Academy o/ Managemenl Execulive, 2001, Vol. 15, No

Integrating entrepreneurshipand strategic management

actions to create firm wealth

ff. Duane Ireland, Michael A. Hitt. S. Michael Camp, and Donald L. Sexton

*

Executive OverviewCreating wealth is at the heart o/ both cntrepreneurship and stTategic management. For

general managers and entrepreneurs, a keen interest is to leam how to applyentrepreneurial and strategic tools, techniques, and concepts in wayz that help the firmcreate increasing amounts of wealth. Many of the activities that organizations engage in tocreate wealth take place within six domains: innovation, networfes, infemafionalizafion,organizational learning, top management teams and governance, and growth. Importantly,the entrepreneurship and strategic management literatures have insights for entrepreneursand general managers about the value to be gained by paying attention to these sixdomains. We describe how these insights can be classified as entrepreneurial and strategicactions, and discuss how greater wealth can be created when firms integrate these actionswhen seeicing to create wealth.

Organizing to Create Wealth

Both strategic management and entrepreneur-ship are concerned with decisions made bygeneral managers who have responsibility fora total business. Strategic management hasplaced great emphasis on examining influ-ences on firm performance, including strategyand environment, and the sources of sustain-able competitive advantage. Entrepreneurship,both in considering independent firms and cor-porate entrepreneurship, has emphasized pro-cesses which lead to venture creation.

. —i^nold C. Cooper

Professor Cooper's thoughts, drawn from his com-mentary in this special issue of The Academy ofManagement Executive, speak to the relationshipbetween entrepreneurship and strategic manage-ment. This relationship is the one around whichthe articles in this special issue are framed.

In this introductory article, we build on ProfessorCooper's insights, as well as those from other schol-urs and business practitioners, to advance severalarguments. The most compelling and prominent ofthese arguments is that a primary organizationalobjective is to create wealth. Moreover, effective in-

tegration of entrepreneurial actions and strategicmanagement actions facilitates a firm's wealth-creating efforts. Independently, the actions involvedwith entrepreneurship and strategic managementprocesses contribute to firm growth and success.When integrated, however, these actions create syn-ergy that enhances the value of their outcomes.

We also believe that the most successful wealth-creating organizations have employees who arefully committed to making decisions and takingactions that are intended to increase the amount ofwealth their companies create. Continuous, profit-able growth is a prerequisite to a firm's ability togenerate wealth across time and events. Success-ful growth is achieved by firms that are growingfaster than the majority of those competing in theirindustry in terms of both sales and profits.' Achiev-ing this type of growth is at the center of the agen-das of most CEOs and entrepreneurs as they guidetheir firms in the global economy's complex andturbulent competitive arenas.^

-^—'

Entrepreneurial and strategic actions are at thecore of wealth creation

To frame our discussion of how firms createwealth, we first describe the differences between

49

50 Academy of Management Executive February

entrepreneurial actions and strategic actions. Al-though subtle, these differences are important forthe positions we take in this introduction and inthe articles that follow.

Oriented to novelty, entrepreneurial actions arenewly fashioned behaviors through which compa-nies exploit opportunities others have not identi-fied or exploited. Entrepreneurial actions are a"fundamental behavior of firms by which theymove into new markets, seize new customersand/or combine (existing) resources in new ways."^As the 21^' century dawns, many companies acrossvirtually all industries regard entrepreneurial ac-tions as "essential if they are to survive in q. world,increasingly driven by accelerating change."'' {-'

Strategic actions are taken to select and imple-ment the firm's strategies. Increasingly, in glo-bally competitive organizations, many of thesestrategies are framed around the pursuit of en-trepreneurial opportunities by taking entrepre-neurial actions. Strategic actions provide thecontext within which innovations, which oftenare the product of newly fashioned behaviors,are developed and commercialized.^ These ac-tion types intersect; indeed, analysis of variousaspects of this intersection is the focus of thisspecial issue. This special issue demonstratesthat successfully integrating entrepreneurialand strategic actions improves the firm's abilityto grow and create wealth.

This special issue demonstrates thatsuccessfully integrating entrepreneurialand strategic actions improves the firm'sability to grow and create wealth.

Wealth creation is concerned with develop-ing sustainable income. As an economist notes,"The ability to generate growing, sustainable in-come streams determines which companies createwealth."^ Two measures of sustainable income aremarket value added (MVA) and firm growth. MVAmeasures the amount of wealth the firm is gener-ating as a result of how it has used the capitalentrusted to it by shareholders. Firm growth insales and profits that significantly exceeds com-petitors' growth also results in sustainable income.

Leaders influence their firms' ability to createsustainable income streams. Glenn Rowe, in thisissue, examines this influence. In the global econ-omy, the standard for leadership excellence ismore rigorous and demanding. Superior leader-ship is exhibited by demonstrating integrity, pro-viding meaning to others, generating trust while

working with all stakeholders, and clearly commu-nicating values. Some believe that this set of skillsand orientations yields leaders capable of captur-ing human hearts and motivating people to pursueorganizational wealth.'^ v-

We offer three examples of leaders who exhibitexcellence in the use of these skills to createwealth. Wayne Huizenga, interviewed in this issue,started and built three well-known firms—Waste/'Management, Blockbuster Video, and AutoNation.Using market innovations, Huizenga developed theworld's largest company in three different industries.The sales and profit growth rates of each companyexceeded those in the respective industries at crucialpoints in time, resulting in the creation of continuousincome streams and wealth. During his tenure asCEO, Roberto Goizueta helped to form and imple-ment strategies through which Coca-Cola generateda significant amount of wealth. Under Jack Welch'sleadership, GE has grown rapidly and also createdsubstantial amounts of wealth. GE's sales revenuegrow from S28 billion in 1981 (Welch's first year asCEO) to $130 billion in 2000. Over the same timeperiod, the firm's market capitalization increased re-markably, from $13 billion to $500 billion. In the finalyear of his service as GE's CEO, Welch, his succes-sor, Jeffrey Immelt, and other GE stakeholders areforming strategies intended to further enhance thefirm's wealth-creating abilities after Welch's 2001 re-tirement.^

The effective leadership demonstrated by Hui-zenga, Goizueta, and Welch is a relatively rarecommodity. Enhancing the skills associated withsuccessful strategic leaders can increase the num-ber of companies that create substantial firmwealth.9 Welch, for example, epitomizes "the CEOas maximum leader for all seasons—a human dy-namo who through sheer force of personality andbrilliance of vision can transform any company, nomatter how big or complicated, into an engine ofperpetual outperformance."'°

Local, state, and federal governments shouldfoster environments in which business leadersand their firms are able to consistently and con-tinuously create wealth." Australia's ministerfor Industry, Science, and Resources observedthat his government has "a range of programsspecifically designed to stimulate innovation^A iparticularly through R&D, both on the ttpT-Jt;concession side and the expenditure sidei, *̂ V"However, there is substantial variance in newventure formation rates across nations suggestingdifferences in governments' intentions and/or abili-ties to support and promote entrepreneurship andthus new ventures.'^

The articles in this issue emphasize that creat-

2001 Ireland, Hiit, Camp, and Sexton 51

ing wealth is at the heart of entrepreneurship andstrategic management. For example, developingand configuring organizational resources and ca-pabilities to identify and pursue marketplace op-portunities is a central theme for entrepreneursand strategists.''' Brush, Greene, and Hart describethe difficulty of this task for entrepreneurs leadingnew ventures, arguing that forming an initial re-source base is indeed challenging for entrepre-neurs. However, in some successful organizationalwealth creators, including GE, Dell Computer Cor-poration, and Cisco Systems, entrepreneurial ac-tions are recognized as a cornerstone of an effec-tive strategic management process.'^ L^--^

Six domains are critical to firms' efforts to createwealth, (See Figure 1.) The entropreneurship andstrategic management literatures offer similarguidance regarding the use of these domains tocreate sustainable income streams by developingand exploiting competitive advantages. These ar-ticles show how firms create wealth by using en-trepreneurial actions and strategic actions withinthe different domains.

All types of organizations can practiceentrepreneurship

Large and long-established organizations such asGE can use entrepreneurial actions to createwealth, as can newer, relatively established com-panies like Dell and Cisco Systems, and startupventures. Large established companies sometimestransform themselves through entrepreneurial ac-tions and the resulting innovations. Enron, the for-merly regulated natural-gas pipeline utility, has

• Innovation

• Networks

• Internationalization

Top managemenlteams andgovernance

Wealth Creation

FIGURE 1Creating Wealth Through Entrepreneurial and

Strategic Actions

combined strategic and entrepreneurial actions totransform itself into the world's largest buyer andseller of gas and electricity, with involvement infiber-optic bandwidth, shipping, pulp, paper, andrelated derivative securities. Nokia used entrepre-neurial and strategic actions as the foundation forits transformation from a widely diversified con-glomerate to the world's leading maker of cellularphones.'s .•

Companies that demonstrate the use of eitherentrepreneurial or strategic actions in the differentdomains are shown in Table 1. Taken together,these company-specific examples highlight issuesregarding entrepreneurial and strategic actionsthat create organizational wealth.

The Entrepreneurship and Strategic ManagementDisciplines

Entrepreneurship focuses on growthand innovation

While there are many definitions of entrepreneur-ship, there is at least general agreement regard-ing entrepreneurship's positive effects on firms'wealth-creating efforts.'-' We define entrepreneur-ship as a context-dependent social process throughwhich individuals and teams create wealth by bring-ing together unique packages of resources to exploitmarketplace opportunities-.!^ This definition sug-gests that gaining access to a variety of resourcesand knowing how to leverage them creatively aretwo core entrepreneurial functions.'^ Brush, Greene,and Hart speak to and support these functions' im-portance. Moreover, this definition highlights thatentrepreneurship is an eclectic academic disciplineand business-related phenomenon. Entrepreneur-ship can also be used to describe a firm's actions. Inthis instance, an entrepreneurial firm creates wealthby concentrating on innovative, proactive, and risk-taking behaviors.^,. ^^

We define entrepreneurship as a context-dependent social process through whichindividuals and teams create wealth hybringing together unique packages ofresources to exploit marketplaceopportunities.

The entrepreneurship discipline is grounded insociology, economics, and psychology. Fntropre-neurship "implies an innovative and proactive ap-proach to challenges, tasks, needs, obstacles, andopportunities."^' As a context-dependent social

52

Domain

Academy of Management Executive

Table 1ExamploG of Entrepreneurial and Strategic Actions

Entrepreneurial Actions

February

Strategic Actions

InnovationNetworksInternationalizationOrganizational learningTop management teams and governanceGrowth

BIOS Group; SonyWells FargoNokiaGEPolaroidWilly Wonka Candy Factory

Juniper Networks; EnronAriba, Inc.Hewlett-Packard; Nova CruzCoca-Cola; CiscoMotorolaIntemet Capital Group (iCG)

process, entrepreneurship is concerned primarilywith identifying market opportunities and creatinga set of resources through which they can be ex-ploited. Entrepreneurship has both attitudinal andbehavioral components.^2 Strategic actions are thepathway through which a concept or idea is movedfrom the invention stage to its positioning in acompetitive arena.

Entrepreneurs engage in entrepreneurial behav-iors often without paying much attention to theiravailable resources. For example, Karl Ulrichstarted Nova Cruz Products, LLC, without venturecapital. Instead, he relied on the appeal of an in-novative product, an updated child's scooter, andthe Internet as a primary means of distributing it.Such behavior contributes to the image of entre-preneurs as high risk takers. The most successfulentrepreneurs carefully evaluate risk-return rela-tionships, rejecting ventures when the relationshipis unattractive.

Ranft and O'Neill report that only about 25 per-cent of new ventures survive their first five years.Because of tho risk and entrepreneurs' desire toredefine competitive space, entrepreneurial ven-tures can be viewed as experiments. Arnie Coopermakes this point in his commentary, suggestingthat entrepreneurial ventures are often pursued to"determine the size of particular markets orwhether particular technologies or ways of com-peting are promising."

Entrepreneurial attitudes and behaviors providea foundation for long-term competitive success forfirms of all types competing in multiple countriesacross several different market economies.^^ In hisarticle, Peng describes how entrepreneurship andassociated entrepreneurial actions are flourishingin the transition economies of Central and EasternEurope as well as in some of the newly indepen-dent states of the former Soviet Union and EastAsia. Peng suggests that the increasing entrepre-neurial activity in these economies is helping totransform them in vital and fundamental ways.These transformations increase the amount ofwealth created by revitalized firms—companies

learning how to compete in economies that arenow more closely defined by market-based compe-tition. The effectiveness of these newly emergingglobal competitors as wealth creators is importantto the global economy's stability and overall suc-cess.

Peng's insights provide value to those wantingto know more about commitments and activitiesthat are the pathway to transformational success.For example, he suggests that the ability to formeffective networks is linked with a successful tran-sition for a firm seeking to create wealth, espe-cially when involved with a novel economic cli-mate. Privatization has become a dominant meansof promoting economic development within emerg-ing and developing ec0nomie^ as well as in stableand growing economies.^''

Firms operating in newly transformed or partlytransformed market economies nevertheless oftenexperience difficulties. The president of the Chi-nese Economic Reform Foundation suggested thata considerable number of state-owned enterpriseshave not yet adapted to the demands of the marketeconomy because of "the long-term influence of thetraditional system, the many problems left overfrom history, the redundancy of construction overthe years, and the drastic changes of the marketenvironment."^^ Thus much work remains for alarge number of formerly state-owned enterprisesseeking to become viable partners in a global mar-ket-based economy.

Strategic management focuses on competitiveadvantage

Grounded in managerial practice, strategic man-agement is also at the core of wealth creation inmodern industrial societies, and, increasingly, inemerging and transitioning economies, as sug-gested by Peng. The primary interest of strategicmanagement researchers is to explain differentialfirm performance. Increasingly, entrepreneurshipresearchers share this interest, while general man-agers lely on strategic actions to help them create

2001 heland, Hitt, Camp, and Sexton

effective strategies for organizations. Environmen-tal alignment is one of the intended outcomes of aneffective strategy. When the firm develops a matchbetween its unique competitive advantages andthe opportunities in its external environment, it isaligned properly with Its environment. Uniquecompetitive advantages are grounded in the re-sources and capabilities the firm uses to performvalue-adding transactional activities better thanits competitors.^'''

Strategic management is a context-specific pro-cess that includes commitments, decisions, andactions required for the firm to create wealth.Learning how to develop, nurture, and exploit com-petitive advantages is critical when using the stra-tegic management process. These advantages arethe product of proper positioning within the firm'sindustry; effective exploitation of idiosyncratic,firm-specific resources, capabilities, and core com-petencies; and successful participation in uniquenetworks or cooperative arrangements with othercompanies.^' Effective strategic management pro-cesses elicit and then support newly fashionedbehaviors to identify and pursue competitive op-portunities that have not been previously recog-nized or exploited.

Intersections between entrepreneurship andstrategic management

Entrepreneurship and strategic management areboth dynamic processes concerned with firm be-havior and performance. Strategic managementcalls for firms to establish and exploit competitiveadvantages within a particular environmentalcontext. Entrepreneurship promotes the search forcompetitive advantages through product, process,and market innovations. A new venture, either anindependent startup or a new unit within an estab-lished firm, is typically created to pursue the mar-ketplace promise from innovations.

Entrepreneurial and strategic actions are oftenintended to find new market or competitive spacefor the firm to create wealth. Firms try to find fun-damentally new ways of doing business that willdisrupt an industry's existing competitive rules,leading to the development of new business mod-els that create new competitive life forms.^^ Thedegree to which the firm acts entrepreneurially interms of innovativeness, risk-taking, and proactiv-ity i? related to dimensions of strategic manage-ment.*^

Flowing from these general commonalties be-tween entrepreneurship and strategic manage-ment are specific domains for firms committed tocreating wealth. These domains are innovation, net-

works, internationalization, organizational learning,top management teams and governance, andgrowth.^" Understanding the critical intersectionsrelative to specific domains of organizational actionallows those responsible for creating wealth toincrease their knowledge stocks and professionaltoolkits which, in turn, leads to higher quality entre-preneurial and strategic actions.

Dominant Domains of Entrepreneurial andStrategic Actions

Innovation brings noveity to the firm and to themarketplace .̂̂

Innovation is the sum of invention plus the com-mercialization of that invention.31 Innovation re-sults from the firm's effective development and useof new technologies and/or knowledge about mar-ket opportunities. When Scott Kriens joined JuniperNetworks as CEO and president, he and the otherfounders concluded that the overburdened Internetinfrastructure was a growing market opportunityand that Internet Protocol (IP) would become thestandard worldwide language of the Internet. Be-lieving that more than a product was necessary tobe the market leader. Juniper's leaders set out tobuild a business model that involved selling ofstakes in the company to prospective customersinterested in upgrading their networks. AT&T, Lu-cent, and Ericsson, among others, committed toJuniper, allowing the firm to raise more than $46million. Today Juniper offers super-high-speed-communication routing systems that help provid-ers meet increasing demands from their custom-ers. As Kriens said, "While we didn't have aproduct initially, we did have an idea."^'-

"While we didn't have a productinitially, we did have an idea,"

Research and development (R&D) is the firm'sprimary source of Inventions—bringing somethingnew into being—and innovations—bringing some-thing new into use.^^ The development part of R&Dis being emphasized in many large corporations.For example, a business writer noted that "theinnovative content of corporate research has beengreatly diminished in favor of work that supportsshort-term goals, like improvement of existingproducts."^'' In contrast, many smaller, entrepre-neurial ventures are concentrating on researchrather than development. Thus truly novel or rad-ical innovations may come more frequently fromsmaller, entrepreneurial ventures than from large

54 Academy of Management Executive February

companies, tor example, the startup venture BiosGroup is developing pioneering software based onalgorithms that mimic the movement of ants.Southwest Airlines, Procter & Gamble, Ford, Uni-lever, and Texas Instruments are among the firmsusing this software to improve management oftheir supply chains.

Although the degree to which innovations willbe successful is difficult to predict, firms are in-creasingly recognizing innovation's importance asa primary driver of growth and wealth creatior^.^^ .Entrepreneurs and general managers should un-derstand, however, that they must provide strongsupport for the entrepreneurial and strategic ac-tions intended to bring about innovations, or theprobability of innovation success is reduced.^^CEO Ken Lay's support and emphasis on innova- >tion contributed meaningfully to Enron's success,creating an organization "where thousands of peo-ple see themselves as potential revolufionariesi"^'^ / ,Pioneering the practice of helping energy usersprotect themselves against fluctuations in energyprices, Enron used innovation to generate sustain-able income streams.

Innovation is also an important component of aneconomy's productivity. In economies falling shortof international competitive standards, calls aremade to develop a collective vision that placesgreater weight on innovation, risk taking, and in-dividualism.^s Moreover, in large corporations andentrepreneurial ventures, innovation is the foun-dation on which strategies should be built andwealth can be created.^^

In successful firms, innovation does not exist forits own sake, but is used as a critical component ofstrategy and becomes an embedded capability.Hamel suggests that the real story of Silicon Valleyis not e-commerce but innovation and the strate-gies used to exploit its outcomes. He refers to thisstory as the power of i.'"̂

Wealth enhancements result when the firm's en-trepreneurial and strategic actions are focused oninnovation. For this focus to evolve, innovationmust become a vital part of the company's compet-itive mindset.*" Dell Computer Corporation's abil-ity to deliver the exact computer to consumers atlow cost is an example of significant value createdthrough a competitive mindset based on innova-tion. An entrepreneurial mindset is the foundationon which leveraged buyouts can be used to pursueentrepreneurial opportunities, an insight pre-sented in this issue by Wright, Hoskisson, andBusenitz.

Innovation has long been an important part ofbpth entrepreneurship and strategic managementand the actions associated with them. Peter

Drucker, for example, believes that "innovation is. . . the 'means by which the entrepreneur either

creates new wealth-producing resources or en-dows existing resources with enhanced potentialfor creating wealth,"''^ Strategic managementscholars argue that innovation that is difficult toimitate, is consistent with market realities, ex-ploits the market-timing characteristics of an in-dustry, and relies on the use of unique capabilitiesis linked strongly to the firm's ability to createsustainable competitive advantages.'*'* > o

The entrepreneurial use of the strategic m.anage-ment process allows the firm to engage in productmarket innovation and somewhat risky ventures.Such firms are usually the first to introduce inno-_vations, beating competitors to the market.''^ Thusentrepreneurial actions dramatically increase the 'probability of successful innovations. Sony's AIBOproducts—artificial intelligence robots—resultedfrom Sony's nurturing of employee actions that aredesigned to find new markets or ones that areunexploited. At $2,500 per unit, Japan's first-timeallotment of 3,000 AIBOs sold out in 20 minutes.Sony's U.S. servers crashed as millions tried to buythe 2,000 AIBOs allocated for America.""̂ Sony viewsthese responses as an indication that consumers areready to purchase entertainment robots.

In general, the failure to create wealth throughinnovations can result from either an inability todevelop new goods or services or to establish theorganizational routines required to successfullyimplement innovations, especially those based ona new business model. Ineffective implementationis the cause of innovation failure.**'' \

Routines required for successful implementa-tion are developed only in organizational cul-tures that support innovation and where the us-ers' values are matched with the entrepreneurialand strategic actions that generate innovations.Entrepreneurial actions, especially in smallerfirms or startups, lead to more supportive cul-tures than do strategic actions. Both entrepre-neurial and strategic actions are required—theformer to promote creativity and spontaneity, thelatter to provide the framework within which cre-ative and spontaneous activity occurs. However,emphasis should be placed on entrepreneurialactions when trying to create value through in-novations.

Networks bring firms and people together

Networks are patterned relationships betweenindividuals and groups.'*^ They take many forms,including strategic alliances, joint ventures, li-censing arrangements, subcontracting, joint R&D

2001 Ireland, Hitt, Camp, and Sexton 55

endeavors, and joint marketing activities. An or-ganizational network is a voluntary arrangementbetween two or more firms that involves durableexchange, sharing, or codevelopment of newproducts and technologies. Capital, technology,and other firm-specific assets are examples ofwhat partners may commit to a network. Increas-ingly, these networks are extending across coun-try borders.''^ Networking is the act of building aresource network and of strengthening the tieswithin it.^° Thus networks are products of inten-tional entrepreneurial or strategic actions; theydo not evolve on their own. Advantages includefaster market penetration, sharing of financialrisk, increased production efficiencies, enhance-ments of innovation capability, and access tocompetitively valuable knowledge. In short, net-works allow firms to gain access to resourcesthey need but do not possess and to learn newcapabilities.^'/^((^^ ^

Alvarez aha Barney emphasize in their articlethat networks are frequently linked to wealth cre-ation in startups and small firms as well as inlarge corporations. Thus both entrepreneurial andstrategic actions are involved with developing andeffectively using the firm's batch of patterned re-lationships. Although networks are used to accom-plish both tactical and strategic objectives, theircomplexity and their significant role in creatingwealth result in their being used more frequentlyfor strategic, rather than tactical, purposes. More-over, networks are a primary driver of internation-alization, another domain of intersection betweenentrepreneurship and strategic management.

Wells Fargo used networks with entrepreneurialdot-com startup ventures to shape its future andstrategic objectives. Fearing that it could become adinosaur because of rapidly changing technolo-gies and the new market-based capabilities theydemand. Wells Fargo decided to reinvent itselfaround the Internet. Through cooperative arrange-ments with startups such as Scient Corp. andRightWorks, the company has become the nation'sleader in online banking. With a customer baseexceeding two million and continuing to grow.Wells Fargo's actions with its partners reshapedcorporate banking practices. Payroll and benefitswere but two of the financial services Wells Fargooffered to small businesses via the Internet. Thecontinuous learning Wells Fargo obtained from itspartners was the source of innovations and wealthcreation.^2

The interest of entrepreneurs and strategic lead-ers in networks is not surprising. As noted earlier,effective use of interfirm cooperative arrange-ments is one of three key paths to develop compet-

itive advantages. Firms able to combine resourcesin unique ways may realize an advantage overcompeting firms that are unable or unwilling to dosoP Alvarez and Barney's suggestion that thevalue of network arrangements could reach $40trillion by the end of 2004 is consistent with thisexpectation.

Networks can help an entrepreneurial ventureestablish legitimacy and develop a desirable rep-utation in the marketplace.^'' For example, Scientand RightWorks may gain legitimacy from theirrelationship with Wells Fargo. Most entrepreneur-ial ventures, especially in the startup phase, relyon effective networks for survival.^^ As noted by

Most entrepreneurial ventures, especiallyat the startup phase, rely on effectivenetworks for survival.

Brush, Greene, and Hart, ventures can use net-works to build competitively valuable social capi-tal.^^ Along with financial resources and personalskills, social capital plays a critical role in entre-preneurial efforts to create wealth.^' However, so-cial capital is also linked to wealth creation inlarge, established organizations.

Being able to assemble a viable set of resourceswhen founding an entrepreneurial venture is animportant indicator of organizational legitimacy.As Brush, Greene, and Hart note, there have beenfew studies of the efficacy of different processesused to build the resource base an entrepreneurialventure needs to maintain financial stability in theshort term and to create wealth over time. Simi-larly, entrepreneurs rarely identify the appropriateconfiguration of resources for the successful launchof a venture. Yet an adequate and properly consti-tuted resource base is the foundation for the strategicactions necessary to successfully implement a ven-ture's strategy. Brush, Greene, and Hart present de-tailed and insightful pathways that several firmsfollowed, that are extremely valuable for entrepre-neurs approaching the launch stage of a venture.

Entrepreneurial ventures find both formal or-ganizational and personal networks to be of valuein efforts to compete successfully against moreestablished and larger corporations. The strongestpersonal networks are based on trust among part-ners; less effective ones are framed around casualrelationships. For entrepreneurs leading new ven-tures, developing and enhancing social skills, per-ceiving others accurately, making favorable firstimpressions, and being able to adapt quickly andeffectively to a wide range of social situations are

56 Academy ol Management Executive February

important sources of strong and successful per-sonal or social network^.^^ (c

In general, networks are linked with the compet-itive success achieved by a large established com-pany. For entrepreneurial ventures, especiallyemerging ones, networks are linked both with sur-vival and wealth creation. Strategic and entrepre-neurial actions are targeted to creating formal andinformal networks used to fashion new behaviorsto pursue marketplace opportunities.

Organizational networks are formed amongfirms of all types and sizes. Competitors some-times join forces to work on high-risk, capital-intensive projects. Large corporations establishcooperative arrangements with other large compa-nies and with small entrepreneurial ventures. Like-wise, entrepreneurial ventures form partnershipswith large corporations. Ariba, Inc., for example, hasa cooperative relationship with IBM. A leader in theB2B e-commerce sector, Ariba builds virtual market-places that network companies in a highly inte-grated electronic market for purchasing and com-mercial services. Networks have been crucial toAriba's success. The company president and founderstrives to form what he views as a 60-60 deal—one inwhich each party derives significant, but equivalentbenefits.^^ This is difficult to do. As noted by Alvarezand Barney, entrepreneurial ventures should exer-cise caution when developing formal organizationalnetworks with large corporations. Without carefulattention to the actual workings of a cooperativearrangement, the entrepreneurial venture may findmuch of the wealth generated by the network goingto its larger partner. Alvarez and Barney provideguidelines for entrepreneurial ventures to increasethe likelihood that they will receive their fair share ofthe wealth created. These guidelines can serve ashurdle rates when evaluating potential networks.

/n/ernationa/ization extends the firm's reachand potential

Internationalization, where a company sells itsproducts in nations outside its home country, is aprimary driver of the global economy, and influ-ences the set of entrepreneurial and strategicactions used throughout the company.^"^ Asshown in Table 2, the percentage of sales reve-nue generated by at least some large firms out-side their home markets continues to expand.Recognizing internationalization's potential ben-efits, Hewlett-Packard's CEO, Carly Fiorina, rad-ically reorganized her firm to make it easier forcustomers throughout the world to buy H-P'sproducts. Because of rapidly developing global

markets, managers at all levels must be activelyinvolved in internationalization. The CEO of STMicroelectronics reminds his managers: "We areall heads of international. The scope of everymanager is the worlc^."^'

"We are all heads of international. Thescope o/ every manager is the world."

Firms can use several entry modes to interna-tionalize their operations in efforts to createwealth. Exports, licensing, acquisitions, strategicalliances, and foreign direct investments are ex-amples. Fewer entry modes are viable for entrepre-neurial ventures. Peng argues that regardless ofthe entry mode used, companies entering foreignmarkets should always treat those with whom theybecome involved with respect—especially net-work partners—and should concentrate on findingways to promote mutual interests. At a minimum,firms should establish a global mindset, whichwill result in entrepreneurial and strategic actionsthat balance competing country, business, andfunctional area concerns.^^

Some of the firms shown in Table 1, such as GEand Nokia, are recognized worldwide for their abil-ity to innovate through entrepreneurial and strate-gic actions. In fact, Nokia's ability to beat compet-itor Motorola in the global cell phone market hasbeen attributed to its superior innovation skills.Participation in a large number of markets outsidethe home country stimulates innovation. Nokia isbased in Finland, a relatively small country, andthus had to develop a global mindset early in itsexistence to survive and grow. In so doing, it alsodeveloped innovative capabilities that have pro-vided a competitive advantage in the wirelesscommunications market.^^

Positive wealth-creating outcomes accrue tofirms through international diversification. Or-ganizational learning and improvements of inno-vative skills resulting from such diversificationcontribute to higher returns, for example. However,international diversification can reduce wealthwhen the firm lacks the infrastructure and entre-preneurial and strategic capabilities required tocope with the complexities of operating in multi-ple, diverse markets.^''

Historically associated with large, establishedcompanies, entrepreneurial ventures such as NovaCruz Products LLC are now diversifying internation-ally in record numbers in the pursuit of wealth, andare increasingly prominent in the global economy.^^International entrepreneurship is defined as "new

;001 /re/and, Hitt, Camp, and Sexton 57

Table 2 pIncreasing Porcentages of Nondomestic

Sales Revenue

Company

ileneral ElectricVal-Marti/IcDonald's'lokiaroyota

1993

16.6%0%

46.9%85.0%44,6%

Year

1999

30.1%13.8%61.5%97.6%49,5%

Source: Edmondson, G. All the world, see the borders. Busi-less Weefe, 28 August 2000, 113-114.

md innovative activities that have the goal of valuewealth) creation and growth in business organiza-ions across national borders. "^.^ ̂

International entrepreneurial ventures need toidapt quickly to the competitive pressures broughtabout by the global economy's complexity and dy-lamism. As they enter more new internationalnarkets, they are presented with increasing oppor-:unities to learn new technologies and processes,enhancing their performance. The extent to whichzn entrepreneurial venture is able to diffuse thatknowledge throughout its operations affects itsA^ealth-creating ability.^' (^[^

In a growing number of cases, entrepreneurial/entures internationalize their operations at thetime of their founding, often using the Internet astheir entry mode. Entrepreneur Karl Ulrich, atiolder of 15 patents, and a professor at the Univer-sity of Pennsylvania, used the Internet to interna-tionalize Nova Cruz Products LLC, creating a Website to promote sales of Xootrs, his updated child's3cooter. A shortage of scooters in Asia, especiallyin Japan, found customers turning to Ulrich's Website to buy his scooter. At prices ranging from $269to $489, unit sales were expected to reach 50,000 bythe end of

Organizational learning occurs through rapidtransfers of knowledge

Organizational learning is the development of newknowledge that has the potential to influence behav-ior and help the firm create wealth. It takes placethrough information acquisition, information dis-semination, and shared interpretation.^^ The degreelo which a firm is committed to learning is a strategicchoice. Because learning is a capability, it requiresskills and processes that must be activated forknowledge to be developed and shared. In a growingnumber of companies, the decision to emphasize

learning is reflected in formal positions that high-light learning, ludy Rosenblum spent five years atCoca-Cola Company as vice president and chieflearning officer, creating the Coca-Cola LearningConsortium, which served as a catalyst for learningthroughout the company. The consortium's directorsof learning strategy served as liaisons betweenlearning efforts and the firm's business units. Theconsortium also formed four small internal consult-ing operations focused on learning skills, knowledgemanagement, competency development, and globaltraining support. Participating with Rosenblum's ac-tivities allowed people to understand the value oflearning and the organizational relationships, bothpersonal and structural, that should be establishedfor it to occur.™ .

Firms must be able to quickly disseminate newknowledge to all parts of the company in which itcan contribute to wealth-creating efforts. Knowl-edge sharing is one of only three business pro-cesses for which GE CEO Jack Welch alone is re-sponsible (the other two are allocating resourcesand developing people).^^ •

Facilitating knowledge transfer and the organi-zational learning resulting from it at GE is thefirm's executive development program. High-potential managers are identified early in theircareers and then rotated through a variety of unitsand jobs, rarely remaining in one position for morethan two years. Broad exposure to GE's businesseshelps managers learn how to quickly pinpointproblems and propose solutions, recognize thevalue of entrepreneurial and strategic actions indifferent settings, and learn how human resourcescan be a source of competitive advan tage .^^^o '^

Rapid knowledge transfers are also vital in eh-trepreneuriai ventures, particularly in interna-tional market^.''^ A^TBrush, Greene, and Hart note,the ability to share knowledge influences the effortto form the initial resource base necessary forlong-term wealth creation.

As with GE, organizations that have the capabilityto learn and transfer knowledge quickly by effec-tively using their human capital rely on this skill asa source of competitive advantage. Innovative indi-viduals, the types needed engage primarily in entre-preneurial actions and to generate important newknowledge in the process, develop chunks of knowl-edge, sets of patterns and relationships that haveevolved over tim^.'''' Chunks are used to make con-nections among events across time; they are quitevaluable when seeking novel solutions to problems.

Effective companies recognize, however, thatprograms should be in place to facilitate the typeof learning that results in knowledge chunks. AtCisco Systems, executives believe that people lose

58 Academy of Management Executive February

their competitive value if they are not learningcontinuously. As vice president of worldwide train-ing, Tom Kelly used the Web to create e-learninginside Cisco. Kelly designed a "lesson plan fore-learning" that may lead to Internet education sobroad and deep that it will make e-mail trafficalmost inconsequential by comparison. Kelly'splan focuses on providing different types of learn-ing experiences, including structured learning andemergency learning.

Organizational learning is a prerequisite to in-novations and the establishment of new venturesor business operations.''^ Strategic managementand enfrepreneurship researchers have found thatorganizational learning is linked to firms' abilitiesto innovate continuously and generate competitiveadvantages. The development of new knowledgefrom organizational learning reduces the likeli-hood that a firm's competencies will become out-dated. Instead, the competencies on which the ad-vantages are based remain dynamic, and changein accordance with environmental contingencies.^^ -This is an important outcome of learning, for asRanft and O'Neill note, at least in certain entrepre-neurial settings, success reduces the likelihood thefirm will explore how to develop new competitiveadvantages.

The development of new knowledgederived from organizational learningreduces the likelihood that a firm'scompetencies will become outdated.

The increasing competitive value of such intel-lectual assets as the knowledge stocks of individ-uals, corporate brands, and organizational reputa-tions as a means of wealth creation highlights theimportance of organizational learning.^' Intellec-tual assets, which are stored and transferredthrough several processes, including the firm's id-iosyncratic organizational learning patterns, oftenhave a greater potential to contribute to sustain-able income streams than do tangible assets. Infact, these intellectual assets affect the implemen-tation of firm strategies and are directly related tofirm performance.''^ Through effective entrepre-neurial actions, the firm is able to use its intellec-tual assets to fashion new behaviors throughwhich unexploited market opportunities can bepursued. Intellectual assets are rapidly becomingthe foundation of strategic actions the firm uses tocreate wealth.

Strategic leadership has a strong influence onthe firm's ability to use intellectual assets both

entrepreneurially and strategically. In his article,Rowe speaks to strategic leadership's importancefor all organizational types, including not-for-profitagencies and governments, as well as large, es-tablished corporations and entrepreneurial ven-tures. Rowe views strategic leadership as a form ofinfluence that causes organizational actors to be-have in ways that simultaneously enhance thefirm's long-term viability while ensuring its shorter-term financial performance. Rowe contrasts strategicwith managerial and visionary leadership, believingthat strategic leadership has the highest probabilityof contributing significantly to the generation ofgreater firm wealth. Those able to effectively usestrategic leadership make investments that shape acompetitively viable future while maintaining an ap-propriate level of financial stability. While strategicleadership can be exhibited at any level in the firm,if is critical for the fop management teams that wediscuss in the next section.

Top management teams and governancemechanisms serve stakeholders

A top management team has the final responsibil-ity for selecting the firm's strategies and ensuringthat they are implemented in ways that will createwealth and thus can be a source of competitiveadvantage. It is responsible for the strategic ac-tions that mitigate external environmental threatsand exploit opportunities by effectively using thefirm's unique resources and capabilities. The per-formance of the strategic actions selected and im-plemented is important in both entrepreneurial/^ventures and large, established corporations.''^ Inemerging entrepreneurial ventures, the top man-agement team's influence on strategic goals andactions is especially significant.^^

To reverse Polaroid Corporation's inability tocreate wealth, the relatively new top managementteam initially decided that the firm had to simul-taneously rely on innovation to rejuvenate its corebusinesses and develop digital products. Afteronly five years, Polaroid introduced between 20and 25 new products annually and broadened itsreach into the digital market with new camerasand an innovative technology that produces low;^'price, high-quality prints. A major success from thW--innovation focus is the $25 I-Zone instant camerathat produces stamp-size sticker prints. Introducedin 1999, the I-Zone quickly became the world's best-selling camerix.^'

Top managers are often key players in networks tosupport entrepreneurial and strategic actions. JaniceWebb, senior vice president—Networks Group at Mo-torola, describes herself as a human modem. Seek-

2001 heland, Hitt, Camp, and Sexton 59

ing to make her company a leader in the wirelessIntemet market, Webb is a "master at relationships:brokering them, managing them, surviving them andstriking them in such a way as that benefits of suchrelationships are evident to all sides."^^

Governance is concerned with determining andensuring that the firm's direction has a highprobability of satisfying the expectations of stake-holders—shareholders, employees, suppliers, boardsof directors, investors, and local communities. In mar-ket-based economies, shareholder satisfaction is thedominant concern of governance decisions. In essence,governance decisions specify relationships among allstakeholders with a vested interest in the firm's perfor-mance and its ultimate success in terms of wealthcreation. Variance in preferred outcomes among stake-holders sometimes must be addressed. For example,Ranft and O'Neill note that there may not be an obvious

In market-based economies, shareholdersatisfaction is the dominant concern ofgovernance decisions.

parallel between the interests of the founder/owner of an entrepreneurial venture and those ofnew investors. Resolution must be achieved bythose bearing the responsibility for governanceof the firm's operations. The goal of these mem-bers of the top management team and the boardof directors should be the specification and useof actions to create wealth.

The firm's board of directors is also an importantsource of governance decisions. Moreover, evi-dence indicates that the board's decisions affectthe firm's wealth-creating performance.^^ Somebelieve that the actions by DaimlerChrysler'sboard had a negative effect on the firm's ability tocreate wealth. Approximately 60 percent of thevalue of the combined Daimler-Benz and ChryslerCorporation shares was lost between January 1999and the end of 2000. A business periodical ob-served: "Investors should start scrutinizing theboard. It's supposed to represent the interests ofworkers and shareholders."^'' However, the preciseexpectations that are the legitimate purview of aboard of directors such as DaimlerChrysler's havenot been established.^^ The board members of en-trepreneurial ventures tend to be more involved inselecting and implementing strategies. Jn largercompanies, board members allow more discretionto top-management team members to select strat-egies and influence the choice and implementa-tion of entrepreneurial and strategic actions to cre-ate wealth.

Ranft and O'Neill found that a board's behaviorhas a stronger influence on its ability to make deci-sions that will enhance wealth creation than does itscomposition. They suggest that an independentboard, lacking ties to the top management team, beestablished early. Input from initial venture capital-ists or other investors can serve this need well. Doingthis is critical, because successful founders and en-trepreneurs tend to prefer weak boards.

Another insight from the Ranft and O'Neillstudy is the importance of an orderly successionplan; failure to implement one is a hallmark ofineffective boards. The actions called for bythese authors will be of keen interest for boardmembers, particularly in entrepreneurial ven-tures, and will improve the odds that effectivegovernance will evolve and remain in placeacross time.

Governance mechanisms sometimes fail, stronglyreducing the firm's ability to create wealth. Lever-aged buyouts (LBOs) are a tool through which afirm's performance can be turned around and itswealth-creating capabilities restored. Often focusingon improving the efficiency of the target organiza-tion, LBOs can be used to address governance fail-ures in large, established corporations as well as inentrepreneurial ventures. The most successful use ofLBOs is to make efficiency improvements in largemature firms whose actions are constrained by op-erational inefficiencies that have evolved throughrigid structures.

Wright, Hoskisson, and Busenitz argue that LBOscan also be used as a means of wealth creation.This is a dynamic and fascinating argument, sug-gesting that, when structured appropriately, LBOsprovide a foundation to pursue marketplace oppor-tunities that remain unexploited or underex-ploited. To create wealth, LBOs help develop anentrepreneurial mindset to view problems as op-portunities to innovate. This article will interestthose contemplating involvement with LBOs andthose who have participated in buyouts that didnot meet their expectations.

Growth stimulates success and change

Mergers and acquisitions provide rapid growth,long a primary goal of large, established organi-zations. As such, this strategic option is popular inmany firms competing in the global economy. Adesire to engage in these transactions is not nec-essarily ill-advised; when managed successfully,mergers and acquisitions can help firms generateadditional wealth.^^ Growth is also a key objectivefor entrepreneurial ventures; however, their sizeand asset base commonly make it more difficult for

60 Academy of Management Executive February

them to acquire others. Because it has been arguedthat growth is the essence of entrepreneurship,these firms must find other ways to grow. In thiscontext, wealth creation is an outcome of entrepre-neurial growth-oriented acfions.^'' Innovativeness,risk-taking, and proactive behaviors often form thebasis of entrepreneurship.

Growth is an outcome sought in large, estab-lished corporations, as well as in entrepreneurialventures. Two major types of growth opportunitiesare significant changes in social, political, demo-graphic and/or economic forces; and inefficienciesin existing markets, such as information asymme-tries or limits to technology.^^ In both cases, thesegrowth stimulants call for innovations to dealmeaningfully with emerging opportunities. Sincethe most successful innovations are products ofproperly designed and implemented strategies,entrepreneurial actions and strategic actions arelinked to the type of growth through which firmsare able to create more wealth.

The Willy Wonka Candy Factory, selected asCandy Industry's 2000 Manufacturer of the Year,had a growth rate in sales that exceeded the in-dustry's. Innovation is the key to its growth. Ac-cording to Group Vice President David Hubinger:"Innovation has always been part of the brand.Innovative, imaginative, unpredictable—that's theplatform for any kind of Wonka product or pack-age."^^ Nerds Rope, Xploder Bar, Oompas, and arelaunch of Laffy Taffy are examples of recent in-novations. Long-tenured employees, close interac-tions with children—the firm's target customergroup—and a desire to create enjoyment for kidsdrive Wonka's entrepreneurial actions.

Extremely ambitious entrepreneurs who leadhigh-growth ventures demonstrate intensity andhave effective and powerful visions of the wealththey can create.9° By effectively integrating entre-

Extremely ambitious entrepreneurs wholead high-growth ventures demonstrateintensity and have effective andpowerful visions of the wealth they cancreate.

preneurial and strategic actions, these high-growth ventures utilize unique configurations ofdifferent strategies to create wealth.^'

High growth can also create discontinuities. Es-tablished routines can be disrupted and uncertain-ties about cause and effect relationships may sur-face. The challenges resulting from these conditionsare particularly acute in entrepreneurial ventures.

especially emerging ones. Internet Capital Group(ICG), a holding company, was a high-flyer, goingpublic in August 1999. At that time, the split-adjustedprice of a share of the firm's stock was $6; by Decem-ber 1999, it was $212. However, by December 2000, theprice per share approximated the initial $6. Accord-ing to some analysts, the firm's growth was frenziedin design and flawed in execution. With stakes in 80B2B Internet companies, ICG acquired companiesquickly, often paying excessive premiums. To restoreits luster and performance, the firm recently restruc-tured its portfolio, identifying holdings with potentialand those that should receive less financial supportor be divested. ICB executives anticipated the firstsix months of 2001 would be weak, but were hopefulthat the IPO market for Internet startups would im-prove in the second half, providing money to financeits intended tumaround.^^ ,

j

Top-Management Challenges

In the final analysis, the firm's top managementteam bears the responsibility of dealing with theissues and problems growth can create. A first stepin this process is to verify that the firm's entrepre-neurial and strategic actions are integrated effec-tively to create wealth. The firm's leaders shouldalso remain flexible in determining actions to copewith growth challenges. Simultaneously, all em-ployees must be flexible and focused on the ulti-mate objective of wealth creation. Following theseprescriptions increases the likelihood that the firmwill be able to generate appropriate opportunitiesto achieve growth.

Flexibility is critical to create wealth while com-peting in the global economy.^^ Continuous or-ganizational change is needed as firms seek tonavigate in an increasingly turbulent competitivelandscape. Brown and Eisenhardt suggest that thekey strategic challenge for current firms is manag-ing organizational change.^'* Effective manage-ment of change is required but difficult, becausechange is risky.^^ Outcomes from organizationalchange processes are a product of the firm's moti-vation, opportunity, and capability to change.^^Many smaller entrepreneurial firms have the typeof flexibility that yields an advantage, comparedto many larger firms, in initiating and managingorganizational change. This advantage may beone factor that accounts for the ability of smallerentrepreneurial firms to be more innovative thantheir larger counterparts.

Each of the articles featured in this special issuespeaks meaningfully to an aspect of wealth cre-ation in firms competing in the global economy. Webelieve that, individually and collectively, the au-,

2001 heland, Hitt, Camp, and Sexton 61

thors' insights have significant potential to enhancemanagerial and entrepieneurial practice in today'sorganizations, and to stimulate analysis of how toimprove those practices as the 21^' century unfolds.

Endnotes' The growth rate for high-growth firms ranges from about six

to ID times the growth rate for median firms. See: Sexton, D. L.,Pricer, R, 8E Nenide, C, Measuring performance in high growthfirms. 2000, Paper presented at the Babson EntrepreneurshipResearch Conference.

^•Lucier, C, E,, Moeller, L, H,, 8E Held, R. 1997. lOX value: Theengine powering long-term shareholder returns, Stiategy &Business, 8 (Third Quarter): 21-28,

^ Smith, K. G., & DG Gregorio. D. 2000. Bisociation, discoveryand the role o( entrepreneurial action. Creating a new mindset:Integrating strategy and entrepreneurship perspectives confer-ence, Kansas City, MO: November.

' Lyon, D. W., Lumpkin, G. T,, & Dess, G. G. 2000, Enhancingentrepreneurial orientation research: Operationalizing andmeasuring a key strategic decision making process. Journal ofManagement, 26: 1055-1085.

^ Our definitions of entrepreneurial actions and strategic ac-tions are drawn from: Hitt, M. A., Ireland, R, D., & Hoskisson, R. E.2001. Strategic management: Competitiveness and globaliza-tion, 4"̂ ed, Cincinnati, OH.: South-Western College PublishingCompany; Kuratko, D. F., Ireland, R. D., & Hornsby, J, S. 2001. Thepower of entrepreneurial actions: Insights from Acordia, Inc.The Academy of Management Executive (iorthcoming); Smith &Di Gregorio, op. cit.

^ This definition of wealth is consistent with the view of mosteconomists. See Rutledge, J, Wealth builder. Forbes. 24 May1993, 236.

' Bennis, W., & O'Toole, ], 2000. Don't hire the wrong CEO.Haivard Business Review, 78(3): 171-176.

" Some believe that it will be difficult ior Immelt to success-fully follow Welch. To consider this possibility further, see:Moore, P, L, The man who would be Welch. Business Week, 11December 2000, 94-97,

^ Ireland. R D., & Hitt, M. A. 1999. Achieving and maintainingstrategic competitiveness in the 21^' century: The rale of strategicleadership. The Academy of Management Executive, 12(1): 43-57.

'° Bianco, A,, & Lavelle, L. The CEO trap. Business Week. HDecember 2000, 86-92.

" See: Turner, N. Infosys', N. R, Narayana Murthy: He stressescreating wealth before spending il. Investor's Business Daily, 24August 2000, A4.

'̂ Samson, D, 2000. Industry minister Nick Minchin on gov-ernment's role in progress and innovation. The Academy ofManagement Executive, 14(3): 8-14,

'̂ Sexton, D. L., & Landstrom, H., (Eds,), 2000. Handbook of entie-preneuTship. Oxford, U.K.: Blackwell Publishers Ltd., Ch, 5-9.

''' See Kazanjian, R. K., Drazin, R., & Glynn, M. A, 2000. Imple-menting strategies for corporate entrepreneurship: A knowl-edge based perspective. Paper presented during the Greating anew mindset: Integrating strategy and entrepreneurship per-spectives conference. Kansas City, MO: November.

'̂ Hitt, Ireland & Hoskisson, op, cit,, chapter 1.'̂ Golvin, G, Value driven, Foitune. 27 November 2000, 82."Lyon. et. aL, op, cit,, 1055-1056.'^Morris, M, H, 1998, Entrepreneurial intensity: Sustainable

advantages ior individuals, organizations, and socielies. West-port, CT,: Quorum Books: 16.

'^Sexton, D, L,, & Bowman-Upton. 1991. Entrepreneurship:Creativity & growth. New York: Macmillan Publishers.

°̂ Barringer, B. R., & Bluedorn, A. C. 1999. The relationshipbetween corporate entrepreneurship and strategic manage-ment. Sfrategic Managemerif/ournaJ, 20: 421-444,

'̂ Morris, op. cit.: 2.^̂ Ibid.^̂ Covin, J. G., Slevin, D. P., 8f Heeley, M, B. 1999, Pioneers and

followers: Competitive tactics, environment, and firm growth.louinal of Business Venturing, 15: 175-210.

^* Zahra, S. A,, Ireland, R, D., Gutierrez. L, & Hitt, M. A. 2000.Privatization and entrepreneurial transformation: Emerging is-sues and a future research agenda. Academy of ManagementReview, 25: 509-524; and the July 2000 issue of Academy ofManagement Review. Articles in this issue evaluate multipleaspects of the driving forces behind privatization efforts acrossthe global economy and the results: ol different privatizationmodes.

^̂ Additional perspectives appear in: Wang, Z, M, 2000, Eco-nomic Reform Foundation's President Shangquan Gao on or-ganizational reform and sustainable business development.The Academy of Management Executive, 14(1): 8-18,

^̂ Porter, M, E. 1985, Compefifive advantage. New York: TheFree Press.

^̂ Porter, M. E. 1980. Competitive strategy. New York: The FreePress; Barney, L B. 1991. Firm resources and sustained compet-itive advantage. Journal of Management, 17: 99-120; Dyer, J. H.,& Singh, H. 1998. The relational view: Cooperative strategy andsources of interorganizational advantage. Academy of Manage-ment Review, 23: 660-679.

^̂ Hamel, G. 2000, Leading the revolution. Boston: HarvardBusiness School Press.

^̂ Barringer & Bluedorn. op. cit.^° These domains were proposed initially in: Hitt, M. A.. &

Ireland, R. D. 2000. The intersection of entrepreneurship andstrategic management research. In D. L. Sexton & H. Landstrom,(Eds.), Handbook oi entiepreneurship. Gxford, U, K,: BiackwellPublishers, 45-63.

'̂ Afuah, A. 1998. Innovation management: Strategies, imple-mentation, and profits. New York: Oxford University Press.

^̂ Rappleyea, W. 2000. Juniper Networks: Entrepreneur of theyear 2000, Ernst & Young, November, 7-8.

^̂ Sharma, P,, & Chrisman, J. J. 1999. Toward a reconciliationcl the definitional issues in the field ol corporate entrepreneur-ship, Endepreneurship,- Theory & Practice, 23(3): 11-27,

'̂' Bylinsky, G, Look who's doing R&D. Fortune. 27 November2000, 232(c)-232(f),

•'̂ Hargadon, A., & Sutton, R, I. 2000. Building an innovationfactory, Haivord Business Review, 78(3): 157-166; Kim, W. G., &Mauborgne. R. 2000. Knowing a winning business idea whenyou see ane, Harvaid Business Review, 78(5): 129-138,

^̂ Zahra, S. A., Neubaum, D, O., & Huse, M, 2000. Entrepre-neurship in medium-size companies: Exploring the effects ofownership and governance systems. Journal of Management,26: 947-976.

^•'Hamel, op, cit,, 212.^̂ An observer of Ganada's standing in terms of world com-

petitiveness took this position recently. CN: Canada must re-ward risk-taking and innovation more to stem the loss of itsbrightest minds, fiusirjess Wire, 5 April 2000, 14.

^̂ Hitt, Ireland, & Hoskisson, op. cit., Gh. 13.°̂ Hamel, op. cit.

'" Kuczmarski, T, D. 1998. Creating an innovative mind-set.Management fleview, November, 47-51.

''̂ Markides, C. 1998, Strategic innovation in established com-panies. SJoan Management Review, Spring, 31-42.

''̂ Drucker, P, F. 1985, Enfrepreneurship and innovation: Prac-tices and principles. New York: Harper Business,

,^Jij I.'""-'. ?«k •*** .'V

62 Academy of Management Executive February

•''' Lengnick-Hall, G, A. 1992, Innovation and competitive ad-vantage. Joutnal of Management, 18: 399-429.

"^Dess, G, G., Lumpkin, G. T., & Govin, J, G. 1997. Entrepre-neurial strategy making and firm performance: Tests of contin-gency and configurational models. S(ra!egic Management Joux-nal. 18: 677-695,

^̂ Kunii, I. M. How much is that robot in the window? BusinessWeek. 27 November 2000, 170.

" Klein, K. ].. & Soira, J, S. 1996. The challenge of innovationimplementation. Academy of Management Review, 21: 1055-1080.

^^ This definition of networks is from Dubini, P., & Aldrich, H.1991, Personal and extended networks are central to the entrepre-neurial process. Journal of Business Venturing, 6: 305-313. Anotherdefinition appears in Rangan, S. 2000, The problem of search anddeliberation in economic action: When social networks really mat-ter. Academy of Management Review, 25: 813-828.

'^^ Gulati, R.. Nohria, & Zaheer, A. 2000. Strategic networks. Stra-tegic Management Journal (Special Issue). March; Gulati, R. 1999,Network location and learning: The influence oi network resourcesand firm capabilities on alliance formation, Sfraiegic Manage-ment Journal, 20: 397-420; Gulati, R. 1998. Alliance'^ and networks.Sfrafegic Managemenf/ournai, 11 (Special Issue): 293-318.

^̂ Friga, P., O'Neill, H,, & Bateman, T. 2000. Entrepreneurialnetworks: A cross-country comparison. Working paper. Univer-sity of North Garolina at Chapel Hill,

^' Hitt. M. A,, Dacin, M, T.. Levitas. E. Arregle, I. L., & Borza, A.2000. Partner selection in emerging and developed market con-texts: Resource-based and organizational learning perspec-tives. Academy of Management Journal, 43: 449-467.

^̂ Anders, G, Power partners. Fast Company. September 2000,145-158,

^̂ Dyer & Singh, op. cit., 661.^"Sharman, M. P., Gray, B., & Yin, A. 1991. The context of

interarganizational collaboration in the garment industry: Aninstitutional perspective. Journal of Applied Behavioral Sci-ence, 27: 181-208.

^̂ Malecki, E. G. 1997. Entrepreneurs, networks, and economicdevelopment: A review of recent research. In J. A. Katz, (Ed,),Advances in enfrepreneurship, firm emergence and growth (Vol.3). Greenwich, CT.: JAI Press, 57-118,

^ We refer readers to the Brush. Greene, and Hart definitionof social capital,

"Hitt, M. A., & Bartkus, B. 1997. International entrepreneur-ship. In Katz, op. cit., 7-30.

^̂ Baron, R. A., & Markman, G. D. 2000. Beyond social capital:How social skills can enhance entrepreneurs' success. TheAcademy of Management Executive, 14(1): 106-116.

^̂ Griesser, T. 2000. Ariba. Inc.: Entrepreneur of the year. Ernst& Yaung, November. 10-11.

^° Hitt, M. A., Keats, B. W,, & DeMarie, S. 1998. Navigating inthe new competitive landscape: Building strategic flexibilityand competitive advantage in the 21^' century. The Academy ofManagement Executive, 11(1): 22-42; Ireland & Hitt, op. cit,

Edmondson, G. See the world, erase its borders. BusinessWeek. 28 August 2000, 113-114,

^^See also Barkema, H. G., & Vermeulen, F, 1998. Interna-tional expansion through start-up or acquisition: A learningperspective. Academy of Management journal, 41: 7-26; Murtha,T. P., Lenway, S. A., & Bagozzi, R. P, 1998, Global mindsets andcognitive shift in a complex multinational corporation. Sfrate-gic Management Journal 19: 97-114; Zacharakis, A. L. 1998. En-trepreneurial exporting strategies: Gontractual considerations.Journal of Business Strategies, 15: 73-90,

^̂ Nokia accounts for as much as one-third of Finland's GDP.Some call the phenomenon the "Nokia Effect," Reynolds, P. D., Hay,M.. 8E Camp, S. M, 1999. Global Entiepreneuiship Monitor. KansasCity, MO: Kauffman Center for Entrepreneurial Leadership.

^̂ Hitt, M. A., Hoskisson, R, E,, & Kim. H. 1997, Internationaldiversiiication: Effects on innovation and firm performance inproduct diversified iirms. Academy of Management Jouinat, 40:767-798.

^̂ McDougall, P. P. & Oviatt, B, M, 2000. International entre-preneurship: The intersection of two research paths. Academyof Management Journal, 43: 902-908.

^̂ McDougall, P, P., & Oviatt, B, M. 1997. International entre-preneurship literature in the 1990s and directions for futureresearch. In D. L. Sexton & R, W, Smilor, (Eds.), Entrepreneurship2000, Chicago: Upstart Publishing Company.

" Zahra, S, A,, Ireland. R. D., & Hitt. M, A. 2000, Internationalexpansion by new venture firms: International diversity, modeof market entry, technological learning and performance. Acad-emy of Management Journal, 43: 925-950.

^̂ Judge, P, Professor Ulrich's excellent adventure. East Com-pany. August 2000, 248-257.

^̂ De Long, D, W.. & Fahey, L. 2000, Diagnosing cultural barriersto knowledge management. The Academy of Management Exec-utive, 14(4): 113-127; Sinkula, J. M. 1994, Market information pro-cessing and organizational learning. Journal of Marketing, 58:35-45; Slater, S. F,, & Narver, J. G. 1995. Market orientation and thelearning organization. Journal of Marketing, 59: 63-74,

™ Webber, A. Will companies ever learn? Fast Company.October 2000, 275-282.

" Stewart, T. A, The house that knowledge built. Fortune. 2October 2000, 278-280.

'^ Byrnes, N. 2000. What really happened to the class of GE.Business Week. 13 November 2000, 98-99.

'^ Zahra. Ireland, & Hitt, op. cit.^̂ Knowledge chunks are examined in: Simon, H. A. 1985.

What we know about the creative process. In R. L. Kuhn, (Ed.),Frontiers in creative and innovative management. Cambridge,MA.: BalHnger Books.

'^This point is included in a comprehensive analysis of ac-ademic relationships between the entrepreneurship and strate-gic management disciplines. See: Day, D, L. 1992. Researchlinkages between entrepreneurship and strategic managementor general management. In D. L. Sexton & J. D. Kasarda, (Eds.),The state of entrepreneurship. Boston: PWS-Kent Publishing Co.,117-163,

'^ Hitt, Keats, & DeMarie, op. cit.; Nonaka, I, 1994. A dynamictheory of organizational knowledge. Organizafian Science, 5;14-37; Nonaka, L, & Takeuchi, H. 1995. The knowledge-creatingcompany: How Japanese companies create the dynamics of in-novation. New York: Oxford University Press; Teece, D. J.,Pisano, G., & Shuen, 1997, Dynamic capabilities and strategicmanagement. Strategic Management Journal, 18: 509-533,

" Cohen, D. 1998. Toward a knowledge context: Report on thefirst annual U. C, Berkeley forum on knowledge and the firm.Califotnia Management Review, 40: 22-39.

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R. Duane Ireland is the W.David Robbins Chair of Busi-ness Policy in the E. GlaiborneRobins Schooi of Business, Uni-versity oi Richmond. His re-search includes the intersectionbetween entrepreneurship andstrategic management, strate-gic alliances, innovation, andcorporate growth. He has pub-lished 10 books and more than70 articles and is a former asso-ciate editor of The Academy ofManagement Executive. Con-tact: direiand@richmond,edu.

Michael A. Hitt is proiessorand Weatherup/Overby Chairin Executive Leadership at Ari-zona State University, He re-ceived his Ph,D. from the Univer-sity of Colorado. He haspublished IB books and morethan 100 articles and is a formereditor ot Tbe Academy of Man-agement Journal. He Is a fellowand a past president of the acad-emy of Management. Contact:michael.hitt@asu.edu.

S. Michael Camp is the interimdirector of Adult Learning Pro-grams and vice president of Re-search at the Kaulfman Centerfor Entrepreneurial Leadershipin Kansas City, MO, He has aPh.D, from The Ohio State Uni-versity. The Center's researchprogram is focused on eco-nomic impact, public policy, ed-ucation, and the performance ofleading entrepreneurial com-panies worldwide. Contact:rncamp@enii/. org.

Donald L. Sexton is a professoremeritus at The Ohio State Uni-versity and retired director oithe National Center for Entre-preneurship Research at theKauffman Center for Entrepre-neurial Leadership. He has pub-lished widely and has heldendowed chairs in entrepreneur-ship at Baylor University andThe Ohio State University. Con-tact: dlsexlon@ aoi.com.