mind-set is required to be innovative and to develop successful internal corporate ventures. Having processes and structures in place through which a firm can successfully implement the outcomes of internal corporate ventures and commercialize the innovations is also critical. In addition, effective integration of various functions involved in innovation processes is required to implement the incremental and radical innovations.

Cross-functional product development teams facilitate efforts to integrate activities associated with different organizational functions. In addition, strategic leadership is highly important for achieving cross-functional integration and promoting innovation.

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Innovation Through Cooperative Strategies

Virtually all firms lack the breadth and depth of resources in their R&D activities needed to internally develop a sufficient number of innovations to meet the needs of the market and remain competitive. As such, firms must be open to using external resources to help produce innovations. Alliances with other firms can contribute to innovations in several ways. First, they provide information on new business opportunities and how to exploit them. In other instances, firms use cooperative strategies to align what they believe are complementary assets with the potential to lead to future innovations.

However, there are conflicts in trying to work together to reach a mutual goal. Cooperative strategy participants also take a risk that a partner will appropriate a firm’s technology or knowledge and use it to enhance its own competitive abilities. To minimize these risks, firms need to carefully select partners that have complementary skills as well as compatible strategic goals.

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Innovation Through Acquisitions

Firms sometimes acquire companies to gain access to their innovations and to their innovative capabilities. One reason companies make these acquisitions is that the capital market values growth; acquisitions provide a means to rapidly extend one or more product lines and increase the firm’s revenues. A key risk of acquisitions is that a firm may substitute an ability to buy innovations for an ability to produce innovations internally.

Firms must manage the acquisitions well so that they remain productive and continue to produce innovation after the acquired firm is merged into the acquired firm.

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Creating Value Through Strategic Entrepreneurship

Newer entrepreneurial firms often are more effective than larger established firms in the identification of entrepreneurial opportunities. Consequently, they produce more radical innovations. Entrepreneurial ventures’ strategic flexibility and willingness to take risks partially account for their radical innovations.

To be entrepreneurial, firms must develop an entrepreneurial mind-set among their managers and employees. Mangers must emphasize the management of their resources, particular human capital and social capital.

Entrepreneurial ventures and large firms now regularly enter international markets. Thus, by developing resources, taking advantage of opportunities in domestic and international markets, and using the resources and knowledge gained in these markets to be innovative, firms achieve competitive advantages. In so doing, they create value for their customers and shareholders.

In addition, firms practicing strategic entrepreneurship contribute to a country’s economic development.

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Summary

We have reached the end of this lesson. Let’s take a look at what we have covered.

First, we discussed entrepreneurship. Entrepreneurship is the process by which individuals or groups identify and pursue entrepreneurial opportunities without being immediately constrained by the resources they currently control.

Next, we went over innovation. Innovation is a key outcome firms seek through entrepreneurship and is often the source of competitive success, especially in turbulent, highly competitive environments.

We also looked at entrepreneurs. 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 it.

Then we examined internal innovations and its implementation. There are two types of innovations: incremental and radical. Incremental innovations are built on existing knowledge bases and provide small improvement in the current product lines and radical innovations, provide significant technology breakthrough and create new knowledge.

We concluded the lesson with a discussion on creating value through strategic entrepreneurship. The practice of strategic entrepreneurship creates value for all stakeholders and contributes to the economic development of countries.

This completes this lesson.