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A firm’s philosophy toward innovation greatly impacts the business-level/competitive strategies that it pursues. Having an entrepreneurial orientation stimulates a firm toward innovation, improving its products and services and launching new product lines. Innovation can open new markets for a company, and being the first mover to launch a new product or service can be an advantage over competitors, but not always. There are four types of innovation that depend on if existing or new markets are reached or if existing or new technology is used. Firms may also find it advantageous to cooperate at certain levels, such as through a joint venture, strategic alliance, merger, acquisition co-location, or co-opetition.
Innovation is important in strategic management. A firm must be improving its products and services or developing new ones to stay competitive. Business level strategy will not be able to sustain any competitive advantage by sitting still. As firms implement corporate and international strategies, discussed in the next two chapters, cooperative and co-opetition measures help companies obtain resources and capabilities needed to innovate and enter new markets.