Académique Documents
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Executive
Summary
KEY WORDS
Corporate
Entrepreneurship
Innovation
Focused
Entrepreneurship
Deep Entrepreneurship
Entrepreneurial
Leadership
Most organizations find that their ability to identify and innovatively exploit opportunities
decreases as they move from the entrepreneurial to the growth phase. However, the key to
success in the highly competitive and dynamic environment that most companies presently
operate in is to retain this ability. Therefore, companies need to adopt an entrepreneurial
strategy seeking competitive advantage through continuous innovation to effectively exploit
identified opportunities in order to sustain and grow under such circumstances.
For such a strategy to succeed, companies should develop an enabling economic and
political ecosystem that does not impede small or large scale redeployment of resources in new
ways towards creative, entrepreneurial ends. Companies have a range of options to choose from
to achieve this objective. At the one end of this option spectrum is focused entrepreneurship
wherein specific innovation initiatives are created with the rest of the organization insulated
from them. At the other end is a managerial approach that leads to the creation of organizationwide entrepreneurship. Entrepreneurship in such organizations is a shared value and drives
managerial behaviour in conscious and subconscious ways and creates an entrepreneurial
spirit organization-wide.
Many mature organizations, unwilling to alter the status quo, tend to create focused
initiatives that are mandated to identify and exploit new opportunities. While such focused
initiatives may stimulate innovation, the very nature of their design erects barriers between the
existing organization and the innovation effort. This makes it difficult for the organizations to
access and leverage the existing capability base and to integrate new initiatives back into
operational activity.
Companies intent on developing and preserving entrepreneurship organization-wide,
independent of their stage of growth, create an environment in which those who believe in the
attractiveness of opportunities feel encouraged to pursue them. The top managements of such
companies will design an organizational context conducive to autonomous generation of
entrepreneurial initiatives, provide a sense of overall direction to these initiatives, and ensure
that promising ventures receive necessary resources as they move through the uncertain
development process wherein:
money is neither offered nor seen as a primary motivator
entrepreneurial contributions are rewarded with recognition and through provision of
opportunities to engage in entrepreneurial activities on a bigger scale
failure is considered normal and when failure occurs, the focus is on problem solving
and learning from it rather than apportioning blame
appropriate processes are used to capture knowledge created in the innovation process
and routines developed to enable integration of such knowledge to create organizational
rents.
The contrast between patterns of focused and organization-wide entrepreneurship runs
across every element of the organization starting with its mission and covering strategy,
structure, systems, processes, and people skills and attitude. Institutionalizing the elements of
entrepreneurship is crucial to building a sustaining competitive organization in todays
business environment.
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he competitive landscape in many industries today and Dess, 1996; Ray and Ramachandran, 1996). The
is marked by intense competition among existing
motive for entrepreneurship lies in the urge to identify
players and the emergence of many focused
the sources of existing and emerging customer dissatcompetitors targeting specific segments of the market.
isfaction and developing solutions to eliminate them
In addition, the macro environment is characterized by
(Ramachandran, 2003).
rapid technological progress in many fields resulting in
There are three main phases in the entrepreneurial
current solutions to customer problems becoming obsoprocess: the perception and commitment to opportunity,
lete. In this scenario, any company that is not contithe pursuit of opportunity, and de-commitment
nually developing, acquiring, and adapting to new tech(Burgelman and Sayles, 1985). The first of these involvnological advances and to the changing business enviing the process of identifying an opportunity is the
ronment may be making, in the words of Merrifield
toughest of all the phases. Though the recent years have
(1993), the unintentional strategic decision to be out of
witnessed a major research interest in opportunity idenbusiness within a few years.
tification (Shane, 2004; Timmons, 1999), except for a few
These changes have highlighted the need for com- frameworks developed by Kim and Mauborgne (2000),
panies to become more entrepreRamachandran (2003), and Shane
neurial (Dess, Lumpkin and McGee,
(2004), the research is essentially
An entrepreneurial
1999; Brazeal and Herbert, 1999) and
limited in this field.
manager links up discrete
companies around the globe are
Corporate Entrepreneurship
pieces of new technical
indeed attempting to foster entre(CE) is the process by which indiknowledge that would
preneurship so that business opporviduals inside organizations pursue
provide a solution to a
tunities are perceived and exploited
opportunities without regard to the
customer problem,
(Sathe, 1988; Russell, 1999). Many
resources they currently control
matches this technical
companies have succeeded in their
(Stevenson, Roberts and Grousbeck,
capability with the
endeavour to do so and have deve1998). An entrepreneurial manager
satisfaction of the market,
loped new approaches to innovate
links up discrete pieces of new techand garners resources and
and to create new businesses and
nical knowledge that would provide
skills needed to take the
achieve profitable growth. Change,
a solution to a customer problem,
venture
to
the
next
stage.
innovation, and entrepreneurship
matches this technical capability with
describe what such successful comthe satisfaction of the market, and
panies do to compete (Zahra, 1991; Zahra, Kuratko and
garners resources and skills needed to take the venture
Jennings, 1999; Christensen and Raynor, 2003). At the
to the next stage. This process leads to the birth of new
same time, a larger question looming is the challenge
businesses and to the transformation of companies
of sustaining such changes, both in growing and mature
through a renewal of their key ideas (Guth and Ginsberg,
organizations, particularly when the charismatic lead1990).
ership that inspired the change disappears from the
Within the realm of existing firms, CE encompasses
scene. It is an organizational paradox that, while the
three types of phenomena that may or may not be interexisting capabilities provide the basis for the current
related (Sharma and Chrisman, 1999). These are:
performance of a company, without renewal, they are
the birth of new businesses within an existing firm
likely to constrain the future ability to compete (Leonard the transformation of the existing firms through the
Barton, 1992). Institutionalizing entrepreneurship, thererenewal or reshaping of the key ideas on which they
fore, is a major challenge for the companies in the current
are built
competitive scenario.
innovation.
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BENEFITS OF CORPORATE
ENTREPRENEURSHIP
CE can make a significant difference to a companys
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Developing Organization-wide
Entrepreneurship
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Managements interested in promoting entrepreneur- small and big, will not be judged by the outcome but
ship at lower levels must be willing and able to apprethe quality of the processes followed. As evidence of
ciate the perceptions and judgements of people at those
its commitment, several organizations have created
levels. The two major challenges here are related to separate venture funds for supporting innovative ideas.
ensuring that the freedom granted is not misused and
Organizations follow different criteria while selectthat the risks inherent in entrepreneurial activity are
ing entrepreneurial initiatives for support. As is evident
contained.
from the illustrative models discussed in Annexures 1McGrath and MacMillan (2000) have identified four 5, it depends on the organizational leadership, strategy,
broad sets of practices that go into creating an organihistory, and resource characteristics.
zation focused on identifying and exploiting opportuCE activities create new knowledge that enhances
nities:
the companys competencies and results in the devel Practices that set the right tone for innovation which opment of new ones. This knowledge is of three types
are climate-setting practices like disproportionate (Zahra, Nielsen and Bogner, 1999). The first type is
allocation of attention, resources, and talent to this specific to the present line of activities of the company
activity.
and is the key to future product refinements and product
Practices that orchestrate the processes of seeking line extensions. Such knowledge is predominantly techand realizing opportunities to grow the business nical and is seldom sufficient for a company to develop
that include defining the ballpark of innovation a sustainable competitive advantage. The second type
activities the firm would underof knowledge is integrative in natake and instilling the discipline
ture. It brings together many eleThe challenges of
of parsimony so that investments and is firm-specific in nature.
containing risks of the
ments and costs are minimized
This interlinking of existing compeentrepreneurial activity
until an upside potential is demtencies in idiosyncratic ways can
are met through
onstrated.
frustrate the rivals efforts aimed at
constructive control
Hands-on practices that get the
imitating the firms products thus
mechanisms
that
help
top management actively ingiving the firm a competitive advanavoid irresponsible
volved and require the institutage (Itami, 1987). The third type of
behaviour.
To
promote
tion of analytical processes to
knowledge incorporates new ways
entrepreneurship,
identify opportunities that the
of exploiting the technical and inteindividuals
must
be
firm is uniquely positioned to
grative knowledge of the firm and
allowed the freedom to
exploit.
can lead to the commercialization of
think
and
act
in
A process of managing failures
new products and services (Zahra,
unconventional ways.
which sets the standard for fuNash and Bickford, 1995).
ture commitment to such initiCreating value from the wide
atives and involves conducting constructive post- range of new knowledge generated in CE activities
mortems and recouping benefits from failed projects through the introduction of a new product, process,
for use elsewhere.
technology, system, technique, resource or capability in
The challenges of containing risks of the entrepre- the firm or its markets requires management of the
neurial activity are met through constructive control
process of articulating, focusing, sharing, and transfermechanisms that help avoid irresponsible behaviour. To
ring this knowledge. Lynn and Akgun (1998) find that
promote entrepreneurship, individuals must be allowed
a learning-based innovation strategy is appropriate for
the freedom to think and act in unconventional ways.
managing the process of creation and dissemination of
Proscribed behaviour sets the limit for the exercise of
knowledge generated through innovation efforts so that
this freedom and defines what is considered irresponit can be used to enhance and develop capabilities.
sible and not be tolerated. In order to contain the risks,
INSTITUTIONALIZING ENTREPRENEURSHIP
the management must control the entrepreneurial process and not the specific initiatives. If the process is right, Some of the principles that the organizations follow to
a certain percentage of success will follow. Also, projects,
develop and sustain entrepreneurship are the following:
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selective rotation of talented managers to expose ate practices to manage the process of creation and
them to different business territories that can stimu- dissemination of knowledge generated through innovalate perception of new opportunities
tion efforts and operate effectively as a team in order
resource allocation at various stages
to fulfil its role of recognizing the value and opportu clear communication by the leadership about its nities presented by specialized knowledge. Such an
long-term, sustained commitment to entrepreneur- ecosystem will help the firm reap benefits in terms of
ship
capability development and enhancement and the de learning from experiments and bet on people capa- velopment of new products, services, and processes that
bilities because not all ideas will be winners.
enables it to compete effectively in the marketplace and
It is important for organizations to focus their produce superior performance. A top management team
energies on encouraging people who have displayed
that adopts an entrepreneurial strategy and creates a
entrepreneurial qualities in corporate or other contexts milieu in the firm such that this strategy can be executed,
to lead initiatives rather than trying to test the level of
displays entrepreneurial leadership (Devarajan,
entrepreneurship in people using psychometric tests.
Ramachandran and Ramnarayan, 2003).
The quality of leadership represented by the top
Thus, the role of the top management team in firms
management plays a very critical role in driving inno- that pursue an entrepreneurial strategy is to build an
vation in firms and in mastering its dynamics (Kipp,
organizational setting that stimulates exchange of infor2001; Kuczmarski, 1998; Schoen, 1969; Utterback, 1994;
mation between individuals and develop a culture that
Van De Ven, 1986). Firm success is
encourages innovation. The team
determined by the collective leaderalso fulfils the role of recognizing the
For a top management
ship of top management teams
value and opportunities presented
team to perform with
(Reich, 1987) with skills complementby specialized knowledge and intedeftness, clear and shared
ing each other (Timmons, 1979).
grating it to create rents (Alvarez
goals and roles must
The top management which
and Busenitz, 2001).
exist, communication
believes that CE can make a signifiThe top management team, in
must
be
accurate,
sharing
cant difference in a companys abilthe context of an entrepreneurial
of information should be
ity to compete and achieve successorganization, must function in such
rapid,
constructive
ful performance will pursue an ena way that it solves problems, parconfrontation need to be
trepreneurial strategy. This repreticularly in relation to innovation, in
encouraged,
and
belief
sents a policy decision to seek coma well-honed, effortless, and effecand trust in each other
petitive advantage through innovative manner so that innovation activand
in
the
team
should
tion on a sustained basis (Mintzberg,
ity thrives in the firm and the value
be built.
1983) and will involve:
of specialized knowledge created is
designing an organizational
recognized and integrated to create
context conducive to the autonomous generation of rents. Deftness is a quality in a group which permits such
entrepreneurial initiatives by creation of structures functioning (McGrath, MacMillan and Venkataraman,
and a culture that facilitates entrepreneurial behav- 1995). For a top management team to perform with
iour
deftness, clear and shared goals and roles must exist,
providing a sense of overall direction for innovation communication must be accurate, sharing of information
initiatives through an entrepreneurial vision
should be rapid, constructive confrontation need to be
ensuring that promising ventures receive necessary encouraged, and belief and trust in each other and in
resources as they move through the uncertain de- the team should be built.
velopment process.
A firm intent on creating a CE enabling ecosystem CONCLUSION
will not only adopt an entrepreneurial strategy but also
The highly competitive and dynamic environment precreate an entrepreneurial organization that considers
valent in most industries is forcing many companies to
innovation as an accepted and appropriate response to
adopt an entrepreneurial strategy which is seeking
organizational problems. It will also develop appropri-
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competitive advantage through innovation on a sustained basis. The current debate is more on how of
entrepreneurship and we have seen that there are many
possible routes to follow. Essentially, this requires the
top management team to create an organizational setting
that focuses the attention of individual participants on
innovation as an important and expected activity and
Annexure 1: Firm A
The New Ventures Fund of this engineering and manufacturing company
was created to help any employee with a potentially profitable idea
to obtain funding outside normal budgetary channels in order to pursue
it. The hallmark of the fund is its informality. A short note describing
the idea, its potential, and initial funding requirements is all that is
Annexure 2: Firm B
The objective of the New Products Centre (NPC) of this engineering
firm is to use the companys technology to develop new products or
markets that its internal clients can use to grow their existing businesses.
It balances autonomy the ability to explore new ideas with relatively
Annexure 3: Firm C
The New Venture Organization (NVO) of this firm is a formalized
structure to identify, develop, and obtain sponsorship for opportunistic
ideas that do not fit into their originating organization. Proposals go
through an individual initiative stage, a seed financing stage, and,
finally, an implementation and commercialization stage.
A network of 20 innovation offices is located throughout the
corporation. Any employee can approach an innovation office and
receive support, guidance, and access to a network of internal
consultants who can advise him/her on the merit of the idea. The
employee can seek sponsorship for ideas that survive this stage within
the existing organizations of the company.
If an existing business does not support the idea, it is presented
to the business development arm of the new opportunities development
Annexure 4: Amtrex
Amtrex was transformed from a small time air-conditioner manufacturer
with a turnover of Rs. 60 million in 1986 to a high quality world-class
manufacturer of air-conditioners with a turnover of Rs. 2 billion by the
turn of the century through entrepreneurial initiatives of the management
team. The company created cross-functional innovation teams which
regularly met and brainstormed on new possibilities for adding further
value to customers. This resulted in improved efficiency across the
value chain besides creating a new hope and excitement across the
organization. This process led to the development of a new product
Nidra. This novel product, first of its kind in the world, not only made
sleeping in air-conditioned rooms much more comfortable but also
helped customers reduce their power bill.
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Contd.
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Are we attracting the best talent and keeping the talent challenged
and contemporary?
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Sougata Ray is an Associate Professor of Strategic Management at the Indian Institute of Management, Calcutta, and
specializes in strategic management, international business,
and entrepreneurship. He belonged to the initial core group
of faculty that founded the Indian Institute of Management,
Indore. He has taught at a number of reputed business
schools in India and overseas and his research work has
been published in leading international journals. He also
serves as an independent director of two large public sector
organizations.
e-mail: sougata@iimcal.ac.in
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