The entrepreneurial perceptions of strategy makers: Constructing an exploratory path in the pursuit of radical growth

The

entrepreneurial

perceptions

of

strategy

makers:

Constructing

an

exploratory

path

in

the

pursuit

of

radical

growth

Stern

Neill

,

Jonathan L.

York

a b s t r a c t

For established firms, radical growth requires experimenting with new alternatives, which can test the boundaries of management's thinking. This study proposes that entrepreneurial perceptions of the strategic situation and market environment have a direct influence on corporate entrepreneurship (CE) strategy, which is strategy that supports new business development and renewal. The results indicate that strategy makers will pursue a more explorative CE strategy in situations framed as positive, less controllable and yet knowable, and in environments perceived as munificent and dynamic. Additionally, with explorative CE strategy comes a greater investment in radical growth (i.e., new lines of business). The paper concludes with a discussion of the study's implications in regards to the relationship between interpretation and strategy and the management of attention and meaning.

1. Introduction

Firms may pursue lower-yield growth based on strategy that derivesfromknownparameters(e.g.,capabilities,products,technol­ ogiesandmarkets)orradicalgrowththatstretchesthebusinessinto newdomainsbutmayalsostrainorsupplantexistingknowledgeand resources(Day,2006; Treacyand Sims,2004; Varadarajan, 2009). Venturingintotheunknownrequiresamoreexploratoryapproachby strategymakersthatextendsbeyondexistingproducts,marketsand competencies. Explorative strategies seek change through experi­ mentation with new alternatives, as opposed to exploitation strategies, which pursue incremental change that supplements existing alternatives. This study examines theexploration ofnew product-marketspacesandfirmcompetenciesbystrategymakersin existingfirms,whichisthedomainofcorporate entrepreneurship (CE)strategy.

ToinvestigateCEstrategy,thisstudyexamineshowtheentrepre­ neurialperceptionsofindividualshighlyinvolvedinstrategy-making influencesthedegreetowhichtheorganizationengagesininnovation andrenewal.Entrepreneurialperceptionsareawayofconceivingthat accountsforthesubjectivenatureofopportunityconstruction and resourcemobilization(Koretal.,2007).Theperceptionsofexecutives performanimportantfunctionintheallocationofattentionandhow thefirminteractswithitsenvironment(GavettiandLevinthal,2000). CEstrategydescribesapredispositiontothinkandactinaparticular manner,specificallyas“avision-directed,organization-widereliance

on entrepreneurial behavior that purposefully and continuously rejuvenatestheorganizationandshapesthescopeofitsoperations throughtherecognitionandexploitationofentrepreneurialoppor­ tunity”(Irelandetal.,2009,p.21).Apotentialambiguityrelatedtothe domainofCEstrategyisitsrelatednesstoexistingbusinessoperations andcompetencies(SharmaandChrisman,1999).However,several studiesconceptualizeCEbasedonthedegreeofnewnessinproducts, markets and/or competencies(Covin and Miles,1999; Dess etal., 2003).ThedegreeofnewnesscapturestheextenttowhichCEvaries fromexploitativetoexploratory.Thisresearchpursuesthisfurtherby conceptualizing exploration as a more radical form of CE, while exploitationisanincrementalformofCEstrategy.

In the initial conceptualization, March (1991) argues that explorationandexploitationareessentialyetincompatible.Explora­ tionandexploitationareessentialinthatanorganizationthatpursues explorative–totheexclusionofexploitative–strategiesmaynever realizefullreturns;whereas,astrictexploitativestrategysuffersfrom atendencytowardobsolescence,especiallyinamarketenvironment. Anambidextrous organization balancesthese competingstrategies (He and Wong, 2004; Tushman and O'Reilly, 1996); however, achieving such balance requires managing multiple paradoxes as eachapproachdemandsdifferentorganizationalconfigurations(e.g., resources,procedures,strategies,schemasandculture).

indicatethatenvironmentalperceptioninfluencesCE(Edelmanand Yli-Renko,2010;Simseketal.,2007;Zahra,1991,1993);however,research hasnotexaminedhowastrategymaker'sentrepreneurialperceptionof bothstrategicsituationandmarketenvironmentinfluencestheformof CEstrategyanditsimpactonthepursuitofradicalgrowth.

Irelandetal.,(2009)proposethatindividual(pro-entrepreneur­ ial)cognition andexternalenvironmental conditionsinfluencethe adoptionofCEstrategy.Thispapercontinuesthislineofreasoningby specifically examining the effects of entrepreneurial perceptions. Afterall,itisthisinterpretationbystrategymakersthattranslatesinto business strategy (Burke, 1984; Child, 1972) with interpretation mediating theobjectiveenvironmentand business venturingrela­ tionship (Edelman and Yli-Renko, 2010). What remains relatively unexploredandthatthisarticleseekstoaddressaretheperceptual factorsthatunderlietheformofCEbehaviorintermsofthedegreeof exploration.

This paper's contribution is in investigating the relationship betweenentrepreneurialperceptionandtheexplorativeformofCE strategy. Specifically, this research examines how perceptions of situation and environment by strategy makersinfluence thepath takentowardsthemostradicalformofgrowth,thedevelopmentof newlinesofbusiness.Whileperceptioncanconstrainresponse,itcan alsoliberatestrategy.Toexploretherelationshipbetweenstrategy andbusinessgrowth,thepaperexaminestheextenttowhichaCE strategyexperimentswithnewalternativesratherthansupplements existing alternatives (i.e., exploitation). Therefore, the question guiding this researchis: whatrole doperceptions perform inthe moreexploratorypathtoradicalgrowth?Inexaminingthisquestion, thepaperpresentsaconceptualframeworkandhypotheses,which are tested based on survey responses from senior managers. The paperconcludeswithadiscussionoftheimplicationsthisresearch bringstothetheoryandpracticeofcorporateentrepreneurship.

2. Conceptual framework and hypotheses

The prevailing view in academic research is that business opportunityisdiscovered(Drucker,1985;ShaneandVenkataraman, 2000);however,anewview,predominatelyintheentrepreneurial field,isthatopportunityiscreatedinasmuchasitisfound(Alvarez andBarney,2007;WoodandMcKinley,2010).Fromtheconstructivist perspective,theindividualisanactivecreatorperceivingthecontext thatinfluencesstrategicaction,therebyconstructingtheveryfuture that was envisioned. Inattending to strategicissues, the decision makerbothdefinesthecurrentstateandsetsacourseforresponding (Ocasio,1997).Thetendencyistofocusattentionandexperienceon thenearandfamiliar(LevinthalandMarch,1993);however,sucha convergencetowardssimplificationconstrainsvariabilityleadingto inflexibility,myopia,andaninabilitytoadapt(Miller,1993).Thekey thenbecomesunderwhatcircumstances,andhow,strategymakers constructaninterpretationthatpermitsnewalternativesratherthan simplyadheringtoknownparameters.

There are real differences between objective and perceived conditions,whicharelikelydue towhatisnoticedand howthese conditionsare interpreted(Dotyetal., 2006).Indeed, perceptions may be more relevant to understanding strategy and ultimately performancethantheactualfactsofthesituation.Evidencesuggests thatfirmsmayactuallybenefitfrominaccurate perceptions,which canpromotestrategicchangedespitetheavailabilityorprecisionof externalcues(Sutcliffe,1994;SutcliffeandWeber,2003).Thus,rather thanexaminetheimpactoftheobjectiveenvironmentonthechoice of business unit strategy, this paper examines the in_fluence that perceptionshaveonthedirectionofCEstrategy.

This paper proposes that the entrepreneurial perceptions of strategymakerswillin_fluencetheformofCEstrategy.Toexamine thisrelationship,thecurrentstudyinvestigatesantecedentconditions ofexplorativeCEstrategybyexaminingtheperceptionsofstrategy

makers. Strategy makers enact a plausible construction of the situationandenvironment,whichservesasthenarrativeforpotential action (Weick, 1995). The opportunities available to the firm are regulatedby the perceptionsofits entrepreneurs (Penrose,1959) whichexplainswhyperceptionsare(orcouldbe)entrepreneurial. This paper examines two distinct, but possibly interconnected perceptual domains: situation and environment. The perceived situation describes beliefs about the immediate decision-making context that the individual is addressing, while the perceived environment describes beliefs about business conditions that are externaltothefirm.Thispaperexamineshowperceptionsinfluence theexplorativeformofCEstrategy,asconstruedbytheorganization's strategy makers. Further, this paper posits a positive effect of explorativeCEstrategyonradicalgrowth,byexamininginvestments innew,unrelatedlinesofbusiness(Fig.1).

2.1.Perceivedsituationandexploration

Theperceivedsituationconcernstheexecutive'ssubjectiveviews onthecurrentstrategicdecision-makingcontextwithintheorgani­ zation. Threeelements– valence,controllability anduncertainty– havebeen usedto describesituationsinpriorstudies.Dutton and Jackson(1987)proposethreatsassituationsthatarenegativewhere a loss islikely and there islittle control, whileopportunities are positivesituationswithlikelygainsandadegreeofcontrol.However,

ThomasandMcDaniel(1990)findthatpositive–negativeand gain-lossareempiricallyindistinct;therefore,twomeasuresthatdescribe thesituationarevalenceandcontrollably.Valencecaptureswhether theimmediatesituationisviewedpositively(e.g., opportunity)or negatively(e.g.,threat)(Mittaletal.,2002).Controllabilitygaugesthe extenttowhichdecisionmakersviewthesituationasmanageable

SITUATIONAL VALENCE

SITUATIONAL UNCERTAINTY

SITUATIONAL CONTROLLABILITY

EXPLORATIVE CE STRATEGY

RADICAL GROWTH

ENVIRONMENTAL TURBULENCE ENVIRONMENTAL

MUNIFICENCE

ENVIRONMENTAL COMPLEXITY

PERCEIVED ENVIRONMENT

PERCEIVED SITUATION

based on existing resources (Sutcliffe and Huber, 1998). Other researchers have examined uncertainty during decision-making (Achrol and Stern, 1988; Sitkin and Pablo, 1992). Tushman and Nadler(1978,p.615)defineuncertaintyas“thedifferencebetween informationprocessedandinformationrequiredtocompleteatask.” Together, these three dimensions(i.e., valence,controllability and uncertainty)constitutethestrategymaker'scognitiveconstructionof the strategicdecisionsituation andare proposed tohave adirect effectonthefirm'spursuitofanexplorativeCEstrategy.

A situation with a positive valence is framed as a potential opportunityorgainforthe_firm.Infavorablesituations,managersare morelikely todevelop newcompetencies(Atuahene-Gima, 2005) andimplementagreatermagnitudeofresponse(Whiteetal.,2003), particularly directed at the market (Chattopadhyay et al., 2001; DuttonandJackson,1987).However,ifdecisionmakersperceivethat thefirmalreadyhasadequateresourcestoaddressthesituation(i.e., controllability), thetendency istopursue familiar pathsbased on provenideasandcapabilities(SutcliffeandWeber,2003).Further­ more,underconditionsofuncertainty,decisionmakersarelessable togaugethesituation,itsimpact,orhowtorespond(Milliken,1987). Given a high degree of unforeseeable uncertainty, managers will adhere to tried-and-true approaches that have proven successful (Sitkin and Pablo,1992) — in other words, less likely to pursue explorativestrategies.Thus,experimentationwithnewalternatives andpursuitofamoreexplorativeCEstrategyoccursinsituationsthat areviewedwithgreateroptimism,insufficientinternalresources,and morecertainty.

Hypothesis 1a. Apositivesituationalvalenceispositivelyassociated

withanexplorativeCEstrategy.

Hypothesis 1b. Situationalcontrollabilityisnegativelyassociatedwith

anexplorativeCEstrategy.

Hypothesis 1c. Situationaluncertaintyisnegativelyassociatedwith

anexplorativeCEstrategy.

2.2.Perceivedenvironmentandexploration

Theperceivedenvironmententailssubjectiveviewsofthemarket.

DessandBeard(1984)describetheenvironmentinwhichthefirm conductsits business alongthreedimensions:munificence,turbu­ lence and complexity. Munificence captures the capacity of the markettosupportsustainedgrowth(Castrogiovanni,1991).Turbu­ lencegaugesthelevelofmarketinstabilityinthefirm'scustomer, competitor and technological environments (Jaworski and Kohli, 1993),whilecomplexityisthedegreetowhichtherearemultiple, diverseandinterdependentelementsintheenvironment(Huberand Daft, 1987). It should be noted that each of these represents perceptions of theexternal business environment, ratherthan an objectivestate.

Inmunificent environments,slackexternal resourcesallowthe firmto experiment ratherthanfocus solelyon survival strategies (Castrogiovanni, 1991), which ultimately promotes new business creation(EdelmanandYli-Renko,2010;Simseketal.,2007;Zahra, 1993). Viewing theexternal environment as dynamic encourages exploration of new ideas and alternatives rather than familiar thinkingandstrategy(Davisetal.,1991;Neilletal.,2007;Zhouet al., 2005).This ultimately promotesorganizational innovationand transformation (Lumpkin and Dess, 1996; Zahra, 1991, 1993). Similarly,construingtheenvironmentascomplexprovidesthe_firm withabroadercanvasuponwhichtoexplorenewalternativesrather thanconstrainingstrategytoone-dimensionalpossibilities(Neilland Rose,2006),whichwillacttoencouragetheentrepreneurialnatureof business strategy(Simseketal.,2007; Zahra,1991).Insum,firms experiment with new strategies and resources (i.e., engage in

explorativeCEstrategy)whentheexternalenvironmentisperceived asmunificent,turbulentandcomplex.

Hypothesis 2a. Environmentalmunificenceispositivelyassociated

withanexplorativeCEstrategy.

Hypothesis 2b. Environmental turbulence is positively associated

withanexplorativeCEstrategy.

Hypothesis 2c. Environmental complexity is positively associated

withanexplorativeCEstrategy.

2.3.Explorationandradicalgrowth

Ratherthanrefiningexistingcapabilities,products,technologies andmarkets,whichisthehallmarkofincrementalformsofgrowth, exploration requires that strategy makers venture into unknown territory.Pursuitofnew, unrelatedlinesofbusinessdemandsthat strategymakersdevelopnewapproachesandrelylessonexisting resources.Investmentinnew,unrelatedbusinessrequiresthefirmto stretch existing capabilities and venture into relatively unknown market spaces (Day,2006). Thus,thedecision toinvestin radical growthflowsfromthepursuitofanexplorativeCEstrategy.

Hypothesis 3. AnexplorativeCEstrategyispositivelyassociatedwith

investmentinradicalgrowth.

3. Method

To test the hypotheses, bothnewly developed and established scaleswereused(seeAppendixforscalecontentandsource).Data weregatheredfrombusinessexecutives.Toobtainreliablemeasures, face validity,item analyses and Cronbach's alpha were examined. Structuralequationmodelingwasemployedtotestthehypotheses.

3.1.Measurementdevelopment

Development of the situational valence and explorative CE strategy measures began with conceptual definitions developed throughareviewoftheliterature.Next,anitempoolwasgenerated and reviewedbyapanel offivedomainexperts withexpertisein organizational research.Topurifythe scalesandassess unidimen­ sionality ofscaleitems,apilotstudywasthenundertakenusinga sampleof32seniormanagershighlyinvolvedinstrategicdecisions (averageof5.72onaseven-pointscale)withanaverageofsixormore yearsofexperienceandfromamixofindustries(62.5%services,28.1% manufacturing, and9.4%other). Usingthese responses, unidimen­ sionalitywasassessedbasedona)factorloadingsofatleast.50,b) item-to-total correlations of at least .35, c) average inter-item correlationsofatleast.15,andd)Cronbach'salphaofatleast0.70. The measures were trimmed and revised after ensuring thatface validitywouldnotbecompromised.

3.2.Datacollection

(supplymanagement andinformationtechnology).Eachindividual wasaskedaseriesofbackgroundquestionsinordertoconfirmthat theappropriaterespondentwasreached.Threecontactsweremade (twoletterswithaquestionnaireandareminderpostcard).Thefirst samplerepresented793senior-levelpurchasingexecutivesofwhich 91 responded (response rate = 11.5%), while the second sample represented 652 senior-level marketing executives of which 76 responded(responserate= 11.7%).

Toassessdataquality,responseswereexaminedforkeyinformant competency, non-response bias, data poolability, and common-methods bias. To ensure key informant competency, only those respondents with substantial involvement in the business unit's strategic decisions (four or higher on a seven-point scale) were retained,whichleadtotheremovalof20respondents.Theremaining informantswereexecutives (17.69%chiefexecutiveofficer,27.89% vicepresident,46.26%,middlemanagementand8.16%other)withan average of six or more years of experience and considerable involvementinstrategicdecisions(averageof5.49onaseven-point scale)withtheirorganization.Respondentsalsorepresentedabroad mixof industries(32.7% services,36.1%manufacturing,and 31.3% other).Nonresponsebiasdidnotappeartobeanissue,astherewere nosignificantdifferencesamongthevariablesbetweenearlyandlate returns(cf.,ArmstrongandOverton,1977).ABoxtestconfirmedthat

Table 1

Measurementandstructuralresults.

therelationshipsamongvariableswerenotdifferentacrossthetwo groups(Box'sM= 40.07,F28,46432= 1.34,p= .11)indicatingthatitis

appropriatetocombinethesamples.To testforcommonmethods bias,aHarman'sone-factortest wasperformed(cf.,Podsakoffand Organ,1986).Thetestdidnotindicateacommonsourceofvariance, asthefactorstructureisconfirmedwiththefirstfactoraccountingfor 14.93%ofthevariance.

4. Results

To assess measurement reliability, the same procedure as described intheMeasurement developmentsectionwasfollowed. Basedonthisprocedure,allscalesexhibitedacceptablereliabilities.To determinethateachmeasurewasempiricallydistinct,discriminant validitywasassessedandsupportedinallcases,asthesquareofthe parameterestimate(phi)betweeneachpair ofconstructswasless than the mean of the pair's average variance extracted (AVE) estimates(FornellandLarcker,1981).Table1presentstheinternal consistency estimates,summarystatistics, and correlationsamong constructs.

Asatestofthestudy'shypotheses,structuralequationmodeling wasused.Tocontrolformeasurementerror,eachloadingestimate (lambda)was_fixedasthesquarerootofthereliabilityestimate,and

Internalconsistencyanddescriptivestatistics

Cronbach'sAlpha AVE Mean Standarddeviation

ExplorativeCEstrategy 0.70 .29 4.13 1.05

Radicalgrowth – – 8.11% 12.17%

Situationalvalence 0.93 .77 5.21 1.39

Situationalcontrollability 0.71 .37 5.15 1.01

Situationaluncertainty 0.87 .45 3.11 1.03

Environmentalmunificence 0.84 .50 4.90 1.13

Environmentalturbulence – – 4.26 0.86

Environmentalcomplexity 0.85 .61 5.30 1.06

Correlationsamongconstructs

1 2 3 4 5 6 7 8

(1)ExplorativeCEstrategy (2)Radicalgrowth (3)Situationalvalence (4)Situationalcontrollability (5)Situationaluncertainty (6)Environmentalmunificence (7)Environmentalturbulence (8)Environmentalcomplexity

1.00 0.13 0.12 −0.10 −0.09 0.14 0.23 0.11

1.00 0.11 −0.04 0.02 0.16 0.17 −0.01

1.00 0.22 0.02 0.17 0.09 0.07

1.00 −0.18 0.28 −0.02 −0.11

1.00 0.06 0.15 0.02

1.00 0.16 0.12

1.00

0.25 1.00

Structuralmodelresults

χ2

df SRMR TLI CFI

6.92 6 0.03 0.91 0.98

Explainedvarianceinendogenousconstructs

Endogenousconstructs Explainedvariance

ExplorativeCEstrategy Radicalgrowth

0.25 0.04

Completelystandardizedpathestimates

Hypotheses:path Estimate t-value

H1a:Situationalvalence → ExplorativeCEstrategy

H1b:Situationalcontrollability → ExplorativeCEstrategy

H1c:Situationaluncertainty → ExplorativeCEstrategy

H2a:Environmentalmunificence → ExplorativeCEstrategy

H2b:Environmentalturbulence → ExplorativeCEstrategy

H2c:Environmentalcomplexity → ExplorativeCEstrategy

H3:ExplorativeCEstrategy → Radicalgrowth

0.18 −0.34 −0.27 0.25 0.31 −0.05 0.21

(1.72) (− 2.40) (− 2.45) (2.05) (2.71) (− 0.04) (1.95)

theerrorterm(theta)wassettooneminusthereliability(Hairetal., 2006).Giventhatenvironmentalturbulenceisacompositemeasure,a reliabilityof.80 wasassumedand theerrortermwas fixedat.20.

Table1containsthestructuralmodel results.Theoverallfitofthe structuralmodelwasacceptable(χ2

= 6.92with6d.f.;SRMR = .03; TLI = .91;CFI= .98)andsixofsevenpathsarestatisticallysignificant (pb.05orbetter).H1predictedthatperceivedsituationisrelatedto

anexplorative CEstrategyand issupported forsituational valence (H1a; γ= .18, pb.05), situational controllability (H1b; γ=−.34,

pb.01), and situational uncertainty (H1c; γ=−.27, pb.01). H2,

which posited that the perceived environment is related to an explorative CE strategy,was supported for environmental munifi­ cence (H2a; γ= .25, pb.05) and environmental turbulence (H2b; γ= .31, p_b.01), butnotenvironmental complexity(H2c;γ=−.05,

pN.05). The results indicate that an explorative CE strategy is positively related to the pursuit of radical growth (H3; β= .21,

pb.05).Intotal,thestructuralequationsaccountforaquarterofthe varianceinexplorativeCEstrategyandlessthanfivepercentofthe varianceinradicalgrowth.Except forH2C,theindependenteffects

(H1–H3) are supportedbased onmodel fit, pathsignificance, and

varianceexplained.

5. Discussion

TherearetwopathstoCEstrategy:onedemandsaleapintothe unknownbyexperimentingwithnewalternatives(i.e.,explorative), whiletheotherrequiresanincrementalstepworkingwithinknown parameters(i.e.,exploitative). Growthisthedestinationfor either path;however,deviationfromtried-and-trueapproachesisregulated byhowstrategicissuesareperceived.Explorationrequiresapositive mindsetandacceptancethattheunfamiliarisnotunknowable.This findinglendsadditionalsupporttothebusinessbenefitsofhumble optimism(SutcliffeandWeber,2003).Consistentwiththefindingson strategic change by Wiersema and Bantel (1993), the pursuit of explorative CE strategy occurs when the firm is cognizant of a munificentanddynamic,butnotnecessarilyacomplexenvironment. Exploitation,ontheother hand,isaseeminglymorereliablepath approachedfromaperspectiveoffamiliarity,especiallyintimesof uncertaintyandinenvironmentsperceivedasscarceandstable.

As this study demonstrates, these entrepreneurial perceptual expressions influence how business development and renewal manifest. The results also support that firms which take an exploratory paththatdivergesfromfamiliar waysofthinkingand doingwillinvestmoreheavilyinradicalgrowth.Inregardstothe corporate entrepreneurshipliterature,this paper'sfindingssuggest thatinterpretationhasadirecteffectontheformofCEstrategy.In doingso,thepaperprovidesamoreexpansiveviewby examining dimensionsofboththeperceivedsituationandenvironment.Itisthe entrepreneurial perceptionsof strategy makers – in terms ofthe perceived situationand environment–that shapetheform ofCE strategy towards more exploratory pursuits and the eventual realizationofradicalgrowth.

Thispaperexamineshowentrepreneurialperceptionsinfluence strategy;however,itoffersdifferentresultsthanmightbeexpected from prospect (Kahneman and Tversky, 1979) and threat-rigidity (Stawetal.,1981)theories.Accordingtoprospecttheory,individuals willbelessriskaversewhenfacedwithalikelyloss,while threat-rigidlymaintainsthatthethreatofalikelylossleadstoin_flexibility andriskaversion(Stawetal.,1981).Yet,severalstudiesdemonstrate thatpastsuccessleadstoanincreasedwillingnesstotakerisk(Osborn and Jackson,1988;Thaler and Johnson,1990).Toaccount for this contradictioninresults,severalargumentshavebeenproposedthat the effect of framing on risk behavior is contingent upon risk propensities and perceptions (Sitkin and Pablo, 1992), causal attribution(ForlaniandWalker,2003),andorganizationalroutines andresources(Chattopadhyayetal.,2001).However,itisimportant

to note that both prospect theory and threat-rigidity emphasize responsetothreats.Chattopadhyayetal.(2001)confirmthatneither theoryexplainscorrespondingeffectsforopportunitiesandsurmise thatorganizationalresponsetoopportunitiesmaybedomainspecific. Explaining the construction of opportunity requires alternative theory,whichthispaperseekstosupport.

5.1.Opportunitiesforfutureresearchandlimitations

WhileexplorativeandexploitativeCEstrategiesrequiredifferent kindsofperceptions,thechallengefororganizationsistoexperi­ ment with new alternatives while also sufficiently reaping the rewardsoncenewterritoriesarecharted.Thisstudy'sresultssuggest thatperceptionmayprecipitatetheexplorative-exploitativeduality inthatinterpretationmayconstrainthebusinessunittopursueone strategy over the other. Several studies suggest that the key to balancingthesecompetingstrategiesiscontingentuponthefirm's knowledge-basedcapabilities(AuhandMenguc,2005;Kyriakopou­ los and Moorman, 2004; Wu and Shanley, 2009). Clearly, there remainmultipleavenuesofresearchinhowtocognitivelybalance the potential trade-offs and apparent paradoxes inherent in explorativeandexploitativeCEstrategiesinordertoachieveoptimal outcomes.

isopportunisticallyco-createdwithstakeholders(Readetal.,2009). Examiningrelationshipsbetweenentrepreneurialcognitivecapabil­ ities and strategy presents an interesting avenue of research in corporateentrepreneurship.

Thispaper'slimitationsshouldbeacknowledged.First,relianceon cross-sectionaldatawarrantscaution ininterpretingtheresults.A second limitation is that data collection was restricted to two industries (supply management and information technology)and respondentsonlyrepresentedsenior-levelpurchasingandmarketing executives.Whileeffortswereundertakentoensurethatrespondents werequali_fied,biasesmaybeintroducedbasedonthesampleframe.

5.2.Managerialimplications

Broadly, this research begins to inform executives on how to managegrowththroughthemanagementofattentionandmeaning. Assumingthat strategymakersneednot perceiveastrategicissue accuratelyinordertoprosperfromit,thenstrategiescanbeadvanced by perceiving and communicatingsituations and environmentsin ways that promote long-term goals. If it is not the objective environment determining the route to strategy and growth, then the key becomeshow to manage what is noticed and how it is interpretedinordertoshapetheconstructionofopportunity.This study'sfindingssuggesthowthefirmmaypursueonepathoverthe otherthroughthemanagementofattentionandmeaning.

Whilemanagersmay betemptedtofavoreitherexplorationor exploitation,firmsareadvisednottorelyonasinglepath(Levinthal andMarch,1993;March,1991).Incrementalinnovationshouldnotbe overlooked as a growth strategy (Varadarajan, 2009); however, exploitation without exploration means that the firm concedes radicallynewopportunitiestoitscompetitors.Andyetthetendency isforexploitationstrategiestopushoutexplorativestrategies,which havemoreunpredictableandremoteoutcomes(LevinthalandMarch, 1993;March,1991).Thisisparticularlythecaseatthebusinessunit levelwhereeachstrategycompetesforlimitedresources(Guptaetal., 2006),includingcognitivebandwidth.

The more difficult issue for managers is how to encourage considerationofandexperimentationwithnewalternativesdespite prevailing situational or environmental perceptions. A focus on certainty, for example, leads individuals to “cling to familiar, predictable,andcertainastheirwaysofthinkingabouttheworld” (SorrentinoandRoney,2000,p.4).Overcominginertialtendenciesis agreatchallengegiventhatexplorativeCEstrategiesare,bynature, notcertain.Withequaltendenciestoviewchangeasthreateningand anunwillingnesstoperceiveasituationasuncontrollable,itisoflittle wonderthatfirmsareunabletopursuemoreradicalformsofgrowth. Thechallengeforthemanageristhentoshiftperceptiontoamore exploratorycoursethatisfavorabletoradicalgrowth.

6. Conclusion

Entrepreneurial perceptions influence the strategies that affect growth. This study describes the manner in which situation and environmentareperceivedandhowthisperceptioninfluencesthe trajectoryofthebusinessunit'sstrategy.Thefindingssuggestthatthe road less traveled is taken when the situation is viewed as an opportunity withan understanding that thoughthefirm may not haveallthenecessaryresourcesithassufficientknowledgetoexplore newalternatives.Environmentsperceivedasabundantanddynamic also encourage exploration. While the explorative route is an unknownpath,itisonethatpromotesradicalgrowththroughnew linesofbusiness.Whilemoreresearchisneeded,thecurrentstudy contributestounderstandingtherelationshipbetweenentrepreneur­ ialperceptionandcorporateentrepreneurshipstrategy.

Appendix. Scale content and sources

Construct Contentofscaleitems Source

RadicalGrowtha

Percentageofexpectedbusinessunitgrowthin Treacyand next fiveyearsfromnewlinesofbusiness Sims2004 ExplorativeCE Applycurrentexpertise–developnew Newscale

Strategyb

knowledgeand/orskills,focusonoperational excellence–focusonproduct/serviceinnovation, refinecurrentstrategy–experimentwithnew strategy,investincurrentresources–investin newresources,researchexistingmarkets– researchemergingmarkets,useexisting technologies–developnewtechnologies

Situational Loss–gain,threat–opportunity,negative Newscale Valenceb _{prospect–growthprospect,decliningreturn–}

positivereturn,disadvantage–advantage,crisis– opening,unfavorablecircumstance–favorable circumstance

Situational Resourcesareaccessible,havethecompetencies, Sutcliffeand Controllabilityc _{canbecontrolled,canmanagethissituation, Huber1998}

placesthe firminjeopardy(r),responseis constrained(r)

Situational Situationisunpredictable,donotunderstand Dotyetal. Uncertaintyc

howsituationchanging,uncertainhowaspects 2006 interrelated,unabletopredict,difficultto

determineimpact,uncertainoftheeffect,unable topredictconsequences,uncertainofresponses, difficulttodeterminealternatives

Environmental Demandisgrowing,resourcesareeasily Sutcliffe Munificencec

accessible,saleshavebeengrowing,totalvalue 1994 ofassetsisdeclining(r),capitalexpendituresare growing,marketingopportunitiesarevery favorable

Environmental Competitioniscutthroat,newcompetitivemove, Jaworskiand Turbulencec

competitorsarerelativelyweak(r),technology Kohli1993 ischangingrapidly,rateoftechnologicalchange

hasincreased,technologicaldevelopmentsare ratherminor(r),newcustomerstendtohave differentneeds,catertothesamecustomers(r), customers'preferenceschange

Environmental Weoperateinacomplexenvironment, Sutcliffeand Complexityc

numerouselementsoftheenvironmentare Weber2003 relevant,environmentcomposedofdiverse

elements,environmentalelementshave interdependencies

(r)Reversecoded.

a _{Figurederivedbasedon allocationof expectedbusiness unitgrowthusinga}

constant-sumscaleof100%tothefollowing:customersharegain,marketsharegain, product/servicedevelopment,marketdevelopment,andnewlinesofbusiness.

b

Sevenpointsemanticdifferentialscale.

c

Seven-pointagree-disagreescale.

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