The Unique Nature of Corporate Entrepreneurship Chapter 2 The Unique Nature of Corporate Entrepreneurship Copyright (c) 2011 by Donald F. Kuratko All rights reserved.

Dispelling the Myths: “Entrepreneurs are born, not made” “Entrepreneurs must be inventors” “There is a standard profile or prototype of the entrepreneur” “All you need is luck to be an entrepreneur” “Entrepreneurs are extreme risk takers (gamblers)”

Dispelling the Myths: “Entrepreneurial people are academic and social misfits” “All entrepreneurs need is money” “Ignorance is bliss for entrepreneurs” “Most entrepreneurial initiatives fail” “Entrepreneurship is unstructured and chaotic”

Entrepreneurial Realities: Understanding the Process This process consists of six stages: Identifying the opportunity Defining the business concept Assessing the resource requirements Acquiring the necessary resources Implementing and managing the concept Harvesting the venture

How Corporate Entrepreneurship Differs “Entrepreneurship is the process of creating value by bringing together a unique combination of resources to exploit an opportunity.” The Entrepreneurial Context is never defined, thus, entrepreneurship can occur in: Start-up ventures Small firms Mid-sized companies Large conglomerates Non-profit organizations Public sector agencies

How Corporate Entrepreneurship Differs Similarities between start-up and corporate entrepreneurship Both involve opportunity recognition and definition Both require a unique business concept that takes the form of a product, service or process Both are driven by an individual champion who works with a team to bring the concept to fruition Both require that the entrepreneur be able to balance vision with managerial skill, passion with pragmatism, and proactiveness with patience Both involve concepts that are most vulnerable in the formative stage, and that require adaptation over time

Similarities (continued): Both entail a window of opportunity within which the concept can be successfully capitalized upon Both are predicated on value creation and accountability to a customer Both find the entrepreneur encountering resistance and obstacles, necessitating both perseverance and an ability to formulate innovative solutions Both entail risk and require risk management strategies Both find the entrepreneur needing to develop creative strategies for leveraging resources Both involve significant ambiguity Both require harvesting strategies

How Corporate Entrepreneurship Differs Major differences Start-up Entrepreneurship Corporate Entrepreneurship Entrepreneur takes the risk Company assumes the risks, other than career-related risk Entrepreneur “owns” the concept or innovative idea Company owns the concept, and typically the intellectual rights surrounding the concept Entrepreneur owns all or much of the business Entrepreneur may have no equity in the company, or a very small percentage Potential rewards for the entrepreneur are theoretically unlimited Clear limits are placed on the financial rewards entrepreneurs can receive One mis-step can mean failure Vulnerable to outside influence More room for errors, company can absorb failure More insulated from outside influence Independence of the entrepreneur; although the successful entrepreneur is typically backed by a strong team Interdependence of the champion with many others; may also have to share credit with any number of people

Major differences continued How Corporate Entrepreneurship Differs Major differences continued Start-up Entrepreneurship Corporate Entrepreneurship Flexibility in changing course, experimenting or trying new directions Rules, procedures and bureaucracy hinder the entrepreneur’s ability to maneuver Speed of decision-making Longer approval cycles Little security Job security No safety net Dependable benefit package Few people to talk to Extensive network for bouncing around ideas Limited scale and scope initially Potential for sizeable scale and scope fairly quickly Severe resource limitations Access to finances, R&D, production facilities for trial runs, an established sales force, an existing brand, distribution channels that are in place, existing databases and market research resources, and an established customer base

How Corporate Entrepreneurship Differs Corporate entrepreneurs face three major challenges linked to the need for interorganizational political skills: Achieving credibility or legitimacy for the concept and the entrepreneurial team Obtaining resources Overcoming inertia and resistance

How Corporate Entrepreneurship Differs Corporate entrepreneurs remain in the corporate environment rather than starting their own ventures for three main reasons: The size of the resource base that they can tap into The potential to operate on a fairly significant scope and scale fairly quickly The security they enjoy when operating in an existing company Organizational politics is one of the main reasons corporate entrepreneurs leave the company

How Corporate Entrepreneurship Differs To cultivate an environment of entrepreneurship within an organization, managers must: Create environments where employees have a sense that resources can be accessed if a idea is sound Find ways to reinforce the ability of anyone in the firm to champion an idea and get it implemented Invest in the development of people

Rules for Fostering an Innovative Organization Rule #1 - Unreasonable Expectations Rule #2 - Elastic Business Definition Rule #3 - A Cause, Not a Business Rule #4 - New Voices Rule #5 - An Open Market for Ideas Rule #6 - Create an Open Market for Capital Rule #7 - Open a Market for Talent Rule #8 - Low-Risk Experimentation

Where to Find Entrepreneurship within a Company Seven Ways in Which Entrepreneurship is Manifested in Established Companies Traditional R&D Ad Hoc Venture Teams New Venture Divisions or Groups Champions and the Mainstream Acquisitions Outsourcing Hybrid Forms

General Frameworks for Understanding Corporate Entrepreneurship Fitting Corporate Entrepreneurship Into Strategic Management ENVIRONMENT STRATEGIC ORGANIZATION ORGANIZATION Competitive LEADERS CONDUCT / FORM PREFORMANCE Technological Characteristics Strategy Effectiveness Social Values/Beliefs Structure Efficiency Political Behavior Process Stakeholder Satisfaction Culture (2) (3) (4) (5) (1) CORPORATE ENTREPRENEURSHIP Innovation / Venturing Strategic Renewal within Established of Established Corporations Corporations Source: William D. Guth and Ari Ginsberg, “Corporate Entrepreneurship,” Strategic Management Journal 11 (Summer 1990): 5-15.

General Frameworks for Understanding Corporate Entrepreneurship A Model of Sustained Corporate Entrepreneurship External Transformational Trigger Corporate Entrepreneurial Activity Organizational Antecedents Rewards Management Support Resources (i.e. time availability) Supportive Organizational Structure Risk Taking Individual Behavior Perceived Activity-Outcome Relationship Perceived Decision Outcome-Relationship Outcomes existence perception (Individual Comparison) (Firm Comparison)