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1042-2587^92-163$1.50 Copyright 1992 by Baylor University Strategic Management's Potential Contributions to a Theory of Entrepreneurship William R. Sandberg The article offers an overview of strategic management and its various schools of thought, followed by a summary of the field of entrepreneurship and its own disagreements over definition and boundaries, it suggests that strategic management might help resolve such disagreements through its focus on "the entrepreneuriai work of the organization," which is based on variables that describe the organization's industry, resources, processes, and strategy. Finally, the articie both describes and proposes contributions of strategic management to entrepreneurship theory, specifically addressing issues of new business creation, innovation, opportunity seeking, risk assumption, top management teams, and group processes in strategic decisions. An considering how the field of strategic management might contribute to a theory of entrepreneurship, one faces two substantial obstacles. First, one needs a definition of entrepreneurship, which can no more be defined to everyone's satisfaction than can peace, justice, or pornography. Like Supreme Court Justice Stewart on the latter subject, I can't define entrepreneurship but I know it when I see it. Second, one must circumscribe the field of strategic management, an almost equally daunting prospect. This article skirts the first obstacle by being broadly inclusive, hoping thus not to

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1042-2587^92-163$1.50Copyright 1992 byBaylor UniversityStrategic Management'sPotential Contributionsto a Theoryof EntrepreneurshipWilliam R. SandbergThe article offers an overview of strategic management and its various schools of thought,followed by a summary of the field of entrepreneurship and its own disagreements overdefinition and boundaries, it suggests that strategic management might help resolve suchdisagreements through its focus on "the entrepreneuriai work of the organization," which isbased on variables that describe the organization's industry, resources, processes, andstrategy. Finally, the articie both describes and proposes contributions of strategic managementto entrepreneurship theory, specifically addressing issues of new business creation,innovation, opportunity seeking, risk assumption, top management teams, and groupprocesses in strategic decisions.An considering how the field of strategic management might contribute to a theoryof entrepreneurship, one faces two substantial obstacles. First, one needs a definition ofentrepreneurship, which can no more be defined to everyone's satisfaction than canpeace, justice, or pornography. Like Supreme Court Justice Stewart on the latter subject,I can't define entrepreneurship but I know it when I see it. Second, one must circumscribethe field of strategic management, an almost equally daunting prospect.This article skirts the first obstacle by being broadly inclusive, hoping thus not toexclude any important elements of entrepreneurship. Inasmuch as it addresses howentrepreneurship theory is (or might be) affected by strategic management, the latterfield's real (and potential) contributions govern this article's specific coverage of entrepreneurship.And strategic management's boundaries are stretched to encompass perspectivesfrom outside its mainstream that might bear on entrepreneurship. Finally, asrequested by the editor, this article applies strategic management perspectives, insights,and approaches to new business creation, innovation, opportunity seeking, and riskassumption.This article consists of three major sections. The first describes strategic managementin terms of its dominant paradigm and the multiple perspectives that paradigmcomprises. Selected constructs, variables, and methodologies common to strategic managementare described and related to the perspectives that employ them.The second section discusses contending definitions of entrepreneurship, then describes

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entrepreneurship in terms of the themes commonly attributed to the word. Thesethemes later will serve to describe aspects of entrepreneurship that are open to contributionsfrom the field of strategic management.The third section identifies contributions of strategic management to the themes ofentrepreneurship identified earlier. It begins by tracing the treatment of entrepreneurshipwithin strategic management's dominant paradigm, then links strategic management'sSpring, 1992 73current domain to themes in entrepreneurship. The coverage highlights potential applicationsof strategic management research to new business creation, innovation, opportunityseeking, and risk assumption. In addition, the third section points out strategicmanagement's potential contributions to knowledge on entrepreneurial teams. The articleconcludes with speculation on the prospects for cross-fertilization between the fieldsof strategic management and entrepreneurship.THE FIELD OF STRATEGIC MANAGEMENTThe field of strategic management descends from business policy and still earlierembodiments of a continuing interest in the tasks and responsibilities of general management.Although some organizational scientists deny the existence of a dominantparadigm in strategic management (Bowman, 1990) and other scholars dispute thefield's origins (Mintzberg, 1990). most strategic management research today conformsto a paradigm articulated in 1979 by Schendel and Hofer. The following description ofthat paradigm and its associated process of strategic management is intended as anupdated overview rather than a complete summary or critique. As will be seen below,many schools of thought contend within the bounds of this dominant paradigm.The Dominant Paradigm of Strategic ManagementUsing as their point of departure a concept of strategy that had developed over theprevious 20 years, Schendel and Hofer (1979, p. 11) proposed "the strategic managementparadigm" to clarify the concept of strategy and link it with the tasks of managingstrategy and the roles of the general manager. They described strategic management asa process that deals with the entrepreneurial work of the organization, with organizationalrenewal and growth, and more particularly, with developing and utilizingthe strategy which is to guide the organization's operations.At the heart of this paradigm is the concept of strategy that prevails to this day instrategy-based theory and researcb. Strategy consists of four components: (1) scope,defined in terms of product/market combinations; (2) deployment of organizationalresources as competitive weapons, perhaps creating a distinctive competence; (3) competitiveadvantage stemming from appropriate matches of competitive weapons andscope; and (4) synergy among activities, resources, and scope.Within an organization, up to four strategies may be present in a hierarchy: anenterprise, or institutional, strategy to ensure the firm's social and political legitimacy;a corporate strategy that governs the firm's choice of businesses, allocation of capitalamong them, and their integration into an effective whole; business strategies governinghow it will compete in its various businesses and how functional areas will be integrated

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at the business level; anA functional area (e.g., marketing, production) strategies.Goals and objectives always are present but have been treated differently by variousstrategic management scholars: either they are an additional component of strategy ateach level or they combine with these strategies to form an overarching, "master"strategy for the firm (Schendel & Hofer, 1979, p. 11). This distinction need not concernus in this paper, as it does not cut to the heart of the strategic management paradigm.Recognizing that "administrative structure and processes [construed broadly to includenumerous macro- and microbehavioral variables] . . . also influence strategy,"Schendel and Hofer acknowledged the possibility that "structure and processes should74 ENTREPRENEURSHIP THEORY and PRACTICEbe considered a component of strategy" (pp. 17-18). During the 1980s many researcherswent on to incorporate both structure and processes in their frameworks of strategicmanagement.The Process of Strategic ManagementSchendel and Hofer identified six interactive ''major tasks" that constitute theprocess of strategic management. These tasks are goal formulation, environmental analysis,strategy formulation, strategy evaluation, strategy implementation, and strategiccontrol.Far more controversy has surrounded the nature of the process than has attached tothe identity of its elements. The opposing camps generally divide on the question ofwhether strategic management can be studied as a rational-analytic process. Schendeland Hofer, as well as the most influential of the earlier thinkers about strategy, stronglyreflected a rational-analytic orientation—so much so that Bygrave (1989, p. 16) jokedthat the uninitiated sometimes mistook diagrams of strategy formulation processes for"electrical control drawings for heating and ventilating the Empire State Building." He(quite seriously) traced this perspective to the engineering and mathematics training ofSchendel, Hofer, and many others among its most prominent advocates. Whatever itsorigins, the rational-analytic perspective remains overwhelmingly common in strategicmanagement research (Hambrick, 1990).Those who doubt the rationality of organizational processes (necessarily includingstrategic management) instead posit several variant strains of incrementalism. In theirmodels of decision making, issuesareaddressedandactions taken on the basis of inertia,political power and coalitions, organizational routines, or other nonrational factors. Atthe extreme there really is no room for strategy formulation, since no coherent strategycan be said to exist. A more moderate perspective describes a middle ground of "logicalincrementalism" (Quinn, 1980) in which top managers move gradually hy buildingawareness and consensus, seeking a series of partial solutions rather than radicalchanges, and juggling analytical, behavioral and political processes along the way.Research MethodologiesTwo organization theorists (Daft & Buenger, 1990, p. 91) have taken strategyresearchers to task foradher[ing] strongly to a belief in systematic, definable strategy procedures andstructures that can be described, measured, analyzed, and compared. This assumptionso dominates the discipline that it obscures any others that might competewith it.

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Moreover, they add, "positivist assumptions lead straightaway to dominance of researchmethod over theory as the primary concern of investigation."Their opinion notwithstanding, the field of strategic management comprises contendingschools of thought and harbors divergent approaches to research. The followingparagraphs sketch the field's main research methodologies as a prelude to detailing someof its principal schools of thought.In strategy research the total organization or one of its portfolio businesses typicallyis the unit of analysis, although the increased attention to structure and processes duringthe 1980s brought more studies of groups or individual managers. Based on an analysisSpring, 1992 , 75of the 50 most-cited strategic management works published between 1980 and 1985,Hambrick (1990) concluded that the 23 empirical projects relied most often on archivaldata, notably from the PIMS database, followed by interview or observation data andsurvey data; no laboratory studies were included. The empirical projects leaned heavilytoward deductive rather than inductive intent, and nearly all contained specific propositionsor concluded with a model or theory. Only four of the empirical projects usedlongitudinal data, and only seven others used cross-sectionai data to test a dynamicmodel. Most tested static models with cross-sectional data.Research in the field of strategic management traditionally has been viewed asprescriptive. To organization theorists Daft and Buenger (1990, p. 92) this orientation isa ''fixation" that hinders discovery of knowledge and leads researchers to define performanceso narrowly as "to oversimplify not only what it is but how it is achieved."Most strategic management scholars would agree with Hambrick (1990), however, thattheir criticism misses the mission and distinctive competence of strategic management.Moreover, he found, the most-cited works in strategic management were about evenlydivided between prescription (i.e., linkages to performance) and description (i.e., theoreticalanalysis unrelated to performance).Some Contending Schools of ThoughtTo undertake a full exposition and classification of strategic management thought inthis article would be foolhardy indeed. Fortunately Henry Mintzberg has provided ashortcut. His review of 1,495 works on strategic management—and, more broadly, on"systems of collective social action Ito] set direction and change it" (1990, p. 110)—-ledhim to identify ten schools of thought. He characterized each school by how it conceivesof strategy formation, as shown in Table 1.According to Mintzberg, the first three schools (design, planning, and positioning)are prescriptive and normative, while the rest are mainly descriptive. The entrepreneurialand cognitive schools emphasize visionary leadership and the mental process associatedwith it. The remaining four schools of thought broaden strategy formation "beyond theindividual and his or her cognition, to other forces and other actors" (p. 109). TheTable 1Mintzberg's (1990) Schools of Thought on Strategy FormationSchool of Thought Sees Strategy Formation Process asE>esign conceptual

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Planning formalPositioning analyticalEntrepreneurial visionaryCognitive mentalLearning emergentPolitical power-basedCultural ideologicalEnvironmental passiveConfigurational episodic76 ENTREPRENEURSHIP THEORY a n d PRACTICEfollowing capsule descriptions are adapted from Mintzberg's detailed treatment of eachschool.Design School. This school was born of the original, Harvard-driven, case methodwith its belief in rational leadership to match organizations to their environments. Stillthe foundation of much prescription and of many business policy courses, it focuses onthe CEO as architect of a strategy clear enough to be understood throughout management.Its leading early work was Andrews's The Concept of Corporate Strategy (1971).Planning School. This highly rational school of planning, programming, and budgetingdeveloped parallel to the design school. Its formalized procedures, replete withchecklists and the diagrams that Bygrave (1989) lampooned, favored the ascent of aplanning staff distinct from top management. Ansoff s Corporate Strategy (1965) providedits momentum, but the school's influence waned in the 1970s because its advocatesnever established a research program to lend empirical support. (On the latterpoint, see Sandberg and Glueck (19801.)Positioning School. The third prescriptive school has a strong empirical foundationand roots in industrial organization economics. Its impetus can be traced to researchers(notably Schendel) at Purdue University and later to Porter's Competitive Strategy(1980). The positioning school emphasizes generic strategies and strategic groups basedon them, analysis of industry structure, and identification of generic environments. Itsresearch base includes studies using the case method and hybrid, "medium grained"methods as well as those using large databases.Entrepreneurial School. This school conceives strategy as "the personal, flexibleconstruct of one individual" (Mintzberg, 1990. p. 137), built on his intuition, judgment,experience, etc. Its initial impetus came from Schumpeter's Theory of Economic Development(1934), which portrayed the extraordinary visionary whose innovation destroysequilibrium. This entrepreneur could be a hired manager as well as an owner orfounder, and the organization could be a large corporation. Mintzberg considers theEntrepreneurial School relevant to start-up and turnaround situations and to organizationsof sustained small size. (This school also spawned numerous studies of the entrepreneur'spersonality which, though prominent in the entrepreneurship literature, areperipheral to strategic management.)Cognitive School. Even more than the Entrepreneurial School, the Cognitive Schoolattempts to penetrate the strategist's mind. Strategy is a concept that emerges as limitedcognitive capabilities cope with complexity. Progenitors of this school include March

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and Simon's Organizations (1958). Mintzberg believes the Cognitive School is applicableto the original conception or a reconception of a business.Learning School. Essentially the incrementalist perspective described earlier, thisschool's most influential sources include Lindblom's "The Science of MuddlingThrough" (1959) and Quinn's Strategies for Change (1980). The strategic managementprocess is informal, and strategy implicit; leaders respond to initiatives taken by whomeverhas ideas or insights. According to Mintzberg, the school most closely fits decentralized,professional organizations that face complex, dynamic situations. It is frequentlyapplied to corporate venturing ("intrapreneurship").Political School. This school emphasizes the exercise of political (i.e., noneconomic)power either within or by the organization. Its origins are in political science; Allison'sEssence of Decision (1971) brought its perspectives to strategy formation. Becausepolitical means are illegitimate or are legitimate, conflict usually accompanies them.Mintzberg sees applications of this school to strategic change within and around organizations.Cultural School. Strategy emerges from a process of collective behavior, accordingto the Cultural School, and takes the form of a perspective shared throughout theSpring, 1992 , 77.organization. Impletnetitation rests on normative pressures that grow out of sharedbeliefs. Although potent and effective in a stable environment, the culturally anchoredstrategy can promote resistance to change. Management's key challenge is to managecollective cognition.Environmental School. This school emphasizes all-powerful extemal forces thatdrive organizations into safe niches or to their death. Leadership, including strategicmanagement, is futile, its apparent impact illusory. A more moderate approach withinthis school emphasizes the environment's contingent impact on organizations and theirstrategic management processes. The latter approach, says Mintzberg, can be applied tosituations of severely constrained strategic choice, such as industry maturity.Configurational School. This school is Mintzberg's professed favorite, and his own.It conceives of an episodic process that configures various types/forms of strategyformation, environment, and organization at a particular time. Mintzberg sees thisschool as offering a means to integrate and make sense of other schools of strategicmanagement, in the following way: Configurations tend to form pattems along a lifecycle of strategy formation; specification of the configuration would help reconcileconflicting premises and findings among the other nine schools. [Readers may recognizethat the configurational school promises essentially a frame theory (Rumelt, 1979) thattells when to apply each of the various limited domain theories represented by the othernine schools. 1SummaryThe presence of so many contending schools of thought within strategic managementattests to the field's highly permeable boundaries. Its openness to new ideas sometimesverges on susceptibility, but probably accounts for the durability of strategic managemetit'sdominant paradigm. To a remarkable degree, new ideas are absorbed into existingconstructs, sometimes giving birth to new schools of thought. Thus, for example,

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can the configurational school attempt integration of notably diverse approaches withoutdiscarding strategic management's dominant paradigm.WHAT IS ENTREPRENEURSHIP?If the boundaries of strategic management are permeable, those of entrepreneurshipare downright porous. No dominant paradigm exists to repel new ideas; self-appointeddefenders of the faith themselves disagree on doctrine. This section of the article tumsto entrepreneurship, briefiy describing first a fundamental disagreement on definitionand boundaries, then two potential routes to common ground.Convictions and ControversyMost attempts to define entrepreneurship begin with ati author's conviction as to itsessence. Thus Gartner's advocacy of a "behavioral" approach to definition began byidentifying "the primary phenomenon of entrepreneurship—the creation of organizations,the process by which new organizations come into existence" (1988, p. 21);indeed, "[ejntrepreneurship ends when the creation stage of the organization ends" (p.26). This approach is contrasted to a traditional, "trait" approach to definition, characterizedby Gartner as " 'if-we-can-just-find-out-who-the-entrepreneur-is-then-we'llknow-what-entrepreneurship-is' " (p. 23).Though acknowledging the importance of entrepreneurial behavior, defenders of thetrait approach have argued that to understand small business ventures "one must leam78 ENTREPRENEURSHIP THEORY and PRACTICEmore about the individuals who create and manage them, because the two are inextricablybound" {Carland, Hoy, & Carland, 1988, p. 34). They also have cautionedagainst a definitional exclusion of corporate venturers and purchasers or inheritors offirms from the population of entrepreneurs. The definition proposed by Carland andassociates included such "entrepreneurs" (and their ventures) on the presumption thattheir business goals, pursuit of Schumpeterian innovation, and adherence to strategicmanagement practices distinguished them from "small business owners" (Carland,Hoy, Boulton. & Carland, 1984).Given their very different convictions about the essence of entrepreneurship, itfollows that the behavioral and trait approaches adopt different units of analysis. Thebehavioral approachviews the creation of an organization as a contextual event, the outcome of manyinfluences. The entrepreneur is part ofthe complex process of new venture creation.This approach to the study of entrepreneurship treats the organization as the primarylevel of analysis and the individual is viewed in terms of activities undertaken toenable the organization to come into existence (Gartner, 1988, p. 21, emphasisadded).The trait approach focuses on the individual, of course, and treats the organization, atleast in its formative stages, as a projection of the individual's goals and his financialdependence on it (Carland et al., 1984).Observing correctly that the Carland definition requires knowledge of a person'sintentions, Gartner concluded that these ostensibly behavioral factors merely led researchersback into a trait approach. His conclusion seems hasty, though, as one certainlycan study intended strategies without also presenting psychological portraits of

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key managers, as can be seen in several studies of new ventures (Roure, 1986; Sandherg,1986) or small firms (Covin, Slevin, & Covin, 1990). Gartner also criticized the Carlanddefinition for its reliance on innovativeness and strategic management practices, sayingthat researchers would be plagued by ambiguity as they tried to determine "the degreeof difference between one product and another similar product . . . [and] between thetruly innovative [method of manufacturing, marketing, or distribution] and the not soinnovative" (1988, p. 24). Again, though, Gartner's criticism appears overdrawn; withoutminimizing the problem, it can be noted that such measurements often are made inresearch on strategy (e.g., Covin et al., 1990) and the management of innovation (e.g..Van de Ven & Chu. 1989).In a sense, Gartner would postpone but not avoid the researcher's encounter withambiguity. His proposed study of entrepreneurial behaviors, patterned after Mintzberg'sstudy of managerial behaviors, would require identification of, inter alia, the informationon entrepreneur processes, the pressures of his job, and the roles he performs "inmoving information, in making decisions, in dealing with people" (Mintzberg, 1973, p.3). Such identifications, though, require inferences on the part of the researcher thatpromise to raise the spectre of ambiguity just as surely as does Carland's definition.Moreover, the ambiguity inherent in various organizational processes (e.g., team formation;"claiming ownership of a new idea, organization, etc."; generating esprit decorps) that Gartner proposed for study (1988, pp. 27-28) poses obvious definitional andmeasurement problems.As noted above, the dispute hetween partisans of the behavioral and traits approachesis rooted in honest convictions as to which type of business or manager isentrepreneurial; indeed, given the disputants' evident passion and their esteem for theentrepreneur, perhaps their disagreement is over who deserves the label. Probably it canSpring, 1992 , 79be settled only through joint custody of the coveted term, with each user specifying thepopulation or phenomenon to which it applies in his writings.Search for Common GroundGartner has detected in recent writings "the worry that entrepreneurship has becomea label of convenience with little inherent meaning. Labeling a research study as anentrepreneurship study does not seem to identify what will be studied and why" {1990,p. 16). Citing the terminology in the 1989 call for papers by the EntrepreneurshipDivision of the Academy of Management, Gartner asked, " . . . what are the commonalitiesthat link family businesses, small business management, and new ventures?" (p.16).'Rather than a deductive answer to his question, Gartner offered the results of aDelphi panel that expiored the meanings attached to "entrepreneurship" by 44 researchersand practitioners. His factor analysis of their responses discerned eight commonthemes: the entrepreneur (described in terms of personality and abilities); innovation (anessentially Schumpeterian phenomenon, in either a new or an existing organization);organization creation; creating value; profit or nonprofit (i.e., can a nonprofit venturebe entrepreneurial?); growth as an orientation or an attribute; uniqueness; and the presence

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of an owner-manager. Although Gartner's panel also ranked the themes accordingto their importance to entrepreneurship. their identification is sufficient for the purposesof this article. These themes will reappear in a discussion of how strategic managementmight contribute to a theory of entrepreneurship.Gartner's question may find an answer in the emergence of theory and research thattreat family-owned, small, or new businesses as limited domains of strategic management(Sandberg, 1989). The primary variables of strategic management describe anorganization's resources, processes, and strategy as well as its industry. Together thesevariables exercise potent, near-universal influence on firm performance. Yet firms thatare family-owned, small, or new are thought to be substantively unique in ways thatmake them special cases of strategic management.Theorists have pursued this notion. For example, Churchill and Hatten (1987, p. 55)isolated family succession as the distinguishing feature of family firms and the successionprocess as "where changes in management, in strategy, and in control are plannedfor and/or executed." Similarly, Keats and Bracker (1988, p. 42) offered a model ofsmall firm performance "as a first step in the development of a limited domain theoryof small firm strategic management," and Sandberg (1986, p. 1) approached newventures as "a special case of existing strategic management theory."In looking to strategic management for limited-domain theories applicable to entrepreneurship,one must temper optimism witb realism. Though useful, such theories areunlikely to offer a complete theory of entrepreneurship. The domain of strategic management,despite its great breadth, does not comprise all topics that interest entrepreneurshipscholars. Little will be found of the personality or psychological characteristicsof managers, nor is much written about the presence of owner-managers. What followsin the final section of this article, then, is not an attempt to treat all aspects of entrepreneurship;rather it is an attempt to apply strategic management theory to entrepreneurship.1. The question remains ripe, as the Entrepreneurship Division retains those terms in its 1991 domainstatement.80 ENTREPRENEURSHIP THEORY and PRACTICESTRATEGIC MANAGEMENT'S CONTRIBUTIONS TOENTREPRENEURSHIP THEORYStrategic management's great breadth and eclectic origins enable it to speak to manyissues in the less mature, highly heterogeneous field of entrepreneurship. This sectionrecounts how strategic management has treated entrepreneurship and identifies furthercontributions that strategic management might make to building a theory of entrepreneurship.Particular attention will be given to its contributions to the study of newbusiness creation, innovation, opportunity seeking, and risk assumption. The sectionconcludes by discussing selected strategic management topics that also might benefitentrepreneurship theorists.Entrepreneurship was hardly a neglected topic in the management literature prior tothe emergence of the strategic management paradigm (Sandberg, 1986). This literature

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has been reviewed elsewhere (e.g., Cooper, 1979; Vesper, 1980). For our purposes,though, it is enough to trace the topic's treatment within that paradigm.Entrepreneurship in the Strategic Management ParadigmSeveral basic distinctions are drawn by strategic management theorists in contemplatingentrepreneurship. The most fundamental is between independent and corporateentrepreneurship. Within the realm of independent entrepreneurship, strategic managementhas in mind almost exclusively the new venture rather than the established smalibusiness or the family business. Within the realm of corporate entrepreneurship, strategicmanagement distinguishes between types that create new organizations or organizationalunits and types that do not. The first grouping includes what is commonlyknown as corporate venturing, intrapreneurship, corporate new venture divisions, and soon. The second grouping includes strategic change undertaken to renew an organizationor to innovate within the framework of existing businesses.In their paradigmatic work, Schendel and Hofer (1979) accorded entrepreneurship aprominent role. They described strategic management as "a process that deals with theentrepreneurial work of the organization, with organizational renewal and growth . . . "(p. 11). Moreover, "a model that fails to place entrepreneurial choice at the center of themanagerial universe . . . is incapable of providing a mechanism for renewing the firmbeyond its originally intended purpose." "Any successful business begins with a 'keyidea' " that is a "product of the entrepreneurial mind. Without it, there is no business.. . . Thh entrepreneurial choice is at the heart of the concept of strategy . . . " ( p .6, emphasis added).Their use of "entrepreneurial" was not identical to that of many entrepreneurshiptheorists, of course. Clearly Schendel and Hofer included established as well as neworganizations, and managers as well as founders. In this respect they followed Schumpeter(1934), as they did also in stressing that the key idea is "a new strategy for abusiness" (Schendel & Hofer, 1979, p. 6). But they also referred to small businesses as"where the pure entrepreneurial character of strategic management is perhaps seen best"(p. 20) and "the simplest, cleanest, and easiest environment in which to see the basicstrategic management tasks" (p. 309). In other words, anticipating the views of Gartner(1988), they saw the essence of entrepreneurship in the actions of strategic managers."Newly founded firms, small and ongoing" were the subject of a separate topicpaper by Arnold Cooper in Schendel and Hofer's presentation of the strategic managementparadigm. The aim was to explore "the commonalities and differences in theSpring, 1992 ^ t 81strategic management process" across three organization archetypes (Cooper, 1979, p.304). [Using Mintzberg's terminology, one would call that a configurational study!]Cooper (1979) noted the scarcity of research on the relationships among the characteristicsof entrepreneurs, venture strategies and performance. He focused on threestages in the life of a growing firm: start-up, early growth, and later growth. Anentrepreneur's first decision was whether to start a business; here Cooper viewed the

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research question as why and whether persons with certain characteristics became entrepreneurs.This decision made, the entrepreneur faced decisions conceming competitivestrategy; here Cooper broadened his focus to include the performance of the venture,and the effects of strategy on that performance. He thought the need was especiallygreat for research on the relationship between strategy and performance, and suggestedthat important dimensions of this relationship might include a venture's business strategy,its product/market choice, and the industry's stage of evolution. In addition. Cooperdiscussed new ventures by existing corporations, citing their similarity to independentventures but emphasizing issues involving the organizational mechanisms forlaunching and managing them.Thus Cooper had placed new ventures squarely within the strategic managementparadigm. Moreover, along with the accompanying commentary by Susbauer (1979),his paper argued persuasively that strategic management researchers should studygrowth-oriented new ventures and established firms but avoid "mom and pop" smallbusinesses. These recommendations presaged the definitional distinction between entrepreneursand small business managers (and their respective firms) favored by Carlandand associates (Carland et al., 1984).Cooper also had set an agenda for a decade of strategic management research inentrepreneurship. Following his lead, Sandberg (1986) studied the effects of businessstrategy and industry structure on the performance of growth-oriented, independent newventures. He devised a classification scheme for venture strategies that encompassedbreadth of product/market scope, basis of competition (differentiation, low cost, ornone), and competitive weapons (in the form of various "entry wedges" [Vesper, 1980]that could be used with strategies). His small-sample results showed significantly superiorperformance to be associated with industry disequilibrium, subsequently risingentry barriers, early stages of industry evolution, and industries that offer noncommodityproducts; with differentiation rather than focus strategies; and with several combinationsof strategy and industry structural conditions, including broad-scope strategies pursuedin early-stage industries.Perhaps more important than any of these particular findings was the conclusion thatthe strategic management paradigm applies to new ventures. Subsequent studies havebolstered this conclusion. The following sections of this article relate strategic managementtheory and research to several key topics in entrepreneurship: new business creation,innovation, opportunity seeking, and risk assumption. In so doing, the discussionties various schools of strategic management thought (Mintzberg, 1990) to the majorthemes of entrepreneurship articulated by Gartner's (1990) Delphi panel.New Business CreationAs conceived in the strategic management paradigm, new business creation comprisesboth the decision to start a business and ensuing decisions on competitive strategy(Cooper, 1979). The topic of new business creation seems to capture elements of twoentrepreneurship factors identified by the Delphi: organization creation (factor 3) andcreating value (factor 4).

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Factor analysis of panelists' responses linked rather obvious organization-creation82 ENTREPRENEURSHIP THEORY and PRACTICEitems (e.g., "new venture development," "the creation of a business that adds value")and several items describing the acquisition, mobilization, and deployment of resourcesand their integration with opportunities. Such themes suggest a contributory role forstrategic management, drawing perhaps on the Design School's emphasis on matchingresources to opportunities. Indeed, the acquisition and use of resources are the core ofsome strategic management models of the firm and its performance (e.g., Barney, 1991;Wemerfelt, 1984).The potential value of resources is realized through their conversion—concretely,into goods and services, but abstractly, and more importantly, into competences. Thistenet of strategic management (Schendel & Hofer, 1979) is reiterated in more recentresearch. For example, two studies of mature businesses have found that a firm'sperformance depends on how closely its competences fit its industry's key successi"actors (Chrisman & Boulton, 1987; Sousa de Vasconcellos e Sa & Hambrick, 1989).Unfortunately, their methodologies may not be perfectly replicable in entrepreneurshipresearch. Both studies used expert panels to assess industry conditions and firms'strengths; the latter could be difficult to arrange for a contemporaneous study of neworganizations. Alternative sources of information are available, though. For instance,Chrisman and Boulton also used trade journals and other published sources of informationconceming firms. Romanelli (1989) successfully used a similar approach in herlongitudinal study of start-ups in the minicomputer industry."Creating value," the fourth factor in Gartner's (1990) study, comprised "thecreation of a new business" and "creation of wealth" as well as "transformation ofa business that adds value" and "growth strategy for an organization." The lattertwo items clearly apply to established companies and recall Schendel and Hofer's(1979) emphasis on the renewing role of entrepreneurship. They also are consistent withorganizational reconception, a process for which the Design School is well suited(Mintzberg, 1990).The strategic decisions made early in an organization's life generally affect itsstrategy for years afterward (Boeker, 1989). Romanelli (1989) found little change instrategies following the third year after firms' foundings. Not only do such decisionslock a firm into a strategy, but they also affect its perfonnance. Subsequent to Sandberg's(1986) study, other researchers have reported similar results. Romanelli (1989)concluded that broad-scope strategies performed better than narrow-scope strategieswhen industry sales were growing rapidly but that the effect was reversed when industrysales were declining. Research that has narrowly defined or operationalized strategy hasnot always found it to affect performance, as when Eisenhardt and Schoonhoven (1990)operationalized strategy solely in terms of technical innovation in their study of start-upsin the semiconductor industry, and found no significant effect.InnovationMembers of the Delphi panel (Gartner, 1990) seemed to have Schumpeter's conceptof entrepreneurship in mind. "Innovation" (factor 2) comprised innovative product,market, technology, and service. It also included new ways to meet market demand and

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adapting a creative idea to a market opportunity. Echoing Schumpeter's "new combinationsof factors of production," panelists included new combinations of resources.The possibility of a corporate setting was realistic, as the factor included items oncorporate entrepreneurship, large organizations, and older organizations. Finally, innovationalso included "convinces others to join the venture," suggesting some concernfor team building.Strategic management offers tremendous potential contributions to this theme inSpring, 1992 , 8 3entrepreneurship research. Which of the field's schools of thought would prove fruitfuldepends on what aspect of innovation is under study. For example, if innovation isconceived as an individual process, both the Cognitive and Entrepreneurial Schoolsmight contribute, although both would be severely limited. Cognitive research in strategicmanagement has not explored creativity, and so is of little help in explaining howinnovative ideas occur (Mintzberg, 1990). The Entrepreneurial School explains thestrategic nature of innovation but does not tell how to put innovations into practice.If innovation is considered an organizational phenomenon, the Learning School isapplicable. Strategic management researchers have investigated the process by whichproject ideas are developed, gain sponsorship, and rise through the organization to finalapproval, and the means by which upper management can manipulate an organization'sstructural and strategic contexts to influence this process (Bower, 1970; Burgelman,1983). (These topics also are explored by business historians and journalists, usually instudies of a major innovation by one company. See, for example, Graham [1986] onRCA's development of video players and Chposky and Leonsis [1988] on IBM's developmentof the personal computer. Both strategic management and entrepreneurshipresearchers could profit from this literature.)If the interest in innovation lies in its integration into a business or corporatestrategy, however, the Positioning School applies. It is inconceivable that Schumpeterianinnovation would not require modification of an organization's logistics, production,marketing, and so forth. The techniques of value-chain analysis (Porter, 1985)could pinpoint these changes and identify their effects on other parts of the organizationand on buyers' value chains. Such knowledge enables management to reduce the impactof unintended consequences both within the innovating unit and among organizationalunits that are linked to it. (Synergies require coordination or sharing of activities amongbusiness units or product lines. Such linkage may bring benefits but. in the case of aparticular innovation, may also threaten greater economic losses to an established companythan to a new venture. Whereas both risk losing their investment in the innovation,only the established company also risks unfavorable effects on activities that also serveother business units or product lines.)Opportunity SeekingNo factor clearly equated to opportunity seeking emerged from the Delpbi panel.However, about half the items in factor 7 (labeled "uniqueness") seemingly relate toopportunity seeking. "Identifies a market," "provides a concept or a product or service,"

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and "ability to see situations in terms of unmet needs" seem highly relevant;"vision of accomplishment" and "creates a competitive advantage" seem related as,respectively, antecedent and subsequent conditions of opportunity seeking; and even "aspecial way of thinking" may relate to opportunity seeking.Once again the potential contributions of various schools of strategic managementthought depend on how the theme from entrepreneurship is presented. The EntrepreneurialSchool views strategy as a "personal, flexible, construct of one individual" builton that person's intuition, judgment, experience, and similar bases (Mintzberg, 1990, p.137). Herron (1990) has explored the relationship among the individual entrepreneur'sskills and aptitudes (operationalized via the "Structure of the Intellect" model [Gui!-ford, 1967; Meeker. 1969] as various forms of intelligence) and new venture performance.Entrepreneurial skill, "essentially a facility in conceiving the opportunity toprofitably reallocate company resources to new endeavors in the face of disequilibrium"(Herron, 1990, p. 79), contributed significantly to venture performance.Whereas the Entrepreneurial School recognizes the importance of an individual's84 ENTREPRENEURSHIP THEORY and PRACTICEvision and concepts, the Cognitive School also addresses their formation and, sometimes,their existence as group phenomena. In many respects this viewpoint is consistentwith the concept of "entrepreneurial intentions," described as entrepreneurs' "states ofmind" (Bird, 1988, p. 442). Two studies may prove useful to entrepreneurship theoristsbecause they describe how managers, individually and in teams, think about opportunitiesand threats.Jackson and Dutton (1988) have investigated how individual managers discemthreats and opportunities and, in an experiment, detected a threat bias that leads individualsto pay greater heed to perceived threats than to opportunities. They discuss howorganizations may encourage a threat bias by more generously rewarding the managerwho successfully handles a threat than the one who successfully handles an opportunity.The implications of a threat bias and the organizational incentives that foster it areworthy of further investigation by researchers in corporate entrepreneurship, particularlysince many such incentives seem likely to be informal and thus to have eluded someresearchers.A cognitive process study of a group as it tracked an emerging technology identifiedstimuli that prompted changes in the group's frames of reference (El Sawy & Pauchant,1988). These changes swung the group between focuses on opportunities and threats, buteven after completing their work, participants were unable to identify the stimuli that hadtriggered the switches.Risk AssumptionDespite their importance in the inventory of personal characteristics measured byentrepreneurship researchers, risk propensity and risk assumption have not figured soprominently in the field of strategic management. Two principal examples will serve tosummarize what strategic management offers to entrepreneurship.A study of top managers of very large, successful manufacturers found that their

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strategic decisions were markedly influenced by a strong desire to maintain their company'sfmancial health and independence (Donaldson & Lorsch, 1983). In fact, manytop managers limited investment to the amount generated internally rather than becomereliant on external capital markets. That these sentiments prevailed among professionalmanagers may be a surprise, but one can anticipate even stronger sentiments in manyowner-managed businesses. The role of a management belief system, usually includingsome notion of acceptable financial risk, looms large in such firms. It probably explainsthe "conscious underachiever" firm (Susbauer, 1979) and many decisions in familyownedfirms where preservation as a legacy takes precedence over riskier initiatives.Risk assumption also impinges on corporate entrepreneurship at the individual level,in terms of a manager's personal finances, job security, and career prospects. In someorganizations compensation and promotion opportunities are tied to the size of the unit(or budget, or sales) for which a manager is responsible. Under such circumstances thepotential rewards for championing a new product, technology, or business are notcommensurate with the degree of personal risk (Beatty & Gordon, 1991; Burgelman &Sayles, 1986).Additional Topics from Strategic ManagementHaving discussed the potential implications of strategic management theory andresearch for several major themes in entrepreneurship, there remain many other aspectsof strategic management on which entrepreneurship researchers might draw. Two inSpring, 1992 ®^particular seem noteworthy because of their implications for a topic of increasing interestin entrepreneurship research and a second, related topic that has yet to receive so muchattention.Top management teams. Researchers in entrepreneurship have begun to give the roleof entrepreneurial teams the attention it deserves. In the early 1980s researchers maintainedtheir traditional focus on the entrepreneur, perhaps out of habit. My own study ofnew ventures was typical: It measured characteristics of the entrepreneur rather than thetop management team, and found no link to performance. 1 speculated that entrepreneurialteams or hired managers might be filling gaps in the entrepreneur's experienceor other qualifications (Sandberg, 1986, p. 125). Soon afterward another researcherusing a similar sample and model found that team completeness and prior joint experiencewere strongly associated with superior performance, whereas the entrepreneur'svarious forms of experience had no effect (Roure, 1986).Strategic management theorists have attempted to identify the characteristics ofsuccessful top management teams. The mixture of backgrounds, knowledge, skills, andcognitive styles influences a team's strategic choices and hence the organization's performance(Hambrick & Mason, 1984). In their policy-capturing simulation of individualtop managers' strategic acquisition decisions, Hitt and Tyler (1991) found that the extentof this influence was significant, both directly and as a moderator of other, strongerinfluences. As strategic management researchers continue to explore the impact of top

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management teams' characteristics, their findings should inform research on entrepreneurialteams.Group processes in strategic decisions. The effectiveness of decision-making groupsis an issue that has been largely overlooked in entrepreneurship researcb. Strategicdecisions are the result of much more than the characteristics of a top management (orentrepreneurial) team. Those characteristics can be thought of as representing the potentialquality of a decision—the base of knowledge, experience, cognitive skills, andother resources on which the team may draw. Exploitation of those resources depends onthe effectiveness of the team's decision process.Except for extreme instances of solo decision making as conceived by the EntrepreneurialSchool, strategic decisions typically are worked out in management teams. Avast literature describes decision making, but the most promising theoretical applicationsto entrepreneurship involve the handling of conflict in the decision process. Both anecdotaland experimental evidence indicates that groups make better strategic decisionswhen they build cognitive conflict into tbeir process (Schweiger, Sandberg, & Rechner,1989). Otherwise they act on faulty assumptions, fail to utilize the knowledge availablewithin the group, and accept inferior decisions.Other strategic management research has a particular bearing on the timeliness ofdecisions. In a study of eight microcomputer firms, Eisenhardt (1989) found that decision-making speed came from accelerated cognitive processing and a smooth groupprocess on the part of tbe top management team; effective resolution of conflict playeda key role. In this dynamic industry, faster decisions led to superior performance.The distinction between looking to top managers' characteristics and looking to theirdecision processes in an effort to explain performance parallels the traits-versusbehaviorsdispute in entrepreneurship. The first approach implies confidence that theright ingredients in a top management team will be transformed into good decisions. Thesecond approach implies skepticism that this transformation is so reliable. Experimentalevidence favors the second approach; procedures that ensure cognitive conflict lead tobetter strategic decisions precisely because they make better use of a team's individualknowledge and capabilities (Schweiger «fe Sandberg, 1989).ENTREPRENEURSHIP THEORY a nd PRACTICEThe Prospects for Cross-FertilizationThroughout this article I have argued that the strategic management paradigm hasmuch to contribute to the study of entrepreneurship. Although beyond the scope of thepresent topic, it is also apparent that research in entrepreneurship can contribute to thefield of strategic management. On the precise points of contact between the two fieldsand on the elements of theory that can be transferred, scholars can be expected todisagree. After all, they remain far from consensus on the definition of each field and,at the extremes, quite disparate in their topical interests. Prospects for a merger, friendlyor otherwise, seem remote.Even without total integration, though, momentum is building for substantially mwecross-fertilization between the fields. The locus of contact is corporate entrepreneurship,

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to some an oxymoron but to others a bridge. Two particular conceptual and theoreticalefforts—one from entrepreneurship, the other from strategic management—may havebrought us closer to a paradigm that embraces both subjects. Stevenson and Jarillo(1990) sought to facilitate the flow of knowledge from entrepreneurship to the study ofcorporate management. They proposed a paradigm of entrepreneurship that emphasizesindividual actors, whether independent or within an existing organization, and the pursuitof opportunities irrespective of the resources initially under one's control. Their"purely behavioral, situational defmition" of entrepreneurship leads to the recognitionof "the crux of corporate entrepreneurship'': "opportunity/or the firm has to be pursuedby individuals within it" (pp. 23, 24). Organizations find it hard to create inducementsthat will bring individuals' perceptions of personal opportunity, based on both incentivesand access to organizational resources, into harmony with opportunities for the firm.Many of the steps suggested by Stevenson and Jarillo to achieve this alignment fall underthe heading of strategy implementation.From the opposite side of the bridge, so to speak, Chrisman and Bauerschmidt(1990) extended the strategic management theory of new venture performance to includecorporate ventures. By adding the constructs of organizational structure and resources toSandberg's (1986) strategy, industry structure, and entrepreneur, they incorporated twocritical dimensions of corporate entrepreneurship. Whereas the independent entrepreneurcreates an organization and acquires new resources, the corporate entrepreneur workswithin the (sometimes stifling) strictures of an existing organization and seeks to reorganizeresources already under its control. The effects of these differences, according toChrisman and Bauerschmidt, account for both the higher failure rate and higher maximumretums experienced by independent ventures.CONCLUSIONThis article closes as it began, with personal observations. The prospects for developinga theory of entrepreneurship seem brighter than might have been imagined a meredecade ago, when the shortcomings of the traits approach, including its inability topredict performance, began to become obvious. At the same time, the prospects forcross-fertilization between strategic management and entrepreneurship have neverseemed brighter.These two observations are closely related, I think, because both prospects owemuch of their present luminosity to a common phenomenon: increased attention to thebehaviors of human actors in strategic contexts, whether inside or outside organizations.The behavioral approach's more sophisticated and nuanced interpretations of entrepreneurshiphave their conceptual (and temporal) counterparts in the burgeoning research onSpring, 1992strategy implementation. As both fields develop and refine their theories along theselines, we can expect continued sharing of knowledge between them.REFERENCESAllison, G. T. (1971). Essence of decision: Explaining the Cuban missile crisis. Boston: Little, Brown.

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Schweiger. D. M., & Sandberg. W. R. (1989). The utilization of individual capabilities in group approachesto strategic decision-making. Strategic Management Journal, 10, 31-43.Schweiger, D. M., Sandberg, W. R.. & Rechner. P. L. (1989). Experiential effects of dialectical inquiry,devil's advocacy, and consensus approaches to strategic decision making. Academy of Management Journal.32, 145-112.Sousade Vasconcellos e Sa, J. A., & Hambrick, D. C. (1989). Key success factors: Test of a general theoryin the mature industrial products sector. Strategic Management Journal. 10. 527-538.Stevenson. H. H., & Jarillo. J. C. (1990). A paradigm of entrepreneurship: Entrepreneurial management.Strategic Management Journal, 11, 17-27.Susbauer.J. C. (1979). Commentary. InD. E.Schcndel&C. "^.HofcriEds.), Strategic management pp327-332. Boston: Little, Brown.Van dc Ven, A. H., & Chu. Y-h. (1989). A psychometric assessment ofthe Minnesota Innovation Survey.In A. H. Van de Ven, H. L. Angle, & M. S. Poole (Eds.), Research on the management of innovation, pp.55-103. New York: Harper & Row.Vesper. K. H. (1980). New venture strategies. Englewood Cliffs, NJ: Prentice Hall.Wemerfelt, B. (i984). A resource-based view of the firm. Strategic Management Journal, 5. 171-180.William R. Sandberg is Associate Professor of Management at the University of South Carolina.An earlier version of tbis article was presented to the Interdisciplinaiy Conference on EntrepreneurshipTheory at the University of Baltimore. January 18, 1991. The author thanks conference participants andstudents in his doctoral seminar in entrcpreneurship for their comments and suggestions.90 ENTREPRENEURSHIP THEORY and PRACTICE