Innovation Strategies of Firms and Entrepreneurs (ISFE)

Comprehensive practice flashcards covering all 13 lectures from the Innovation Strategies of Firms and Entrepreneurs (ISFE) course at Utrecht University.

Product Innovation

The introduction of changes in the things (goods or services) that an organization offers to the market.

Process Innovation

Changes in the operational methods, equipment, and workflows by which products or services are created and delivered.

Incremental Innovation (Meeus et al.)

A mode of technological change based on a step-by-step approach that causes continuous, small improvements to existing products or processes.

Radical Innovation (Meeus et al.)

Discontinuous innovations that overturn established competencies, rendering old methods obsolete and disrupting entire industries.

General Purpose Technology (GPT)

A pervasive, transformative technology that alters broad sectors across the economy, creating massive shifts sometimes referred to as techno-economic paradigms.

Architectural Innovation Matrix (Henderson & Clark, 1990)

A classification matrix dividing technological change into Incremental, Modular, Architectural, and Radical innovation depending on whether core concepts are reinforced or overturned, and whether linkages between core concepts and components remain unchanged or changed.

4Ps Innovation Space (Francis & Bessant, 2005)

A framework mapping organizational innovation across four broad dimensions: Product (what is offered), Process (how it is created and delivered), Position (the market context in which it is introduced), and Paradigm (underlying mental and business models).

Disruptive Innovation

A process where entrants with fewer resources challenge incumbents by initially targeting overlooked or fringe market segments, gradually improving until they capture mainstream customers.

Organizational Routines

Regular, predictable, collective behavioral patterns displayed by an organization that are social and tacit, guiding cognition, behavior, and performance.

Heuristic Nature of Routines (Becker, 2005)

Execution patterns that allow organizational tasks to be executed subconsciously, economizing on limited cognitive resources and gaining efficiency through repetition.

Dynamic Capabilities (Teece, 2012)

Higher-level competences that determine an organization's capacity to integrate, build, and reconfigure internal and external resources to address and shape rapidly changing business environments through sensing, seizing, and transforming.

Strategic Product-Market-Organization Fit

The alignment among technology, market needs, and organizational structures, where basic routines maximize operational efficiency and dynamic capabilities ensure sustained adaptability in volatile conditions.

Organizational Slack (Cyert & March, 1963)

The pool of resources possessed by an organization in excess of what is strictly needed at a given time; it represents static operational inefficiency but acts as a dynamic shock absorber.

Non-Local Search (Nelson & Winter, 1984)

An exploratory search behavior pursued by successful firms with abundant organizational slack, yielding long-term, significant innovations far outside existing knowledge domains.

Local Search (Nelson & Winter, 1984)

A narrow, problem-driven search behavior common when firms experience low performance and limited slack, restricting innovation attempts closely to existing organizational knowledge bases.

Incumbent's Curse

The structural difficulty experienced by large, established market leaders that, despite having vast slack and resources, become constrained by cognitive mental models and operational inertia.

Business Model (Richardson, 2008)

A conceptual framework that links a firm's strategy (theory of how to compete) to its activities (execution), explaining how it creates and delivers value to customers and makes money.

Business Model Framework (Richardson, 2008)

A tripartite architecture comprising the Value Proposition (offering, target customer, competitive strategy), Value Creation and Delivery System (resources, organizational processes, value network), and Value Capture (revenue sources, business economics).

Sufficiency-Driven Business Model (Bocken & Short, 2016)

An adaptation of the standard business model framework that embeds sustainability by incorporating societal/environmental value into the value proposition and ecological capture into the value capture system.

Business Model Canvas (Osterwalder, 2013)

A visual framework mapping an enterprise across nine essential building blocks to systematically evaluate desirability, feasibility, and economic viability.

Lean Startup Approach (Steve Blank)

The view that a startup is not a smaller version of a large company, but a temporary organization searching for a repeatable and scalable business model through hypothesis-driven experimentation.

Customer Development (Blank, 2013)

A new-product development process emphasizing getting out of the building to test hypotheses iteratively with customers, contrasting with traditional linear product management.

Metrics That Matter (Lean Reporting)

Entrepreneurial operational indicators—such as customer acquisition cost ($\text{CAC}$), customer lifetime value ($\text{LTV}$), churn, and viralness—prioritized over conventional accounting statements.

Incrementalist Strategic Perspective

A strategy posture based on bottom-up, inside-out evolutionary learning, variation, and selection, contrasting with top-down, static rational planning.

Generative AI

Artificial intelligence systems that produce novel content—such as text, software code, images, or audio—by learning complex structural patterns from extensive training datasets.

Agentic AI

Autonomous artificial intelligence agents capable of perceiving context, reasoning, making independent decisions, using digital tools, and executing multi-step workflows to achieve specific goals.

Growth Hacking (Rezazadeh et al., 2025)

A methodology prioritizing rapid experimentation across the end-to-end customer journey to uncover cost-effective, scalable opportunities for customer and revenue expansion.

AI Wheel Framework

An analytical model categorizing generative AI applications across three startup growth modes: product-led growth, sales-led growth, and operational efficiency.

AI Feature Knowledge

The practical capability of knowing and selecting what generative AI-enabled capabilities and tools can achieve within specialized enterprise tasks.

Reflective Knowledge in AI Adoption

The critical human judgment needed to evaluate AI outputs for factual correctness, hallucination, systemic bias, intellectual property copyright, and ethics.

TRIZ Ideation Prompting

A systematic prompting approach adapted from the Theory of Inventive Problem Solving where an LLM is instructed to act as a TRIZ expert and generate ideas having at most $10\%$ overlap with existing solutions.

The Mom Test (Rob Fitzpatrick, 2014)

A customer interview method for uncovering authentic user needs and past behaviors without biasing respondents by pitching ideas, adapted in AI workflows by using LLMs as sparring partners.

Business Incubator

An organization that supports new technology-based firms (NTBFs) by providing physical space, seed capital, knowledge, networking, and institutional legitimacy.

Startup Resource Needs Framework (Van Weele et al., 2017)

A five-part taxonomy categorizing startup resource needs into physical capital, financial capital, knowledge, social capital, and organizational legitimacy.

Tangible to Intangible Resource Shift

The pattern identified by Van Weele et al. (2017) wherein early founders initially demand tangible resources (money, office space) but eventually realize intangible resources (business knowledge, social capital) are far more essential.

Unconsciously Incompetent Entrepreneur

A novice founder who is primarily technical, lacks awareness of vital managerial deficits, and tends to remain within a narrow comfort zone.

Strong Intervention Approach (Incubators)

An assertive incubator management approach applied to inexperienced founders that utilizes mandatory participation, aggressive business coaching, and strict milestones.

Laissez-Faire Incubator Strategy

A demand-driven incubator model tailored for experienced, competent entrepreneurs that grants full autonomy and provides resources only upon specific request.

Firm Resources (Barney, 1991; Daft, 1983)

All assets, capabilities, organizational processes, attributes, information, and knowledge controlled by an enterprise that enable it to conceive and execute strategies that improve efficiency and effectiveness.

Value Capture Challenges (Ahuja et al., 2008)

Five hurdles firms must manage: integrating external knowledge, navigating industry networks, developing organizational capabilities, commercializing scientific insights, and defending innovations from imitation.

Creative Destruction (Schumpeter)

The process of industrial mutation where novel products, processes, and business models continuously replace outdated industrial structures, driving economic evolution.

Schumpeterian Rents

Temporary monopoly profits enjoyed by an innovative pioneer before competitors successfully imitate the product or enter the market.

Resource-Based View (Barney, 1991)

A strategic management theory stating that sustainable competitive advantage stems from the accumulation of firm resources that are valuable, rare, inimitable, and non-substitutable (VRIN).

VRIN Resource Framework (Barney, 1991)

A diagnostic matrix showing that valuable resources yield parity; valuable and rare yield temporary advantage; valuable, rare, and inimitable yield temporary advantage; and adding non-substitutability secures sustained competitive advantage.

Organizational Capability to Repeatedly Innovate

The foundational VRIN resource in the Resource-Based View that resides in complex, embedded routines and tacit knowledge, allowing persistent innovation over time.

Complementary Assets (Teece, 1986)

Downstream capabilities—such as manufacturing plants, distribution networks, service infrastructure, and marketing channels—required to commercialize and capture profits from an invention.

Integrated Value Capture Model

A strategic model combining Schumpeterian innovation (creating value through disruption and rapid entry) with the Resource-Based View (protecting and sustaining that value through internal VRIN assets).

Entrepreneurial Finance Dimensions (Block et al., 2018)

Four criteria classifying startup capital: type of financial deal (debt, equity, grants), motivation of funder (interest, capital gain, technology access, impact), type of support provided, and venture development stage.

Information Asymmetry in Bank Lending

The informational gap between early-stage ventures and banks regarding the probability of business success, making debt financing difficult without established cash flow or tangible collateral.

Bootstrapping

Financing startup operations through existing internal means—such as founder savings, equipment borrowing, bartered services, and delayed supplier payments—without giving up equity.

3Fs (Family, Friends, and Fools)

Early seed-stage capital providers who invest based on personal relationships rather than formal due diligence, necessitating clear legal contracts to avoid personal friction.

Business Angel (BA)

An affluent private individual who invests personal funds (typically $\text{€}50{,}000$ to $\text{€}1{,}000{,}000$) into early-stage ventures in exchange for equity, offering hands-on advice and networks.

Venture Capital (VC)

A professional financial intermediary managing third-party pooled funds that invests large equity sums into promising high-growth startups in exchange for significant ownership stakes and board governance.

Corporate Venture Capital (CVC)

Direct equity investments made by established corporations into external entrepreneurial startups, offering access to specialized assets while introducing risks of corporate lock-in.

Crowdfunding Models

Online fundraising from a broad public crowd, split into four categories: reward-based (product pre-orders), donation-based (philanthropic), lending-based (peer-to-peer interest), and equity-based (shares).

Intention-Behavior Gap

The empirical divergence where an individual's expressed intention to adopt a new product fails to translate into an actual commercial purchase.

Innovation-Decision Process (Rogers)

A five-stage sequential framework through which an individual or unit moves: Knowledge, Persuasion, Decision, Implementation, and Confirmation.

Relative Advantage (Rogers)

The degree to which an innovation is perceived as superior to the product, technology, or practice it supersedes, measured in economic, social, or technical terms.

Compatibility (Rogers)

The degree to which an innovation aligns with the existing values, past experiences, psychological habits, and established needs of potential adopters.

Complexity (Rogers)

The degree to which an innovation is perceived as relatively difficult to understand, install, or use.

Trialability (Rogers)

The degree to which an innovation can be experimented with or tested on a limited, low-risk basis prior to making an adoption commitment.

Observability (Rogers)

The degree to which the implementation, usage, and tangible benefits of an innovation are visible to other members of the social system.

Decision-Making Unit (DMU)

The collective group of individuals that influences an adoption decision, consisting of six roles: Initiator, End-user, Influencer, Economic Buyer, Decision-Maker, and Gatekeeper.

Construal-Level Theory

A psychological theory stating that psychologically distant events (forming adoption intentions) are evaluated through abstract 'Why' questions, while psychologically close events (purchasing) trigger concrete 'How' evaluations.

7 Ps Marketing Mix

An extended marketing framework comprising Product, Price, Place, Promotion, People, Process, and Physical Environment that shapes the complete customer experience.

Innovation Diffusion

The aggregate macro-level process of communication over time by which an innovation spreads among the members of a social system.

S-Curve of Diffusion

The sigmoidal curve formed by plotting cumulative adoption over time, driven by an underlying normal distribution of adopter categories.

Unconstrained Birth Process Diffusion Model

A pure word-of-mouth mathematical diffusion model formulated as $\frac{\Delta n}{\Delta t} = a \times n$, which results in unrealistic, infinite exponential growth.

Birth Process with Limits

A word-of-mouth diffusion model formulated as $\frac{\Delta n}{\Delta t} = a \times n \times (N - n)$, which accounts for total potential market size ($N$) but requires $a \le \frac{1}{N}$ to prevent overshoot errors.

Broadcast Diffusion Model

An external-influence diffusion model formulated as $\frac{\Delta n}{\Delta t} = a \times (N - n)$, in which adoption is driven entirely by mass media communications reaching unreached potential buyers.

Bass Diffusion Model (1969)

A mathematical forecasting model combining mass media and word-of-mouth adoption pathways: $\frac{\Delta n}{\Delta t} = p \times (N - n) + q \times \frac{n}{N} \times (N - n)$.

Coefficient of Innovation ($p$)

The Bass model parameter representing external influence (mass media advertising) that drives adoption independently of social interactions.

Coefficient of Imitation ($q$)

The Bass model parameter representing internal social influence, peer pressure, and word-of-mouth that drives adoption as the user base expands.

Tacit Knowledge

Non-codified knowledge that is embedded in individual experience, physical skills, and social routines, making it difficult to formalize or transfer.

Codified Knowledge

Explicit knowledge that has been recorded in tangible formats (documents, blueprints, code), allowing near-costless replication and transfer.

Absorptive Capacity (Cohen & Levinthal, 1990)

A firm's ability to recognize the value of external information, assimilate it through existing knowledge bases, and apply it toward commercial ends.

Make-Buy-Ally Strategic Options

The three fundamental strategic routes for acquiring technological knowledge: internal R&D (Make), licensing or corporate acquisitions (Buy), and collaborative alliances (Ally).

Closed Innovation Model

An R&D paradigm premised on the belief that successful innovation requires internal discovery, in-house development, and strict intellectual property control.

Open Innovation (Chesbrough, 2003)

A paradigm assuming that firms can and should use external as well as internal ideas, and internal and external paths to market, to advance technology.

Inbound Open Innovation

The practice of scanning external environments to discover, source, and integrate external knowledge, technologies, and intellectual property into internal operations.

Outbound Open Innovation

The purposive commercialization and external exploitation of internally developed ideas and intellectual assets through licensing, spin-offs, or alliances.

Inverted U-Shape of Open Search (Laursen & Salter, 2006)

The empirical finding that innovation performance increases with broader and deeper external search up to a point, after which excessive openness causes oversearching and declining performance.

Patent

A statutory legal monopoly granted by a government giving an inventor exclusive rights to commercially exploit an invention for up to 20 years in exchange for complete technical disclosure.

Patentability Criteria

The statutory legal standards an invention must meet to receive a patent: Novelty (no prior art), Inventive Step (non-obviousness), and Industrial Applicability.

Prior Art

All public information, existing technology, and literature anywhere in the world published prior to a patent application's filing date that can invalidate novelty.

Trademark

A formally registered sign, design, or expression granted for 10-year renewable terms that uniquely identifies the commercial origin of goods and services.

Copyright

A legal protection granted to creators of original literary, dramatic, musical, artistic, and software works that prevents unauthorized reproduction, typically lasting at least 50 years.

Defensive Patenting

The strategic practice of filing clusters of interrelated patents around a technology to deter competitors from entering or inventing around the firm's domain.

Appropriability Mechanisms Framework (James et al., 2013)

A strategic model linking institutional environment, industry dynamics, firm capabilities, and technology structure to the deployment of formal (patents) and informal (secrecy, lead time, complementary assets) value-capture mechanisms.

Leadership (Prentice, 2004)

The accomplishment of a goal through the direction of human assistants.

Leadership Style (Gandolfi, 2017)

An intentional means by which a leader influences a group of people in an organization toward a widely understood future state that is different from the present one.

Authoritative Leadership Style (Goleman, 2000)

A visionary leadership approach summarized by 'Come with me' that mobilizes employees toward a shared mission, generating the most strongly positive impact on organizational climate ($+0.54$).

Pacesetting Leadership Style (Goleman, 2000)

A leadership approach summarized by 'Do as I do, now' that sets extremely high performance standards, which frequently damages overall organizational climate ($-0.25$).

Organizational Climate (Litwin & Stringer; McClelland)

The perceived working environment of an organization comprised of six core dimensions: flexibility, responsibility, standards, rewards, clarity, and commitment.

New Venture Team (NVT, Klotz et al., 2014)

The group of individuals chiefly responsible for strategic decision-making and ongoing operations of a new startup, whose early dynamic interactions imprint lasting cultural norms.

NVT Input-Mediators-Outcome (IMO) Framework

A conceptual framework explaining how founding team inputs (prior experience, mental ability, personality) operate through team processes and emergent states to produce venture outcomes.

Belbin Team Roles

A model describing nine behavioral roles necessary for balanced, high-performing teams, grouped into Action-oriented, People-oriented, and Cerebral clusters.

Startup Valley of Death

The critical early phase where a startup expends capital to develop a product before generating commercial cash flow, during which approximately $90\%$ of new ventures fail.

Contribution Margin per Unit

The revenue remaining from each unit sold after deducting unit variable costs, which directly pays down fixed overhead and contributes to net profit: $\text{Selling Price} - \text{Variable Cost per Unit}$.

Break-Even Sales Volume

The minimum number of units a business must sell so that total revenues equal total expenses, calculated as: $\frac{\text{Fixed Costs}}{\text{Contribution Margin per Unit}}$.