Chapter 12: Strategic Leadership 401
that the entrepreneurial firm cannot afford to maintain in-house).^107 However, a firm’s
culture affects its ability to retain quality human capital and maintain strong internal
social capital.
As explained in the Strategic Focus, NBC News, Nokia, and Standard Charter all
experienced failures because of poor top managers’ decisions. NBC News made poor
decisions in the way it managed its human capital, and because of this, it lost the con-
fidence of its audience (loss of social capital). Nokia was overly conservative. Its top
executives made monumental mistakes. Standard Charter was losing the confidence of its
investors with very poor decisions (including perhaps some unethical ones).
12-4c Sustaining an Effective Organizational Culture
In Chapter 1, we defined organizational culture as the complex set of ideologies, symbols,
and core values that are shared throughout the firm and that influence how the firm
conducts business. Because organizational culture influences how the firm conducts its
business and helps regulate and control employees’ behavior, it can be a source of com-
petitive advantage.^108 Given that each firm’s culture is unique, it is possible that a vibrant
organizational culture is an increasingly important source of differentiation for firms to
emphasize when pursuing strategic competitiveness and above-average returns. Thus,
shaping the context within which the firm formulates and implements its strategies—that
is, shaping the organizational culture—is another key strategic leadership action.^109
Entrepreneurial Mind-Set
Especially in large organizations, an organizational culture often encourages (or discour-
ages) strategic leaders and those with whom they work from pursuing (or not pursuing)
entrepreneurial opportunities. (We define and discuss entrepreneurial opportunities in
Chapter 13.) This is the case in both for-profit and not-for-profit organizations.^110 This
issue is important because entrepreneurial opportunities are a vital source of growth
and innovation.^111 Therefore, a key action for strategic leaders to take is to encourage and
promote innovation by pursuing entrepreneurial opportunities.^112
One way to encourage innovation is to invest in opportunities as real options—that
is, invest in an opportunity in order to provide the potential option of taking advantage
of the opportunity at some point in the future.^113 For example, a firm might buy a piece of
land to have the option to build on it at some time in the future should the company need
more space and should that location increase in value to the company. Oil companies
acquire land leases with an option to drill for oil. Firms might enter strategic alliances
for similar reasons. In this instance, a firm might form an alliance to have the option of
acquiring the partner later or of building a stronger relationship with it (e.g., developing
a new joint venture).^114
In Chapter 13, we describe how firms of all sizes use strategic entrepreneurship
to pursue entrepreneurial opportunities as a means of earning above-average returns.
Companies are more likely to achieve the success they desire by using strategic entrepre-
neurship when their employees have an entrepreneurial mind-set.^115
Five dimensions characterize a firm’s entrepreneurial mind-set: autonomy, innova-
tiveness, risk taking, proactiveness, and competitive aggressiveness.^116 In combination,
these dimensions influence the actions a firm takes to be innovative when using the
strategic management process.
Autonomy, the first of an entrepreneurial orientation’s five dimensions, allows employ-
ees to take actions that are free of organizational constraints and encourages them to do so.
The second dimension, innovativeness, “reflects a firm’s tendency to engage in and support
new ideas, novelty, experimentation, and creative processes that may result in new products,
services, or technological processes.”^117 Cultures with a tendency toward innovativeness
