Chapter 13 Corporate Entrepreneurship and Innovation

Defining Entrepreneurship Corporate Entrepreneurship Firm’s capabilities to develop new goods or services and manage the innovation process Invention Creating or developing a new product or process idea Innovation Creating a commercializable product from invention Imitation Adoption of innovation by a population of similar firms

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Chapter 13Corporate Entrepreneurshipand InnovationMichael A. HittR. Duane IrelandRobert E. Hoskisson©2000 South-Western College PublishingCompetitivenessChapter 3InternalEnvironmentChapter 2ExternalEnvironmentThe StrategicManagementProcessStrategic IntentStrategic MissionStrategicCompetitivenessAbove AverageReturnsFeedbackStrategy FormulationChapter 4Business-LevelStrategyChapter 5CompetitiveDynamicsChapter 6Corporate-LevelStrategyChapter 8InternationalStrategyChapter 9CooperativeStrategiesChapter 7Acquisitions &RestructuringStrategy ImplementationChapter 10CorporateGovernanceChapter 11Structure& ControlChapter 12StrategicLeadershipChapter 13Entrepreneurship & InnovationStrategicInputsStrategicActionsStrategic OutcomesDefining EntrepreneurshipFirm’s capabilities to develop new goods or services and manage the innovation processCorporate EntrepreneurshipCreating or developing a new product or process ideaInventionCreating a commercializable product from inventionInnovationAdoption of innovation by a population of similar firmsImitationSuccessful EntrepreneurshipThe key to success with entrepreneurship and innovation is moving from the invention of ideas to effective commercialization and acceptance in the marketplaceTimelyDifficult forcompetitors to imitateCommercially exploitablewith present capabilitiesInnovation and Competitive AdvantageCompetitiveAdvantageProvides significantvalue to customers Fostering Entrepreneurial InnovationInternal Corporate Venturing Three approaches:Cooperating to Produce Innovation Acquiring Innovative Capability Create it!Co-opt it!Buy it!Internal Corporate VenturingCorporate Intrapreneurship can occur as either a bottom-up process or as a top-down processAutonomous strategic behavior is a bottom-up process through which Product Champions pursue new product ideas to commercializationProduct Champions are individuals who have an entrepreneurial vision for a new product and seek support for its commercializationStructural ContextInducedStrategic BehaviorModel of Internal Corporate VenturingConcept of Corporate StrategyAutonomousStrategic BehaviorStrategic ContextInternal Corporate VenturingInduced strategic behavior is a top-down process in which the current strategy and structure foster product innovations that are closely associated with the current strategyEnvironmental uncertainty makes developing entrepreneurship strategy highly complexRequires a decision on which corporate resources to deploy for new technology development and which innovative ideas to bring to marketValue Appropriation from InnovationBarriers to IntegrationDifferent TimeInterpersonalDifferent GoalFormality ofOrientationOrientationOrientationStructureFacilitators of IntegrationShared ValuesLeaders’ VisionEffectiveBudget AllocationCommunicationAppropriating Value from InnovationCross-Functional Integration/Design TeamsTime to MarketProduct QualityCreation of Customer ValueCooperating to Produce InnovationStrategic alliances can help to foster innovation by combining the knowledge and resources of two or more partnersFirms must focus on building knowledge, identifying core competencies and developing strong human resources to manage these projectsFirms can also give away their core competencies by outsourcing to alliance partners rather than developing their own capabilities over timeAcquiring Innovative CapabilityMany firms now use acquisitions of other firms as a substitute for developing innovations internallyThis can reduce risk and lower costly R&D investmentsThe drawback is that firms can eventually lose their ability to generate innovations internallySmall Firms and InnovationSmall firms created most of the new jobs in the U.S. in the 1990s and this will continue in the 21st centuryWhile large firms account for over 80% of the world’s R&D spending, individuals or small firms are granted more than half of U.S. patentsMany small firms are created when employees leave large firms to start their own businesses, frequently continuing to interact with their former firms to develop innovations and new products