Strategic Entrepreneurship: Creating Value for Individuals, Organizations, and Society

Author(s): Michael A. Hitt, R. Duane Ireland, David G. Sirmon and Cheryl A. Trahms
Source: Academy of Management Perspectives , May 2011, Vol. 25, No. 2 (May 2011), pp.
57-75
Published by: Academy of Management

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2011 Hitt, Ireland, Sirmon, and Trahms 57

ARTICLES

Strategic Entrepr
Creating Value for Indivi

by Michael A. Hitt, R. Duane Ireland, David

Executive Overview
The foci of strategic entrepreneur
disciplines such as economics, psychol
including organizational behavior an
strategic management and entrepre
input-process-output model to extend
inputs into SE, such as individual kno
processes that are important for SE a
wealth for stockholders, and creatin
Individual entrepreneurs also benef
satisfaction and fulfillment of person
importance. Therefore, we incorporat
neurs.

individuals, organizations, and/or society. This

cant practical relevance in the current and means that SE involves actions taken to exploit
An projected
important economicscholarly
environments question
is how with signifi current advantages while concurrently exploring
firms can create value, an end goal of both stra new opportunities that sustain an entity's ability
tegic management and entrepreneurship (Bruyat to create value across time. The need to under
& Julien, 2001; Meyer, 1991). In particular, how stand how new ventures can achieve and sustain
do firms create and sustain a competitive advan success by exploiting one or more competitive
tage while simultaneously identifying and exploit advantages and how large established firms can
ing new opportunities? This is the primary ques become more entrepreneurial provides incentives
tion on which strategic entrepreneurship (SE) is to theoretically explain and empirically explore
based, placing it at the nexus of strategic man the SE construct.
agement and entrepreneurship. Thus, SE is con Work on SE began in earnest early in the 21st
cerned with advantage-seeking and opportuni century (Hitt, Ireland, Camp, & Sexton, 2001;
ty-seeking behaviors resulting in value for Ireland, Hitt, Camp, &. Sexton, 2001). Ireland,

* Michael A. Hitt (mhitt@mays.tamu.edu) is Distinguished Professor; Joe B. Foster '56 Chair in Business Leadership, Management
Department, Mays School of Business, Texas A&M University.
R. Duane Ireland (direland@mays.tamu.edu) is Distinguished Professor, Conn Chair in New Ventures Leadership, Management Depart
ment, Mays School of Business, Texas A&M University.
David G. Sirmon (dsirmon@mays.tamu.edu) is Pamela M. and Barent W. Cater '77 Faculty Research Fellow and Assistant Professor,
Management Department, Mays School of Business, Texas A&M University.
Cheryl A. Trahms (ctrahms@mays.tamu.edu) is a Ph.D. Student and Research Assistant, Management Department, Mays School of
Business, Texas A&M University.

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 58 Academy of Management Perspectives May

Hitt, and Sirmon (2003) developed

evolves with the purpose of achieving an array of an initial
model of SE with four
objectives key
that are important dimensions:
to a firm's stakehold (1) the
ers. Hitt, culture,
entrepreneurial mindset, Ireland, and Hoskisson (2011, p.and 6) leadership,
(2) the strategic management
defined strategic management as "theof
full set of organizational
resources, (3) application ofand actions
commitments, decisions, creativity,
required for and (4)
development of innovation.
a firm to achieve strategicBased
competitiveness and on additional
research and critical examination of the SE con earn above-average returns." With a strong focus
on outcomes, Makadok and Coff (2002) sug
struct, Kyrgidou and Hughes (2010) suggested
that this model lacked the robustness required gested
to that strategic management's purpose is to
positively influence the firm's ability to gener
capture the gestalt of SE. Supporting this assertion
is recent evidence suggesting that SE is broader ate
in profits.
scope, multilevel, and more dynamic (Chiles,Strategic management scholars seek to under
stand the causes of performance differentials
Bluedorn, & Gupta, 2007; Hitt, Beamish, Jackson,
& Mathieu, 2007; Rindova, Barry, & Ketchen, across firms (Ireland et al., 2003; Schendel &
2009) than was originally conceptualized. Hofer, 1978). Effective competitive positioning is
To contribute to the continuing development
a primary factor influencing a firm's ability to
of this young and dynamic field of inquiry requirescreate value and wealth for stakeholders and the
broader society (Ketchen, Ireland, & Snow, 2007;
a richer model of SE. Thus, we extend the original
SE model to incorporate a multilevel and broaderPorter, 1980). Similarly, the firm's idiosyncratic
domain (see Shepherd, 2011). The enhanced stock of resources influences efforts to achieve
model of strategic entrepreneurship presented these outcomes (Barney, 1991). Learning how to
herein integrates environmental influences, ex acquire, bundle, and leverage the firm's idiosyn
plains how resources are managed in the process cratic
of resources is critical to achieving a compet
SE to create value across time, and describes sev
itive advantage and creating value (Chen, 1996;
Sirmon, Hitt, & Ireland, 2007).
eral different outcomes, thereby providing a more
complete view of SE.
Entrepreneurship
The new model, discussions of resource orches
tration, and unique outcomes of SE produce Entrepreneurship
a is a developing discipline that
number of valuable and important questions has begun to blossom in recent years, yet there is
warranting scholarly examination to advance our
a lack of agreement on precisely what constitutes
knowledge about SE and its application in orgaentrepreneurship (Rauch, Wiklund, Lumpkin, &
nizations. Frese, 2009). One definition frames the activities
required for entrepreneurship to be engaged. In
Integration of the Relevant Research this context, Davidsson (2005, p. 80) offered what
he labeled as three partly overlapping views of
separate disciplines offering unique opportuni entrepreneurial activities: "(1) entrepreneurship is
Strategic management
ties for scholarly andthatentrepreneurship are
inquiry as well as insights starting and running one's own firm; (2) entrepre
inform managerial and entrepreneurial practice neurship is the creation of new organizations; and
(Schendel &. Hitt, 2007). As a foundation for SE, (3) entrepreneurship is ... the creation of new
we briefly summarize relevant research in these to-the-market economic activity." Criticizing the
two domains.
tendency for scholars to define the entrepreneur
ship domain strictly in terms of the entrepreneur
Strategic Management and what he or she does, Shane and Venkatara
Creating competitive advantages and wealth are man (2000, p. 218) offered a more expansive
at the core of strategic management (Chen, definition, saying that the "field of entrepreneur
Fairchild, Freeman, Harris, &. Venkataraman, ship [is] the scholarly examination of how, by
2010). Andrews (1971) defined corporate strategy whom, and with what effects opportunities to
as a pattern of organizational decisions that create future goods and services are discovered,

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2011
evaluated, and exploited." Thus, Shane and Ven
kataraman argued that entrepreneurship involves
sources of opportunities; the processes of discovery,
evaluation, and exploitation of opportunities; and
the set of individuals who discover, evaluate, and
exploit opportunities. Consistent with the Shane
and Venkataraman definition, Hitt et al. (2001, p.
480) defined entrepreneurship as "the identifica
tion and exploitation of previously unexploited
opportunities." Ireland et al. (2001, p. 51) ex
panded this definition primarily to include a focus
on wealth creation as an outcome of entrepreneur
ship: "We define entrepreneurship as a context
specific social process through which individuals
and teams create wealth by bringing together
unique packages of resources to exploit market
place opportunities."
However, to generate wealth first requires cre
ating value. Entrepreneurs create value by lever
aging innovation to exploit new opportunities and
to create new product-market domains (Miles,
2005). More specifically, "value creation is the act
of obtaining rents (widely defined as financial,
social, or personal) that exceed the total costs
(which may or may not include average rates of
return for a particular industry) associated with
that acquisition" (Bamford, 2005, p. 48). There
fore, generating wealth through value creation
is entrepreneurship's central function (Knight,
1921).
Strategic Entrepreneurship
As our discussion shows, strategic management
and entrepreneurship are concerned with creating
value and wealth. In the main, entrepreneurship
contributes to a firm's efforts to create value and
subsequently wealth primarily by identifying op
portunities that can be exploited in a marketplace,
while strategic management contributes to value
and wealth-creation efforts primarily by forming
the competitive advantages that are the founda
tion on which a firm competes in a marketplace.
Therefore, entrepreneurship involves identifying
and exploiting opportunities, and strategic man
agement involves creating and sustaining one or
more competitive advantages as the path through
which opportunities are exploited. Thus, both
strategic management and entrepreneurship "are
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Hitt, Ireland, Sirmon, and Trahms 59
concerned about growth, creating value for cus
tomers, and subsequently creating wealth for own
ers" (Hitt & Ireland, 2005, p. 228). A significant
amount of scholarship focuses on the need for firm
outcomes to create wealth only or primarily for
shareholders. SE expands the scope to which a
firm's wealth-creating outcomes can apply to mul
tiple stakeholders, including society at large
(Schendel & Hitt, 2007).
SE allows those leading and managing firms to
simultaneously address the dual challenges of ex
ploiting current competitive advantages (the pur
view of strategic management) while exploring for
opportunities (the purview of entrepreneurship)
for which future competitive advantages can be
developed and used as the path to value and
wealth creation. Because "concentrating on either
strategy or entrepreneurship to the exclusion of
the other enhances the probability of firm ineffec
tiveness or even failure" (Ketchen et al., 2007, p.
372), SE involves both entrepreneurship's oppor
tunity-seeking behaviors and strategic manage
ment's advantage-seeking behaviors and is useful
for all organizations, including family-oriented
firms (Sirmon & Hitt, 2003; Webb, Ketchen, &
Ireland, 2010). Relatively speaking, successfully
using SE challenges large, established firms to
learn how to become more entrepreneurial and
challenges smaller entrepreneurial ventures to
learn how to become more strategic.
An Input-Process-Output Model of Strategic
Entrepreneurship
land et al., 2003) and draw insights from pre
Here,
viouswe build
research on athe
to present initial
multilevel input model of SE (Ire
process-output model for the purpose of providing
a richer understanding of the SE construct. The
SE model we advance incorporates environmen
tal, organizational, and individual foci into the
dynamic process of simultaneous opportunity- and
advantage-seeking behaviors. When used effec
tively, these behaviors create value for societies,
organizations, and individuals.
The SE model presented in Figure 1 identifies
three dimensions: resource/factor inputs, resource
orchestration processes, and outputs. The first di
 60 Academy of Management Perspectives May

Figure 1
Input-Process-Output Model of SE

mension specifies the resources/factors serving as external environment and the firm affects perfor
the SE process inputs at different levels, including mance (Keats & Hitt, 1988) and long-term sur
environmental factors, organizational factors, and vival (Dess & Beard, 1984). In addition to the
individual resources. Second, we examine the SE perspectives associated with traditional organiza
related actions or processes in the firm, specifically tional theories such as ecological theory (Hannan
focusing on the orchestration of its resources and & Freeman, 1984, 1989) and evolutionary theory
the entrepreneurial actions that are used to pro (Winter, 2005), an entrepreneurial perspective of
tect and exploit current resources while simulta this relationship proposes that an organization
neously exploring for new resources with value and those within it influence the environment
creating potential. These actions occur primarily (Smith & Cao, 2007). Munificence, dynamism
at the firm level. Last, we examine outcomes, (and the uncertainty resulting from it), and inter
which vary across levels. Specifically, we focus on connectedness are important environmental fac
the creation of value for society, organizations, tors for SE.
and individuals. These benefits include societal
Environmental munificence facilitates acquir
enhancements, wealth, knowledge, and opportuing resources and identifying opportunities as well
nity. First, we discuss the inputs of the extended
as the ability to exploit the resources and oppor
SE model.
tunities to create competitive advantage. Organi
zations seek out environmental munificence,
Inputs: Resources/Factors
which refers to the level of resources in a partic
Environmental Factors
ular environment that can support sustained
The firm's external environment affects its abilitygrowth, stability, and survival (Dess &. Beard,
and the ability of individuals to discover or create 1984). Munificence allows firms to acquire re
opportunities and, subsequently, their ability tosources such as raw materials, financial capital,
exploit those opportunities as a foundation for labor, and customers (Aldrich, 1979; Castrogio
competitive success. The relationship between the vanni, 1991) and intangible assets such as an

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2011 Hitt, Ireland, Sirmon, and Trahms 61

industry's or geographic region's tacit knowledge identifying and exploiting new opportunities).
(Agarwal, Audretsch, &. Sarkar, 2007). However, research has shown that environmental
The munificence of an environment (e.g., geo dynamism has a positive relationship with new
graphic region) is context-specific for the firm. venture creation (Aldrich, 2000) and innovation
Moreover, entrepreneurially minded individuals through the stimulation of exploration (Wang <St
gain access to resources in the environment to Li, 2008).
generate competitive advantage and create value Gaglio and Katz (2001) suggest that individuals
by engaging in entrepreneurial bricolage. Baker who act entrepreneurially seek opportunities in
and Nelson (2005) identified three characteristics dynamic markets, using their knowledge stocks
that affect how perceptions of resources influence and ability to perceive and deal with uncertainty.
the successful interaction between a firm and its The ability to operate under conditions of uncer
environment. First, firms are idiosyncratic in what tainty may also be based on an individual's moti
they perceive to be value-creating resources. Sec vation and risk propensity (Baum & Locke, 2004).
ond, firms tend to gain differential benefits from Alternatively, radical innovations produced by
resources based on their leaders' creative judg entrepreneurial firms often serve as a catalyst for
ments and actions. Third, because of the nature of or at least contribute to more dynamic and poten
the first two attributes, firms can capitalize on tially more munificent environments.
resources that other organizations deem to have In dynamic environments, some firms use rela
less value-creating potential. Thus, even resource tionships to gain access to needed resources from
constrained environments can be perceived as partners and then bundle them to exploit oppor
munificent by some firms. An example is the tunities. In addition, firms may use cooperative
intangible assets that leak into the environment strategies such as alliances to build capabilities
when firms fail to commercialize knowledge they that facilitate the building of a competitive ad
hold (Agarwal et al., 2007). As knowledge is vantage. Theories of interconnectedness includ
rarely idiosyncratic to one organization, it is diffi ing networks and social capital explain the paths
cult to avoid leakage and protect against appro firms follow to build capabilities in this manner.
priation by competitors. This knowledge spillover Building on organizational learning, resource
allows individuals and firms to appropriate knowl based, and real options theories, Ketchen et al.
edge that can be used to create firm capabilities. (2007) argued that collaborative innovation, in
These capabilities are then used to gain a compet which large and small firms share ideas, knowl
itive advantage that subsequently leads to perfor edge, expertise, and opportunities, supports SE.
mance gains (DeCarolis & Deeds, 1999; Grant, Small firms are able to use creativity to create
1996), resulting in the economic growth of a unique innovation while minimizing the liabilities
region and the expansion of an industry (Agarwal associated with their small size and newness. Al
et al., 2007). ternatively, because of slack resources, large firms
The environment many firms face is inherently are able to explore opportunities outside their
dynamic, thereby producing uncertainty (Barnard, traditional domain and leverage existing business
1938). Uncertainty (and the willingness to bear practices in doing so.
uncertainty) (McMullen &. Shepherd, 2006) si
Organizational Resources
multaneously poses threats and reveals opportuni
ties. Because of uncertainty, the quality of infor Culture and top leadership are perhaps the re
mation available to firms and individuals is sources that are the most idiosyncratic to a specific
organization.
limited, reducing their ability to assess present and Effective leadership is required to
future environmental states. In addition,develop
an in and grow new ventures and to entrepre
ability to access robust information aboutneurially
condi lead established corporations. Leaders
tions in the external environment creates ambi understand the importance of developing and sup
guity during the strategic decision-making process
porting a culture through which the entrepreneur
ial actions necessary to achieve profitable growth
(e.g., decision makers lack adequate knowledge for

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 62 Academy of Management Perspectives May

are established (Kuratko,

cessIreland, Covin,
additional resources &.
and to build and Horns
leverage
capabilities to achieve
by, 2005). "[An] entrepreneurial a competitive
culture is advantage
one in
(Hitt, Lee, &. Yucel,
which new ideas and creativity are2002). Thus, specific social
expected, risk
skills influence
taking is encouraged, failure individuals' ability not
is tolerated, only to
learning
acquire knowledge
is promoted, product, process and and resources, but to create
administrative
innovations are championed, and continuous
and/or identify opportunities. Baron and Mark
man (2000, 2003)
change is viewed as a conveyor ofsuggest that social skills—for
opportunities"
(Ireland et al., 2003, p. example,
970). reputation
Thus,and expansion of social
entrepreneur
networks—play
ial leadership is the ability a significant roleothers
to influence in the successto
emphasize opportunity-seeking and
of individuals and their advantage
new ventures by attract
seeking behaviors (Covin & Slevin,
ing resources 2002).
such as financial capital and key
Entrepreneurial leaders employees.
create visionary scenar
ios that can be used to assemble and mobilize a In a specific context, evidence indicates that
supporting group in the firm that is committed toan entrepreneur's social skills and social networks
opportunity discovery and exploitation (Gupta,influence outcomes for both new ventures and
Macmillan, &. Surie, 2004). The leader and the established organizations (Baron & Tang, 2009;
organizational culture are interdependent; theyBatjargal et al., 2009). Additional evidence indi
are symbiotic, with the leader's judgments affect cates that within the firm, individuals with well
ing the organizational culture and cultural attrideveloped social skills who recognize or create
butes influencing a leader's future decisions andopportunities can gain acceptance for projects
actions. In this manner, an "entrepreneurial loop" that require cross-divisional resources through so
occurs between a leader's ability to identify an cial networks (Kleinbaum & Tushman, 2007).
opportunity and the attributes of organizational Actions taken to exploit an opportunity encour
culture that positively influence pursuing itage others in the organization to collaborate,
(Shepherd, Patzelt, &. Haynie, 2009). which in turn facilitates a social structure and
culture conducive to subsequent opportunity
Individual Resources
seeking behaviors.
Financial capital (a tangible resource) and social Human capital is the set of individuals' capa
and human capital (intangible resources) are necbilities, knowledge, and experience related to a task
essary to engage in SE (Ireland et al., 2003). and the ability to increase the "capital" through
Alone, financial capital is relatively less important learning (Dess &. Lumpkin, 2001). Chandler
than social and human capital for achieving, and(1962) wrote that of all resources available to
especially for sustaining, a competitive advantage;firms, human resources are perhaps the most im
however, financial capital is often crucial for acportant; thus, idiosyncratic human capital can be
quiring or creating the resources necessary to ex central to a new venture's survival (Baker, Miner,
ploit opportunities. For example, new ventures Easley, 2003) and an established firm's success.
and firms with stronger financial positions in earlyTacit knowledge is particularly important in iden
developmental stages are more likely to survive,tifying entrepreneurial opportunities (McGrath &
grow, and experience higher performance (ChadMacMillan, 2000) and in achieving a competitive
dad &. Reuer, 2009). In addition, established firms advantage (Coff, 2002). Individuals' knowledge,
with strong financial resources have slack, which skills, and abilities, along with their motivation
can facilitate the development of innovations and passion to perform, are important for a firm to
(Kim, Kim, &. Lee, 2008). exploit an opportunity and achieve an advantage
The firm's social capital is the sum of its inter as the sources of its long-term success.
nal social capital (relationships between individ The entrepreneurial mindset, composed of
uals) and its external social capital (relationshipsalertness, real option reasoning, and opportunity
between external organizations and individuals in recognition, facilitates rapid sensing to identify
the focal firm). It facilitates actions taken to acand exploit opportunities, even those that are

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2011 Hitt, Ireland, Sirmon, and Trahms 63

highly uncertain (McGrath & MacMillan, 2000). as unconventional risk taking, focused intensity,
Entrepreneurial alertness entails the ability to no and belief in a dream (Cardon, Wincent, Singh,
tice opportunities that have been hitherto over &. Drnovsek, 2009). Entrepreneurial leaders' ex
looked and to do so without searching for them pression of passion for the new venture can moti
(Kirzner, 1979). However, being alert is a neces vate employees to create new ideas, take risks, and
sary but insufficient condition to effectively en develop personal pride in the firm's goals. There
gaging in SE. In the SE framework, an individual fore, passion contributes to entrepreneurial suc
must respond to numerous economic changes and cess because of the commitment and effort gener
innovations in a dynamic (and uncertain) envi ated (Baum & Locke, 2004). Passion and the
ronment. To make decisions, one needs a frame commitment it engenders contribute to entrepre
work that helps to identify decision criteria, the neurial self-efficacy. Cassar and Freidman (2009)
available resources, and the value creation goals found that entrepreneurial self-efficacy has a sig
(Gaglio, 2004). Entrepreneurial cognition, or the nificant influence on the commitment of both
knowledge structures driving assessments of op personal time and capital to discover (or create)
portunities (Holcomb, Ireland, Holmes, & Hitt, and exploit entrepreneurial opportunities. For en
2009), helps to differentiate the degree of risk trepreneurial leaders, high self-efficacy often con
involved with various opportunities (Baron, 2007) tributes to enhanced revenue and employment
and thus to select the most appropriate one for the growth in the firm (Baum & Locke, 2004). Pas
new venture (or established organization). sion and entrepreneurial self-efficacy motivate en
Real options logic suggests that real assets pos trepreneurs to pursue and realize strategic and
sess the same characteristics as financial options entrepreneurial goals that are central to SE.
(Barney, 2002). This set of characteristics facili Alvarez and Barney (2007) argued that there
tates individuals' willingness to engage in risky are two theories of entrepreneurial action: discov
(yet carefully evaluated) entrepreneurial activity ery of existing opportunities and creation of new
through opportunity-seeking behavior. Real op opportunities. Thus, opportunity-seeking behav
tions have the potential to positively or negatively ior could involve being alert to existing opportu
influence opportunity- and advantage-seeking be nities or creating new opportunities. The tradi
haviors. The nature of factors in the external
tional perspective of the entrepreneurship process,
environment at a point in time (e.g., bankruptcy
focused on the discovery of an opportunity (Eck
hard & Shane, 2003), relies on a notion of cau
laws) determines the maximum potential down
sation. Two individuals may have the same char
side loss associated with a firm's risky investments,
while the upside potential of these investments acteristics
is and resources; however, environmental
commonly high. An entrepreneur-friendly bank
variation may lead only one of the two to identify
ruptcy law (i.e., one that allows reasonable
and exploit a particular opportunity (Alvarez &
conditions for continuing the new ventureBarney,
by 2010). Identifying existing opportunities
allowing the restructuring of debt) encouragesrequires
en the entrepreneurial mindset.
trepreneurial activity and economic developmentHowever, creating opportunities involves dif
(Lee, Peng, & Barney, 2007). Alternatively, ferent types of entrepreneurial actions: effectua
strong bankruptcy laws (e.g., ones that make tion
it and creativity. Effectuation is based on the
difficult to continue the new venture after declar
notion that firm growth relies on dynamic and
ing bankruptcy) deter individual and firm riskinteractive judgments in which the future is un
taking behaviors. predictable yet controllable through human ac
Goal setting is significantly influenced by an and the belief that the environment can be
tion,
enacted through choice (Sarasvathy, 2008). Thus,
individual's psychological factors. For example,
passion, which in an entrepreneurial contextcognitive
is ability to effectuate is used to create
reflected in the entrepreneur's devotion andopportunities
en in the environment and to achieve
thusiasm for a proposed business venture (Chen,short-term competitive advantages. Creativity af
fects the quality and quantity of innovations,
Yoa, &. Kotha, 2009), accounts for behaviors such

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 64 Academy of Management Perspectives May

strategy, or an entrepreneurial
shaping both existing capabilities strategy. Impor
for competitive
tantly, although each
advantage and entrepreneurial action and related subpro (Ire
opportunities
land et al., 2003). Creativity
cesses are useful,in heterogeneous
properly synchronizing the re
teams or organizations source orchestration actions
generally positively influences
produces at least
the realized outcomes.otherwise uncon
two outcomes. By connecting
An emerging
nected individuals, creative ideasbody ofare
empirical
moreevidence easily
sup
translated into products ports
(Obstfeld,
resource orchestration's2005),
validity asand
a meanscre
ative approaches may of be more
managing a firm's easily accepted
resources to gain maximum
(Shalley & Perry-Smith, value from2008). Acceptance
them. For example, Ndofor, Sirmon, of
creative approaches, in and He's (2011)
turn, results showed
fosters an thatentrepre
managerial
neurial culture in the firm and construction of actions mediate the resource/performance linkage.
market niches in the environment over time. These findings suggest the importance of the lead
Next, we describe the processes component of er's role in realizing the full potential from a firm's
the SE model. resources. In support, Sirmon, Gove, and Hitt
(2008) showed not only that leaders' context
Resource Orchestration Processes
specific resource bundling and deployment actions
Research indicates that competitive advantage re affect performance, but that the importance of
sults from controlling valuable and rare resources.their actions increases as rivals' resource portfolios
Yet, while control of such resources is necessary approach parity. However, leaders' actions must
for competitive advantage, leaders must take furbe comprehensive in synchronizing the various
ther actions for the advantages to be developed resource orchestration actions (Sirmon & Hitt,
and exploited and hopefully sustained over time 2009) while simultaneously addressing both capa
(Crook, Ketchen, Combs, & Todd, 2008; Grimm,bility strengths and weaknesses to realize compet
Lee, & Smith, 2006). Resource orchestration, anitive advantages that help them pursue future op
emerging stream of work that is grounded in re portunities (Sirmon, Hitt, Arregle, & Campbell,
source-based theory (RBT) and dynamic capabil2010).
ities literature, focuses attention on these actions Next, we discuss each major resource orches
(Sirmon, Hitt, Ireland, & Gilbert, 2011). Retration action within a strategic entrepreneurship
source orchestration is based primarily on the concontext.
ceptual work of Sirmon et al. (2007) and Helfat et
al. (2007). Structuring

Resource orchestration is concerned with the Among the three subprocesses of structuring
actions leaders take to facilitate efforts to effecquiring resources is arguably the most impor
tively manage the firm's resources. Primary among for young firms. Young firms often operate
these are actions to structure the firm's resource resource disadvantage (Mosakowski, 2002)
portfolio, bundle resources into capabilities, and must work to overcome it. Research indicates
leverage the capabilities to create value for cus the entrepreneur's "story" strongly affects y
tomers, thereby achieving a competitive advan firms' acquisitions of resources (Gartner, 2
tage for the firm. More specifically, structuring Martens, Jennings, and Jennings (2007) prov
includes acquiring, accumulating, and divesting evidence that capital infusion increases wh
resources; bundling involves stabilizing existing entrepreneur's narrative offers prospective i
capabilities, enriching current capabilities, and pi tors 1) an identity for the firm, 2) logic as to
oneering new capabilities. Leveraging requires a the firm will exploit its opportunity, and 3) i
sequence of actions including mobilizing capabil mation indicating how the firm's intended ac
ities to form requisite capability configurations, are appropriate for its current environment.
coordinating the integrated capability configura over, they concluded that an effective narra
tions, and deploying these configurations with a has significant influence, such that a chan
resource advantage strategy, a market opportunity narrative quality (what they termed a "un

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2011
change") increased investment by millions of dol
lars. Beyond capital investment, Zott and Huy
(2007) found that entrepreneurs' "symbolic ac
tions" speak loudly to a wide array of resource
providers. More specifically, they found that dem
onstrating personal credibility, professional orga
nization, achievement, and relational aptitude not
only resulted in higher levels of capital invest
ment, but also helped entrepreneurs attract tal
ented human capital and assemble a sufficient
customer base.
Firms may also find it necessary to build re
sources internally (accumulate) as well as divest
them. Divestment is an understudied phenome
non; however, it is critical in managing resources.
Recent research indicates that reducing weak
nesses may be more important for increasing per
formance than increasing a firm's strengths (Sir
mon et al., 2010). In addition, Morrow, Sirmon,
Hitt, and Holcomb (2007) provided evidence that
divestment can be especially useful when firms
attempt to recover from a performance crisis. Pre
sumably, the divested resources create a weakness
that when released removes a negative influence
on firm performance (Shimizu & Hitt, 2005).
Accumulating resources (knowledge, skills, repu
tation, etc.) often complements acquiring re
sources, thereby allowing firms to create unique
resource portfolios.
Bundling
Bundling resources to form capabilities requires
intentional actions. Often, capabilities are formed
within functions such as manufacturing and mar
keting. Bundling requires knowledge while pro
viding a rich learning context, especially tacit
learning. For example, Kor and Leblebici (2005)
found that bundling senior partners with less ex
perienced associates in law firms positively affects
performance. These results support Hitt, Bierman,
Shimizu, and Kochhar's (2001) suggestion that
bundling choices strongly affect the development
of tacit knowledge. Thus, the choices leaders
make regarding the bundling of resources to sta
bilize, enrich, or pioneer new capabilities are im
portant to achieving and sustaining a competitive
advantage (Lu, Zhou, Bruton, & Li, 2010).
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Hitt, Ireland, Sirmon, and Trahms 65
Leveraging
Leveraging actions move the firm from the poten
tial to create value to realizing value by deploying
the capabilities to achieve competitive advan
tages. Leaders mobilize, coordinate, and deploy
specific capabilities in particular market contexts
by choosing and implementing a particular strat
egy. Of equal importance to choosing the strategy
to follow is synchronizing the actions necessary for
leveraging. Recent empirical work demonstrates
that resource investment deviating from industry
norms negatively affects performance, unless that
deviation is synchronized with an appropriate le
veraging strategy (Sirmon & Hitt, 2009). When
matched to the appropriate strategy, greater in
vestment deviations (in either direction from in
vestment norms) lead to higher performance. Sup
porting these conclusions, Holcomb, Holmes, and
Connelly's (2009) results showed that synchroni
zation across the resource management processes
is vital to developing a competitive advantage.
For synchronization to occur, leaders require
sufficient information pertaining to the firm's ex
ternal environment and internal organization as
well as the ability to effectively process that in
formation. Sleptsov and Anand's (2008) research
suggested that having one without the other,
or—as is more likely the case—when such infor
mation is not balanced, performance is negatively
affected. Thus, feedback loops exist among struc
turing, bundling, and leveraging actions (Sirmon
et al., 2007). Although we discuss these actions
sequentially, in practice leaders can, and likely do,
perform them in an iterative process.
The choice of sequencing or iteration among
these actions may be based on the specific oppor
tunity being considered. For instance, Choi and
Shepherd (2004) found that the decision to ex
ploit an opportunity was influenced by several
factors, including knowledge of the customer,
knowledge of the underlying technology offered,
level of stakeholder support, and overall manage
rial experience. Moreover, an opportunity's at
tractiveness enhanced the effect of all of these
factors, especially managerial experience. Thus,
when potential entrepreneurs have a high level of
stakeholder support that addresses much of their
66 Academy of Management Perspectives May

turing they
resource acquisition concerns, his initial
may be relationsh
more
development
likely to begin the resource successfully
orchestration se
his actions.
quence with structuring critical personal compl
On the other
vatorknowledge
hand, an entrepreneur with and knowledge
aboutof
custhe
tomer needs may be more thelikely
relationship from
to begin with cont
a
tive with substantial equity
leveraging strategy and follow it with the bundling
and structuring actions him to appropriate
necessary nearly
to implement
the strategy. value he helped to create.
Thus, regardless of the m
Value Creation and Appropriation
copyrights, or negotiated
tion successfully
Regardless of the sequence, of intellectual propert
exploiting
an opportunity invitesresources
imitation is from competi
critical to the
that
tors. Several factors such as resource orchestration
causal ambiguity and
time diseconomies (Dierickx
cuss the&outcomes
Cool, 1989)
thatcan
resu
prevent or slow imitation; however, more proac
entrepreneurship.
tive actions can also discourage imitation. Copy
Outputs
rights and patent protection areof twoStrategic important Entrep
The use
barriers entrepreneurs can processes
to protect and or actions
fore
erate several
stall others from appropriating value from their potential out
ideas and resources (Burgelman
ultimate outcome & Hitt, is 2007).either In f
firm or achieving
fact, research in value appropriation competiti
and intellec
tual property protection value for customers
is growing rapidly, of an e
espe
time both of these outcomes
cially because policy and competitive changes in are intended to cre
the 1980s led to "patentate value for those (Ziedonis,
races" holding equity in the2004).
firm.
Research indicates that a firm's
Creating patenting
wealth for owners strat
is typically interpreted
as "financial
egies contribute several importantwealth," whichoutcomes
is a primary goal. to
entrepreneurship, including
However, owners/entrepreneurs
alliance partner may also achieve
selec
other forms
tion (Lavie, 2007) and IPO of wealth, such as "socioemotional
underpricing (Heeley,
Matusik, &. Jain, 2007),wealth"
among (Berrone, Cruz, Gomez-Mejia,
others. Even & Larraza
more
important, CeccagnoliKintana,
(2009) 2010) and
provided
personal happiness.
evidence
Yet we
also expect the outcome(s)
that patent protection increases a firm's of SE toability
benefit soci to
appropriate rents from innovation.
ety. Importantly, Moreover,
increasing the wealth of owners
nonconventional patenting strategies
should contribute such
positively to additional eco as
"preemptive patenting" can (e.g.,
nomic activity generate market
job creation, technological
power for firms that are following
advancement, such
and economic stabilitystrategies
and growth)
to avoid legal battles and other
and thereby "hold-up"
benefit society, con
and there is potential
for other social benefits
cerns that may be present in technologically in as well. To achieve these
tense industries (Ziedonis, 2004).
longer term and major outcomes, several interim
For the nascent firm or entrepreneur,
outcomes are likely to be critical, patenting
such as creating
is not the only means tonew protect intellectual
technologies or developing prop
innovations with
erty. Coff (2011) described how
value-creating Tony
potential. Fadell,
In addition, the
an interim
driver behind Apple's iPod, protected
and critically important outcomehisis interests
achieving a
when negotiating his employment relationship
competitive advantage. In fact, long-term survival
with Apple. Fadell first istried toa firm
unlikely for create what
that is unable was
to achieve at to
become the iPod within
least his previous
competitive employer,
parity. Innovation often con
Philips Electronics, and tributes
then to within his own
a competitive advantage, failed
but there are
venture before joining Apple.
other Fadell
activities necessary was able
to achieving such an to
protect the assets he brought to Apple
advantage (e.g., managing resourcesby
wiselystruc
and

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2011 Hitt, Ireland, Sirmon, and Trahms 67

effectively as described in the previous section). advantage. The latter actions (incremental inno
Below, we discuss several of these outcomes. vation and imitation by competitors) tend to
move the market toward equilibrium (Kirzner,
Individual Benefits
1973).
Individual entrepreneurs gain value when engag To create a novel product often requires cre
ing in strategic entrepreneurship. For example, ativity and entrepreneurial approaches (Ward,
they gain satisfaction in developing an indepen 2004)- In fact, Ward (2004) suggested that suc
dent business and creating value for customers. In cessful new ideas frequently achieve an effective
addition, increases to the entrepreneur's financial balance between novelty and attributes that are
wealth result from venture success. Thus, starting familiar but attractive to customers. Creating
a new venture and operating it successfully likely novel (radical) innovation often requires a signif
satisfies several of the entrepreneur's needs, in icant investment of time, effort, and frequently
cluding self-actualization. financial capital as well. To produce novel inno
Individual entrepreneurs also learn when they vations, firms often must shift their focus from
develop and implement a new venture; as a result, current products to future technologies and prod
they build their personal knowledge stocks. Baron ucts (Sood & Tellis, 2005). Because firms rarely
and Henry (2010) argued that enhanced cognitive have the resources needed to achieve this type of
resources, which entrepreneurs acquire through innovation internally, they frequently search ex
sustained deliberate practice, strongly influence ternal sources to locate them. To do so, they may
the success of their subsequent ventures. Accord need to develop networks of partners that provide
ing to Baron and Henry, deliberate practice en inputs to help develop the innovations (Hughes,
tails intense, persistent, and highly focused efforts Morgan, & Ireland, 2010), requiring them to be
to improve current performance. In taking these come highly proficient at managing innovation
actions, entrepreneurs' knowledge stocks and networks (Dhanaraj & Parkhe, 2006). Frequently,
other cognitive resources (e.g., perceptual acuity, new venture firms are more creative and thus can
memory) are enhanced, helping them to more develop more novel innovations, while estab
accurately recognize, evaluate, and exploit busi lished firms are effective in adding new features to
ness opportunities. This process can also apply to and improving their current products to maintain
entrepreneurial leaders in established firms. an advantage in the market. Therefore, partner
ships between new venture firms and larger estab
Organizational Benefits: Technology and Innovation lished firms can be productive because of the
Creating new technology and innovation is cru complementary capabilities held by each. In this
cial for many firms, regardless of their size or age. way, the partnership helps the firms balance ex
Of course, for a new entrepreneurial firm, it may ploration and exploitation.
be critical to break into an established market or Following a recent trend, many firms are build
to create a new market, developing a product that ing relationships with university technology de
is highly differentiated from existing products and velopment programs as an external source for new
one that creates substantial value for customers. technologies and products. Simultaneously, an in
Often, this new product will be based on a highly creasing number of universities have built tech
novel, or what is sometimes referred to as a radi nology transfer programs in which they develop
cal, innovation. In fact, the disequilibrium to new technologies and transfer them to the private
which Schumpeter (1942) referred requires a sector for commercialization. As such, the univer
novel innovation. Yet after firms have captured a sity becomes a source of R&D for these businesses
market-leading position with an innovative prod (Markman, Phan, Balkin, <St Gianiodis, 2005). In
uct, they often then try to incrementally improve these cases, the university generally is paid an
that product in order to stay ahead of competitors initial fee for the technology and/or retains a
that are trying to imitate and improve the product percentage ownership in the technology/product.
to gain competitive parity or, ideally, competitive Finally, some firms use acquisitions to gain

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 68 Academy of Management Perspectives May

access to new technologies and

Lumpkin, new
2009; Zahra, highly
Rawhouser, valu
Bhawe, Neu
able innovations (Makri,baum, &Hitt, &Essentially,
Hay ton, 2008). Lane, social2010).
entre
Such acquisitions are common inorganizations
preneurs establish the pharmaceu
to meet social
tical industry and in other high-technology
needs in indus
ways that improve the quality of life and
tries such as software development. Acquisitions
increase human development over time (Zahra et
al., a
are regularly practiced by 2008) while benefitingof
number owners in ways that
technology
continue
oriented firms, including revenue flow and allow
Microsoft andthem Cisco,
to earn a
with the intent of gaining access
return to new
on their investment. software
Organizations created
ideas and technologies. to engage in social entrepreneurship—and, more
Firms seeking to developbroadly,new technologies
corporations engaging in socially respon
sible actions—serve
must currently hold, develop, or have a variety
accessof stakeholders.
to the
necessary and relevant scientific knowledge.
Stakeholders represent a broader view ofSci those
ence or scientific knowledge
affectedprovides the
by an organization (notbase
limited for
to own
developing and commercializing new technology
ership). Thus, stakeholder theory supports much
of this
(Makri et al., 2010). The research concerned
recent with social entre
emphasis on
nanotechnologies is a prime example
preneurship of
(Mahoney, 2010; highly
Surroca, Tribo, &
Waddock, 2010).
popular and potentially valuable work that repre
sents strategic entrepreneurial activity
Yet beyond the in many
specific entrepreneurial activi
industrial and service sectors (Woolley
ties designed &. social
to serve certain Rottner,
needs, in line
2008). An additional benefit
with SE andof developing
stakeholder theory, broadernewperspec
technologies and innovation is
tives can be the to
employed creation of of
achieve other types
new knowledge, which in outcomes,
turn such frequently provides
as attempts to create new compa
new market opportunities (to
nies that introduce
enrich a new
the natural environment and/or
product and even to create a new
are designed market)
to overcome even
or limit others' negative
across industries (Woolley, 2010). Such innova
influences on the physical environment. For ex
tion or technology and ample,
theentrepreneurial
additional effortsvaluable
to harness wind
knowledge spillover from developing the technol
power could have major long-term benefits to
ogy and/or innovation contribute to aaclean
society by providing competitive
energy source (Sine &
advantage. Lee, 2009). In addition, novel innovations could
be used to address a number of environmental
Societal Benefits
problems (Adner &. Kapoor, 2010). Many firms
Certainly, increasing owners' wealth can have may take actions to reduce the negative influences
positive societal benefits because it injects more their operations typically have on the environ
financial capital into the economy and thereby ment with the hope of creating a positive greening
promotes economic growth (Agarwal et al., 2007). effect (Delmas & Montes-Sancho, 2010).
Indeed, many have argued that entrepreneurial Some have argued that entrepreneurial activi
activity is a major contributor to economic devel ties targeting areas of social need could lead to a
opment and growth, creating new jobs and en marketization of nonprofit organizations in ways
hanced market valuations (Baumol &. Strom, that do not truly satisfy societal needs (Eikenberry
2007). Yet entrepreneurial activity can provide & Kluver, 2004). Although this concern is not
other benefits to society as well. without foundation and marketization could have
A new area of research referred to as social negative outcomes, there are a number of positive
entrepreneurship examines how entrepreneurs de examples of entrepreneurial efforts that provide
velop enterprises with the intent of helping soci major benefits to society, often substantially ex
etal members, often those who are underprivileged ceeding public organizations' capabilities to satisfy
and have low incomes (Kistruck, Webb, Ireland, the needs (Hitt, 2005). For example, the KIPP
& Sutter, 2011). This focus has become a signif (Knowledge Is Power Program) charter schools
icant and growing research area (Short, Moss, & demonstrate how entrepreneurial efforts can gen

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2011
erate significant benefits for society that exceed
the benefits created by public educational organi
zations, providing education from prekindergarten
through 12th grade. The organization uses a num
ber of motivational tactics and largely serves
children from underprivileged families. It has
produced phenomenal results. The educational
program offered is one of intense communal focus
on specific goals, and the intent is to effectively
prepare and encourage students to attend college
after they graduate. In fact, 85% of those gradu
ating from KIPP schools enter college—compared
with approximately 40% of low-income students
nationally who enter college after graduating from
high school (Peterson, 2010).
Entrepreneurial activity can also have other
societal benefits. For example, an enhanced focus
on and resources allocated to entrepreneurial ac
tivity could increase the opportunities for women
to pursue entrepreneurial undertakings. In fact, if
the limitations are loosened and barriers to engag
ing in entrepreneurial activity for women and
other disadvantaged groups are overcome, the re
sulting growth in entrepreneurial activity could
eventually facilitate positive societal change by
empowering more women and individuals from
underprivileged families to become entrepreneurs
and to gain access to the economic benefits that
flow from successful entrepreneurial activities
(Calas, Smircich, & Bourne, 2009). Thus, overall,
entrepreneurial activity can help to build new
economic, social, institutional, and cultural envi
ronments and thereby provide significant benefits
to society (Rindova et al., 2009).
Discussion and Conclusions
ments that have become increasingly common
Theproduce
dynamic and complex
multiple challenges competitive environ
for firms seeking
to create value and wealth. Uncertainty and am
biguity are but two of the outcomes in the current
business environment. Strategic management
and entrepreneurship are organizational processes
firms use to reduce and/or take advantage of un
certainty and ambiguity and create more value
and wealth. In essence, the intent of strategic
management is to develop and successfully exploit
competitive advantages. Increasingly, the need to
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Hitt, Ireland, Sirmon, and Trahms 69
operate internationally, the necessity of making
ethical decisions, and the importance of recogniz
ing the criticality of consumers for successful strat
egies influence the decisions and actions the firm
takes to form and exploit competitive advantages.
Entrepreneurship is concerned with recogniz
ing opportunities that when effectively exploited
through the firm's competitive advantages lead to
enhanced value and wealth. Opportunities to pro
duce innovative goods and services that create
value for customers often are a product of market
imperfections. Because competitors will eventu
ally determine how to imitate a firm's value-cre
ating competitive advantages, continuous innova
tion is the source of sustained value and wealth
creation over time.
Strategic entrepreneurship allows the firm to
apply its knowledge and capabilities in the current
environmental context while exploring for oppor
tunities to exploit in the future by applying new
knowledge and new and/or enhanced capabilities.
To be effective, SE demands that firms achieve a
balance between the opportunity-seeking behav
iors of "entrepreneurship" and the advantage
seeking behaviors associated with "strategic man
agement." To a degree, the entrepreneurship part
of SE requires flexibility and novelty, while the
strategic management part seeks stability and pre
dictability. However, achieving this balance is
challenging because firms have finite resources,
meaning that trade-offs often must be made re
garding the amount of resources allocated to ex
ploiting current competitive advantages and those
allocated to exploring for opportunities and new
sources of advantage for the future. Achieving this
balance requires an organizational structure capa
ble of supporting the twin needs of exploitation
and exploration. Future research should seek to
clearly specify the characteristics of such a struc
ture. This type of structure likely needs the attri
butes of an ambidextrous organization that allow
it to simultaneously explore and exploit (Benner
&. Tushman, 2003). The most effective balance
between exploring and exploiting may be partially
dependent on the type of competitive environ
ment in which the firm exists. Future research
should examine the extent to which the compet
itive environment moderates the relationship be
70 Academy of Management Perspectives May

tween the balance achieved

bothbetween exploitation
advantage- and opport
and exploration and the iors
firm's ability
within to create
a single organiz
value over time. what actions are required for
To be sustained over time, even nonprofit
and especially sustain en a com
trepreneurial ventures such as KIPP must
As described herein, SE is a develop
and maintain a competitive advantage.
in which resources For may exam exist
ple, if KIPP charter schools were not better
at the individual, organizatio than
their public counterparts,The
they would be unable
organization bundles to th
sustain their activity. Ifcapabilities
they provide and no thenviable levera
value for
benefits to customers beyond what customers
competitors (Sirmo
provide, they are unlikely outcomes
to survive. of these activities c
Likewise,
large established firms often have slack
individuals resources
(entrepreneurs,
that have accrued fromtional successful
employees, operationscustomers,
and society.
across time. Yet if these large organizations Yet very fail to little
engage in opportunity-seeking
crosses behaviors,
these levels. an Most
en e
trepreneurial firm (or asearch focusescompetitor
large on either the individualacting
or the
organizational level.
entrepreneurially) will introduce More research
a better is needed to
product
that provides more value understand the influence of the interaction
to customers and take of
their market away. Theindividual
demise of Polaroid
and organizational attributes was
on en
accelerated by new competitors' introduction
trepreneurial activities and outcomes. In addi of
tion,
digital cameras. Similarly, thewe need to understand
unique when and under
approach to
video rental introducedwhat by Netflix
conditions eventually
the benefits at any one level
drove Blockbuster into bankruptcy.
become dominant motivators of entrepreneurial
Therefore, SE is relevant across the full life
activities.

Another area
cycle of organizations, although warranting more research
historically, stra con
tegic management has largely been associated
cerns the effects of societal-level institutions on
with mature organizationsentrepreneurial activities and outcomes. For ex
and entrepreneurship
largely associated with young
ample, how ventures. As such,
do informal institutions (e.g., a soci
SE implies a long-term view of value
ety's norms, creation
values, and that
beliefs that determine the
results from simultaneously engaging
social acceptability in and
of actions opportu
their outcomes)
nity- and advantage-seeking behaviors. Because oflaws)
and formal institutions (e.g., regulations and
this, the concept of SE poses
affect a numberactivity?
entrepreneurial of temporal
Evidence suggests,
research questions. For example, there
for example, that is a need
the institutions to
associated with
conduct longitudinal research of new ventures as
bottom-of-the-pyramid (BOP) markets1 are char
they mature to understand how
acterized by the
three key nature
factors: of
(1) underdeveloped
entrepreneurial activities varies
formal over
institutions, time. differences
(2) significant How
between the formal
do organizations learn to manage and informal
resources in institutional
ways
that appropriately and simultaneously serve
boundaries in BOP markets theirmar
and in developed
kets, and (3) differences
need to exploit today's advantages or variancesfor
and explore in formal
and informal institutions within individual BOP
new opportunities to exploit?
Supporting this type of work
markets is et
(Kistruck research
al., 2011). to
precisely detail and classify advantage-seeking be
How do underdeveloped formal institutions
haviors and opportunity-seeking
(in the form ofbehaviors
poorly developed used
propertyin
rights
organizations. To what degree do these behaviors
laws and inadequate enforcement of contracts,
overlap and to what extent
among are theyaffect
other factors) complemen
entrepreneurs' deci
tary? What methods should firms use to master
both types of behaviors? Is it possible for individ
1 Impoverished in nature, a BOP market is one in which the average
ual business units and departments
wage earned is less than $2 per day to excel
(Prahalad, 2004). at

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2011 Hitt, Ireland, Sirmon, and Trahms 71

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