CORPORATE
ENTREPRENEURSHIP
Ridmi Gajanayake
B.B.Mgt (Marketing) special,MBA, Dip M(SL)
Senior Lecturer
Department of Commerce & Financial Management
Faculty of Commerce & Management Studies
University of Kelaniya
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Introduction
 Most established companies find it hard to maintain the initial
entrepreneurial spirit that helped them to make it through during the startup stage.
 They need further entrepreneurial activities;
- to grow
- to attain competitive advantage
- to keep up talent employees etc.
The Need for Corporate
Entrepreneuring
 Rapid growth in the number of new and sophisticated competitors
 Sense of distrust in the traditional methods of corporate management
 An exodus of some of the best and brightest people from corporations to
become small business entrepreneurs
 International competition
 Downsizing of major corporations
 An overall desire to improve efficiency and productivity
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Different Views of Corporate
Entrepreneurship
 new business creation by individual entrepreneurs, view corporate
entrepreneurship as a concept that is limited to new venture creation
within existing organisations (Burgelman, 1984)
 the struggle of large firms to renew themselves by carrying out new
combinations of resources that alter the relationships between them and
their environments (Baumol, 1986; Burgelman, 1983)
 the process of creating new business within established firms to improve
organisational profitability and enhance a firm’s competitive position or the
strategic renewal of existing business (Zahara 1991)
Different Views of Corporate
Entrepreneurship
 Burgelman (1984: 154) conceptualises the definition of corporate
entrepreneurship as a process of “extending the firm’s domain of
competence and corresponding opportunity set through internally
generated new resource combinations”
 Thus corporate entrepreneurship is conceived of as the effort to extend an
organisation’s competitive advantage through internally generated
innovations that significantly alter the balance of competition within an
industry or create entirely new industries.
Objectives of Corporate Entrepreneurship
– Cultivate innovation and creativity within
enterprise
– Creating an entrepreneurial organisation
– Organising around teams
– Assessing enterprises as “intelligent
organisations”
Characteristics of Corporate Entrepreneurship
•New business venturing
•Innovativeness
•Self renewal
•Proactiveness
Forms of Corporate Entrepreneurship
•An established organization that enters a new business
•An individual or individuals who champion new product
ideas within a corporate context
•A situation, where entrepreneurial philosophy permeates an
entire organization’s outlook and operation
INTERNAL FACTORS INFLUENCING
CORPORATE ENTREPRENEURSHIP
•Compensation and Incentive System
•Organization Culture
•Top Management Support
•Organizational Structure
•Resource Availability
•Organization Policies
•Risk Taking and Failure Tolerance
BARRIERS TO CORPORATE
ENTREPRENEURSHIP
•Resistance to change
•The Inherent nature of large organizations
•Lack of Entrepreneurial talent
•Inappropriate compensation methods
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Hierarchy of Terminology
in Corporate
Entrepreneurship
Entrepreneurship
Independent
Entrepreneurship
Corporate
Entrepreneurship
Corporate
Venturing
Internal
Corporate
Venturing
Innovation
Strategic
Renewal
External
Corporate
Venturing
(Sharma and Chrisman, 1999)
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Independent Vs Corporate
Entrepreneurship
 Independent entrepreneurship is the process whereby an individual or
group of individuals acting independently, create a new organization.
 Corporate entrepreneurship is the process whereby an individual or a group
of individuals, in association with an existing organization, create a new
organization or instigate renewal or innovation within that organization
(Sharma &Chrisman, 1999).
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Strategic Renewal
 Refers to the corporate entrepreneurial efforts that result in significant
changes to an organization's business or corporate level strategy or
structure.
 These changes alter pre- existing relationships within the organization and
its external environment and in most cases will involve some sort of
innovation.
 Renewal activities reside within an existing organization and are not treated
as new businesses by the organization.
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Corporate Venturing
 Refers to corporate entrepreneurial efforts that lead to the creation of new
business organizations or divisions within the corporate organization.
 They may follow from or lead to innovations that exploit new markets, or
new product offerings, or both.
 These venturing efforts may or may not lead to the formation of new
organizational units that are distinct from existing organizational units in a
structural sense (e. g., a new division).
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External
corporate venturing
 External corporate venturing refers to corporate venturing activities that
result in the creation of semi-autonomous or autonomous organizational
entities that reside outside the existing organizational domain.
 Potential outcomes:
• Joint ventures
• Spin off (a type of corporate transaction forming a new company or
entity)
• Venture capital initiatives
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Internal corporate venturing
 Internal corporate venturing refers to the corporate venturing activities that
result in the creation of organizational entities that reside within an existing
organizational domain.
 Potential outcomes:
• integration
• new divisions
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Innovation
Innovation is the implementation of a new
or significantly improved product (good or
service), or process, a new marketing
method, or a new organisational method in
business practices, workplace organisation
or external relations (OECD, 2005).
Innovation is the development and use of
new ideas or behaviours in organisations
(Damanpour and Wischnevsky, 2006).
Innovation is the invention of ideas and its
conversion to a useful application (Acs &
Audretsch, 2003).
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Difference between Creativity and
Innovation
Creativity is defined as the production of
novel and useful ideas in any domain
 It is an attitude and ability
 It can be learnt
Innovation is defined as successful
implementation of creative ideas in any
organization
 Creativity of individuals is the starting point for innovation
•
Creativity and innovation are normally complementary activities
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Importance of Innovation
 Innovation is the main source of competitive advantage (Drucker, 1985).
 Innovation is an opportunity for entrepreneurial firms to gain rents through
the temporary establishment of a monopoly and that they are also a key
source of long-term entrepreneurial success.
 Innovations allow firms to establish competitively dominant positions
through patents and first mover positions.
Types of Innovation
 Radical Innovation
 The launching of inaugural breakthroughs.
 These innovations take experimentation and determined vision, which are not
necessarily managed but must be recognized and nurtured.
 Incremental Innovation
 The systematic evolution of a product or service into newer or larger markets.
 Many times the incremental innovation will take over after a radical innovation
introduces a breakthrough.
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Reengineering Corporate Thinking
 Steps that will help innovative people to develop an
entrepreneurial mindset:
1. Set explicit goals.
2. Create a system of feedback and positive reinforcement.
3. Emphasize individual responsibility.
4. Give rewards based on results.
5. Do not punish failures.
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Assessing Support for Innovation
 Does the firm encourage entrepreneurial thinking?
 Does the firm provide ways for innovators to stay with their
ideas?
 Are people permitted to do the job in their own way, or are
they constantly stopping to explain their actions and ask for
permission?
 Has the firm evolved quick and informal ways to access the
resources to try new ideas?
 Has the firm developed ways to manage many small and
experimental innovations?
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Assessing Support for Innovation
(cont’d)
 Is the system set up to encourage risk taking and to
tolerate mistakes?
 Are people in your company more concerned with new
ideas or with defending their turf?
 How easy is it to form functionally complete,
autonomous teams in the firm’s corporate environment?
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Rules for an Innovative Environment
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1.
Encourage action.
2.
Use informal meetings whenever possible.
3.
Tolerate failure and use it as a learning experience.
4.
Persist in getting an idea to market.
5.
Reward innovation for innovation’s sake.
6.
Plan the physical layout of the enterprise to encourage
informal communication.
7.
Expect clever bootlegging of ideas—secretly working on
new ideas on company time as well as personal time.
8.
Put people on small teams for future-oriented projects.
9.
Encourage personnel to avoid rigid procedures and
bureaucratic red tape.
10. Reward and promote innovative personnel.
Encouraging an Intrapreneurial
Environment
 Steps to help restructure corporate thinking and encourage
an intrapreneurial environment:
1. Early identification of potential intrapreneurs
2. Top management sponsorship of intrapreneurial projects
3. Creation of both diversity and order in strategic activities
4. Promotion of intrapreneurship through experimentation
5. Development of collaboration between intrapreneurial
participants and the organization at large
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The Need for Corporate
Entrepreneuring
 Rapid growth in the number of new and sophisticated
competitors
 Sense of distrust in the traditional methods of corporate
management
 An exodus of some of the best and brightest people from
corporations to become small business entrepreneurs
 International competition
 Downsizing of major corporations
 An overall desire to improve efficiency and productivity
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Successful Innovative Companies
 Factors in large corporations that are successful
innovators:
 Atmosphere and vision
 Orientation to the market
 Small, flat organizations
 Multiple approaches
 Interactive learning
 Skunkworks
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Conceptualizing a Corporate
Entrepreneurial Strategy
Critical steps of a corporate entrepreneurial
strategy:
Developing the vision
Encouraging innovation
Structuring for an intrapreneurial climate
Developing individual managers for corporate
entrepreneurship
Developing venture teams.
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Figure
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3.3
Shared Vision
Source: Jon Arild Johannessen, “A Systematic Approach to the Problem
of Rooting a Vision in the Basic Components of an Organization,”
3M’s Innovation Rules
Don’t kill a project
Tolerate failure
Keep divisions small
Motivate the champions
Stay close to the customer
Share the wealth
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Structuring for a Corporate
Entrepreneurial Environment
 Reestablishing the drive to innovate:
 Invest heavily in entrepreneurial activities that allow new ideas to flourish
in an innovative environment.
 Provide nurturing and information-sharing activities.
 Employee perception of an innovative environment is critical.
 Corporate Venturing
 Institutionalizing the process of embracing the goal of growth through
development of innovative products, processes, and technologies with
an emphasis on long-term prosperity.
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Preparing for Failure
“Learning from Failure”
Recognizing the importance of managing the grief
process that occurs from project failure.
Understanding how organizational routines and rituals
are likely to influence the grief recovery.
Ensuring that the organization’s social support system
can encourage greater learning, foster motivational
outcomes, and increase coping self-efficacy in
affected individuals.
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Developing Individual Managers
for Corporate Entrepreneurship
Corporate Entrepreneurship Training
Program (Corporate Breakthrough Training)
1. The Breakthrough Experience
2. Breakthrough Thinking
3. Idea Acceleration Process
4. Barriers and Facilitators to Innovative Thinking
5. Sustaining Breakthrough Teams
6. The Breakthrough Plan
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Corporate Entrepreneurship
Assessment Instrument (CEAI)
Key Internal Climate Factors in an
Organization’s Readiness for Entrepreneurial
Activity
Management support
Autonomy/work discretion
Rewards/reinforcement
Time availability
Internal organizational boundaries
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Facilitating Corporate Entrepreneurial
Behavior
 Organizations foster entrepreneurial behavior
by:
 Encouraging—not mandating—innovative activity
 Human resource policies for “selected rotation”
 Committing to projects long enough for momentum
to occur.
 Bet on people, not on analysis.
 Rewarding Entrepreneuring:
 Allow inventor to take charge of the new venture
 Grant discretionary time to work on future projects
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 Make intracapital available for future research ideas
Corporate Entrepreneurship at IBM
Emerging Business Opportunity (EBO) Program’s
Key Rules:
Think big . . . really big.
Bring in the A-team.
Start small.
Establish unique measurement techniques.
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Thank You