Entrepreneurship and Innovation: Lessons Learned from Tesla Company

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TOMA Sorin-George[1], MARINESCU Paul[2], GRADINARU Catalin[3]

[1] University of Bucharest, (ROMANIA) [2] University of Bucharest, (ROMANIA) [3] University of Bucharest, (ROMANIA)

Emails: tomagsorin62@yahoo.com, paulmarinescu1@gmail.com, gradinarubusiness@gmail.com

Abstract

Today’s interconnected global business world is characterized by uncertainty and risk. As growth in the Fourth Industrial Revolution is driven by human creativity, entrepreneurship and innovation have become key prerequisites for achieving business success in a highly competitive and turbulent business environment. The purpose of this paper is to highlight the relationship between entrepreneurship and innovation at Tesla Company, one of the most innovative companies worldwide. The research is based on a case study. The paper shows that Tesla Company is a perfect example of a firm that succeeded in linking entrepreneurship with innovation. It is not only a company that has changed the paradigm of the car industry but also a company that has continuously reinvented itself through its innovative products.

Introduction 

Numerous factors (e.g., economic, social, technological, demographic, environmental, geopolitical) have highly influenced the recent evolution of human society. In this respect, disruptive technologies, terrorist attacks, interstate conflicts, tensions between economic blocks, income and wealth disparities, cyber fragility, global disease outbreaks, structural unemployment and underemployment, asset bubble, energy price shocks, population growth, climate change and large- scale migration have led to an increasing volatility, complexity and ambiguity of the world [1].

Today’s interconnected global business world is characterized by uncertainty and risk. There is a considerable impact on businesses the current Fourth Industrial Revolution, based on cyber-physical production systems, is having (e.g., mobile networks, technology platforms) across all industries all over the world [2]. As growth in this industrial revolution is driven by human creativity, entrepreneurship and innovation have become key prerequisites for achieving business success in a highly competitive and turbulent business environment. Only companies capable of building an organizational culture that stimulates the entrepreneurial and innovative spirit will thrive in the Fourth Industrial Revolution. They understand the need for sustainable innovation in order to face the challenges of the twenty-first century business context [3] and to create new competitive advantages [4].

The purpose of this paper is to highlight the relationship between entrepreneurship and innovation at Tesla Company, one of the most innovative companies worldwide. The research is based on a case study. The remainder of this paper is divided into three sections. The next section presents the literature review. It is followed by the research methodology. The third section displays the case of Tesla Company. The paper ends with conclusions.

Literature review 

Since the end of the last century entrepreneurship and innovation have evolved and become important fields of study. Entrepreneurship has been defined as “the scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited” [5, p. 218], “the resource, process and state of being through and in which individuals utilize positive opportunities in the market by creating and growing new business firms” [6, p. 4], “an activity that involves the discovery, evaluation and exploitation of opportunities to introduce new goods and services, ways or organizing, markets, processes, and raw materials through organizing efforts that previously had not existed” [7, p. 4] or “an integrated concept that permeates an individual’s business in an innovative manner” [8, p. 4].

On its turn, innovation represents “the ability of individuals, companies, and entire nations to continuously create their desired future” [9, p. 19], “the creation of new knowledge and ideas to facilitate new business outcomes, aimed at improving internal business processes and structures and to create market driven products and services [10, p. 21] or “the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace” [11, p. 1334].

The above definitions show that entrepreneurship and innovation have been defined from different perspectives and can be linked. In this respect, the broad stream of literature that has been developed in order to prove their connection concludes that:

• There is a symbiotic relationship between them as innovation leads ultimately to the creation of new products and/or services, and entrepreneurship seeks to identify and exploit opportunities for such products/services [7; 12]. Some theories argue that entrepreneurship has a major contribution in carrying innovation into the economic process [13] or uses innovation to create change [14] while other opinions consider innovation as a critic characteristic of entrepreneurship [15] or as a determinant of entrepreneurship [16].
• Entrepreneurship and innovation shared some common notions such as value creation and newness [12].

Research methodology

The research uses the case study method. This method has allowed the exploration and understanding of the Tesla Motor case over a period of time. To this end, secondary data were collected and analyzed through the deployment of a significant literature review. The main sources were articles and books from the domains of management, entrepreneurship, business, innovation, and company reports. The first phase of the literature review process consisted in establishing entrepreneurship and innovation as the review’s topics. It was followed by the identification and selection of the relevant literature on these subjects. The third phase dealt with the reading and analyzing the data gathered from various sources (e.g., electronic databases). Finally, it was written the conceptual framework of the paper.

Entrepreneurship and innovation at Tesla Company

Elon Musk is an entrepreneur who plans to change the world with a mindset towards sustainability. He is often compared to Steve Jobs in terms of being a technology visionary, with an exceptional drive, “innovative acumen” and “relentless work ethics”, successfully creating value for his shareholders [17, p. 10]. Among his business endeavors there are noticeable achievements such as co-founder of Tesla Inc. and founder of SpaceX (Fig. 1). He was previously a Pay-Pal co-founder which was sold in 2002 to eBay. Founded in 2003 by a group of Silicon Valley engineers, Tesla Inc. is about creating better electric cars in comparison to gasoline automobiles, accelerating the “advent of sustainable transport by providing compelling, mass-market electric cars as soon as possible” [18, 2]. Its CEO, Elon Musk, plans “to continue developing increasingly accessible and mass-market electric cars” [19, p. 27].

In his pursuit of making mass-market affordable electric vehicles whilst giving “the zero-emission mobility a push” [20, p. 85], the company announced that their patents will be made available to anyone who wants to use them in good faith. By doing so in opening their IP portfolio “they want to invite other car makers to jointly tackle the carbon crisis by enhancing the technology and develop the market for electric vehicles which compared to the gasoline powered cars is minimal these days” [20, p. 85]. This is, indeed, a surprising fact because other competitors in the industry are making considerable efforts to keep total secrecy in connection to the topic on hand.

Fig. 1. The main business endeavors of Elon Musk

Tesla Inc. incorporates:

• The Gigafactory: Critical for the production of the batteries that “push forward” Tesla cars and make a leap towards their market approach aiming at a sustainable environment, this factory is the world’s largest lithium ion cell producer with the most advanced batteries. Created with the help of their strategic partners such as Panasonic, the building has the largest footprint of any building in the In this factory, there will also be produced battery packs destined for stationary storage use [21].
• The Fremont factory: Created in order to be able to achieve the goal of building affordable mass production electric vehicles (EV), this factory now has the capacity of producing 500.000 cars per year. The location was previously owned by New United Motor Manufacturing Inc., a General Motors and Toyota joint venture. By its purchase, Tesla reinstated thousands of jobs [22] and launched several innovative car models (Table 1).

• The Solar City: Founded in 2006 and merged into Tesla in November 2016, Solar City represents “the largest solar energy service provider in America” [23, p. 1]. Considered a revolution in the industry, Solar City aims at providing solutions in order to achieve “more affordable and sustainable alternative to electricity from utilities” [24]. With an innovation driven vision, the company created a product aimed at homeowners: the solar roof. This product is created so as to provide households power (electricity) whilst being tougher, providing better isolation and lasting longer than a conventional roof [25].
• The assembly facility from Tilburg is an assembly and testing facility for Tesla cars in Europe equipped with an indoor driving track. The cars are tested by former race pilots [26; 27].

• The plant from Lathrop, California: Once used by Daimler-Chrysler, the facility is a specialized production.

Since late 2016, all vehicles produced in Tesla’s factory have had the adequate hardware for full self-driving capability providing superior safety levels in comparison to those of a human driver.

Table 1. The innovative car models launched by Tesla Company

Sources: [22; 28]

On its turn, founded in 2002, SpaceX creates highly advanced rockets and spacecraft. With lowering costs on mind, efforts are made so as to enable people to live on other planets, making spaceflights accessible. Innovation here is at its best (Table 2), propelling them towards great achievements. For example, on May 2012, Dragon became the first privately owned spacecraft to visit the International Space Station [29].

Table 2. The rocket models launched by SpaceX

Sources: [29; 30]

Lowering costs by promoting its reusable launch technology proved its viability (after four failed attempts) on 8th April 2016 after the Dragon launch carrying cargo for the International Space Station with the successful landing of its first stage rocket Falcon 9 on their Atlantic Ocean floating platform (instead of crashing and sinking on the bottom) [31].

Elon Musk is an entrepreneur par excellence. Entrepreneurship and innovation have found a generous field of expression at Tesla Company, one of the most promising American businesses. According to the international rankings, Tesla Motors hold the third place in 2015 and the fourth place in 2016 among the world’s ten most innovative companies [32].

Conclusions

Entrepreneurship and innovation have become two of the most debated topics in the business literature in the last decades. Entrepreneurship has proved to be the engine of the capitalist economic system and its fuel is innovation. Both find their meaning in value creation.

The paper shows that Tesla Company is a perfect example of a firm that succeeded in linking entrepreneurship with innovation. It is not only a company that has changed the paradigm of the car industry but also a company that has continuously reinvented itself through its innovative products.

The paper contributes to a better understanding of the relationship between entrepreneurship and innovation at Tesla Company. Future researches may find other arguments that support this connection.

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