Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 1: 349352 (2007) Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/sej.28

MODERATOR COMMENTS ENTREPRENEURIAL ACTIONS, INNOVATION, AND APPROPRIABILITY

ROBERT A. BURGELMAN1* and MICHAEL A. HITT2
1 2

Stanford University, Palo Alto, California, U.S.A. Texas A&M University, College Station, Texas, U.S.A.

Entrepreneurs take strategic action to create value. They can do so individually or collaboratively, and currently researchers are interested in learning the extent to which collaboration can increase the total entrepreneurial value created. Taking entrepreneurial strategic action naturally involves the pursuit of self-interest, but entrepreneurial self-interest can only be served if it simultaneously serves collective interests, such as those of customers, investors, partners, and other relevant constituencies. Currently, researchers are also interested in identifying the most effective ways in which individual and collective interests can be jointly pursued. Copyright 2008 Strategic Management Society.

THE NATURE OF ENTREPRENEURIAL ACTION

Entrepreneurs take actions to commercialize inventions (innovation). In doing so, they usually create new ventures to appropriate value from them. Thus, entrepreneurs enact a process that creates value for customers and themselves along with other owners. Entrepreneurs often see what others do not see. In other words, they commonly recognize opportunities that exist before others are able to identify them. They do so because they are alert to such opportunities. Kirzner (1997) referred to this as entrepreneurial alertness, describing it as superior insight into market imperfections creating an entrepreneurial opportunity. McGrath and MacMillan (2000) argue that those with keen entrepreneurial alertness demonstrate an entrepreneurial mindset.
Keywords: strategic entrepreneurship; collaborative entrepreneurship; self-interest; collective interest *Correspondence to: Robert A. Burgelman, Stanford University, Graduate School of Business, 518 Memorial Way, Palo Alto, CA 94305, U.S.A. E-mail: burgelman_robert@gsb.stanford.edu

They suggest that people with an entrepreneurial mindset are commonly habitual entrepreneurs who share some common characteristics. Among them are passionate pursuit of opportunities, disciplined focus on the most promising opportunities, engaging all others involved in the pursuit of opportunities, and an emphasis on execution. Entrepreneurial opportunities are found in markets in which new goods and services may satisfy a consumer need, for example. Often information asymmetries give rise to entrepreneurial opportunities, suggesting that only a few of a given population will recognize them (Shane and Venkataraman, 2000). Opportunities may exist because of changing demographics, social changes, emergence of new markets, or new market segments and changes in governmental regulations, to name a few (Ireland, Hitt, and Sirmon, 2003). Yet, there is often considerable uncertainty in which opportunities exist. Some believe that most crises present opportunities. In the Chinese language, there are two written characters used to represent the term crisis. One of the characters stands for danger and the other one stands for opportunity. However, in crises, and in many types

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competitive landscapes where technological change and innovation are central to competitive position. Unfortunately, intellectual property protection varies across countries. As such, patents and copyrights are not universally enforceable. The articles in this section focus primarily on entrepreneurial actions to exploit opportunities and create value.

of changes, only a few will perceive the opportunities created and the value to be derived from exploiting those opportunities. Importantly, entrepreneurs act to exploit and appropriate value from the opportunities identied. This may take the form of investing in real options to have the right to act on an opportunity later. Or, more likely, entrepreneurs create innovations. Inventors are rarely successful entrepreneurs because invention and successful commercialization require quite different capabilities. Entrepreneurs identify inventions and commercialize them, thereby creating innovations in the marketplace. Certainly, developing innovations requires some creativity, for example nding the successful market niche to serve. But, the invention may require technical skills with a knowledge base in a hard science. Perceiving the opportunity existing with inventions and determining how to successfully commercialize them sometimes requires what Smith and DiGregorio (2002) refer to as bisociation. Bisociation occurs when two previously unrelated matrices of information/ knowledge are integrated. To commercialize inventions, entrepreneurs obtain, bundle and leverage resources to take advantage of the opportunity identied (Ireland et al., 2003). To do this, entrepreneurs must accumulate resources such as nancial and human capital and integrate them in ways that allow them to exploit the opportunity. They often use their social capital to acquire or gain access to external resources (e.g., venture capital, people with special capabilities) that they can integrate with other resources they control (Sirmon, Hitt, and Ireland, 2007). The goal of entrepreneurs is to create value by exploiting the opportunity. Value is any positive utility, but in most cases, it refers to wealth creation for the entrepreneur or the rm (Bamford, 2005). Of course, after a new product (or technology) has been introduced to the market, it must be protected for the innovating rm to be able to obtain signicant economic returns (Teece, 1986) and for the value creation to be sustained. Normally, sustained value creation requires the erection of barriers to the diffusion of the underlying technology or knowledge of how superior value is produced for the customer. Patent and other formal intellectual property protection devices (e.g., copyright) serve as barriers. Firms may take actions beyond patents to protect the diffusion of their private technologies, especially if they are a source of competitive advantage. And protection of intellectual properties is important in
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INCREASED VALUE CREATION THROUGH COLLABORATIVE ENTREPRENEURSHIP

In Strategic entrepreneurship, collaborative innovation, and wealth creation, Ketchen, Ireland, and Snow, building on the long-standing theoretical argument that rms should be concerned about both strategic management and entrepreneurship (e.g., Burgelman, 1983, 2002; Guth and Ginsberg, 1990), present a cogent argument for recognizing the importance and implications of the wealth-creating potential of collaborative entrepreneurship. Collaborative entrepreneurship combines strategic entrepreneurshipdened as the rm-level combination of advantage seeking and opportunity seekingwith collaborative innovationdened as the creation of innovations across rm and perhaps industry boundaries through the sharing of ideas, knowledge, expertise, and opportunities. Drawing on four theoretical perspectivesnetwork theory, learning theory, the resource-based view, and real options theorythe authors suggest that collaborative innovation can enable both small and large rms to overcome their respective challenges related to successfully engaging in strategic entrepreneurship. They suggest that future studiesin order to be completeshould capture four types of activities: opportunity-seeking activities within rms, opportunity-seeking activities between rms, advantage-seeking activities within rms, and advantage-seeking activities between rms. This article raises several interesting questions for further research. For instance, such research could investigate how the process of collaborative entrepreneurship actually workshow it gets started and what the role of different levels of management is in the process in each of the collaborating rms (and how the conguration of managerial roles in collaborative entrepreneurship is different from the conguration of roles in strategic alliances). Also, such research could investigate the implications
Strat. Entrepreneurship J., 1: 349352 (2007) DOI: 10.1002/sej

Commentary
of the extent to which the collaboration is among equals or unequals, and what the implications are of asymmetry in the power relations for the capturing of relative shares of the greater wealth that is presumably created through collaborative entrepreneurship. Furthermore, such research could investigate what the potential tradeoffs may be between strategic entrepreneurship and collaborative entrepreneurship, given resource constraints at any given time. Indeed, tradeoffs between strategic entrepreneurship and collaborative entrepreneurship may arise. For example, it is quite possible (as the authors recognize) that by having engaged in collaborative entrepreneurship in period t, the rm has spent resources that, if they had been deployed for strategic entrepreneurship, would have generated greater wealth for the rm in period t + 1. How top management evaluates and resolves such potential tradeoffs in a time-interdependent (dynamic) strategic perspective is a potentially fascinating research question.

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THE COMPLEMENTARITY OF ENTREPRENEURIAL SELF-INTEREST AND COLLECTIVE INTERESTS

In Entrepreneurial pursuits of self and collective interests, Van de Ven, Sapienza, and Villanueva argue that individual success is dependent on, and should therefore be examined in, a social context. Based on this premise, they examine three important aspects of entrepreneurshipresource mobilization, running in packs, and opportunity recognition and creation. Regarding resource mobilization, the authors attempt to show the limitations of conventional wisdom (e.g., the Emerson dependency theory). Regarding running in packs, it is interesting to think about how their discussion could be related to studies of consortia to highlight a little more some of the problems in collective action in business entrepreneurship, particularly the converging and diverging interests of different parties over time and the difculty in maintaining common interests. A famous case is the ACE Consortium in the PC industry in the early 1990s. It is also interesting to think about the potential implications of the possible asymmetry in the power relations between parties involved (because of the complementary assets that they control) for the capturing of relative shares of the wealth that are created as they run in packs. Finally, regarding entrepreneurial opportunity recognition and creation, the distinction between
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opportunity recognition and creation is potentially interesting, and it brings us back to the fact that all successful individual entrepreneurs serve collective interests (those of their customers) as well as their own interests. Hence, while recognizing the important insights generated by Van de Ven et al., it is also important to recognize that the presumably narrowly selsh classical individual entrepreneur is a bit of a straw man, since all successful individual entrepreneurs by denition create value for others: in rst instance, the customers willing to pay for the new product or service they provide. Also, individual entrepreneurs need to nd initial funding to start their venture, which usually comes from the 3Fs: family, friends, and fools (as they are somewhat facetiously known in Silicon Valley). Somewhat later they often need to secure additional funding from angel investors and still later from venture capitalists. This sequence implies that the individual entrepreneur has to convince a collection of people that the venture he or she wants to pursue engages their interests as much perhaps as his or hers. Furthermore, in hightechnology ventures subject to network effects and/ or increasing returns to adoption, it is critical that a so-called ecosystem of interested partners (e.g., complementors) emerges around the individual entrepreneurs technological platform to make the venture successful. So, the collective interest here is, in part, the sum of the entrepreneurial interests of the partners that converge around the self-interest of the individual entrepreneur who sets the virtuous circle in motion. The total collective benet that results from leveraging off the self-interest of the individual entrepreneur can be huge, even though this collective interest did not enter much, if at all, in the calculations of the individual entrepreneur. In fact, the individual entrepreneur might not have been able to foresee the magnitude of this collective benet. A related point is that very successful individual entrepreneurs often pursue self-interests and collective interests in a sequential, rather than simultaneous, fashion. The Carnegie Foundation, Ford Foundation, Mellon Foundation, Getty Foundation, Gates Foundation, and numerous other philanthropic organizations, were founded with the enormous wealth that their founders had acquired through individual entrepreneurship. They wanted to put their wealth to good collective use later in their lives. It seems reasonable to ask whether these individual entrepreneurs would likely have achieved the
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Ireland RD (eds). Blackwell Publishing: Oxford, U.K.; 4850. Burgelman RA. 1983. Corporate entrepreneurship and strategic management: insights from a process study. Management Science 29: 13491364. Burgelman RA. 2002. Strategy as vector and the inertia of coevolutionary lock-in. Administrative Science Quarterly 47: 325357. Guth WD, Ginsberg A. 1990. Guest editors introduction: corporate entrepreneurship. Strategic Management Journal 11(Special Summer Issue): 415. Ireland RD, Hitt MA, Sirmon DG. 2003. A model of strategic entrepreneurship: the construct and its dimensions. Journal of Management 29: 963989. Ketchen DJ, Ireland RD, Snow CC. 2007. Strategic entrepreneurship, collaborative innovation, and wealth creation. Strategic Entrepreneurship Journal 1(34): 371385. Kirzner I. 1997. How Markets Work: Disequilibrium, Entrepreneurship and Discovery. The Institute of Economic Affairs: London. McGrath RM, MacMillan I. 2000. The Entrepreneurial Mindset. Harvard Business School Press: Cambridge, MA. Shane S, Venkataraman S. 2000. The promise of entrepreneurship as a eld of research. Academy of Management Review 25: 217236. Sirmon DG, Hitt MA, Ireland RD. 2007. Managing rm resources in dynamic environments to create value: looking inside the black box. Academy of Management Review 32: 273292. Smith KG, DiGregorio D. 2002. Bisociation, discovery, and the role of entrepreneurial action. In Strategic Entrepreneurship: Creating a New Mindset, Hitt MA, Ireland RD, Camp SM, Sexton DL (eds). Blackwell Publishers: Oxford, U.K.; 129150. Teece DJ. 1986. Proting from technological innovation: implications for integration, collaboration, licensing, and public policy. Research Policy 15: 285305. Van de Ven AH, Sapienza HJ, Villanueva J. 2007. Entrepreneurial pursuits of self- and collective interests. Strategic Entrepreneurship Journal 1(34): 353370.

same level of wealth if they had not been intensely focused on self-interest in the rst stage of their career. Hence, the question whether the sequential pursuit of self-interest and collective interest is more or less effective than the simultaneous pursuit of self-interest and collective interests is a potentially interesting and important one. Finally, the founding of novel institutions such as the Grameen Bank suggests that it may be important to clearly distinguish traditional business entrepreneurship from social entrepreneurship.

FUTURE RESEARCH ON APPROPRIABILITY

While there are more research questions to answer in this area, we also believe there are many important research questions on appropriability to be addressed. For example, research on the most effective intellectual property protection policies (government policies and private rm policies) could add value to our knowledge. Research on the allocation of the value appropriated to the inventor, entrepreneur, and consumer could provide important insights. How valuable is formal intellectual property protection to the promotion of entrepreneurial ventures and growth? How do rms protect their most valuable intellectual assets outside of formal devices? This is an important area of research with signicant opportunity for quality scholarly inquiries.

REFERENCES
Bamford CE. 2005. Creating value. In The Blackwell Encyclopedia of Management: Entrepreneurship, Hitt MA,

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Strat. Entrepreneurship J., 1: 349352 (2007) DOI: 10.1002/sej