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CHAPTER 2 CORPORATE

ENTREPRENEURSHIP
Causes of Interest In Corporate
Entrepreneurship
1.

2.

3.

4.

5.
6.

7.
8.

9.

On a social level, individuals


who believe strongly in their
own talents frequently desire to
create something of their own.
They want responsibility and
have a strong need for individual
expression and freedom in work
environment.
Corporate entrepreneurship is
one method of stimulating and
then capitalizing on individuals
in an organization who think
that something can be done
differently and better.
It is important to keep or instill,
the entrepreneurial spirit in an
organization to innovate and
grow.
Corporate entrepreneurship is
an entrepreneurial action within
an established organization.
Hypercompetition has forced
companies to have an increased
interest in such areas as new
product, diversification,
increased productivity and
decreasing costs.
New business venturing refers
to the creation of a new business
within an existing organization.
The entrepreneurial activities
are creating something new of
value either by redefining the
companys current products or
services, developing new
markets or forming formally
autonomous or
semiautonomous units or firm.
Organizational innovativeness
refers to product and service
innovation, with an emphasis on
development and innovation in
technology.

10. Self-renewal is the


transformation of an
organization through the
renewal of the key ideas on
which it is built.
11. Proactiveness includes initiative
and risk taking, competitive
aggressiveness and boldness,
reflected in the orientations and
activities of top management.
Managerial Versus
Entrepreneurial Decision Making
Strategic Orientation and
Commitment to Opportunity
1. Strategic orientation refers to
those factors that are inputs into
the formulation of the firms
strategy.
2. The strategy of entrepreneurial
management is driven by the
presence or generation of
opportunities for new entry and
is less concerned about the
resources that may be required
to pursue such opportunities.
3. The strategy of traditional
management is to use the
resources of the firm efficiently.
4. Entrepreneurially and
traditionally managed firms can
be distinguished in terms of
their commitment to
opportunity.
5. Entrepreneurial orientation
toward opportunity is a
commitment to taking action on
potential opportunities.
6. Able to withdraw their
resources from a particular
opportunity.
7. If initial feedback from the
pursuit of an opportunity
provides information suggesting
that it might not be the right
opportunity for the firm.

Commitment of Resources and


Control of Resources
1. Entrepreneurial orientation
toward the commitment of
resources is a focus on how to
minimize the resources that
would be required in the pursuit
of a particular opportunity.
2. The firm must invest to initially
pursue an opportunity, the
amount of resources at risk if
the opportunity does not pan
out is also minimized.
3. Entrepreneurial managed firms
may test the waters by
committing a small amounts of
resources in a multistep manner
with minimal risk exposure at
each step.
4. Traditionally managed firms
decide to commit resources to
an opportunity, they will do it on
a large scale.
5. Traditionally managed firms
uses in depth analysis of
available information to go for it
or not and if they do go for it, the
investment of resources cannot
be reversed.
6. Entrepreneurially managed
firms are less concerned about
the ownership of resources and
more concerned about having
access to others resources and
operates from the standpoint.
7. Traditionally managed firms
focus on the ownership of
resources and the accumulation
of further resources.
8. If they controlled their own
resources, they are selfcontained.
9. The control that comes with
ownership means that the
resources can be deployed more
efficiently for the benefit of the
firm.

Management Structure and Reward


Philosophy
1. Entrepreneurial orientation
toward management structure is
more organic focus, it has few
layers of bureaucracy between
top management and the
customer and has multiple
informal networks.
2. Entrepreneurially managed firm
are able to capture and
communicate more information
from the external environment
and are sufficiently fluid to be
able to take quick action based
on the information.
3. More structured to make use of
both their internal networks and
external networks, which
provide information and other
important resources in
discovery and exploitation of
opportunities.
4. Traditionally managed firm has
a structure well suited for the
internal efficiencies of allocating
controlled resources.
5. Formalized hierarchy with clear
roles and responsibilities, highly
routinized work and layers of
middle management to
employees use of the firms
resources.
6. The structures are more focused
on efficiency rather than on
detecting and acting on changes
in the external environment.
7. Entrepreneurially managed firm
is focused on pursuing
opportunities for new entry that
represent new value of for the
firm.
8. Entrepreneurial philosophy
toward rewards are one that
compensate employees based on
their contribution toward the
discovery and exploitation of
opportunity.

9. The employees have the


freedom to experiment with
potential opportunities and are
rewarded accordingly.
10. Traditionally managed firm
rewards management and
employees based on their
responsibilities.
Growth Orientation and
Entrepreneurial Culture
1. Entrepreneurial orientation of
growth is a focus on rapid
growth.
2. Traditionally managed firms
prefer growth to be slow and at
a steady pace.
3. Culture is the environment of a
particular organization.
4. Entrepreneurial orientation
toward culture encourages
employees to generate ideas,
experiment and engage in other
tasks that might produce
creative output.
5. This output is often the source of
opportunities for new entries.
6. Traditionally managed firms
begin with an assessment of the
resources that it controls, and
this is reflected in its
organizational culture.
7. It only interested in ideas that
revolve around controlled
resources.
Establishing a Culture for Corporate
Entrepreneurship
1. Characteristics of an
entrepreneurial environment:
Organization operates on
frontiers of technology
New ideas encouraged
Trial and error encouraged
Failures allowed
No opportunity
parameters
Resources available and
accessible

2.

3.

4.

5.

6.
7.

8.
9.

Multidiscipline teamwork
approach
Long time horizon
Volunteer program
Appropriate reward
system
Sponsors and champions
available
Support of top
management
First, the organization operates
on frontiers of technology.
Research and development are
key sources for successful new
product ideas, the firm must
operate on the cutting edge of the
industrys technology,
encouraging and supporting new
ideas.
Second, trial and error. Successful
of new products or services do
not appear fully developed, they
evolve.
Establish an environment that
allows mistakes and failures in
developing new and innovative
products.
Third, the organization should
make sure that there are no initial
organizational obstacles that
inhibit creativity in new product
development.
Fourth, the resources of the firm
need to be available and easily
accessible.
Insufficient funds are allocated
not to creating something new,
but to solve problems that have
an immediate effect on the
bottom line.
Fifth, a multidiscipline team
approach needs to be encouraged.
This open approach, with
participation by needed
individuals regardless of area, is
the antithesis of the typical
corporate organizational
structure.

10.
An evaluation of successful
cases of corporate
entrepreneurship indicated that
one key to success was the
existence of skunkworks
involving relevant people.
11.
A team members promotion
and overall career within the
corporation are based on their job
performance in the current
position.
12.
Establish a long time horizon
for evaluating the success of the
overall program and the success
of an individual venture.
13.
This patient toward money in
the corporate setting is no
different from the
investment/return time horizon
used by venture capitalists and
others when invest in an
entrepreneurial effort.
14.
Sixth, the spirit of corporate
entrepreneurship cant be forced.
15.
An individual willing to spend
the excess hours and effort to
create a new venture needs the
opportunity and the
accompanying reward of
completing the project.
16.
A corporate entrepreneur
falls in love with the newly
created internal venture and will
do almost anything to help ensure
its success.
17.
Seventh, reward system.
Rewards based on the attainment
of established performance goals.
18.
The corporate entrepreneur
needs to be appropriately
rewarded for all the energy, effort
and risk taking expended in the
creation of the new venture.
19.
Eighth, sponsors and
champions throughout the
organization supports the
creativity and the planning
flexibility to establish new
objectives and directions.

20.
Corporate structures
frequently measure managers on
their ability to come close to
objectives, regardless the quality
of performance.
21.
Ninth, must be supported by
top management, both by their
physical presence and making
sure that the necessary personnel
and financial resources are
available.
Leadership Characteristics of
Corporate Entrepreneurs
1. Leadership characteristics:
Understands the
environment
Visionary and flexible
Creates management
options
Encourages teamwork
Encourages open
discussion
Builds a coalition of
supporters
Persists
2. To establish a successful
corporate venture, the individual
must be creative and have a broad
understanding of the internal and
external environments of the
corporation.
3. Be a visionary leader, a person
who dreams great dreams.
4. To establish a successful new
venture, the corporate
entrepreneur must have a dream
and overcome obstacles to
achieving it by selling the dream
to others.
5. A corporate entrepreneur does
not mind the store but open to
and encourages change.
6. In forming a new venture, putting
together a variety of skills
requires crossing established
departmental structure and
reporting systems.

7. To minimize disruption, the


corporate entrepreneur must be a
good diplomat.
8. Open discussion must be
encouraged to develop a good
team for creating something new.
9. A successful new venture within
an established firm can be formed
only when the team involved feels
free to disagree and to critique
idea to reach the solution.
10.
The corporate entrepreneur
must encourage and affirm each
team member, especially during
difficult times.
11.
Only through the corporate
entrepreneurs persistence will a
new venture be created and
successful commercialization
result.
Establishing Corporate
Entrepreneurship in the
Organization
1. The first step is to secure a
commitment to corporate
entrepreneurship in the
organization by top, upper and
middle management levels.
2. Top management commitment is
managers in an organization
strongly supporting corporate
entrepreneurship.
3. Without top management
commitment, the organization
will never go through all the
cultural changes for
implementation.
4. Second, ideas and general areas
that top management is
interested in supporting should
be identified, along with amount
of risk money that is available to
develop the concept further.
5. These should specify the time
frame, volume and profitability
requirements for the new
venture.

6. A sponsor system and an


entrepreneurial training need to
be established.
7. Third, a company needs to use
technology to be more flexible.
8. Fourth, the organization should
be a group of interested managers
who will train employees and
share their experiences.
9. This will require the
entrepreneurial team to develop a
business plan, obtain customer
reaction and some initial
intentions to buy, and learn how
to coexist within the
organizational structure.
10.
Fifth, the organization needs
to develop ways to get closer to
its customer.
11.
Sixth, an organization must
learn to be more productive with
fewer resources.
12.
Seventh, the organization
needs to establish a strong
support structure for corporate
entrepreneurship.
13.
These ventures require
flexible, innovative behavior with
the corporate entrepreneurs
having total authority over
expenditures and access to
sufficient funds.
14.
Eighth, support must involve
tying the rewards to the
performance of the
entrepreneurial unit.
15.
This to encourage the team
members to work harder and
compete more effectively.
16.
Ninth, the organization needs
to implement an evaluation
system that allows successful
entrepreneurial units to expand
and unsuccessful ones to be
eliminated.

Problems and Successful Efforts


1. one study found that new
ventures started within a
corporation performed worse
than those started independently
by entrepreneurs.
2. The corporations difficulty in
maintaining a long-term
commitment, a lack of freedom to
make autonomous decisions and a
constrained environment.
3. Minnesota Mining and
Manufacturing (3M) allows
employees to devote a percentage
of their time to independent
projects.
4. An important goal : to generate a
significant percent sales from new
products introduced within the
last five years.
5. The most successful
entrepreneurial activities was the
development of Post-it Notes by
entrepreneur Arthur Fry.
6. Hewlett-Packard (HP) failed to
recognize the potential of Steven
Wozniaks proposal for a personal
computer.
7. The case of Charles House, an
engineer who went far beyond his
entrepreneurial duty when he
ignored an order from David
Packard to stop working on a
high-quality video monitor.
8. IBM developed the independent
business unit concept.
9. Each unit is a separate
organization with its own miniboard of directors and
autonomous decision-making
authority on many manufacturing
and marketing issues.
10.
Corporate entrepreneur
Philip Estridge led his group to
develop and market the PCs
through both IBMs sales force
and the retail market, breaking
some of the most binding

operational rules of IBM at that


time.
Learning from Failure
1. By learning why an
entrepreneurial initiative failed,
entrepreneurs can avoid such
mistakes in the future and do a
better job by managing the
uncertainties associated with
entrepreneurial action.
2. Dual process model of coping
with negative emotions involves
oscillation between loss
orientation and a restoration
orientation.
3. Individuals who use a dual
process model of coping with
negative emotions or grief
recovery can be more quickly
recover from the negative
emotions generated by the failure
of an entrepreneurial initiative.
4. Entrepreneurs with a loss
orientation might seek out
friends, family or psychologists to
talk through the event and their
negative emotions.
5. Loss orientation is an approach to
negative emotions that involves
working through and processing
some aspect of the loss
experience and as a result of this
process, breaking emotional
bonds to the object loss.
6. Restoration orientation is an
approach to negative emotions
based on both avoidance and a
proactiveness toward secondary
sources of stress arising from a
major loss.
7. This orientation involves
distracting oneself from thinking
about the failure and focusing
ones energy on addressing other
problems that have arisen as
result of the failure.
8. Practical implications :

Knowledge that the


feelings and reactions
being experienced by the
entrepreneur are normal
for someone dealing with
such a loss may help to
reduce feelings of shame
and embarrassment.
There are psychological
and physiological
outcomes caused by the
feelings of loss.
A process of recovery from
failure to learn, which
offers entrepreneurs some
comfort that their current
feelings of loss, sadness
and helplessness will
eventually diminish.
The recovery and learning
process can be enhanced
by some degree of
oscillation between a loss
orientation and a
restoration orientation.
Recovery from loss offers
and opportunity to
increase ones knowledge
of entrepreneurship.S