Question

• How does strategic entrepreneurship help firms create value?
• How does a firm acquire other companies to increase the number of innovations it produces and improve its capability to innovate?

Answer 1

Strategic entrepreneurship is defined as the use or stimulation of entrepreneurial activities to achieve specific targets or goals. It is taking entrepreneurial actions using an strategic perspective. Innovation and creating new businesses or techniques to improve the existing processes are key elements of strategic entrepreneurship.

Strategic entrepreneurship helps firms create value in the following ways:

1. It promotes innovation and innovative techniques which in turn provides the firm with competitive advantage over others in the industry.
2. Strategic Entrepreneurship promotes the employees to create and launch new start-ups within the organization to promote growth.
3. It helps in identifying and developing opportunities of growth within existing organizations it creates value for the firm.
4. Strategic entrepreneurship helps firm to exploit their current competitive advantage while focusing on means to maintain the advantage in future as well.
5. It reduces the risk of doing business during the time of economic uncertainty or in much competitive environments thus creating value for the firm.
6. It also helps a firm in its long term sustainability by capitalising over opportunities.

A firm acquires other companies to increase the number of innovations it produces and improve its capability to innovate because:

1. The capabilities of the human capital are limited and every company may not be able to get the right person he needs in order to innovate something. By acquiring a company you acquire all its assets including human capital which in very important as far as innovations are concerned.
2. The firm gains synergy after acquiring another capable firm and its capabilities to innovate grows manifold.
3. The other company which is being acquired may also have some patented innovations and on-going R&D activities which automatically increases the number of innovation present firm has.
4. In the field of sophisticated technologies such as defence or pharmaceuticals the R&D process is very time taking and expensive also every firm does not has the tools to innovate and here acquisition can help in getting hands on the innovations by acquiring the company which has the patents.
5. The firms become bigger by acquisition and they can use their resources in a much better way therefore increasing its number of innovations.