CORPORATE ENTREPRENEURSHIP ENGAGEMENT IN CORPORATE ORGANISATIONS IN MALAYSIA Selvamalar Ayadurai CB Consultancy & Training, Petaling Jaya, Malaysia Email: drmalar@cbconsultancy.com.my ABSTRACT A study conducted in 2001 to 2003 on the political economy of corporate entrepreneurship in Malaysia revealed that 78.7% of the local Malaysian companies and 74.3% of the multinational subsidiaries practiced corporate entrepreneurship in Malaysia. However, subsequent focus groups and dialogues with the corporate organizations in Malaysia during 2008 to 2010 revealed that more than 90% of middle managers and senior managers were neither aware of the term corporate entrepreneurship or intrapreneurship nor the concept and benefits of corporate entrepreneurship. Hence, there is a lacuna between the findings of the 2003 study and the engagement of corporate employees in the practice of corporate entrepreneurship. This study is aimed at looking at three key areas: i) awareness of corporate employees towards the concept of corporate entrepreneurship; ii) employee engagement in corporate entrepreneurship in 6 dimensions, adopted from Zahra s method of measuring corporate entrepreneurship and competition (Zahra, 1996, 2000), namely, product innovation, process innovation, organisational innovation, national venturing, international venturing and strategic renewal; iii) the profile of the employees involved in the practice of corporate entrepreneurship. An empirical research was conducted with corporate employees in the middle management and senior management levels of local Malaysian companies and multinational corporations in Malaysia. A structured questionnaire with both quantitative and qualitative questions was electronically mailed to a selected group of employees using the judgmental sampling technique. The findings of the study clearly indicate the percentage of corporate employees who are aware of the concept of corporate entrepreneurship, the extent of the practice of corporate entrepreneurship within their organizations, and the profile of the employees engaged in the practice of corporate entrepreneurship. The study highlights the engagement levels of corporate employees in corporate entrepreneurial behavior within their organizations and brings to light their awareness levels in the six dimensions from Zahra (1996, 2000). Establishing an organizational environment, specifically an organizational climate that encourages corporate entrepreneurship, wherein each employee is encouraged to create new things, is of crucial importance and one of the key factors for fostering corporate entrepreneurship (Eggers 1999; Hamel 2000; Sathe 1988; 2003; Sykes & Block 1989) as cited in Narasimhan and Flamholtz (2010). Keywords: corporate entrepreneurship, intrapreneurship, employee engagement, innovation INTRODUCTION The enablers of corporate entrepreneurship include the role of vision, team management and compensation for stimulating corporate entrepreneurship within the organization as researched by Bhardwaj, Sushil and Momaya (2010). These three factors indicate the involvement of people as in employees within the organization to help facilitate the practice of corporate entrepreneurship. The study by Bhardwaj et. al (2010) clearly indicates that alignment of the organization structure with the vision of the organization is the key driver of corporate entrepreneurship efforts. The hierarchical organization structure does not help to promote corporate entrepreneurship. The organization structure which provides scope for flexibility to the employees, is instrumental for stimulating CE initiatives. Secondly, managers at all levels play critical roles in driving CE initiatives. Researchers have emphasized on the contribution of managers at all levels for successful outcomes in entrepreneurial effort (Floyd and Lane, 2000; Ireland et. al, 2002) as cited in Bhardwaj, Sushil and Momaya (2010). The researchers state that top management provides the strategic intent to the entrepreneurial efforts of the company. The vision provides the cultural glue to bind people with the goals of the company (Khandwalla, 2006) as cited in Bhardwaj, Sushil and Momaya (2010). These executive champions need to provide encouragement, support and resources to business units to pursue entrepreneurial initiatives. The three levels of 17
top management, middle management and operating level management are all three critical for effective execution of CE initiatives. Thirdly, the study by Bhardwaj et. al (2010) suggest that the type of compensation has a greater effect than the amount of compensation on a firm s competitiveness. A mixture of variable pay or incentives results in a more significant effect on firm competitiveness than any single compensation source. Rewarding with recognition, enhanced status and the opportunity to engage in such activity on a bigger scale motivates employees to take such CE initiatives. Hence, the study clearly indicates the engagement of employees for successful CE initiatives within an organization. Employee engagement which involves employees at all levels involved in the initiation and execution of CE initiatives is critical for CE success within an organization. This is further confirmed by a recent finding by Kelley (2011) who states that true corporate entrepreneurship relies on people: the entrepreneurs developing these businesses and the managers that guide and support them. It reflects, at its core, an entrepreneurial ability held by the organization (Kelley, 2011). Kelley (2011) studied the evolution of corporate entrepreneurship programs over a period of 4 years in 12 industry-leading organizations: 3M, Air Products, Albany International, Corning, DuPont, GE, IBM, Johnson & Johnson, Kodak, Mead-Westvaco, Sealed Air, and Shell Chemical. All of these companies were building programs to improve the management of entrepreneurship within their organizations, Her findings show that there was a general feeling that good ideas for entrepreneurial ventures could get supported. Typically, communication was open, with people able to converse about ideas with others across the organization, whether or not they knew them previously. Those starting businesses in the past had been rewarded, and even regarded as heroes. There was little fear that failed initiatives would have negative career consequences. The job for these enduring companies, was chiefly centered on adopting their entrepreneurial abilities as change occurred (Kelley, 2011). This view is supported by Abraham (1997) as cited in Kenney and Mujtaba (2007) who states that four factors (autonomy, rewards and reinforcement, time availability, and management support) are required for corporate entrepreneurial success. These studies clearly indicate employee engagement for corporate entrepreneurial success within an organization. This was the lacuna in the Malaysian multinational corporations and local organizations in a CE study conducted in 2001 to 2003 because the findings of the study indicated that 78.7% of the local Malaysian companies and 74.3% of the multinational subsidiaries practiced corporate entrepreneurship in Malaysia. However, subsequent focus groups and dialogues with the corporate organizations in Malaysia during 2008 to 2010 revealed that more than 90% of middle managers and senior managers were neither aware of the term corporate entrepreneurship or intrapreneurship nor the concept and benefits of corporate entrepreneurship. Hence, there is a lacuna between the findings of the 2003 study and the engagement of corporate employees in the practice of corporate entrepreneurship. The purpose of this study is to close that gap. RESEARCH OBJECTIVES This study is aimed at looking at three key areas: i) awareness of corporate employees towards the concept of corporate entrepreneurship; ii) employee engagement in corporate entrepreneurship in 6 dimensions, adopted from Zahra s method of measuring corporate entrepreneurship and competition (Zahra, 1996, 2000), namely, product innovation, process innovation, organisational innovation, national venturing, international venturing and strategic renewal; iii) the profile of the employees involved in the practice of corporate entrepreneurship. REVIEW OF THE LITERATURE For any organization to sustain success it must engage in some form of entrepreneurial activity in order to continue to effectively compete in the marketplace and continue to increase stakeholder value. Therein lies the dilemma of Corporate Entrepreneurship (CE), how can growing organizations nurture an environment for entrepreneurial activity, given that such organizations must have a certain level of policies, procedures, and processes in order to manage and control their activities (Zimmerman, 2010). A study by Zimmerman (2010) of two successful companies, General Electric Company (GE) and Intel Corporation revealed a history of sustained CE that was made possible by their evolving organizational design and strategic processes. Both GE and Intel are large, complex, and thriving organizations who have significant differences in their CE processes. According to Zimmerman (2010), the development of organizations can be connected to Hayek s Theory of Cultural Evolution, where he posits that as civilizations emerge and grow, their members spontaneously create rules and structures in order to foster and facilitate this growth. Therein lies the CE dilemma for the organization how 18
can a growing organization sustain CE while at the same time maintaining the procedures and rules needed for control? Zimmerman (2010) listed four key attributes that could lead to sustained CE behavior: i) organizations should undertake a CE health audit to conduct a comprehensive review of structures, controls, human resources management, and culture as researched by Ireland et. al (2006) as cited in Zimmerman (2010); ii) CE development training for high potential individuals; iii) strategic business unit (SBU) process into their strategic process; and iv) to establish an internal corporate venture capital committee to approve and fund any initiative that would add potential value to the company. Steps such as these have led to a strong history of innovation that have led to new products and businesses at both GE and Intel. A similar finding was revealed by Thornberry (2003) where he studied four large organizations such as Siemens-Nixdorf, Colonia-Axa Insurance, the Venezuelan Oil Company (PDVSA), and Mott s (a part of Cadbury-Schweppes). All four organizations displayed a strong corporate entrepreneurship culture that was made possible by entrepreneurship training of their managers that was driven by a company culture and top level leadership support in developing managers to become entrepreneurs (Thornberry, 2003). The employee engagement factor where employees at all levels were involved in corporate entrepreneurship within the firm was found to be critical. A direct line boss could be a barrier to a corporate entrepreneur if he or she was not committed to the development of new business ventures within the firm. Similarly, the peers of the entrepreneurship training programme participants were found to be an obstacle to the corporate entrepreneur due to envy and competition. Time was also a critical barrier as it prevented corporate entrepreneurs from pursuing their opportunities due to their overwhelming jobs. Hence, managers were expected to do their jobs and develop an opportunity in a stressful working environment. Zimmerman (2010) also found that compensation was a critical factor where if an organization is to teach managers to act like entrepreneurs, they must also be willing to pay them as entrepreneurs. This was supported by Bhardwaj et. al. s study in 2010 where Bhardwaj et. al (2010) identified the enablers of corporate entrepreneurship to include the role of vision, team management and compensation as factors for stimulating corporate entrepreneurship within the organization. CE has been viewed as the driver of new businesses within on-going enterprises as achieved through internal innovation, joint ventures or acquisitions; strategic renewal (Guth and Ginsberg, 1990; Hitt, Nixon, Hoskisson and Kockhar, 1999); product, process, and administrative innovations (Covin and Miles, 1999); diversification (Burgelman, 1991); and processes through which individuals ideas are transformed into collective actions through the management of uncertainties (Chung and Gibbons, 1997) as cited in Dess et. al (2003). Sharma and Chrisman as cited in Dess et. a; (2003) define CE as 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 (1999: 18). Given the importance of employee engagement in the strategic renewal or high birth of new businesses (Guth & Ginsberg, 1990) within an organization, this study highlights the importance of the people factor within an organization to foster CE. The study by the researcher in 2001 to 2003 (Ayadurai, 2006) which highlighted the significant practice of corporate entrepreneurship within corporate organizations in Malaysia which subsequently contradicted with the level of awareness and knowledge amongst managers in 2008 to 2010 towards the concept of CE raised concerns as to employee engagement within the organizations. Was corporate entrepreneurship in Malaysia being practiced by a selected level of managers or a selected department within the organization which led to more than ninety percent of the managers and senior managers not understanding the term, let alone, the concept of corporate entrepreneurship? Can then an assumption be made that CE was being practiced by a selected few within the organization and was not part of the corporate vision or corporate culture, hence the lack of awareness and knowledge amongst the greater majority of the managerial workforce? This paper identifies employee engagement issues within the organization and closes the gap on CE awareness and knowledge amongst the managerial workforce. RESEARCH METHODOLOGY A structured questionnaire was designed for the survey. There were 13 questions comprising of 3 dichotomous questions, 6 Likert-type scale questions, 1 multiple choice question, 2 open-ended questions and 1 question on personal information. The 6 Likert-type scale questions were based on Zahra s method of measuring corporate entrepreneurship and competition where there were six dimensions measuring corporate entrepreneurship: 19
product innovation (5 items), process innovation (4 items), organizational innovation (4 items), national venturing (5 items), international venturing (3 items), and strategic renewal (4 items) as stated in Zahra et. al (2000) and Zahra (1996). This method was chosen because it measured the main aspects of corporate entrepreneurship and uses measures that were validated by Zahra and his colleagues. SAMPLING AND DATA COLLECTION A total of 80 structured questionnaires were electronically mailed (50) and personally distributed using the delivery and collection method (30) to a selected group of managers and senior managers using the judgmental sampling technique. The response rate was 35 out of the 50 that were electronically mailed (70% response rate) and 30 out of the 30 (100% response rate) for the delivery and collection method questionnaires. Overall, 65 questionnaires out of the 80 questionnaires sent were received, deriving a response rate of 81%. DATA ANALYSIS AND INTERPRETATION OF FINDINGS The data were analysed using SPSS version 16.0 and they were tested for reliability. Cronbach Alpha of 0.843 was derived indicating a high internal consistency for the results. On the level of awareness amongst the respondents (managers and senior managers) on the term corporate entrepreneurship, 40% of the respondents said they were aware with 60% saying they were not aware of the term corporate entrepreneurship. This indicates that more than 50% of the employees in the managerial and senior managerial level of the corporate organizations in Malaysia were not aware of the concept of corporate entrepreneurship. On the level of knowledge on the respondents understanding of the concept o0f corporate entrepreneurship, 15% of the respondents were found to have high knowledge (10%) and medium knowledge (5%). Knowledge is defined by their understanding of the main features of corporate entrepreneurship, being innovation, creation of new businesses, opportunity to improve existing processes, sustainability in a competitive business environment and proactiveness. 77% of the respondents said they had no knowledge at all. This indicates that almost 80% of the managerial and senior managerial workforce in the corporate organizations in Malaysia had absolutely no knowledge on corporate entrepreneurship, both the term and the concept. On the question as to whether their corporate organization practiced corporate entrepreneurship, 30% of the respondents said Yes, 13% said No and 57% responded that they did not know. Hence, it can be concluded that 70% of the respondents were not aware whether their organization practiced corporate entrepreneurship or not, again leading to lack of awareness and knowledge. 30% of the respondents who said Yes to the practice of corporate entrepreneurship within their organizations were asked to identify the indicators that showed the practice of corporate entrepreneurship within their organizations. 22% of the respondents said innovation, risk-taking and proactiveness, 3% of the respondents said high birth of new businesses and 11% said strategic renewal (modifying existing products, services and processes to produce something new). 20% said an organizational culture that encourages creativity, innovation, risk-taking and proactiveness and 14% said entrepreneurial mindset. The results indicate that 20% of the respondents are of the opinion that the key indicators for corporate entrepreneurship are innovation, risk-taking, proactiveness and organizational culture. 80% of the respondents do not have the knowledge on the indicators of corporate entrepreneurship, leading to the conclusion that managers in corporate organizations in Malaysia have limited knowledge on the concept of corporate entrepreneurship. On the question as to the employees and departments that practiced corporate entrepreneurship within their organizations, 45% of the respondents said the employees were from the production department, 28% said the employees were from the R & D department, 14% said the employees were from the quality department, and 3% said the employees were from the marketing department. 10% of the respondents said the category of employees who practiced corporate entrepreneurship were managers. 20
An assumption is made by the researcher that this figure is based on the opinion of the respondents and not on justified facts and figures from the practice within the organization. Hence, it can be said that respondents are of the opinion that corporate entrepreneurship is practiced or is the responsibility of the production and R & D department and the responsibility of managers. Respondents were asked to assess the following statements to the best of their knowledge, on a scale from 1 to 5, with 1 = strongly disagree; 2 = disagree; 3 = undecided; 4 = agree; and 5 = strongly agree. The results that follow indicate the responses for 4 = agree and 5 = strongly agree, which will affirm the measures of corporate entrepreneurship within an organization according to Zahra (1996 and 2000). Product Innovation Findings: % of respondents who responded to agree and strongly agree Being the first company in your industry to introduce new products to 40% the markets Creating radically new products for sale in new markets 36% Creating radically new products for sale in the company s existing 36% markets Commercializing new products. 40% Investing heavily in cutting-edge product-oriented R&D. 25% Process Innovation Investing heavily in cutting-edge process technology oriented R&D 25% Being the first company in the industry to develop and introduce 33% radically new technologies Pioneering the creation of new process technologies 35% Copying other companies process technologies (reversed) 30% said 35% they don t copy which indicates originality of their innovation Organisational Innovation Being the first in the industry to develop innovative management systems Being the first in the industry to introduce new business concepts and practices Changing the organizational structure in significant ways to promote innovation Introducing innovative human resource programs to spur creativity and innovation 38% 38% 38% 35% National Venturing Entering new national markets 45% Prompting new national business creation 30% Diversifying into new industries in Malaysia 30% Supporting and financing new national venture and start0up activities 27% Acquiring companies in very different industries 16% International Venturing Entering into new foreign markets 48% Expanding your international operations 34% Supporting and financing start-up business activities dedicated to 27% international operations Strategic Renewal Divesting several unprofitable business units 30% Changing its competitive approach (strategy) for each business unit 42% 21
Initiating several programs to improve the productivity of business units Reorganising operations to ensure increased coordination and communication among business units 73% 68% Summary of results indicate that on an average response, the following findings reflect the corporate entrepreneurial behaviour of the corporate organisations: 35% of the respondents corporate organisations practice product innovation 32% practice process innovation 37% practice organisational innovation 30% practice national venturing with a significant high score (45%) for entering new national markets 36% practice international venturing with a significant high score (48%) for entering into foreign markets 53% practice strategic renewal with significant high scores for initiating several programs to improve the productivity of business units (73%) and reorganising operations to ensure increased coordination and communication among business units (68%) On the question whether the respondents were aware that companies that practice high product innovation, high process innovation, high organizational innovation, high national venturing, high international venturing and high strategic renewal are considered to be high in corporate entrepreneurship behavior, 35% said Yes and 65% said they had no knowledge on this. There was no significant correlation between corporate entrepreneurship and the geographical location of the corporate organisations, type of industry the organizations belonged to, number of years the organization was established, number of employees in the organization. The findings of the Chi-Square Tests reveal a score of > 0.05, which shows that there is no significant relationship or correlation between the variables. DISCUSSION AND CONCLUSIONS Corporate entrepreneurship has become an important competitive tool amongst corporate organizations such as Siemens-Nixdorf, Dell, Intel and GE. It is not a new phenomena and has taken been in existence since the 1970s. Yet, sixty percent of the managers in the Malaysian organizations in this study had no awareness on what the term corporate entrepreneurship meant; eighty percent of the managers had no knowledge on the concept of corporate entrepreneurship; and seventy percent of the managers were not aware whether their organizations practiced corporate entrepreneurship or not. This clearly indicates the ignorance of Malaysia s managerial workforce towards the concept of corporate entrepreneurship. If they were ignorant, they will not know of the importance of CE and use it to compete for sustainable competitive advantage. However, Zahra s measurements on corporate entrepreneurship and competition revealed that averagely thirty seven percent of the organizations practiced the six dimensions of corporate entrepreneurship. Hence, it can be stated that corporate entrepreneurship within corporate organizations in Malaysia exist independently of the managerial workforce. This could mean 2 things: i) only a selected group of individuals in the production and/or R & D department are involved in CE; or ii) CE is being practiced without being labeled as CE; it could be labeled as innovation or external development. This causes a grave area of concern for Malaysian organizations as this reflects a corporate Malaysia which is not entrepreneurial and can be said to be passive or conservative as opposed to aggressive or entrepreneurial. Given the importance of corporate entrepreneurship to the global economy, this could also indicate the non-competitiveness of Malaysian organizations in terms of sustained business success. However, the thirty seven percent of organizations which practiced corporate entrepreneurship to a certain extent indicates that Malaysian organizations are not all devoid of corporate entrepreneurship. When positioned on a continuum ranging from passive to aggressive, they are characterized as being passive moving towards becoming more aggressive or entrepreneurial. The thirty seven percent contradicts with the 78.7% of the local Malaysian companies and 74.3% of the multinational subsidiaries that were found to be practicing corporate entrepreneurship in 2005. This could be due to two reasons: i) the selection of respondents for the 2005 study were senior management and top management compared to the respondents in this study who were largely middle management; ii) the level of corporate entrepreneurial behavior within the firms had declined over the past five years. The reason why the sample population were more of middle managers was because this study was aimed at studying employee engagement and whilst it was clear that top management is involved in corporate entrepreneurship, it was not clear if middle managers and line managers were involved in CE. This study indicates that respondents were of the opinion that CE was the responsibility of managers from the 22
production and R & D departments. This reflects their mindset and the corporate culture that is being practiced in Malaysian organizations. CE plays a key role in inducing and cultivating organizational learning, which is a key source of new knowledge that could be used to develop organizational capabilities (Dess et. al., 2003). Learning is at the heart of the strategic renewal process that enables the firm to adapt and respond to challenges in their new markets (Zahra, Nielsen and Bogner, 1999) as cited in Dess et. al., (2003). Hence, according to Covin and Miles (1999) as cited in Dess et. al. (2003), CE in domestic and international operations creates new knowledge that generates advantages for the firm. This new knowledge, according to Guth and Ginsberg )1990) lies in strategic renewal and the birth of new businesses within existing firms, a classic phenomena of CE. Employees in Malaysia must be trained to think and behave like corporate entrepreneurs and Malaysian organizations must create a corporate culture which engages all levels of employees, irrespective of whether or not they are managers, to engage in entrepreneurial activity. The vision, team management and compensation structures within the organization must drive and enable CE within the organizations. Organisations must work at nurturing corporate entrepreneurs and creating a platform for learning to generate new knowledge for product, process and organizational innovation. Entrepreneurship training must be instituted to create entrepreneurs such as the individuals that made a difference at GE, Intel, Siemens-Nixdorf and Mott s. There are five key areas that have been derived so far: i) vision; ii) team management; iii) compensation structures; iv) entrepreneurship training; and v) learning. This has to be driven by a sixth factor leadership. The top level leadership has to drive corporate entrepreneurship by engaging their employees and making CE an inclusive approach which becomes the responsibility of the whole organization as opposed to selected managers or selected departments. REFERENCES Ayadurai, S. (2006) The Political Economy of Corporate Entrepreneurship in Malaysia, Ph. D Thesis, Faculty of Social Sciences and Humanities, National University of Malaysia Bhardwaj, B.R. and Sushil and Momaya, K. (2010) Drivers and enablers of corporate entrepreneurship, Journal of Management Development, Vol. 30 No.2, pp. 187-205 Dess, G.G., Ireland, R.D., Zahra, S.A., Floyd, S.W., Janney, J.J. and Lane, P.J. (2003) Emerging Issues In Corporate Entrepreneurship, Journal of Management, Vol. 29 No. 3, pp. 351-378 Guth, W. D. & Ginsberg, A. (1990) Guest Editor s Introduction: Corporate Entrepreneurship, Strategic Management Journal, 11: 5-16. Covin, J. G. & Miles, M. P. (1999) Corporate entrepreneurship and the pursuit of competitive advantage. Entrepreneurship: Theory & Practice, 23(3): 47-63. Kelley, D. (2011) Sustainable corporate entrepreneurship: Evolving and connecting with the organization, Business Horizon, Vol. 54, pp. 73-83 Kenny, M. (2007) Understanding Corporate Entrepreneurship and Development: A Practitioner View of Organizational Intrapreneurship, Journal of Applied Management and Entrepreneurship, Vol. 12 No. 3, pp. 73-81 Martinez, A.M.R. and Rodriguez, Z.F. and Inchausti, E.V. (2009) Exploring corporate entrepreneurship in privatized firms, Journal of World Business, Vol. 45, pp. 2-8 Narasimhan, R. K. & Flamholtz E. G. (2010) Growing Pains: A Barrier to Successful Corporate Entrepreneurship, (online), Anderson School of Management, University of California, Los Angeles, www. mgtsystems.com/media/1690.pdf Thornberry, N.E. (2002) Corporate entrepreneurship: teaching managers to be entrepreneurs, Journal of Management Development, Vol. 22 No. 4, pp.329-344 Zahra, S. A. (1996) Governance, ownership, and corporate entrepreneurship: The moderating impact of industry technological opportunities, Academy of Management Journal, (December), 39, 1713-1735. Zahra, S. A., Neubaum, D. O. & Huse, M. (2000) Entrepreneurship in medium-size companies: Exploring the effects of ownership and governance systems, Journal of Management, 26(5): 947-976. Zimmerman, J. (2010) Corporate Entrepreneurship at GE and Intel. Paper read at 2010 EABR & ETLC Conference Proceedings, Dublin, Ireland. 23