bachelor thesis organization & strategy

Bachelor Thesis Organization & Strategy

Corporate Entrepreneurship

Bachelor Thesis Organization & Strategy

Student: Arthur WillemsANR: S801275

Teacher: Stijn van den Hoogen

Word Count: 6640

Bachelor Thesis Organization & Strategy Corporate Entrepreneurship

Management SummaryIn this thesis a research to how multinational corporations can successfully leverage

corporate entrepreneurship is described. Corporate entrepreneurship includes radical

product innovation, risk taking, and proactiveness. It also includes business venturing

and "intrapreneuring” and organizational renewal.

Firstly the two dimensions of corporate entrepreneurship will be clarified, innovation

aimed at business creation and venturing, and strategic renewal. Innovation aimed at

business creation and venturing is a two-fold view. Innovation refers to creating and

introducing new products, production processes, and organizational systems. While

companies have a lot of difficulties creating value from innovations, some companies see

possibilities to turn to corporate venturing. Corporate venturing is the process of creating

new business in either existing markets where the company already competes, or new

markets. Corporate venturing involves entrepreneurial efforts in which established

business organizations invest in and/or create new businesses. Strategic

entrepreneurship has been defined as involving the identification and exploitation of

opportunities, while simultaneously creating and sustaining a competitive advantage. It

may involve strategic renewal, sustained regeneration, domain redefinition,

organizational rejuvenation, and business model reconstruction. Four domains which

clarify the natural integration between entrepreneurship and strategic management are

explained. These domains are external networks, resources and organizational learning,

innovation, and internationalization.

Next the characteristics which multinational corporations need to possess are described,

following the four earlier dimensions and the different managerial capacities needed at

senior-level, middle-level and first-level management. Management should always

consider the dangers ahead in the process of corporate entrepreneurship and consider six

important areas in the process.

The proposed problem statement is answered using a model from earlier research.

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Table of ContentsManagement Summary ............................................................................................................... 2 Table of Contents ........................................................................................................................ 3 Chapter 1 - Introduction .............................................................................................................. 4

1.1 Introduction ....................................................................................................................... 4 1.2 Problem Indication ............................................................................................................ 4 1.3 Problem Statement ............................................................................................................ 5 1.4 Research Questions ........................................................................................................... 5 1.5 Data collection and research design .................................................................................. 6 1.6 Thesis Structure ................................................................................................................. 6 2.1 Introduction ....................................................................................................................... 7 2.2 Dimensions of Corporate Entrepreneurship ...................................................................... 7

2.2.1 Innovation and Corporate Venturing ......................................................................... 7 2.2.2 Strategic Renewal ...................................................................................................... 9

2.3 Summary ......................................................................................................................... 13 Chapter 3 - Organizational and Managerial Capabilities .......................................................... 14

3.1 Introduction ..................................................................................................................... 14 3.2 Organizational Capabilities ............................................................................................. 14

3.2.1 External Networks .................................................................................................... 14 3.2.2 Resources and Organizational Learning .................................................................. 17 3.2.3 Innovation ................................................................................................................ 19 3.2.4 Internationalization .................................................................................................. 20

3.3 Managerial Capabilities .................................................................................................. 21 3.4 Conclusion ...................................................................................................................... 24 4.1 Introduction ..................................................................................................................... 25 4.2 A Model of Strategic Entrepreneurship .......................................................................... 25

4.2.1 Entrepreneurial Mindset ........................................................................................... 25 4.2.2 Entrepreneurial Culture and Entrepreneurial Leadership ........................................ 26 4.2.3. Strategic Management of Resources ....................................................................... 26 4.2.4 Applying Creativity to Develop Innovations ........................................................... 27

4.3 Conclusion ...................................................................................................................... 27 Chapter 5- Conclusion .............................................................................................................. 28

5.1 Introduction ..................................................................................................................... 28 5.2 Conclusion ...................................................................................................................... 28 5.3 Further Recommendations and Limitations .................................................................... 30

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Chapter 1 - Introduction

1.1 IntroductionAs our economic climate is changing as a consequence of the credit crunch organizations

are seeking new ways to find competitive advantages. Organizations are constantly

trying to innovate faster than its best competitors. Essentially, this capacity is about

identifying new ways of doing business, developing new technologies and products, and

entering new markets in new organizational forms (Teng, 2007).

This thesis is written for the course Bachelor Thesis Organization & Strategy at Tilburg

University in the Netherlands. This first chapter contains the problem indication and the

problem statement. To answer the problem statement two research questions are

formulated. Furthermore, the research design and data collection will be considered

followed by the structure of the paper.

1.2 Problem IndicationWhile there is a broadly held belief in the need for and inherent value of entrepreneurial

actions on the part of established organizations (Morris et al., 2008), much remains to be

understood about how corporate entrepreneurship as a strategy is enacted in

organizational settings (Hornsby et al., 2009).

A longstanding literature has highlighted significant challenges and shortcomings in the

corporate entrepreneurship activities of firms. Previous reviews have emphasized the

need for further research on the processes and knowledge-based resources involved in

corporate entrepreneurship, as well as the heterogeneous nature of corporate

entrepreneurship. The scope of corporate entrepreneurship is also becoming wider as

organizations, not previously recognized as entrepreneurial, need to become so in order

to survive and succeed in increasingly competitive and financially constrained

environments. This raises important questions concerning the applicability of the

structures and processes developed in traditional corporations to these new contexts and

how the appropriate strategies and mechanisms can be developed. Another motivation

concerns the need for understanding the link between corporate entrepreneurship and

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corporate governance, in part because corporate entrepreneurship activities can be costly

and have significant impact on the future value of the enterprise (Phan et al., 2009).

1.3 Problem StatementFor this thesis the following problem statement will be researched:

• How can multinational corporations successfully leverage corporate

entrepreneurship?

Multinational corporations are corporations with subsidiaries in foreign countries. In the

multinational corporations´ field, it is recognized that subsidiaries may not be merely

subordinate elements of their parent multinational corporations. Instead they can be

examined as networks of autonomous and differentiated units (Boojihawon et al, 2007).

The choice of multinational corporations is not only for the international aspects of these

corporations, but also considering the size. Multinational corporations tend to be large

and divided into multiple subsidiaries. In his article, Zahra (1996) defines corporate

entrepreneurship using definitions from various studied. Zahra states that corporate

entrepreneurship includes radical product innovation, risk taking, and proactiveness. It

also includes business venturing and "intrapreneuring" and organizational renewal. A

review of the literature by Guth and Ginsberg (1990) concluded that corporate

entrepreneurship has two dimensions: innovation aimed at business creation and

venturing, and strategic renewal. These activities are often collectively called corporate

entrepreneurship, which can be defined as ‘the sum of a company’s innovation, renewal,

and venturing efforts’

1.4 Research QuestionsTo find an answer to the problem statement this research will use the following research

questions:

• What dimensions are typical for corporate entrepreneurship?

• What organizational and managerial capabilities do multinational corporations

need to possess or incorporate to facilitate corporate entrepreneurship?

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1.5 Data collection and research designThe thesis will be based on an exploratory research. The research is secondary and

available research literature and data will be reviewed where possible.

Data and research literature used in this thesis is published in major academic journals.

These are, among others:

• Journal of Business Venturing

• Journal of Small Business Management

• Journal of Management

• Journal of Management Studies

• Organization Studies

• Entrepreneurship: Theory and Practice

• Strategic Entrepreneurship Journal

• Small Business Economics

• Entrepreneurship and Regional Development

• Research Policy

• Academy of Management Journal

The university library search engine is used to search in these academic journals. Key

words used for the search are corporate entrepreneurship, multinational corporation,

managerial entrepreneurship, innovation, strategic entrepreneurship and corporate

venturing.

1.6 Thesis StructureThe second chapter of this thesis researches the characteristics of corporate

entrepreneurship. The third chapter researches the organizational and managerial

capabilities which multinational corporations’ need to possess. The fourth chapter consist

of a model of the strategic aspects of corporate entrepreneurship. Chapter five is the

conclusion and further recommendations.

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Chapter 2 – Corporate Entrepreneurship Dimensions

2.1 IntroductionAs stated in the first chapter, this thesis uses Zahra’s definition of corporate

entrepreneurship. Zahra (1996) states that corporate entrepreneurship includes radical

product innovation, risk taking, and pro-activeness. It also includes business venturing

and "intrapreneuring” and organizational renewal. This chapter will further explore the

definition of corporate entrepreneurship by explaining the dimensions of corporate

entrepreneurship. This will lead to the answer to the first research question:

What dimensions are typical for corporate entrepreneurship?

2.2 Dimensions of Corporate EntrepreneurshipZahra’s definition is supported by many other researchers. Phan, Wright, Ucbasaran and

Tan (2009) state that corporate entrepreneurship refers to the process of organizational

renewal and relates to two distinct but related phenomena, corporate venturing and

strategic entrepreneurship. Guth and Ginsberg (1990) concluded that corporate

entrepreneurship has two dimensions: innovation aimed at business creation and

venturing, and strategic renewal. To understand corporate entrepreneurship these two

dimensions will be further clarified in the next part of the thesis.

2.2.1 Innovation and Corporate VenturingTeng (2007) states that innovation refers to creating and introducing new products,

production processes, and organizational systems. Antoncic and Hirsch (2001) stated two

fundamental concepts for corporate venturing, objectives focused on rejuvenating or

purposefully redefining organizations, markets and industries to create or sustain a

position of competitive superiority, and innovation as the premier mechanism for meeting

these objectives. Clearly, innovation is one of the most important backbones for

corporate venturing. Nevertheless, there are some fundamental problems which could

harm the process of innovation and corporate venturing. In his research, Gompers

(2002) states that corporate internal investments in innovative activities, including

research and development, have often been maligned for their ineffectiveness. Gompers

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states that over the past forty years, organizations have attempted to capture the value

from waves of technology and innovation. However, during much of this time, these

organizations realized that young, nimble start-ups saw possibilities to capitalize on

opportunities that the corporations saw first.

It seems that corporations always had some difficulties bringing innovations to the

market. A lot of visions and concepts have been wasted over time. Reasons of this

phenomena are either because of internal resistance (for example, from managers who

did not want to see a product launched that competed with one of their offerings) or an

inability to execute on the initial insight. Traditionally, corporations try to encourage

innovations by investing in research and design (R&D) laboratories. Nevertheless, there

is evidence that investments in conventional R&D laboratories are not able to create the

expected returns. Researchers in conventional R&D laboratories have focused on

incremental product advances or on academic ideas with little relevance to the

corporation. Even worse, sometimes when R&D laboratories managed to think up an

innovative idea, all to often this idea is commercialised by other organizations.

Corporations nowadays are turning into corporate venturing. Corporate venturing is the

process of creating new business in either existing markets where the company already

competes, or new markets. Corporate venturing involves entrepreneurial efforts in which

established business organizations invest in and/or create new businesses (Sharma &

Chrisman, 1999). Narayanan, Yang and Zahra (2009) state that corporate venturing

focuses on the various steps and processes associated with creating new businesses and

integrating them into the firm's overall business portfolio. It is a strategy for business

development and involves investment in high-risk activities that generate new businesses

within or closely related to the activities of the parent corporation. Corporate venturing

can be used strategically to encourage corporate renewal in the parent organization, as a

growth driver by investing in ventures with high growth potential, or to diversify the core

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business of the parent by investing in ventures in diverse industries (Hustes and

Vintergaard, 2004).

2.2.2 Strategic RenewalThe second dimension of corporate entrepreneurship is strategic renewal. Strategic

renewal contains al renewal activities that enhance a corporations' ability to compete and

take risks, which may or may not involve the addition of new businesses to a corporation

(Phan, Wright, Ucbasaran and Tan, 2009). This dimension is also described as strategic

entrepreneurship in previous research.

Phan et al (200) define strategic renewal as the process of identification and exploitation

of opportunities, while simultaneously creating and sustaining a competitive advantage.

It may involve strategic renewal, sustained regeneration, domain redefinition,

organizational rejuvenation, and business model reconstruction. Basically, strategic

entrepreneurship is a concept which contains all entrepreneurial actions with a strategic

perspective within an organization.

To further understand the concept of strategic renewal, the linkage between

entrepreneurship and strategic management is an essential element. Hitt and Ireland

(2000) define four domains in which they explain the natural integration between

entrepreneurship and strategic management. These domains are external networks,

resources and organizational learning, innovation, and internationalization.

• External Networks: In a changing competitive landscape, the importance of

external networks is becoming clear for corporations. Corporations are not alone

in the competitive landscape; they are only part of the value chain. The external

network of a corporation consists of relationships with customers, suppliers, and

competitors among others and often extends across industry, geographic,

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political, and cultural boundaries (Hitt et al, 2000). But how can external networks

help in creating strategic renewal? Phan et al (2009) state that the importance of

external networks for corporations is because external networks can provide firms

with access to information, resources, markets and even, at times, technologies.

External networks provide corporations with credibility and legitimacy. Further,

potential opportunities can be identified by using external networks. But according

to Hitt et al (2000), the greatest value of networks for entrepreneurial firms is the

provision of resources and capabilities needed to compete effectively in the

marketplace.

External Networks are valuable for the corporation because they create

possibilities of learning new capabilities and competing in new markets without

possessing al the necessary resources to normally undertake these steps.

Corporations which typically profit most from external networks to learn new

capabilities or compete in new markets are new ventures. New venture firms

normally have limited resources and can benefit from establishing alliances and

developing these alliances into an effective network (Hitt et al, 2000). Lee, Lee

and Pennings (2001) confirm this statement in their research. Lee et al use the

term entrepreneurial orientation to define the organizational processes, methods

and styles which new ventures use to implement their founding strategy. The

external network is an important part of the founding strategy. The study

researched linkages between the new venture companies and different

relationships in the external networks and the effects of these linkages to the

internal capabilities. The results showed the strongest interaction effect of the

linkage between the new venture and venture capital companies. Venture capital

companies invest equity in new ventures and therefore have a very strong

incentive to help the new venture succeed. Venture capital companies do not only

provide financial resources, but also managerial skills. Other linkages which

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effected the internal capabilities where found with other enterprises, with

universities and research institutes and with venture associations.

• Resources and Organizational Learning: Hitt, Ireland, Camp and Sexton

(2001) state that knowledge is generated through organizational learning.

Learning new capabilities helps firms to compete effectively, survive, and grow.

But consequently there is always the danger of a changing landscape in which the

corporations resides. In a changing landscape the value of a corporations’ current

resources and knowledge can reduce in its value. As a result, the corporation

needs to learn new knowledge to adapt to the new situation and effectively

compete in the new environment.

One of the resources associated with organizational learning is human capital or

the employees’ capabilities. Hitt et al (2001) found evidence that the transfer of

knowledge within a corporation creates human capital and aids to higher firm

performance. Also, the firm’s human capital will be used to implement strategies

that in turn enhance performance as well.

Elkjaer (2004) defined three types of organizational learning. The first two types

are derived from earlier literature and the third is developed by Elkjaer herself.

The first type of organizational learning is defined as the individual skills and

knowledge acquisition in organizations as systems. The second type is the ability

to learn while participating in communities of practice. So, a learning organization

is to be created on the basis of the individual employees' ability to think of the

organization as a set of systems. The third type of organizational learning is

defined as the development of experience and knowledge by inquiry (or reflective

thinking) in social worlds held together by commitment. By introducing a third

type of organizational learning, Elkjaer adds a new dimension to the concept.

Historically, individuals and organizations are researched to study the effect of

organizational learning. Elkjaer adds the dimension of events and situations to the

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equation. By adopting such an implication it is possible to trace why for example

an organizational development project does not succeed - not by pointing at

individuals' failures but by acknowledging that individuals and organizations

constitute each other in a continuous process individuals and groups act or do not

act and the organization reacts or does not react in subtle ways that can be

explored by following the event or situation in time and space (Elkjaer, 2004).

• Innovation: As described earlier, innovation is one of the dimensions of

corporate venturing. Hitt and Ireland discuss the effect of innovation on strategic

renewal. Hamel (2000) even names innovation the most important component of

a firms’ strategy. In his study, Hamel executed a survey of approximately 500

chief executive officers. Most of the chief executive officers agreed that their

industry had changed in the last 10 year. The reason of this change was

innovation by newcomers, not by the incumbent corporations. The chief executive

officers largely agreed that the new venture corporations changed the rules and

the landscapes. Hamel concludes that the real story of Silicon Valley is not e-

commerce, but innovation.

There is a strong relationship between innovation and the first two domains of

strategic renewal, external networks and resources and organizational learning.

Corporations which are able to use the knowledge acquired from partners can

achieve a differential technological advantage. Zahra, Ireland and Hitt (2000)

argued that firms with greater dimensions and speed of technological learning

achieved higher levels of performance. These results suggest that firms can

employ strong innovative capabilities to implement entrepreneurial strategies and

thereby create wealth.

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• Internationalization: Since the end of last century and continuing throughout

this century, the competitive landscape is changing. Hitt et al (2001) show

evidence of internationalization as the primary driver of the changing landscape.

The number of economic transactions across country borders is growing and will

continue to do so. Increasing internationalization creates more complexity of

doing business, but also creates new opportunities for entrepreneurs. To manage

the complex transactions and interactions in global markets, entrepreneurs are

obligated to develop a global mindset. Hitt et al (2001) argue that the

opportunities available, the simplification of international transactions by new

technologies, and the opening of international markets all led to an increasing

number of smaller, entrepreneurial businesses entering international markets.

2.3 SummaryThis chapter explains the first research questions by looking at the dimensions of

corporate entrepreneurship. The dimensions defined by previous research are innovation

and corporate venturing, and strategic renewal. Innovation and corporate venturing is

the process of creating and introducing new products, production processes, and

organizational systems. Strategic renewal or strategic entrepreneurship is the integration

of entrepreneurial and strategic perspectives in developing and taking actions designed

to create wealth. The concept is further explained by using Hitt and Irelands four

domains of strategic renewal. The domains are external networks, resources and

organizational learning, innovation, and internationalization.

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Chapter 3 - Organizational and Managerial Capabilities

3.1 IntroductionChapter 2 described the dimensions of corporate entrepreneurship. In this chapter the

organizational and managerial capacities multi-national corporations need to possess to

successfully facilitate corporate entrepreneurship are researched. This will be researched

following the four domains of strategic renewal and the managerial capabilities an

organization need to possess. In this chapter the second research question will be

answered:

What organizational and managerial capabilities do multinational corporations need to

possess or incorporate to facilitate corporate entrepreneurship?

3.2 Organizational CapabilitiesThe research question consists of two parts, the organizational capabilities needed and

the managerial capabilities needed by multinational corporations to incorporate or

facilitate corporate entrepreneurship. The organizational capabilities will be explained

following the dimensions of strategic renewal explained in chapter 2. This will not only

focus on strategic renewal, but also new venturing and innovation.

3.2.1 External NetworksAs discussed in chapter 2, external networks are essential to the discovery of

opportunities, to the testing of ideas, and to gather resources for the creation of the new

organization. Firms such as Cisco and Motorola have created extensive alliance portfolios,

forming 50 to 100 new alliances each year, while the Dutch electronics and medical

equipment firm Philips is currently engaged in over 1,000 alliances. However, evidence

shows that alliance failure rates are generally high, ranging from 40 to 70%, thus

displaying a ‘mix of promise and peril’ (Koen, Elko and Jeffrey, 2009). The multinational

corporation need to possess the capabilities to understand the external network and the

different linkages to find successful linkages with external parties. Lee, Lee and Pennings

(2001) define partnership-based linkages with external actors as cooperative bilateral

relationships with environmental constituents. Lee et al differentiate between four types

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of linkages, with other enterprises, with venture capitalists, with universities and

research institutes and with venture associations.

• Strategic alliances with other enterprises consist of long-term relationship

with suppliers, customers and other corporations with complementary resources.

Lee et al (2001) describe two ways in which these strategic alliances can provide

better performance in technological start-ups.

First, new ventures can find lacking financial, technical and managerial resources

through links with incumbent (developed) firms.

Second, strategic alliances can aid new ventures in receiving financial, technical

and managerial resources from third parties through the signalling role of the

alliance. Holders of the resources will generally be more willing to provide the

financial, technical and managerial resources to the new venture.

• Linkages with venture capitalists provide financial resources and managerial

knowledge. Naturally, venture capitalists with an interest in the new venture have

an incentive to make the start-up succeed. Ways of providing managerial

knowledge to new ventures are having a seat on the board of directors, create

access to professionals, and initiate change at the management board when the

start-up does not meet the expectations of the venture capitalist.

Chang (2004) studied the linkage between internet start-ups and venture

capitalists. His study showed that there are four factors influencing the speed in

which internet start-ups had initial public offerings: the reputations of the venture

capital firms from which they raised funds, the amount of money these start-ups

raised, the reputations of strategic alliance partners, and the number of strategic

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alliances they developed.

• Linkages with universities and research institutes provide technological

knowledge which the new venture does not process, and could not have

accomplished without help. Universities and research institutes provide

consultancy and education for professionals. Students who participate in the start-

up will become familiar with the technology and will be inclined towards starting

their career at the new venture (Lee et al, 2001).

Stuart, Ozdemir and Ding (2007) state that in the past few decades, universities

have become much more proactive in their commercialization efforts. They found

evidence that many universities diverge of their traditional mission of educating

students and advancing understanding to have broadened to include patenting

and commercializing research discoveries. Stuart et al studied the sector of

biotechnology firms. They found that biotechnology firms with prominent and

well-networked academic founders and scientific advisors are more likely to enter

formal alliances with universities and biotechnology firms with more upstream,

university contracts are more frequent participants in downstream,

commercialization alliances. This resulted in evidence that these firms with strong

academic connections (and not necessarily with academic founders) have the

organizational capabilities and business model to capitalize university technology.

• Linkages with venture associations create an informal network which is very

useful for further accumulating social capital. The network becomes a channel of

referral and will provide access to other professionals such as lawyers, bankers,

marketers and accountants (lee et al, 2001).

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To fully exploit the possibilities created by external networks, the new venture must

possess an open culture. The corporation needs to be able to differentiate the four types

of linkages and develop the relationships.

As an organization becomes large and more established, it is increasingly difficult to

develop new networks. Most well-functioning organizations are better suited for more

familiar activities building on current businesses. Attempts to pave new paths for

information exchange and knowledge sharing will conflict with the organization's

institutionalized environment (Kelley, Peters, O’Conner, 2009).

3.2.2 Resources and Organizational LearningIn chapter 2 the three ways of organizational learning are introduced. These three ways

are the individual skills and knowledge acquisition in organizations as systems, the ability

to learn while participating in communities of practice and the development of experience

and knowledge by inquiry (or reflective thinking) in social worlds held together by

commitment (Elkjaer, 2004). Another typology for organizational learning is described by

Dess, Ireland, Zahra, Floyd, Janney and Lane (2003). To exploit the advantages from

organizational learning corporations must be able to see the difference between the

different types of organizational learning.

First, technical knowledge is concerned with insights about the properties of specific

activities, is vital to sustained regeneration and results primarily from acquisitive

learning. Second, firm-specific and predominately tacit in nature, it is a product of how

the firm has learned to creatively and uniquely combine its idiosyncratic resources and

capabilities to create value. Third, exploitative knowledge accumulates as the firm learns

how to exploit its resources. Thus, exploitative knowledge expands as the firm learns

how to creatively find unique, value-creating ways to exploit its technical and integrative

knowledge sets (Dess et al, 2003).

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Dess et al (2003) state that to gain maximum benefit from organizational learning a

different emphasis on the different types of knowledge is needed. If a new venture uses

technical knowledge, the implementation focus is on leveraging knowledge. Nevertheless,

rearranging and extending knowledge is the result from the corporation applying its new

integrative knowledge. Lastly, the corporation imports new technical and integrative

knowledge into value-creating primary and support activities when trying to effectively

use its new exploitative knowledge.

Popper and Lipshitz (1998) researched organizational learning using a structural and

cultural approach. The research focuses on the question: Can organizational learning be

treated as an extension of individual learning? They introduce anthropomorphism into the

research of organizational learning. Anthropomorphism is the attribution of human form

or qualities to nonhuman entities. To realize anthropomorphism, an organization should

have cognitive systems in place that enable them to perceive, think, and so on, which are

similar to those possessed by individuals.

These organizational learning mechanisms are the structural aspect of organizational

learning. The organizational learning mechanisms are institutionalized structural and

procedural arrangements that allow organizations to systematically collect, analyze store,

disseminate and use information relevant to the performance of the organization and its

members (Popper et al, 1998).

The cultural aspect of organizational learning is defined as a normative system of shared

values and beliefs that shape how organization members feel, think and behave.

Productive organizational learning requires a learning culture that includes five values:

continuous learning, valid information, transparency, issue orientation and accountability

(Popper et al, 1998). These 5 values are further explained below.

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• Continuous learning is at the heart of the organization and vital for surviving.

• Valid information is the governing value of organizational learning.

Organizational learning involves the transformation of data into knowledge and

therefore it is vital that full, undistorted and verifiable information is used in the

learning process.

• Transparency is the willingness to hold oneself open to inspection in order to

receive valid feedback. The importance of transparency becomes clear when

individuals realize that an information environment is mostly produced by people

rather than being given by nature.

• Issue orientation becomes apparent when expressed opinions and assertions

are valued according to their merits, divorced from the identity and status of the

individual pronouncing them.

• Accountability is the responsibility individuals take for their actions and their

consequences and for the learning from these consequences.

3.2.3 InnovationAs discussed in chapter 2, innovation is often a difficult process in large multinational

corporations. Conventional research and development laboratories are not able to create

the expected returns. Researchers in conventional R&D laboratories have focused on

incremental product advances or on academic ideas with little relevance to the

corporation. Even worse, sometimes when R&D laboratories managed to think up an

innovative idea, all too often this idea is commercialised by other organizations.

Corporate venturing needs a critical population of ideas and certain requirements in the

quality and innovativeness of these ideas (Husted and Vintergaard, 2004).

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Dess et al (2003) discuss in their research that innovative proposals are frequently

defeated by financial control systems and other formalities that are typical of large

bureaucracies. According to Dess et al. (2003) corporate entrepreneurship often fails

because large organizations present hostile environments for creative ideas.

Gompers (2002) researched the success of venture investments by an analysis of

innovation by comparing corporate venturing and independent venturing. Gompers found

that corporate venture investments in innovation are significantly more successful than

other investments.

3.2.4 InternationalizationInternational entrepreneurship is a combination of innovative, proactive, and risk seeking

behaviours that crosses national borders and is intended to create value in organizations

(McDougall and Oviatt, 2005). Dess et al (2003) state that the interaction between

corporate entrepreneurship and internationalization is an important research opportunity.

They state that managers and researchers should give much attention to the firm’s

entrepreneurial activities that shape these firms’ product portfolios and differentiate them

from the competition.

In a changing global environment chief executive officers and professionals should be

able to gain new insights into the dynamic interaction between the internationalization

process and corporate entrepreneurship as a way of creating new competencies that

enable firms to enhance firm performance. To take advantage of this dynamic interaction

corporations should be able to create and gain knowledge that can be combined or

deployed to renew existing skills and knowledge while creating and honouring new ones

(Zahra, Nielsen and Bogner, 1999). According to Dess et al. (2003), the development

and acquisition of skills creates strategic entrepreneurship, a process that usually

demands creativity.

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McDougall et al (2005) researched the speed of entrepreneurial internationalization.

There are our forces which determine the speed of internationalization, enabling,

motivating, mediating and moderating. The first, enabling, makes accelerated

internationalization feasible. Faster and more efficient transportation among multiple

foreign countries has a positive effect on the costs for foreign trade and investment. The

costs of airline transportation of people and freight have declined over the last decades.

Computers, faxes and wireless technologies have made sharing of data and information

faster and cheaper. The second force, motivating, is the existence of competition. The

existence of competition encourages and force entrepreneurs into internationalization.

Many entrepreneurs have been motivated to take pre-emptive advantage of technological

opportunities in foreign countries because they feared competitors would respond quickly

to a new product introduction and prevent them from eventually going international if

they initially competed only in their home country (McDougall et al, 2005). The third

force, mediating, refers to the entrepreneurial actor. The person or group that discovers

or enacts an opportunity is central to the dynamics of international exploitation.

According to McDougall et al (2005), accelerated or retarded international

entrepreneurial behaviour cannot be explained through some objective measure of

technology and competition, but only by understanding how the opportunity, the enabling

forces, and the motivating forces are interpreted, or mediated, by the entrepreneurial

actor. The fourth and last force, mediating, consists of two types. After an

entrepreneurial actor discovers or enacts an opportunity and interprets the enabling and

the motivating forces, then the knowledge-intensity of the opportunity combined with the

know-how already available to the entrepreneurial actor, plus the characteristics of the

entrepreneur’s international network largely determine internationalization speed.

Therefore, we view these as two types of moderating forces (McDougall et al, 2005).

3.3 Managerial CapabilitiesManagerial capabilities to seize the advantages of corporate entrepreneurship are

different on the different levels of managerial level. The managerial levels used in this

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thesis are senior-level management, middle-level management and first-level

management.

Hornsby, Kuratko, Shepherd and Bott (2009) researched that senior-level managers have

ratifying, recognizing, and directing roles which are in turn, are associated with particular

managerial actions. In examining the role of middle-level managers, Hornsbey et al

(2009) state that middle-level managers endorse, refine, and shepherd entrepreneurial

opportunities and identify, acquire, and deploy resources needed to pursue those

opportunities. Whereas first-level managers have experimenting roles corresponding to

the competence definition sub-process, adjusting roles

corresponding to the competence modification sub-process, and conforming roles

corresponding to the competence deployment sub-process (Hornsbey et al, 2009).

Heavy, Simsek, Roche and Kelly (2009) conclude that uncertainty due to decision-

makers’ lack of timely awareness of what opportunities to pursue, as well as a sense of

doubt surrounding the feasibility and desirability of those opportunities, shroud

entrepreneurial acts.

Gompers (2002) stated that the chances of success of corporate entrepreneurship is

influenced by strategic fit, market knowledge, resources and the way a corporation

approaches its venture program. Unsuccessful venture programs mostly fail because

managers made two fatal mistakes. Firstly, managers fail to create consensus inside the

organisation about the program’s objectives and its potential outcomes and benefits to

the organization. Secondly, the managers fail to build relationships and establish

credibility outside the corporation.

According to Husted and Vintergaard (2004), there are six areas managers need to

consider regarding corporate entrepreneurship:

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• Take responsibility: Companies cannot be passive; rather they need to take

active part in creating the bases from which ideas can spring. These actions

should be focused both on encouragement of employees and on engagement in

sources of innovation outside the organization. Therefore, parent companies need

to take responsibility for knowledge production in networks and in the process of

conceptualizing knowledge (Husted and Vintergaard, 2004).

• Secure access: Companies need to be active in securing access in networks by

offering their own level of knowledge, production capabilities or reputation in

return. In industries where knowledge is crucial, companies must be experts in

both in-house research and in cooperative research with external partners, such

as university scientists, research hospitals, and skilled competitors (Husted and

Vintergaard, 2004).

• Network capabilities: Companies need to learn to interact and create networks

in order to be able to manage the venture base. The ability to create and

participate in a network and to contextualize one’s knowledge should be viewed as

something that can be learned, but also something that often depends on

personal traits (Husted and Vintergaard, 2004).

• Competencies in how to influence the vision and agendas in knowledge-

creating networks: An organization must be able to influence the vision and

agenda of a network by learning where and how to access or structure a network

formation and a community for contextualization (Husted and Vintergaard, 2004).

• Contextualization: In order to shape the venture base during the process of

contextualization, there are strong demands on the company to disseminate and

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negotiate new knowledge to a wide range of stakeholders. These types of

stakeholder must hold central positions and originate from a transdisciplinary

background (Husted and Vintergaard, 2004).

• Invite to discussion at an early stage: A common error in the phases of

building a venture base is that the process of contextualization occurs too late in

the development. As a consequence, the final business proposal will receive a

lower evaluation due to both a lack of quality and a lack of appropriateness.

Therefore, corporations must overcome the traditional paradigm of ‘‘knowledge

hoarding’’ and create new methods and incentives for knowledge sharing. Even

though knowledge sharing is a necessity for the venture base to develop,

knowledge-sharing hostility both at individual and organizational levels hampers

such development (Husted and Vintergaard, 2004).

3.4 ConclusionIn this chapter the different capabilities which multinational corporations need to possess

are discussed following the four domains of strategic renewal. The conclusion is that a

multinational organization should be open and aware of the different relationships,

knowledge and internationalization processes are present. Managerial capabilities are

different between levels within the organization. Furthermore, managers should be well

aware of the gaps lying ahead and be aware of the capabilities an organization needs to

possess to successfully engage in corporate entrepreneurship.

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Chapter 4 – A Model of Strategic Entrepreneurship

4.1 IntroductionIn this chapter, the model constructed by Ireland, Hitt and Sirmon (2003) will be used to

further explain the strategic aspect of corporate entrepreneurship. This wil hlp to form

the conclusion in the next chapter.

4.2 A Model of Strategic EntrepreneurshipIreland, Hitt and Sirmon (2003) developed a model of strategic entrepreneurship. This

model describes how an entrepreneurial mindset, an entrepreneurial culture and

entrepreneurial leadership, the strategic management of resources and applying

creativity to develop innovations are important dimensions of strategic entrepreneurship

and how these dimensions facilitate the creation of wealth in an organization. See figure

1 for the links between these dimensions.

Figure 1. A model of strategic entrepreneurship.

4.2.1 Entrepreneurial MindsetAccording to Ireland et al (2003), an entrepreneurial mindset is required to successfully

engage in strategic entrepreneurship. An entrepreneurial mindset is both an

individualistic and collective phenomenon. Ireland et al (2003) explain that an

entrepreneurial mindset is very important to individual entrepreneurs as well as to

managers and employees in established firms to think and act entrepreneurially. They

state that an entrepreneurial mindset is a view on doing business focused on and

capturing the benefits of uncertainty. Uncertainty derives from an inability to properly

assess future events, largely because of a lack of information about cause/effect

relationships.

25


4.2.2 Entrepreneurial Culture and Entrepreneurial LeadershipEntrepreneurial culture is a system of shared values and beliefs that shape the firm’s

structural arrangements and its members’ actions to produce behavioural norms (Ireland

et al, 2003). Ireland et al (2003) define six properties of behavioural norms:

• Shared basic assumptions.

• Invented, discovered, or developed by a given group.

• Ability to cope with problems of external adaptation and internal integration.

• The assumptions are considered valid.

• They can be taught to new members of the group.

• The assumptions are the correct way to perceive, think, and feel in relation to

those problems.

Ireland et al (2003) define entrepreneurial leadership as the ability to influence others to

manage resources strategically in order to emphasize both opportunity-seeking and

advantage-seeking behaviours.

4.2.3. Strategic Management of ResourcesResearch has shown that resources are the basis of firm differential performances in

terms of wealth creation. Ireland et al (2003) define three critical resources to be

managed in strategic entrepreneurship. One, financial capital, is a tangible asset while

the other two, human capital and social capital, are intangible assets.

• Financial Capital: Financial capital refers to assets that are considered to be

liquid in nature. A capital asset of this type can be used to make purchases of

various goods and services or to acquire other types of assets (tangible or

intangible).

• Human Capital: Human Capital is the total of skills and knowledge within the

organization. As stated previously in chapter 3, a firm can leverage its human

26


capital by engaging in external networks.

• Social Capital: Social capital is the set of relationships between individuals

(internal social capital) and between individuals and organizations (external social

capital) that facilitate action (Ireland et al, 2009).

These resources need to be bundled and the corporation need to make choices about

how to leverage these bundles within the organization.

4.2.4 Applying Creativity to Develop InnovationsIreland et al (2003) state that to gain a sustainable advantage need to apply creativity in

a way that helps incumbent companies earn higher margins by selling better products to

their best customers.

4.3 ConclusionIn this chapter the model created by Ireland, Hitt and Sirmon (2003) is used to show

how corporate entrepreneurship can create wealth for multinational corporations. When

organization bundle and leverage the capabilities described in chapter 3, the model can

be used to provide a framework in how to leverage and divide the capabilities between

subsidiaries.

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Chapter 5- Conclusion

5.1 IntroductionIn the former chapters the concept of strategic entrepreneurship has been researched

using the dimensions of corporate entrepreneurship, the organizational and managerial

capabilities needed by the organisation to successful leverage corporate entrepreneurship

and the strategic aspects within a model by Ireland et al. In this chapter a conclusion of

the research and further recommendation will be given.

5.2 ConclusionIn this conclusion there is one central goal and that is the answer to the problem

statement proposed in the first chapter.

• How can multinational corporations successfully leverage corporate

entrepreneurship?

As became clear in this study there are a lot of aspects which need to be considered in

corporate entrepreneurship. In order to fully leverage the successes belonging to

corporate entrepreneurship this research found that there are important aspects which

multinational corporations need to incorporate.

To get to an answer to the problem statement two research question where formulated:

• What dimensions are typical for corporate entrepreneurship?

• What organizational and managerial capabilities do multinational corporations

need to possess or incorporate to facilitate corporate entrepreneurship?

The dimensions of corporate entrepreneurship are innovation aimed at business creation

and venturing, and strategic renewal. Innovation and corporate venturing is the process

of creating and introducing new products, production processes, and organizational

systems. Strategic renewal or strategic entrepreneurship is the integration of

entrepreneurial and strategic perspectives in developing and taking actions designed to

create wealth. The concept is further explained by using four domains of strategic

28


renewal. The domains are external networks, resources and organizational learning,

innovation, and internationalization.

The managerial and organizational capabilities which the corporation needs to posses are

detailed in chapter three using the dimensions of chapter 2. Linking these with the model

of strategic entrepreneurship in chapter 4 adds to the conclusion below. This conclusion

answers the problem statement of this research.

An entrepreneurial mindset needs to be adopted. This is both an individualistic and

collective phenomenon and should incur in both the management levels as the other

employees. Adopting an entrepreneurial mindset is a cultural aspect and should focus on

the learning aspect of entrepreneurship. It should focus on continuous learning, valid

information, transparency, issue orientation and accountability. Focussing on these

aspects will have a positive affect on uncertainty. The entrepreneurial culture should

have shared values and beliefs. This process should be under leadership of an

entrepreneurial leader who understands the factors which could lead to negative

outcomes. The two most important reasons are failing to create consensus inside the

organisation about the program’s objectives and its potential outcomes and benefits to

the organization and failing to build relationships and establish credibility outside the

corporation. The entrepreneurial leader should have the ability to influence others to

manage resources strategically in order to emphasize both opportunity-seeking and

advantage-seeking behaviours.

Furthermore the corporation should fully understand the external networks of the

organization. Not only should the corporation be able to see the value of the different

linkages, but it should also be able to act as an important player within the external

networks. To become an important player, the corporation should be fully aware of the

six focus points of the external network, taking responsibilities, securing access, network

29


capabilities, influencing opportunities, contextualization and being part of the discussion

at an early stage.

Multinational corporations should be aware of the internationalization aspect of

entrepreneurship. There are our forces which determine the speed of internationalization,

enabling, motivating, mediating and moderating.

5.3 Further Recommendations and LimitationsThis research is purely descriptive and based on former research and literature. To

further expand the research the empirical method could be used. Data could be added

from interviews and from performance indicators. This could result in a new framework

which could be used to set a strategy for corporate entrepreneurship.

Furthermore, this research is based on large multinational corporations. There could be

differences in corporate entrepreneurship between corporations in different fields or

markets. For example, a corporation in a fast-moving high tech market could have

different aspects and different outcomes than a corporation in a saturated adult market.

It is also interesting to further target the senior-level management and research

differences in the composition of the board, the complementary and conflicting aspects

with middle-level management or personal aspects of individual managers

30


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