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1、 65 / 65STRATEGY 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: 3It was Herbs advic

2、e not to 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 u

3、sefulness 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

4、Romeo or 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

5、 context 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 pos

6、sible discovery 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 Rom

7、eo,” strategic 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 fi

8、elds have 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

9、 process, 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,

10、 1997). 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 t

11、he individual 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 originalmind, even though it might not have excluded a certain element of progress in the distant future, may well delay it for fifty yea

12、rs or a 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 andfirms. Thus, if we understand entrepreneurship and strategic manageme

13、nt as 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 captu

14、re.One 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. B

15、ut the 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

16、 modes 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

17、of later 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 techn

18、ical invention 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 exis

19、ting firms. 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. W

20、here they 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 Teec

21、e identify 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 ch

22、oice of 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 D

23、ifferentiationWhy 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 t

24、he firm?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

25、theories 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.W

26、e have 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 complet

27、eness 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 ex

28、istence. 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 Di

29、ctionary 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

30、entrepreneurial 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

31、 about 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

32、 only 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 lifest

33、yle to 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

34、important 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 opportunit

35、ies 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 ent

36、repreneurial 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 s

37、erendipitous 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 c

38、ontinually 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

39、human 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

40、 Jerry 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 aspiration

41、s have 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 befor

42、e the 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 domai

43、n for 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 entrepreneuria

44、l opportunities 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

45、of good 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 typ

46、ology 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 eithe

47、r through 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 franchise

48、e only 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

49、 exist 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 is Ron Popeil and