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MASTER OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG 2013
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In contrast to incremental innovations, radical innovations usually provide significant technological breakthroughs and create new knowledge. radical innovations have strong potential to lead to significant growth in revenue and profits. Radical innovations are rare because of the difficulty and risk involved in developing them. Internally developed incremental and radical innovations result from deliberate efforts. Autonomous strategic behavior is a bottom-up process in which product champions pursue new ideas, often through a political process, by means of which they develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace. The second of the two forms of internal corporate venturing, induced strategic behavior, is a top-down process whereby the firms current strategy and structure foster innovations that are closely associated with that strategy and structure. Implementing Internal Innovations An entrepreneurial mind-set is required to be innovative and to develop successful internal corporate ventures. Because of environmental and market uncertainty, individuals and firms must be willing to take risks to commercialize innovations. Having processes and structures in place through which a firm can successfully implement the outcomes of internal corporate ventures and commercialize the innovations is critical. Effective integration of the various functions involved in innovation processes from engineering to manufacturing and, ultimately, market distributionis required to implement the incremental and radical innovations resulting from internal corporate ventures. Cross-functional teams facilitate efforts to integrate activities associated with different organizational functions, such as design, manufacturing, and marketing. Innovation through Cooperative Strategies Virtually all firms lack the breadth and depth of resources (e.g., human capital and social capital) in their R&D activities needed to internally develop a sufficient number of innovations to meet the needs of the market and remain competitive. Both entrepreneurial firms and established firms use cooperative strategies (e.g., strategic alliances and joint ventures) to innovate. Because of the importance of strategic alliances, particularly in the development of new technology and in commercializing innovations, firms are beginning to build networks of alliances that represent a form of social capital to them. Innovation through Acquisitions Firms sometimes acquire companies to gain access to their innovations and to their innovative capabilities. One reason companies make these acquisitions is that the capital market values growth; acquisitions provide a means to rapidly extend one or more product lines and increase the firms revenues. Creating Value through Strategic Entrepreneurship Newer entrepreneurial firms often are more effective than larger established firms in the identification of entrepreneurial opportunities. Alternatively, larger and well-established firms often have more resources and capabilities to exploit identified opportunities. To be entrepreneurial, firms must develop an entrepreneurial mind-set among their managers and employees. Firms practicing strategic entrepreneurship contribute to a countrys economic development.