This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
There is already a substantial body of research established that deals with entrepreneurship within companies, why they become entrepreneurial and how that might affect performance. So far conclusive evidence of how an enterprise decides to move from a mere producer towards a more innovative approach is still missing. One reason is that it is difficult to
In this research the focus will be on
People often associate entrepreneurship with one or two adventurous young men working on a small start-up in a new and promising field, operating from their own garage. But entrepreneurship is more. Also companies engage in enterprising. In the literature there exist different terms for entrepreneurship in companies: intrapreneurship (Pinchot, 1985), corporate entrepreneurship, corporate venturing (Ellis & Taylor, 1987) and internal corporate venture (Burgelman & Sayles, 1986). In this thesis these terms will be used interchangeably.
Corporate entrepreneurship (CE) is important to gain and sustain a competitive advantage. It has brought about prominent success for companies in growing profits and creating new revenues (Sykes, 1987). Innovations can change the rules of the game or redefine the boundaries of the business sector (Baden-Fuller, 1995). That helps to explain the great interest of companies to engage in at least one kind of CE to drive their company forward in an always faster moving and complex world and to gain a competitive edge over rivals.
Companies build new internal businesses, create corporate joint ventures, engage in corporate and university spin-offs and face start-ups by former employees (Phan, Wright, Ubcasaran, Tan, 2009). The success of becoming entrepreneurial does not come automatically. Many enterprises face difficulties in incorporating entrepreneurial processes within their company or even fail with their corporate ventures completely.
Barringer and Bluedorn (1999) e.g. find a positive relationship between corporate entrepreneurship intensity and strategic management practices including scanning intensity, planning flexibility, locus of planning, and strategic control. Different forms of corporate entrepreneurship call for different levels of management involvement. The stronger the need for involvement, the more the company seems to have an entrepreneurial friendly culture. The extend to which managers live the entrepreneurial spirit seems to have an influence on weather or not a company will succeed with its entrepreneurial projects.
What (else) does it take for a company to be successful in CE? Do the same rules apply for all companies or what are the distinguishing factors (such as size, age of enterprise, internal structures, and business area) to find the best suitable way for a company to engage in successful corporate entrepreneurship and to become entrepreneurial. How can different projects be handled in regard to the different forms of corporate entrepreneurship? This paper intends to form a guideline for managers to avoid common pitfalls and structure their company's way into CE in a helpful, practical manner.
This thesis focuses on SMEs in the automotive industry in the areas of Oberbayern and Stuttgart in Germany. The companies were chosen from this specific region for three reasons. Germany is the fourth biggest innovative country in the EU-27 (afterâ€¦), Oberbayern and Stuttgart are the second and third most innovative regions in the Eu-27 with 3.9% and 3.2% respectively only overshadowed by the Ile de France with 7.7%. The author is German, speaks the language and grew up in the Stuttgart region and therefore has easier access to companies in this area. (Innovation in Eu-27, Germany, Oberbayern and Stuttgart)
This research will focus on small and medium sized enterprises for several reasons. The simple structure of SMEs makes it easier to identify intrapreneurs (Carrier, 1997), the negotiation tone is friendlier which makes it likelier for entrepreneurs-intrapreneurs to interact (Carrier, 1997), and smaller companies tend to be easily forgotten in scientific research, since bigger companies are more present in the public eye. Nevertheless the vast amount of companies are SMEs and therefore worth studying.
Different kinds of CE: new internal businesses, corporate joint ventures, corporate and university spin-offs; and start-ups by former employees, different kinds of companies: SMEs, big corporations, different business sectors: services, products may call for very different recommendations and that an all-encompassing guideline might go beyond the scope of a master thesis.
This thesis will try to study intrapreneurship from an interactionist perspective. The goal is to describe a company as actors in a changing environment that can form both their company and environment by innovation and changing, either as leaders or followers. A company can engage in organisational learning, absorb new skills and people.
The methodology will follow Eisenhardt's (1989, 1993) suggestions on how to build theory based on case studies. Additionally, I may use grounded theory (Glaser and Strauss, 1967; Corbin and Strauss, 1990).
What is entrepreneurship
Bhidé, A., 1999. The origin and evolution of new businesses. The Oxford University Press.
Entrepreneur needs quite some abilities to make the cut from small to bigger firm. Since the abilities are not interrelated not many entrepreneurs posses all necessary ones. That might be the reason why so many fledging companies fail to develop into big companies.
Eliminate customer dissatisfaction
There are three main phases in the entrepreneurial process: the perception
Entrepreneurship or intrapreneurship
Former research has found several reasons why business alternatives and new opportunities might be explored and exploited by entrepreneurs rather than by intrapreneurs. Some of these reasons are agency costs between employers and employees, lack of transferable human capital and low overlap in assets within existing firms, and inherent inertias within organisations like bureaucracy and rigid routines (Henderson, 1993: Anton&Yao, 1995; Helfat&Lieberman, 2002).
To date there has only been a limited amount of research about factors that favour intrapreneurship rather than entrepreneurship. The focus is mainly on organisational factors influencing intrapreneurship (Pinchot, 1985; Hornsby et al., 2002), links between the market entry strategy and market results of company spin-offs and the mother firm (Helfat&Lieberman, 2002; Gompers et al., 2005; Klepper&Thompson, 2006), on how intrapreneurship effects corporate performance (Lumpkin&Dess, 1996), and on character traits of intrapreneurs (Fayolle, 2004; Howell&Higgins, 1990).
What is corporate entrepreneurship (competitive advantage, value creation)
Corporate Entrepreneurship is innovation by established firms (Baden-Fuller, 1995). New approaches to competition are just as important as picking the right market and a good positioning. Strategic and continuous innovation plays a key role in the competitive process. Companies are "slow-moving actors in a turbulent environment where the rules are uncertain and changing" (p. 6). Innovations can change the rules of the game or redefine the boundaries of the business sector. Strategic innovations can be defined as the relative costs for the company to innovate as compared by the costs imposed on the competition for responding to the innovation. Entrepreneurship has to be built in stages. "â€¦the lowest level of capability is when corporate entrepreneurship is relatively isolated, the next level requires a more extensive kind of entrepreneurship, and leadership capability requires the whole business is truly, collectively entrepreneurial" (p. 14). We can measure the competitive advantage of a company in regard to its capacity of faster strategic innovation by its relative state of corporate entrepreneurship in the company compared to that of its competitors.
Knowledge can be created through good intrapreneurship (Kuratko, Ireland, Hornsby, 2001). Formal and informal corporate entrepreneurial activities can improve a firm's performance through knowledge creation. This new knowledge becomes a foundation for learning new competences and re-learning existent ones (Zahra et al 1999). Knowledge is not neutral and free of judgment. Since it is mostly apparent within the humans working for a firm (Lepak&Snell, 1999) it can be subjective. Humans gain knowledge by using their intuition, applying their values, experiencing their environment and judging their experiences (Nonaka&Takeuchi, 1995). Knowledge can be explicit and implicit and underlies changes in the light of new evidence or changing circumstances.
Corporate Entrepreneurship can bring about the creation of new knowledge. Zahra et al. (1999) distinguish between three different kinds of knowledge that can be gained through CE activities: technical, integrative, and exploitative.
Companies need to become more entrepreneurial
Companies attempt to engage in entrepreneurship, perceive and exploit business opportunities
Organisational factors which influence intrapreneurship
CE includes 3 types of phenomena (creation of new business within the firm, transforming the firm through renewal or reshaping, innovation)
Sharma and Chrisman, 1999
Companies build new internal businesses, create corporate joint ventures, engage in corporate and university spin-offs and face start-ups by former employees
Phan, P. H., Wright, M., Ubcasaran, D., Tan, W.-L., 2009. Corporate entrepreneurship: Current research and future directions. Journal of Business Venturing, 24, 197-205.
Can improve growth and profitability
Change the rules of the game
How to best engage in CE
Burgers, Jansen, Van den Bosch, Volberda (2009) studied the moderating role of formal and informal integrating mechanisms in 240 Dutch companies. They found that firms can improve their venturing performance when they separate their venturing activities from established business units. That allows the company to use reward and control systems different to the mainstream units allowing for more freedom and less pressure to perform immediately.
Also, management can improve venturing efforts further by establishing a shared vision within the enterprise. Having a shared goal throughout the firm ensures keeping venturing units on track and within the same understanding of where the company is heading.
Thirdly, Burgers et al find that management should avoid enforcing too much integration of the mainstream and venture units. Taking away independence might hinder the venturing development by submitting the venturing business to inert forces within the established business units.
For small and medium sized companies Carrier (1997) finds the owner-manager to be the main catalyst in the development of intrapreneurial activities in the firm. Other influencing factors are the context, firm's strategic goals, type of growth aspired, and the reward system in place. The structural and relational settings within a firm help to motivate or de-motivate potential intrapreneurs. It seems important to give extrinsic reward an intrapreneur after the change in order to give them new motivation for a new challenge (Carrier, 1997).
Different approaches and strategies and certain working environments can support or hinder intra-organisational innovation.
An organisation needs to be on top of her game in technology in order to be or become a successful innovator (Hisrich, 1990). An enterprise must develop a positive approach towards experimentation and allow for mistakes. If people feel the freedom to explore and develop ideas further without too close restriction they dare to be more innovative and to move further away from in-the-box-thinking. Having resources freely at hand is another point that fosters an intrapreneurial environment. They must be easily accessible without having to go through time consuming and difficult bureaucratic procedures.
Teams consisting of people with different backgrounds also lead to better results in innovative thinking (quote). Approaching a problem from different angles and avoiding group-think often leads to better ideas that are better-thought through.
A company should have a good evaluation process in place. It is important to evaluate the success of each corporate entrepreneurship project as well as the performance of each individual taking part in the programme (Hisrich, 1990). People cannot be forced to engage in CE projects. For a good outcome and motivated participants it is necessary to have people on the team that are motivated and engage on a voluntary basis. Another factor that drives motivation is an appropriate reward system. Employees need to see that engaging time and effort to the company leads to a satisfactory outcome, both monetary and appreciative.
An intrapreneurial project needs champions and sponsors. They need to support the creative process and deal with possible failures, they need to have the power to alter plans and change direction and introduce new objectives if the need arises. Top management needs to stand behind the intrapreneurial projects, support and embrace them and advertise them throughout the organisation.
The organizational learning theory says that when enterprises experience different and new stimuli, they will start questioning their underlying assumptions and belief system. With the questioning comes experimentation, which can be described as a try and error mode. New things are tried out and judged by their result, and people learn. Organisational learning means to gain information and knowledge which is new to an enterprise. This is important for exploration and exploitation of knowledge necessary for innovation, be it product process, or organizational innovation.
'Learning' theories (Argyris and Schon, 1978; Senge, 1990; Nonaka and Takeuchi, 1995; Brown and Duguid, 2000) consider the creation and application of knowledge at various levels, its centrality to organizational performance, its construction at an individual and group level ('communities of practice'), and the ways in which individual learning becomes an organizational property;
Learning is at the heart of the strategic renewal process that allows firms to adapt and answer to challenges in the markets they enter (Zahra, Nielson, Bogner, 1999)
It can be differentiated between two main types of learning, i.e. acquisitive and experimental, when organizations engage in corporate entrepreneurship (Zahra et al., 1999). Acquisitive learning appears when a company attains and then internalizes knowledge existing in the environment surrounding the company. Since acquisitive knowledge is freely available, it is public knowledge (Matusik, 2002) unique insights can hardly be gained from it. Therefore firms will seldom earn a sustainable competitive advantage from the acquisitive knowledge they gain (Leonard-Barton, 1995). Contrary, not being able to gain access to openly available knowledge may result in a disadvantage for a company towards its competitors.
Experimental learning takes place within the firm and creates firm-specific knowledge. Private knowledge is the foundation of experimental learning. It includes a firm's unique processes, routines, documentation and trade secrets (Matusik, 2002). Since these are not easily copied or imitated, have been established by the company through experience, are likely to be illicit and valuable to the distinctive firm, competitive advantages that evolve from experimental learning can be seen as more viable and longer lasting than products of aquisasitive learning. Therefore, acquisitive learning is a necessary but not sufficient condition for competing well against rivals. (Dess et al., 2003).
Change management (theory) (strategic renewal, strategic change)
Dynamic competence-based theory
Competition as innovating
Corporate culture and systems control
The intrapreneurial manager
There has been a substantial body of research regarding managers and entrepreneurs, and the differences between the two. Some believe people are born entrepreneurs the skills for being an entrepreneur cannot be taught (â€¦) others argue that there is not a special skill base an entrepreneur needs. () Some skills that are among the most common to be stated when describing the perfect entrepreneur are: creativity, visionary leader, flexibility and experience, Persistence (Hisrich, ), Charismatic, â€¦
Mangers are often described asâ€¦
Intrapreneurs must be something in betweenâ€¦
An entrepreneurial manager links up discrete pieces of new technical knowledge that would provide a solution to a customer problem and matches this technical capability with the satisfaction of a market and garners resources and skills needed to take the venture to the next stage. This process leads to the birth of new businesses and to the transformation of companies through a renewal of their key ideas.
Guth and Ginsberg, 1990
Parker (2009) argues that nascent entrepreneurs can be more often found with younger and older people, since the former lack the resources the later the inclination to start up their own companies and therefore can be more easily convinced to engage in corporate entrepreneurship.
the bigger (more expensive, more long-term, more crucial to business' existence) the project the more management support is needed
the younger and older the people involved (not 25-44) the more motivated to engage in CE
it is easier for companies in product related industries to engage in CE than for service companies
The younger the company is to develop an intrapreneurial 'lifestyle' and develops a CE culture the more natural and successful in its corporate ventures.
The stronger the top management support the more successful the company will be in CE
The 'newer' a CE project the more likely it is to be externalized
The more mature the industry or the more high technology related the company the likelier it is to engage in open innovation
Multi-disciplinary corporate venture teams are more successful than teams with the same disciplinary background
Effective rewarding systems need to be in place to ensure long-term commitment of the corporate venture teams and the whole company
Companies that have developed/ ore send their employees to intrapreneurial' courses have a bigger benefit from CE
The weaker the board the more difficult and less promising is internalisation of innovation - externalize
High absorptive capacity equals high level of skills to integrate strategic renewal
managers need to invest in internal R&D, building connections to universities and research centres, and gaining access to knowledge from other companies
The objective of this research is to further develop the theory of organizational learning in respect to non-R&D innovation in SMEs in an industrial product background.