ENTREPRENEURSHIP
Course MSB302 Course NumberYasser Bentahar
ProfessorAl Khawarizmi International College ENTREPRENEURSHIP
http://create.mcgraw-hill.com
Copyright by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without prior written permission of the publisher.This McGraw-Hill Create text may include materials submitted to McGraw-Hill for publication by the instructor of this course. The instructor is solely responsible for the editorial content of such materials. Instructors retain copyright of these additional materials. ISBN-10: ISBN-13:
2013
Contents
1. Corporate Entrepreneurship 1
2. The Nature, Characteristics and Behaviour of the Entrepreneur 16 3. Entrepreneurship, Team Building and Conflict Resolution 40 4. Vision and the Business Model 63
5. The entrepreneurial process 86
6. The Business Plan: Creating and Starting the Venture 118
7. Strategies for Growth and Managing the Implications of Growth 148 8. Intrapreneurship: Developing Entrepreneurship in Large Organizations 178 9. Succession Planning and Strategies for Harvesting and Ending the Venture 204 10. Small Business and Electronic Commerce 230
Credits
1. Corporate Entrepreneurship: Chapter 6 by Deakins, Freel, 2012 1
2. The Nature, Characteristics and Behaviour of the Entrepreneur: Chapter 5 by Kirby, 2002 16 3. Entrepreneurship, Team Building and Conflict Resolution: Chapter 8 by Kirby, 2002 40 4. Vision and the Business Model: Chapter 3 by Byers, Dorf, Nelson, 2011 63
5. The entrepreneurial process: Chapter 3 by Timmons, Gillin, Burshtein, Spinelli, 2010 86
6. The Business Plan: Creating and Starting the Venture: Chapter 7 by Hisrich, Peters, Shepherd, 2013 118 7. Strategies for Growth and Managing the Implications of Growth: Chapter 13 by Hisrich, Peters, Shepherd,
2013 148
8. Intrapreneurship: Developing Entrepreneurship in Large Organizations: Chapter 12 by Kirby, 2002 178 9. Succession Planning and Strategies for Harvesting and Ending the Venture: Chapter 15 by Hisrich, Peters,
Shepherd, 2013 204
10. Small Business and Electronic Commerce: Chapter 9 by Balderson, 2011 230
Learning Outcomes
Introduction
Defi nitions and Forms of Corporate
Entrepreneurship
Corporate Entrepreneurship as Strategy
Quantifying Corporate Entrepreneurship
Conclusions
Review Questions
Suggested Assignments
References
Recommended Reading
6
CORPORATE
ENTREPRENEURSHIP
dea36454_ch06.indd 125 dea36454_ch06.indd 125 2/21/2012 5:00:59 PM2/21/2012 5:00:59 PMAt the end of this chapter you should be able to:
• Identify the importance of entrepreneurship within existing fi rms.
• Discuss the various forms of corporate entrepreneurship and describe the factors that may affect their success.
• Describe the components of an entrepreneurial orientation and the importance of a balanced pursuit of these.
• Discuss the environmental changes that are driving the focus upon corporate entrepreneurship. • Outline emerging empirical patterns of intrapreneurship and appreciate the importance of quantifi cation.
LEARNING OUTCOMES
INTRODUCTION
As Chapter 1 detailed, there is a great variety of approaches to defining entrepreneurship, reflecting varying perspectives. However, common in many of them, and common in public conceptions of entrepreneurship, is the pursuit of opportunity with limited resources. This is entrepreneurship as manifest in most new-venture creation activities, where market opportunities are identified and exploited in the face of resource constraints.(1)
How then can we make sense of corporate entrepreneurship? In a world where, when compared to most of the new and small firms we encounter, corporations appear to have an abundance of resources. They appear well endowed with human, financial and physical capital; they frequently enjoy brand equity, which helps them launch new products and services; and, of course, they usually have, at least some, successful products or ser-vices (with the associated income streams). In this light, the phrase ‘corporate entrepreneurship’ seems a curi-ous juxtaposition or contradiction in terms.(2) Yet, longstanding evidence(3; 4) appears to suggests that the process
of identifying and exploiting opportunities in large established firms is subject to a similar bundle of risks as those faced by new ventures and smaller enterprises.(1)
Perhaps more importantly, while the study of corporate entrepreneurship is not new, there is a growing belief in an increasing entrepreneurial imperative for large corporations.(5) This imperative is being driven by
turbu-lence in the various environments in which corporations operate. In these terms Morris, Kuratko and Covin(6)
talk about the ‘embattled corporation’, facing dramatic changes in the way they must do business. These authors identify four dimensions through which environmental turbulence has created a need for new management practices, in general, and in corporate entrepreneurship in particular:
• Through customers – where increasingly fragmented markets do not permit a ‘one size fi ts all’ approach
to serving diverse customer groups and where rising customer expectations place greater emphasis on costly customization (including investments in relationships and in more elaborate support functions) • Through competitors – where competitors’ new products tempt existing customers away and place an
additional burden on new product development, where the speed of innovation and imitation has improved (and intellectual property becomes less easy to protect), and where technology changes have permitted small niche players to encroach on the more profi table markets of large diversifi ed fi rms
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• Through technology – where technological advances in information search and management, but also in
customer management, production, sales, logistics and inventory management, and, perhaps most cru-cially, in the technologies of innovation, have raised new challenges for executives in large fi rms
• Through legal, regulatory and ethical standards – where increasing oversight has resulted in greater
accountability to a wider group of stakeholders, growing litigation has raised the stakes on liability, more stringent regulatory environments have limited choice and forced companies to learn new ways to com-pete, and, most recently, rising affl uence in home countries has seen priorities shift amongst some stake-holder groups, leading to more public attempts to hold companies accountable for the social and environmental consequences of their actions.
Of course, these four domains are not entirely independent. For instance, much of the increased oversight has been afforded by new media technologies. Similarly, new niche competition is a result, at least in part, of market fragmentation. Neither is the idea of enacting entrepreneurial strategies in turbulent environments a new one. Indeed, it harks back to the classic work of Burns and Stalker(7) on organic and mechanistic firms and to Miller
and Friesen(8) on innovation in conservative and entrepreneurial firms. One of the shared theses of these is the
contingent role played by the environment in strategy formulations. In other words, while firm strategy and organizational structure must ‘fit’, both must also fit with the firm’s environment. That is, while organic firms pursuing entrepreneurial strategies may prosper in turbulent environments, conservative firms with mechanistic structures are better suited to stable environments. Our contention, and the impetus behind much of the renewed interest in corporate entrepreneurship, is that there are very few stable environments remaining where conservatism will win the day. At best, large firms can aim for ambidexterity, through which the superintendence and admin-istration of existing business is carried out in parallel with the search for new business.(9; 10) To employ March’s
classic terminology:(11) the former may be thought of as ‘exploitation’, while the latter is ‘exploration’.
In the current chapter we attempt to further delineate what is meant by corporate entrepreneurship and to look at some of the forms it takes. We also look, in large, at corporate entrepreneurship as strategy. What does it mean and what does it require at the organisational level to have an entrepreneurial strategy or to be open to corporate entrepreneurship? What limitations might be suggested by the existing work and the corporate entre-preneurship thesis? We conclude the chapter by recounting some recent empirical evidence on one particular form of corporate entrepreneurship – ‘intrapreneurship’.
DEFINITIONS AND FORMS OF CORPORATE
ENTREPRENEURSHIP
As the earlier allusion to ambidexterity hints, corporate entrepreneurship is often modelled as a learning pro-cess through which firms sequentially engage in exploration and exploitation.(1) That is, opportunity search
activities are followed by the exploitation of resulting discoveries. However, what seems to be becoming more common is an emphasis on the concurrency of exploration and exploitation. This ‘true’ ambidexterity, wherein firms simultaneously explore potential new opportunities while also exploiting existing products, services, markets and so on, raises greater challenges around, for instance, the allocation of resources and is at the core of striving to pursue corporate entrepreneurship as strategy. Before we turn to this, however, it is important to stress that corporate entrepreneurship is not homogeneous in form.(12)
A fairly typical definition of corporate entrepreneurship is offered by Sharma and Chrisman(13) as: ‘the
pro-cess whereby an individual or group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization’. In this we can see the common dis-tinction between the creation and pursuit of new venture opportunities and strategic renewal.(14) The former,
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following the work of Gifford Pinchot in the 1980s,(15) is normally labelled ‘intrapreneurship’ since it refers to
[almost] classical entrepreneurial activities within existing firms. The latter, in contrast, is often captured under the term ‘strategic entrepreneurship’,(16) which has been defined as ‘involving the identification and
exploita-tion of opportunities, while simultaneously creating and sustaining competitive advantage’.(1; 17) Broadly, it
may involve such activities as strategic renewal, organizational rejuvenation, sustained regeneration, business model reconstruction and domain redefinition.(18) Stopford and Baden-Fuller(19) go a step further, noting that
‘the strategy literature identifies three types of corporate entrepreneurship . . .’:
1 Individual: the creation of new businesses within existing organizations – what is called ‘intrapreneurship’
or ‘corporate venturing’ (e.g. 3M’s development and introduction of Post-it Notes is a classic account of intrapreneurship(20)).
2 Renewal: the transformation or renewal of existing organizations – that is, ‘strategic entrepreneurship’
(IBM’s reinvention of its core business in the 1990s is perhaps one of the more dramatic recent examples of corporate renewal).
3 Framebreaking: where an enterprise changes the ‘rules of competition’ for its industry (Dell’s direct
selling and mass customization approach to computers is one such example(14)).
However, these ‘types’ are not unrelated or wholly independent (see below). As Stopford and Baden-Fuller note,(19) ‘most authors accept that all types of entrepreneurship are based on innovations that require changes in
the patterns of resource deployment and the creation of new capabilities to add new possibilities for positioning in markets’ (p. 522). Following this, two common themes appear to underscore almost all definitions of corpo-rate entrepreneurship: a focus on innovation; and an indication of the centrality of the innovation activity to the overall activities of the firm.(21)
Yet, notwithstanding these common themes, there is considerable variety in how companies approach corpo-rate entrepreneurship – not least as the scope of corpocorpo-rate entrepreneurship is widening to organizations and contexts not previously thought to be fertile ground for entrepreneurship (such as the public and third sector organizations). To this end Wolcott and Lippitz(22) provide a useful framework for simplifying and
understand-ing the bases of heterogeneity in approaches to corporate entrepreneurship.
These authors contend that there are two dimensions falling under the control of management that consist-ently differentiate the approach companies take towards corporate entrepreneurship:
Organizational ownership – ‘who, if anyone, within the organization has primary ownership for the creation
of the new business? (Note: responsibility and accountability . . . might be focused in a designated group or groups, or it might be diffused across the organization)’ (p. 76)
Resource authority – ‘is there a dedicated “pot of money” allocated to corporate entrepreneurship, or are new
business concepts funded in an ad hoc manner through divisional or corporate budgets?’ (p. 76)
The potential independence of these two dimensions allows the authors to draw a 2 x 2 matrix, which serves to outline four ‘dominant’ models (Figure 6.1). For instance, the combination of diffused ownership of corpo-rate entrepreneurial activities and ad hoc funding is styled the ‘opportunist’ approach, while more focused ownership and dedicated resources is associated with the ‘producer’ approach. The basic premise of the frame-work is that the different approaches are likely to be more or less suitable for different environments. This idea that one size is unlikely to fit all is intuitively appealing and accords with the acknowledged heterogeneity of corporate entrepreneurship – if not with the casual use of the term.
In more detail: the authors suggest that most companies begin with the opportunist model. As we will discuss below, unstructured individual entrepreneurship typically precedes more structured and pervasive
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organization-wide entrepreneurship.(19) In the absence of dedicated resources or designated ownership,
corpo-rate entrepreneurship relies upon ‘the efforts and serendipity of intrepid “project champions”’ (p. 76). Of course, it may not happen at all. The opportunist approach is only likely to work in high-trust environments, with extensive social networks underlying the formal organizational hierarchy. In such environments, multiple executives are liable to be in a position to encounter and endorse new venture proposals. In environments where these are absent, ideas are likely to fall through the cracks or be insufficiently supported.
Following one or more unstructured successes, organizations are likely to become more considered in their approach to pursuing organic growth through corporate entrepreneurship. A diffused, ad hoc, approach is unlikely to be one which promises easy reproducibility. As such, the opportunist model is positioned as a start-ing point from which companies evolve to the more premeditated models that occupy that top and right of Figure 6.1. Again, the suitability of the various models is contingent upon the fit with the organizational envi-ronment. The enabler model, for instance, is proposed for organizations where concept development and exper-imentation are relatively inexpensive (e.g. consultancies and technology organizations).
As Wolcott and Lippitz note, Google is the poster child of the enabler model. At Google, employees are permitted to spend up to 20 per cent of their time exploring concepts, building prototypes, selling their ideas to colleagues and building teams to champion them. Project teams form themselves, based on their own terms. If, and when, the team believes it has a commercially viable opportunity it approaches the Google Product Council (which includes the company founders and senior executives) for funding. Successfully funded projects receive further assistance from the Google Product Strategy Forum (e.g. in business modelling and in setting mile-stones). While there is a dedicated source of funds (and other resources), entrepreneurial activity is open to, and encouraged in, all employees. Crucial to this openness is the principle that the Google Product Council applies no predetermined criteria or hurdle rates on projects. As long as there is demonstrated promise and employee interest, projects may continue.
Of course, Google is not a typical company. Its entrepreneurial culture, the fast-paced technology and market environments it inhabits and its access to capital make it a difficult company to imitate. However, Wolcott and Lippitz point out that other organizations, such as Boeing and Whirlpool, have also found that ‘dedicated funds for innovation combined with clear, disciplined processes for allocating those funds can go a long way to
unlock-OPPORTUNIST ENABLER Organizational ownership Diffused ad hoc Dedicated Focused Resour ce authority PRODUCER ADVOCATE
FIGURE 6.1
A typology of approaches to corporate entrepreneurship SOURCE: Adapted from Wolcott and Lippitz (2007).(22)
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ing latent entrepreneurial potential’ (p. 77). The basic premise of the enabler model is that employees, from across the company, will be prepared to develop new ideas if they are given enough support. Importantly, this support is not simply financial. The enabler model also requires strong personnel development and executive engagement if it is to succeed. In Google, the former is manifest in creative and elaborate recruitment activities (see Figure 6.2) that are designed to ensure that new employees are a fit for Google’s culture. The latter, however, is equally impor-tant in ensuring trust in the organization’s commitment to corporate entrepreneurship.
There is also a danger that access to such dedicated pools of resource may encourage ‘bowling for dol-lars’ – i.e. the pursuit of projects that should fall within ordinary business-unit activity or projects that the employees are not seriously committed to championing. An alternative approach, which avoids this danger, is the advocate model. In the advocate model, funding is not at issue. Rather, the company assigns owner-ship of corporate entrepreneurial activity to a dedicated group who act as evangelists and advisers to other parts of the organization. Where projects are pursued, the funding comes largely from existing business-unit budgets. As an example, Wolcott and Lippitz cite DuPont’s Market Driven Growth initiative. In 1999, hav-ing determined that DuPont had reached a ‘stall point’, CEO Chad Holliday asked executive Bob Cooper to develop and implement an initiative that would help reinvigorate company growth. The result was the com-pany-wide launch of the Market Driven Growth initiative in 2000 (see also http://marketdrivengrowth. blogspot.com). The initiative provides DuPont employees with a range of help and advice on activities from idea generation to commercialization. New-venture project teams work with a facilitator from the pro-gramme to prepare a business plan that is subsequently presented to business-unit leadership. Successful ventures act as signals to other parts of the organization and have helped build a multi-billion dollar growth portfolio at DuPont. Importantly, use of the programme is not mandated by senior executives and tangible support is fairly modest (Wolcott and Lippitz report that it is staffed by five full-time employees). Indeed, Bob Cooper is recorded as saying: ‘I thought I’d spend most of my time helping design and build new busi-nesses . . . Instead, I spent at least half my time advocating’ (p. 78).(22) This advocacy model has proven
particularly adept at promoting the growth of established business through the introduction of new ideas. It also helps prevent ‘turf wars’ between old and new business by allowing the ‘old’ some ownership of the ‘new’. It is, however, less likely to be accommodating of more radical forms of corporate entrepreneurship or innovation.
While established business units are unlikely sponsors of disruptive innovation and change, a producer model which vests both resources and ownership in a unit with dedicated responsibility for corporate entre-preneurship may be more permissive. A well-resourced, independent initiative will be better placed to pro-vide the co-ordination necessary where complex technologies are involved or where projects require
competences that are spread across different parts of the organi-zation. Wolcott and Lippitz cite IBM, Motorola and Cargill as examples of companies pursuing a producer model, but elabo-rate on Cargill’s approach: the Emerging Business Accelerator (EBA). They quote David Patchen (the unit’s founder and man-aging director): ‘Prior to the EBA we lacked a clearly defined process for pursuing opportunities that fell outside the scope of existing business units and functions’ (p. 78).(22) The EBA was
founded in 2004 to complement the activities of the outward-looking corporate venture arm: Cargill Ventures. However, the EBA is not about innovation in existing businesses (Cargill has a Chief Innovation Officer structure that is separate from the EBA); rather, it is concerned with the development of new busi-ness. The group funds new business opportunities that have the potential to become new business units for Cargill. The ideas
FIGURE 6.2
Google engineer recruitment advert, 2004
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underpinning these opportunities may come from within the organization or from outside. The example given by Wolcott and Lippitz relates the development of de-icing technology: Cargill’s established de-icing business identified a new de-icing technology that inhibited ice formation. Given cost and performance con-siderations, the new technology was to be marketed and sold to road builders for critical applications such as bridges. However, Cargill’s existing de-icing business was positioned in a commodity market, selling in volume to the United States Department of Transport. While the technology originated in the established business unit, the business model required to commercialize it was unfamiliar. Accordingly, the new tech-nology was transferred to the EBA to bring it to market.
The EBA positions itself as a ‘global clearing house for new concepts and value propositions across Cargill’ (p. 79).(22) It gathers promising opportunities, builds executive teams, conducts due diligence, provides capital
and monitors performance.
Of course, the producer model is not without challenges. Clearly, to be pursued on a similar scale to Cargill, it requires the commitment of considerable resource. It also entails the initial separation of promising projects and the eventual reintroduction of successes. Neither of these is easy, and jealousy and anxiety must be guarded against. For the producer model to work, organizations must build credibility and trust in their corporate-venture activities.
In summary, the archetypes suggested by Wolcott and Lippitz (2007) are a simplifying device. While corpo-rate entrepreneurship activities in some companies may resemble one of the four ideal forms more than others, the two dimensions are more usefully thought of as continua with any individual organization’s position reflect-ing as a tendency towards more or less focused ownership and more or less dedicated resources. Indeed, Wol-cott and Lippitz(22) suggest that very large companies may be able to pursue multiple approaches to corporate
entrepreneurship, noting within IBM the coexistence of an advocate model (Thinkplace and the innovation jams – e.g. https://www.collaborationjam.com) and a hybrid producer-advocate model in the form of the Emerging Business Opportunities programme. Indeed, like an enabler, IBM also supports corporate entrepre-neurship at the divisional level and has developed a corporate culture that, through distributed power bases, may represent aspects of an opportunist model. Ultimately, however, the message is clear:
Unless a company is blessed with the right culture – and few are – corporate entrepreneurship won’t just happen. It needs to be nurtured and managed as a strategic, deliberate act. The traditional, isolated ‘skunk-works’ project is no longer the primary option for companies pursuing the creation of new businesses. Indeed, as IBM, Google, DuPont and others have shown, corporate entrepreneurship does not have to rely solely on serendipity and the grassroots efforts of a few ‘project champions’.(22)
(p. 82)
CORPORATE ENTREPRENEURSHIP AS STRATEGY
The idea, then, is that while corporate entrepreneurial initiatives may frequently appear as the unplanned byproducts of an organization’s day-to-day (deliberate and spontaneous) actions,(23) this is likely to be
insuffi-cient. Such outcomes may speak to the ubiquity of corporate entrepreneurship, but are unlikely to be the basis of a sustainable strategy. Rather as Ireland, Covin and Kuratko(24) suggest, corporate entrepreneurship as
strat-egy ‘implies a level of purposefulness and intentionality with respect to entrepreneurial initiatives that is any-thing other than inevitable’ (p. 21).
The starting point for this appears to be a commitment to innovation and entrepreneurship amongst the senior executives in an organization. In their study of a select number of large, European domestic appliance produc-ers, Baden-Fuller and Stopford(19) observed that individual entrepreneurship ‘especially amongst those who
hold power’ (p. 534) paved the way for more persistent organization-wide entrepreneurship: ‘Sustainable
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progress did not start until the top team was committed to a common direction and was prepared to undergo the pain of reexamining their fundamental values’ (p. 530).
This is a common theme. Ireland, Covin and Kuratko(24) talk in terms of ‘pro-entrepreneurial cognition’,
not-ing that it is essential in top managers if a corporate entrepreneurship strategy is to be introduced and to prevail. While important, the pro-entrepreneurial cognition of other employees is likely to be a function of the extent to which the organization’s incentive system encourages entrepreneurial activities such as opportunity recogni-tion and exploitarecogni-tion – and this will be shaped, in large part, by the executive team.
While these authors define pro-entrepreneurial cognition as positive attitudes to entrepreneurship that are independent of context, there is a clear parallel with the more familiar concept of ‘entrepreneurial orientation’ (EO). Evidence suggests that EO, which has been shown to associate with stronger performance,(25) is found in
organizations where senior executives and organizational culture demonstrate a strong disposition towards innovation, through risk taking and the pursuit of opportunity.(26) Indeed, Dess and Lumpkin(14) are quite blunt:
‘Firms that want to engage in successful CE need to have an EO’ (p. 147). Entrepreneurial orientation is the driving force for corporate entrepreneurship.
ENTREPRENEURIAL ORIENTATION
What then is entrepreneurial orientation? Adapted from Dess and Lumpkin,(14) Table 6.1 outlines the
dimen-sions of EO typically elaborated in the research literature.
Often these attributes are presented entirely in a positive light. As Dess and Lumpkin themselves note, those that advocate the acquisition of a strong entrepreneurial orientation display a ‘normative bias’. In other words, they implicitly favour the pursuit of exploration and adaptation over the efficient allocation and exploitation of the organization’s existing resources. Accordingly, and following Dess and Lumpkin, we attempt a more bal-anced elaboration of the dimensions listed in Table 6.1:
Autonomy – While ‘top down’ approaches to supporting corporate entrepreneurship, such as those discussed
in the previous section, are characteristic of the more entrepreneurial organizations, it nonetheless appears true
TABLE 6.1 DIMENSIONS OF ENTREPRENEURIAL ORIENTATION
Dimension Definition
Autonomy Scope for independent action by individuals or groups in pursuit of a business opportunity
Innovativeness A willingness to pursue novelty through investments in experimentation and creativity. Novelty may be manifest in many aspects of the business
Proactiveness Opportunity orientation. The efforts an organization makes to identify and seize opportunities. Often characterized as foresight or a ‘forward-looking’ perspective
Competitive aggressiveness A willingness to ‘do battle’ with competitors. Refers to an organization’s efforts to outperform or out-compete rivals
Risk-taking The willingness to make decisions and commit resources to projects or ventures whose outcomes cannot be known with certainty in advance Source: Dess and Lumpkin, (2005).(14)
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that many of the best ideas come from the ‘bottom up’. For these ideas to become adequately defined and to gain impetus, a product (or project) ‘champion’ is often required. These champions busy themselves with resource acquisition and advocacy and, in this, require considerable freedom of action or discretion in decision-making.
The primary danger that may result from too much autonomy is one of co-ordination. In the absence of co-ordination there is considerable danger of inefficiency through duplication of effort and insufficient over-sight. Clearly, as we will see with all dimensions of EO, a balance must be struck. Part of striking this balance is about defining a clear sense of purpose, and we return to this below.
Innovativeness – As noted earlier in the chapter, innovativeness is perhaps the only consistent theme in the
literature on corporate entrepreneurship. Without doubt, innovativeness is a central component in an entrepre-neurial strategy. Importantly, as discussed elsewhere in the text, innovation is not simply a technological phe-nomenon. While new products or production processes may be the source of increased revenues or reduced costs, competitive advantage is as likely to arise from new ways of doing business involving, for instance, new ways of serving markets or new ways of organizing resources (e.g. consider Dell’s direct selling model and its impact on the PC industry).
Of course, an innovation strategy is essentially speculative, with returns unknowable in advance. Innovators run the risk of wasted resources if investments (in R&D, training, marketing and so on) don’t yield the hoped-for results. Even if the innovation is successfully developed, the risks of imitation are often very high. Nonetheless, alertness to and investment in new ways to create and capture value are the clearest characteristics of organiza-tions pursuing a corporate entrepreneurship strategy.
Proactiveness – Related to innovativeness, proactive organizations ‘monitor trends, identify the future needs
of existing customers, and anticipated changes in demand or emerging problems that can lead to new venture opportunities’ (p. 150).(14) It is not, of course, simply about spotting patterns, but must also be accompanied by
a willingness to act on the new intelligence. Successful proactiveness confers first mover advantages on organi-zations, and requires that competitors devote resources to responding. The benefits to being a first mover include: premium pricing (with a period where there is no competition to drive down prices); brand building; and channel selection (e.g. the best suppliers or distributors).
However, there are also costs to pioneering and not all first movers are successful. For instance, in addition to direct development costs, first movers with new technologies and new products typically have to bear the costs of educating or convincing sceptical customers. These initial costs, and a commitment to original pro-cesses, often result in persistently higher costs that allow followers to underprice leaders. Similarly, early fol-lowers may also learn from the mistakes and successes of their predecessors which serves to reduce their own investment requirements and risks. Recent evidence supports this ambivalent picture, suggesting that while there is often a sales premium to pioneering, this may be outweighed by cost disadvantages.(27; 28) As before, a
delicate balancing act that weighs costs and benefits is required.
Competitive aggressiveness – Refers to the efforts an organization makes to outperform its rivals. Often this
involves leveraging the resources made available through past successes (as a result of innovativeness or pro-activeness). Common manifestations of aggressiveness include entering new markets with dramatically lower prices than incumbents (often sacrificing profitability to achieve market share) or pre-announcing new products or technologies to discourage competitors (in addition to informing customers). Despite the apparent contradic-tion in terms, competitive aggression may also be defensive, such that ‘firms need to be forceful in defending the competitive position that has made them an industry leader’ (p. 151).(14) And copying the practices and
techniques of successful competitors is common.
However, more aggressiveness is not always positive. Companies may damage their reputation and lose goodwill by being too aggressive. Dess and Lumpkin give Microsoft and its consequent antitrust travails as an example of this. They conclude that ‘competitive aggressiveness is a strategy best used in moderation’ (p. 152).
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Risk-taking – Risk-taking relates to an organization’s readiness to pursue opportunities despite uncertainty
around the eventual success. That is, ‘to act boldly without knowing the consequences’ (p. 152).(14) Like
inno-vation, risk-taking is central to contemporary (and casual) definitions of classical entrepreneurship. Successful corporate entrepreneurship typically involves investments far in advance of anticipated returns. And, equally typically, the scale of these anticipated returns will be unknowable. Dess and Lumpkin identify three types of risk that organisations and their executives face in pursuing entrepreneurial activities:
1 Business risk – associated with activities such as entering new markets or supporting unproven technologies 2 Financial risk – relating to the financial exposure required and the risk/return profile of any new venture.
That is, to engage in entrepreneurial activities, organizations may have to borrow heavily or commit large proportions of their resources
3 Personal risk – refers to the reputation effects of success or failure for executives leading the new
venture. Success in the new venture can give executives considerable influence over the future direction of the organization (as well as significant pecuniary and status rewards). Failure, of course, can have the opposite effects
In this way, risks are not something that organizations seek out for their own sake. Rather, as Drucker argued, entrepreneurs (corporate or classical) are not typically risk seekers.(29) Like most rational individuals they take
steps to minimize risk. A corporate entrepreneurship strategy may involve a higher tolerance for risk, but the calculation of risks is a crucial activity.
Following this, in discussing the dimensions of entrepreneurial orientation, as the basis of corporate entrepre-neurship, we have indicated in all instances the need for ‘balance’.
As noted above, there is danger that discussions of corporate entrepreneurship take on too normative a tone such that innovation is good, more innovation is better, or risk-taking is good, more risk-taking is better. Given the consequences of unsuccessful innovation, risk-taking and so on, this would certainly be foolish. Firms must, it is suggested, ‘strike a balance’. But how is the right balance to be found? Is there an algorithm or scoresheet which may be used?
Clearly the answer to this final question is ‘no’. However, in avoiding ill-considered imperatives to pursue entrepreneurship we believe that organizations may usefully think about why they exist. While some might argue that, at least, private-sector organizations exist to make money, it makes more sense to think of organizations existing to create value. Money is made only to the extent that value is created, communicated and priced. Organizations that fail to create sufficient value rarely persist. Accordingly, any strategy that the organization pursues should aim at creating more value or reducing the costs of value creation – the aim being to maximize the difference between value and costs. A focus on ‘value’ ought to help in balancing, by requiring organizations to examine the motivations for pursuing new opportunities and providing a basis for estimating costs and bene-fits. Moreover, as Dess and Lumpkin conclude,(14) ‘whatever form CE efforts take, the key to successfully
creat-ing value is viewcreat-ing every value chain activity as a source of competitive advantage’. Or, at least, as a potential source of competitive advantage.
QUANTIFYING CORPORATE ENTREPRENEURSHIP
We opened this chapter by noting growing interest in corporate entrepreneurship and a growing belief in its importance as a competitive strategy for firms and organizations. However, whether this increasing attention reflects an increasing incidence of entrepreneurial activities within these firms and organizations is more difficult to say. While the extent of classical entrepreneurship, in the form of new venture creation, is often proxied by government-collected data on business start-up rates or self-employment figures, there is no equivalent data source for corporate entrepreneurship. Indeed, most studies of corporate entrepreneurship
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involve a few case studies (often exclusively concerned with successful firms) or, rarely, limited surveys. As such, it is difficult to say with any confidence how commonplace or widespread is corporate entrepreneur-ship. Certainly, our intuition is that it is on the increase in line with changing environmental and competitive pressures. However, this is hardly satisfactory and a key challenge remains acceptably quantifying the level of corporate entrepreneurship.
To this end an intriguing recent project is reported in a paper by three Dutch economists, Neils Bosma, Erik Stam and Sander Wennekers.(30) As an extension of the Global Entrepreneurship Monitor, and using a similar
framework, these authors report the levels of intrapreneurship in 11 countries.a The authors stress that their
study is exploratory and we should certainly be careful in drawing conclusions from it. However, the initial findings are intriguing.
In the first instance, it is important to recall that ‘intrapreneurship’ is only part of what we have discussed as corporate entrepreneurship. However, it is an important part and is most closely aligned with notions of classi-cal entrepreneurship. In their study, Bosma, Stam and Wennekers operationalize intrapreneurship as ‘employ-ees developing new business activities for their employer, including establishing a new outlet or subsidiary and launching new products or product-market combinations’ (p. 4). From this, they further distinguish ‘narrow’ and ‘broad’ definitions, where the latter includes individuals engaged in either idea development for new busi-ness or preparation and exploitation of these activities. The former (i.e. the narrow definition) requires that individuals be involved in both idea development and the exploitation of opportunities. Here, the parallel with our early discussions of exploration and exploitation is clear.
Regardless of whether intrapreneurship is defined narrowly or broadly, the headline figures are quite clear: intrapreneurship is a minority activity. On the basis of the narrow definition, Bosma and colleagues report intrapreneurship rates (as percentage of employees) ranging from 0.6 per cent in Iran to 4.2 per cent in Norway. Adopting the broader definition inevitably increases the rate of intrapreneurship – from 1.2 per cent (again, in Iran) and 7.4 per cent (again, in Norway). These figures are far lower than those for classical entrepreneurship (using the GEM’s Total Entrepreneurship Activity rate – recall Chapter 2), though it is important to note that the simple number of individuals involved in these activities is unlikely to be a very good indicator of the rela-tive economic impact of intrapreneurship and classical entrepreneurship.
Beyond simple frequencies, the authors also highlight some interesting patterns in the data. For instance, there appears to be an inverted U-shaped relationship between employee age and intrapreneurship prevalence rates, with the lowest rates recorded for employees aged 18–24 and 55–64. Perhaps unsurprisingly, intrapre-neurship increases with firm size; it is more than double in companies employing in excess of 250 compared to those employing fewer than 10. Women also seem less likely to be intrapreneurial than men, especially in high-income countries. Indeed, in contrast to the U-shaped relationship observed between economic development and classical entrepreneurship (recall Chapter 2), the data suggest a simpler positive relationship between the wealth of a country (measured by GDP per capita) and intrapreneurship rates.
While the relationship is far from perfect (with low-income Chile recording a higher intrapreneurship rate than high-income Spain), the data displayed in Figure 6.3 are strongly suggestive of increasing intrapreneurship with increasing economic development. By way of potential explanation, Bosma and colleagues note that higher education levels, higher employee autonomy and higher share of employees in multi-person organisations are likely factors. However, they are keen to stress the smallness of their sample and the need for further work.
In other interesting analyses, the authors sketch the relationship between intrapreneurship and independent entrepreneurship, using both the GEM’s TEA and owner-management of independent young businesses (this
a Brazil, Chile, Ecuador, Iran, Republic of Korea, Latvia, the Netherlands, Norway, Peru, Spain and Uruguay.
dea36454_ch06.indd 135
latter is shown in Figure 6.4). In both instances the data indicate a negative relationship. That is, while their evidence suggests that at the micro-level intrapreneurship begets entrepreneurship (i.e. intrapreneurs record higher entrepreneurial intentions than other employees, with the differences highest in high-income econo-mies), at the macro level intrapreneurship may substitute for independent entrepreneurship.
0 EC IR LV BR PE UY ES CL NL NO KR 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.5% Intra pr eneurship 3.0% 10,000
GDP per capita, in purchasing power parities (PPP) 20,000 30,000 40,000 50,000 60,000
FIGURE 6.3
Intrapreneurship (narrow definition) and economic development SOURCE: Bosma et al. (2010).(30)
0% 0.0% 0.5% 1.0% Intra pr eneurship (% of 18–64 population) 1.5% 2.0% 2.5% 3.0% 3.5% NO NL CL ES UY PE LV KR BR EC IR 2% 4%
Owner-manager young business (% of 18–64 population)
6% 8% 10%
FIGURE 6.4
Intrapreneurship and owner management SOURCE: Bosma et al. (2010).(30)
dea36454_ch06.indd 136
Again, the authors are keen to stress the exploratory nature of their study but, rightly, point to the far-reaching implications if further research were to support their findings. In trying to understand this relationship, they speculate on the role of economic development. That is, the positive effect of economic development on the presence of large firms and the consequent negative effect on the prevalence of independent entrepreneurship. And, relatedly, that higher levels of economic development (manifest in higher personal incomes) raise the opportunity cost of entrepreneurship, acting as a disincentive and depressing levels of independent entrepre-neurship. In summary, they note that:
Given a ‘supply of entrepreneurial talent’, it might then depend on various contextual determinants, such as the level of economic development, the institutional framework (e.g. employment protection) and manage-ment styles within organizations (possibly related to national culture), whether entrepreneurial individuals exploit their entrepreneurial tendencies within a business or choose to start up for themselves.
(p. 23)
At the very least, there would be important implications for economic development policy or for educational practice that viewed independent entrepreneurship as the only legitimate expression of ‘entrepreneurial tenden-cies’. Regardless, Bosma, Stam and Wennekers don’t claim too much from their work to date. We include it here as a novel attempt to quantify intrapreneurship and to relate it to a variety of important structural and demographic factors. The results, while tentative, are intriguing and we look forward to future developments.
In this chapter we have tried to outline the nature of corporate entrepreneurship and understand the bases for an increasing entrepreneurial imperative within established and larger firms. Ireland, Covin and Kuratko(24) suggest that corporate entrepreneurship or ‘an entrepreneurial strategic vision’ (p. 28) is the
rational response to the existence of three inter-related environmental conditions: competitive intensity, technological change and emerging or fragmenting product-market domains. The essence of all three is ‘dynamism’. That is, openness to corporate entrepreneurship, in some form, has become progressively more important as the rate of change in organizational environments has increased. This change is driven by a variety of factors, but prominent amongst these has been the accelerated development of information and communication technologies; the globalisation of production and of markets; and rising standards of living. All serve to give a growing number of more demanding customers greater choice, while simultane-ously placing a downward pressure on prices.
We closed the chapter with a look at some recent, if limited, evidence on one form of corporate entrepre-neurship: intrapreneurship. The picture painted should temper the discussion of corporate entrepreneurship somewhat. At least from the perspective of employees, intrapreneurship is a minority activity and its inci-dence is far less than that of classical entrepreneurship (though this does not imply that its economic impact is less). Importantly, as with classical entrepreneurship (see the discussion in Chapter 2), intrapreneurship – and, quite possibly, corporate entrepreneurship more generally – appears to vary with economic develop-ment. In other words, there is likely to be an institutional contingency underpinning levels of corporate entrepreneurship, which speaks to incentive structures within a society. Intriguingly, classical entrepre-neurship and intrapreentrepre-neurship appear to substitute for one another. Of course, given the exploratory nature of this early work, more needs to be done to establish these patterns.
CONCLUSIONS
dea36454_ch06.indd 137
SUGGESTED ASSIGNMENTS
1 Working in groups, ask students to identify a large organization that they believe to be
entrepreneurial. Require each group to justify its selection.
2 In teams, ask the students to debate the implications of a trade-off between independent entrepreneurship
and corporate entrepreneurship as hinted at by the work of Bosma, Stam and Wennekers.
1 What is driving the increasing interest in corporate entrepreneurship? 2 In what dimensions of the environment might firms perceive turbulence? 3 What is meant by ambidexterity in the context of organizational strategy? 4 What are Stopford and Baden-Fuller’s three forms of corporate entrepreneurship?
5 On what dimensions do Wolcott and Lippitz believe approaches to corporate entrepreneurship may vary? 6 What are the different approaches identified by Wolcott and Lippitz?
7 Are any of the case studies in this book engaged in corporate entrepreneurship? Which form or
approach have they taken?
8 What are the dimensions of entrepreneurial orientation?
9 How might organizations approach the difficult task of balancing the dimension of entrepreneurial
orientation?
10 What is the incidence of intrapreneurship in the countries studied by Bosma, Stam and Wennekers? 11 What appears to be the relationship between intrapreneurship and independent entrepreneurship?
REVIEW QUESTIONS
REFERENCES
1 Phan, P.H., Wright, M., Ucbasa-ran, D. and Tan, W. L. (2009)
‘Corporate entrepreneurship: Cur-rent research and future directions’,
Journal of Business Venturing, vol.
24, no. 3, pp. 197–205.
2 Stevenson, H.H. and Jarillo, J.C. (2007) ‘A paradigm of
entrepre-neurship: Entrepreneurial manage-ment’, in A.C. Garcia, D. Ribeiro, and S. Roig, (eds)
Entrepreneur-ship: Concepts, Theory and Per-spective, Springer, NY, pp. 155–70.
3 Burgelman, R.A. (1983) ‘A
pro-cess model of internal corporate venturing in the diversified major firm’, Administrative
Sci-ence Quarterly, vol. 28, no. 2,
pp. 223–44.
4 Grinyer, P. and McKiernan, P.
(1980) ‘Generating major change in stagnating companies’,
Strate-gic Management Journal, vol. 11,
pp. 131–46.
5 Kuratko, D.F. (2010) ‘Corporate
entrepreneurship: An introduc-tion and research review’, in Z.J. Acs and D.B. Audretsch (eds),
Handbook of Entrepreneurship Research, Springer New York,
New York, NY, pp. 129–63. 6 Morris, M.H., Kuratko, D.F. and
Covin, J.G. (2010) Corporate
Entrepreneurship & Innovation.
Cengage Learning, Cincinnati, OH. 7 Burns, T. and Stalker, G.M.
(1961) The Management of
Inno-vation, Tavistock, London.
8 Miller, D. and Friesen, P.H.
(1982) ‘Innovation in conserva-tive and entrepreneurial firms: Two models of strategic momen-tum’, Strategic Management Journal, vol. 3, no.1, pp. 1–25.
9 Tushman, M.L. and O’Reilly III, C.A. (1996) ‘Ambidextrous
organizations: Managing evolu-tionary and revoluevolu-tionary change’, California Management
Review, vol. 38, no. 4, pp. 8–30.
10 Duncan, R.B. (1976) ‘The ambi-dextrous organization: Designing dual structures for innovation’,
The Management of Organization Design, vol. 1, pp. 167–88.
11 March, J.G. (1991) ‘Exploration and exploitation in organizational
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learning’, Organization Science, vol. 2, no.1, pp. 71–87.
12 Narayanan, V.K., Yang, Y. and
Zahra, S.A. (2009) ‘Corporate
venturing and value creation: A review and proposed framework’,
Research Policy, vol. 38, no.1,
pp. 58–76.
13 Sharma, P. and Chrisman, S.J.J. (2007) ‘Toward a reconciliation of the definitional issues in the field of corporate entrepreneurship’, in A.C. Garcia, D. Ribeiro and S. Roig (eds) Entrepreneurship:
Concepts, Theory and Perspective,
Springer, NY, pp. 83–103. 14 Dess, G.G. and Lumpkin, G.T.
(2005) ‘Research edge: The role of entrepreneurial orientation in stimulating effective corporate entrepreneurship’, The Academy
of Management Executive (1993),
vol. 19, no.1, pp. 147–56. 15 Pinchot, G. (1985)
Intrapre-neuring: Why you don’t have to leave the corporation to become an entrepreneur, Harper & Row,
New York.
16 Kuratko, D.F. and Audretsch,
D.B. (2009) ‘Strategic
entrepre-neurship: Exploring different perspectives of an emerging con-cept’, Entrepreneurship Theory
and Practice, vol. 33, no. 1, pp.
1–17.
17 Ireland, R.D., Hitt, M.A. and
Sirmon, D.G. (2003) ‘A model of
strategic entrepreneurship: The construct and its dimensions’,
Journal of Management, vol. 29,
no. 6, pp. 963–89.
18 Covin, J.G. and Miles, M.P. (1999) ‘Corporate entrepreneur-ship and the pursuit of competitive advantage’, Entrepreneurship
The-ory and Practice, vol. 23, pp.
47–64.
19 Stopford, J.M. and
Baden-Fuller, C.W.F. (1994) ‘Creating
corporate entrepreneurship’,
Stra-tegic Management Journal, vol.
15, no. 7, pp. 521–36.
20 Fry, A. (1988) ‘Lessons from a successful intrapreneur’, The
Jour-nal of Business Strategy, vol. 9,
no. 2, pp. 20–6.
21 Kazanjian, R.K., Drazin, R. and
Glynn, M.A. (2002) ‘Implementing
strategies for corporate entrepre-neurship: A knowledge-based per-spective’, in M. Hitt, R.D. Ireland, S.M. Camp and D. Sexton (eds),
Strategic Entrepreneurship: Creat-ing a New Mindset,
Wiley-Black-well, Oxford, pp. 173–200. 22 Wolcott, R.C. and Lippitz, M.J.
(2007) ‘The four models of cor-porate entrepreneurship’, MIT
Sloan Management Review, vol.
49, no.1, pp. 75–82.
23 Burgelman, R.A. (1983) ‘A pro-cess model of internal corporate venturing in the diversified major firm’, Administrative Science
Quarterly, vol. 28, pp. 223–44.
24 Ireland, R.D., Covin, J.G. and
Kuratko, D.F. (2009)
‘Concep-tualizing corporate
entrepreneur-ship strategy’, Entrepreneurentrepreneur-ship
Theory and Practice, vol. 33, no. 1,
pp. 19–46.
25 Rauch, A., Wiklund, J.,
Lumpkin, G.T. and Frese, M.
(2009) ‘Entrepreneurial orien-tation and business perfor-mance: An assessment of past research and suggestions for the future’, Entrepreneurship
The-ory and Practice, vol. 33, no. 3,
pp. 761–87.
26 Memili, E., Lumpkin, G.T. and
Dess, G.G. (2010)
‘Entrepreneur-ial orientation: the driving force for corporate entrepreneurship’, in P. Mazzola and F. Kellermanns (eds), Handbook of Research on
Strategy Process, Edward Elgar,
Cheltenham, p. 326.
27 Boulding, W. and Christen, M. (2003) ‘Sustainable pioneering advantage? Profit implications of market entry order’, Marketing
Science, vol. 22, pp. 371–92.
28 Boulding, W. and Christen M. (2008) ‘Disentangling pioneering cost advantages and disadvan-tages’, Marketing Science, vol. 27, no. 4, p. 699.
29 Drucker, P.F. (2006) Innovation
and Entrepreneurship, Harper
Paperbacks.
30 Bosma, N.S., Stam, F.C. and
Wennekers, A.R.M. (2010)
Intra-preneurship: An International Study, SCALES working paper,
http://www.ondernemerschap.nl/ pdf-ez/H201005.pdf.
RECOMMENDED READING
Sharma, P. and Chrisman, S.J.J.
(2007) ‘Toward a reconciliation of the definitional issues in the field of corporate
entrepreneurship’,
Entrepreneurship, pp. 83–103. Ireland, R.D., Hitt, M.A. and
Sirmon, D.G. (2003) ‘A model
of strategic entrepreneurship:
The construct and its dimensions’, Journal of
Management, vol. 29, no. 6,
pp. 963–89.
Phan, P.H., Wright, M.,
Ucbasaran, D. and Tan, W.L.
(2009) ‘Corporate entrepreneurship: Current research and future directions’,
Journal of Business Venturing,
vol. 24, no. 3, pp. 197–205.
Bosma, N.S., Stam, F.C. and Wennekers, A.R.M. (2010) Intrapreneurship: An
International Study, SCALES
working paper, http://www. ondernemerschap.nl/pdf-ez/ H201005.pdf.
dea36454_ch06.indd 139
7
Introduction
As mentioned in Chapter 1, there is no single, uniform definition of entrepre-neurship, and past attempts to identify and define the archetypal entrepreneur have not met with a great deal of success. Indeed, this led Kilby (1971) to suggest that the entrepreneur has much in common with the Heffalump in A.A. Milne’s Winnie the Pooh stories, in that nobody has ‘captured’ him and those who have seen him disagree on his particulars. Despite years of further research, the situa-tion appeared to be little better in 1986, when Brockhaus and Horwitz recognized that, ‘the literature appears to support the argument that there is no generic def-inition of the entrepreneur’. More recently, Kuratko and Hodgetts (2001: 28) have suggested that, ‘Although no single definition of “entrepreneur” exists and no
Learning Outcomes
On completion of this chapter, the reader will:
● be familiar with the major theoretical approaches to the psychological study of
entrepreneurial personality and behaviour
● have some initial insight into the strengths and weaknesses of the various approaches and the opportunities for further research
● be aware of the more recent cognitive approaches to the psychological study of entrepreneurial behaviour
● appreciate how entrepreneurship can be developed, from a psychological
per-spective, in both society and the individual
● have begun to appreciate his/her own entrepreneurial tendencies and how these might be developed further.
7
Chapter
5
The Nature, Characteristics and
Behaviour of the Entrepreneur
one profile can represent today’s entrepreneur, research is providing an increas-ingly sharper focus on the subject.’
Certainly the subject has evolved and it is generally recognized that the early attempts to classify entrepreneurial types and/or identify the archetypal entrepre-neur were at best incomplete and fixed in both time and space. Being based very largely on western (usually American) research conducted mainly around the third quarter of the twentieth century, the findings had somewhat limited utility, but they very much influenced entrepreneurship thinking and clearly must be considered in any treatise on the subject. Accordingly, they constitute the focus of this chapter, which attempts to consider the attributes and ways of behaving that the reader will need to develop if he/she is to become more entrepreneurial.
7
The entrepreneurial personality
So, there is no uniform, standardized definition of ‘the entrepreneur’ and, in all probability, there is no one stereotypical model. However, it is frequently con-tended that entrepreneurs display certain similar characteristics and patterns of behaviour (traits). The problem is that there is no agreement over how many there are or what form they take. For example, Hornaday (1982) identifies more than 40 traits associated with entrepreneurs, Gibb (1990) identifies 12 and Timmons et al. (1985) 19. Some of them are similar or constant, but not all. The Timmons et al. attributes are:
● total commitment, determination and perseverance
● drive to achieve and grow
● orientation to goals and opportunities
● taking initiative and personal responsibility
● persistence in problem-solving
● veridical awareness and a sense of humour
● seeking and using feedback
● internal locus of control
● tolerance of ambiguity, stress and uncertainty
● calculated risk-taking and risk-sharing
● low need for status and power
● integrity and reliability
● decisiveness, urgency and patience
● dealing with failure
● team builder and hero maker
● high energy, health and emotional stability
● creativity and innovativeness
● high intelligence and conceptual ability
● vision and capacity to inspire.
which the entrepreneur is found, and can be learned or acquired. Clearly this is important as it suggests that entrepreneurs can be developed. However, there are problems. Not only are the findings inconsistent but they are based very largely on American research and could be culturally biased (Kirby and Fan, 1995; Spence, 1985; Stimpson et al., 1990). Also, it is not clear whether entrepreneurs possess these attributes or whether they acquire them as a result of being an entre-preneur. According to Chell (2000) whereas the traditional trait model suggested that P (trait) causes B (behaviour), the more recent social constructionist model suggests that B (behaviour) is construed and categorized before being ascribed to the person (P) as a behavioural descriptor or trait ascription. Finally, very few entrepreneurs possess all of the attributes or, if they do, they are combined in dif-ferent ways. This has led Lessem (1986b) to suggest that there are various types of entrepreneur resulting from how the various personality traits combine. He iden-tifies seven entrepreneurial types, as shown in Table 5.1.
Lessem’s innovator type, Sir Terence Conran, started out making furniture, and diversified into home furnishings and household accessories through the devel-opment of a chain of retail outlets. According to Lessem he transformed a whole industry. Similarly, Mary Quant, his designer type, transformed women’s fashion in the 1960s, sensing intuitively what people wanted and ensuring that the right products were developed at the right time. In contrast, Sir John Harvey Jones, the leader type, did not develop something. Rather, under his leadership and direc-tion the image, profitability and productivity of Britain’s largest chemicals
com-Table 5.1: Entrepreneurial types (after Lessem, 1986b)
Entrepreneurship type Personality type Attributes
Innovator Imagination Originality,
(Sir Terence Conran) inspiration, love,
transformation New designer/enabler Intuition Evolution,
(Mary Quant) development,
symbiosis, connection
Leader Authority Direction,
(Sir John Harvey Jones) responsibility,
structure, control
New entrepreneur Will Achievement,
(Jack Dangoor) opportunity,
risk-taking, power
Animateur Sociability Informality,
(Nelli Eichner) shared values, community,
culture
Adventurer Energy Movement,
(Anita Roddick) work, health,
activity
Change agent Flexibility Adaptability,
pany, ICI, was improved. Likewise, Jack Dangoor, the new entrepreneur type, con-verted an existing product into a cheaper, higher-performing product. In the process, though, he created his own company, Advance Technology, by the age of 28. Meanwhile, Lessem’s change agent type, Steve Shirley, created a new form of business organization, F International, in order to meet the career needs of women who had the responsibility for caring for their families, while his anima-teur type, Nelli Eichner, created a similar type of organization, Interlingua, which not only employed her family but developed into ‘a family of nations’. Finally, his adventurer type is Anita Roddick, the founder of The Body Shop, who created a franchised chain of retail outlets selling products developed from natural ingredi-ents from around the world. Apart from behaving in different ways and doing dif-ferent things, each of these enterprising individuals has a very difdif-ferent and dis-tinct personality. As Lessem points out, an entrepreneur is very much his or her own person.
7
Exercise 5.1
Complete Lessem’s (1986a) Spectral Inventory, which is to be found in his book
Enterprise Development (Aldershot: Gower). Which of his seven entrepreneurial
types best represents you?
PA U S E F O R T H O U G H T
Consider any entrepreneurs known to you. What attributes do they display? Do they display the same attributes or different ones? How do the attributes they display com-pare with those suggested by the literature?
7
The individual characteristics of entrepreneurs
The work of Lessem is important because it:
● reasserts that entrepreneurs can be found within large as well as small organi-zations
● denies the over-simplistic notion of the single entrepreneurial type
● focuses attention on the attributes of the entrepreneur.
Clearly he was not the first either to recognize that there are different entrepre-neurial types or to focus on the psychological characteristics of entrepreneurs. For example, early research by Smith (1967) identified three types of entrepreneur— craftsmen, opportunists and inventors—the fundamental distinction being between the entrepreneur as ‘opportunist’ and the entrepreneur as ‘craftsperson’ or artisan. Whereas the archetypal craftsperson is a loner who values his/her inde-pendence, and whose social and commercial links are limited, the opportunist pos-sesses considerable self-confidence, has an outgoing, cosmopolitan personality and is concerned more with the market than with production. In contrast Chell et al. (1991), drawing on an analogy from the biological classification system, have sug-gested that within the ‘family’ of business owners, it is possible to distinguish
between the entrepreneurial intentions of those members of the family and to identify four different species: entrepreneurs, quasi-entrepreneurs, administrators and caretakers. The prototypical ‘caretaker’, they suggest, has little strategic focus and little or no desire to grow or change the business, whereas the business owned by the prototypical ‘entrepreneur’ is typified by growth and change. This distinc-tion between those business owners who wish to grow their business (possess entrepreneurial intention) and those for whom self-employment is a way of life that enables them to fulfil their own personal goals (or non-entrepreneurial inten-tions) appears to have acquired quite widespread support. Indeed, it forms the basis for several of the various typologies that have been developed over the years. From the literature, the main psychological characteristics of the entrepreneur would appear to be risk-taking ability, need for achievement (‘nAch’), locus of control, desire for autonomy, deviancy, creativity and opportunism, and intu-ition. We will now look at each of these in turn.
Risk-taking ability
As noted in Chapter 1, classical economic theory suggests that entrepreneurs are risk-takers. By the very nature of their activities and roles in economy and socie-ty, it is clear that entrepreneurs cannot be averse to risk. Indeed, the research of Koh (1996) suggests that people who are entrepreneurially inclined have higher risk scores than those who are not. This appears to contradict the earlier findings of Brockhaus (1980) whose work indicates that there are no significant differences in their risk-taking ability between entrepreneurs, managers or the general popu-lation, while Miner (1997) argues that a key entrepreneurial task is that of avoid-ing risk. Thus, there is no apparent consensus with respect to risk-takavoid-ing, though the prevailing belief appears to be that entrepreneurs are more predisposed to tak-ing calculated risks than are other sectors of society (Caird, 1991; Cromie and O’Donoghue, 1992), and that they are more able to cope with the consequent ambiguity and uncertainty than are non-entrepreneurs (Koh, 1996). Interestingly the work of Busenitz (1999) indicates that entrepreneurs are more confident than managers in large organizations and as a consequence tend to distort their per-ceptions of risk. This introduces a further concept, that of self-confidence, which Koh (1996) believes to be a prerequisite for successful entrepreneurship, and which Ho and Koh (1992) regard as being linked to both a tolerance for ambigu-ity and creativambigu-ity.
Need for achievement (nAch)
First propounded by McClelland in 1961, this suggests that entrepreneurs have a high need for achievement and that achievers will choose situations that are char-acterized by:
● individual responsibility
● moderate (not high) risk-taking
● knowledge of results of decisions
● novel instrumental activity
It is the prospect of achievement (not money) that motivates them. Money is only important as a measure of success.
Empirical research support for McClelland’s theory of nAch (1961) has been somewhat conflicting. While the work of Cromie and Johns (1983), Cromie et al. (1992) and Koh (1996) has suggested that entrepreneurs have consistently higher nAch scores than some population groups, they appear not to have significantly higher scores than others (such as managers and university professors). Thus it is generally held that ‘although people with a strong need to achieve might well act entrepreneurially, there are problems with elevating nAch to a central position in explaining entrepreneurial motivation’ (Cromie, 2000: 17).
However, within this statement there is a probable clue to reasons for the different findings. People can act entrepreneurially in all walks of life, as Van Gelderen (2000) has demonstrated. It does not mean that because they are not classified as ‘entrepreneurs’ (however defined), people do not behave entrepre-neurially. Conversely, people who start a business, need not necessarily be entre-preneurs (Hull et al., 1980). It is the nature of the activity, rather than its title, that needs to be measured. Entrepreneurship is a way of thinking and behaving, and entrepreneurial behaviour is not confined solely to the act of starting and running a small enterprise, as has been shown.
Locus of control
This is based on the work of Rotter (1966). Essentially a person who believes in internal control believes that the achievement of a goal is dependent on his/her own behaviour or individual characteristics. A person who believes it is the result of luck or other people’s actions believes in external control. Entrepreneurs are believed to possess a high internal locus of control. However, the results of empir-ical research into this are inconclusive. Some (Cromie, 1987; Cromie and Johns, 1983) have found significantly higher ‘internal’ scores compared to experienced managers, while others (Brockhaus and Nord, 1979; Cromie et al., 1992) have found no differences between the scores of these two groups. Additionally, it has been suggested, as Cromie (2000) has recognized, that high achievers will also exhibit these behaviours, and there is conflicting evidence (Chen et al., 1998; Hull et al., 1980) about whether locus of control or need for achievement is the more fundamental entrepreneurial attribute.
Desire for autonomy
Entrepreneurs want to be in control—hence they have been found to have a higher need for autonomy and a greater fear of external control than many other occupational groups (Caird, 1991; Cromie and O’Donoghue, 1992). They value individualism and freedom more than do either the general public or managers, and they have a dislike of rules, procedures and social norms. As a consequence they have difficulty functioning in constraining environments that stifle creativ-ity, and can experience difficulty relating to others. As Cromie (2000) observes, some are even regarded as deviants (see below).