302 J PROD INNOV MANAG ABSTRACTS 1986;4:292-306

in new ventures operating in emerging markets. They were to accelerate promising investments, spin off the rest, and eventually consolidate related lines.

Exxon made 37 investments, 19 internal and 18 ex- ternal (via venture capital funding). The external in- vestments, as a group, were very successful, but the internal ones were not.

Of the 19 internal ventures, 13 involved entirely new technologies, necessitating large-scale R&D, and long time frames. Given the commitment to emerging mar- kets, most ventures amounted to diversification-new technologies and new markets.

Review of all 37 projects showed an inverse rela- tionship between venture success and the level of mar- ket and technical risk at the time of the investment. But the author feels that the real issue was mismanagement. Managers of internal ventures were usually technical people with little or no marketing experience. Having technical management experience showed no correla- tion with profitability.

As ventures grew, corporate involvement increased. Exxon management procedures conflicted with the in- dependent start-up environments of the ventures. Ini- tiative was stifled, decisions slowed down, motivation was lost. Ventures were consolidated, superstructures were created, departures increased, sales fell, losses widened. Negative publicity made things even worse. So even tighter and more complex managerial pro- cedures were instituted.

Each single corporate encroachment was perhaps necessary, but in total the entrepreneurship that is vital to venturing was lost. As stated, “The corporate bear hug amounts to death by a thousand cuts. ” Even Exx- on’s great financial resources acted to weaken the urge to be efficient.

Overall, the author concluded with a section entitled Lessons Learned. First, a venture should be based on the acquisition of an established company in a new business area. Such an acquisition gives technological capabilities, managerial experience, and market know- ledge, a competitive base for product innovation, etc.

Second, the parent firm should provide some added value, so the purchase is more than a portfolio invest- ment. And this is most likely if the acquired firm is functionally close to the parent’s base business.

Third, start fewer R&D-oriented ventures. The need for technical breakthroughs adds too much risk, ex- tends the time of payout (if there is any at all), and often conflicts with down cycles in the parent’s base busi- ness. It also presents the dilemma of how to bring expe- rienced marketing executives into the game without

just having them sit around for several years waiting the technical accomplishment.

Fourth, use venture capital investments as the prima- ry “probe” strategy. Keeping them independent lets them attract and hold capable managers.

Fifth, there must be a carefully woven relationship with the parent corporate body. The venturing must be important to the parent, the reintegrating of venturing subgroups must be handled adroitly, there must not be excessive risk-taking expected, there should be more single product focus, and there must be a flow of mana- gerial talent to the venture. As the author concludes, “A venture environment that encourages resource- fulness is more important than ample financing. ”

Entrepreneurship: The Issue of Creativity in the Market Place, Benny Gilad, Journal of Creative Behavior (Third Quarter 1984), pp. 151-160. (CMC)

This is an article by an economist who is challenging psychologists for ignoring the act of entrepreneurship as a field for scientific research. Psychologists accept creativity as a field of activity, but not entrepreneurship (the act of starting up a new business or line of busi- ness). The purpose of this article is to show that en- trepreneurship is itself a creative act. It finds relevance to us through the distinction usually made between in- vention (creative) and innovation (managerial). Gilad would claim that both are creative.

The entrepreneur is a person who analyzes situa- tions, spots opportunity, and then rearranges resources in such a way as to capitalize on that opportunity. The act of discovering opportunity is one dimension of creativity, and rearranging resources is another.

Creativity, though difficult to define, is generally felt to involve four key properties: unusualness, appro- priateness, transformation, and condensation. The pa- per primarily offers the argument that entrepreneurship involves these four properties.

Unusualness lies in the opportunity visualized. If it were not unusual, it would not be an opportunity- others would be exploiting it. Unusualness also lies in the product produced, since no one would buy it unless it offered something others did not. That something

ABSTRACTS J PROD INNOV MANAG 303 1986;4:292-306

may not be form; it may be a service, location, time utility, or other. But profit comes only from diseq- uilibrium in the marketplace (sometimes called monop-

oly). Appropriateness is also essential to entrepreneur-

ship. A merely bizarre product or service will not com- mand a profit-consumers must need or want it.

Transformation of materials (or other resources) into finished product (service) is essential to any entrepre- neurship. If there were no transformation necessary, there would be no reason to have the entrepreneurship. Every new product or new business creates new forms or new perspectives on forms.

Condensation consists of merging extremes, cer- tainly evident in entrepreneurship. Most new products are combinations of simplicity and complexity-soft soap, for example, was an extremely simple product in form (already available in public restrooms) but com- plex to forecast consumer demand.

So, entrepreneurship is itself a creative process, not just the determined push of an eager novice or the powerful thrust of an experienced capitalist. Without creativity (as defined above) the entrepreneurship is empty and will fail.

Other psychologists have offered other definitions of creativity, and this article also deals with a couple of them. But the point is made: entrepreneurship is a cre- ative process. Given that new products management is often viewed today as in-house entrepreneurship, it should be studied as a creative process too; concept generation is not the only creative dimension.

Strategy and Strategic Choice: The Case of Telecommunications, Richard J. Butler and Mick Carney, Strategic Management Journal (March-April 1986), pp. 161-177.

(CMC)

The purpose of this article is to help us to see the larger picture of strategy, how strategy takes one of four basic forms, and what determines when each form is approp- riate.

First, the author defines two basic forces that shape strategy. The first force is the degree of concentration in the industry. There can be concentration in supporter organizations (such as customers, suppliers, banks,

etc.) and/or in competition. Competitive concentration (the traditional concentration of economics) is the one that drives strategy and that interests us here. The sec- ond force is ambiguity in task knowledge. Ambiguity is high in such industries as aerospace manufacturing and higher education, but low in water and textiles. It is always high if there is rapid scientific development.

These two forces lead to a matrix of four situations, each of which calls for a different one of the four basic strategic alternatives.

High Concentration, High Task Ambiguity: this sit- uation leads to the strategy of cooperation. The aero- space and education industries are examples cited. The main problem for an organization in this condition is to ensure a supply of supporters and avoid the entrance of competitors. Joint ventures help in this, as do other kinds of agreements. The new products strategy of the telephone companies probably reflects this situation.

High Concentration, Low Task Ambiguity: this sit- uation leads to the strategy of consolidation-appro- priate where a firm operates a routine technology and enjoys a monopoly. The author cites the steel and water industries as examples. Activities here include: (1) de- fense of existing domain so as to restrict entry of com- petitors, (2) institution building, where the monopoly is legitimatized, (3) attempts to capture regulatory agen- cies, (4) integration, either vertical or horizontal, and (5) formulation, as where a major department store formulates standards for its suppliers to meet. New products projects would be primarily defensive.

Low Concentration, High Task Ambiguity: this sit- uation leads to the strategy of innovation, and the ex- ample cited is the electronics industry. The organiza- tion tries to gain an advantage over competitors, using innovation, but any monopoly is temporary. Differ- entiation and diversification are sought. It is a dynamic strategy. There might be, for example, joint ventures that included only the R&D function; there are too many competitors for joint ventures to yield monopoly advantage, yet the high task ambiguity yields itself to joint actions. Acquisition is also a viable alternative here.

Low Concentration, Low Task Ambiguity: this situa- tion leads to the strategy of competition, and the exam- ple cited is textiles. Conditions are not at all favorable to innovation, but instead lead to efficiency seeking, cost-cutting, attempts to restrict sources of supply, and in general just attempting to do one’s best. Process innovations are sought more than are product innova- tions, particularly since the latter are very difficult to come by in the setting of low task ambiguity.