Chapter 13

Corporate Entrepreneurship and Innovation
Michael A. Hitt R. Duane Ireland Robert E. Hoskisson
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©1999 South-Western College Publishing

Corporate Entrepreneurship and Innovation Some argue that any firm¶s (both large, established ones and start-ups) long term startcompetitive advantage is related to its ability to continually create and successfully market new products, services and processes.

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Large, Established Firms Versus Small, New Ventures: Entrepreneurship and Innovation

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Corporate Entrepreneurship? An Oxymoron ‡What precludes large, established corporations from being entrepreneurial? ‡From where did these obstacles to entrepreneurship come? ‡How can corporate policies and procedures be modified to allow for more entrepreneurship?

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Impediments to Corporate Entrepreneurship In the 1970s - 80s, it took around six years for accompany to change its strategy and 10 to 30 years to change its culture Most existing firms are preoccupied with serving existing customers. Incumbent firms many times demonstrate a general contempt for new (especially radical) innovation and entrepreneurial activity.
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Defining Entrepreneurship
Corporate Entrepreneurship Firm¶s capabilities possessed 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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Successful Corporate Entrepreneurship

The key to success with entrepreneurship and innovation is moving from the invention of ideas to effective commercialization and acceptance in the marketplace

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Internal Corporate Venturing Corporate Intrapreneurship can occur as either a bottombottom-up process or as a top-down process topAs a bottom-up process, corporate bottomintrapreneurship often occur through Product Champions who pursue new product ideas to commercialization Product Champions are individuals who have an entrepreneurial vision for a new product and seek support for its commercialization
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Managers as Entrepreneurs
‡The ability to respond positively to challenges and learn from mistakes. ‡Taking personal initiative. ‡Great perseverance and determination. ‡Commitment and determination ‡Leadership ‡Opportunity Obsession ‡Tolerance for Risk, Ambiguity, and Uncertainty ‡Creativity, Self-reliance, and Adaptability ‡Motivation to Excel
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Managers as Entrepreneurs

Business plans are not just for new ventures; intrepreneurial managers use them as well.

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Methods of Producing Innovation ‡Cooperation with other Firms: Strategic Alliances ‡Acquisitions ‡Establishing Venture Capital Divisions

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Acquiring Innovative Capability Many firms now use acquisitions of other firms as a substitute for developing innovations internally This can reduce risk and lower costly R&D investments The drawback is that firms can eventually lose their ability to generate innovations internally Many firms now use acquisitions of other firms as a substitute for developing innovations internally Transparency 13-12

Small Firms/New Ventures and Innovation Small firms have created most of the new jobs in the U.S. in the 1990s While 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. patents Many 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
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Small Firms/New Ventures and Innovation Successful entrepreneurs generally: ‡Are older ‡Have 8 - 10 years of work experience ‡Have a net worth that they contribute to the venture ‡Have participated in prior entrepreneurial activities

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Sources of Capital for New Ventures

‡Bootstrapping (77% of NVs < $50,000) ‡Venture Capitalists (1% of all NVs) ‡Angels (select)

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