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Entrepreneurial actions, innovation, and

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Article in Strategic Entrepreneurship Journal December 2007
DOI: 10.1002/sej.28

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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

Copyright 2008 Strategic Management Society

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

350

R. A. Burgelman and M. A. Hitt

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 identified. 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 finding 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 identified (Ireland et al.,
2003). To do this, entrepreneurs must accumulate
resources such as financial 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 firm (Bamford, 2005). Of
course, after a new product (or technology) has been
introduced to the market, it must be protected for
the innovating firm to be able to obtain significant
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
Copyright 2008 Strategic Management Society

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.

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 firms 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 entrepreneurshipdefined as the firm-level combination
of advantage seeking and opportunity seekingwith
collaborative innovationdefined as the creation of
innovations across firm 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 firms 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 firms, opportunity-seeking activities
between firms, advantage-seeking activities within
firms, and advantage-seeking activities between
firms.
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 firms
(and how the configuration of managerial roles in
collaborative entrepreneurship is different from the
configuration 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 firm has spent resources
that, if they had been deployed for strategic entrepreneurship, would have generated greater wealth
for the firm 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.

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 difficulty 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
Copyright 2008 Strategic Management Society

351

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 selfish
classical individual entrepreneur is a bit of a straw
man, since all successful individual entrepreneurs by
definition create value for others: in first instance,
the customers willing to pay for the new product or
service they provide. Also, individual entrepreneurs
need to find 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 benefit 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
benefit.
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
Strat. Entrepreneurship J., 1: 349352 (2007)
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R. A. Burgelman and M. A. Hitt

same level of wealth if they had not been intensely

focused on self-interest in the first 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 firm 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 firms protect their most valuable intellectual
assets outside of formal devices? This is an important area of research with significant opportunity for
quality scholarly inquiries.

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

Copyright 2008 Strategic Management Society

Ireland RD (eds). Blackwell Publishing: Oxford, U.K.;

4850.
Burgelman RA. 1983. Corporate entrepreneurship and
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Guth WD, Ginsberg A. 1990. Guest editors introduction: corporate entrepreneurship. Strategic Management
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Ireland RD, Hitt MA, Sirmon DG. 2003. A model of strategic entrepreneurship: the construct and its dimensions.
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Ketchen DJ, Ireland RD, Snow CC. 2007. Strategic entrepreneurship, collaborative innovation, and wealth creation.
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Strat. Entrepreneurship J., 1: 349352 (2007)

DOI: 10.1002/sej