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1、STRATEGY AND ENTREPRENEURSHIP: OUTLINES OF AN UNTOLD STORYSaras D. SarasvathyUniversity of WashingtonS. VenkataramanUniversity of VirginiaInvited book chapter in the Strategic Management Handbook edited by Hitt et.al.(Revised December 10, 2000) In his book “InventionPage: 2It was Herbs advice not to

2、 use “editorial” adjectives while citing a work as far as possible may be the reader thinks it is a mundane piece, for example, why turn the reader off our piece based on differences of opinion about someone we are citing? The key thing is to focus on the actual content of the cite and its usefulnes

3、s in making our point than expressing our enthusiasm for it,” Professor Norbert Wiener (1993), commenting on the relative importance accorded to individuals and institutions in historical narratives of science and inventions, asks us to imagine Shakespeares “Romeo and Juliet” without either Romeo or

4、 the balcony. Weiner took his inspiration from the work of the English writer, Rudyard Kipling. The story is just not the same. He likens much of the study of the economic history of science and accounts of inventions as “all balcony and no Romeo.” The balcony for Norbert Wiener captures the context

5、 in which the story unfolds the culture, the institutions, the constraints and the catalysts that move the plot forward and thicken it. Romeos, for Wiener, play the leading parts in the story, because there is a strong fortuitous element to inventions and there is no inevitability that a possible di

6、scovery will be made at a given time and space. Take away either one, Romeo or the balcony, and the whole story falls apart. In a similar vein, we would liken studies of strategic management to “all balcony and no Romeo.” But if we accuse strategic management of being “all balcony and no Romeo,” str

7、ategic management scholars could legitimately accuse entrepreneurship of being “all Romeo and no balcony.” In this chapter we wish to suggest a point of view from entrepreneurship that will allow strategic management scholars to accommodate more Romeos in their stories. Although these two fields hav

8、e much to offer each other (trade in balconies and Romeos), they have developed largely independent of each other. We wish to suggest that entrepreneurship has a role to play in strategic management theory and that strategic management theory enriches our understanding of the entrepreneurial process

9、, although this latter aspect will not be the focus of this chapter.One useful way of thinking about entrepreneurship is that it is concerned with understanding how, in the absence of markets for future goods and services, these goods and services manage to come into existence (Venkataraman, 1997).

10、To the extent value is embodied in products and services, entrepreneurship is concerned with how the opportunity to create “value” in society is discovered and acted upon by some individuals. As Wiener has noted (Wiener, 1993: 7), at the beginning stages of a new idea, the effectiveness of the indiv

11、idual is enormous: “Before any new idea can arise in theory and practice, some person or persons must have introduced it in their own minds The absence of original mind, even though it might not have excluded a certain element of progress in the distant future, may well delay it for fifty years or a

12、 century.” The field of strategic management can be usefully described as having to do with the “methods” used to create this “value” and the ensuing struggle to capture a significant share of that “value” by individuals and firms. Thus, if we understand entrepreneurship and strategic management as

13、the fields that together seek to describe, explain, predict and prescribe how value is discovered, created, captured, and perhaps destroyed, then there is not only much that we can learn from each other, but together we represent two sides of the same coin: the coin of value creation and capture.One

14、 side of the coin, namely strategic management, has to do with the achievement of ends obtaining market share, profit, and sustained competitive advantage. The other side of the coin, namely entrepreneurship, has to do with the achievement of beginnings creating products, firms, and markets. But the

15、 clarity and complexity with which an author connects beginnings and ends is what makes a great story. We believe the really interesting story between strategic management and entrepreneurship has not yet been told. The main reason for this is that in general, creation calls for very different modes

16、 of thinking and behavior than capture and sustenance over time. Yet the creation process not only determines certain powerful tendencies for survival and growth, but some elements of it also persist over long periods of time, subtly and substantially influencing the selection and achievement of lat

17、er ends. Carefully bearing in mind that large expanses of strategic management may have no overlap with entrepreneurship It is worth pointing out here that when discussing creative processes in the economic domain, strategy is a sub-set of entrepreneurship. For example, for any given new technical i

18、nvention there are, at least in theory, an infinite number of product possibilities that may flow out of that invention. But, in practice, only a finite sub-set of those possibilities will come into existence. Of those new products that come into existence, only a sub-set is introduced by existing f

19、irms. Indeed, a large number of new products are introduced into the economy by new firms. Strategy essentially focuses on existing firms and the activities of existing firms. Entrepreneurship, on the other hand, has been focusing attention on the creative process, particularly of new firms. Where t

20、hey overlap is at the nexus of the creative process of existing firms. Thus, each field has vast terrains that do not overlap., this chapter nevertheless focuses exclusively on where entrepreneurship and strategic management overlap.In the preface to their 1994 book, Rumelt, Schendel, and Teece iden

21、tify the subject matter of strategic management as the purposeful direction and natural evolution of enterprises. (Rumelt, et. al., 1994) They further identify four fundamental issues that comprise a research agenda in strategic management:1.Firm Behavior The choice of the term firm and the choice o

22、f focusing on the pre-existing firm by Rumelt, Schendel, and Teece (1994) only affirm our assertion in the previous footnote.How do firms behave? Or, do firms really behave like rational actors, and, if not, what models of their behavior should be used by researchers and policy makers?2.Firm Differe

23、ntiationWhy are firms different? Or, what sustains the heterogeneity in resources and performance among close competitors despite competition and imitative attempts?3.Firm ScopeWhat is the function of or value added by the headquarters unit in a diversified firm? Or, what limits the scope of the fir

24、m?4.Firm PerformanceWhat determines success or failure in international competition? Or, what are the origins of success and what are their particular manifestations in international settings or global competition?In answering the four questions stated above, economics and strategic management theor

25、ies generally tend to focus on rational decision making (whether unbounded or bounded and linear or non-linear) based on causal reasoning and the logic of prediction. Our explication of entrepreneurship, however, rests upon creative action based on effectual reasoning and the logic of control.We hav

26、e elsewhere identified the subject matter of entrepreneurship as having to do with the exploitation of opportunities for creating hitherto non-existent economic artifacts (Venkataraman, 1997; Shane and Venkataraman, 2000; Sarasvathy and Simon, 2000; Sarasvathy, 2001). Depending upon the completeness

27、 and/or consistency of the larger environment, entrepreneurial opportunities may have to be recognized or discovered or created. In this chapter, we first examine these three types of action connected with entrepreneurial opportunities through a framework based on the preconditions for their existen

28、ce. Thereafter, we explore the four fundamental issues of strategic management listed above from an entrepreneurial opportunity perspective. ENTREPRENEURIAL OPPORTUNITIES This section summarizes our more detailed exposition titled Three views of entrepreneurial opportunity.The Oxford English Diction

29、ary defines opportunity as “a time, juncture, or condition of things favorable to an end or purpose, or admitting of something being done or effected.” As is clear from this definition, at the minimum, an opportunity involves an end or purpose, and things favorable to the achievement of it. An entre

30、preneurial opportunity consists of the opportunity to create future economic artifacts and as such, involves a demand side, a supply side and the means to bring them together. Therefore, in the case of an entrepreneurial opportunity, the “things favorable” consist of two categories: (a) beliefs abou

31、t the future; and (b) actions based on those beliefs. In sum, an entrepreneurial opportunity consists of:1. Supply side: New or existing idea/s or invention/s;2. Demand side: One or more ends may be subjective (endogenous) aspirations or objective (exogenous) goals or both; The entrepreneur not only

32、 has an idea for a product or firm, but also has some personal aspirations and/or goals in pursuing the opportunity. Goals could be as specific as making an IPO in five years to creating a legacy for their children. And aspirations could range from making money to enjoying an independent lifestyle t

33、o changing the world. Furthermore, these aspirations and goals could change and new ones could emerge over time. 3. Beliefs about things favorable to the achievement of those ends; and,4. Possible implementations of those ends through the creation of new economic artifacts. At this point, it is impo

34、rtant to note that entrepreneurial opportunities exist at all levels of the economy individual, corporate, and macroeconomic. For example, the invention of the internet not only led to the identification and creation of entrepreneurial opportunities for individuals and firms, but also opportunities

35、for the US economy as a whole in terms of more effective globalization. Similarly, Adam Smiths exposition of the invisible hand guided both economic policy at the government level as well as the decisions of individual economic agents and firms in the creation of free market institutions.But entrepr

36、eneurial opportunities are extremely context specific. What might be an opportunity today in the Ukraine may not be an opportunity at all in the US today or even in the Ukraine tomorrow. This means that entrepreneurial opportunities do not necessarily lie around waiting to be discovered by the seren

37、dipitous entrepreneur who stumbles upon them or even to be “divined” by entrepreneurial geniuses, if any such geniuses exist. Instead, entrepreneurial opportunities are often residuals of human activities in non-economic spheres and emerge contingent upon conscious actions by entrepreneurs who conti

38、nually strive to transform the outputs of those non-economic activities into new products and firms and in the process fulfil and transform human aspirations into new markets.In other words, before there are products and firms, there is human imagination; and before there are markets, there are huma

39、n aspirations. Creative outputs of the human imagination in every realm of human action be it the arts or the sciences, sports or philosophy, become inputs for the economic domain. It is an empirical fact that profits for the individual and the firm, and welfare for the economy come as much from Jer

40、ry Seinfelds jokes and Michael Jordans baskets, as from great technological inventions and the tearing down of the Berlin wall. Similarly, human aspirations may range from career goals and individual prosperity to freedom and justice and the good life for all and peace on earth. These aspirations ha

41、ve to be transformed into demand functions and markets for specific economic artifacts such as particular goods, services and firms. Entrepreneurship consists in matching up the products of human imagination with human aspirations to create markets for goods and services that did not exist before th

42、e entrepreneurial act. In fact, most entrepreneurial opportunities, be they supply based or demand based, do not originate in the economic domain at all. For example, the internet was developed as a way to facilitate communication between defense scientists and remained out of the economic domain fo

43、r several years. The mere existence of the internet did not guarantee the development of e-commerce. Rather, this artifact created to solve a political problem (namely, defense), had to be transformed through several intentional and unintentional activities to become a universe of entrepreneurial op

44、portunities in the economic domain. To cite another example, entrepreneurs such as Robert Lucas transform literary and artistic endeavors into the Star Wars marketing empire by matching up creations of the human imagination with human aspirations such as the desire to participate in the triumph of g

45、ood over evil. That is why if we are to understand entrepreneurial opportunities, we have to delve into the preconditions for their existence - i.e., the preconditions for the existence of demand and supply combinations that constitute entrepreneurial opportunities. This leads us to a simple typolog

46、y of entrepreneurial actions in relation to opportunities as follows: 1. Opportunity RecognitionIf both sources of supply and demand exist rather obviously, the opportunity for bringing them together has to be recognized and then the match-up between supply and demand has to be implemented either th

47、rough an existing firm or a new firm. Examples include arbitrage and franchises. For example, through its first successful coffee shop, Starbucks proved the existence of a demand for specialty coffees as also a viable and effective way to satisfy that demand. Thereafter, each Starbucks franchisee on

48、ly has to recognize potential geographic locations for extending that demand and supply combination. They do not have to invent sources of supply, or induce demand for a completely new product.2. Opportunity DiscoveryIf only one side exists in an obvious manner and the other side either does not exi

49、st or is so latent as to be virtually non-existent for most people - i.e., demand exists, but supply does not, and vice versa - then, the non-existent side has to be discovered before the match-up can be implemented. In other words, when demand exists; supply has to be discovered. An example of this

50、 is Ron Popeil and his inventions for more convenient and health conscious kitchen devices. On the other side of the coin, supply might exist; then demand has to be discovered. The history of technology entrepreneurship is strewn with solutions in search of problems. Xerox had the technology for the

51、 Macintosh computer, but it took Jobs and Wozniak to discover and exploit its potential demand.3. Opportunity CreationIf neither supply nor demand exist in an obvious manner, one or both have to be created, and several economic inventions in marketing, financing, management etc. have to be made, for

52、 the opportunity to come into existence. Examples include Wedgwood Pottery, Edisons General Electric, U-Haul, AES Corporation, Netscape, Beanie Babies, and the MIR space resort.Historically, opportunities have been supposed to exist - and the entrepreneur either is alert to them (Kirzner, 1979) or s

53、omehow goes about discovering them (Hayek, 1945 and Schumpeter, 1976). But the idea we will explore in this chapter is that entrepreneurial opportunities often have to be created by using the entrepreneurial imagination to embody human aspirations in concrete products and markets.THE CREATIVE ENTREP

54、RENEURIAL ASPECTS OFFUNDAMENTAL ISSUES IN STRATEGIC MANAGEMENT1.Firm Behavior - Emphasizing the creativity of human actionHow do firms behave? Or, do firms really behave like rational actors, and, if not, what models of their behavior should be used by researchers and policy makers?Rational ActionEc

55、onomics has long rested on foundations of rational action; and it has long been criticized for it. For example, studies have shown that that there are severe limits - lack of knowledge, computational ability, and ability to consider more than a few factors simultaneously - that place an upper bound

56、on human objective rationality (Simon, 1959; Payne, Bettman & Johnson, 1993; Bar-Hillel, 1980; Tversky & Kahneman, 1982). Although this does not imply that decision makers are irrational, it shows that they must usually use heuristics and approximate inductive logics - that nevertheless often lead t

57、o very effective decisions (Gigerenzer, Hell & Blank, 1988). They seldom have the luxury of behaving like utility maximizers. But most criticisms of the rational foundations of economics attack and try to relax assumptions of rationality rather than provide an overarching alternative framework. In 1

58、991, however, Buchanan and Vanberg called for more drastic measures, particularly for our understanding of entrepreneurship (Buchanan & Vanberg, 1991). In that paper, they argue for the usefulness of a perceptual construct of the market as a creative process, rather than as a discovery process, or t

59、he more familiar allocative process. Their arguments are based on a fundamental assumption of the future that is not merely unknown, but essentially unknowable. Only speculations and conjectures are possible about the future because the future is created by the choices that human beings make: “Entre

60、preneurial activity, in particular, is not to be modeled as discovery of that which is “out there.” Such activity, by contrast, creates a reality that will be different subsequent on differing choices. Hence, the reality of the future must be shaped by choices yet to be made, and this reality has no

61、 existence independent of these choices. With regard to a “yet to be created” reality, it is surely confusing to consider its emergence in terms of the discovery of “overlooked opportunities.” (178)Creative actionPursuant to the detailed arguments advanced by Buchanan and Vanberg, we propose the fol

62、lowing answer to the first fundamental issue in strategic management: Firms behave creatively. Firms not only use rational and analytical decision making, they also use creative action as a way to figure out both goals and strategies in an intrinsically dynamic process. If we are to build theories o

63、f strategic management and entrepreneurship based on creative rather than rational action We use the terms “rational action” and “creative action” in their precise philosophical/sociological meanings such as those used by Parsons and Joas respectively (Parsons, 19xx; Joas, 1996). We want to stress t

64、hat we do not mean creative action to be “irrational”, nor do we suggest that rationality cannot lead to creative outcomes in the colloquial sense., we need to first examine what we know so far about creative action.In a powerful theoretical exposition, Joas (1996) has argued in considerable detail

65、for the fundamentally creative nature of all human action. “All theories of action which proceed from a type of rational action irrespective of whether they are based on a narrower or broader, a utilitarian or a normative concept of rationality make at least three assumptions. They presuppose firstly that the actor is capable of purposive action, secondly that he has control over his own body, and thirdly that he is autonomous vis-vis his fellow human beings and