Chapter 3

Capturing the Entrepreneurial

Orientation of the Firm

Copyright (c) 2011 South-Western/Cengage Learning. All rights reserved.

Exploring the Dimensions of
Entrepreneurship
Three dimensions characterize an entrepreneurial
organization

• Innovativeness
• Risk-Taking
• Proactiveness
Exploring the Dimensions of
Entrepreneurship

Three Frontiers of Innovation

• Services – new or improved services
• Products – unique or improved
• Processes – new or better ways to accomplish a task or function
Exploring the Dimensions of
Entrepreneurship
Innovativeness – to what extent is the company doing
things that are novel, unique, or different
• Does the concept address a need that has not
previously been addressed
• Does it change the way one goes about addressing a
need
• Is it a dramatic improvement over conventional
solutions
• Does it represent a minor modification or
improvement to an existing product
• Is it just the geographic transfer of a
 Sixteen Dilemmas of Innovation

• Not all entrepreneurs are innovators, and not all innovators are entrepreneurs, but
successful entrepreneurship tends to involve continued innovation (in products, services
and processes/methods).
• Innovation is about the unknown. Management is about control. How do you control
the unknown?
• Innovation is often about breaking the rules. People who break rules don’t last long in
organizations.
• Successful innovation tends to occur when there are constraints, routines and
deadlines. There is a need for both freedom and discipline, and the issue is one of
balance.
• Failure is likely if the firm does not innovate. But the more the firm innovates, the more
it fails.
• An innovation succeeds because it addresses customer needs. Yet, when you ask
customers about their needs, many do not know or cannot describe them to you except
in very general terms.
• Innovating can be risky. Not innovating can be more risky.
• Innovation can be revolutionary or evolutionary. The costs, risks, and returns of both
types differ, and both require different structures and management styles.
• A company that innovates is frequently making its own products obsolete when there
was still profit potential in those products.
 Sixteen Dilemmas of Innovation (continued)
• Innovation requires supporting infrastructure to be successful, and the existing
infrastructure is often inadequate. However, these infrastructure needs may not
become apparent until after the innovation is developed.
• While innovation is more technically complex and costly today, many breakthrough
innovations do not come from large companies or corporate R&D labs with sizeable
budgets, but from individual inventors and entrepreneurs.
• People who design innovations typically seek to perfect their new product or service,
making it the best possible. But the marketplace often wants it to be “good enough,”
not perfect. The additional time and money necessary to make the innovation “best
possible” drive up prices beyond what the customer will pay, and result in missed
opportunity.
• Technology-driven innovation often leads to dramatic new products that prove to be
“better mousetraps” nobody wants. Customer-driven innovation often leads to minor
modifications to existing products or “me-too” products meeting a competitive brick
wall.
• While typically associated with genius or brilliance, innovation is more often a function
of persistence.
• While innovation is sometimes associated with breaking the rules of the game (e.g,
3M), it frequently entails playing an entirely different game (e.g., Starbucks, Dell).
• Being first to market is not consistently associated with success, while being second or
third is not consistently associated with failure.
 Exploring the Dimensions of
Entrepreneurship
Four Types of Innovation:
• Discontinuous innovation
• Dynamically continuous innovation
• Continuous innovation
• Imitation
Exploring the Dimensions of
Entrepreneurship
Risk-taking
• Individual level & Organization level
• Financial
• Technical
• Market
• Personal
• Social
Exploring the Dimensions of
Entrepreneurship
Relating Types of Innovation to Risk
High

RISK

Low
Dynamically
Imitation Continuous Continuous Discontinuous

TYPE OF INNOVATION
 Exploring the Dimensions of Entrepreneurship

Proactiveness
•“Entrepreneurial firms acting on, rather than
reacting to their environments”

• 3 items to measure proactiveness

• Following versus leading competitors in
innovation
• Favoring the tried and true versus emphasizing
growth, innovation, and development
• Trying to cooperate with competitors versus trying
to undo them
 Exploring the Dimensions of Entrepreneurship

1. Seeking new opportunities that may or

may not be related to the present line of
operations;
2. Introducing new products and brands
ahead of the competition; &
3. Strategically eliminating operations that
are in the mature or declining stages of
the life cycle.
Entrepreneurial Intensity:
Combining Degree and Frequency of Entrepreneurship

 Combining Degree and Frequency……

The Entrepreneurial
Grid
Entrepreneurial Intensity:
Combining Degree and Frequency of Entrepreneurship

High
Continuous/
Revolutionary
Entrepreneurship
Frequency of

Incremental

Dynamic

Periodic/ Periodic/
Incremental Discontinuous
Low
Low H
Degree of igh
Entrepreneurship
(innovativeness, risk-taking, proactiveness)