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Strategic Management: Strategic Managment
Gregory G. Dess, University of Texas at Dallas
G.T. Lumpkin, University of Illinois--Chicago

Effective Strategic Leadership: Fostering Corporate Entrepreneurship and New Venture Creation

Chapter Overview

Young and small businesses that capitalize on marketplace opportunities make an important contribution to the U.S. economy. To remain competitive in today’s economy, established firms must find new avenues for development and growth. This chapter has addressed entrepreneurship as a means of new venture creation and strategic renewal. Entrepreneurial companies—both young and old, large and small—seek out opportunities to implement the latest technologies or introduce new products and services. Thus, all firms can enhance their competitive position by pursuing a strategy of entrepreneurial venturing.

To successfully launch new ventures or implement new technologies, firms must develop a strong ability to recognize viable opportunities. Opportunity recognition is a process of determining which venture ideas are, in fact, promising business opportunities. It consists of two phases. First is the discovery phase, in which new ideas are identified by alert individuals or generated by means of deliberate search processes. Second is the formation phase, in which the feasibility of opportunities is evaluated and plans are made to support and fund the new venture.

New ventures and small business face a unique set of issues and challenges. However, many of the tools of strategic management can be applied to these firms. Decisions about the strategic positioning of young and small firms can benefit from applying five-forces analysis and evaluating the requirements of niche markets. The resources that start-ups need include financial resources as well as human and social capital. Various avenues for obtaining resources are available to new ventures. Most start-ups can also benefit from bootstrapping—that is, operating economically and relying on as few outside resources as possible. Finally, young and small firms thrive best when they are led by founders or owners who have vision, drive and dedication, and a commitment to excellence.

We also discussed the role of corporate entrepreneurship in internal development and strategic renewal. Some large firms foster an overall policy of entrepreneurship by encouraging all areas of a company to watch for new venture opportunities. Such an environment induces strategic behaviors that lead to new venture creation. Some corporations with a strong reputation for corporate entrepreneurship have a culture that encourages entrepreneurial behavior by all organizational members. In many organizations, the idea for a new venture comes from individuals who recognize an opportunity in their work arena. These ideas often need product champions, people who can carry the idea forward and generate support for it from strategic managers.

Most entrepreneurial firms need to have an entrepreneurial orientation: the methods, practices, and decision-making styles that strategic managers use to act entrepreneurially. Five dimensions of entrepreneurial orientation are found in firms that pursue corporate venture strategies. Autonomy, innovativeness, proactiveness, competitive aggressiveness, and risk taking each make a unique contribution to the pursuit of new opportunities. When deployed effectively, the methods and practices of an entrepreneurial orientation can be used to engage successfully in corporate entrepreneurship and new venture creation. However, strategic managers must remain mindful of the pitfalls associated with each of these approaches.