Strategic entrepreneurship
Michael A. Hitt and R. Duane Ireland
Entrepreneurship involves identifying opportunities and exploiting them (Venkataraman and Sarasvathy, 2001), whereas strategic management involves creating and sustaining a competitive advantage (Hitt, Ireland, and Hoskisson, 2005; De Carolis, 2003). Both are concerned about growth, creating value for consumers, and subsequently creating wealth for owners 228 strategic entrepreneurship (Amit and Zott, 2001; Ireland, Hitt, and Sirmon, 2003). While entrepreneurship focuses on new products, processes, and markets, strategic management emphasizes using them to gain an advantage over competitors (Barney, 1991; Lumpkin and Dess, 1996; Sharma and Chris man, 1999). With their different yet complementary foci, both entrepreneurship and strategic management are integral to firm success.
Venkataraman and Sarasvathy (2001) suggest strategic management and entrepreneurship should be integrated. They use the metaphor of Romeo and Juliet. They suggest that entrepreneurship alone is like having Romeo with no balcony. Strategic management alone is similar to having the balcony but no Romeo. Both are needed to create firm success over the long term. Therefore, the integration of entrepreneurship and strategic management is referred to as strategic entrepreneurship. Strategic entrepreneurship involves identifying and exploiting opportunities while simultaneously creating and sustaining a competitive advantage (Ireland, Hitt, and Sirmon, 2003). Strategic entrepreneurship is important for both small and new firms and for large established firms as well. Established firms must be entrepreneurial, while entrepreneurial firms must also be strategic (Hitt et al., 2001, 2002; Ireland et al., 2001).
Strategic entrepreneurship has several dimensions to include developing an entrepreneurial mindset and culture, managing resources strategically, applying creativity and developing in novation, and leveraging the innovation through strategy to create a competitive advantage and thereby creating value for the end consumer. When value is created for the end consumer and done so efficiently, it then creates wealth for owners (the entrepreneur) (Ireland et al., 2003; Sirmon, Hitt, and Ireland, 2003). An entrepreneurial mindset is both an individual and an organizational phenomenon. Individuals can be entrepreneurial, but so too can organizations. To do so, they must have a mindset that makes them alert to entrepreneurial opportunities as well as to the rent generating potential created by uncertainty (McGrath and MacMil lan, 2000) (see navigating uncertainty). An entrepreneurial mindset also involves the use of real options logic in which opportunities may be identified and acquired for future use (McGrath, 1999).
An entrepreneurial culture is one in which new ideas and creativity are expected, risk taking is encouraged, failure is tolerated, learning is promoted, innovations are championed, and continuous change is viewed as an opportunity (Ireland, Hitt, and Sirmon, 2003). An entrepreneurial culture requires that leaders nourish entrepreneurial capabilities within the firm (Alvarez and Barney, 2002). It also requires leaders to protect innovations that may threaten the current business model and even encourages questions about the firm’s dominant logic.
Opportunities, once identified, must be exploited. To do so requires that the resources of the firm be managed strategically. Sirmon and Hitt (2003) suggest that this requires structuring the resource portfolio, bundling resources into productive capabilities, and leveraging the cap abilities to create value for consumers and wealth for shareholders. Structuring the resource port folio involves acquiring resources as needed, developing those resources more fully, and then when necessary, divesting resources that lose their value to the firm. Resources must also be bundled to create the capabilities to take actions. For example, financial capital, human capital, and even physical assets may be integrated to create capabilities in R&D, marketing, and pro duction (Sirmon, Hitt, and Ireland, 2003). Le veraging those capabilities involves developing a strategy that will help create value for customers. When the value created for customers is superior to that value created by competitors, the firm gains a competitive advantage. If the firm is able to sustain that competitive advantage, it can create wealth for the owners.
However, in order to create value for the customer, the firm must use its capabilities to create innovation (Smith and Di Gregorio, 2002). Thus, firms creating innovations that have value for customers and are able to distribute them to consumers at a reasonable price for that value gain the advantage and create wealth for their owners. Essentially, firms must continuously innovate to effectively compete in the complex, global business environment. The requirement for constant and successful innovation is satisfied when organizations rely on their entrepreneurial talents and strategic entrepreneurship 229 capabilities to act strategically and compete in the marketplace.
There are a number of interesting research questions for scholars to explore regarding strategic entrepreneurship. As a new area of inquiry, a critical question is defining the field’s boundary. Because strategic entrepreneurship is an intersection of two fields of study, it is important for research to specify the attributes of each field that are required to form strategic entrepreneur ship. Defining the boundaries of the independent fields remains challenging (Greve, 2003), meaning that specifying the boundaries of their intersection requires careful study and analysis. An extension of the field’s boundary is the de termination of theories with the greatest potential to inform our understanding of the phenomenon. Can strategic entrepreneurship best be specified and understood through a re source based view lens, for example? Do trans action cost economics theory and institutional theory inform strategic entrepreneurship re search and yield testable hypotheses? Another research question concerns isolating the variance (if any) in effective strategic entrepreneurship practices across various strata of firms (e.g., large versus small, new versus old, domestic versus international, and so forth). Finally, assessing the performance implications of strategic entrepreneurship is a vital topic warranting study. In this regard, does strategic entrepreneurship positively affect firm performance? If so, how strong is that effect and does the effect vary by type of performance measure? Examining these research questions as along with others will increase our understanding of strategic entrepreneurship.
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