STRATEGIC

ENTREPRENEURSHIP &
INNOVATION
■ The world’s 10 most innovative firms start with 2011:
Apple Google
Twitter Dawning Information Industry
Facebook NetFlix
Nissan Zynga,
Groupon Epocrates
Source: Fast Company

■ Continuous innovation, is a competitive weapon, especially

during tough economic times
■ Open innovation occurs when a firm finds that a
good idea is not commercially viable, given a firm’s
present strategy; and then commercialization can
take place through licenses, spin-offs, and joint
ventures

■ P&G launched the concept of open innovation in

2001, with its Connect & Develop program
■ Open innovation examples:

● P&G - Tide Total Care was developed through Sweden’s

Lund University and two small chemical companies as partners
● P&G - Glad brand plastic bag joint venture with Clorox, a
historical rival
● P&G - Food product joint ventures with ConAgra and
General Mills
■ Open innovation examples:

● Nike and Apple developed a sensor that transmits

data from inside a shoe to the runner’s iPod or iPhone

● GlaxoSmithKline and Oratech partnered to develop

Aquafresh White Trays, a tooth-whitening strip
■ Open innovation examples:

● Kimberly-Clark and SunHealth Solutions developed

Little Swimmers Sun Care, an adhesive sticker that
changes color to alert parents to the risk of sunburn

● Kraft and Hershey developed S’mores, a mixture of

hot marshmallows that melt the chocolate between two
graham crackers
Three paths for open innovation solutions:

● Customer-driven: tapping unmet customer

needs

● Technology-driven: substantial investments in

R&D

● Competitor-driven: Fast follower of

competitors’ successful strategies
IMPORTANT DEFINITIONS

Strategic entrepreneurship: all the entrepreneurial

actions through a strategic perspective

• Entrepreneurship dimension: identifying

opportunities in external environment to exploit
through innovations
• Strategic dimension: determining the best way to
manage the firm’s innovation efforts
Strategic entrepreneurship actions can be taken by:

• Individuals

• Corporations

Corporate entrepreneurship: the use or application of

entrepreneurship within an established firm
 ENTREPRENEURSHIP AND
ENTREPRENEURIAL OPPORTUNITIES
Entrepreneurship is concerned with:

• The discovery of profitable opportunities

• The exploitation of profitable opportunities

Entrepreneurship: the process by which individuals or groups

identify and pursue entrepreneurial opportunities without the
immediate constraint of the resources they currently control
What mean Entrepreneurial opportunities:

• Are opportunities others do not see or for which they do not

recognize the commercial potential

 Develop a new market for an existing product.

 Find a new supply of resources that would enable the entrepreneur to
produce the product for less money.
 Use existing technology to produce an old product in a new way.
 Use an existing technology to produce a new product.
 Finally, use new technology to produce a new product.
Example
 Chester Carlson
 Chester Carlson, a physicist, inventor, and patent attorney, spent ten
years searching for a company to develop and manufacture a new
photographic machine for office use to make copies faster and for less
money. Carlson went on to found the XEROX Corporation, the
company that made the first photocopy machines. Can you imagine a
school or office today without a photocopy machine? The companies
that Carlson approached with his invention missed the opportunity to
invest. For Carlson, it was the beginning of a technology product
development company that has been granted more than 50,000
patents worldwide.
 Creative Destruction
 (Schumpeter)
• Entrepreneurship, as a process, results in the ‘creative
destruction’ of existing products (good or services) or
methods of producing them, and replaces them with new
products/production methods

• Entrepreneurial firms value individual innovations and

the ability to continuously innovate across time
THREE ‘I’s
Three types of innovation activities according to Schumpeter
● Invention
● Innovation
● Imitation

THREE WAYS TO INNOVATE

● Internal - autonomous vs. induced

● Cooperative strategies (e.g., strategic alliances)
● Acquisitions
 • The act of creating or
Invention developing a new product or
process
• Brings something new into
being
• Technical criteria determine the
success of an invention
 • Process of creating a
commercial product from an
invention
• Brings something new into use
Innovation • Commercial criteria determine
the success of an innovation
 • Adoption of an innovation by similar firms
• Usually leads to product or process
standardization
• Products based on imitation often are
offered at lower prices and without as
many features
• Results of imitation
• Product or process standardization
• Products made with fewer features
Imitation • Products offered at lower prices
 THE IMPORTANCE OF INNOVATION

• Innovation is the “specific function of entrepreneurship”

(Drucker)

• It is a source of competitive success, especially in turbulent

and highly competitive environments

• For global markets, innovation is key for competitive

advantage
• Entrepreneurship is the link between invention and
innovation

• Inventions are easier than commercializing them:

roughly 80% of R&D occurs in large firms, but
these same firms produce fewer than 50% of the
patents

• Note: Google Labs was created to facilitate the

transition from invention to innovation
 Entrepreneurial characteristics:

• Highly motivated
• Willing to take responsibility for their projects
• Passionate
• Optimistic
• Emotional about the value and importance of their
innovation-based ideas
• Able to deal with uncertainty
• More alert to opportunities than others
• Good social skills and plan exceptionally well
INTERNATIONAL ENTREPRENEURSHIP

● Firms creatively discover and exploit opportunities outside

their domestic markets in order to develop a competitive
advantage

● Entrepreneurship has become a global phenomenon as

internationalization typically leads to improved firm
performance

● EXAMPLE - Large multinational companies (MNCs)

generate roughly 54% of their sales outside their domestic
market, and more than 50% of their employees work outside
of the home country
 Risks include:

• Unstable foreign currencies

• Inefficient markets

• Insufficient infrastructures to support businesses

• Limitations on market size and growth

Rates of entrepreneurship differ across countries due to:

● 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
versus group ownership of innovation is required
● Level of investment outside of the home country made by new
ventures
● Internationally diversified firms are generally more innovative
https://
saylordotorg.github.io/text_international-business/s15-03-business-entrepreneurship-acro.html
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.
INTERNAL INNOVATION
Most innovation is due to research and development (R&D):
• Investments are uncertain

• Often not achieved in the short term

• Firms innovate internally in two ways

1. Autonomous strategic behavior
2. Induced strategic behavior
 • Radical Innovation -creates
AUTONOMOUS new knowledge/processes
STRATEGIC
BEHAVIOR

INDUCED • Incremental Innovation -

small improvements in
STRATEGIC current product
BEHAVIOR
• To successfully commercialize inventions, firms may
need to cooperate and integrate knowledge and
resources
• 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 via cooperative relationships, firms
must share their knowledge and skills – strategic
alliances and joint ventures allow this to occur
 - New Ventures is a global program that provides
services for the development of
small and medium enterprises (SMEs) whose main goal
is to generate a positive environmental or social
change within their own communities.

New Venture's reach varies in each country, but every

Center offers free development services that provide
SMEs with management tools and access to capital in
order to make them grow and increase their positive
impact.
 A joint venture (JV) is a business entity created by two or more parties,
generally characterized by:

- shared ownership,

- shared returns and risks,

- and shared governance.

Companies typically pursue joint ventures for one of four
reasons:

- to access a new market, particularly emerging markets;

- to gain scale efficiencies by combining assets and
operations;
- to share risk for major investments or projects;
- to access skills and capabilities
STRATEGIC ALLIANCES

Strategic alliance: collaboration with a partner firm for

international market entry

• Involves shared risks and resources

• Facilitates development of core competencies
• Involves fewer resources and costs required for entry
• May involve possible incompatibility, conflict, or lack of
trust with partner