Bachelor Thesis Organization & Strategy

Transcription

1 Bachelor Thesis Organization & Strategy Student: Arthur Willems ANR: S Teacher: Stijn van den Hoogen Word Count: 6640

2 Management Summary In this thesis a research to how multinational corporations can successfully leverage corporate entrepreneurship is described. Corporate entrepreneurship includes radical product innovation, risk taking, and proactiveness. It also includes business venturing and "intrapreneuring and organizational renewal. Firstly the two dimensions of corporate entrepreneurship will be clarified, innovation aimed at business creation and venturing, and strategic renewal. Innovation aimed at business creation and venturing is a two-fold view. Innovation refers to creating and introducing new products, production processes, and organizational systems. While companies have a lot of difficulties creating value from innovations, some companies see possibilities to turn to corporate venturing. Corporate venturing is the process of creating new business in either existing markets where the company already competes, or new markets. Corporate venturing involves entrepreneurial efforts in which established business organizations invest in and/or create new businesses. Strategic entrepreneurship has been defined as involving the identification and exploitation of opportunities, while simultaneously creating and sustaining a competitive advantage. It may involve strategic renewal, sustained regeneration, domain redefinition, organizational rejuvenation, and business model reconstruction. Four domains which clarify the natural integration between entrepreneurship and strategic management are explained. These domains are external networks, resources and organizational learning, innovation, and internationalization. Next the characteristics which multinational corporations need to possess are described, following the four earlier dimensions and the different managerial capacities needed at senior-level, middle-level and first-level management. Management should always consider the dangers ahead in the process of corporate entrepreneurship and consider six important areas in the process. The proposed problem statement is answered using a model from earlier research. 2

3 Table of Contents Management Summary... 2 Table of Contents... 3 Chapter 1 - Introduction Introduction Problem Indication Problem Statement Research Questions Data collection and research design Thesis Structure Introduction Dimensions of Innovation and Corporate Venturing Strategic Renewal Summary Chapter 3 - Organizational and Managerial Capabilities Introduction Organizational Capabilities External Networks Resources and Organizational Learning Innovation Internationalization Managerial Capabilities Conclusion Introduction A Model of Strategic Entrepreneurship Entrepreneurial Mindset Entrepreneurial Culture and Entrepreneurial Leadership Strategic Management of Resources Applying Creativity to Develop Innovations Conclusion Chapter 5- Conclusion Introduction Conclusion Further Recommendations and Limitations

4 Chapter 1 - Introduction 1.1 Introduction As our economic climate is changing as a consequence of the credit crunch organizations are seeking new ways to find competitive advantages. Organizations are constantly trying to innovate faster than its best competitors. Essentially, this capacity is about identifying new ways of doing business, developing new technologies and products, and entering new markets in new organizational forms (Teng, 2007). This thesis is written for the course Bachelor Thesis Organization & Strategy at Tilburg University in the Netherlands. This first chapter contains the problem indication and the problem statement. To answer the problem statement two research questions are formulated. Furthermore, the research design and data collection will be considered followed by the structure of the paper. 1.2 Problem Indication While there is a broadly held belief in the need for and inherent value of entrepreneurial actions on the part of established organizations (Morris et al., 2008), much remains to be understood about how corporate entrepreneurship as a strategy is enacted in organizational settings (Hornsby et al., 2009). A longstanding literature has highlighted significant challenges and shortcomings in the corporate entrepreneurship activities of firms. Previous reviews have emphasized the need for further research on the processes and knowledge-based resources involved in corporate entrepreneurship, as well as the heterogeneous nature of corporate entrepreneurship. The scope of corporate entrepreneurship is also becoming wider as organizations, not previously recognized as entrepreneurial, need to become so in order to survive and succeed in increasingly competitive and financially constrained environments. This raises important questions concerning the applicability of the structures and processes developed in traditional corporations to these new contexts and how the appropriate strategies and mechanisms can be developed. Another motivation concerns the need for understanding the link between corporate entrepreneurship and 4

5 corporate governance, in part because corporate entrepreneurship activities can be costly and have significant impact on the future value of the enterprise (Phan et al., 2009). 1.3 Problem Statement For this thesis the following problem statement will be researched: How can multinational corporations successfully leverage corporate entrepreneurship? Multinational corporations are corporations with subsidiaries in foreign countries. In the multinational corporations field, it is recognized that subsidiaries may not be merely subordinate elements of their parent multinational corporations. Instead they can be examined as networks of autonomous and differentiated units (Boojihawon et al, 2007). The choice of multinational corporations is not only for the international aspects of these corporations, but also considering the size. Multinational corporations tend to be large and divided into multiple subsidiaries. In his article, Zahra (1996) defines corporate entrepreneurship using definitions from various studied. Zahra states that corporate entrepreneurship includes radical product innovation, risk taking, and proactiveness. It also includes business venturing and "intrapreneuring" and organizational renewal. A review of the literature by Guth and Ginsberg (1990) concluded that corporate entrepreneurship has two dimensions: innovation aimed at business creation and venturing, and strategic renewal. These activities are often collectively called corporate entrepreneurship, which can be defined as the sum of a company s innovation, renewal, and venturing efforts 1.4 Research Questions To find an answer to the problem statement this research will use the following research questions: What dimensions are typical for corporate entrepreneurship? What organizational and managerial capabilities do multinational corporations need to possess or incorporate to facilitate corporate entrepreneurship? 5

6 1.5 Data collection and research design The thesis will be based on an exploratory research. The research is secondary and available research literature and data will be reviewed where possible. Data and research literature used in this thesis is published in major academic journals. These are, among others: Journal of Business Venturing Journal of Small Business Management Journal of Management Journal of Management Studies Organization Studies Entrepreneurship: Theory and Practice Strategic Entrepreneurship Journal Small Business Economics Entrepreneurship and Regional Development Research Policy Academy of Management Journal The university library search engine is used to search in these academic journals. Key words used for the search are corporate entrepreneurship, multinational corporation, managerial entrepreneurship, innovation, strategic entrepreneurship and corporate venturing. 1.6 Thesis Structure The second chapter of this thesis researches the characteristics of corporate entrepreneurship. The third chapter researches the organizational and managerial capabilities which multinational corporations need to possess. The fourth chapter consist of a model of the strategic aspects of corporate entrepreneurship. Chapter five is the conclusion and further recommendations. 6

7 Chapter 2 Dimensions 2.1 Introduction As stated in the first chapter, this thesis uses Zahra s definition of corporate entrepreneurship. Zahra (1996) states that corporate entrepreneurship includes radical product innovation, risk taking, and pro-activeness. It also includes business venturing and "intrapreneuring and organizational renewal. This chapter will further explore the definition of corporate entrepreneurship by explaining the dimensions of corporate entrepreneurship. This will lead to the answer to the first research question: What dimensions are typical for corporate entrepreneurship? 2.2 Dimensions of Zahra s definition is supported by many other researchers. Phan, Wright, Ucbasaran and Tan (2009) state that corporate entrepreneurship refers to the process of organizational renewal and relates to two distinct but related phenomena, corporate venturing and strategic entrepreneurship. Guth and Ginsberg (1990) concluded that corporate entrepreneurship has two dimensions: innovation aimed at business creation and venturing, and strategic renewal. To understand corporate entrepreneurship these two dimensions will be further clarified in the next part of the thesis Innovation and Corporate Venturing Teng (2007) states that innovation refers to creating and introducing new products, production processes, and organizational systems. Antoncic and Hirsch (2001) stated two fundamental concepts for corporate venturing, objectives focused on rejuvenating or purposefully redefining organizations, markets and industries to create or sustain a position of competitive superiority, and innovation as the premier mechanism for meeting these objectives. Clearly, innovation is one of the most important backbones for corporate venturing. Nevertheless, there are some fundamental problems which could harm the process of innovation and corporate venturing. In his research, Gompers (2002) states that corporate internal investments in innovative activities, including research and development, have often been maligned for their ineffectiveness. Gompers 7

8 states that over the past forty years, organizations have attempted to capture the value from waves of technology and innovation. However, during much of this time, these organizations realized that young, nimble start-ups saw possibilities to capitalize on opportunities that the corporations saw first. It seems that corporations always had some difficulties bringing innovations to the market. A lot of visions and concepts have been wasted over time. Reasons of this phenomena are either because of internal resistance (for example, from managers who did not want to see a product launched that competed with one of their offerings) or an inability to execute on the initial insight. Traditionally, corporations try to encourage innovations by investing in research and design (R&D) laboratories. Nevertheless, there is evidence that investments in conventional R&D laboratories are not able to create the expected returns. Researchers in conventional R&D laboratories have focused on incremental product advances or on academic ideas with little relevance to the corporation. Even worse, sometimes when R&D laboratories managed to think up an innovative idea, all to often this idea is commercialised by other organizations. Corporations nowadays are turning into corporate venturing. Corporate venturing is the process of creating new business in either existing markets where the company already competes, or new markets. Corporate venturing involves entrepreneurial efforts in which established business organizations invest in and/or create new businesses (Sharma & Chrisman, 1999). Narayanan, Yang and Zahra (2009) state that corporate venturing focuses on the various steps and processes associated with creating new businesses and integrating them into the firm's overall business portfolio. It is a strategy for business development and involves investment in high-risk activities that generate new businesses within or closely related to the activities of the parent corporation. Corporate venturing can be used strategically to encourage corporate renewal in the parent organization, as a growth driver by investing in ventures with high growth potential, or to diversify the core 8

9 business of the parent by investing in ventures in diverse industries (Hustes and Vintergaard, 2004) Strategic Renewal The second dimension of corporate entrepreneurship is strategic renewal. Strategic renewal contains al renewal activities that enhance a corporations' ability to compete and take risks, which may or may not involve the addition of new businesses to a corporation (Phan, Wright, Ucbasaran and Tan, 2009). This dimension is also described as strategic entrepreneurship in previous research. Phan et al (200) define strategic renewal as the process of identification and exploitation of opportunities, while simultaneously creating and sustaining a competitive advantage. It may involve strategic renewal, sustained regeneration, domain redefinition, organizational rejuvenation, and business model reconstruction. Basically, strategic entrepreneurship is a concept which contains all entrepreneurial actions with a strategic perspective within an organization. To further understand the concept of strategic renewal, the linkage between entrepreneurship and strategic management is an essential element. Hitt and Ireland (2000) define four domains in which they explain the natural integration between entrepreneurship and strategic management. These domains are external networks, resources and organizational learning, innovation, and internationalization. External Networks: In a changing competitive landscape, the importance of external networks is becoming clear for corporations. Corporations are not alone in the competitive landscape; they are only part of the value chain. The external network of a corporation consists of relationships with customers, suppliers, and competitors among others and often extends across industry, geographic, 9

10 political, and cultural boundaries (Hitt et al, 2000). But how can external networks help in creating strategic renewal? Phan et al (2009) state that the importance of external networks for corporations is because external networks can provide firms with access to information, resources, markets and even, at times, technologies. External networks provide corporations with credibility and legitimacy. Further, potential opportunities can be identified by using external networks. But according to Hitt et al (2000), the greatest value of networks for entrepreneurial firms is the provision of resources and capabilities needed to compete effectively in the marketplace. External Networks are valuable for the corporation because they create possibilities of learning new capabilities and competing in new markets without possessing al the necessary resources to normally undertake these steps. Corporations which typically profit most from external networks to learn new capabilities or compete in new markets are new ventures. New venture firms normally have limited resources and can benefit from establishing alliances and developing these alliances into an effective network (Hitt et al, 2000). Lee, Lee and Pennings (2001) confirm this statement in their research. Lee et al use the term entrepreneurial orientation to define the organizational processes, methods and styles which new ventures use to implement their founding strategy. The external network is an important part of the founding strategy. The study researched linkages between the new venture companies and different relationships in the external networks and the effects of these linkages to the internal capabilities. The results showed the strongest interaction effect of the linkage between the new venture and venture capital companies. Venture capital companies invest equity in new ventures and therefore have a very strong incentive to help the new venture succeed. Venture capital companies do not only provide financial resources, but also managerial skills. Other linkages which 10

11 effected the internal capabilities where found with other enterprises, with universities and research institutes and with venture associations. Resources and Organizational Learning: Hitt, Ireland, Camp and Sexton (2001) state that knowledge is generated through organizational learning. Learning new capabilities helps firms to compete effectively, survive, and grow. But consequently there is always the danger of a changing landscape in which the corporations resides. In a changing landscape the value of a corporations current resources and knowledge can reduce in its value. As a result, the corporation needs to learn new knowledge to adapt to the new situation and effectively compete in the new environment. One of the resources associated with organizational learning is human capital or the employees capabilities. Hitt et al (2001) found evidence that the transfer of knowledge within a corporation creates human capital and aids to higher firm performance. Also, the firm s human capital will be used to implement strategies that in turn enhance performance as well. Elkjaer (2004) defined three types of organizational learning. The first two types are derived from earlier literature and the third is developed by Elkjaer herself. The first type of organizational learning is defined as the individual skills and knowledge acquisition in organizations as systems. The second type is the ability to learn while participating in communities of practice. So, a learning organization is to be created on the basis of the individual employees' ability to think of the organization as a set of systems. The third type of organizational learning is defined as the development of experience and knowledge by inquiry (or reflective thinking) in social worlds held together by commitment. By introducing a third type of organizational learning, Elkjaer adds a new dimension to the concept. Historically, individuals and organizations are researched to study the effect of organizational learning. Elkjaer adds the dimension of events and situations to the 11

12 equation. By adopting such an implication it is possible to trace why for example an organizational development project does not succeed - not by pointing at individuals' failures but by acknowledging that individuals and organizations constitute each other in a continuous process individuals and groups act or do not act and the organization reacts or does not react in subtle ways that can be explored by following the event or situation in time and space (Elkjaer, 2004). Innovation: As described earlier, innovation is one of the dimensions of corporate venturing. Hitt and Ireland discuss the effect of innovation on strategic renewal. Hamel (2000) even names innovation the most important component of a firms strategy. In his study, Hamel executed a survey of approximately 500 chief executive officers. Most of the chief executive officers agreed that their industry had changed in the last 10 year. The reason of this change was innovation by newcomers, not by the incumbent corporations. The chief executive officers largely agreed that the new venture corporations changed the rules and the landscapes. Hamel concludes that the real story of Silicon Valley is not e- commerce, but innovation. There is a strong relationship between innovation and the first two domains of strategic renewal, external networks and resources and organizational learning. Corporations which are able to use the knowledge acquired from partners can achieve a differential technological advantage. Zahra, Ireland and Hitt (2000) argued that firms with greater dimensions and speed of technological learning achieved higher levels of performance. These results suggest that firms can employ strong innovative capabilities to implement entrepreneurial strategies and thereby create wealth. 12

13 Internationalization: Since the end of last century and continuing throughout this century, the competitive landscape is changing. Hitt et al (2001) show evidence of internationalization as the primary driver of the changing landscape. The number of economic transactions across country borders is growing and will continue to do so. Increasing internationalization creates more complexity of doing business, but also creates new opportunities for entrepreneurs. To manage the complex transactions and interactions in global markets, entrepreneurs are obligated to develop a global mindset. Hitt et al (2001) argue that the opportunities available, the simplification of international transactions by new technologies, and the opening of international markets all led to an increasing number of smaller, entrepreneurial businesses entering international markets. 2.3 Summary This chapter explains the first research questions by looking at the dimensions of corporate entrepreneurship. The dimensions defined by previous research are innovation and corporate venturing, and strategic renewal. Innovation and corporate venturing is the process of creating and introducing new products, production processes, and organizational systems. Strategic renewal or strategic entrepreneurship is the integration of entrepreneurial and strategic perspectives in developing and taking actions designed to create wealth. The concept is further explained by using Hitt and Irelands four domains of strategic renewal. The domains are external networks, resources and organizational learning, innovation, and internationalization. 13

14 Chapter 3 - Organizational and Managerial Capabilities 3.1 Introduction Chapter 2 described the dimensions of corporate entrepreneurship. In this chapter the organizational and managerial capacities multi-national corporations need to possess to successfully facilitate corporate entrepreneurship are researched. This will be researched following the four domains of strategic renewal and the managerial capabilities an organization need to possess. In this chapter the second research question will be answered: What organizational and managerial capabilities do multinational corporations need to possess or incorporate to facilitate corporate entrepreneurship? 3.2 Organizational Capabilities The research question consists of two parts, the organizational capabilities needed and the managerial capabilities needed by multinational corporations to incorporate or facilitate corporate entrepreneurship. The organizational capabilities will be explained following the dimensions of strategic renewal explained in chapter 2. This will not only focus on strategic renewal, but also new venturing and innovation External Networks As discussed in chapter 2, external networks are essential to the discovery of opportunities, to the testing of ideas, and to gather resources for the creation of the new organization. Firms such as Cisco and Motorola have created extensive alliance portfolios, forming 50 to 100 new alliances each year, while the Dutch electronics and medical equipment firm Philips is currently engaged in over 1,000 alliances. However, evidence shows that alliance failure rates are generally high, ranging from 40 to 70%, thus displaying a mix of promise and peril (Koen, Elko and Jeffrey, 2009). The multinational corporation need to possess the capabilities to understand the external network and the different linkages to find successful linkages with external parties. Lee, Lee and Pennings (2001) define partnership-based linkages with external actors as cooperative bilateral relationships with environmental constituents. Lee et al differentiate between four types 14

15 of linkages, with other enterprises, with venture capitalists, with universities and research institutes and with venture associations. Strategic alliances with other enterprises consist of long-term relationship with suppliers, customers and other corporations with complementary resources. Lee et al (2001) describe two ways in which these strategic alliances can provide better performance in technological start-ups. First, new ventures can find lacking financial, technical and managerial resources through links with incumbent (developed) firms. Second, strategic alliances can aid new ventures in receiving financial, technical and managerial resources from third parties through the signalling role of the alliance. Holders of the resources will generally be more willing to provide the financial, technical and managerial resources to the new venture. Linkages with venture capitalists provide financial resources and managerial knowledge. Naturally, venture capitalists with an interest in the new venture have an incentive to make the start-up succeed. Ways of providing managerial knowledge to new ventures are having a seat on the board of directors, create access to professionals, and initiate change at the management board when the start-up does not meet the expectations of the venture capitalist. Chang (2004) studied the linkage between internet start-ups and venture capitalists. His study showed that there are four factors influencing the speed in which internet start-ups had initial public offerings: the reputations of the venture capital firms from which they raised funds, the amount of money these start-ups raised, the reputations of strategic alliance partners, and the number of strategic 15

16 alliances they developed. Linkages with universities and research institutes provide technological knowledge which the new venture does not process, and could not have accomplished without help. Universities and research institutes provide consultancy and education for professionals. Students who participate in the startup will become familiar with the technology and will be inclined towards starting their career at the new venture (Lee et al, 2001). Stuart, Ozdemir and Ding (2007) state that in the past few decades, universities have become much more proactive in their commercialization efforts. They found evidence that many universities diverge of their traditional mission of educating students and advancing understanding to have broadened to include patenting and commercializing research discoveries. Stuart et al studied the sector of biotechnology firms. They found that biotechnology firms with prominent and well-networked academic founders and scientific advisors are more likely to enter formal alliances with universities and biotechnology firms with more upstream, university contracts are more frequent participants in downstream, commercialization alliances. This resulted in evidence that these firms with strong academic connections (and not necessarily with academic founders) have the organizational capabilities and business model to capitalize university technology. Linkages with venture associations create an informal network which is very useful for further accumulating social capital. The network becomes a channel of referral and will provide access to other professionals such as lawyers, bankers, marketers and accountants (lee et al, 2001). 16

17 To fully exploit the possibilities created by external networks, the new venture must possess an open culture. The corporation needs to be able to differentiate the four types of linkages and develop the relationships. As an organization becomes large and more established, it is increasingly difficult to develop new networks. Most well-functioning organizations are better suited for more familiar activities building on current businesses. Attempts to pave new paths for information exchange and knowledge sharing will conflict with the organization's institutionalized environment (Kelley, Peters, O Conner, 2009) Resources and Organizational Learning In chapter 2 the three ways of organizational learning are introduced. These three ways are the individual skills and knowledge acquisition in organizations as systems, the ability to learn while participating in communities of practice and the development of experience and knowledge by inquiry (or reflective thinking) in social worlds held together by commitment (Elkjaer, 2004). Another typology for organizational learning is described by Dess, Ireland, Zahra, Floyd, Janney and Lane (2003). To exploit the advantages from organizational learning corporations must be able to see the difference between the different types of organizational learning. First, technical knowledge is concerned with insights about the properties of specific activities, is vital to sustained regeneration and results primarily from acquisitive learning. Second, firm-specific and predominately tacit in nature, it is a product of how the firm has learned to creatively and uniquely combine its idiosyncratic resources and capabilities to create value. Third, exploitative knowledge accumulates as the firm learns how to exploit its resources. Thus, exploitative knowledge expands as the firm learns how to creatively find unique, value-creating ways to exploit its technical and integrative knowledge sets (Dess et al, 2003). 17

18 Dess et al (2003) state that to gain maximum benefit from organizational learning a different emphasis on the different types of knowledge is needed. If a new venture uses technical knowledge, the implementation focus is on leveraging knowledge. Nevertheless, rearranging and extending knowledge is the result from the corporation applying its new integrative knowledge. Lastly, the corporation imports new technical and integrative knowledge into value-creating primary and support activities when trying to effectively use its new exploitative knowledge. Popper and Lipshitz (1998) researched organizational learning using a structural and cultural approach. The research focuses on the question: Can organizational learning be treated as an extension of individual learning? They introduce anthropomorphism into the research of organizational learning. Anthropomorphism is the attribution of human form or qualities to nonhuman entities. To realize anthropomorphism, an organization should have cognitive systems in place that enable them to perceive, think, and so on, which are similar to those possessed by individuals. These organizational learning mechanisms are the structural aspect of organizational learning. The organizational learning mechanisms are institutionalized structural and procedural arrangements that allow organizations to systematically collect, analyze store, disseminate and use information relevant to the performance of the organization and its members (Popper et al, 1998). The cultural aspect of organizational learning is defined as a normative system of shared values and beliefs that shape how organization members feel, think and behave. Productive organizational learning requires a learning culture that includes five values: continuous learning, valid information, transparency, issue orientation and accountability (Popper et al, 1998). These 5 values are further explained below. 18

19 Continuous learning is at the heart of the organization and vital for surviving. Valid information is the governing value of organizational learning. Organizational learning involves the transformation of data into knowledge and therefore it is vital that full, undistorted and verifiable information is used in the learning process. Transparency is the willingness to hold oneself open to inspection in order to receive valid feedback. The importance of transparency becomes clear when individuals realize that an information environment is mostly produced by people rather than being given by nature. Issue orientation becomes apparent when expressed opinions and assertions are valued according to their merits, divorced from the identity and status of the individual pronouncing them. Accountability is the responsibility individuals take for their actions and their consequences and for the learning from these consequences Innovation As discussed in chapter 2, innovation is often a difficult process in large multinational corporations. Conventional research and development laboratories are not able to create the expected returns. Researchers in conventional R&D laboratories have focused on incremental product advances or on academic ideas with little relevance to the corporation. Even worse, sometimes when R&D laboratories managed to think up an innovative idea, all too often this idea is commercialised by other organizations. Corporate venturing needs a critical population of ideas and certain requirements in the quality and innovativeness of these ideas (Husted and Vintergaard, 2004). 19

20 Dess et al (2003) discuss in their research that innovative proposals are frequently defeated by financial control systems and other formalities that are typical of large bureaucracies. According to Dess et al. (2003) corporate entrepreneurship often fails because large organizations present hostile environments for creative ideas. Gompers (2002) researched the success of venture investments by an analysis of innovation by comparing corporate venturing and independent venturing. Gompers found that corporate venture investments in innovation are significantly more successful than other investments Internationalization International entrepreneurship is a combination of innovative, proactive, and risk seeking behaviours that crosses national borders and is intended to create value in organizations (McDougall and Oviatt, 2005). Dess et al (2003) state that the interaction between corporate entrepreneurship and internationalization is an important research opportunity. They state that managers and researchers should give much attention to the firm s entrepreneurial activities that shape these firms product portfolios and differentiate them from the competition. In a changing global environment chief executive officers and professionals should be able to gain new insights into the dynamic interaction between the internationalization process and corporate entrepreneurship as a way of creating new competencies that enable firms to enhance firm performance. To take advantage of this dynamic interaction corporations should be able to create and gain knowledge that can be combined or deployed to renew existing skills and knowledge while creating and honouring new ones (Zahra, Nielsen and Bogner, 1999). According to Dess et al. (2003), the development and acquisition of skills creates strategic entrepreneurship, a process that usually demands creativity. 20

21 McDougall et al (2005) researched the speed of entrepreneurial internationalization. There are our forces which determine the speed of internationalization, enabling, motivating, mediating and moderating. The first, enabling, makes accelerated internationalization feasible. Faster and more efficient transportation among multiple foreign countries has a positive effect on the costs for foreign trade and investment. The costs of airline transportation of people and freight have declined over the last decades. Computers, faxes and wireless technologies have made sharing of data and information faster and cheaper. The second force, motivating, is the existence of competition. The existence of competition encourages and force entrepreneurs into internationalization. Many entrepreneurs have been motivated to take pre-emptive advantage of technological opportunities in foreign countries because they feared competitors would respond quickly to a new product introduction and prevent them from eventually going international if they initially competed only in their home country (McDougall et al, 2005). The third force, mediating, refers to the entrepreneurial actor. The person or group that discovers or enacts an opportunity is central to the dynamics of international exploitation. According to McDougall et al (2005), accelerated or retarded international entrepreneurial behaviour cannot be explained through some objective measure of technology and competition, but only by understanding how the opportunity, the enabling forces, and the motivating forces are interpreted, or mediated, by the entrepreneurial actor. The fourth and last force, mediating, consists of two types. After an entrepreneurial actor discovers or enacts an opportunity and interprets the enabling and the motivating forces, then the knowledge-intensity of the opportunity combined with the know-how already available to the entrepreneurial actor, plus the characteristics of the entrepreneur s international network largely determine internationalization speed. Therefore, we view these as two types of moderating forces (McDougall et al, 2005). 3.3 Managerial Capabilities Managerial capabilities to seize the advantages of corporate entrepreneurship are different on the different levels of managerial level. The managerial levels used in this 21

22 thesis are senior-level management, middle-level management and first-level management. Hornsby, Kuratko, Shepherd and Bott (2009) researched that senior-level managers have ratifying, recognizing, and directing roles which are in turn, are associated with particular managerial actions. In examining the role of middle-level managers, Hornsbey et al (2009) state that middle-level managers endorse, refine, and shepherd entrepreneurial opportunities and identify, acquire, and deploy resources needed to pursue those opportunities. Whereas first-level managers have experimenting roles corresponding to the competence definition sub-process, adjusting roles corresponding to the competence modification sub-process, and conforming roles corresponding to the competence deployment sub-process (Hornsbey et al, 2009). Heavy, Simsek, Roche and Kelly (2009) conclude that uncertainty due to decisionmakers lack of timely awareness of what opportunities to pursue, as well as a sense of doubt surrounding the feasibility and desirability of those opportunities, shroud entrepreneurial acts. Gompers (2002) stated that the chances of success of corporate entrepreneurship is influenced by strategic fit, market knowledge, resources and the way a corporation approaches its venture program. Unsuccessful venture programs mostly fail because managers made two fatal mistakes. Firstly, managers fail to create consensus inside the organisation about the program s objectives and its potential outcomes and benefits to the organization. Secondly, the managers fail to build relationships and establish credibility outside the corporation. According to Husted and Vintergaard (2004), there are six areas managers need to consider regarding corporate entrepreneurship: 22

23 Take responsibility: Companies cannot be passive; rather they need to take active part in creating the bases from which ideas can spring. These actions should be focused both on encouragement of employees and on engagement in sources of innovation outside the organization. Therefore, parent companies need to take responsibility for knowledge production in networks and in the process of conceptualizing knowledge (Husted and Vintergaard, 2004). Secure access: Companies need to be active in securing access in networks by offering their own level of knowledge, production capabilities or reputation in return. In industries where knowledge is crucial, companies must be experts in both in-house research and in cooperative research with external partners, such as university scientists, research hospitals, and skilled competitors (Husted and Vintergaard, 2004). Network capabilities: Companies need to learn to interact and create networks in order to be able to manage the venture base. The ability to create and participate in a network and to contextualize one s knowledge should be viewed as something that can be learned, but also something that often depends on personal traits (Husted and Vintergaard, 2004). Competencies in how to influence the vision and agendas in knowledgecreating networks: An organization must be able to influence the vision and agenda of a network by learning where and how to access or structure a network formation and a community for contextualization (Husted and Vintergaard, 2004). Contextualization: In order to shape the venture base during the process of contextualization, there are strong demands on the company to disseminate and 23

24 negotiate new knowledge to a wide range of stakeholders. These types of stakeholder must hold central positions and originate from a transdisciplinary background (Husted and Vintergaard, 2004). Invite to discussion at an early stage: A common error in the phases of building a venture base is that the process of contextualization occurs too late in the development. As a consequence, the final business proposal will receive a lower evaluation due to both a lack of quality and a lack of appropriateness. Therefore, corporations must overcome the traditional paradigm of knowledge hoarding and create new methods and incentives for knowledge sharing. Even though knowledge sharing is a necessity for the venture base to develop, knowledge-sharing hostility both at individual and organizational levels hampers such development (Husted and Vintergaard, 2004). 3.4 Conclusion In this chapter the different capabilities which multinational corporations need to possess are discussed following the four domains of strategic renewal. The conclusion is that a multinational organization should be open and aware of the different relationships, knowledge and internationalization processes are present. Managerial capabilities are different between levels within the organization. Furthermore, managers should be well aware of the gaps lying ahead and be aware of the capabilities an organization needs to possess to successfully engage in corporate entrepreneurship. 24

25 Chapter 4 A Model of Strategic Entrepreneurship 4.1 Introduction In this chapter, the model constructed by Ireland, Hitt and Sirmon (2003) will be used to further explain the strategic aspect of corporate entrepreneurship. This wil hlp to form the conclusion in the next chapter. 4.2 A Model of Strategic Entrepreneurship Ireland, Hitt and Sirmon (2003) developed a model of strategic entrepreneurship. This model describes how an entrepreneurial mindset, an entrepreneurial culture and entrepreneurial leadership, the strategic management of resources and applying creativity to develop innovations are important dimensions of strategic entrepreneurship and how these dimensions facilitate the creation of wealth in an organization. See figure 1 for the links between these dimensions. Figure 1. A model of strategic entrepreneurship Entrepreneurial Mindset According to Ireland et al (2003), an entrepreneurial mindset is required to successfully engage in strategic entrepreneurship. An entrepreneurial mindset is both an individualistic and collective phenomenon. Ireland et al (2003) explain that an entrepreneurial mindset is very important to individual entrepreneurs as well as to managers and employees in established firms to think and act entrepreneurially. They state that an entrepreneurial mindset is a view on doing business focused on and capturing the benefits of uncertainty. Uncertainty derives from an inability to properly assess future events, largely because of a lack of information about cause/effect relationships. 25

26 4.2.2 Entrepreneurial Culture and Entrepreneurial Leadership Entrepreneurial culture is a system of shared values and beliefs that shape the firm s structural arrangements and its members actions to produce behavioural norms (Ireland et al, 2003). Ireland et al (2003) define six properties of behavioural norms: Shared basic assumptions. Invented, discovered, or developed by a given group. Ability to cope with problems of external adaptation and internal integration. The assumptions are considered valid. They can be taught to new members of the group. The assumptions are the correct way to perceive, think, and feel in relation to those problems. Ireland et al (2003) define entrepreneurial leadership as the ability to influence others to manage resources strategically in order to emphasize both opportunity-seeking and advantage-seeking behaviours Strategic Management of Resources Research has shown that resources are the basis of firm differential performances in terms of wealth creation. Ireland et al (2003) define three critical resources to be managed in strategic entrepreneurship. One, financial capital, is a tangible asset while the other two, human capital and social capital, are intangible assets. Financial Capital: Financial capital refers to assets that are considered to be liquid in nature. A capital asset of this type can be used to make purchases of various goods and services or to acquire other types of assets (tangible or intangible). Human Capital: Human Capital is the total of skills and knowledge within the organization. As stated previously in chapter 3, a firm can leverage its human 26

27 capital by engaging in external networks. Social Capital: Social capital is the set of relationships between individuals (internal social capital) and between individuals and organizations (external social capital) that facilitate action (Ireland et al, 2009). These resources need to be bundled and the corporation need to make choices about how to leverage these bundles within the organization Applying Creativity to Develop Innovations Ireland et al (2003) state that to gain a sustainable advantage need to apply creativity in a way that helps incumbent companies earn higher margins by selling better products to their best customers. 4.3 Conclusion In this chapter the model created by Ireland, Hitt and Sirmon (2003) is used to show how corporate entrepreneurship can create wealth for multinational corporations. When organization bundle and leverage the capabilities described in chapter 3, the model can be used to provide a framework in how to leverage and divide the capabilities between subsidiaries. 27

28 Chapter 5- Conclusion 5.1 Introduction In the former chapters the concept of strategic entrepreneurship has been researched using the dimensions of corporate entrepreneurship, the organizational and managerial capabilities needed by the organisation to successful leverage corporate entrepreneurship and the strategic aspects within a model by Ireland et al. In this chapter a conclusion of the research and further recommendation will be given. 5.2 Conclusion In this conclusion there is one central goal and that is the answer to the problem statement proposed in the first chapter. How can multinational corporations successfully leverage corporate entrepreneurship? As became clear in this study there are a lot of aspects which need to be considered in corporate entrepreneurship. In order to fully leverage the successes belonging to corporate entrepreneurship this research found that there are important aspects which multinational corporations need to incorporate. To get to an answer to the problem statement two research question where formulated: What dimensions are typical for corporate entrepreneurship? What organizational and managerial capabilities do multinational corporations need to possess or incorporate to facilitate corporate entrepreneurship? The dimensions of corporate entrepreneurship are innovation aimed at business creation and venturing, and strategic renewal. Innovation and corporate venturing is the process of creating and introducing new products, production processes, and organizational systems. Strategic renewal or strategic entrepreneurship is the integration of entrepreneurial and strategic perspectives in developing and taking actions designed to create wealth. The concept is further explained by using four domains of strategic 28

29 renewal. The domains are external networks, resources and organizational learning, innovation, and internationalization. The managerial and organizational capabilities which the corporation needs to posses are detailed in chapter three using the dimensions of chapter 2. Linking these with the model of strategic entrepreneurship in chapter 4 adds to the conclusion below. This conclusion answers the problem statement of this research. An entrepreneurial mindset needs to be adopted. This is both an individualistic and collective phenomenon and should incur in both the management levels as the other employees. Adopting an entrepreneurial mindset is a cultural aspect and should focus on the learning aspect of entrepreneurship. It should focus on continuous learning, valid information, transparency, issue orientation and accountability. Focussing on these aspects will have a positive affect on uncertainty. The entrepreneurial culture should have shared values and beliefs. This process should be under leadership of an entrepreneurial leader who understands the factors which could lead to negative outcomes. The two most important reasons are failing to create consensus inside the organisation about the program s objectives and its potential outcomes and benefits to the organization and failing to build relationships and establish credibility outside the corporation. The entrepreneurial leader should have the ability to influence others to manage resources strategically in order to emphasize both opportunity-seeking and advantage-seeking behaviours. Furthermore the corporation should fully understand the external networks of the organization. Not only should the corporation be able to see the value of the different linkages, but it should also be able to act as an important player within the external networks. To become an important player, the corporation should be fully aware of the six focus points of the external network, taking responsibilities, securing access, network 29