CORPORATE ENTREPRENEURSHIP

Corporate entrepreneurship (CE) is defined as the sum of a company’s innovation, renewal, and venturing efforts (Zahra, 1995).  Corporate entrepreneurship is also defined as a process through which individuals in an established business pursue entrepreneurial opportunities to innovate, without regard for the level and nature of currently available resources (Ireland et al., 2009).  

Another definition of corporate entrepreneurship (CE) is the emergent behavioural intentions or behaviours deviating from the usual way of doing business (Antoncic & Hisrich, 2004).  It is emphasised that corporate entrepreneurship as a spirit of entrepreneurship within the existing business (Hisrich et al., 2013).  CE has become an abstract term associated with any individual or group that creates new combinations in their existing organisations (Lumpkin & Dess, 1996).  Subsequently, the three entrepreneurial dimensions - risk assumption, innovativeness and proactively - that are developed in a new and independent business unit can be associated to corporate process known as corporate entrepreneurship (Covin & Slevin, 1991). 

Sharma and Chrisman (1999) have further defined corporate entrepreneurship as the process whereby an individual or a group of individuals, in association with an existing organisation, create a new organisation or instigate renewal or innovation within the organisation.   In fact, Sharma, and Chrisman (1999) have come up with the entrepreneurship terminology which is shown in Figure 2.3.

 

 

Even though there are differences in the definitions by previous researchers, there are also similarities of the corporate entrepreneurship definitions as summarised by Thornberry (2001) in Kraus and Rigtering (2015).  The similarities are:

1. Corporate entrepreneurship effects in greater risk for the organisation.
2. Corporate entrepreneurship implicates the creation of new ideas.
3. The creation requires changes in forms of resource placement.
4. The creation inspires the development of new competencies.
5. The financial performances are anticipated to be better.
6. The contribution is intended to create additional value for stakeholders.

 

In this present study, the researcher has basically demarcated the entrepreneurship terminology in a simple term whereby the independent entrepreneurs own the business organisation.  Conversely, the corporate entrepreneur does not own the business organisation, but they work as if it is their life and death of their own business venture.

 

2.3.2     Concept of Corporate Entrepreneurship

Corporate entrepreneurship (CE) is a process by which individuals inside organisations pursue new and emerging opportunities regardless of resources they currently control (Simsek et al., 2010; Stevenson & Jarillo, 1990).   Early concept of CE is defined as a process of “extending the firm’s domain of competence and corresponding opportunity set through internally generated new resource combinations” (Burgelman, 1984).   In response to the dynamism in the business environment, business owners agreed in their desire to make their employees and organisations more entrepreneurial (Covin et al., 2006).   This is supported by Morris et al. (2008) by quoting that corporate entrepreneurship is demonstrated in companies either through corporate venturing or strategic entrepreneurship. 

Basically, it was found that Morris et al. (2008) demarcation of the different form of corporate entrepreneurship (CE) is focused more on the organisational unit of analysis rather than the individual unit of analysis.  Corporate entrepreneurship has been demarcated by Morris et al. (2008; 2011) as the corporate venturing and strategic entrepreneurship as shown in the following Figure 2.4.

Nevertheless, corporate entrepreneurship is characteristically observed as the summation of an organization’s innovation, strategic renewal, and venturing efforts (Guth & Ginsberg, 1990; Zahra, 1996).  Corporate entrepreneurship can be also taken in numerous practices (Corbett et al., 2013; Kuratko & Audretsch, 2013).

 

 

Figure 2.4: Defining the different forms of corporate entrepreneurship

(Source: Morris et al., 2008; 2011)

 

 

 

 

According to Morris et al. (2008; 2011), corporate entrepreneurship are divided into two formations, which consists of strategic entrepreneurship and corporate venturing.    Morris et al. (2008; 2011) has further defined strategic entrepreneurship and corporate venturing as follows:

               i.         Strategic entrepreneurship encompasses large-scale innovations of the organisation’s strategy, products, and brands, assisted markets, internal organisation, or business model that may or may not result in the creation of new businesses; and

              ii.         Corporate venturing comprises bringing new businesses (or new products/services) to the organisation through corporate venture capital, co-operative ventures with external parties, intrapreneurship, or internally generated corporate ventures.

 

However, there is some debate in the previous literature about whether strategic entrepreneurship is a pleonasm and identical with corporate entrepreneurship and/or strategic renewal (Foss & Lyngsie, 2011; Kuratko & Audretsch, 2009; Van Rensburg, 2013b).  The more recent and rising inclination are to view strategic entrepreneurship (SE) as a sub-set of corporate entrepreneurships (Corbett et al., 2013; Kuratko & Audretsch, 2013; Morris et al., 2011).   Based on their findings (Morris et al., 2008), the present study has utilised the organisational unit of analysis rather than other unit of analysis.  Moreover, this study has also adopted a position of agreement with other scholars (Corbett et al., 2013; Kuratko & Audretsch, 2013; Morris et al., 2011), in which strategic entrepreneurship is viewed as a sub-set of corporate entrepreneurships.

 

2.3.3    Corporate Entrepreneurs, Independent Entrepreneurs, and Traditional 

            Managers

There is a need for the public to understand the similarities and differences among the corporate entrepreneurship, independent entrepreneurs and the traditional managers.  The similarities between corporate entrepreneurs (CE) and independent entrepreneurs as according to Morris et al., (2008; 2011) are shown in the following Table 2.1:

 

Table 2.1: Similarities between corporate entrepreneurs

and independent entrepreneurs

 

Similarities between corporate entrepreneurship and independent entrepreneurship

·       Both involve opportunity recognition and definition. ·       Both require a unique business concept that takes the form of a product, service, or process ·       Both are driven by an individual champion who works with a team to bring the concept or fruition. ·       Both require that the entrepreneur be able to balance vision with managerial skill, passion with pragmatism, and pro activeness with patience. ·       Both involve concepts that are most vulnerable in the formative stage, and that require adaptation over time. ·       Both entail a window of opportunity within which the concept can be successfully capitalized upon. ·       Both are predicated on value creation and accountability to a customer. ·       Both find the entrepreneur encountering resistance and obstacles, necessitating both perseverance and an ability to formulate innovative solutions. ·       Both entail risk and require risk management strategies. ·       Both find the entrepreneur needing to develop creative strategies for leveraging resources. ·       Both involve significant ambiguity. ·       Both require harvesting strategies.

 

(Source: Morris et al., 2008; 2011)

 

 

 

However, Morris et al. (2008; 2011) does not stop on observing the similarities between the corporate entrepreneurs and independent entrepreneurs only.  They have continued to observed from another perspective of which it explained the major differences between corporate entrepreneurs (CE) and independent entrepreneurs.

In this study, the independent entrepreneurs are identified as those who owned the business.  However, the corporate entrepreneurs are identified as those who do not owned the business or having a small percentage of equity in the company.  The following Table 2.2 shows the detail explanation of the differences between corporate entrepreneurs and the independent entrepreneurs.

 

 

 

Table 2.2: Differences between independent entrepreneurs

and corporate entrepreneurs

 

No.	Independent Entrepreneurship	Corporate Entrepreneurship
1	Entrepreneurs take the risks	Company assumes the risks, other than career-related risk
2	Entrepreneur “owns” the concept or innovative idea	Company owns the concept, and typically the intellectual rights surrounding the concept
3	Entrepreneur owns all or much of the business	Entrepreneur may have no equity in the company, or a very small percentage
4	Potential rewards for the entrepreneur are theoretically unlimited	Clear limits are placed on the financial rewards entrepreneurs can receive
5	One misstep can mean failure	More rooms for errors; company can absorb failure
6	Vulnerable to outside influence	More insulated from outside influence
7	Independence of the entrepreneur, although the successful entrepreneur is typically backed by a strong team	Interdependence of the champion with many others; may have to share credit with any number of people
8	Flexibility in changing course, experimenting, or trying new directions	Rules, procedures, and bureaucracy hinder the entrepreneur’s ability to manoeuvre
9	Speed of decision making	Longer approval cycles
10	Little security	Job security
11	No safety net	Dependable benefit package
12	Few people to talk to	Extensive network for bouncing around ideas
13	Limited scale and scope initially	Potential for sizeable scale and scope fairly quickly
14	Severe resource limitations	Access to finances, R&D, production facilities for trial runs, an established sales force, an existing brand, distribution channels that are in place, existing databases and market research resources, and an established customer base

 

(Source: Morris et al., 2008)

 

 

Upon explaining the similarities and differences between the corporate entrepreneurs and the independent entrepreneurs, Morris et al. (2008; 2011) has further elaborate on the primary roles of the traditional managers and the entrepreneurs. The primary roles of the manager are contrasted with those of the entrepreneur as shown in Figure 2.3 below.  According to Morris et al. (2008), managers are stimulated with the efficient and effective utilisation of the resources under their control.  They tend to be focused on optimizing current operations.  Entrepreneurs, alternatively, are preoccupied not with what is, but with what can be.  They envision the future; recognize emerging patterns, identified untapped opportunities, and come up with innovations to exploit those opportunities.  They then demonstrate creative capabilities in obtaining resources, overcoming obstacles, and persisting in implementing new ideas that represent change (Morris et al., 2008).

According to Morris et al. (2008), within great organisations, a balance is achieved between disciplined management and entrepreneurship.  Disciplined management requires focus, attention to basic managerial principles and values, and a strong sense of accountability for results.  Entrepreneurship requires vision, a willingness to take risks, and a focus on creating the future. 

 

 

Figure 2.5: Comparing and combining key roles of managers and entrepreneurs

(Source: Morris et al., 2008)

Achieving this balance suggests that managers must become entrepreneurs.  That is, managers must be able to optimize current operations while at the same time engaging in activities that make current operations obsolete.  This is a difficult challenge, and companies have achieved mixed results in striking the balance.   From another perspective of Pinchot (1985), the characteristics of corporate entrepreneurs as compared to the independent entrepreneurs and the traditional managers are shown in the following Table 2.3:

 

 

Table 2.3: The characteristics of corporate entrepreneurs as compared to

independent entrepreneurs and traditional managers

 

Characteristic	Traditional manager	Independent entrepreneur	Corporate entrepreneur
Tendency to action	Delegate’s action: supervising and reporting take most energy.	Get hands dirty; may upset employees by suddenly doing their work.	Get hands dirty; may know how to delegate but, when necessary, does what needs to be done.
Skills	Professional management; often business-school trained; uses abstract analytical, people-management, and political skills.	Knows business intimately; more business acumen than managerial or political skill; often technically trained if in technical business; may have had formal profit-and-loss responsibility in the company.	Very much like the entrepreneur, but the situation demands greater ability to prosper within the needs help with this.
Attitude toward courage and destiny	Sees others being in charge of his or her destiny; can be forceful and ambitious but may be fearful of others’ ability to do him or her in.	Self-confident, optimistic, and courageous.	Self-confident and courageous; many are cynical about the system but optimistic about their ability to outwit it.
Focus of attention	Primarily on events inside corporation.	Primarily on technology and marketplace.	Both inside and outside; sells insiders on needs of venture and market-place but also focuses on customers.
Attitude toward risk	Cautious.	Like moderate risk; invest heavily but expect to succeed.	Like moderate risk; generally not afraid of being fired, so sees little personal risk.

Table 2.3 – Continued.

Characteristic	Traditional manager	Independent entrepreneur	Corporate entrepreneur
Use of Market research	Has market studies done to discover needs and guide product conceptualization.	Create needs; creates products that often cannot be tested with market research; potential customers do not yet understand them; talks to customers and forms own opinions.	Does own market research and intuitive market evaluation, like the entrepreneur.
Attitude toward status	Cares about status symbols (corner office, and so on).	Happy sitting on an orange crate if job is getting done.	Considers traditional status symbols a joke; treasures symbols of freedom.
Attitude toward failure and mistakes	Strives to avoid mistakes and surprises; postpones recognizing failure.	Deals with mistakes and failures as learning experiences.	Sensitive to need to appear orderly; attempts to hide risky projects from view so as to learn from mistakes without political cost of public failure.
Decision-making style	Agrees with those in power; delays making decisions until a feel of what bosses want is obtained.	Follows private vision; decisive, action oriented.	Adept to getting others to agree with private vision; somewhat more patient and willing to compromise than the entrepreneur but still a doer.
Who serves	Pleases others.	Pleases self and customers.	Please self, customers, and sponsors.
Attitude toward the system	Sees system as nurturing and protective; seeks position within it.	May rapidly advance in a system; then, when frustrated, may reject the system and form own company.	Dislikes the system but learns to manipulate it.
Problem-solving style	Works out problems within the system.	Escapes problems in large and formal structures by leaving and starting over alone.	Works out problems within the system or bypasses them without leaving.
Socioeconomic background	Middle class.	Lower class in some early studies; middle class in more recent ones.	Middle class.
Educational level	Highly educated.	Less well educated in earlier studies; some graduate work but not PhD in later ones.	Often highly educated, particularly in technical fields, but sometimes not.
Relationship with others	Perceives hierarchy as basic relationship.	Perceives transaction and deal making as basic relationship.	Perceives transactions within hierarchy as basic relationship.

 

(Source: Pinchot, 1985)

In a normal situation of an organisational operation, employees are continuously attached to one department.   At the same time, the employees are being assigned to other units in matrix structured organisations.  Some matrix structured organisations can be only related to a specific project, others can be of more permanent character.  A matrix structured approach can involve various units of different departments to work together on a specific project.  It could also be for a longer working group or forming a task force on a specific project, while still being permanently attached to a specific department (Trestl, 2016).

Beside the organisational structure design, compensation and reward are other crucial structural drivers of corporate entrepreneurship in relation to individual characteristics.  In order to understand the structure of monetary reward and compensation better, it is necessary to have a closer look at two of the most fundamental motivational theories by Abraham Maslow and Frederick Hertzberg which are being discussed in sub-section 2.4.4. 

Compensation comprises of monetary and non-monetary arrangements.  Monetary arrangements of compensation can be divided into two forms, namely the direct monetary compensation and indirect monetary compensation.  Direct monetary compensation refers to wages, salaries, bonuses, merits and incentives.  Wherelse, indirect monetary compensation refers to the employee’s benefits and services.  On the other hand, non-monetary arrangements of compensation can refer to intrinsic or psychic compensation. It includes job recognition, employment status, job challenges, opportunities in learning and development, job functions and responsibilities.

As at today, business organisations are gradually introducing performance-based compensation systems, which include all the three types of compensations which were elaborated previously.  In addition to the above, business organisations have various methods to reward employees, which might include not just the above-mentioned monetary compensation, but also designation positions, such as larger office space, or even a company car (Trestl, 2016).  From the corporate entrepreneurship perspective, compensation, and reward play an important role in motivating employees.  Business organisations should endeavour at providing supports to corporate entrepreneurial practices within the organisation with suitable compensation and reward structures (Bhardwaj et al., 2011).  Compensations could be in terms of payment of annual bonuses which may relate to the organisational business performance based on various performance measurements and can be based on senior management level effectiveness over a period of time, which encourage sustainability.   Bhardwaj et al. (2011) has further discussed on the monetary rewards that can be made to organisational employees such as promotion, respect, recognition, enhanced status, and the opportunity to grow with the organisation.  Non-monetary rewards to the organisational employees will be by providing them training, personal development, and a fair performance appraisal system.

            The above statements were enhanced by previous studies in corporate entrepreneurship which show that employee satisfaction has a positive influence on organisational financial performance (Antoncic & Antoncic, 2011).   This emphasises the decisive importance of compensation and reward to the organisation employees.  Thus, Antoncic and Antoncic (2011) has identified that there are four fundamental dimensions of employee satisfaction which are the general satisfaction, employee relationships, employee loyalty, culture, benefits, and compensation. 

In concluding the above discussion, it has been found that monetary reward, non-monetary reward, and compensation are significant drivers to triggers corporate entrepreneurship practices in an organisation.  According to Trestl (2016), alternative methods of compensations need to be established in industries with low levels of profitability to reduce operational cost of the business organisation, especially in the case of small and medium enterprises.  The subsequent sub-section attempts to explore the importance of corporate entrepreneurship determinants and financial performance in more detail.