Chapter 12

Corporate Entrepreneurship
and Innovation

CA
 Key Definitions

Corporate Entrepreneurship
is the set of capabilities possessed by a firm to produce or
acquire new products (good or service) and manage the
innovation process.

Lean Production Methods

combine the activities or everyone from top-level manager to
line workers, to suppliers, into a tightly integrated whole.

Invention
is defined as the act of creation or development of a new
product (good or service) or process idea.

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 Key Definitions
Autonomous Strategic Behavior
is a bottom-up process in which product champions pursue
new product ideas, often trough a political process, whereby
they develop and coordinate the commercialization of a
new good or service until it achieves marketplace success

Product Champion
is a member of an organization who has an
entrepreneurship vision (that is, a mental image) of a new
good or service and seeks to create support for its
commercialization

Chapter 12 3
 Key Definitions

Innovation
is the process of creating a commercializable product from
innovation.

Imitation
is adoption of the innovation by a population of similar firms.

Internal Corporate Venturing

is the set of activities used to create inventions and
innovations within a single organization

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 Key Definitions

Strategic Context
refers to process used to arrive at strategic decisions.

Structural Context
refers to the hierarchical structure and reward system used to
support the implementation of a corporate-level strategy.

Induced Strategic Behavior

is a top-down process where the current strategy and structure
foster product innovations that are associated closely with the
current strategy and structure.

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 Key Definitions
Horizontal Organization
refers to changes in organizational processes where managing across
functional units becomes more critical than managing up and down
functional hierarchies.

Strategic Alliances
are partnership between firms whereby resources, capabilities, and
core competencies are combined to pursue common interest and goals

Joint Ventures
are new business ventures that were not part of either partner’s portfolio
of business before the venture began.

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 Key Definitions
Product-Link Alliances
are used to fill gaps in product lines; often, these alliances
are apart of a desire to outsource to global areas where
products can be made at low-cost production sites.

Knowledge-Link Alliances
are formed to help a company learn specialized
capabilities from another firm, with the intention being
that both partners will gain skill and capabilities that in
turn, will benefit future endeavor.

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 Three Approaches for Producing and
Managing Innovation

I better write down

1. Internal corporate these ways firms
venturing can benefit from
innovation
2. Strategic alliances
and/or joint ventures

3. Acquiring innovation

Chapter 12 8
 Internal Corporate Venturing

I’ll be the product’s

champion!
I can’t believe that no one else can
see the value of this idea!

It takes someone within

the firm who has vision
and who will fight to have
an idea accepted
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Strategic Alliances and/or Joint Ventures
We have a great idea
and we are looking for a partner
to back us. May we tell you more
 Bring together
resources to do
about our idea? innovative or large
projects, and
 May diversity risks
associated with
product develop-
ment or lack or
market acceptance
of the new concept.

Chapter 12 10
Acquiring Innovation I am not going to tell him
– I know we could not
have developed his
product by ourselves.
Fortunately, he is selling
… is quicker than it to us!
developing it internally,
but a firm may substitute
the ability to buy it for the
ability to produce it
internally

Chapter 12 11
Model of Internal Corporate Venturing

Concept of
corporate strategy

Strategic context Structural context

Autonomous Induced
strategic strategic
behavior behavior

Chapter 12 12
 Appropriating Value from Internal Firm
Innovation
Barriers to integration
• Different functional time
orientation (e.g., R&D &
production)
• Different functional language
and interpersonal orientation
Time to market
• Different goal orientation
• Formality of structure

Interfunctional Value
integration -- Product quality appropriation
cross–functional from innovation
design teams

Facilitators to integration
• Shared values
Creation of
• New product vision provided customer value
by leadership
• Budget allocation to foster
integrated design

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 Evidence of R&D and Patents per Dollar of
Sales Before and After Large Acquisitions
0.032

0.030
0.000
Firm minus industry R&D intensity

-0.002 0.028

Patients intensity
-0.004 0.026

-0.006 0.024

-0.008 0.022

-0.010 0.020

-0.012 0.018
-4 -2 0 2 4 -4 -2 0 2 4

Years before and after acquisition Years before and after acquisition

Difference between pre- & post-acquisition Difference between pre- & post-acquisition
observations is statistically significant at p<.01 observations is statistically significant at p<.01

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 Contribution by Small Firms

… created all of the 5.8 million jobs from 1987 to 1992 at

a time when firms with more than 500 employees recorded
a net loss of 2.3 million jobs

I am glad this small

company hired me. I am glad to
be working. I know a lot people
do not have jobs – and it is
exciting work here. But I wish I
had some job security.

Chapter 12 15
More Contributions by Small Firms

Although the may not

develop many Hubble
telescope, they account
for more than half
of the world’s
technology activity.

Chapter 12 16
the end of the lessons

Chapter 12 17