Corporate Entrepreneurship: Increasing the chance of success

Transcription

1 Corporate Entrepreneurship: Increasing the chance of success Investigating characteristics of human capital and organizational climate Bachelor Thesis Organization & Strategy Academic Year: 2010 Name: Pieter van de Wouw ANR: Supervisor: S.H.J. van den Hoogen Number of Words: 6658

2 Management Summary Due to increasingly globalized and dynamic markets, organizations are more and more frequently asked to deal with changing conditions. Engaging in corporate entrepreneurship can assist organizations in staying competitive and dealing with this change. Successful entrepreneurship aims to increase the innovativeness of organizations, enabling them to exploit or create business opportunities. This said, solely engaging in corporate entrepreneurship will not guarantee successful outcomes. Organizations must also create the right entrepreneurial circumstances in order to successfully facilitate corporate entrepreneurship. In other words: organizations must be able to make the switch to a more entrepreneurial business approach. The switch to a more entrepreneurial approach requires organizations to make adjustments and implement changes in multiple areas. This thesis describes the characteristics of human capital and organizational climate that can increase the success of corporate entrepreneurial activities. Both of these variables can contribute to increasing the entrepreneurial output of organizations. Besides possessing the right entrepreneurial skills and capabilities in an organizations human capital, it is also crucial to motivate employees and commit them to the entrepreneurial goal. In order to motivate and commit employees, entrepreneurially orientated managers are essential. Entrepreneurially orientated managers are indispensable in order to create an entrepreneurial organizational culture. Besides, managers also fulfil an important motivational role themselves. The organizational climate has to be (re)shaped as well; through the allocation of slack resources and more autonomous decision-making power, employees/project teams are allocated with more responsibility and opportunity for self-achievement. Reinforced by intrinsic motivators like entrepreneurial persuasiveness and passion, this can positively influence the entrepreneurial output. 2

3 Table of Contents Management Summary 2 Table of Contents 3 Chapter Problem Indication Problem statement Research Questions Relevance Research Design and data collection Conceptual Model Overview of the Rest of the Chapters 7 Chapter Corporate entrepreneurship defined Successful Corporate Entrepreneurship Summary 11 Chapter Characteristics of Managers Characteristics of Employees Summary 15 Chapter Organizational culture Level of Autonomy Organizational Slack Summary 19 Chapter Conclusion Discussion and Limitations Recommendations 22 References 23 Appendix 27 3

4 Chapter 1 This chapter explains the purpose and structure of this thesis. First, the topic is introduced by explaining the problem at hand. Second, the problem statement and research questions are introduced. Furthermore, this chapter elaborates on the relevance, research design and method of data collection of this thesis. At the end of this chapter, the conceptual model that is used in this thesis is introduced, followed by a brief overview of the chapters. 1.1 Problem Indication The topic of corporate entrepreneurship has increasingly become a field of interest in recent years. The ability to be innovative has become a major source of competitive advantage in recent times ( Ireland & Webb, 2007). A large number of organizations are forced to frequently change in order to serve all of their stakeholders such as their customers and suppliers (Ireland & W ebb, 2007). As Ireland and Webb (2007) illustrate, the challenge of dealing with continuous change affects organizations across a large number of, increasingly globalized, industries. Change, especially radical change, forces competitors to adapt, and creates a situation where organizations can become winners or losers. Ahuja and Lampert (2001) state that radical changes, or breakthrough inventions, lie at the very heart of entrepreneurial activities and are crucial for the creation of wealth. They further emphasize that these breakthrough inventions can serve as foundations for new technological trajectories which, over time, can make existing technologies and products become obsolete. Ahuja and Lampert (2001) argue that although the lion s share of academic studies have focused on new firms when describing the introduction of such breakthrough technologies, it has become clear that established firms are likely to contribute to these introductions on a much larger scale than is generally recognized (Methe et al., 1997). By introducing new technologies, established firms enable themselves to retain technological leadership in their industries. This allows firms to create value for customers and other stakeholders that exceeds the value of less innovative, existing technology used by competitors (Ireland & Webb, 2007). An illustration of this concept is the downfall of the automobile industry in the U.S.A (Morris et al., 2009). Japanese car manufacturers like Honda and Toyota introduced new green innovative technologies, while the inert traditional American car manufacturers like GM and Ford were still holding on to existing technologies and concepts, damaging GM and Ford s respective competitive positions. 4

5 In essence, it is important for firms to recognize the need ( ) to learn how to simultaneously exploit today that which it does well relative to rivals, while also exploring to determine what it needs to do to be successful in the future (Ireland & Webb 2007, p.50). Entrepreneurship can assist firms in order to discover opportunities for future products and technologies, as well as how to create and exploit them (Venkataraman, 1997). This said, investments in corporate entrepreneurial activities are not always a guarantee for success. There are many different variables that can obstruct or promote a successful result, both internal and external variables. This thesis aims to provide an overview of the characteristics of human capital and organizational climate, that will help organizations to increase the chance of success of corporate entrepreneurial activities. 1.2 Problem statement The problem statement that will be at the heart of this thesis is: o Which characteristics of human capital and organizational climate can contribute to increasing the chance of success of corporate entrepreneurship? The characteristics of human capital and organizational climate, the independent variables, will be analysed as to what they can contribute in order to create the right circumstances to increase the chance of success of corporate entrepreneurship, the dependent variable. 1.3 Research Questions In order to be able to provide an answer to the problem statement three research questions are discussed in this thesis. These research questions are: 1. How can success in corporate entrepreneurship be defined? 2. What are the required characteristics of human capital in an organization in order to be successful in corporate entrepreneurship? 3. How can organizations contribute to the creation of an optimal climate for entrepreneurship within an organization? 5

6 1.4 Relevance The purpose of this thesis is to aggregate the existing knowledge about the features of human capital and organizational climate that will assist in achieving positive results from corporate entrepreneurship. This thesis aims to provide a clear and comprehensive overview of several characteristics and qualities of the two specified independent variables that are relevant for increasing the success of entrepreneurial activities. This thesis can contribute to the academic knowledge of corporate entrepreneurship by establishing clear relations between the independent variables and the success of corporate entrepreneurship. By doing so, it contributes to the full understanding of the concept of how to be successful in corporate entrepreneurship 1.5 Research Design and data collection The research design that is chosen in order to answer the problem statement can be categorized as a descriptive research. Literature review is used in order to gather relevant information. This literature review is conducted in order to identify relevant existing concepts and knowledge about concepts and variables of interest with respect to the problem statement. The main concept that is studied is the concept of corporate entrepreneurship. Within this concept, different variables are of special interest for this research. Literature will be used in order to investigate several variables such as: competitive advantage, human resource management, characteristics and personality traits of human capital and the balance of autonomy. The data that is collected comes from secondary sources. Articles from several renowned academic journals and magazines have been used in order to collect relevant data. These articles are gathered by searching in available online databases of academic literature for relevant data about the concepts and variables that are of interest. Furthermore, the references related to the topic of this thesis that were made in obtained articles were used to gather additional data. Databases that were used include WebofScience.com, JStor.com and Wiley.com. These databases are hosted by organizations that aim to provide, amongst others, students and researchers with relevant data. The databases have both been accessed directly as well as through the Tilburg University search engine. Keywords for searching included: corporate entrepreneurship, strategic entrepreneurship and organizational slack. The advantages of this search mechanism are obvious, large amounts of high quality data from researches all over the world are easily accessible. 6

7 1.6 Conceptual Model The conceptual model that is at the heart of this thesis is presented in Figure 1. The model shows the relations that are investigated in this thesis. Figure 1: Conceptual model of the relations that are investigated in this thesis (Van de Wouw, 2010) 1.7 Overview of the Rest of the Chapters This thesis consists of five chapters. Chapter two focuses on research question one and thus discusses the dependent variable. The objective of this chapter is to clarify the concept of corporate entrepreneurship and to elaborate on the definition of successful corporate entrepreneurship that is used in this thesis. Chapter three and four elaborate on the independent variables. Chapter three provides insight in the characteristics of human capital that can contribute to an increased chance of success in corporate entrepreneurship. A distinction is made between the characteristics of managers and the characteristics of employees/teams. Chapter four focuses on how organizations can raise the chance of success in corporate entrepreneurship by creating the right circumstances for entrepreneurship. Organizational culture, the desired level of autonomy and organizational slack are reviewed here. The fifth and final chapter contains the answer to the problem statement, as well as the limitations of this thesis and recommendations for further research. 7

8 Chapter 2 This chapter elaborates on the dependent variable: success in corporate entrepreneurship. In the first section, a definition of the concept of corporate entrepreneurship is given. The second section aims to provide insight into what makes corporate entrepreneurship a success. At the end of the chapter a summary is presented. 2.1 Corporate entrepreneurship defined The concept of corporate entrepreneurship has increasingly received attention in recent years. As Stevenson and Jarillo (1990, p.17) point out, the very concept of corporate entrepreneurship sounds ( ) as something of an oxymoron, for entrepreneurship and corporate management are radically different concepts. Though this may be true in essence, the need for entrepreneurship within existing organizations is created by the present business environment which forces organizations to frequently change in order to meet the requirements set by their stakeholders (Ireland & Webb, 2007). Thornberry (2001) states that entrepreneurship is of special importance to organizations acting in rapidly changing and uncertain environments. Embracing entrepreneurship can assist organizations to stay innovative and deal with change, as Cooper, Markman, and Niss (2000, p. 116) argue: entrepreneurial strategies suggest ways to revitalize existing organizations and make them more innovative. According to Stevenson and Jarillo (1990), entrepreneurship is generally believed to promote growth, flexibility and innovation. These characteristics are also beneficial for large organizations. This is confirmed by Thornberry (2001), who suggests that corporate entrepreneurship can assist (mature) organizations in tackling problems such as a lack of innovative output, inertia and stagnated growth. Corporate entrepreneurship is often divided into two different phenomena (Guth & Ginsberg, 1990; Kuratko & Audretsch, 2009): corporate venturing and strategic entrepreneurship. Corporate venturing, according to Sharma and Chrisman (1999), can be split up into internal and external corporate venturing: Internal corporate venturing entails the establishment of new businesses within the existing organizational structure, as well as semi-autonomous businesses outside the organizational structure (Phan et al., 2009). External corporate venturing embodies the process of investing in young businesses with high growth potential. Furthermore, corporate venture capital, licensing, acquisitions and joint ventures are also referred to as external corporate venturing (Phan et al., 2009). 8

9 The second form of corporate entrepreneurship is known as strategic entrepreneurship. Ireland and Webb (2007, p.50) define strategic entrepreneurship as: firms efforts to simultaneously exploit today s competitive advantages while exploring for the innovations that will be the foundation for tomorrow s competitive advantages. Strategic entrepreneurship can be split up into 4 distinct forms (Covin & Miles, 1999): The first form is known as sustained regeneration. Sustained regeneration embodies efforts made towards the development of new products for current markets as well as the introduction of existing products in new markets (Dess et al., 2003). The second form, organizational rejuvenation, is primarily focused on changes in the value chain activities of a firm. Through innovating structure, processes and/or administrative routines, firms aim to become more entrepreneurial. Thirdly, strategic renewal contains the repositioning of firms in relation to their competitive environment. By doing so, firms seek to increase profitability through the more effective exploitation of product-market opportunities (Dess et al., 2003). The fourth and final form is known as domain redefinition. Firms proactively seek to create a new product market position that competitors haven t recognized or have underserved (Dess et al., 2003, p.355). Through domain redefinition, first mover advantages can be established. According to Thornberry (2001), the four forms of strategic entrepreneurship share several commonalities between them. Thornberry (2001) argues that at the very heart lies the fact that through the allocation of resources something new is created with the goal of bringing longterm value or wealth for stakeholders; for example a business or a product or service. In addition, Thornberry (2001) suggests that organiza tional learning takes place at both the creation as well as at the implementation of the newly established business feature. Through this organizational learning new organizational capabilities are developed. Furthermore, all forms of entrepreneurship incorporate an increase of risk for the organization due to the uncertain nature of their outcomes. 9

10 Figure 2: Forms of Corporate Entrepreneurship (Covin &Miles, 1999; Kuratko&Audretsch, 2009) Conclusively it can be stated that entrepreneurial activities and initiatives within an existing organization can be categorized as corporate entrepreneurship, or as Sharma and Chrisman (1999, p. 18) define corporate entrepreneurship: 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. This is the definition of corporate entrepreneurship that will be used in this thesis. 2.2 Successful Corporate Entrepreneurship The operationalization of successful corporate entrepreneurship is not apparent. The interpretation of the definition successful will differ vastly across organizations. Very different criteria are used to assess the success of entrepreneurial activities across different organizations. However, in this thesis it is assumed that the level of success that is perceived will be in close relation with the extent to which the goals and expectations that were formulated by the organization are achieved. To be able to operationalize the concept of successful corporate entrepreneurship in this thesis, this assumption is generalized. Therefore, the general and widely agreed upon desirable consequences and outcomes of engaging in corporate entrepreneurial activities are considered as the definition of successful corporate entrepreneurship. 10

11 Phan et al. (2009) suggest that the purpose of corporate entrepreneurship refers to: renewal activities that enhance a corporations ability to compete and take risks (Phan et al. 2009, p.199). In addition, Ireland and Webb (2007) argue that effective corporate entrepreneurship is about the exploration of new business opportunities in order to achieve or retain, (sustainable) competitive advantages in the future. Dess et al. (2003) add that the increase of organizational knowledge plays a pivotal role here, enabling organizations to outperform (future) competitors through continuous innovations. Outperforming competitors through corporate entrepreneurship, according to Morris et al. (2009), is a result of an increase in flexibility, adaptability and innovativeness. Similarly, Ireland and Webb (2007) argue that through corporate entrepreneurship, organizations (re)position themselves in such a way that they are more able to react to changes in the business environment in a suitable way. The definition of successful corporate entrepreneurship that will be used in this thesis results from an aggregation of the desired consequences of entrepreneurship described in the latter paragraph. Successful corporate entrepreneurship, in general, will aim to increase the innovativeness of an organization (Dess et al., 2003). Through this increase in innovativeness, and the accompanying increase in organizational knowledge, organizations tend to become more flexible and adaptable (Morris et al., 2009). This in turn enables organizations to retain or achieve (sustainable) competitive advantages by outperforming competitors, thus increasing the organisations potential for profit and growth (Ireland & Webb 2007). Figure 3: Effects of successful corporate entrepreneurship (Dess et al., 2003 ; Ireland & Webb, 2007) 2.3 Summary Due to the present dynamic and globalized business climate, organizations are more and more frequently forced to change in order to stay competitive (Ireland & Webb, 2007). Engaging in corporate entrepreneurial activities can assist organizations to deal with this change. Through successful corporate entrepreneurship, organizations can increase their innovativeness. An increase in innovativeness can in turn positively influence the degree of organizational flexibility and adaptability (Morris et al., 2009). Increasing these qualities can enable organizations to react to changes in the business environment in a more suitable way, assisting organizations to stay competitive (Ireland & Webb, 2007). 11

12 Chapter 3 This chapter describes the first independent variable: the characteristics of human capital. In this thesis, Dess and Lumpkin s (2001) definition of human capital is used. Human capital is defined as: individual capabilities, knowledge, skill, and experience of the company s employees and managers, as they are relevant to the task at hand, as well as the capacity to add to this reservoir of knowledge, skills, and experience through individual learning (Dess & Lumpkin, 2001, p.26). The aim of this chapter is to give an overview of the characteristics of human capital within an organization that will increase the chance of success in corporate entrepreneurship. In line with the definition of human capital presented earlier in this paragraph, two groups of interest are distinguished. The characteristics of both managers as well as employees will be investigated. As Hayton and Kelley (20 06) suggest, there is empirical evidence to support the claim that the characteristics of human capital greatly influence the ability of an organization to be, and stay, entrepreneurial. In the final paragraph of this chapter, a summary is presented. 3.1 Characteristics of Managers As acknowledged in the second chapter, the differences between entrepreneurs and corporate managers are quite radical. Thornberry (2003) argues that entrepreneurs posses s three qualities especially well. Firstly, entrepreneurs are opportunity identifiers. Secondly, they are able to reshape and translate these opportunities into viable business propositions. Thirdly, they are able to (successfully) exploit these opportunities through new businesses. The ability to develop radically new, but risky, business ideas is generally not associated with corporate managers. Though, on the basis of empirical research, Thornberry (2003) has concluded that every manager is capable of creative and innovative thinking, as long as they are passionate and willing to develop their skills. In order to assist managers to switch to entrepreneurial thinking, Thornberry (2003) found that education and coaching are very effective tools in order to let these skills surface and develop them. Through these methods managers are encouraged to think out of the box and, crucially, identify the difference between a business idea and a business opportunity. Besides changing the way managers think, Hayton (2005) has found that it is also important for corporate managers to change their management style in order to fully exploit the entrepreneurial potential of an organization. When engaging in corporate entrepreneurship, as argued in chapter 1, an increase in uncertainty is unavoidable. As a result, the need for constant gathering and assimilation of new information increases as well (Hayton, 2005). This information is often gathered cross-functional or from extra-organizational sources. 12

13 This causes the boundaries of organizations to become somewhat less clear. This increase in ambiguity and uncertainty may prohibit or complicate purely rational decisions when choosing between alternatives (Busenitz & Barney, 1997). As a result of the increase in uncertainty and complexity, managers in entrepreneurial organizations should strive for: coordination through mutual adjustment rather than command and control ( ) driven by commitment rather than consensus (Hayton, 2005, p4.). From the preceding paragraphs, it has become clear that managers have to adjust their corporate behaviour in order to be able to be successful in their new role as entrepreneurs. It is clear that corporate entrepreneurship requires a different management approach. This approach requires a more personal and less formal style of management including, amongst others, a reduction of bureaucracy, decentralizing authority and encouraging creativity (Luchsinger & Bagby, 1987). This different management approach creates more opportunity for communication and participation. Managers should be aware of their influential role in these processes. Brundin et al. (2008) have found that managers should be aware of the emotions they display. The displayed emotions can have great influence on the entrepreneurial output of their employees. The results of empirical research show that managerial displays of confidence and/or satisfaction towards an entrepreneurial project, can significantly positively influence the willingness and commitment of employees to act entrepreneurial. Similar, but significantly negative, relations were established between more negative emotions such as frustration and worry (Brundin et al., 2008). From this finding, it becomes clear that managers in an entrepreneurial setting should be aware of the emotions they display for they affect motivation and commitment of employees regarding entrepreneurial projects. Therefore, managers who understand the effects of the emotions they display, in other words managers who are emotionally intelligent, will have superior motivational skills. This in turn will positively influence the entrepreneurial output of their employees (Brundin et al., 2008). 3.2 Characteristics of Employees According to Hayton and Kelley (2006), specific individual competencies of employees are necessary when an organization wants to successfully engage in entrepreneurial activities. Kelley, Peters and O Connor (2009) argue that an important skill for corporate entrepreneurs, is the ability to create, reshape or mobilize relationships to serve the entrepreneurial goal. This skill is referred to as individual network capacity. Individual network capacity refers to the ability of an individual to access knowledge that is beneficial for the entrepreneurial project at hand, through locating and securing assistance and cooperation from other members 13

14 of the organization (Kelley, Peters & O Connor, 2009). Fully exploiting the potential of the available network, or even actively expanding the network outside of the organization, maximizes the base of knowledge and skills that can be accessed, thus positively influencing the chance of entrepreneurial success (Kelley, Peters & O Connor, 2009). Being convincing and confident can surely assist individuals in exploiting the full potential of their network. More general, Kelley, Peters and O Connor (2009) have found that when these traits are present, it can boost the chance of success of corporate entrepreneurial projects. Kelley, Peters and O Connor (2009) refer to these traits as entrepreneurial persuasiveness. Entrepreneurial persuasiveness relates to the presence of the personality traits of being persistent, confident and convincing. Persuasiveness is needed when dealing with entrepreneurial uncertainty. Individuals need to feel confident about their innovation. They also need to be willing to convince other members of the organization, as well as individuals outside of the organization, of the value of their innovation. This requires persistence. Being passionate about the project at hand will assist entrepreneurial persuasiveness. Individuals need to believe in their innovation and try to improve it. Set-backs need to be translated into opportunities for improvement. In general Hayton and Kelly (2006) suggest that four entrepreneurial roles must be present in one or more of the employees in order to be successful. The first role that has to be fulfilled is the role of the innovator. In order to be innovative, employees must be creative and able to recognize opportunities. A broad cognitive base will assist this ability, for it enables individuals to combine knowledge and recognize multiple solutions by looking at problems from different perspectives. Furthermore, innovators need to possess entrepreneurial persuasiveness (as described in the preceding paragraph) and need to be willing to gather and combine knowledge from a wide array of sources. The second role that Hayton and Kelly (2006) indentify is that of the broker. The broker gives the innovator access to a diverse pool of knowledge. Brokering entails gathering knowledge and information from many different sources, both from existing as well as new sources. By combining the knowledge and information, breakthrough innovations may arise. In order to be successful in the brokering process and combine information from different sources, employees must be able to reason analogically. This enables employees to use knowledge that originates from a certain domain, and translate this knowledge to other domains in order to solve problems in the innovation process (Hayton & Kelley, 2006). Furthermore, the broker must also possess entrepreneurial persuasiveness and have a high individual network capacity. 14

15 Hayton and Kelly (2006) further identify the role of the champion. The champion can be considered as the catalyst of an entrepreneurial project. Championing regards a more or less social role within a project team. Champions are motivators. They inspire and enthuse their colleagues by promoting the potential they see in the innovation at hand. By showing and spreading great confidence towards the entrepreneurial project, they aim to increase the entrepreneurial commitment of the other employees (Howell & Higgins, 1990). Champions must possess excellent social skills. They rely on their formal and informal relationships and must therefore be charismatic, trustworthy and credible. Finally, Hayton and Kelly (2006) suggest that a sponsor must be present in the entrepreneurial environment. A sponsor, as the name already suggests, makes sure that entrepreneurial teams in organizations have access to the resources they need. Often, but not necessarily, the sponsor has an executive or high-hierarchy function (Cross & Cummings, 2004). Sponsors need to be able to recognize potentially profitable entrepreneurial projects; a deep technological and business understanding is crucial in this process. Furthermore, sponsors need to be risk tolerant and possess entrepreneurial persuasiveness. 3.3 Summary There is empirical evidence that the presence of certain human capital characteristics can promote a successful result in corporate entrepreneurship (Hayton & Kelley, 2006). When engaging in entrepreneurial activities, managers must make the switch to a more entrepreneurial management approach. Thornberry (2003) suggests that managers need to think like an entrepreneur, identifying opportunities and assuming a more risk tolerant attitude. Besides, managers may need to adjust their management style in order to exploit the full entrepreneurial potential of a project (Hayton, 2005). Brundin et al. (2008) suggest that motivational aspects become increasingly important, emotions displayed by managers can influence the commitment of employees to entrepreneurial projects. Employees must be able to mobilize and exploit their network in order to serve the entrepreneurial goal, a skill that is referred to as individual network capacity (Kelley, Peters & O Connor, 2009). Employees must also possess entrepreneurial persuasiveness: a combination of the personality traits confidence, persistence and convincingness. Entrepreneurial persuasiveness assists individuals in moving forward with an innovation. In general, Hayton and Kelley (2006) suggest that there are four roles that need to be fulfilled within an organisation in order to be successful in corporate entrepreneurial activities. They identify the innovator, the broker, the champion and the sponsor. 15

16 Chapter 4 This chapter describes the second independent variable: the organizational climate. There are three features of the organizational climate that will be investigated in this thesis. The first paragraph describes how organizational culture can promote successful entrepreneurship. The influence that the employees level of autonomy can have on corporate entrepreneurship is investigated in the second paragraph. The third paragraph will elaborate on the relationship between organizational slack and innovation, a key element in entrepreneurial success. The fourth and final paragraph of this chapter will present a summary. 4.1 Organizational culture As Linstead (2004) argues, the concept of organizational culture typically is taken to refer to the beliefs, values, behaviour patterns, and understandings that are shared by members of an organization and which are distinctive of it (p ). As becomes apparent from this definition, the dominant values of an organizational culture can affect the decision-making process and behaviour of organizational members (Schein, 1985). Because of this, organizational culture also co-determines what members of an organization expect from each other, as well as what they expect from relationships with external stakeholders such as suppliers and customers (Ireland, Hitt & Sirmon, 2003). Promoting an entrepreneurial culture can thus contribute to instigating an entrepreneurial mindset within the organization, committing its members to the entrepreneurial vision (Ireland, Covin & Kuratko, 2009). In entrepreneurial cultures, organizations must be able to facilitate both opportunity-seeking behaviour as well as advantage-seeking behaviour (Ireland, Hitt & Sirmon, 2003). Creativity and the formation of new ideas must be encouraged, failure associated with risk taking behaviour must be tolerated and innovative change, as a result from organizational learning, must be related to the exploitation of opportunities (Ireland, Hitt & Sirmon, 2003). Another important aspect of organizational culture that affects entrepreneurship is the degree of individualism within an organization ( Hayton, 2005; Hornsby, Kuratko & Zahra, 2002 Morris et al., 2009). The individualistic character of entrepreneurship is one of the most important reasons for resistance when implementing corporate entrepreneurship, as it often collides with the collectivistic nature of the organization (Morris et al., 2009). It is up to organizations to establish a balance between individualism and collectivism. Empirical research conducted by Morris, Allen and Avila (1993), shows that the presence of such a balance is positively related to sustainable corporate entrepreneurship. Individualism, in an entrepreneurial context, may be associated with an increased sense of personal responsibility 16

17 and self-confidence, the creation of a competitive attitude and breakthrough innovations. Collectivism on the other hand may assist in moving entrepreneurial output forward throughout an often elaborate and difficult process. Furthermore, collectivism may be associated with the creation of synergies, a more supportive and sociable business environment and incremental innovations (Morris et al., 2009). Both individualism and collectivism, when pushed too far, can also have several undesirable consequences. An overly individualistic culture can lead to selfishness, unethical behaviour and social conflicts. Collectivistic cultures on the other hand, may lead to group think, free riding and sub-optimal actions as a result of compromising (Morris et al., 2009). In order to promote entrepreneurship, organizations need to strive for balance in the trade-offs of individualism and collectivism that suit the entrepreneurial goal. Besides these organizational implications, it can be stated that the creation, or development, of an entrepreneurial culture is depending heavily upon the presence of a favourable attitude towards entrepreneurship of managers and executives within an organization (Ireland, Covin & Kuratko, 2009). It is essential that they possess an entrepreneurial mindset, as described in paragraph 3.1, for they exercise great influence on the cultural norms as well as on the commitment of employees to the entrepreneurial goal (Ireland, Covin & Kuratko, 2009). The presence of an entrepreneurial mindset and the formation of an entrepreneurial organizational culture, are therefore two interconnected concepts (Ireland, Hitt & Sirmon, 2003). 4.2 Level of Autonomy As Utterback (1994) argues, the main focus of top-managers in large firms is generally more on conservation rather than on creation. Large firms have certain products or services that provide them with income that must be nurtured and preserved. Often, elaborate structures of analysts and controllers are instigated in order to identify the desirability and risk of proposed changes. Because of this, it can be difficult to implement radically new ideas, in other words firms can become resistant to change (Utterback, 1994). Morris et al. (2009) recognize this as a phenomenon that can obstruct favourable outcomes of corporate entrepreneurial activities. Because innovation leads to change of which the outcomes are often unknown, it will inherently compromise an increase of risk. Morris et al. (2009) argue that firms need to establish a balance between the level of autonomy and restraint of employees in order to overcome their resistance to change. Less rigid job descriptions and organic, more horizontal business structures with a broader span of control result in an increase in autonomy. This can be applied to the entire organization or in 17

18 parts of the organization, such as certain divisions, business units or specific project teams (Morris et al., 2009). An increase in autonomy will provide employees with room for own initiative and more independent decision-making. Autonomy provides employees with additional room for invention, improvement, modification and enhancement. Though, as stated earlier, a balance between autonomy and restraint has to be established because increasing the employees level of autonomy too much can also result in several unwanted effects. Too much autonomy can result in the exploration of unrealistic business concepts, business concepts that do not match the strategic scope of the firm or business concepts that are not economically viable (Morris et al., 2009). The level of autonomy that is desirable is firm-specific, though in general it can be stated that incremental innovation requires only limited levels of autonomy, whereas for radical innovation to occur, more considerable levels of autonomy are required. High levels of autonomy must be accompanied by the communication of clear goals and directions, as well as a clear vision (Morris et al., 2009). 4.3 Organizational Slack The desirability of organizational slack has been subject of academic discussion, for it has been associated with both desirable as well as undesirable effects. This discussion has resulted in several definitions, both positively as well as negatively orientated. In this thesis organizational slack is defined as: the pool of resources in an organization that is in excess of the minimum necessary to produce a given level of organizational output ( Nohria & Gulati, 1997, p.604). Most importantly, in relation to entrepreneurship, organizational slack is associated with facilitating innovation (Nohria & Gulati, 1997). Due to the presence of excess resources, firms enable themselves to take on innovative and experimental, but risky projects. The slack resources can absorb the costs of failure, and act as a buffer for the organization (Bourgeois, 1981). On the other hand, organizational slack is associated with principal-agent problems and can even be considered as waste (Williamso n, 1964). Empirical research by Nohria and Gulati (1997) on the relation between innovation and organizational slack yielded an interesting conclusion: they found strong evidence for an inversed U-shaped relation (see appendix). Nohria and Gulati (1997) conclude that firms must establish a balance between resource slack and tightness, in order to maximize their innovative potential. This conclusion is confirmed by Morris, Schindehutte and Allen who obtained similar results from their 2006 research. 18

19 4.4 Summary An entrepreneurial organizational culture will contribute to committing the organizations members to the entrepreneurial goal (Ireland, Covin & Kuratko, 2009). The presence of an entrepreneurial mindset of managers and executives within the organization is essential for the development of an entrepreneurial culture (Ireland, Hitt & Sirmon, 2003). In order to promote successful corporate entrepreneurship, organizations must engage in a balancing act (Morris et al., 2009). Fostering entrepreneurship and innovation requires organizations to establish a balance in the trade-offs of both the level of individualism and collectivism (Morris et al., 2009) and the level of restraint and autonomy (Morris et al., 2009). Furthermore, balance has to be established in the level of organizational slack (Nohria & Gulati, 1997;Morris, Schindehutte & Allen, 2006). 19

20 Chapter 5 In the first section of this final chapter the answers to the research questions and problem statement presented in chapter one are given. First, the individual research questions will be answered, followed by the answer to the problem statement. The second section discusses some general remarks about the academic literature concerning corporate entrepreneurship, as well as the limitations of this thesis. Some recommendations for future research are supplied in the third and final section of this chapter. 5.1 Conclusion RQ 1: How can success in corporate entrepreneurship be defined? In general, successful corporate entrepreneurship will assist organizations in staying competitive. Through entrepreneurial activities, organizations will aim to raise the innovativeness of organizations, making them more flexible and adaptable (Morris et al., 2009). Through process and/or product innovations, organizations aim to exploit recognized opportunities (Ireland and Webb 2007). An increase in organizational knowledge, obtained at both the creation of the innovation as well as at the implementation, can enable organizations to outperform competitors through a continuous stream of innovations (Dess et al., 2003). This can assist organizations in creating or retaining (sustainable) competitive advantages, increasing their potential for profit and growth. RQ 2: What are the required characteristics of human capital in an organization in order to be successful in corporate entrepreneurship? In order to be successful in corporate entrepreneurship, managers and employees need to switch to entrepreneurial thinking. Instead of conservation, creation must be the principal strategy. Through creative thinking, backed-up by a broad cognitive base and a thorough understanding of the business environment, organizational members must be able to identify and recognize business opportunities. Managers need to facilitate this transition; through coaching and training, managers can be assisted in assuming a more entrepreneurial role (Thornberry, 2003). Besides, managers need to adapt their style of management, decentralizing authority and increasing the participation of employees (Hayton, 2005). Because of the uncertain outcomes of an entrepreneurial process, motivation is of great importance in order to move an innovation forward. Intrinsic motivators like passion, confidence and persistence are great contributors to entrepreneurial success (Kelley, Peters & O Connor, 2009). Extrinsically, managers and champions fulfill an important motivational role. Being emotionally intelligent is therefore a beneficial managerial quality (Brundin et al., 2008). 20

21 RQ 3: How can organizations contribute to the creation of an optimal climate for entrepreneurship within an organization? In order to successfully facilitate entrepreneurial behavior within existing organizations, the presence, or development, of an entrepreneurial organizational culture is greatly beneficial. The presence of such a culture, for which managers with an entrepreneurial mindset are a prerequisite (Ireland, Covin & Kuratko, 2009), will contribute to committing employees to the entrepreneurial vision. Furthermore, a well-balanced more enlightened approach of doing business must be implemented in order to stimulate entrepreneurial behavior. Organizations must relax their traditional control mechanisms in order to empower employees to be creative and innovative. Organizations must allocate slack resources (Nohria & Gulati, 1997) and provide employees with a higher degree of autonomy. A higher degree of autonomy and individualism results in an increased sense of personal responsibility, where room exists for individual decision-making and the deployment of own initiatives (Morris et al., 2009). This will positively influence the entrepreneurial output. This said, organizations must be aware to set clear boundaries to the amount of freedom that is granted to its employees in order to keep the innovational output aligned with the organizations strategic goals. Which characteristics of human capital and organizational climate can contribute to increasing the chance of success of corporate entrepreneurship? Organizations must be able to make the switch to a more entrepreneurial approach of doing business in order to successfully facilitate corporate entrepreneurship and achieve associated benefits. Corporate entrepreneurial activities require organizations to adjust their traditional corporate behavioural patterns and attitudes. This transition must be resembled in both human capital as well as in organizational climate in order to stimulate innovative and creative output, which is at the very heart of entrepreneurship. An entrepreneurial organizational climate aims to increase entrepreneurial motivation and commitment of employees. Commitment and motivation are crucial in moving innovations forward in often elaborate entrepreneurial processes. Through the allocation of slack resources, an increased sense of freedom and more autonomous decision-making, employees are allocated with more responsibility and opportunity for self-achievement. Reinforced by intrinsic qualities like selfconfidence and persistence, these circumstances aim to increase both the entrepreneurial motivation and commitment of employees. Besides, the presence of employees who are convincing and possess the ability to mobilize and exploit their available network to serve the entrepreneurial goal can also play an important role in the entrepreneurial process. In every entrepreneurial process, the presence of entrepreneurially orientated managers is crucial. The managerial attitude towards entrepreneurship influences the motivation and commitment of employees both directly, as well as indirectly through the organizational culture. 21

22 5.2 Discussion and Limitations When reviewing parts of the academic literature concerning the concept of corporate entrepreneurship, it soon became apparent that the concept is still pretty hazy. Several definitions of relevant constructs vary from author to author, the exact effects of practicing corporate entrepreneurial activities are not undisputed and findings from different disciplines of research are scattered. The effect of this obscurity is the very general character of a lot of the suggested conclusions and findings. In this thesis two independent variables, namely human capital and organizational climate, are investigated. Due to spatial availability, a selection had to be made in describing the characteristics and concepts concerning these independent variables that could contribute to finding an answer to the problem statement. In order to answer the problem statement secondary data was gathered, this method of data collection can lead to the exclusion of experimental researches, or new researches that have not been published or posted yet. 5.3 Recommendations This thesis aims to provide an integrative framework, contributing to the academic field of corporate entrepreneurship. By investigating the variables introduced in this thesis, some guidelines for increasing entrepreneurial success are discussed. Future research could empirically verify the presence of the relations suggested in this thesis. Besides verifying the presence of the relations, it could also be relevant to identify the strength of correlation of the independent variables with respect to entrepreneurial success, either individually or clustered. This could present organizations with specified information as to what variables are most relevant for increasing the chance of entrepreneurial success. Future research could also concentrate on establishing a more in-depth framework of increasing entrepreneurial success through segmentation of the empirically obtained results. In order to do so successfully, a wide variety of (entrepreneurial) organizations with different characteristics has to be involved in the sample. The obtained results could be segmented in order to apply to specific sectors, geographic regions and/or sizes of organizations. The conclusions of research conducted in this manner could have beneficial practical implications for organizations. Results from this research could provide organizations with specific directions on how to facilitate corporate entrepreneurship in their line of business. By analyzing the results, more specific conclusions could be drawn about the effects that the relevant variables have on facilitating corporate entrepreneurship specified for each segment. Furthermore, it could also indicate the most relevant variables, again specified per segment. 22

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27 Appendix Figure 4: The observed relationship between slack and innovation (Nohria&Gulati, 1997, p.608) 27