ISL453U-ENTREPRENEURSHİP
Chapter 2: Corporate Entrepreneurship
Introduction
Entrepreneurship, in a narrow sense and simple, refers to the sum of the processes of finding out a new business for the purposes of profit and growth.
In an established organizations, to stimulate the novel efforts towards innovation and firm growth, leaders of the organizations strongly intend to sustain their success through corporate entrepreneurship by incorporating the strategies, processes, and employee involvement.
The literature on entrepreneurship at the organizational level has developed with two research streams;
One of these thoughts tries to reveal the internal environmental factors that motivate employees for entrepreneurship behaviors in existing organizations.
The second school of thought on firm-level entrepreneurship examines the firms’ entrepreneurial posture towards entrepreneurship.
This chapter aims to explain “corporate entrepreneurship” with its actors, namely internal-entrepreneurs in established organizations, and the organizational factors that enable and facilitate entrepreneurial activities in the organizations, the outcomes of corporate entrepreneurship for the organizations and how they are associated with the employees’ attitudes towards the entrepreneurship culture.
Conceptual Framework of Corporate Entrepreneurship
Corporate entrepreneurship is the trigger of new business creation in on-going organizations through various innovative endeavors.
These entrepreneurial efforts can also help create new businesses with their combinations and new business models.
In addition to innovation, corporate entrepreneurship covers strategic renewal or corporate-level strategies, such as finding out new businesses or joint venturing with other organizations, merging with another organization, or acquiring new companies.
To fully understand what is corporate entrepreneurship, one has to raise questions of where do the new ideas come from or how can an organization motivate employees for entrepreneurship in an ongoing organization to gain and sustain the competitive advantage for their companies.
Intrapreneurs in the organization also requires a warm climate for entrepreneurship. What are the appropriate internal factors to stimulate employees for organizational innovation or transform regular employees?
Which types of organizational mechanisms stress the employees to deliver their intellectual ideas for the sake of their organizations? How can employees implement their own innovative ideas within their organization? Why do employees take bold-risks within their organizations?
First, we will explain intrapreneurship and intrapreneurs. Then, the internal factors for the corporate entrepreneurship environment, and forms of corporate entrepreneurship. Finally, based on the research on corporate entrepreneurship, organizational performance types will show how to control the corporate entrepreneurship activities within ongoing organizations.
Intrapreneurship and Entrepreneurial Orientation
Many of the top managers of ongoing organizations aim to create and sustain the internal factors for continuous innovation; thus, intrapreneurs are one of the main outcomes of top management’s strategies for corporate entrepreneurship. The employees who are willing to and are able to transform their ideas to a successful innovation for the sake of their organizations are called internal corporate entrepreneurs. Employees’ entrepreneurship behaviors come to surface only with the commitment of management towards innovative outcomes.
Types of Corporate Entrepreneurship
Previous literature categorizes the corporate entrepreneurship in four forms, which are sustained regeneration, organizational rejuvenation, strategic renewal, and domain redefinition,
Sustained regeneration is the most common form of corporate entrepreneurship. Sustained regeneration, companies constantly develop new processes and structures both to support new product launches to their current markets and to enter into new markets with their existing products.
The organizational rejuvenation form of corporate entrepreneurship, decision-makers formulate and implement strategies to motivate the employees to intrapreneurship in order to enhance the value-chain of their organizations’ internal activities.
The organizational rejuvenation form of corporate entrepreneurship, decision-makers formulate and implement strategies to motivate the employees to intrapreneurship in order to enhance the value-chain of their organizations’ internal activities.
The final form of corporate entrepreneurship is similar to the proactiveness dimension of entrepreneurial orientation, namely domain redefinition. Domain redefinition is not repositioning the corporations’ competitive position, but it is the positioning or repositioning of one or a group of current or new products or services in the markets. The aim is to benefit from the first-mover advantage.
Internal Environmental Factors for Corporate Entrepreneurship
In order to practice entrepreneurial orientation or to succession of corporate entrepreneurship, top managers of corporations have to try and establish a convenient work environment for awakening potential intrapreneurs.
Apart from the family or friendship ties, successful leaders create emotional relations with the members and stakeholders of organizations. In turn, the employees’ positive feelings towards their leaders and their vision motivate employees to engage in the given tasks, to work harder, and to show extra-role behaviors
Research points to the importance of the middle level managers on intrapreneurship regarding their roles in organizational communication at vertical and horizontal channels. They either accelerate the communication speed or cut the communication between top management and potential intrapreneurs.
How can a regular director achieve corporate entrepreneurship?
Research in corporate entrepreneurship provided leaders with the knowledge about how to motivate their employees to work harder, and share their innovative ideas for the sake of their leaders and contribute to the profitability of their corporations.
The conditional, mediating or moderating factors, the main components of internal factors for intrapreneurship in the literature are management support
These factors are essential in developing a perceived entrepreneurial context within an organization for employees.
Management Support
Although a number of committed employees exist and try their best for their organizations, their cordial endeavours for successful intrapreneurship will never come into existence without the support of top management. Therefore, in order to create the environment, the first step that management should take is to support the new ideas of their employees with planned programs and incentives.
The support of management takes place in two integrated processes. The initial is creating the means for idea generation, idea development and collecting them. The latter is for the evaluation of those ideas in committees and includes transforming the novel ideas into written projects to reduce the risks and letting intrapreneurs to actualize their innovative ideas.
Reward System
In order to motivate employees for aligning their potentials to the expected outcomes of the organizations, managing the rewards by the top management for employees’ motivation is very important. Two types of rewards based on the perception of employees are proposed in the literature. One type is the extrinsic rewards that are perceived as a significant economic or financial value. While extrinsic rewards are important to start-up intrapreneurship, conditioning the employees towards intrapreneurship is dependent on the powerful interaction of the extrinsic and intrinsic rewards. Intrinsic rewards refer to the psychological rewards perceived
values of which are much higher than their economic value or exchange value with money. The main sorts of intrinsic rewards are appreciation, gratification, or recognition.
Tolerance for Risk Taking
Managers and entrepreneurs act together in sharing the risk. Mutual trust for risk-taking in relationships will occur between management and intrapreneurs depends on the perceptions of employees about taking risks for the sake of their corporations.
Along with the attitudes and behaviours of management for motivating intrapreneurs for innovation, in turn, intrapreneurs also assume or expect that some failures with good- heart will be tolerated.
Autonomy
One fundamental common characteristic of entrepreneurs is being independent in their own decisions.
intrapreneur is a type of entrepreneur who works in organizations, and while their dependency is on their daily routine tasks, they need autonomy to successfully generate ideas and pioneer innovations for the best of their firms.
Autonomy for an employee refers to the degree of freedom in conducting the job to achieve the expected outputs and outcomes.
Resource Allocation Including Time
Firms own tangible and intangible resources, in forms of physical, human, and organizational capital. They are vital in gaining and sustaining a competitive advantage. Tangible resources are like raw materials, equipment, and machinery that firms own and have an exchange value with money. Intangible resources such as the experience and education level of employees, organizational memory towards innovation, networks of firms’ decision-makers are like the unseen part of an iceberg.
According to the resource-based theory of firms, if a firm’s resources are rare, valuable, and hard to imitate by its competitors, it brings a distinct competitive advantage to that firm. Therefore, besides owning human capital and other intellectual resources, firms’ inputs and production processes are also one of the main predictors of the production.
Resources for entrepreneurship are twofold. One is the tangible resources that are monetary resources, raw materials, hardware, software, machine, or equipment. The latter is the intangible resources that many of the potential intrapreneurs cannot consider in advance, and the allocation of intangible resources is in the responsibilities of managers to effectively establish the internal environment for corporate entrepreneurship. Framing the boundaries for entrepreneurial projects is also an intangible resource for intrapreneurs.
Also, in order to awaken potential intrapreneurs among the employees, allocating free time from formal work hours for the purposes of generating new ideas for the firm or creating social value with synergy from the organizations’ inert resources will bring value to organizations.
Performance Outcomes of Corporate Entrepreneurship
The outcomes of corporate entrepreneurship has strong relations with various criteria of organizational performance.
Considering the functions of management, which are planning, organizing, leading, and controlling, firms’ strategies for corporate entrepreneurship are also subject to performance evaluation. Therefore, we need to ask ourselves what the criteria for performance evaluation at the organizational or departmental level are, and another complementing question is generally, how firms control their performance.
Accordingly, the outcomes of corporate entrepreneurship are not only limited to the availability of internal factors for intrapreneurs, but also the outcomes shall be considered with which success fields and at what degree they achieve competitive advantage through corporate entrepreneurship. The replies of the following questions are in the following paragraphs with a simple classification.
We can elaborate on a classification of performance assessment according to whether a management’s method of performance assessment is traditional or modern.
In many of the small and medium-sized enterprises (SMEs) as well as in the majority of the family-owned large corporations are all in big danger of recession or closure against crises just because of a lack of clear medium-term objectives or defined courses of action in their plans.
In the strategic control processes of corporate entrepreneurship, while modern managers will show interest in how to learn from failures and produce alternative business models; in failures, traditional management tends to correct the employees who fail.
Modern management, facts are important to keep the organization engaged in the set objectives. However, with the facts and measurements, managers mostly tend to investigate the accounting and financial criteria in performance assessments, such as return on investments and equity, total income, growth in sales, or net profits.
Corporate entrepreneurship, decision-makers go beyond the financial and economic criteria such as market performance, marketing performance, and innovation performance. Therefore, managers need to monitor the developments in the current markets such as the growth of the total current market, changes in the market shares compared to competitors’, frequency and volume of orders
from loyal and regular customers, the number of new customers and their volume of purchases with the payment installations. Innovations are not just limited to the new products or services; besides them, they are in the form of new marketing techniques. The costs of new marketing platforms and new orders from them, cost-benefit controls over the new search engine optimizations, or sponsored advertisements in selected social media platforms are several examples for the outcomes of corporate entrepreneurship. Intrapreneurship is open to any viable and novel idea that may bring value to the firm, by seizing and understanding the e-commerce and digital markets, too.
Innovative performance is one of the most salient outcomes indicators for intrapreneurship.
What can be the criteria for evaluating innovation performance? Managers need to consider the determination of their innovation performance in modern ways (with facts/ data) at their strategy-formulation stage of corporate entrepreneurship.
If managers aim at making intrapreneurship processes to have dramatic or incremental impacts on the behaviors of their consumers, the performance criteria need to include the influence degrees of innovation.
If the expectation is delivering totally new or significantly improved products, the form of innovation will be evaluated according to incremental innovation. If the strategic objectives were on producing many new products, this time the number of new products in all products would be one of the criteria. Another completing criterion would be the overall income of new products introduced in current markets or the income comparisons of each of the new products compared to others or each other.
Employees blend their thoughts and emotions with the work and tasks that they conduct, with the attitudes of their superiors towards themselves. Moreover, they also develop positive or negative feelings for their organizations, based on their experiences.
In the literature vocational and workplace-related psychological assessment instruments on psychological contracts, job satisfaction, job commitment, and organizational commitment exist, the traditional approach of the top manager may produce unexpected outcomes on intrapreneurs.