PART 3:
STRATEGIC ACTIONS:
STRATEGY IMPLEMENTATION
Chapter 13
Strategic
Entrepreneurship
THE STRATEGIC MANAGEMENT
PROCESS
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
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IMPORTANT DEFINITIONS
 Organisational culture refers to the complex set of ideologies, symbols
and core values shared throughout the firm and that influence how the
firm conducts business.
 Strategic entrepreneurship refers to entrepreneurial actions through a
strategic perspective.
 Corporate entrepreneurship is the use or application of
entrepreneurship within an established firm.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
ENTREPRENEURSHIP AND
ENTREPRENEURIAL OPPORTUNITIES
 Entrepreneurship is concerned with:
 discovery of profitable opportunities
 exploitation of profitable opportunities.
 Entrepreneurship is the process by which individuals or groups
identify and pursue entrepreneurial opportunities without the
immediate constraint of the resources they currently control.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
ENTREPRENEURSHIP AND
ENTREPRENEURIAL OPPORTUNITIES
 Entrepreneurial opportunities:
 opportunities others do not see or for which they do not
recognise the commercial potential.
 conditions in which new products or services can satisfy a need in
the market.
 exist as a result of competitive market imperfections and
unevenly distributed information
 are studied at the level of the individual firm
 may be the economic engine driving many nations’ economies in
the global competitive landscape.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
ENTREPRENEURSHIP AND
ENTREPRENEURIAL OPPORTUNITIES
 Creative destruction
 As a process, entrepreneurship results in the ‘creative
destruction’ of existing products (goods or services) or methods
of producing them, and replacing them with new products/
production methods.
 Entrepreneurial firms value individual innovations and the ability
to continuously innovate over time.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INNOVATION
 Three types of innovation activities according to Schumpeter:
 Invention
 Innovation
 Imitation
 Three ways to innovate:
 Internal innovation (autonomous vs induced)
 Cooperative strategies (e.g. strategic alliances)
 Acquisitions
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INNOVATION
 According to Drucker, innovation is the ‘specific function of
entrepreneurship’.
 It is ‘the means by which the entrepreneur either creates new wealthproducing resources or endows existing resources with enhanced
potential for creating wealth’.
 It is a source of competitive success, especially in turbulent and highly
competitive environments.
 For global markets, innovation is key for competitive parity at a minimum,
much less for competitive advantage.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INNOVATION:
INVENTION
 The act of creating or developing a new
product or process
 Brings something new into being
 Success of an invention determined by technical
criteria
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INNOVATION:
INVENTION
INNOVATION
 Process of creating a commercial product
from an invention
 Brings something new into use
 Success of an invention determined by
commercial criteria
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INNOVATION:
INVENTION
INNOVATION
IMITATION
 Adoption of an innovation by similar firms
 Usually leads to product or process standardisation
 Products based on imitation often offered at lower
prices and without as many features
 Results of imitation
 Product or process standardisation
 Products with fewer features
 Products offered at lower prices
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
THE IMPORTANCE OF INNOVATION
 Entrepreneurship is the link between invention and
innovation.
 Inventing is easier than commercialising inventions: roughly
80 per cent of R&D occurs in large firms, but these same firms
produce fewer than 50 per cent of the patents.
 Note: Google Labs was created to facilitate the transition from
invention to innovation.
 Especially in the USA, innovation is the most critical of the
three types of innovative activities.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
ENTREPRENEURS
 Entrepreneurs refers to individuals, acting independently or as
part of an organisation, who see an entrepreneurial opportunity
and then take risks to develop an innovation to exploit it.
 The entrepreneurial mind-set values uncertainty in the
marketplace and seeks to continuously identify opportunities
with the potential to lead to important innovations.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Highly
motivated
ENTREPRENEURS
Excellent
Planning
skills
Willing to
take
responsibility
for their
projects
Good social
skills
Passionate
Entrepreneurial
characteristics
Alert to
opportunities
Optimistic
Able to deal
with
uncertainty
Entrepreneurial
mind-set
Emotional
about the
value and
importance
of their ideas
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNATIONAL ENTREPRENEURSHIP
 Firms creatively discover and exploit opportunities outside their
domestic markets in order to develop a competitive advantage.
 Example: Large multinational companies generate roughly 54 per cent
of their sales outside their domestic market, and more than 50 per cent
of their employees work outside of the home country.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNATIONAL ENTREPRENEURSHIP
 Risks include:
 unstable foreign currencies
 inefficient markets
 insufficient infrastructure to support businesses
 limitations on market size and growth
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNATIONAL ENTREPRENEURSHIP
Rates of entrepreneurship differ across countries because of:
 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
 top executives with international experience.
 Internationally diversified firms are generally more innovative.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNAL INNOVATION
 Firms take deliberate efforts to develop inventions and innovations
within the organisation, selecting from several types of innovation
and the specific processes through which each type is produced.
 Most innovation is due to R&D.
 The outcomes of investments are uncertain and often not achieved in
the short term.
 Firms innovate internally in two ways:
 autonomous strategic behaviour
 induced strategic behaviour.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION
AUTONOMOUS
STRATEGIC
BEHAVIOUR
INDUCED
STRATEGIC
BEHAVIOUR
the numberand
of aradical
firm’s employees
 Reduction
Facilitatesinincremental
innovation
in the number
of its operating units, but it
 and
Primarily
radical innovation
does not change the essence of the business
 Facilitates incremental and radical innovation
 Primarily incremental innovation
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Incremental innovation:
Radical innovation:
 is evolutionary and linear
 is common
 builds on existing knowledge
bases and provides small
improvements in current
product lines/processes.
 is revolutionary and nonlinear
 is rare due to difficulty and risk
 generates significant
technological breakthroughs
and creates new
knowledge/processes
 requires creativity.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION
Incremental innovation:
Radical innovation:
 results from deliberate efforts
 primarily involves induced
strategic behaviour
 can create value.
 results from deliberate efforts
 strong potential to lead to
significant growth in revenues
and profits
 primarily involves autonomous
strategic behaviour
 can create value.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNAL INNOVATION:
Internal corporate venturing refers to the set of activities firms use to develop
internal inventions and innovations, both autonomous and induced.
AUTONOMOUS
STRATEGIC
BEHAVIOUR
 Bottom-up process
INDUCED
STRATEGIC
BEHAVIOUR
 Top-down process
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNAL INNOVATION:
AUTONOMOUS STRATEGIC BEHAVIOUR
 Autonomous strategic behaviour is a bottom-up process in which
product champions pursue new ideas, often through a political
process, to develop and coordinate the commercialisation of a new
good or service.
 A product champion is an individual with an entrepreneurial vision of a new
good or service who seeks to create support in the organisation for its
commercialisation.
 Autonomous strategic behaviour is focused on the firm’s knowledge
and resources.
 Knowledge must be continuously diffused throughout the firm.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
INTERNAL INNOVATION:
INDUCED STRATEGIC BEHAVIOUR
 Induced strategic behaviour is a top-down process whereby a firm’s
current strategy and structure foster product innovations that are
closely associated with that strategy and structure.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
IMPLEMENTING INTERNAL INNOVATIONS
 An entrepreneurial mind-set is:
 required for internal corporate ventures
 a viewpoint that values uncertainty in the marketplace and seeks to
continuously identify opportunities with the potential to lead to important
innovations.
 Value creation through internal innovation processes
 Cross-functional product development teams
 Facilitating integration and innovation
 Creating value from internal innovation
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
IMPLEMENTING INTERNAL INNOVATIONS:
CROSS-FUNCTIONAL PRODUCT DEVELOPMENT TEAMS
Cross-functional
product development
team
 Teams aim to integrate and coordinate
activities and apply knowledge from
different functional activities to maximise
innovation.
 New product development processes can be
completed more quickly.
 Products can be more easily commercialised
when cross-functional teams work
effectively.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
IMPLEMENTING INTERNAL INNOVATIONS:
CROSS-FUNCTIONAL PRODUCT DEVELOPMENT TEAMS
Cross-functional
product development
team
 Horizontal structures support the use of
cross-functional teams.
 There are two primary barriers to success:
 independent frames of reference of
members with distinct specialisations
 organisational politics that create
competition for resources and interunit conflict.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
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IMPLEMENTING INTERNAL INNOVATIONS:
FACILITATING INTEGRATION AND INNOVATION
 Shared values:
 are framed around the firm’s strategic intent and mission
 become the glue that promotes integration between functional units
 Effective leadership:
 sets goals (e.g. integrated development and commercialisation of new goods and
services) and allocates resources
 Effective communication
All are important to successfully innovate and facilitate cross-functional integration.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
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IMPLEMENTING INTERNAL INNOVATIONS:
CREATING VALUE FROM INTERNAL INNOVATION
 Requires an entrepreneurial mind-set
 Manager support
 Cross-functional teams
 Effective leadership and shared values
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
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INNOVATION THROUGH COOPERATIVE STRATEGIES
 To successfully commercialise 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.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
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INNOVATION THROUGH ACQUISITIONS
 Innovation through acquisitions allows a firm to:
 rapidly extend its product line
 increase its revenues.
 A key risk is that a firm may substitute its ability to buy innovations
for its ability to produce innovations internally.
 A firm may lose:
 its intensity in R&D efforts
 its ability to produce patents.
 Research demonstrates that subsequent to acquisitions, firms
introduce fewer new products into the market.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CREATING VALUE THROUGH STRATEGIC ENTREPRENEURSHIP
Entrepreneurial ventures:
Larger, well-established firms:
 Produce more radical
innovations
 Possess strategic flexibility and
willingness to take risks
 Do more opportunity seeking
 Must learn how to gain a
competitive advantage
(advantage-seeking
behaviours).
 Produce more incremental
innovations
 Possess more resources and
capabilities to exploit identified
opportunities
 Must re-learn how to identify
entrepreneurial opportunities
(opportunity-seeking skills).
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CREATING VALUE THROUGH STRATEGIC ENTREPRENEURSHIP
The objective is to help firms develop successful incremental and radical
innovations. To do this, firms must:
 be flexible and willing to take risks
 identify and exploit opportunities with sufficient resources and
capabilities to launch strategic actions
 sustain a competitive advantage while identifying and exploiting
opportunities
 foster an entrepreneurial mind-set among managers and employees
 emphasise resource management, particularly human capital and
social capital
 seek to enter and compete in international markets.
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, Competitiveness and Globalisation, 7th Edition. © 2021 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.