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In this particular brief data point a paradigm of entrepreneurship entrepreneurial management.
A Paradigm of Entrepreneurship: Entrepreneurial Management
Author(s): Howard H. Stevenson and J. Carlos Jarillo
Reviewed work(s):
Source: Strategic Management Journal, Vol. 11, Special Issue: Corporate Entrepreneurship
(Summer, 1990), pp. 17-27
Published by: John Wiley & Sons
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Strategic Management Journal, Vol. 11, 17-27 (1990)
A PARADIGM OF ENTREPRENEURSHIP:
ENTREPRENEURIAL MANAGEMENT
HOWARD H. STEVENSON
Harvard Business
School, Boston, Massachusetts, U.S.A.
J. CARLOS JARILLO
IMD, Lausanne,
Switzerland
Corporate entrepreneurship seems to many entrepreneurship scholars a contradiction in
terms. This paper represents an attempt to bridge that gap. This is done by, first, reviewing
the literature on entrepreneurship, trying to summarize it in a few major themes. Second, a
view of entrepreneurship is proposed that facilitates the application of the previolus findings
to the field of corporate entrepreneulrship. Finally, a series of propositions are developed,
as instances of the kind of research that can be pursued by following the proposed approach.
Corporate entrepreneurship is a concept that has
acquired more and more importance in the last
few years. Serious, scholarly work has appeared
on the subject (see, for instance, Burgelman,
1983a,b, 1984a,b, Nielsen, Peters and Hisrich,
1985; MacMillan, Block and Subba Narasimha,
1986; Hisrich and Peters, 1986; MacMillan and
Day, 1987; for some recent examples). General-
interest books have also made an impact (Brandt,
1986; Hisrich, 1986; Kanter, 1983, 1989), and
some of them have even reached best-seller lists
(Pinchot, 1985). The very existence of this issue
of the Strategic Management Journal testifies to
the credibility gained by the concept among
experts in business management.
Yet, when reading much of the literature on
entrepreneurship as such, to which corporate
entrepreneurship should be somewhat related
(perhaps as is a species to its genus), one finds
an implicit definition of entrepreneurship as
something which is radically different from
corporate management. Indeed, some writers
find it to be the opposite of corporate management
(Vesper, 1985). Thus, the very concept of
corporate entrepreneurship sounds to many
entrepreneurship scholars as something of an
oxymoron.
What is, then, behind that surge of the corporate
01 43-2095/90/050017-11 $05.50
( 1990 by
John
Wiley
& Sons, Ltd.
entrepreneurship construct? There is no doubt
that, of late, entrepreneurship in general has
gained its status as a legitimate scholarly research
subject, enjoying in addition much public interest
(Vesper, 1988). This is evidenced by the appear-
ance of new academic journals, such as the
Journal of Business Venturing; by the fact that
mainstream journals carry more and more articles
on related issues (Churchill and Lewis, 1985);
and by the growth of interest in non-academic
publications, which has been even faster (see
McClung, J. J. and J. A. Constantin, 'Nonaca-
demic literature on entrepreneurship: An evalu-
ation', in Kent et al., 1982). As of today, there
is practically no business school without at least
one course on entrepreneurship (Porter and
McKibben, 1988).
The main traits generally believed to be
associated with entrepreneurship, such as growth
(Drucker, 1985), innovation (Backman, 1983),
and flexibility (Birch, 1987), however, were
deemed to be also desirable traits for large
corporations, by theorists and practitioners alike.
Thus the field of corporate entrepreneurship was
born. There is a need, however, to establish
clear links between the fields of entrepreneurship
and corporate management, if the large body of
research in the former is to benefit the latter.
18 H. H. Stevenson and J. C. Jarillo
Establishing such a link is especially important
because, as pointed out above, many entrepre-
neurship scholars would consider entrepreneurship
as just what is outside of mainstream corporate
management.
This paper attempts to establish this linkage.
It reviews much of the literature on entrepre-
neurship and groups these previous studies into a
few underlying themes which have relevance to
corporate entrepreneurship. It then re-examines
definitions of entrepreneurship and advances its
own definition of entrepreneurship that facilitates
the connection of the previous research findings
to the broader field of corporate management.
From that connection, propositions for research
and implications for the teaching and practice of
corporate entrepreneurship are developed.
THREE MAIN STREAMS OF RESEARCH
The plethora of studies on entrepreneurship can
be divided in three main categories: what happens
when entrepreneurs act: why they act; and how
they act. In the first, the researcher is concerned
with the results of the actions of the entrepreneur,
not the entrepreneur or even his or her actions
per se. It is generally the point of view taken by
economists, such as Schumpeter, Kirzner, or
Casson. The second current may be termed the
'psychological/sociological approach', founded by
McClelland (1961) and Collins and Moore (1964),
in the early 1960s. Their work provides a useful
emphasis on the entrepreneur as an individual,
and on the idea that individual human beings-
with their background, environment, goals,
values, and motivations-are the real objects of
analysis. The causes of individual entrepreneurial
action constitute the primary interest of the
researcher. Both the individual entrepreneur and
the environment as it relates to the motives of
individual entrepreneurial behavior are con-
sidered. It is the why of the entrepreneur's
actions that becomes the center of attention.
Finally, how entrepreneurs act can become the
center of attention. In this case, researchers
analyze the characteristics of entrepreneurial
management, how entrepreneurs are able to
achieve their aims, irrespective of the personal
reasons to pursue those aims and oblivious to
the environmental inducements and effects of
such actions.
Considering what happens when entrepreneurs
act: Studying the results of entrepreneurship
The area of literature concerned with the question
of what happens when entrepreneurs act is
dominanted by economists. What matters here is
the net effect upon the general economic system
of the actions of the entrepreneur, and the role
he or she plays in the development of the market
system. The earliest interest in entrepreneurship
was expressed by Richard Cantillon, who focused
upon the economic role of the entrepreneur,
rather than the individual who performs such a
role. Cantillon, who coined the word 'entrepre-
neur,' said that entrepreneurship entails bearing
the risk of buying at certain prices and selling at
uncertain prices. Jean Baptiste Say broadened
the definition to include the concept of bringing
together the factors of production. Thus the
entrepreneur is the protagonist of economic
activity in general.
Schumpeter takes a more specific view. He
considers entrepreneurship the process by which
the economy as a whole goes forward. It is
something which disrupts the market equilibrium,
or 'circular flow.' Its essence is 'innovation.' He
writes that 'the carrying out of new combinations
we call "enterprise"; the individuals whose
function is to carry them out we call "entrepre-
neurs" (1934: 74). He thus distinguishes different
roles:
We call entrepreneurs not only those 'indepen-
dent' businessmen in an exchange economy who
are usually so designated, but all who actually
fufil the function by which we define the concept,
even if they are, as is becoming the rule,
"dependent" employees of a company, like
managers, members of boards of directors, and
so forth, or even if their actual power to perform
the entrepreneurial function has any other
foundations, such as the control of a majority
of shares. As it is the carrying out of new
combinations that constitutes the entrepreneur,
it is not necessary that he should be permanently
connected with an individual firm; many 'finan-
ciers,' 'promoters,' and so forth are not, and
still they may be entrepreneurs in our sense. On
the other hand, our concept is narrower than
the traditional one in that it does not include
all heads of firms or managers of industrialists
who merely may operate an established business,
but only those who actually perform that function
(p. 74).
A Paradigm of Entrepreneurship 19
A few pages earlier he had spelled in detail what
he understood by 'new combinations':
(1) The introduction of a new good-that is one
with which consumers are not yet familiar-or
of a new quality of a good. (2) The introduction
of a new method of production, that is one not
yet tested by experience in the branch of
manufacture concerned, which need by no means
be founded upon a discovery scientifically new,
and can also exist in a new way of handling a
commodity commercially. (3) The opening of a
new market, that is a market into which the
particular branch of manufacture of the country
in question has not previously entered, whether
or not this market has existed before. (4) The
conquest of a new source of supply of raw
materials or half-manufactured goods, again
irrespective of whether this source already exists
or whether it has first to be created. (5) The
carrying out of the new organization of any
industry, like the creation of a monopoly position
(for example, through trustification) or the
breaking up of a monopoly position (p. 66).
After Schumpeter's work, most economists
(and many non-economists as well) have accepted
his identification of
entrepreneurship with inno-
vation. This represents a change from the previous
tradition, where the term 'entrepreneur' meant
basically 'businessman,' as we saw. (See Kilby,
1971, for a summary of the term 'entrepreneur'
in classical economics.)
Some economists interpret the results of
entrepreneurship in a different way: instead of
disrupting the market equilibrium, thus advancing
the economy to qualitatively higher levels, the
entrepreneur works towards the accomplishment
in real life of the (theoretical) equilibrium
(Kirzner, 1979). The first tradition, represented
by Cole (1968) at the Harvard Research Center
in Entrepreneurial History, has stressed the
aspect of innovation in the entrepreneurial
function (see Scherer, 1984, significantly titled
Innovation and Growth, Schumpeterian
Perspectives). The second, represented by
Kirzner, has stressed the informational aspects
of the entrepreneurial function; his argument is
that the entrepreneur has a superior knowledge
of market imperfections, that he uses to his
advantage. Leibenstein (1968), also based at
Harvard, takes this approach, beyond merely
allocative efficiency. He makes the entrepreneur's
basic function the destruction of pockets of
inefficiency in the system.
For the most part, microeconomics has
neglected the study of the entrepreneurial func-
tion, simply by assuming that markets would
eventually reach equilibrium. Even industrial
organization, the area of microeconomics that is
arguably closest to actual management practice
(Porter, 1981), maintains an emphasis on supra-
firm variables by concentrating on the assumption
that the structure of a given industry drives the
conduct of the firms in it. Nevertheless, the
importance of the 'entrepreneurial function' to
the actual development of the economy of a
given country, following more or less Schumpeter-
ian lines, has been studied extensively, starting
with Hirschman: 'development depends not so
much on finding optimal combinations for given
resources and factors of production as on calling
forth and enlisting for development purposes
resources and abilities that are hidden, scattered
or badly utilized' (1958: 5) These points of view
open the way for an empirical study of the effects
of entrepreneurship in the real economy. Birch
(1979, 1987) has analyzed carefully the impact
of entrepreneurial activity in the overall economy
through the actual creation of jobs.
Thus the study of the effects of entrepreneurship
has the following characteristics: (1) It abstracts
from the individual entrepreneur and his or her
actions to focus on the process by which those
actions affect the economic environment. (2) It
recognizes the entrepreneurial function as respon-
sible for economic improvement in our society,
due to its 'innovations,' thus providing a theoreti-
cal base for the 'advocacy studies' we shall discuss
below. (3) It creates a basis for the distinction
between the roles of 'investor,' the 'manager,'
and the 'entrepreneur.' Under this third torch of
analysis, entrepreneurship would then go well
beyond the mere creation of small businesses
(Scherer and Ravenscraft, 1984), thus paving the
way for the legitimation of the concept of
corporate entrepreneurship.
Considering why entrepreneurs act: Studying the
causes of entrepreneurship
It is not surprising that entrepreneurs themselves
have been subjects of interest. If entrepreneurship
is at the root of economic improvement, the
implication that 'we need more of it' is not
difficult to draw. Researchers must, therefore,
understand those who provide it. This is consistent
20 H. H. Stevenson and J. C. Jarillo
with a cultural emphasis upon the individual
actor ('the cult of the individual'). It also fits
with a need to understand why some depart from
the norms of average behavior: the dramatic
accomplishments of some entrepreneurs easily
leads to the thinking that the individuals behind
them must somehow be different and therefore
of particular interest.
One level of inquiry into the 'causes' of
observed entrepreneurial behavior conceptualizes
entrepreneurship as 'a psychological characteristic
of individuals, which can be described in terms
such as creativity, daring, aggressiveness, and the
like' (Wilken, 1979: 58). It was probably started
by The Enterprising Man, by Collins and Moore
(1964), who put at the core of entrepreneurship
the 'desire for independence,' and who identified
as the causal variable certain Oedipal conflicts
and neuroses of the entrepreneur. This early
work has had much following, particularly among
social scientists with a background in psychology.
Brockhaus studied the locus of control belief of
entrepreneurs (1975), and their risk-tendency
(1980). Marcin and Cockrum (1984), study
psychological characteristics of entrepreneurs
across different countries. Hochner and Ganrose
(1985) analyze the characteristics of entrepre-
neurs, compared to their non-entrepreneurial
fellow co-workers; and a similar psychological
study is performed on female entrepreneurs
by Rowen and Hisrich (1986). Cooper and
Dunkelberg (1986) compare the path to entre-
preneurship (inheritance, purchase, start-up) with
background attitudes characteristic of a large
sample of entrepreneurs. The popular press
has also written extensively about the 'special
psychological characteristics of the entrepreneur,'
generally understood as someone who starts-
somewhat successfully-his or her own business.
An interesting twist is the study of the
relationship between personal characteristics of
entrepreneurs and the companies they set up.
Smith and Miner (1983) analyzed the adequacy
of different 'types' of entrepreneurs along the
different stages in the development of a firm,
while Webster (1977) and Gartner (1985) focus
on the kinds of firms set up by different kinds
of entrepreneurs.
A second level of inquiry conceptualizes
entrepreneurship 'as a socal role ... that may be
enacted by individuals in different social positions'
(Wilken, 1979: 58). It was pioneered by McClel-
land's best-selling The Achieving Society (1961).
The essence of this approach is that entrepreneur-
ial behavior is dependent upon personal motiv-
ations which in turn are dependent on environ-
mental characteristics. McClelland started from
a psycho-sociological point of view, asking why
some societies, at some points in time, had
exhibited high economic and social growth.
He attributed that growth to the 'need for
achievement (n-achievement)' present in the
psychological make up of large parts of the
population in those societies. This point of view
has been very fruitful in that it has brought all
the theoretical resources of sociology to bear on
the field of entrepreneurship. Its results have been
well-detailed accounts of how the environment
affects practice of entrepreneurship (see, for
instance, Greenfield, Stricken and Aubey, 1979;
Delacroix and Carrol, 1983; Pennings, 1982a,b).
The practical consequences for public policy are
obvious, so much of the research undertaken
with this 'environment as motivator' approach
has clear political overtones. In fact, much of
what is being published right now falls into this
advocacy approach (see, for instance, Backman,
1983 and Kent, 1984).
Many criticisms have been levelled at these
attempts to understand the why of entrepre-
neurship. First, it can be pointed out that it is
extremely difficult to link particular psychological
or sociological traits causally to patterns of
complex behavior, such as entrepreneurship
(Cooper, Dunkelberg, and Woo, 1988). Indeed,
the literature suggests that no causal link can be
established between any of the above-mentioned
variables and entrepreneurship. At most, one
could speak of correlates or antecedents of
particular kinds of entrepreneurial behavior.
An added problem with this approach is that
its constant focus on the individual entrepreneur
has led, in many cases, to the identification of
entrepreneurship with small business manage-
ment (Carland et al., 1984) and to the failure to
differentiate clearly between the individuals and
organizations. These two points of view seriously
impair the ability to transfer whatever knowledge
is gained in entrepreneurship research to broader
fields of management, such as corporate entre-
preneurship.
On the other hand, the contributions of this
'entrepreneurship from its causes' approach are
extremely important, and cannot be forgotten
in
A Paradigm of Entrepreneurship 21
any serious attempt at understanding corporate
entrepreneurship. This approach has reminded
us of the following facts: (1) It is individuals who
carry out entrepreneurial activities, no matter
how they are defined. (2) Their characteristics
(personality, background, skills, etc.) matter.
(3) Environmental variables are also relevant,
not only in that they open up opportunities to
exploit market inefficiencies, as in the 'econo-
mists' approach,' but also in the sense that
different environments are more or less conducive
to entrepreneurship, and can be more favorable
to the new venture's success. So, apart from the
possible social benefits that might have obtained
from some of the advocacy approach, emphasis
on the individual focuses the study of entrepre-
neurship on its protagonist-the invidivual entre-
preneur, who was somewhat 'lost' in the previous
economic analysis.
Considering how entrepreneurs act: Studying
entrepreneurial management
The two streams of research discussed above,
which have been characterized as 'entrepre-
neurship from its effects' and 'entrepreneurship
from its causes,' deals with the 'what' and the
'why' of entrepreneurship. It is now left to study
the 'how'. Entrepreneurship can be considered
from a practical point of view-what do entre-
preneurs do, or, normatively, 'how to succeed at
being an entrepreneur.' It is, in fact, what is
between the 'causes' and the 'results': the
'managerial behavior' of the entrepreneur. Table
1 represents the three major categories entrepre-
neurial studies can be fitted into.
Table 1. Contributions of disciplines to entrepreneurship
Line of inquiry Causes Behavior Effects
Main question Why How What
Basic discipline Psychology, sociology Management Economics
Contributions Importance of individual Entrepreneurship is the
function by which growth
is achieved (thus not only
the act of starting new
businesses)
Environmental variables are Distinction between
relevant entrepreneur and manager
There is a vast popular literature along these
'how-to' lines, from functional studies on aspects
of interest to small businesses, to work on start-
ups, venture capital, etc.; as well as many
practical, functional studies on how to set up and
run a few businesses successfully (see, for
instance, Silver, 1983). There is also now emerg-
ing academic work focused on considering how
entrepreneurs act. The study of strategy formation
in entrepreneurial firms is now a legitimate area
of inquiry (Mintzberg and McHugh, 1985).
Two important areas of research in this domain
are studies concerned with the different life cycles
through which new ventures pass and the
problems entrepreneurs face as their companies
mature (Gray and Ariss, 1985; Quinn and
Cameron, 1983); and studies that try to find
predictors of success for new ventures. This latter
group attempts to identify predictors generally
by relating such success (or lack thereof) to
either the entrepreneurs' background, the chosen
strategy, environmental considerations, or some
mixture of these (Dollinger, 1984; Miller, 1983;
Cooper and Bruno, 1975). Timmons and Bygrave
(1986), Roure and Maidique (1986), and MacMil-
lan, Zemann and Subba Narasimha (1987) have
all sought predictors of success in new ventures
funded with venture capital. They have found
that there are indeed variables other than just
the personalities of the individuals involved, such
as the existence and nature of management
teams, which affect the likelihood of a positive
outcome.
It can be argued that this research on 'how' is
the most appropriate for a business school, since
it focuses on understanding (and, it is hoped,
22 H. H. Stevenson and J. C. Jarillo
improving) actual managerial practice. An exam-
ple may help clarify this. The success in business
of the overseas Chinese has been well documented
(see Limlingan, 1986, for an up-to-date analysis),
together with that of other ethnic minority groups
(Sowell, 1983). This can be analyzed from the
point of view of the 'why,' and resultingly we
find answers such as the traditional closeness of
the Chinese family or the need for achievement
of a barely tolerated minority. But also the 'how'
can be studied; then a network of both strong
and weak relationships is found (Larson, 1988).
That network enables the participants in it
to work with much lower transactions costs
(Williamson, 1975), thus becoming much more
efficient than larger, more formal competitors
(Jarillo, 1988). The first level of analysis provides
little guidance for a would-be entrepreneur. The
second gives a clue as to how a start-up
company can structure itself in order to be more
competitive. As will be seen later, this stream of
research promises the most relevance for the
field of corporate entrepreneurship.
DEFINING ENTREPRENEURSHIP IN A
USEFUL WAY
The extent to which the above studies can be
taken to relate to corporate managment depends
on one critical question, one which we have thus
far avoided throughout the literature review:
what is an entrepreneur? Does anybody who
starts a business qualify as an entrepreneur? Or
is an entrepreneur necessarily an innovator,
whether in a large or a small firm? If we take
the first approach-that is, if we assume that
only those who start a business qualify-then
Ray Kroc of McDonald's or Thomas Watson of
IBM would not qualify as entrepreneurs, although
they have been producers of all the 'good things'
that entrepreneurs are supposed to do, such as
job and wealth creation through the introduction
of new products and services. At the same time,
only a few of those researchers interested
in entrepreneurial studies would consider the
opening of a typical 'mom and pop' store an
entrepreneurial act worthy of study. The work
of Reynolds, Van de Ven, Vesper, Cooper,
among others, has provided insights into the
start-up process; however, they have not always
focused on the difference between high-potential
ventures and others.
This dilemma is reflected throughout the
literature. Some prominent researchers think that
the present explosion in interest should not be
diverted to anything other than new venture
creation (Vesper, 1985). Others see entrepre-
neurship as something that is indistinguishable
from innovation and as something that should
not be circumscribed to new ventures. It is seen
by some as the key to economic growth and
productivity, and to the diffusion of knowledge
(Baumol, 1986). This view of entrepreneurship
would then also encompass the struggle of large
firms to remain competitive (Kanter, 1989). The
divergence in points of view is so great that it
has been said that even a 'unifying theme' is
lacking (Kirzner, 1973: 281). Casson has pointed
out that the task of reviewing the literature on
entrepreneurship 'is rendered still more difficult
by the fact that in most academic studies of
entrepreneurs the word "entrepreneur" does not
appear in the title, whilst most of the literature
with "entrepreneur" in the title is either nonaca-
demic or is not about entrepreneurs at all' (1982:
xiii).
Those attempts to pigeon-hole entrepre-
neurship do not contribute very much to our
understanding, for each of the aspects described
above focuses upon one important factor of
entrepreneurship. Generally speaking, it does
not appear useful, in managerial terms, to delimit
entrepreneurship by definining some economic
functions as 'entrepreneurial' and others as non-
entrepreneurial. Nor does it appear particularly
helpful to base the decision of what an entrepre-
neur is upon studies of personality or character.
The first exercise appears to be rather more
semantic than practical. The second appears to
be equally fruitless, for individuals in our society
may attempt entrepreneurship and often succeed
even if they do not fit the standards of academic
judges as to their entrepreneurial personality or
sociological background. In sum, neither function
nor character provide a useful basis for under-
standing entrepreneurship in managerial terms.
Defining entrepreneurship is, nevertheless, an
important question, albeit semantic, because a
definition too narrow may render much useful
research inapplicable to important areas, such as
corporate entrepreneurship. On the other hand,
too broad a definition may make entrepreneurship
A Paradigm of Entrepreneurship 23
equivalent to good management, thus effectively
dissolving it as a specialized field of study.
The following view of entrepreneurship is then
proposed to help take advantage of previous
research on entrepreneurship for the strengthen-
ing of the corporate entrepreneurship field:
entrepreneurship is a process by which
individuals-either on their own or inside
organizations-pursue opportunities without
regard to the resources they currently control
(Stevenson, Roberts, and Grousbeck, 1989).
'Opportunity' is defined here as a 'future situation
which is deemed desirable and feasible.' Thus
opportunity is a relativistic concept; opportunities
vary among individuals and for individuals over
time, because individuals have different desires
and they perceive themselves with different
capabilities. Desires vary with current position
and future expectations. Capabilities vary depend-
ing upon innate skills, training, and the competi-
tive environment. Perceptions of both desires
and capabilities are only loosely connected
to reality. But, in any case, the essence of
entrepreneurship is the willingness to pursue
opportunity, regardless of the resources under
control. It is typical of the entrepreneur 'to find
a way.' Those ways are arrayed on a spectrum
from the behavior of a pure promotor to those
of stodgy trustees (Stevenson and Gumpert,
1985).
This purely behavioral, situational definition
fits well with the common experience that the
level of 'entrepreneurship,' however defined,
often varies across the life of an individual, or
even across the different activities of an individual
in a given moment. This approach overcomes
the dilemma posed by the question of whether
or not entrepreneurs are to be found only in
start-up companies; we assume that we are
seeing the entrepreneurial phenomenon whenever
opportunity which requires resources beyond
those controlled is being pursued. The final
advantage of this point of view is that it
concentrates on practice, thus leading us to study
and then teach basic entrepreneurial skills. We
understand these skills not as traits of character
(hardly transmittable in a class room), but
as knowledge that results from training and
experience that has been accumulated over the
years and that will assist in problem-solving
(Simon, 1984). Thus, by concentrating on entre-
preneurial behavior-by trying to understand the
'entrepreneurial process'-we may be able to
make use of findings of previous research, while
gaining insights on a crucial issue: how to foster
entrepreneurship, by learning the nature of the
entrepreneurial process.
This approach also allows us to deal with both
individual and organizational entrepreneurship,
thus providing the necessary link between many
of the findings mentioned in the literature review
(need for innovation; influence of personal
characteristics and motivation upon the outcome
of entrepreneurial ventures; objective (although
contingent) predictors of success, etc.) and the
field of corporate entrepreneurship.
In the remainder of this paper, specific
propositions, relevant to corporate entrepre-
neurship research, practice and teaching, are
derived from this view of entrepreneurship,
following some ideas found in Stevenson and
Jarillo (1986).
TOWARDS THE ENTREPRENEURIAL
ORGANIZATION
Our definition of entrepreneurship can easily be
applied to a corporation, and this application
can be summarized in six logical propositions
concerning corporate entrepreneurship. Thus the
field of corporate entrepreneurship would not
limit itself to the study of internal venturing,
but also to the ability of corporations to act
entrepreneurially. The first proposition is purely
definitional. Together with proposition 2, they
set the stage for the rest, more testable and
research oriented:
Proposition 1: An entrepreneurial organi-
zation is that which pursues opportunity, regard-
less of resources currently controlled.
As has been argued in the previous review of
the literature, it is important to distinguish
between individuals and organizations. At least
in the case of entrepreneurial behavior, this
cannot be avoided by equating an organization's
direction to the wishes of its top managers: an
opportunity is, by definition, something beyond
the current activities of the firm, and it is very
hard for top managers to 'force' that pursuit
through the normal managerial mechanisms of
24 H. H. Stevenson and J. C. Jarillo
planning and control: it has to come from below.
Therefore:
Proposition 2: The level of entrepreneurship
within the firm (i.e. the pursuit of opportunities)
is critically dependent on the attitude of
individuals within the firm, below the ranks of
top managment.
The crux of corporate entrepreneurship is,
then, that opportunity for the firm has to be
pursued by individuals within it, who may have
perceptions of personal opportunity more or less
at variance with opportunity for the firm. In
addition, an opportunity can hardly be pursued,
of course, if it has not been spotted. But spotting
opportunities is certainly a function of the
individual's abilities: his/her intimate knowledge
of the market, the technologies involved, custo-
mer's needs, etc. As a consequence, the kind of
jobs and positions the firm designs, the effort it
puts into developing generalists, able to make
the necessary mental connections to detect the
opportunity, should have a measurable impact.
Thus:
Proposition 3: The entrepreneurial behavior
exhibited by a firm will be positively correlated
with its efforts to put individuals in a position
to detect opportunities; to train them to be able
to do so and to reward them for doing so.
But, as we have learned from the studies of
the 'causes' of entrepreneurship, the individual's
motivations are decisive to the emergence of
entrepreneurial behavior. By definition, nobody
will pursue an opportunity if he/she does not
want to, and we have seen argued that the very
exceptional nature of pursuing opportunities
without adequate resources makes it very difficult
for top management to 'force' that pursuit
through the typical managerial mechanisms by
prespecifying task goals.
There is a large body- of literature on moti-
vation, not only in the field of entrepreneurship
(the 'why' question) but also in organization
theory and psychology. It is not redundant to
remark how important motivation is for the
emergence of entrepreneurial behavior within the
corporation. In most cases the individuals who
must exhibit that behavior if the firm is to succeed
have already satisifed most of their basic needs,
since they are on a company's payroll. Thus the
positive inducements necessary to break the status
quo may have to be stronger (Baker, 1986).
Indeed, several of the studies mentioned above
on the background of individual entrepreneurs
point out that many of them come from relatively
dispossessed families.
But that extra inducement is hard to develop
within an organization. For that reason it may
be more efficient to lessen the impact of deterrents
to entrepreneurial behavior, particularly that of
fear of the consequences of failure to the career
of the corporate entrepreneur. Given that the
would-be entrepreneurs enjoy an acceptable
status within the firm, the treatment of failure
would appear to be a critical component of the
necessary motivation to pursue opportunity.
Thus:
Proposition 4: Firms which make a conscious
effort to lessen negative consequences of failure
when opportunity is pursued will exhibit a
higher degree of entrepreneurial behavior.
The third element in the pursuit of opportunity,
after its detection and the willingness to pursue
it, is the belief that it can, at least with some
likelihood, be successfully exploited. Thus:
Proposition 5: Not only the success rate, but
the very amount of entrepreneurial behavior
will be a function of the employees' (subjective)
ability to exploit opportunities.
How is that ability increased? The findings of
the 'how-to' stream of research in entrepre-
neurship offer insights. These include the impor-
tance of investing the venture with enough
managerial and technical ability from the begin-
ning, found in the studies for venture capital-
funded start-ups success. Widespread research
suggests that different stages in the life of a
venture may require different managers. The
importance of teams in successful entrepreneur-
ships also follows.
Directly deriving from the above definition of
entrepreneurship, a specific skill would appear
to be particularly important: that of making use
of resources that are outside the entrepreneur's
control (Stevenson, 1983; Jarillo, 1989), since
entrepreneurial behavior implies pursuing oppor-
tunities regardless of the resources under control.
A Paradigm of Entrepreneurship 25
The vast amount of literature on networks can
be applied here, from studies that show the
usefulness of a social network in order to sustain
the new venture (Birley, 1986), to those that
analyze how an efficient network can be sustained
over the long-term (Jarillo and Ricart, 1987;
Birley, 1989; Lawrence, 1988). This literature
now can be seen as relevant to corporate
entrepreneurship, for the ability to obtain access
to resources widely scattered throughout the
organization, with no need to set up a previous,
rigorous appropriations procedure, greatly
facilitates the pursuit of opportunities. Thus:
Proposition 6: Organizations which facilitate
the emergence of informal internal and external
networks, and allow the gradual allocation and
sharing of resources, will exhibit a higher degree
of entrepreneurial behavior.
CONCLUSIONS
This paper shows how a particular conception
of entrepreneurship, based on the notion of
opportunity, may help link the vast and varied
research on that topic with the emerging field of
corporate entrepreneurship. The proposed view
understands corporate entrepreneurship as some-
thing wider than just 'corporate venturing,' or
setting-up intra-firm 'venture capital' processes.
Entrepreneurial behavior would be, following the
economists' tradition started by Schumpeter, the
quest for growth through innovation, be this
technological or purely mangerial. But pursuing
opportunity, whether through specific company
structures of not, constitutes the core of entre-
preneurship, both individuals and corporate.
More research is needed, at all levels, on
how that process develops, and on successfully
exploiting opportunity. Certainly, the three
aspects discussed above-namely detection of
the opportunity, willingness to pursue it, and
confidence and the possibilities of succeeding-
are key components in the process. Much
research, from many different fields, can shed
light on those issues, but there are still plenty of
unanswered questions.
The implications for teaching are quite clear:
entrepreneurship is more than just starting up
new businesses. It is a process for which some
skills are highly relevant. Many of those skills
are teachable. In fact, the implications for
teaching may well go beyond the field of
entrepreneurship, for entrepreneurial manage-
ment may be seen as a 'mode of management'
different from traditional management, with
different requirements of control and rewards
systems, for instance.
Practitioners of corporate entrepreneurship
would be well advised, following the proposed
approach, to address all three key parameters of
entrepreneurial behavior. Without an environ-
ment that fosters the detection of opportunities,
no entrepreneurship will emerge. Equally, the
motivation to pursue opportunity, and its facili-
tation, influence the final outcome. And there is
much evidence on at least some of the factors
that influence these three parameters. The fact,
moreover, that they are not strictly independent
but, rather, reinforce each other (someone who
is willing to pursue opportunities will 'see more'
of them; someone who is confident in his/her
ability to succeed will be more willing to
pursue them; etc.) points out the need for an
'entrepreneurial culture' within the firm, i.e. a
'track record' of fair treatment to internal
entrepreneurs.
Evidently, it is debatable whether entrepre-
neurship should be viewed as the pursuit of
opportunity or as something else. After all, that
is a matter of definitions. But it is believed that,
by taking that approach, much of the previous,
separate research on entrepreneurship can be
useful for both individual and corporate practice,
and that specific avenues for research and
teaching are opened.
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A Paradigm of Entrepreneurship: Entrepreneurial Management
Author(s): Howard H. Stevenson and J. Carlos Jarillo
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Source: Strategic Management Journal, Vol. 11, Special Issue: Corporate Entrepreneurship
(Summer, 1990), pp. 17-27
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Strategic Management Journal, Vol. 11, 17-27 (1990)
A PARADIGM OF ENTREPRENEURSHIP:
ENTREPRENEURIAL MANAGEMENT
HOWARD H. STEVENSON
Harvard Business
School, Boston, Massachusetts, U.S.A.
J. CARLOS JARILLO
IMD, Lausanne,
Switzerland
Corporate entrepreneurship seems to many entrepreneurship scholars a contradiction in
terms. This paper represents an attempt to bridge that gap. This is done by, first, reviewing
the literature on entrepreneurship, trying to summarize it in a few major themes. Second, a
view of entrepreneurship is proposed that facilitates the application of the previolus findings
to the field of corporate entrepreneulrship. Finally, a series of propositions are developed,
as instances of the kind of research that can be pursued by following the proposed approach.
Corporate entrepreneurship is a concept that has
acquired more and more importance in the last
few years. Serious, scholarly work has appeared
on the subject (see, for instance, Burgelman,
1983a,b, 1984a,b, Nielsen, Peters and Hisrich,
1985; MacMillan, Block and Subba Narasimha,
1986; Hisrich and Peters, 1986; MacMillan and
Day, 1987; for some recent examples). General-
interest books have also made an impact (Brandt,
1986; Hisrich, 1986; Kanter, 1983, 1989), and
some of them have even reached best-seller lists
(Pinchot, 1985). The very existence of this issue
of the Strategic Management Journal testifies to
the credibility gained by the concept among
experts in business management.
Yet, when reading much of the literature on
entrepreneurship as such, to which corporate
entrepreneurship should be somewhat related
(perhaps as is a species to its genus), one finds
an implicit definition of entrepreneurship as
something which is radically different from
corporate management. Indeed, some writers
find it to be the opposite of corporate management
(Vesper, 1985). Thus, the very concept of
corporate entrepreneurship sounds to many
entrepreneurship scholars as something of an
oxymoron.
What is, then, behind that surge of the corporate
01 43-2095/90/050017-11 $05.50
( 1990 by
John
Wiley
& Sons, Ltd.
entrepreneurship construct? There is no doubt
that, of late, entrepreneurship in general has
gained its status as a legitimate scholarly research
subject, enjoying in addition much public interest
(Vesper, 1988). This is evidenced by the appear-
ance of new academic journals, such as the
Journal of Business Venturing; by the fact that
mainstream journals carry more and more articles
on related issues (Churchill and Lewis, 1985);
and by the growth of interest in non-academic
publications, which has been even faster (see
McClung, J. J. and J. A. Constantin, 'Nonaca-
demic literature on entrepreneurship: An evalu-
ation', in Kent et al., 1982). As of today, there
is practically no business school without at least
one course on entrepreneurship (Porter and
McKibben, 1988).
The main traits generally believed to be
associated with entrepreneurship, such as growth
(Drucker, 1985), innovation (Backman, 1983),
and flexibility (Birch, 1987), however, were
deemed to be also desirable traits for large
corporations, by theorists and practitioners alike.
Thus the field of corporate entrepreneurship was
born. There is a need, however, to establish
clear links between the fields of entrepreneurship
and corporate management, if the large body of
research in the former is to benefit the latter.
18 H. H. Stevenson and J. C. Jarillo
Establishing such a link is especially important
because, as pointed out above, many entrepre-
neurship scholars would consider entrepreneurship
as just what is outside of mainstream corporate
management.
This paper attempts to establish this linkage.
It reviews much of the literature on entrepre-
neurship and groups these previous studies into a
few underlying themes which have relevance to
corporate entrepreneurship. It then re-examines
definitions of entrepreneurship and advances its
own definition of entrepreneurship that facilitates
the connection of the previous research findings
to the broader field of corporate management.
From that connection, propositions for research
and implications for the teaching and practice of
corporate entrepreneurship are developed.
THREE MAIN STREAMS OF RESEARCH
The plethora of studies on entrepreneurship can
be divided in three main categories: what happens
when entrepreneurs act: why they act; and how
they act. In the first, the researcher is concerned
with the results of the actions of the entrepreneur,
not the entrepreneur or even his or her actions
per se. It is generally the point of view taken by
economists, such as Schumpeter, Kirzner, or
Casson. The second current may be termed the
'psychological/sociological approach', founded by
McClelland (1961) and Collins and Moore (1964),
in the early 1960s. Their work provides a useful
emphasis on the entrepreneur as an individual,
and on the idea that individual human beings-
with their background, environment, goals,
values, and motivations-are the real objects of
analysis. The causes of individual entrepreneurial
action constitute the primary interest of the
researcher. Both the individual entrepreneur and
the environment as it relates to the motives of
individual entrepreneurial behavior are con-
sidered. It is the why of the entrepreneur's
actions that becomes the center of attention.
Finally, how entrepreneurs act can become the
center of attention. In this case, researchers
analyze the characteristics of entrepreneurial
management, how entrepreneurs are able to
achieve their aims, irrespective of the personal
reasons to pursue those aims and oblivious to
the environmental inducements and effects of
such actions.
Considering what happens when entrepreneurs
act: Studying the results of entrepreneurship
The area of literature concerned with the question
of what happens when entrepreneurs act is
dominanted by economists. What matters here is
the net effect upon the general economic system
of the actions of the entrepreneur, and the role
he or she plays in the development of the market
system. The earliest interest in entrepreneurship
was expressed by Richard Cantillon, who focused
upon the economic role of the entrepreneur,
rather than the individual who performs such a
role. Cantillon, who coined the word 'entrepre-
neur,' said that entrepreneurship entails bearing
the risk of buying at certain prices and selling at
uncertain prices. Jean Baptiste Say broadened
the definition to include the concept of bringing
together the factors of production. Thus the
entrepreneur is the protagonist of economic
activity in general.
Schumpeter takes a more specific view. He
considers entrepreneurship the process by which
the economy as a whole goes forward. It is
something which disrupts the market equilibrium,
or 'circular flow.' Its essence is 'innovation.' He
writes that 'the carrying out of new combinations
we call "enterprise"; the individuals whose
function is to carry them out we call "entrepre-
neurs" (1934: 74). He thus distinguishes different
roles:
We call entrepreneurs not only those 'indepen-
dent' businessmen in an exchange economy who
are usually so designated, but all who actually
fufil the function by which we define the concept,
even if they are, as is becoming the rule,
"dependent" employees of a company, like
managers, members of boards of directors, and
so forth, or even if their actual power to perform
the entrepreneurial function has any other
foundations, such as the control of a majority
of shares. As it is the carrying out of new
combinations that constitutes the entrepreneur,
it is not necessary that he should be permanently
connected with an individual firm; many 'finan-
ciers,' 'promoters,' and so forth are not, and
still they may be entrepreneurs in our sense. On
the other hand, our concept is narrower than
the traditional one in that it does not include
all heads of firms or managers of industrialists
who merely may operate an established business,
but only those who actually perform that function
(p. 74).
A Paradigm of Entrepreneurship 19
A few pages earlier he had spelled in detail what
he understood by 'new combinations':
(1) The introduction of a new good-that is one
with which consumers are not yet familiar-or
of a new quality of a good. (2) The introduction
of a new method of production, that is one not
yet tested by experience in the branch of
manufacture concerned, which need by no means
be founded upon a discovery scientifically new,
and can also exist in a new way of handling a
commodity commercially. (3) The opening of a
new market, that is a market into which the
particular branch of manufacture of the country
in question has not previously entered, whether
or not this market has existed before. (4) The
conquest of a new source of supply of raw
materials or half-manufactured goods, again
irrespective of whether this source already exists
or whether it has first to be created. (5) The
carrying out of the new organization of any
industry, like the creation of a monopoly position
(for example, through trustification) or the
breaking up of a monopoly position (p. 66).
After Schumpeter's work, most economists
(and many non-economists as well) have accepted
his identification of
entrepreneurship with inno-
vation. This represents a change from the previous
tradition, where the term 'entrepreneur' meant
basically 'businessman,' as we saw. (See Kilby,
1971, for a summary of the term 'entrepreneur'
in classical economics.)
Some economists interpret the results of
entrepreneurship in a different way: instead of
disrupting the market equilibrium, thus advancing
the economy to qualitatively higher levels, the
entrepreneur works towards the accomplishment
in real life of the (theoretical) equilibrium
(Kirzner, 1979). The first tradition, represented
by Cole (1968) at the Harvard Research Center
in Entrepreneurial History, has stressed the
aspect of innovation in the entrepreneurial
function (see Scherer, 1984, significantly titled
Innovation and Growth, Schumpeterian
Perspectives). The second, represented by
Kirzner, has stressed the informational aspects
of the entrepreneurial function; his argument is
that the entrepreneur has a superior knowledge
of market imperfections, that he uses to his
advantage. Leibenstein (1968), also based at
Harvard, takes this approach, beyond merely
allocative efficiency. He makes the entrepreneur's
basic function the destruction of pockets of
inefficiency in the system.
For the most part, microeconomics has
neglected the study of the entrepreneurial func-
tion, simply by assuming that markets would
eventually reach equilibrium. Even industrial
organization, the area of microeconomics that is
arguably closest to actual management practice
(Porter, 1981), maintains an emphasis on supra-
firm variables by concentrating on the assumption
that the structure of a given industry drives the
conduct of the firms in it. Nevertheless, the
importance of the 'entrepreneurial function' to
the actual development of the economy of a
given country, following more or less Schumpeter-
ian lines, has been studied extensively, starting
with Hirschman: 'development depends not so
much on finding optimal combinations for given
resources and factors of production as on calling
forth and enlisting for development purposes
resources and abilities that are hidden, scattered
or badly utilized' (1958: 5) These points of view
open the way for an empirical study of the effects
of entrepreneurship in the real economy. Birch
(1979, 1987) has analyzed carefully the impact
of entrepreneurial activity in the overall economy
through the actual creation of jobs.
Thus the study of the effects of entrepreneurship
has the following characteristics: (1) It abstracts
from the individual entrepreneur and his or her
actions to focus on the process by which those
actions affect the economic environment. (2) It
recognizes the entrepreneurial function as respon-
sible for economic improvement in our society,
due to its 'innovations,' thus providing a theoreti-
cal base for the 'advocacy studies' we shall discuss
below. (3) It creates a basis for the distinction
between the roles of 'investor,' the 'manager,'
and the 'entrepreneur.' Under this third torch of
analysis, entrepreneurship would then go well
beyond the mere creation of small businesses
(Scherer and Ravenscraft, 1984), thus paving the
way for the legitimation of the concept of
corporate entrepreneurship.
Considering why entrepreneurs act: Studying the
causes of entrepreneurship
It is not surprising that entrepreneurs themselves
have been subjects of interest. If entrepreneurship
is at the root of economic improvement, the
implication that 'we need more of it' is not
difficult to draw. Researchers must, therefore,
understand those who provide it. This is consistent
20 H. H. Stevenson and J. C. Jarillo
with a cultural emphasis upon the individual
actor ('the cult of the individual'). It also fits
with a need to understand why some depart from
the norms of average behavior: the dramatic
accomplishments of some entrepreneurs easily
leads to the thinking that the individuals behind
them must somehow be different and therefore
of particular interest.
One level of inquiry into the 'causes' of
observed entrepreneurial behavior conceptualizes
entrepreneurship as 'a psychological characteristic
of individuals, which can be described in terms
such as creativity, daring, aggressiveness, and the
like' (Wilken, 1979: 58). It was probably started
by The Enterprising Man, by Collins and Moore
(1964), who put at the core of entrepreneurship
the 'desire for independence,' and who identified
as the causal variable certain Oedipal conflicts
and neuroses of the entrepreneur. This early
work has had much following, particularly among
social scientists with a background in psychology.
Brockhaus studied the locus of control belief of
entrepreneurs (1975), and their risk-tendency
(1980). Marcin and Cockrum (1984), study
psychological characteristics of entrepreneurs
across different countries. Hochner and Ganrose
(1985) analyze the characteristics of entrepre-
neurs, compared to their non-entrepreneurial
fellow co-workers; and a similar psychological
study is performed on female entrepreneurs
by Rowen and Hisrich (1986). Cooper and
Dunkelberg (1986) compare the path to entre-
preneurship (inheritance, purchase, start-up) with
background attitudes characteristic of a large
sample of entrepreneurs. The popular press
has also written extensively about the 'special
psychological characteristics of the entrepreneur,'
generally understood as someone who starts-
somewhat successfully-his or her own business.
An interesting twist is the study of the
relationship between personal characteristics of
entrepreneurs and the companies they set up.
Smith and Miner (1983) analyzed the adequacy
of different 'types' of entrepreneurs along the
different stages in the development of a firm,
while Webster (1977) and Gartner (1985) focus
on the kinds of firms set up by different kinds
of entrepreneurs.
A second level of inquiry conceptualizes
entrepreneurship 'as a socal role ... that may be
enacted by individuals in different social positions'
(Wilken, 1979: 58). It was pioneered by McClel-
land's best-selling The Achieving Society (1961).
The essence of this approach is that entrepreneur-
ial behavior is dependent upon personal motiv-
ations which in turn are dependent on environ-
mental characteristics. McClelland started from
a psycho-sociological point of view, asking why
some societies, at some points in time, had
exhibited high economic and social growth.
He attributed that growth to the 'need for
achievement (n-achievement)' present in the
psychological make up of large parts of the
population in those societies. This point of view
has been very fruitful in that it has brought all
the theoretical resources of sociology to bear on
the field of entrepreneurship. Its results have been
well-detailed accounts of how the environment
affects practice of entrepreneurship (see, for
instance, Greenfield, Stricken and Aubey, 1979;
Delacroix and Carrol, 1983; Pennings, 1982a,b).
The practical consequences for public policy are
obvious, so much of the research undertaken
with this 'environment as motivator' approach
has clear political overtones. In fact, much of
what is being published right now falls into this
advocacy approach (see, for instance, Backman,
1983 and Kent, 1984).
Many criticisms have been levelled at these
attempts to understand the why of entrepre-
neurship. First, it can be pointed out that it is
extremely difficult to link particular psychological
or sociological traits causally to patterns of
complex behavior, such as entrepreneurship
(Cooper, Dunkelberg, and Woo, 1988). Indeed,
the literature suggests that no causal link can be
established between any of the above-mentioned
variables and entrepreneurship. At most, one
could speak of correlates or antecedents of
particular kinds of entrepreneurial behavior.
An added problem with this approach is that
its constant focus on the individual entrepreneur
has led, in many cases, to the identification of
entrepreneurship with small business manage-
ment (Carland et al., 1984) and to the failure to
differentiate clearly between the individuals and
organizations. These two points of view seriously
impair the ability to transfer whatever knowledge
is gained in entrepreneurship research to broader
fields of management, such as corporate entre-
preneurship.
On the other hand, the contributions of this
'entrepreneurship from its causes' approach are
extremely important, and cannot be forgotten
in
A Paradigm of Entrepreneurship 21
any serious attempt at understanding corporate
entrepreneurship. This approach has reminded
us of the following facts: (1) It is individuals who
carry out entrepreneurial activities, no matter
how they are defined. (2) Their characteristics
(personality, background, skills, etc.) matter.
(3) Environmental variables are also relevant,
not only in that they open up opportunities to
exploit market inefficiencies, as in the 'econo-
mists' approach,' but also in the sense that
different environments are more or less conducive
to entrepreneurship, and can be more favorable
to the new venture's success. So, apart from the
possible social benefits that might have obtained
from some of the advocacy approach, emphasis
on the individual focuses the study of entrepre-
neurship on its protagonist-the invidivual entre-
preneur, who was somewhat 'lost' in the previous
economic analysis.
Considering how entrepreneurs act: Studying
entrepreneurial management
The two streams of research discussed above,
which have been characterized as 'entrepre-
neurship from its effects' and 'entrepreneurship
from its causes,' deals with the 'what' and the
'why' of entrepreneurship. It is now left to study
the 'how'. Entrepreneurship can be considered
from a practical point of view-what do entre-
preneurs do, or, normatively, 'how to succeed at
being an entrepreneur.' It is, in fact, what is
between the 'causes' and the 'results': the
'managerial behavior' of the entrepreneur. Table
1 represents the three major categories entrepre-
neurial studies can be fitted into.
Table 1. Contributions of disciplines to entrepreneurship
Line of inquiry Causes Behavior Effects
Main question Why How What
Basic discipline Psychology, sociology Management Economics
Contributions Importance of individual Entrepreneurship is the
function by which growth
is achieved (thus not only
the act of starting new
businesses)
Environmental variables are Distinction between
relevant entrepreneur and manager
There is a vast popular literature along these
'how-to' lines, from functional studies on aspects
of interest to small businesses, to work on start-
ups, venture capital, etc.; as well as many
practical, functional studies on how to set up and
run a few businesses successfully (see, for
instance, Silver, 1983). There is also now emerg-
ing academic work focused on considering how
entrepreneurs act. The study of strategy formation
in entrepreneurial firms is now a legitimate area
of inquiry (Mintzberg and McHugh, 1985).
Two important areas of research in this domain
are studies concerned with the different life cycles
through which new ventures pass and the
problems entrepreneurs face as their companies
mature (Gray and Ariss, 1985; Quinn and
Cameron, 1983); and studies that try to find
predictors of success for new ventures. This latter
group attempts to identify predictors generally
by relating such success (or lack thereof) to
either the entrepreneurs' background, the chosen
strategy, environmental considerations, or some
mixture of these (Dollinger, 1984; Miller, 1983;
Cooper and Bruno, 1975). Timmons and Bygrave
(1986), Roure and Maidique (1986), and MacMil-
lan, Zemann and Subba Narasimha (1987) have
all sought predictors of success in new ventures
funded with venture capital. They have found
that there are indeed variables other than just
the personalities of the individuals involved, such
as the existence and nature of management
teams, which affect the likelihood of a positive
outcome.
It can be argued that this research on 'how' is
the most appropriate for a business school, since
it focuses on understanding (and, it is hoped,
22 H. H. Stevenson and J. C. Jarillo
improving) actual managerial practice. An exam-
ple may help clarify this. The success in business
of the overseas Chinese has been well documented
(see Limlingan, 1986, for an up-to-date analysis),
together with that of other ethnic minority groups
(Sowell, 1983). This can be analyzed from the
point of view of the 'why,' and resultingly we
find answers such as the traditional closeness of
the Chinese family or the need for achievement
of a barely tolerated minority. But also the 'how'
can be studied; then a network of both strong
and weak relationships is found (Larson, 1988).
That network enables the participants in it
to work with much lower transactions costs
(Williamson, 1975), thus becoming much more
efficient than larger, more formal competitors
(Jarillo, 1988). The first level of analysis provides
little guidance for a would-be entrepreneur. The
second gives a clue as to how a start-up
company can structure itself in order to be more
competitive. As will be seen later, this stream of
research promises the most relevance for the
field of corporate entrepreneurship.
DEFINING ENTREPRENEURSHIP IN A
USEFUL WAY
The extent to which the above studies can be
taken to relate to corporate managment depends
on one critical question, one which we have thus
far avoided throughout the literature review:
what is an entrepreneur? Does anybody who
starts a business qualify as an entrepreneur? Or
is an entrepreneur necessarily an innovator,
whether in a large or a small firm? If we take
the first approach-that is, if we assume that
only those who start a business qualify-then
Ray Kroc of McDonald's or Thomas Watson of
IBM would not qualify as entrepreneurs, although
they have been producers of all the 'good things'
that entrepreneurs are supposed to do, such as
job and wealth creation through the introduction
of new products and services. At the same time,
only a few of those researchers interested
in entrepreneurial studies would consider the
opening of a typical 'mom and pop' store an
entrepreneurial act worthy of study. The work
of Reynolds, Van de Ven, Vesper, Cooper,
among others, has provided insights into the
start-up process; however, they have not always
focused on the difference between high-potential
ventures and others.
This dilemma is reflected throughout the
literature. Some prominent researchers think that
the present explosion in interest should not be
diverted to anything other than new venture
creation (Vesper, 1985). Others see entrepre-
neurship as something that is indistinguishable
from innovation and as something that should
not be circumscribed to new ventures. It is seen
by some as the key to economic growth and
productivity, and to the diffusion of knowledge
(Baumol, 1986). This view of entrepreneurship
would then also encompass the struggle of large
firms to remain competitive (Kanter, 1989). The
divergence in points of view is so great that it
has been said that even a 'unifying theme' is
lacking (Kirzner, 1973: 281). Casson has pointed
out that the task of reviewing the literature on
entrepreneurship 'is rendered still more difficult
by the fact that in most academic studies of
entrepreneurs the word "entrepreneur" does not
appear in the title, whilst most of the literature
with "entrepreneur" in the title is either nonaca-
demic or is not about entrepreneurs at all' (1982:
xiii).
Those attempts to pigeon-hole entrepre-
neurship do not contribute very much to our
understanding, for each of the aspects described
above focuses upon one important factor of
entrepreneurship. Generally speaking, it does
not appear useful, in managerial terms, to delimit
entrepreneurship by definining some economic
functions as 'entrepreneurial' and others as non-
entrepreneurial. Nor does it appear particularly
helpful to base the decision of what an entrepre-
neur is upon studies of personality or character.
The first exercise appears to be rather more
semantic than practical. The second appears to
be equally fruitless, for individuals in our society
may attempt entrepreneurship and often succeed
even if they do not fit the standards of academic
judges as to their entrepreneurial personality or
sociological background. In sum, neither function
nor character provide a useful basis for under-
standing entrepreneurship in managerial terms.
Defining entrepreneurship is, nevertheless, an
important question, albeit semantic, because a
definition too narrow may render much useful
research inapplicable to important areas, such as
corporate entrepreneurship. On the other hand,
too broad a definition may make entrepreneurship
A Paradigm of Entrepreneurship 23
equivalent to good management, thus effectively
dissolving it as a specialized field of study.
The following view of entrepreneurship is then
proposed to help take advantage of previous
research on entrepreneurship for the strengthen-
ing of the corporate entrepreneurship field:
entrepreneurship is a process by which
individuals-either on their own or inside
organizations-pursue opportunities without
regard to the resources they currently control
(Stevenson, Roberts, and Grousbeck, 1989).
'Opportunity' is defined here as a 'future situation
which is deemed desirable and feasible.' Thus
opportunity is a relativistic concept; opportunities
vary among individuals and for individuals over
time, because individuals have different desires
and they perceive themselves with different
capabilities. Desires vary with current position
and future expectations. Capabilities vary depend-
ing upon innate skills, training, and the competi-
tive environment. Perceptions of both desires
and capabilities are only loosely connected
to reality. But, in any case, the essence of
entrepreneurship is the willingness to pursue
opportunity, regardless of the resources under
control. It is typical of the entrepreneur 'to find
a way.' Those ways are arrayed on a spectrum
from the behavior of a pure promotor to those
of stodgy trustees (Stevenson and Gumpert,
1985).
This purely behavioral, situational definition
fits well with the common experience that the
level of 'entrepreneurship,' however defined,
often varies across the life of an individual, or
even across the different activities of an individual
in a given moment. This approach overcomes
the dilemma posed by the question of whether
or not entrepreneurs are to be found only in
start-up companies; we assume that we are
seeing the entrepreneurial phenomenon whenever
opportunity which requires resources beyond
those controlled is being pursued. The final
advantage of this point of view is that it
concentrates on practice, thus leading us to study
and then teach basic entrepreneurial skills. We
understand these skills not as traits of character
(hardly transmittable in a class room), but
as knowledge that results from training and
experience that has been accumulated over the
years and that will assist in problem-solving
(Simon, 1984). Thus, by concentrating on entre-
preneurial behavior-by trying to understand the
'entrepreneurial process'-we may be able to
make use of findings of previous research, while
gaining insights on a crucial issue: how to foster
entrepreneurship, by learning the nature of the
entrepreneurial process.
This approach also allows us to deal with both
individual and organizational entrepreneurship,
thus providing the necessary link between many
of the findings mentioned in the literature review
(need for innovation; influence of personal
characteristics and motivation upon the outcome
of entrepreneurial ventures; objective (although
contingent) predictors of success, etc.) and the
field of corporate entrepreneurship.
In the remainder of this paper, specific
propositions, relevant to corporate entrepre-
neurship research, practice and teaching, are
derived from this view of entrepreneurship,
following some ideas found in Stevenson and
Jarillo (1986).
TOWARDS THE ENTREPRENEURIAL
ORGANIZATION
Our definition of entrepreneurship can easily be
applied to a corporation, and this application
can be summarized in six logical propositions
concerning corporate entrepreneurship. Thus the
field of corporate entrepreneurship would not
limit itself to the study of internal venturing,
but also to the ability of corporations to act
entrepreneurially. The first proposition is purely
definitional. Together with proposition 2, they
set the stage for the rest, more testable and
research oriented:
Proposition 1: An entrepreneurial organi-
zation is that which pursues opportunity, regard-
less of resources currently controlled.
As has been argued in the previous review of
the literature, it is important to distinguish
between individuals and organizations. At least
in the case of entrepreneurial behavior, this
cannot be avoided by equating an organization's
direction to the wishes of its top managers: an
opportunity is, by definition, something beyond
the current activities of the firm, and it is very
hard for top managers to 'force' that pursuit
through the normal managerial mechanisms of
24 H. H. Stevenson and J. C. Jarillo
planning and control: it has to come from below.
Therefore:
Proposition 2: The level of entrepreneurship
within the firm (i.e. the pursuit of opportunities)
is critically dependent on the attitude of
individuals within the firm, below the ranks of
top managment.
The crux of corporate entrepreneurship is,
then, that opportunity for the firm has to be
pursued by individuals within it, who may have
perceptions of personal opportunity more or less
at variance with opportunity for the firm. In
addition, an opportunity can hardly be pursued,
of course, if it has not been spotted. But spotting
opportunities is certainly a function of the
individual's abilities: his/her intimate knowledge
of the market, the technologies involved, custo-
mer's needs, etc. As a consequence, the kind of
jobs and positions the firm designs, the effort it
puts into developing generalists, able to make
the necessary mental connections to detect the
opportunity, should have a measurable impact.
Thus:
Proposition 3: The entrepreneurial behavior
exhibited by a firm will be positively correlated
with its efforts to put individuals in a position
to detect opportunities; to train them to be able
to do so and to reward them for doing so.
But, as we have learned from the studies of
the 'causes' of entrepreneurship, the individual's
motivations are decisive to the emergence of
entrepreneurial behavior. By definition, nobody
will pursue an opportunity if he/she does not
want to, and we have seen argued that the very
exceptional nature of pursuing opportunities
without adequate resources makes it very difficult
for top management to 'force' that pursuit
through the typical managerial mechanisms by
prespecifying task goals.
There is a large body- of literature on moti-
vation, not only in the field of entrepreneurship
(the 'why' question) but also in organization
theory and psychology. It is not redundant to
remark how important motivation is for the
emergence of entrepreneurial behavior within the
corporation. In most cases the individuals who
must exhibit that behavior if the firm is to succeed
have already satisifed most of their basic needs,
since they are on a company's payroll. Thus the
positive inducements necessary to break the status
quo may have to be stronger (Baker, 1986).
Indeed, several of the studies mentioned above
on the background of individual entrepreneurs
point out that many of them come from relatively
dispossessed families.
But that extra inducement is hard to develop
within an organization. For that reason it may
be more efficient to lessen the impact of deterrents
to entrepreneurial behavior, particularly that of
fear of the consequences of failure to the career
of the corporate entrepreneur. Given that the
would-be entrepreneurs enjoy an acceptable
status within the firm, the treatment of failure
would appear to be a critical component of the
necessary motivation to pursue opportunity.
Thus:
Proposition 4: Firms which make a conscious
effort to lessen negative consequences of failure
when opportunity is pursued will exhibit a
higher degree of entrepreneurial behavior.
The third element in the pursuit of opportunity,
after its detection and the willingness to pursue
it, is the belief that it can, at least with some
likelihood, be successfully exploited. Thus:
Proposition 5: Not only the success rate, but
the very amount of entrepreneurial behavior
will be a function of the employees' (subjective)
ability to exploit opportunities.
How is that ability increased? The findings of
the 'how-to' stream of research in entrepre-
neurship offer insights. These include the impor-
tance of investing the venture with enough
managerial and technical ability from the begin-
ning, found in the studies for venture capital-
funded start-ups success. Widespread research
suggests that different stages in the life of a
venture may require different managers. The
importance of teams in successful entrepreneur-
ships also follows.
Directly deriving from the above definition of
entrepreneurship, a specific skill would appear
to be particularly important: that of making use
of resources that are outside the entrepreneur's
control (Stevenson, 1983; Jarillo, 1989), since
entrepreneurial behavior implies pursuing oppor-
tunities regardless of the resources under control.
A Paradigm of Entrepreneurship 25
The vast amount of literature on networks can
be applied here, from studies that show the
usefulness of a social network in order to sustain
the new venture (Birley, 1986), to those that
analyze how an efficient network can be sustained
over the long-term (Jarillo and Ricart, 1987;
Birley, 1989; Lawrence, 1988). This literature
now can be seen as relevant to corporate
entrepreneurship, for the ability to obtain access
to resources widely scattered throughout the
organization, with no need to set up a previous,
rigorous appropriations procedure, greatly
facilitates the pursuit of opportunities. Thus:
Proposition 6: Organizations which facilitate
the emergence of informal internal and external
networks, and allow the gradual allocation and
sharing of resources, will exhibit a higher degree
of entrepreneurial behavior.
CONCLUSIONS
This paper shows how a particular conception
of entrepreneurship, based on the notion of
opportunity, may help link the vast and varied
research on that topic with the emerging field of
corporate entrepreneurship. The proposed view
understands corporate entrepreneurship as some-
thing wider than just 'corporate venturing,' or
setting-up intra-firm 'venture capital' processes.
Entrepreneurial behavior would be, following the
economists' tradition started by Schumpeter, the
quest for growth through innovation, be this
technological or purely mangerial. But pursuing
opportunity, whether through specific company
structures of not, constitutes the core of entre-
preneurship, both individuals and corporate.
More research is needed, at all levels, on
how that process develops, and on successfully
exploiting opportunity. Certainly, the three
aspects discussed above-namely detection of
the opportunity, willingness to pursue it, and
confidence and the possibilities of succeeding-
are key components in the process. Much
research, from many different fields, can shed
light on those issues, but there are still plenty of
unanswered questions.
The implications for teaching are quite clear:
entrepreneurship is more than just starting up
new businesses. It is a process for which some
skills are highly relevant. Many of those skills
are teachable. In fact, the implications for
teaching may well go beyond the field of
entrepreneurship, for entrepreneurial manage-
ment may be seen as a 'mode of management'
different from traditional management, with
different requirements of control and rewards
systems, for instance.
Practitioners of corporate entrepreneurship
would be well advised, following the proposed
approach, to address all three key parameters of
entrepreneurial behavior. Without an environ-
ment that fosters the detection of opportunities,
no entrepreneurship will emerge. Equally, the
motivation to pursue opportunity, and its facili-
tation, influence the final outcome. And there is
much evidence on at least some of the factors
that influence these three parameters. The fact,
moreover, that they are not strictly independent
but, rather, reinforce each other (someone who
is willing to pursue opportunities will 'see more'
of them; someone who is confident in his/her
ability to succeed will be more willing to
pursue them; etc.) points out the need for an
'entrepreneurial culture' within the firm, i.e. a
'track record' of fair treatment to internal
entrepreneurs.
Evidently, it is debatable whether entrepre-
neurship should be viewed as the pursuit of
opportunity or as something else. After all, that
is a matter of definitions. But it is believed that,
by taking that approach, much of the previous,
separate research on entrepreneurship can be
useful for both individual and corporate practice,
and that specific avenues for research and
teaching are opened.
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