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Chapter 9. Choosing the Right Organizational Form

Chapter 9. Choosing the Right Organizational Form

Most people believe that entrepreneurship involves creating a new firm that does all of its own product development, production, and distribution. Although it is true that entrepreneurs often use hierarchical approaches to exploiting opportunities, by creating new organizations that own all stages of the value chain from purchasing supplies to marketing and distribution, you can also exploit opportunities with more market-based mechanisms, such as licensing or strategic alliances. For example, biotechnology start-ups often partner with large pharmaceutical firms either through licensing or strategic alliances in which the actual drug production, and even development and FDA approval, is undertaken by the pharmaceutical firms. Therefore, an important question for you to consider as you plan to become a technology entrepreneur is, What is the right mode of exploitation for my opportunity?

In general, several different sets of factors affect this decision: Cost, speed, capabilities, and information.[1] The sections of this chapter each examine one of these four sets of factors. We begin with the cost of exploitation.


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