The Corporate Entrepreneurship

In today’s rapidly changing and hyper competitive business environment where opportunities and threats are present, innovation and continued growth remains as a main concern for companies. Scholars have voiced importance of corporate entrepreneurship behavior to cope with the environmental challenges and managing innovation and sustainable growth. Corporate entrepreneurship is an interesting arena among scholars and no universal definition has been agreed. Corporate entrepreneurship is generally defined as the “process by which teams within an established company conceive, foster launch and manage new businesses that is distinct from the parent company but make use of parent company’s resources, market position, capabilities and other resources” (Ferreira, 2002). Implementation of corporate entrepreneur behavior within firm is a challenging process, which involves individual’s roles and most importantly firm level antecedents that promotes corporate entrepreneurial activities (Marina G. Biniari, 2010). This paper explains factors (individual characteristics and firm level antecedents) affecting corporate entrepreneurship and how beneficial this strategy is to firms.

Individual Characteristics and Corporate Entrepreneurship

To cultivate and build successful corporate entrepreneurship in organizations, individuals working at the organization should inherit or possess certain characteristics and traits. These skills and competencies enable them to achieve the outcomes of a successful entrepreneurship and to involve effectively in corporate entrepreneurship activities (Christensen, 2004). As similar to definition of corporate entrepreneurship, researchers have explained various characteristics of individuals in different occasions and no agreement have been reached over key characteristics. Various researches have been conducted on this area analysis of such studies are explained here.

Findings of a study done by Lumpkin and Des in Dess in 1996 explained corporate entrepreneurship in terms of entrepreneurial orientation and they determined main characteristics as innovativeness, proactiveness, risk taking, autonomy and competitive aggressiveness (J.P.J de Jong, 2001). In contrast to this study Zahra (1993, 1995) suggested three main characteristics, which are venturing, innovation and self-renewal (Scheepers, 2008). Brockhaus and Horwitz (1982) also suggested some other set of characteristics supporting corporate entrepreneurship, which are locus of control, risk taking propensity, and achievement motivation (Burgers, 2011). In addition to these characteristics, other important characteristics determined by other researchers include; energy level, conformity, need for autonomy, dominance, personal control and desire to build something of one’s own (Sanchez, 2011). Since there is no universal set of characteristics, certain set of characteristics are explained in detail in this section and these characteristics are found as common characteristics highlighted by most of the researchers.

Innovativeness

Arguably innovation is the most crucial element of the corporate entrepreneurship and all most all researchers have talked about the importance of innovation towards corporate entrepreneurship. Researchers have stressed on importance innovativeness characteristic of individuals in product and service innovation within organizations and Antoncid and Hisrich (2001) suggested that if employees of firma are innovative, it would drive firm towards corporate entrepreneurship. According to James C. Hayton (2006), innovativeness in corporate entrepreneurship is defined as “a predisposition to engage in creativity and experimentation through the introduction of new products”.

Pinchot (1985) suggested that, at that time the important factor missing in corporate innovation was intrapreneurs or corporate entrepreneurs. He defined intrapreneurs as “those who take hands-on responsibility for creating innovation of any kind within an organization; they may be the creator or inventors but are always the dreamers who figure out how to turn an idea into a profitable reality” (Zhang, 2010). One of the key roles of intrapreneurs is to finding creative methods or ways to improve the speed and cost-effectiveness of technology transfer from internal R&D to the marketplace. To achieve this they are need to be innovative to come up with new ideas on how to sustain competitive advantage in a highly dynamic business environment. This may include individual’s ability to deliver creative ideas about new product/service development and also process related innovations to improve company’s efficiency and enhance productivity (Antoncic, 2009).

Proactiveness

According to Bateman and Crant (1993), proactive personality trait refers to individual’s capability to influence one’s environmental and bring about change. Moreover proactiveness of an individual would make him strong to face challenges and motivates plays a vital role in implementing effective environmental changes (Devarajan, 2005). Furthermore Bateman and Jauhari (2008) stated that “people are not always passive recipients of environmental constraints on their behavior; rather, they can intentionally and directly change their current circumstances”. Researchers have positively related proactive personality with individual innovation, taking charge, problem prevention, voice and issue selling credibility. Since these are crucial elements of corporate entrepreneurial behavior, it is clearly evident that there is a positive relationship between proactiveness of individuals and corporate entrepreneurial behavior.

Need for achievement and internal locus of control

The need for achievement is one of the important characteristics of a corporate entrepreneur which makes him distinguished from other non corporate entrepreneurs. Individual’s hunger to achieve high goals and hard working in achieving firm’s mission effectively develops the firm’s ability to develop wealth creation and finally it encourages creating new businesses and ventures within existing organizations (Ferreira, 2002). In addition to need for achievement, internal locus of control is another important characteristic of corporate entrepreneurs. Individuals who have strong belief on that they have the control on over their destiny, vitally affects their performance positively. Such confidence self motivates individuals to take beneficial decisions that would achieve goals of corporate entrepreneurship and this belief motivates them to tackle any hurdles they may face in the process of corporate entrepreneurship (Lassen, 2007).

Risk taking

Individual’s willingness to take risks and ability tolerate in the times of failure is considered as one of the fundamental characteristics to be a corporate entrepreneur. Individuals who bear the risk of profit or loss are ready to take brave actions by venturing into new businesses and investing significantly heavy resources in unknown environments (A. Zahra, 2000). All entrepreneurial activities such as venturing, innovation and strategic renewal involves certain degree of risk as any of such activity would require effort, time and most importantly financial investments. According to Lin and Colleagues (2008), risk taking style managers enriches the corporate entrepreneurship behavior within firms. Furthermore, in a corporate entrepreneurial environment, individuals work on converting intelligent ideas to innovative products even without permission or approval from top management.

Other individual characteristics

In addition to above discussed individual characteristics, scholars have also stressed on some other fundamental individual characteristics that qualifies them to engage with corporate entrepreneurial activities. Self renewal is one of the important characteristic, which refers to individual’s interest or ability to renew or redefine the usual methods of business process and transforming to more innovative methods that enhances ability to gain competitive advantage (Rutherford, 2007). Other important characteristics include feedback seeking and effective communication skills, which are highly useful when it comes to work as groups and interact with each other (Srivastava, 2010). Such personal traits would help to convince team and top management about the individual’s innovative ideas and to attain support at organizational level. Furthermore, knowledge, experience and flexibility to adjust changes in environment and managerial structure are also considered as crucial individual characteristics.

Firm-Level Antecedents and Corporate Entrepreneurship

According to findings of various researches done on corporate entrepreneurship, it indicates the existence and importance of firm level antecedents that impact on corporate entrepreneurship. Exploratory study done by Kuratko (1990) suggested five distinct internal factors that support corporate entrepreneurship, which are reward and resource availability, organizational structure and boundaries, risk taking and time availability (Burgers, 2011). In addition to Kuratko’s findings, study conducted by Fortune 500 CEO’s observed tangible and intangible factors within organization that foster corporate entrepreneurship. Their study found that factors such as communication, scanning, integration, and differentiation and control influences firm’s ability to foster corporate entrepreneurship (Scheepers, 2008).

Rewarding System

Usage of appropriate rewards within firms is highly acknowledged by several researchers such as Scanlan (1981), Souder (1981), Kanter (1985), Sathe (1985), Fry (1987), Block and Ornati (1987), Sykes (1992), Barringer and Milkvoich (1998). They suggested that when implementing an effective reward system, organization should consider certain factors, which includes; consider goals, feedback from employees, stress individual responsibility and result based incentives (Monsen, 2007). To support the idea suggested by the above researchers, Fry (1993) stated “even though monetary rewards may not be especially important to entrepreneurial individual, some mechanism of rewarding innovation must be evident if innovation is to continue.

By implementing an effective reward system that value achievements of employees would promote motivation among employees to take risks associated with activities of corporate entrepreneurship. According to expectancy theory individual’s maximum effort requires that the individual should believe that by accomplishing goals it would lead to a reward (Devarajan, 2005). Therefore organizations should provide rewards in an appropriate way to show employees that creative works and high level performances are recognized and appreciated by management. Rewards could be presented as options from where deserving employees could choose desired rewards.

Management Support

Management support means the willingness of top management to facilitate required resources and support to promote corporate entrepreneurial activities within organization. Many researchers have stressed on the importance of management support and they have suggested that management involvement, commitment, championing innovative ideas, providing necessary resources, rewarding venture activities and institutionalizing entrepreneurial activities within firm are important for corporate entrepreneurship (Christensen, 2004). Furthermore Steven & Jarillo (1990) stated that by providing necessary training to individuals and trusting those within the firm in detecting opportunities would have a positive impact on firm’s corporate entrepreneurial behaviour.

According to Guth & Ginsberg (1990), organizational values are also important in promoting corporate entrepreneurship within firms. They suggested that the corporate entrepreneurial behaviour within a firm critically depends on the values/beliefs and organizational vision (Kollman, 2008). Leadership of the firm should support innovative behaviour of individuals when they propose promising innovative ideas that could venture new business opportunities within the existing organization. This idea was supported by findings of study done by Pearce et al (1997) and they found that leaders who act entrepreneurially had a positive influence on their subordinates and such leaders encourage corporate entrepreneurship behavior within the firm.

Resources

Resources of the organization and their availability when required play a vital role in promoting corporate entrepreneurial behaviour within organization. According to Pinchot (1985), in order to behave corporate entrepreneurial ways, individuals should be allowed access company’s resources to be utilized in various corporate entrepreneurial activities. Furthermore he stated that individuals should have enough time to work on innovative ideas to make them reality and employees should be assigned with reasonable workload so that they could work on other activities to solve important problems (A. Zahra, 2000). Moreover, employees should be provided with necessary resources to conduct experiments on new findings and this includes any required equipments/devices and satisfactory environmental settings. The resource-based view (RBV) suggests that availability of resources in a company is a crucial factor in determining competitive advantage (Kuratko, 2007). Companies should manage their resources to build unique capabilities to be exceeding competitor’s capability to provide better solutions to customers.

Supportive organizational structure

Supportive organizational structure is an important antecedent highlighted by many authors (Souder, 1981; Sathe, 1985; Hisrich and Peters, 1986; Sykes, 1986; Sykes and Block, 1989; Burgelman and Sayles, 1986; Schuler, 1986; Bird, 1988; Guth and Ginsberg, 1990; Covin and

Slevin,1991; Zahra, 1991, 1993; Brazeal, 1993; Hornsby et al., 1993) in their literatures. Authors have suggested that organizational structure should provide appropriate administrative mechanisms for idea evaluation, choosing, and implementing productive ideas. Moreover they argued that the bureaucratic nature of organizational structure would gradually build boundaries that hinder individual’s ability to convert their innovative ideas to innovative products/services (Kenney, 2010). Therefore organizational structure should be implemented in a way that avoids having standard operating procedures for all major job related activities and rigid performance standards should be avoided as much as possible.

Other firm level antecedents

In addition to above discussed antecedents there are other important antecedents that affect corporate entrepreneurial behavior. One of them is empowered, autonomous employees, which refers to extent to which employees are give power to make decisions on working on their own works in a manner they believe to be most effective (A. Zahra, 2000). Strategic leadership and their support for corporate entrepreneurship also play a vital role in fostering this strategy within firms. This involves manager’s willingness to facilitate necessary resources to corporate entrepreneurial activities and to encourage subordinates to participate in such activities. Last but not least, risk taking is also considered as a key element. Risk taking involves firm’s willingness to spend resources in exploiting opportunities and launching projects with uncertain outcomes (Ferreira, 2002).

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Contributions of Corporate Entrepreneurship

Corporate entrepreneurship plays a vital role in enhancing company’s ability to sustain competitive advantage. Zahra & Kuratko (1990) stressed on the importance of corporate entrepreneurship by stating that it improves competitive positioning and transform corporations and strengthen their markets by fostering creativeness within firms. A key benefit organizations could gain via corporate entrepreneurship is to drive firm with diverse strategies with unique combinations. And also corporate entrepreneurship could improve the overall performance of the firm, growth and profitability (Fitzsimmons, 2004). Furthermore it increases the company’s proactiveness and willingness to take risks by investing on new product development and integrating innovative technologies in various processes of business. A study done by Zahra and Covin in 1995 showed that there is a strong relationship between corporate entrepreneurship and financial performance. Based on the findings of their study they suggested that companies should focus on ways to encourage potential individuals who show corporate entrepreneurial qualities (Kollman, 2008).

According to general definition of corporate entrepreneurship, it refers to activities that enhance new product and service development and especially development of new business models and business ventures. Companies, who encourage corporate entrepreneurship behaviour within their firms, enjoy improved internal efficiencies, higher employee morale which all leads to improvements in financial performance (Monsen, 2007). In corporate entrepreneurial companies, managers tend to implement new management trends to overtake old methodologies which are found to be boring and frustrating. Such changes in management bring them success and effective changes in structure and systems will show significant results over longer time period.

All researches done on the arena of corporate entrepreneurship have suggested that firms should encourage corporate entrepreneurship to attain positive results in a long run. Most of the studies are focused on examining the impact of corporate entrepreneurship on financial performance of the firm and how it motivates individuals to work on sustaining financial improvements. However financial improvements are not only the benefits contributed by corporate entrepreneurship but it involves certain non-financial benefits too. Lumpkin and Dess (2005) argued that in addition to financial performances (market share growth, sales growth, financial profitability etc), outcomes of corporate entrepreneurship also includes valuable non financial benefits that assist firm to sustain financial improvements.

According to Lumpkin and Dess (2005), satisfaction and commitment of organizational members in achieving company’s vision are crucial non financial benefits to organization from corporate entrepreneurship. Dover (2002) defined job satisfaction as a pleasurable or favorable emotional state derived from an evaluation of one’s job or job experiences. In contrast to this, affective commitment is defined as degree of employee’s emotional attachment to his or her organization. Both the job satisfaction and commitment have a positive influence on motivation and leads to greater organizational effectiveness. Most importantly researchers, Hindle and Cutting (2002) have positively related both to corporate entrepreneurship.