ENTREPRENEURSHIP THEORY AND PRACTICE

ASSIGNMENT 2

CORPORATE ENTREPRENEURSHIP;

1. DIFFERENCES BETWEEN INTRAPRENEURSHIP AND

ENTREPRENEURSHIP

2. CLASSIFICATION OF CORPORATE ENTREPRENEURSHIP

3. HOW TO NURTURE ENTREPRENEURSHIP

Group 1

1. Francis Kawagga Tel: 0712848252

2. Odhiambo Anita Akinyi Tel: 0782640981

3. Apolot Stella Tel: 0751884000

CORPORATE ENTREPRENEURSHIP

1.0 Introduction

Corporate entrepreneurship is an evolving area of research. Today there is no universally

acceptable definition of corporate entrepreneurship. Despite the growing interest of corporate

entrepreneurship, there appears to be nothing near a consensus on what it is. Some scholars

emphasizing its analogy to new business creation by individual entrepreneurs, view corporate

entrepreneurship as a concept that is limited to new venture creation within existing organizations.

(Burgelman, 1984). Others argue that the concept of corporate entrepreneurship should

encompass the struggle of large firms, to renew themselves by carrying out new combination of

resources that alter the relationships between them and their environment. (Baumol, 1986;

Burgelman 1983).

According to Zahra (1991), corporate entrepreneurship refers to the process of creating new

business within established firms to improve organizational profitability and enhance a firm’s

competitive position or the strategic renewal of existing business. Burgelman conceptualizes the

definition of corporate entrepreneurship as a process of extending the firms’ domain of competence

and corresponding opportunity set through internally generated new resource combinations.

Despite the different views of different scholars on the subject, the implication of corporate

entrepreneurship is that entrepreneurial activities are explicitly supported within established

organizations, provided with organizational resources and accomplished by company employees.

The term intraprenuership was coined in America in the late 70s, several senior executives of big

corporations in America left their jobs to start their own businesses because the top bosses were

not receptive to innovative ideas. These executives turned entrepreneurs, achieved phenomenal

success in their new ventures and some posed a threat to the corporations they left.

A few years ago, industrialists all over the world started devising ways of stopping the flight of their

brightest executives. In 1976, Norman Macras wrote in the London economist that successful big

corporations should become confederations of entrepreneurs. An American management expert

2

Gifford Pinchot wrote his famous book intrapreneuring in 1985 and used the term intrapreneurs to

describe the persons who resigned from their well paid executive positions to launch their own

venture.

What was needed were a system and an organizational culture within a large organization that

would allow the executives to operate like entrepreneurs. Pinchot suggested the creation of a

system that will provide selected executives a status within the corporation similar to that of an

entrepreneur in society. The notion of intrapreneurship requires that managers inside the company

should be encouraged to be entrepreneurs within the firm rather than go out side.

Jack Welsh, chairman of the general electric corporation of USA observes, one key to alluring

entrepreneurial managers to flourish is to give them a sense of ownership of their businesses as if

they were their small autonomous business, create an environment that exalts risk taking. What is

need in large bureaucratic companies is a strong and healthy risk taking culture where risk taking

managers are assured of security and rewards.

1.1 The difference between entrepreneurship and intrapreneurship

It is clear that scholars view the two concepts in different ways. There is no universally acceptable

definition for both the terms entrepreneurship and intrapreneurship. To appreciate the difference

between the two, we must look at the distinction between an entrepreneur and an intrapreneur.

An entrepreneur is an independent business man who bears full risks of his business, whereas an

intrapreneur is semi independent and does not fully bear the risk of the business he develops and

operates.

The entrepreneur himself raises the necessary capital from various sources and guarantees the

return to people who give him finance. While the intrapreneur neither raises the capital himself nor

guarantees any returns to the suppliers of capital.

An entrepreneur operates from outside an organization whereas an intrapreneur is an

‘organizational man’ operating from within the organization.

3

Given the above distinctions, we can conclude that entrepreneurship is a creative and innovative

response to the environment and an ability to recognize, initiate, and exploit an economic

opportunity. It is a function of handling an economic activity, undertaking risks, creating some thing

new and organizing and coordinating resources.

While the implication of intrapreneurship is that entrepreneurial activities are explicitly supported

within established organizations, provided with organizational resources and accomplished by

company employees. The innovative employees disrupt the company in constructive ways to

instigate new product or services. Therefore, there is a thin line that distinguishes intrapreneurship

from entrepreneurship. One can conclude that intrapreneurship is entrepreneurship within a

corporation.

1.2 Classification of corporate entrepreneurship

Hans schollhammer provides five classification of intra-corporate entrepreneurship. Each

classification implies a supportive environment and a cooperate endeavor within an organization

that benefits not only the corporation but also the innovative manager.

Administrative entrepreneurship: here, the firm moves a step beyond formal research and

development projects to encourage greater innovation and commercial development of new

inventions. The distinction that makes R&D entrepreneurial is a philosophy of corporate

enthusiasm for supporting researchers while providing extensive resources for making new ideas

commercial realities. Personnel in R&D will be only partial contributors, implementation relies on

contribution form many other departments as well as from an entrepreneurial team.

Opportunistic entrepreneurship: formal structural ties are loosened in this model as

intrapreneurs are given the freedom to pursue opportunities both for the organization and through

external markets. For example, Quad/graphics, the company that prints US news and world report,

has taken opportunistic entrepreneurship a step further when printing technology begun to change

4

rapidly with computers, the company challenged its engineers to design state- of- the- art

equipment. They did so but they also convinced management that the technology itself was

marketable. The company then created a separate subsidiary, Quad/tech, and gave its engineers

executive control and the autonomy to sell technology openly to anyone. Although they are isolated

from the parent company, they have significant support for innovation.

Acquisitive entrepreneurship: the acquisition concept is one of the corporate managers in search

of external opportunities such as other firms and entrepreneurial start ups that can enhance the

corporate profile through mergers, acquisitions, joint ventures and licensing agreements. Rather

than develop ideas internally, corporations actively court other firms that have proprietary

knowledge or promising products. For instance major companies such as GM, IBM, and General

Electric have created joint ventures or new subsidiaries through acquisition.

Imitative entrepreneurship: sometimes bordering on corporate espionage, imitative

entrepreneurship takes advantage of other firms’ ideas and simply brings to bear the weight of

corporate muscle to control markets. The Japanese have suffered this label for years, perhaps

rightly so, in many instances they have studied American products, found ways to improve on

those products at lower costs and exported them to American markets. The fact remains that if a

company provides consumers with valuable products or services, they are not interested in how it

all came about. Imitation is a way of shaking out less efficient producers as more capable firms

take the initiative.

Incubative entrepreneurship; When new ideas materialize, they must be developed to the stage

of feasible commercialization. This incubative process is necessary for any corporate endeavor

and the pattern for this activity has been to create project teams charged with high impact

implementation programs. these teams are expected to put an innovation through its paces, to

subject the idea to torture, to test market prototypes and then to either kill the project or push for

implementation. As a result, the incubative process has evolved towards a pattern more reflective

5

of this oriented entrepreneurship. A team is established as a semi autonomous new venture

development unit that often has seed capital, access to corporate resources freedom of

independent action and responsibility for implementation from inception to commercialization.

1.3 How to nurture intrapreneurship

To promote entrepreneurship within a corporate environment, firms must release their grip on

efficiency and instead embrace the failures which enable them to learn new ideas and methods,

they must empower the innovative leaders with access to senior management, and equip them

with the support of cross-functional teams.

For instance, large conglomerates like Johnson and Johnson have realized strong performance by

emphasizing and encouraging entrepreneurial activities within their organizations. They have built

a competitive advantage by focusing on innovation and the ability to develop products and services

in a broad market scope. Their success is attributed to a flat and decentralized corporate structure,

based on small autonomous business units that support the intrapreneurs.

Encouraging entrepreneurial activities within a firm means promoting a risk taking culture as well

as tolerating the failures when they occur. The appropriate value from successful innovation can be

enormous for the firm, leading to new market opportunities or increased process efficiency. The

gains will rely on structures and mechanisms such as a renewal of corporate vision to encompass

innovation, support and buy-in from all levels of management, direct channel of communication

between the entrepreneurs and senior managers and a focusing effect from personal risk to the

entrepreneur.

To nurture the intrapreneurs, organizations need to organize them in a separate hierarchy with very

minimal layers of management between the intrapreneurs and senior management. The

intrapreneur must be given autonomy and the ability to make decisions. This increased level of

autonomy will result in the intrapreneur’s ability to fail at an earlier stage of each venture, which

naturally leads to more successes.

6

The organization needs to assign commensurate levels of accountability; this will serve to further

focus innovation, and reinforce conviction and drive.

The mechanisms to promote intrapreneurship do not necessarily rely on a complete organizational

restructuring. However important structures and mechanisms will need to be designed to realize

continued success in innovation.

Renewed corporate vision that treats innovation as fundamental.

Support from senior and middle management.

Identification and development of intra-corporate entrepreneurs through mentors and

leadership development programs

Direct channels of communication between intrapreneurs and senior management.

1.4 conclusions

The concept of corporate entrepreneurship is controversial in part because of the muddy definitions

of entrepreneurship and in part because of ambiguity about the roles of managers within their

established organizations. At one end there are those who view the concept as a contradiction;

that corporate entrepreneurship does not exist because salaried employees who innovate take little

or no personal risk in the process, and they seldom reap rewards for their achievements. At the

other end, they are cast in a heroic term as corporate commandos who alter the course of their

companies through tenacious innovation.

Despite all the controversies surrounding corporate entrepreneurship, organizations are

responding to its importance and creating a favorable environment within their organizations so as

to retain them. There is a growing interest in corporate entrepreneurship as a means for

corporations to enhance the innovative abilities of their employees and also increase corporate

success through the creation of new corporate ventures.

7

References

DAVID, H. Holt (1992). Entrepreneurship: new venture creation

Prentice-hall of India, New Delhi – 110 001

GUPTA, C.B. and SRINIVASAN, N.P. Entrepreneurial Development. Third revised edition

Sultan Chand and Sons educational publishers 23, Daryaganj, New Delhi- 110002

HANS, Schollhammer, “internal corporate entrepreneurship,” in Calvin A. Kent, Donald L. Sexton, and Karl

H. vesper, eds. (Prentice-hall, 1982)

BAUMOL, W. J (1986): “Entrepreneurship and a century of growth,” journal of business venturing, 1(2), 141-

145;

BURGELMAN, Robert A.(1983): “ a process model of Internal Corporate Venturing in the diversified major

firm”, administrative science Quarterly, 28, 223-224.

8