Advances In Entrepreneurship, Firm Emergence And Growth

Description
Advances In Entrepreneurship, Firm Emergence And Growth

ADVANCES IN ENTREPRENEURSHIP, FIRM EMERGENCE AND
GROWTH VOLUME 7
CORPORATE
ENTREPRENEURSHIP
EDITED BY
JEROME A. KATZ
Department of Management, Cook School of Business,
Saint Louis University, USA
DEAN A. SHEPHERD
Leeds School of Business, University of Colorado, Boulder, USA
2004
Amsterdam – Boston – Heidelberg – London – New York – Oxford
Paris – San Diego – San Francisco – Singapore – Sydney – Tokyo
CORPORATE ENTREPRENEURSHIP
ADVANCES IN ENTREPRENEURSHIP,
FIRM EMERGENCE AND GROWTH
Series Editor: Jerome A. Katz
Recent Volumes:
Volumes 3–4: Edited by Jerome A. Katz
Volume 5: Edited by Jerome A. Katz and
Theresa M. Welbourne
Volume 6: Edited by Jerome A. Katz and
Dean A. Shepherd
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CONTENTS
LIST OF CONTRIBUTORS vii
INNOVATION AND CORPORATE ENTREPRENEURSHIP
Dean A. Shepherd and Jerome A. Katz 1
CORPORATE ENTREPRENEURSHIP BEHAVIOR AMONG
MANAGERS: A REVIEW OF THEORY, RESEARCH, AND
PRACTICE
Donald F. Kuratko, R. Duane Ireland and
Jeffrey S. Hornsby 7
CENTRAL PROBLEMS IN MANAGING CORPORATE
INNOVATION AND ENTREPRENEURSHIP
Andrew H. Van de Ven and Rhonda M. Engleman 47
THE RELEVANCE OF THEORIES OF CHANGE FOR
CORPORATE ENTREPRENEURSHIP SCHOLARS
Dawn R. DeTienne 73
EQUIFINALITY, CORPORATE ENTREPRENEURSHIP AND
STRATEGY-STRUCTURE-PERFORMANCE RELATIONSHIPS
Daniel F. Jennings and Kevin G. Hindle 101
INTERNATIONAL CORPORATE ENTREPRENEURSHIP AND
THE EVOLUTION OF ORGANIZATIONAL COMPETENCE: A
KNOWLEDGE-BASED PERSPECTIVE
Shaker A. Zahra, Heidi M. Neck and Donna J. Kelley 145
v
vi
INTERNATIONALIZING CORPORATE
ENTREPRENEURSHIP: THE IMPACT ON GLOBAL HR
MANAGEMENT
Bostjan Antoncic, Melissa S. Cardon and Robert D. Hisrich 173
ACHIEVING “CRITICAL MESS” IN ENTREPRENEURSHIP
SCHOLARSHIP
William B. Gartner 199
CAN SIGNAL DETECTION THEORY BE USEFUL IN THE
STUDY OF ENTREPRENEURSHIP?
C. M. Gaglio 217
SIGNAL DETECTION THEORY AND THE ENTREPRENEUR:
CLARIFICATION, EXTENSION, AND FUTURE
Jeffery S. McMullen and Dean A. Shepherd 227
LIST OF CONTRIBUTORS
Bostjan Antoncic University of Ljubljana, Slovenia
Melissa S. Cardon Weatherhead School of Management,
Case Western Reserve University, USA
Dawn R. DeTienne Utah State University, USA
Rhonda M. Engleman Carlson School of Management, Strategic
Management Research Center, University of
Minnesota, USA
C. M. Gaglio San Francisco State University, USA
William B. Gartner Spiro Center for Entrepreneurial Leadership,
Clemson University, USA
Kevin G. Hindle Swinburne University of Technology,
Australia
Robert D. Hisrich Weatherhead School of Management,
Case Western Reserve University, USA
Jeffrey S. Hornsby The Entrepreneurship Program,
Ball State University, USA
R. Duane Ireland Mays School of Business, Texas A&M
University, USA
Daniel F. Jennings Texas A&M University, USA
Jerome A. Katz Department of Management, Cook School of
Business, Saint Louis University, USA
Donna J. Kelley Arthur M. Blank Center for Entrepreneurship,
Babson College, USA
Donald F. Kuratko The Entrepreneurship Program,
Ball State University, USA
vii
viii
Jeffery S. McMullen Hankamer School of Business, Baylor
University, USA
Heidi M. Neck Arthur M. Blank Center for Entrepreneurship,
Babson College, USA
Dean A. Shepherd Leeds School of Business, University of
Colorado, USA
Andrew H. Van de Ven Carlson School of Management, Strategic
Management Research Center, University of
Minnesota, USA
Shaker A. Zahra Arthur M. Blank Center for Entrepreneurship,
Babson College, USA
INNOVATION AND CORPORATE
ENTREPRENEURSHIP
Dean A. Shepherd and Jerome A. Katz
Arguably, one of the most unexpected ?ndings of the Panel Study of En-
trepreneurial Dynamics has been the discovery of higher levels of corporate
entrepreneurship (CE) than expected. One entrepreneur in seven is starting a
business for or with their current employers. Given the current numbers for
independent start-ups, that rate translates into 150,000 corporate entrepreneurship
efforts annually in the USA. Another way to think of it is that in terms of ?rms
with employees, corporate entrepreneurial ventures represent one-quarter of new
start-ups each year. Those efforts also potentially represent a disproportionate
percentage of surviving efforts, because corporate entrepreneurial projects tend
to have superior initial access to ?nancial, human and organizational resources
than the vast majority of independently started ?rms.
In these days where pro?ts and job creation share the role of sovereign criteria
for business, corporate entrepreneurship (CE) is particularly important. CE
embodies one of the major vehicles for corporate innovation, revitalization, and
retrenchment. It preserves and even grows jobs and markets, and provides an aid
to limiting or channeling some of the volatility in the population of businesses. At
this point in the history of entrepreneurship and business generally, CE is coming
off of a slump in mindshare, and represents one of the areas we believe is ripe for
a reformulation and revitalization.
In business and business education, CE has been treated as a stepchild. Like
many other practical inventions of businesspeople, it seems to have existed in
business for years before the academics stumbled upon it and gave it a label and
wider visibility (Knight, 1967). Two of management’s greatest observers, Peter
Corporate Entrepreneurship
Advances in Entrepreneurship, Firm Emergence and Growth, Volume 7, 1–6
© 2004 Published by Elsevier Ltd.
ISSN: 1074-7540/doi:10.1016/S1074-7540(04)07001-1
1
2 DEAN A. SHEPHERD AND JEROME A. KATZ
Drucker and Arnie Cooper seemed to write about the topic at around the same
time, in 1970. Drucker penned “Entrepreneurship in the business enterprise” in
the introductory issue of the Journal of Business Policy, while Arnie Cooper’s
“Entrepreneurial environment” article was already in the publication pipeline at
Industrial Research. Research interest in the topic grew in the 1970s, with perhaps
the seminal event being the International Symposium of Entrepreneurship and
Enterprise Development (ISEED) held in Cincinnati in 1975. More than a half-
dozen of the papers in the proceedings focused on aspects of CE (e.g. Susbauer,
1975), paving the way for the rest of the decade’s work (Cooper, Hornaday &
Vesper, 1997).
In the 1980s, as America was buffeted by foreign competition, CE came to
the fore as one possible answer to the Japanese industrial onslaught. Even as
academicians such as Burgelman (1983) and Block (1982) promoted research
on CE in business schools, Rosabeth Moss Kanter with The Change Masters
(1983) and Gifford Pinchot with Intrapreneuring (1985) popularized corporate
entrepreneurship in business best-sellers. These CE efforts in big business
may have had several unexpected effects. At the economy level, CE did make
a positive contribution to revitalizing American business and taking a more
proactive approach to improvement. Another of these was the creation of a cadre
of corporate managers with CE experience and an understanding of how big
business gets things done. These individuals became an essential component of
the growth of independent entrepreneurial high-growth ?rms in the 1990s, as
they raided corporate ranks for management talent coupled with a sympathetic
world view.
But the 1990s were clearly the decade of independent, not corporate, en-
trepreneurship, and despite continuing efforts in the area by long-time CE
advocates such as Zenas Block and Don Kuratko, the concept of CE was accepted,
but seemed to lose visibility as a corporate revitalization strategy and business
school research topic.
However, there are several factors that suggest a revival of corporate en-
trepreneurship is in the of?ng. One is the surprising PSED ?nding of the
robustness of CE efforts in corporate America. A second is the historical ebb
and ?ow between corporate and independent forms of entrepreneurship, with the
latter in decline in the aftermath of the Internet Boom at the millenium. Third
has been the growing global competitiveness of big business in the post-cold war
period, which energizes a variety of efforts such as CE.
Fourth and most signi?cant of the indications has been an increase in the
intellectual and empirical depth of recent work in corporate entrepreneurship
among academics. Capturing and showcasing this re-emerging trend is the
Innovation and Corporate Entrepreneurship 3
purpose of this seventh volume in the series Advances in entrepreneurship, ?rm
emergence and growth series. Consider the papers in this volume.
In the following chapter, Don Kuratko, Duane Ireland, and Jeffrey Hornsby
offer their perspective on “Corporate entrepreneurship behavior among managers:
A review of theory, research, and practice.” These three authors have each made
a substantial contribution to the corporate entrepreneurship literature. Their
chapter provides an extensive review of theoretical and empirical studies that have
addressed issues of corporate entrepreneurship and its successful use. They focus
on the relationship between managers’ entrepreneurial behavior and the successful
implementation of corporate entrepreneurship actions. Speci?cally, they examine
the relationships among external transformational triggers, execution of a corpo-
rate entrepreneurship strategy, antecedents to managers’ entrepreneurial behavior,
a decision to implement entrepreneurial actions, and resulting outcomes. It was
a challenging task to propose a model with such broad scope and Don, Duane
and Jeff were able to “pull it off” and in so doing offer a number of important
implications for scholars and practitioners. For example, they describe evaluations
that can help determine the sustainability of corporate entrepreneurship actions
as well as how managers can sustain entrepreneurial behavior.
Andy Van de Ven is one of the leading scholars of innovation and his chapter on
the “Central problems in managing corporate innovation and entrepreneurship”
with Rhonda Engleman provides a theoretical framework for addressing three
important research (and practical) questions: (1) How do entrepreneurial ventures
develop over time?; (2) What kinds of problems will most likely be encountered as
the innovation and entrepreneurship process unfolds?; (3) What responses are ap-
propriate for managing these problems? Speci?cally, Andy and Rhonda highlight
four basic concepts for studying corporate innovation and entrepreneurship over
time – people, process, industry, and leadership – and four corresponding central
problems in its management – managing attention, developing ideas into good
currency, developing the industry infrastructure, and managing the pluralistic
context. By combining these previously disparate concepts and problems into one
conceptual framework provides an important contribution to the literature. We
are particularly excited about the future longitudinal research that will hopefully
be inspired by this chapter.
In Chapter 4, Dawn DeTienne continues the theme of the previous chapter by
also acknowledging that the phenomenon of corporate entrepreneurship can be
investigated from a number of different perspectives. After proposing a number
of important theoretical lenses, Dawn uses them to highlight opportunities for
future research. We believe that scholars who pursue these research opportunities
will likely substantially increase our understanding of corporate entrepreneurship.
4 DEAN A. SHEPHERD AND JEROME A. KATZ
Speci?cally, the theoretical lenses described and used are those of: (1) organiza-
tional ecology; (2) evolutionary theory; (3) continuous change; and (4) cognitive
theory. As usual, Dawn has been able to take on a project of considerable
complexity, digest it, and present it in a comprehensible and useful way.
In Chapter 5, Dan Jennings and Kevin Hindle address recent challenges in
the literature to explore the relationship among strategy-structure-performance
and corporate entrepreneurship. They do this by using a general systems theory
to focus on the concept of equi?nality, which “allows a feasible set of equally
effective, internally consistent patterns of strategy and structure” (Jennings &
Hindle, this volume). Their equi?nality generated hypotheses are tested using a
sample of 148 U.S. electrical distribution ?rms over the period of 1998–2002.
They ?nd that high ?rm performance is determined by an organization’s strategy-
structure match and not necessarily whether the organization is entrepreneurial or
conservative or on the type of strategy-structure employed. We believe that future
research should follow this approach of investigating organizations orchestrating
themes (including three-way, four-way and/or higher order interactions) rather
than focusing on developing theories and empirical tests that consider only main
effect or contingent (two-way interactions) relationships.
Shaker Zahra is one of the most in?uential scholars in the areas of corporate
entrepreneurship, international entrepreneurship, and a knowledge-based per-
spective of strategy. In this chapter he works with two highly promising young
scholars, Heidi Neck and Donna Kelley, to combine these important ?elds into one
chapter. In Chapter 6, Shaker, Heidi and Donna use organizational learning and
knowledge perspectives to explore and build our understanding of international
corporate entrepreneurship. Speci?cally, they discuss the conditions under which
new knowledge is acquired through international corporate entrepreneurship and
how this can be a source of competitive advantage. After reviewing four streams
of research that inform the nature of learning inherent in various international
corporate entrepreneurship activities, the authors highlight the importance of
geopolitical forces, and how these forces impact knowledge exploration and
exploitation. This chapter makes a number of important contributions. One in
particular is the acknowledged importance of knowledge integration and the
balance of internal and external venturing.
Continuing with the theme of international corporate entrepreneurship, Bostjan
Antoncic, Melissa Cardon, and Robert Hisrich focus on the impact of global
human resource management. In Chapter 7, Bostjan, Melissa, and Bob highlight
the importance of human resource management in today’s environment, an
environment that is highly dynamic and one where many ?rms are going inter-
national. They propose a useful theoretical framework to explain international
corporate entrepreneurship (e.g. new ventures, new business, product innovation,
Innovation and Corporate Entrepreneurship 5
and competitive aggressiveness) in terms of factors internal to the organization
(e.g. support, commitment, values, experience, intro-?rm communications) and
alliance/network factors that link the organization to other ?rms. An outcome
of the model is a number of useful prescriptions that will provide some help to
managers and highlight important areas of future research.
We change gears for the remainder of the book and focus on connections with
previous volumes of this series. First, in Chapter 8 we continue our discussion
of the distinctive domain of entrepreneurship previously offered by Venkat
(Venkataraman, 1997) and Per (Davidsson, 2003). Who better than Bill Gartner
to add to this important debate? Bill is one of the pre-eminent scholars of
entrepreneurship and, as hoped, he offers a provocative essay that challenges
some of our deeply-held beliefs and proposes a way in which scholarship can best
increase our knowledge of entrepreneurship.
Second, in the previous volume Jeff McMullen and Dean Shepherd (2003) used
signal detection theory to explore entrepreneurial action and offer an interpretation
of economic theories of the entrepreneur. This work was inspired, in part, by
Connie Marie Gaglio’s chapter in Volume three of this series (Gaglio, 1997)
and her work with Jerry Katz (Gaglio & Katz, 2001). To continue the discussion
along this important theme, we asked Connie Marie Gaglio to comment on
the McMullen and Shepherd 2003 chapter. This commentary provides many
insightful ideas, to which Jeff and Dean respond by acknowledging possible
changes to the initial model and, working on Connie Marie Gaglio’s suggestions,
highlight a number of interesting avenues for future research.
We believe that the chapters in this volume will make an important contribution
to the body of knowledge on innovation and corporate entrepreneurship, encourage
scholars to continue to think about, and discuss, the direction of entrepreneurship
as a ?eld, and demonstrate how scholars can build off each others’ work to
advance important research agendas.
REFERENCES
Block, Z. (1982). Can corporate venturing succeed? Journal of Business Strategy, 3(2), 21–33.
Burgelman, R. A. (1983). Corporate entrepreneurship and strategic management: Insights from a
process study. Management Science, 29, 1349–1364.
Cooper, A. C. (1970). Entrepreneurial environment. Industrial Research (September), 74–76.
Cooper, A. C., Hornaday, J. A., & Vesper, K. H. (1997). The ?eld of entrepreneurship over time. Fron-
tiers of Entrepreneurship Research. Babson, MA: Babson College.http://www.babson.edu/
entrep/fer/papers97/cooper/coop1.htm.
Drucker, P. (1970). Entrepreneurship in business enterprise. Journal of Business Policy, 1(1), 3–13.
Kanter, R. M. (1983). The change masters. New York: Simon and Schuster.
6 DEAN A. SHEPHERD AND JEROME A. KATZ
Knight, K. E. (1967). A descriptive model of intra-?rm innovation process. Journal of Business, 40,
478–496.
Pinchot, G., III (1985). Intrapreneuring. New York: Harper.
Susbauer, J. C. (1975). Intracorporate entrepreneurship programs in American industrial enterprise.
In: J. W. Schreier et al. (Eds), Entrepreneurship and Enterprise Development: A Worldwide
Perspective – Proceedings of Project ISEED (pp. 558–562). Milwaukee, WI: ISEED.
CORPORATE ENTREPRENEURSHIP
BEHAVIOR AMONG MANAGERS:
A REVIEW OF THEORY, RESEARCH,
AND PRACTICE
Donald F. Kuratko, R. Duane Ireland
and Jeffrey S. Hornsby
INTRODUCTION
Environmental uncertainty, turbulence, and heterogeneity create a host of strategic
and operational challenges for today’s organizations (Brown & Eisenhardt,
1998). To cope with the challenge of simultaneously developing and nurturing
both today’s and tomorrow’s core competencies, ?rms increasingly rely on
effective use of corporate entrepreneurship (Covin & Miles, 1999). These facts
make it imperative that managers at all levels actively participate in designing
and implementing a strategy for corporate entrepreneurship actions. The recent
literature reveals that there is a general although certainly not a complete
consensus around the position that successful corporate entrepreneurship (CE) is
linked to improvement in ?rm performance (Ireland et al., 2001). Covin, Ireland
and Kuratko (2003) suggest that corporate entrepreneurship is increasingly
recognized as a legitimate path to high levels of organizational performance
and that the understanding of corporate entrepreneurship as a valid and effective
practice with real, tangible bene?ts is occurring across ?rm type and managerial
levels. Other researchers cite corporate entrepreneurship’s importance as a
Corporate Entrepreneurship
Advances in Entrepreneurship, Firm Emergence and Growth, Volume 7, 7–45
© 2004 Published by Elsevier Ltd.
ISSN: 1074-7540/doi:10.1016/S1074-7540(04)07002-3
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8 DONALD F. KURATKO ET AL.
growth strategy (Kuratko, 1993; Kuratko et al., 1993; Merri?eld, 1993; Pinchott,
1985; Zahra, 1991; Zahra & Covin, 1995; Zahra, Kuratko & Jennings, 1999).
As an example, Dess, Lumpkin and McGee (1999) note that, “Virtually all
organizations – new start-ups, major corporations, and alliances among global
partners – are striving to exploit product-market opportunities through innovative
and proactive behavior” – the type of behavior that is called for by corporate
entrepreneurship. Barringer and Bluedorn (1999) suggested that in light of the
dynamism and complexity of today’s environments, “. . . entrepreneurial attitudes
and behaviors are necessary for ?rms of all sizes to prosper and ?ourish.”
Developing an internal environment that cultivates employees’ interest in and
commitment to creativity and the innovation that can result from it contributes to
successful competition in today’s competitive arenas. A valuable and appropriate
internal organizational environment is a product of effective work (often within
the context of corporate entrepreneurship) by managers at all levels (Floyd &
Lane, 2000).
Corporate entrepreneurship (CE) and the behavior through which it is practiced
has been initiated in established organizations for a host of purposes, including
those of pro?tability (Vozikis et al., 1999; Zahra, 1993), strategic renewal (Guth
& Ginsberg, 1990), innovativeness (Baden-Fuller, 1995), gaining knowledge to
develop future revenue streams (McGrath, Venkataraman & MacMillan, 1994),
international success (Birkinshaw, 1997), and the effective con?guration of
resources as the pathway to developing competitive advantages (Borch, Huse
& Senneseth, 1999; Covin & Miles, 1999; Covin, Slevin & Heeley, 2000;
Ireland, Kuratko & Covin, 2003). Regardless of the reason the ?rm decides
to engage in CE, managerial behavior affects the degree of success achieved
from these efforts. From the perspective of long-term ?rm growth through CE,
creative and innovative managerial behavior must be displayed and consistently
reinforced.
However, despite the espoused and observed positive effects of CE, issues
remain if we are to fully understand this construct’s promise (Hornsby, Kuratko &
Zahra, 2002; Zahra, Nielsen & Bogner, 1999). A lack of theoretical and empirical
knowledge about the antecedents of CE and the entrepreneurial behavior on which
it is based are key issues warranting attention. Moreover, outcome factors that
in?uence an organization’s willingness to continue implementing a CE strategy
as well as managers’ willingness to continue engaging in entrepreneurial behavior
have not been integrated to enhance our understanding of CE practices. And,
a fundamental ambiguity exists in the literature concerning what it means, in a
theoretical sense, to have CE as a ?rm’s strategy (Meyer & Heppard, 2000). As
such, while there is a broadly-held belief in the need for and inherent value of
entrepreneurial action on the part of established organizations (Hitt et al., 2001;
Corporate Entrepreneurship Behavior Among Managers 9
Morris & Kuratko, 2002), much remains to be revealed about how CE strategy is
enacted in organizational settings.
Fortunately, knowledge accumulation on the topic of CE has been occurring
at a rapid rate, and many of the elements essential to constructing a theoretically
grounded model of CE and its relation to managers can be readily identi?ed
from the extant literature. Our purpose is to outline such a model that depicts
the CE process as it effects managers. We review the empirical and conceptual
research that substantiates the many components of the model and we describe
the results of a corporate entrepreneurship strategy at a Fortune 500 company that
emphasizes many components of the model.
CORPORATE ENTREPRENEURSHIP AND
THE ROLE OF MANAGERS
The concept of corporate entrepreneurship (CE) has evolved over the last
twenty-?ve years (Hanan, 1976; Hill & Hlavacek, 1972; Peterson & Berger, 1972;
Quinn, 1979). Sathe (1989) de?ned CE as a process of organizational renewal.
More comprehensively, Sharma and Chrisman (1999, p. 18) suggested that CE
“is the process where by an individual or a group of individuals, in association
with an existing organization, create a new organization or instigate renewal or
innovation within that organization.” Other researchers conceptualize CE as em-
bodying entrepreneurial behavior requiring organizational sanctions and resource
commitments for the purpose of developing different types of value-creating
innovations (Alterowitz, 1988; Borch et al., 1999; Burgelman, 1984; Jennings
& Young, 1990; Kanter, 1985; Schollhammer, 1982). This conceptualization of
CE is consistent with Damanpour’s (1991, p. 556) perspective that corporate
innovation is a very broad concept that includes “. . . the generation, development
and implementation of new ideas or behaviors. An innovation can be a new
product or service, an administrative system, or a new plan or program pertaining
to organizational members.” In this context, CE centers on re-energizing and
enhancing the ?rm’s ability to develop the skills through which innovations can
be created. CE is linked to ?rms’ efforts to establish sustainable competitive
advantages as the foundation for pro?table growth (Ireland, Kuratko & Covin,
2003; Kuratko, 1993; Merri?eld, 1993; Pinchott, 1985; Zahra, 1991).
Zahra (1991) observed that “corporate entrepreneurship may be formal or infor-
mal activities aimed at creating new businesses in established companies through
product and process innovations and market developments. These activities may
take place at the corporate, division (business), functional, or project levels,
with the unifying objective of improving a company’s competitive position and
10 DONALD F. KURATKO ET AL.
?nancial performance.” Guth and Ginsberg (1990) stressed that CE encompasses
two major types of phenomena: newventure creation within existing organizations
and the transformation of on-going organizations through strategic renewal. In this
paper, we argue that managers’ entrepreneurial behavior is critical to effective CE,
regardless of the primary reason (either the creation of new ventures or strategic
renewal) it is being pursued. Based on Smith and Di Gregorio’s (2002) logic, our
conceptualization of CE is that newness is CE’s de?ning characteristic regardless
of the context (e.g. new ventures, strategic renewal) within which newness
is sought.
Managers at all organizational levels have critical strategic roles to ful?ll for the
organization to be successful (Floyd & Lane, 2000; Ireland, Hitt & Vaidyanath,
2002). In essence, the strategic role of top-level managers is concerned with the
making of effective strategic decisions – decisions that are concerned with setting
the ?rm’s direction and helping it reach the objectives suggested by that direction.
The strategic role of middle-level managers focuses on the effective communi-
cation of information between the ?rm’s two internal managerial stakeholders
(top-level managers and operating-level managers). In this role, managers interac-
tively synthesize information, disseminate that information to both top-level and
operating-level managers and then as appropriate, champion innovation-oriented
projects that are the products of integrated work between the other two managerial
levels. In slightly different words, once a commitment is made by all managerial
parties to pursue a certain set of actions, such as those associated with CE, man-
agers’ communication responsibilities ?nd them facilitating information ?ows in
ways that support project development and implementation efforts. The strategic
role of operating-level managers is to react to information gained from outside the
?rm while responding to managers’ communication of information that is based
on decisions that have been made by top-level managers (Floyd & Lane, 2000).
The strategic roles of each level of managers call for different actions if the
?rm is to be successful through its CE efforts (Miller & Camp, 1985). Top-level
managers must effectively direct the ?rm’s resource allocation processes and
ratify efforts being taken to facilitate individuals’ efforts to act creatively in
the pursuit of product, process and administrative innovations. Middle level
managers are challenged to understand information ?ows emanating from top-
and operating-level managers in ways that permit successful interpretation and
integration of these managers’ intentions and concerns. Operating-level managers
must respond to the challenges suggested by the information extended to them by
managers within the context of their understanding of changes occurring in the
demands of some of the ?rm’s external stakeholders, particularly customers.
Ghoshal and Bartlett (1994) point to middle-level managers as enablers of
individual actions – actions that can be taken for either the purpose of creating new
Corporate Entrepreneurship Behavior Among Managers 11
ventures or engaging in strategic renewal. Their strategic role of communicating
information between the other two managerial levels is the foundation through
which managers enable others’ actions. Thus, managers affect the context and
organization of work within which their subordinates can become “job crafters.”
Wrzesniewski (2001) described the ability of employees to “craft” their job by
changing the physical or cognitive nature of the task or relational boundaries of
the work. Job crafting often involves a series of creative acts where an employee
will push, transform or adjust the boundaries of the task at hand. Examples
of job crafting have been documented in various job classi?cations, including
hospital cleaning staffs (Dutton, Debebe & Wrzesniewski, 2002), hairdressers
(Cohen & Sutton, 1998), engineers (Fletcher, 1998), nursing (Benner, Tanner &
Chesia, 1996; Jacques, 1993), information technicians (Star & Strauss, 1999) and
restaurant kitchen employees (Fine, 1996). When engaging in CE, the ?rm desires
for job crafters to act creatively in the pursuit of product, process or administrative
innovations.
The information communication role of middle-level managers, a role resulting
from their position at the nexus of information transmittals between top-level
managers and operating-level managers, creates a critical responsibility for these
organizational actors to help others in the ?rm learn how to engage in successful
entrepreneurial behavior (Floyd & Lane, 2000; Floyd & Wooldridge, 1990,
1992, 1994; Ginsberg & Hay, 1994; Kanter, 1985; Pearce, Kramer & Robbins,
1997). This responsibility is in addition to the need for all managers to display
entrepreneurial behavior to support the ?rm’s use of CE. The dual responsibility
to use information as the foundation on which their own entrepreneurial behavior
is based as well as to help others learn how to behave entrepreneurially highlights
the importance of managers to the ?rm’s commitment to use CE to establish
new ventures or to renew itself (Burgelman, 1983; Day, 1994; King, Fowler &
Zeithaml, 2001; Nonaka & Takechi, 1995; Pinchott, 1985).
A MODEL OF MANAGERS’ CORPORATE
ENTREPRENEURIAL BEHAVIOR
According to Smith and Di Gregorio (2002, p. 130), “Entrepreneurial actions
are original along at least one of the following four dimensions: they entail new
resources, new customers, new markets and/or new combinations of existing
resources, customers, and markets.” Managers play a critical role in successful
corporate entrepreneurship (CE). However, the antecedents causing managers to
behave entrepreneurially and then to sustain that behavior across time and events
have not been fully speci?ed. The model presented in Fig. 1 is an initial step to
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Fig. 1. A Model of the Corporate Entrepreneurship Process as it Relates to Managers.
Corporate Entrepreneurship Behavior Among Managers 13
increase understanding of the triggers of a CE strategy as well as the antecedents
causing managers to engage in entrepreneurial behavior and then whether or not to
sustain that behavior. Effective entrepreneurial behavior on the part of managers
is a necessary step to the achievement of the objective the ?rm seeks (e.g.
innovation, renewal, and so forth) when engaging in corporate entrepreneurship.
The model integrates and extends previous theoretical and empirical research
to develop a framework of the current state of the knowledge regarding CE and
managers’ entrepreneurial behavior. Contributions to the entrepreneurship and
strategic management literatures suggest the viability of integrating theoretical and
empirical ?ndings as a means of better understanding conditions and relationships
that are associated with CE (Hitt et al., 2001; Ireland et al., 2001). Hornsby
et al. (1993) for example, advanced an interactive model of CE suggesting that a
combination of circumstances lead to entrepreneurial behavior by managers. In
their multidimensional model, Baum, Locke and Smith (2001) integrated research
?ndings regarding personality traits, general motives, personal competencies, sit-
uational speci?c motivation, competitive strategies and the business environment
to study venture growth. Of importance to the purpose of our work is the Baum
et al. (2001) ?nding that the interaction among individual, organizational and
environmental domains was the strongest predictor of venture growth. To under-
stand the antecedents of managerial behavior and factors in?uencing the degree
to which it will be sustained, we draw from work concerned with the motivations
of individual entrepreneurs (e.g. Naffziger, Hornsby & Kuratko, 1994) as well as
comprehensive analyses of motivation (e.g. Porter & Lawler, 1968) that are partly
based on equity theory (Adams, 1965) and expectancy theory (Vroom, 1964).
In the following sections we examine the speci?c elements of our proposed
model (Fig. 1). We begin with the “triggering” events that cause CE to be pursued
by organizations.
PRECIPITATING EVENTS (TRIGGERS)
External environments are unpredictable and outside the direct control of
individual organizations. Indeed, the external environments facing ?rms today are
generalized characterized as being hostile, dynamic and heterogeneous (Zahra,
1991). Environmental hostility threatens achievement of the ?rm’s mission;
dynamism reduces the stability of the ?rm’s market position; while heterogeneity
makes prediction of competitors and their actions dif?cult. Because of these
conditions, the ?rm’s external environment may frequently change in signi?cant,
yet unexpected ways. Some (e.g. Meyer, 1982) think of signi?cant, yet unexpected
changes as environmental jolts. Regardless of their label, changes in the ?rm’s
14 DONALD F. KURATKO ET AL.
external environment, especially signi?cant, unexpected changes create opportu-
nities for the ?rmto improve its performance through creativity and innovation and
to generate more value for its stakeholders as a result of so doing. More speci?cally,
the ambiguity associated with signi?cant environmental changes makes it possible
for ?rms to creatively use their resources to develop value-generating innovations
as a primary means of effectively exploiting what are often unexpected changes.
Evidence suggests that value-creating innovations result only when the ?rm
alters the conditions of its internal environment in ways that result in co-alignment
with the realities of its external environment. Tushman and Romanelli (1985)
argued, for example, that a ?rm’s reorientation to external environmental changes
involves metamorphic changes in structures, systems, processes and commitments.
Meyer (1982) developed a model of antecedents, dynamics and consequences of
organizational adaptations to signi?cant changes (or jolts) in the ?rm’s external
environment. Meyer’s (1982) model incorporates the stimulus-response paradigm
and the variation-selection-retention mechanism (Weick, 1976) in proposing
that when jolts surface in ?rms’ external environment, organizations select and
interpret stimuli according to theories of action (Argyris, 1976) that are encoded
in prevailing strategies and ideologies (Miles & Snow, 1978).
Thus, signi?cant changes in a ?rm’s external environment will act as a trigger
that stimulates top-level managers to call for entrepreneurial actions to take place
throughout the company as a means of responding to external environmental
changes. While conditions in the ?rm’s internal environment can also stimulate
the use of CE, our focus is on triggers fromthe external environment. Akey reason
for this focus is that compared to triggers from the ?rm’s internal environment,
those from the external environment are more disruptive of bureaucratic inertia
that may have formed across time as a result of the ?rm’s success within the
context of previous environmental conditions. Kelly and Amburgey (1991) studied
organizational inertia and momentum and suggested the need to extrapolate past
trends in the face of organizational change. Viewing events in this context suggests
the possibility that what some consider to be discontinuous change may actually
be momentum. Miller and Friesen’s (1980a, b) ?ndings indicate that momentum
is a pervasive force in organizations; that past practices, trends and strategies tend
to keep evolving in the same direction, perhaps eventually reaching dysfunctional
extremes such as when ?rms become stagnant and fail to innovate (Miller &
Friesen, 1982). However, at points in time, momentum can also contribute to
organizational effectiveness as is the case for ?rms with a propensity to innovate
remaining committed to the position that nurturing creativity across time and
events facilitates consistent and continuous use of entrepreneurial behavior.
Tushman, Newman and Romanelli (1986) argued that most organizational reori-
entations are triggered by performance crises that push ?rms to replace managers
Corporate Entrepreneurship Behavior Among Managers 15
who cannot or will not adapt. However, they found that the most successful reori-
entations occurred in organizations whose managers foresaw the need for radical
change and initiated it before crises occurred. Decision makers, therefore, are the
architects of their environments and adapt to these interpretations (Boeker, 1997).
Managers must minimize mis?ts between the ?rm’s strategy-structure matches as
they prepare their organizations to deal with change (Jennings & Seaman, 1994).
Wrzesniewski (2001) states, “As organizations change their forms and functions
more quickly, employees need to fundamentally realign how they understand the
?rm.” Thus, employees’ ability to craft their own jobs (and, thus, their understand-
ing of their role in the organization) may be a strategic advantage in larger-scale
organizational change” (Lau & Woodman, 1995). Once again, the concept of job
crafting seems to ?t the entrepreneurial response of managers facing changes
caused by precipitating events. The precipitating event provides the impetus to
behave entrepreneurially when other conditions are conducive to such behavior.
However, the precipitating event’s effect and the entrepreneurial behavior it
causes depend on the dynamic interaction among several characteristics such as
the speci?c managers/employees (e.g. personal life, responsibility, personality),
characteristics of the company (e.g. size, culture, structure, strategies) and
developments in the external environment (e.g. competitive, industry, and market
changes) (Baum et al., 2001). Moreover, different types of entrepreneurial actions
are likely the result of different types of triggers. The nature of the triggering
event and the type of entrepreneurial initiative that is pursued are also likely to
be associated with outcomes such as whether an innovation is completed and
implemented and the level of success that is achieved.
Following analysis of evidence in the literature, such as that presented above,
Schindehutte, Morris and Kuratko (2000) generated a sample list of precipitating
events that stimulate or trigger a commitment to and subsequent use of CE.
(Table 1). These events were grouped into ?ve categories:

internal/external source;

opportunity-driven/threat-driven;

technology-push/market pull;

top-down/bottom-up;

systematic or deliberate search/chance or opportunism.
Although there are many ways in which these precipitating factors could be clas-
si?ed, each of the ones identi?ed has potential strategic relevance. For instance,
it may be that resource requirements differ markedly for entrepreneurial projects
triggered by internal developments as opposed to those initiated principally by
external developments and for technology-driven projects vs. market-driven
projects. Triggers from outside the company such as technological change may
16 DONALD F. KURATKO ET AL.
Table 1. “Triggering” Events for Corporate Entrepreneurship.
Speci?c customer request Senior management initiative
Competitor threat or action Initiative on the part of one or more employees
Changes in people’s lifestyles/expectations Strategic program in the ?rm
New sales targets Strategic growth target
Public relations/image New marketing initiative
Substitute product or service Diversi?cation
Declining market share Availability of new equipment
Declining pro?ts Availability of new resources
Declining sales Availability of new distribution channel or method
Improved quality control New management
Poor quality of an existing product or service Perception of increasing risk
Rising costs Vertical integration
Problem with existing logistical performance Geographical expansion
Speci?c customer complaint Internal opportunities
Supplier request Inventory problems
Availability of new IT or on-line systems Staff training
Regulatory requirement Horizontal integration
Decreasing size of the market New investment by a supplier
New investment by a buyer Change in accounting practices
Supplier complaint Insuf?cient standards
Source: M. Schindehutte, M. H. Morris, and D. F. Kuratko, “Triggering Events, Corporate En-
trepreneurship and the Marketing Function,” Journal of Marketing Theory and Practice 8
#2 (Spring 2000): 18–30.
tend to produce entrepreneurial projects that are more innovative or that represent
bigger departures from the status quo than do triggers from inside the company.
Triggers related to the actions of competitors might lead to more imitation, and
those related to threat from a substitute product might produce more innovative
solutions. Managerial support may be more easily obtainable for entrepreneurial
projects triggered by threats (e.g. an impending government regulation) as
opposed to opportunities (e.g. an untapped market niche). The same may be true
for those where the source of the trigger is more top down as opposed to bottom
up. Further, in terms of outcomes, if the trigger is some successful action by a
competitor, then the entrepreneurial project may represent a reactive response
that comes too late to have any marketplace impact. Similarly, it may be that
entrepreneurial events that are in response to a particular supplier or customer
request are associated with higher levels of success (Morris & Kuratko, 2002).
A number of implications can be drawn from this discussion for the concept
of corporate entrepreneurship. The ability to encourage entrepreneurship on an
ongoing basis requires that managers ?rst identify the types of triggers that are
prevalent in the company and determine if any key triggers are not occurring
Corporate Entrepreneurship Behavior Among Managers 17
for particular reasons. There is a need to systematically review triggering events
for both successful and unsuccessful products, service, and processes that have
been pursued by the ?rm over the past ?ve years. Further, managers should apply
the groupings or categories above and then look for associations between types
of triggers and types of entrepreneurial projects and between types of triggers
and the outcomes of entrepreneurial endeavors (Morris & Kuratko, 2002). Thus,
a corporate entrepreneurship strategy pursued by the ?rm is a response to a
precipitating event.
CORPORATE ENTREPRENEURSHIP STRATEGY
Firms choose from among several strategic options for use at the corporate level
when deciding how to respond to the realities (i.e. threats and opportunities)
brought forth by external environmental triggers (Boeker, 1997). In each instance,
the purpose of a selected option is to help the ?rm transform or adapt to increase
its likelihood of competitive success. In general, transformational models focus on
metamorphic changes in organizations that evolve through a series of fundamen-
tally different periods or stages. Some writing about organizational transformation
postulate a predictable set of development stages (e.g. Greiner, 1972). Others,
however, argue the existence of non-deterministic patterns in organizational
transformations (Filley & Aldag, 1980; Mintzberg & Waters, 1982).
The choice of the ?rm’s strategy or strategies is a critical organizational decision
– a decision that has a major in?uence on organizational performance (Borch et al.,
1999). Strategies available as strategic adaptation options include diversi?cation
(Davis & Duhaime, 1992; Hitt, Hoskisson & Kim, 1997; Markides, 1995; Palepu,
1985), acquisition (Hitt, Hoskisson & Ireland, 1990, 1994), restructuring (Hitt
et al., 1994), turnaround (Robbins & Pearce, 1991), and cooperative arrangements
(e.g. strategic alliances, joint ventures) (Dyer & Singh, 1998; Gulati, Nohria &
Zaheer, 2000). Each of these strategies (e.g. diversi?cation, acquisition and so
forth) can be an appropriate adaptation mechanism to use to meet the challenges
posed by external environmental conditions.
Consistent with the arguments presented herein, a strategy for corporate
entrepreneurship is another option that a ?rm can choose to pursue once triggers
from the external environment denote the need for organizational change and
strategic adaptation (Kuratko, Ireland & Hornsby, 2001). A strategy for corporate
entrepreneurship is a set of commitments and actions that is framed around
entrepreneurial behavior and innovation in order to develop current and future
competitive advantages that are intended to lead to competitive success. The
choice of using a strategy for corporate entrepreneurship as a primary means of
18 DONALD F. KURATKO ET AL.
strategic adaptation re?ects the ?rm’s decision to seek competitive advantage
principally through innovation and entrepreneurial behavior on a sustained basis
(Russell, 1999).
Increasingly environmental triggers are interpreted by today’s decision makers
as ones that call for the formation and use of corporate entrepreneurship as
the core of the ?rm’s efforts to adapt strategically. Lumpkin and Dess (1996)
suggested that organizations facing a rapidly changing, faster-paced competitive
environment might be best served by implementing corporate entrepreneurship
actions as an adaptation mechanism. Labels have been attached to organizations
relying on entrepreneurship actions as the core of their commitments, decisions,
and strategies. Examples of these labels include entrepreneurial ?rms (Mintzberg,
1973), prospectors (Miles & Snow, 1978), and adaptive, innovative, and impulsive
?rms (Miller & Friesen, 1980a).
The operational essence of using a strategy for corporate entrepreneurship as
the foundation of a ?rm’s adaptation responses is the call for an organization’s
employees to rely on entrepreneurial behavior as the source of adjustments re-
quired to assure current and future marketplace success. In this context, corporate
entrepreneurship strategy encompasses the full set of commitments, decisions,
and entrepreneurial behavior required for the ?rm to improve the likelihood of
achieving current and future competitive success. As noted previously, when using
corporate entrepreneurship as the source of strategic adaptation to the realities
of a ?rm’s external environment, the intention is to rely on innovation as the
foundation for creating new businesses or recon?guring existing ones. In general,
corporate entrepreneurship calls for ?rms to innovate boldly and regularly and
to be willing to accept considerable, though reasonable levels of risk in doing
so (Miller & Friesen, 1982). To Sykes and Block (1989), reasonable risks are
“affordable” to the organization in terms of its current and future viability as
an operating entity. Resulting from successful use of corporate entrepreneurship
?rms may deliberately reposition themselves within their environment, including
the main arena(s) in which they compete (Covin & Slevin, 1991).
For success to be recorded by using corporate entrepreneurship, those within
the ?rmmust be aware of it and encouraged and nurtured in their use of it. Without
awareness, encouragement, and nurturing, the entrepreneurial behavior that is
linked to use of corporate entrepreneurship will not surface or be used consistently
throughout the ?rm (Kuratko et al., 2001). Furthermore, an awareness of what
corporate entrepreneurship calls for in terms of behavior on the part of individuals
permits an analysis of choices. Typically, organizational members compare and
evaluate the opportunity cost of engaging in entrepreneurial behavior with those
of either not doing so or displaying still other behaviors. Lower opportunity costs,
relative to the costs of other behavior, engender a commitment to engaging in
Corporate Entrepreneurship Behavior Among Managers 19
entrepreneurial behavior (Amit, Mueller & Cockburn, 1995; Reynolds, 1987;
Shane & Venkataraman, 2000).
In comprehensive arguments, Burgelman (1983, 1984) and Burgelman and
Sayles (1986) argued that organizational innovation as well as other strategic ac-
tivities surface through two models – induced strategic behavior and autonomous
strategic behavior. Of the two models, induced strategic behavior occurs more
frequently in organizations. Comparatively, induced strategic behavior captures
formal entrepreneurial behavior while autonomous strategic behavior is concerned
with entrepreneurial behavior that surfaces informally in the ?rm. The more
resource rich is the ?rm the greater is the likelihood that autonomous strategic
behavior will emerge.
Burgelman’s (1983) induced strategic behavior approach is a top-down process
whereby the ?rm’s strategy and structure provide the context within which en-
trepreneurial behavior is elicited and supported. The responsibility for establishing
a strategy and forming a structure that can induce entrepreneurial behavior rests
with top-level managers. Induced strategic or entrepreneurial behavior is shaped
by the ?rm’s structural context. Thus, in this instance, structure follows strategy.
Our analysis focuses on induced strategic behavior. However, this focus does
not suggest that we fail to recognize the importance of autonomous strategic
behavior to the successful use of corporate entrepreneurship actions. Indeed, both
induced and autonomous strategic behavior are important to a ?rm’s corporate
entrepreneurship efforts, whether they are oriented to creating new businesses
or recon?guring existing ones. The model we envision (as shown in Fig. 1) is
one in which managers are imbued with the ?rm’s values and strategies so their
entrepreneurial behavior and innovative efforts will be channeled toward effective
use of current core competencies and simultaneous development of new ones in
the pursuit of competitive success for the organization (Van de Ven, 1986). In
the induced strategic behavior model, top-level managers oversee, nurture, and
support the ?rm’s attempts to use entrepreneurial behavior as the foundation for
product, process, and administrative innovations (Heller, 1999). These actions
can be formalized through selection and use of corporate entrepreneurship actions
that is part of the ?rm’s efforts to identify and pursue marketplace opportunities
in its enactable environment (Weick, 1976). We also believe that a corporate
entrepreneurship strategy that is intended to elicit and support induced strategic
behavior should include degrees of ?exibility through which autonomous strategic
behavior is allowed and indeed encouraged to surface. Properly viewed as a formal
tolerance of autonomous strategic behavior, an intentional commitment of this
type is a conscious strategic decision on the part of the ?rm’s upper-level decision
makers to foster the surfacing and use of innovative entrepreneurial behavior, re-
gardless of whether its origin rests with formal or informal processes (Bird, 1988).
20 DONALD F. KURATKO ET AL.
From the execution of a corporate entrepreneurial strategy we now focus
on the organizational antecedents that must be present and recognized for any
entrepreneurial behavior to be pursued.
ORGANIZATIONAL ANTECEDENTS
The relationship between antecedents and outcomes during corporate refocusing
as a path to strategic renewal has been established (Johnson, 1996). In addition,
research has examined the organizational antecedents that affect (either by
promoting or impeding) the breadth and depth of entrepreneurial actions that are
taken within the ?rm at a point in time to pursue CE (Zahra, 1991; Zahra & Covin,
1995; Zahra, Nielsen &Bogner, 1999). This research has studied different internal
organizational factors including the ?rm’s incentive and control systems (Sathe,
1985), culture (Brazeal, 1993; Hisrich & Peters, 1986; Kanter, 1985), organiza-
tional structure (Covin & Slevin, 1991; Dess et al., 1999; Naman & Slevin, 1993),
and managerial support (Kuratko et al., 1993; Stevenson &Jarillo, 1990). Because
they affect the nature of the ?rm’s internal environment, these factors, both indi-
vidually and in combination, are recognized as antecedents of the entrepreneurial
behavior on which CE is built. An internal environment supportive of innovation
tends to have strong antecedents of entrepreneurial behavior while an environ-
ment that dismisses innovation and its importance yields weak antecedents of
entrepreneurial behavior.
Other research has contributed to our understanding of the organizational
antecedents of entrepreneurial behavior. Miller (1983), for example, correlated
several macro-level variables (e.g. company type, environment, structure and
decision making) with the intensity of entrepreneurial activity. Quinn (1985)
identi?ed several actions large corporations can take to develop the right
“atmosphere” for entrepreneurial behavior to ?ourish. Some of these actions are
oriented to changing the ?rm’s structure in ways that will facilitate innovation.
Souder (1981) found a positive relationship between six management practices
and performance for 100 new ventures in 17 organizations. Fry (1987) and Kanter
(1985) also identi?ed a set of factors that were associated with successful CE
while Schuler (1986) outlined essential structural practices that ?rms need to use
to facilitate entrepreneurial actions.
As mentioned earlier, Burgelman (1983) argued that CE can take two primary
forms – autonomous strategic behavior and induced strategic behavior. As an orga-
nizational antecedent, induced strategic behavior is a top-down process in which
the ?rm’s current strategy and structure shape the entrepreneurial actions taken to
develop product, process and administrative innovations. Autonomous strategic
Corporate Entrepreneurship Behavior Among Managers 21
behavior is a bottom-up process in which product champions pursue new ideas,
often through a political process, by means of which they develop and coordination
activities associated with an innovation until it achieves success. A top-level
managerial decision to encourage risk taking and not to punish failure is a strong
antecedent of autonomous strategic behavior on the part of managers’ behavior as
well as others in the ?rm. An important contribution of Burgelman’s (1983, 1984)
work is the recognition of the effect of the ?rm’s culture, strategy and structure
as antecedents of autonomous strategic behavior – behavior that is grounded in
entrepreneurial actions. Other research (e.g. Floyd & Wooldridge, 1990, 1992,
1994) has recognized the importance of managers in enhancing and cultivating
autonomous strategic behavior. Thus, top-level managers should verify that
organizational antecedents are in place that will elicit and support value-creating
entrepreneurial behavior (in the form of autonomous strategic behavior) on the
part of managers.
The research literature continues to enhance our understanding of organizational
antecedents of entrepreneurial behavior. Previous research results suggest that
many factors encourage the emergence of entrepreneurial behavior. Nonetheless,
an integrated review and analysis of these results shows that the bulk of these
factors can be grouped into ?ve categories. Thus, we conclude that research
?ndings highlight ?ve primary dimensions of the ?rm’s internal environment that
serve as antecedents of entrepreneurial behavior (see Table 2 for a list of the ?ve
dimensions and the research supporting each one). These dimensions are: (1) the
appropriate use of rewards to elicit and then support entrepreneurial actions; (2)
managerial support, which indicates the willingness of managers, especially top-
level executives, to facilitate and promote entrepreneurial behavior; (3) available
resources, including the time required to continuously engage in entrepreneurial
behavior; (4) a supportive organizational culture, which is a culture that is organic
rather than mechanistic in nature; and (5) work discretion (autonomy and risk
taking), the ability or willingness on the part of managers, based upon their job
descriptions, to take risks in the pursuit of innovation and to tolerate and learn
from failures.
Based on these general ?ndings, as reported in the literature, research has
been conducted to identify speci?c organizational antecedents of managers’
entrepreneurial behavior. In their work, Kuratko, Montagno and Hornsby (1990)
found three factors- management support, organizational structure and rewards
– to be the most important antecedents of managers’ entrepreneurial behavior.
Hornsby, Kuratko and Montagno (1999) extended this earlier study as they reported
that the ?ve antecedents listed in the paragraph above were important determinants
of entrepreneurial behavior on the part of managers. Hornsby, Kuratko and Zahra
(2002) developed the Corporate Entrepreneurship Assessment Instrument (CEAI)
22 DONALD F. KURATKO ET AL.
Table 2. Internal Organizational Factors.
Factor Research Citations
Rewards/reinforcement Scanlan (1981), Souder (1981), Kanter (1985), Sathe (1985), Block
and Ornati (1987), Fry (1987), Sykes (1992), Barringer and Milkovich
(1998), Covin and Miles (1999), and Kuratko, Ireland and Hornsby
(2001).
Top management support Souder (1981), Quinn (1985), Hisrich and Peters (1986), MacMillan,
Block and Narasimha (1986), Sykes (1986), Sathe (1989), Sykes
and Block (1989), Stevenson and Jarillo (1990), Damanpour (1991),
Kuratko et al. (1993), Pearce, Kramer and Robbins (1997), Lyon,
Lumpkin and Dess (2000), Antonic and Hisrich (2002), Kuratko et al.
(2001), and Morris and Kuratko (2002).
Resources/time availability Von Hippel (1977), Souder (1981), Kanter (1985), Sathe (1985),
Burgelman and Sayles (1986), Hisrich and Peters (1986), Sykes (1986),
Katz and Gartner (1988), Sykes and Block (1989), Damanpour (1991),
Stopford and Baden-Fuller (1994), Das and Teng (1997), and Slevin
and Covin (1997).
Organizational boundaries Souder (1981), Burgelman(1983), Sathe (1985), BurgelmanandSayles
(1986), Hisrich and Peters (1986), Schuler (1986), Sykes (1986), Bird
(1988), Sykes and Block (1989), Guth and Ginsberg (1990), Covin and
Slevin (1991), Damanpour (1991), Zahra (1991, 1993, 1995), Brazeal
(1993), Hornsby et al. (1993), Hornsby et al. (1999), Antoncic and
Hisrich (2001), and Hornsby et al. (2002).
Work discretion (autonomy) Burgelman (1983, 1984), Kanter (1985), Quinn (1985), Sathe (1985),
MacMillan, Block and Narasimha (1986), Sykes (1986), Bird (1988),
Ellis and Taylor (1988), Sathe (1989), Sykes and Block (1989),
Stopford and Baden-Fuller (1994), Hornsby et al. (1999), Zahra,
Kuratko and Jennings (1999), Morris and Kuratko (2002), and Hornsby
et al. (2002).
to partially replicate and extend results previously reported by Kuratko et al. (1990)
and Hornsby et al. (1999). The instrument included 84 Likert style questions.
The results from the study’s factor analyses suggested that there are ?ve stable
antecedents of managers’ entrepreneurial behavior. These antecedents, along with
an interpretation of them, are as follows: (1) management support (the willing-
ness of top-level managers to facilitate and promote entrepreneurial behavior,
including the championing of innovative ideas and providing the resources people
require to take entrepreneurial actions); (2) work discretion/autonomy (top-level
managers’ commitment to tolerate failure, provide decision making latitude and
freedom from excessive oversight and to delegate authority and responsibility to
managers); (3) rewards/reinforcement (developing and using systems that reward
based on performance, highlight signi?cant achievements and encourage pursuit
Corporate Entrepreneurship Behavior Among Managers 23
of challenging work); (4) time availability (evaluating work loads to ensure that
individuals and groups have the time needed to pursue innovations and that their
jobs are structured in ways that support efforts to achieve short- and long-term
organizational goals); and (5) organizational boundaries (precise explanations of
outcomes expected from organizational work and development of mechanisms for
evaluating, selecting and using innovations). In interpreting their results, Hornsby
et al. (2002) highlighted the importance of middle-level managers receiving
information fromtop-level managers regarding their position relative to the ?ve an-
tecedents and then effectively communicating that information to operating-level
managers. Managers’ tacit knowledge about successful entrepreneurial behavior is
critical to these efforts and is the source of their ability to surface as a competitive
advantage. However, as shown in Fig. 1, managers will engage in entrepreneurial
behavior only when the organizational antecedents to that behavior exist and when
they are aware of their existence. Recognizing and interpreting the antecedents
as indications of an internal environment supporting entrepreneurial behavior
results in individuals assessing their entrepreneurial capacities in reference to
what they perceive to be is a set of organizational resources, opportunities, and
obstacles to engaging in entrepreneurial behavior (Chen, Greene & Crick, 1998).
Determining that the value of entrepreneurial behavior exceeds that of other
behaviors causes managers to champion, synthesize, facilitate, and implement as
we described earlier.
ENTREPRENEURIAL BEHAVIOR
The relationship between entrepreneurial behavior and performance in large
organizations has been assessed differently across time. During the 1980s, some
(e.g. Duncan et al., 1988; Morse, 1986) argued that it was dif?cult for people
to act entrepreneurially in bureaucratic organizational structures. During this
same time period others suggested that for companies of any size, entrepreneurial
behavior was possible, should be encouraged, and could be expected to enhance
?rm performance (Burgelman, 1984; Kanter, 1985; Kuratko & Montagno, 1989).
A signi?cant change in the general perception of the value of entrepreneurial
behavior as a predictor of ?rm performance took place throughout the 1990s. This
was a time during which companies were rede?ning their businesses, thinking
about how to most effectively use human resources and learning how to compete
in the global economy. In short, this was a time during which “Some of the world’s
best-known companies had to endure painful transformation to become more en-
trepreneurial. These companies had to endure years of reorganization, downsiz-
ing, and restructuring. These changes altered the identity or culture of these ?rms,
24 DONALD F. KURATKO ET AL.
infusing a new entrepreneurial spirit throughout their operations . . . change, inno-
vations, and entrepreneurship became highly regarded words that describe what
successful companies must do to survive” (Zahra, Kuratko &Jennings, 1999, p. 5).
Entrepreneurial behavior does not occur in a vacuum; rather, it takes place
within the context of the organization’s full array of actions (Dess, Lumpkin &
Covin, 1997). Establishing an internal environment in large, established organiza-
tions that elicits and nurtures entrepreneurial behavior is challenging and requires
appropriate decisions and actions (Sathe, 1985). As shown in Fig. 1 and as we
discuss next, entrepreneurial behavior is a product of organizational and individual
antecedents.
Entrepreneurial behavior is any newly fashioned set of actions through which
companies seek to exploit entrepreneurial opportunities rivals have not noticed or
exploited. Entrepreneurial opportunities are external environmental conditions
suggesting the viability of introducing and selling newproducts, services, rawma-
terials and organizing methods at prices exceeded their production costs (Casson,
1982; Shane & Venkataraman, 2000). In complex environments, entrepreneurial
opportunities often surface unexpectedly. Because these opportunities are
short-lived and subject to capture or appropriation by rivals, a ?rm must move
quickly to pursue a desired opportunity once it has been identi?ed (Eisenhardt
& Sull, 2001). Entrepreneurial behavior constitutes a “. . . fundamental behavior
of ?rms by which they move into new markets, seize new customers, and/or
combine (existing) resources in new ways” (Smith & Di Gregorio, 2001). Three
key dimensions – innovativeness (the seeking of creative solutions to problems
or needs), risk-taking (the willingness to commit signi?cant levels of resources
to pursue entrepreneurial opportunities with a reasonable chance of failure), and
proactiveness (doing what is necessary to bring pursuit of an entrepreneurial
opportunity to completion) – underlie entrepreneurial behavior (Covin & Slevin,
1991; Lumpkin & Dess, 1996; Morris & Kuratko, 2002).
Novelty, in terms of new resources, new customers, new markets, or a new
combination of resources, customers, and markets is the de?ning characteristic
of entrepreneurial behavior as the foundation for pursuing entrepreneurial
opportunities (Ireland et al., 2001; Smith & Di Gregorio, 2002). Entrepreneurial
behavior is the conduit through which entrepreneurship is practiced in companies
of all types. Increasingly, organizations are committing to the position that
entrepreneurial behavior is essential if they are to ?rst survive and then achieve
competitive success in a world that is being driven by accelerating change
(Barringer & Bluedorn, 1999; Ireland et al., 2001; Lyon, Lumpkin & Dess, 2000).
Entrepreneurial behavior is one of two foundational components (willingness
is the other) comprising the entrepreneurship construct. In essence, through
two components, entrepreneurship is concerned with discovering and exploiting
Corporate Entrepreneurship Behavior Among Managers 25
value creating entrepreneurial opportunities (Shane & Venkataraman, 2000).
The behavioral component “. . . includes the set of activities required to move
a concept or idea through the key stages in the entrepreneurial process to
implementation” (Morris & Kuratko, 2002). Herein, we suggest that managers’
entrepreneurial behavior is vital to this set of implementation-related activities.
Furthermore, we argue that managers’ entrepreneurial behavior can be a source
of competitive advantage for a ?rm over its rivals (Floyd & Wooldridge, 1994).
Entrepreneurship’s willingness component “. . . refers to the willingness of an
individual or organization to embrace new opportunities and take responsibility
for effecting creative change” (Morris & Kuratko, 2002). Lumpkin and Dess
(1996) call this attitude or willingness entrepreneurial orientation. Here too, man-
agers’ entrepreneurial behavior is important, especially in terms of autonomous
strategic behavior.
Entrepreneurial behavior, displayed within the context of an existing orga-
nization, is linked to corporate entrepreneurship and is differentiated from its
relationship with independent entrepreneurship (Sharma & Chrisman, 1999).
Evidence indicates that corporate entrepreneurship is especially important for
use in ?rms facing rapid changes in industry and market structures, customers’
needs, technology, and societal values (Morris & Kuratko, 2002). In the instance
of corporate entrepreneurship, the process of entrepreneurial actions encom-
passes a set of organization-wide activities rather than any single one (Vozikis
et al., 1999).
Entrepreneurial Behavior and Levels of Management
All levels of management are critical to successful corporate entrepreneurship
efforts, whether they are concerned with starting new businesses or recon?guring
existing ones. Indeed, Burgelman (1983) argued that “. . . the strategic process in
large, complex ?rms consists of the strategic activities of managers from different
levels in the organization.”
The position that all managers are important to the development and use of
corporate entrepreneurship actions is supported at least indirectly by researchers’
growing interest in assessing the in?uence of managers on corporate performance
(Tihanyi et al., 2000). Of direct relevance to our focus is Floyd and Wooldridge’s
(1990, 1992, 1994) position that continuous and purposeful involvement of
managers throughout the ?rm is required for corporate entrepreneurship to be
successful.
Thus, managerial behavior, at all levels in the organization, should be driven
by agreed upon purposes. However, as shown in Fig. 1, the behaviors required by
26 DONALD F. KURATKO ET AL.
corporate entrepreneurship differ across managerial level. Speci?cally, functional-
level managers are to engage in the entrepreneurial behaviors that are principally
framed for themthrough interactions with middle-level managers. When behaving
entrepreneurially, ?rst-level managers experiment (learn and improve), adjust and
adapt (respond to the challenges posed by pursuing entrepreneurial opportunities
and engaging in entrepreneurial behavior that is necessary to do so), and conform
(loyally serve others while implementing a corporate entrepreneurship strategy)
(Floyd & Lane, 2000). Top-level executives must provide an environment that
elicits and supports entrepreneurial behaviors on the parts of all employees,
especially middle- and ?rst-level managers. Included as a key component of this
supportive environment is the formation of one or more strategies through which
the ?rm will be able to either create new businesses or recon?gure existing ones.
Whether creating or recon?guring, the ?rm’s interest is to increase the probability
of competitive success (Miller & Camp, 1985). A signi?cant entrepreneurial
behavior expected of middle-level managers is related to the proper integration
of the dictates of formulated strategies with what is typically knowledge-based
entrepreneurial behavior on the part of ?rst-level managers and those for whom
they are responsible (Bartlett &Ghoshal, 1993). To successfully engage in this en-
trepreneurial behavior, middle-level managers champion (nurture and advocate),
synthesize (categorize and sell issues to others), facilitate (share information and
guide adaptationbehavior), and implement (motivate and inspire, revise and adjust)
(Floyd & Lane, 2000).
Research has emphasized the importance of middle-level managers’ en-
trepreneurial behavior to the ?rm’s attempt to create new businesses or
recon?gure existing ones (Floyd & Wooldridge, 1990, 1992; Ginsberg & Hay,
1994; Kanter, 1985; Pearce, Kramer & Robbins, 1997). This importance
manifests itself both in terms of the need for middle-level managers to behave
entrepreneurially themselves and the requirement for them to support and nurture
others’ attempts to engage in the same type of behavior.
The recognition of middle-level managers’ entrepreneurial behavior as a vital
component to successful corporate entrepreneurship actions has surfaced through
an evolutionary path. Bower (1970) was among the ?rst scholars to suggest that
middle-level managers are important agents of organizational change. Middle-
level managers’ work as change agents is facilitated by their organizational cen-
trality. Evidence shows that because of their central positions most organizational
knowledge ?ows through middle-level managers (Floyd & Lane, 2000; Floyd &
Wooldridge, 1992; King et al., 2001). To interact with ?rst-level managers and
their reports to gain access to their knowledge, middle-level managers must pos-
sess the technical competence required to understand initial development, sub-
sequent shaping, and continuous applications of the ?rm’s core competencies.
Corporate Entrepreneurship Behavior Among Managers 27
Simultaneously, they must understand the ?rm’s strategic intent and goals, as well
as the political context within which they are chosen and pursued, to interact ef-
fectively with top-level executives and to gain access to their knowledge (Floyd &
Lane, 2000). Recently, King et al. (2001) demonstrated the importance of middle
managers perception of a ?rms core competencies in order to gain competitive
advantage. Using the speci?c competency characteristics of tacitness, robustness,
embeddedness, and consensus, the researchers identi?ed a strong link between
middle managers perceptions of these characteristics and a ?rm’s high perfor-
mance. Resulting fromthese interactions is the ability of middle-level managers to
champion strategic alternatives fromthose below(i.e. ?rst-level managers and their
reports) and to make them accessible to those above (i.e. upper-level managers).
Quinn (1985) enhanced the strategic signi?cance of middle-level managers’
work by suggesting their ability to foster organizational innovation. This occurs
as middle-level managers interpret and, as appropriate, transfer innovation-based
ideas to upper-level managers for their analysis. Once communicated upward,
top-level managers may decide to incorporate suggestions for additional inno-
vations into the ?rm’s corporate entrepreneurship strategy, allowing them to
them to become part of future induced strategic behavior (Burgelman, 1983).
Moreover, through extensive interactions with those producing the ?rm’s goods or
services, middle-level managers can encourage their colleagues to take reasonable
amounts of risk to develop value-creating innovations. Nonaka and Takeuchi
(1995) emphasized the importance of middle-level managers to innovation
by suggesting that their central organizational position allows them to gather
innovative ideas from inside and outside the ?rm. Through interactions with
?rst- and top-level managers, those operating in the middle of an organization’s
leadership structure in?uence and shape entrepreneurial behavior as they parcel
and integrate knowledge related to potential product, process, and administrative
innovations. Evidence about managers’ value to ?rms’ competitive success when
pursuing a corporate entrepreneurship strategy and relying on entrepreneurial
behavior to do so can be used to summarize this particular discussion.
Thus, in summary fashion, organizations committed to successful corporate en-
trepreneurship are involved with a cascading, yet integrated set of entrepreneurial
behaviors. At the top, upper-level managers act entrepreneurially (in concert with
others throughout the ?rm as well as key stakeholder groups) to form strategies
through which new businesses can be created or existing ones recon?gured.
Both forms of corporate entrepreneurship are pursued in light of environmental
opportunities and threats and with the purpose of creating a more effective
alignment between the company and conditions in its external environment.
Upper-level managers’ entrepreneurial behavior ?nds them ratifying (articulating
mission, endorsing and supporting others’ entrepreneurial behavior), recognizing
28 DONALD F. KURATKO ET AL.
(empowering and enable others), and directing (planning and deploying resources)
(Floyd & Lane, 2000). The entrepreneurial behavior expected of middle-level
managers is framed around the need for this group of organizational leaders to
interpret the newly-formed strategies and then behave entrepreneurially in ways
that will facilitate other employees’ efforts to understand the entrepreneurial
behaviors that are expected of them (King, Fowler & Zeithaml, 2001). As
recipients of these interpretations, ?rst-level managers then work with their
people to fashion the entrepreneurial behaviors through which the ?rm’s core
competencies can be used daily to exploit marketplace opportunities that others
have not observed or have failed to effectively exploit. Working jointly, top-,
middle-, and ?rst-level managers are responsible for verifying that some of
today’s resources and capabilities are used to form the core competencies through
which future competitive success can be pursued.
Recent evidence suggests that human capital affects ?rm performance (Hitt
et al., 2001). We believe that managers, as part of a ?rm’s human capital, can
be a source of competitive advantage. When managers engage in entrepreneurial
behavior that is valuable, rare, imperfectly imitable and for which equivalent
substitutes do not exist, they become a competitive advantage for their ?rm over
its rivals. Contributing to the likelihood that managers’ entrepreneurial behavior
could be a source of advantage is the fact that a great deal of the knowledge on
which their entrepreneurial behavior is based is tacit. Tacit knowledge is embedded
in uncodi?ed behavioral routines as well as the ?rm’s social context (Liebeskind,
1996). Thus, tacit knowledge is a product of managers’ skills and abilities and
their collaborative working relationships that occur within the organization
(Nelson & Winter, 1982). Managers cannot articulate their tacit knowledge,
nor can they describe exactly how it is used when engaging in entrepreneurial
behavior. However, tacit knowledge is critical to middle-level managers as they
simultaneously use their unique relationships to interact with upper- and ?rst-level
managers (King et al., 2001). Managers’ entrepreneurial behaviors of cham-
pioning, synthesizing, facilitating, and implementing become more successful
when they are grounded in carefully established, non-imitable, and sophisticated
networks of interactions with organizational managers and other stakeholders as
well. Thus, the importance of managers in the ?ow of organizational information
and their reliance on tacit knowledge to engage in entrepreneurial behavior
increase the probability that this part of a ?rm’s human capital can be a source of
competitive advantage.
Next, we consider entrepreneurial outcomes and the consequences resulting
from them. These outcomes and their consequences are a product of the series of
events that is initialized by top-level managers’ awareness of external transforma-
tional triggers, the execution of a corporate entrepreneurial strategy, the existence
Corporate Entrepreneurship Behavior Among Managers 29
of organizational antecedents, and the pursuit of entrepreneurial behaviors by
managers.
ENTREPRENEURIAL OUTCOMES
AND CONSEQUENCES
Entrepreneurial outcomes result from using entrepreneurial behavior as the
foundation for implementing a strategy for corporate entrepreneurship. We
argue that unique, yet interrelated outcomes accrue to the organization and to
managers (see Fig. 1). Once recorded, each party evaluates the outcomes that
have been achieved and the subsequent consequences relative to incurred costs
and opportunity costs. Resulting from these evaluations are decisions regarding
the status (continuance, rejection, or modi?cation) of corporate entrepreneurship
actions (an organizational level issue) and the status (continuation, rejection,
or modi?cation) of entrepreneurial behavior (an individual level issue). For an
organization, the consequences to be evaluated concern primarily the degree
to which using corporate entrepreneurship actions enhanced current and future
performance. For managers, consequences concern the degree to which the
displayed entrepreneurial behavior enhanced and expanded their skills set as well
as the degree to which the organization recognized and rewarded the behavior.
Individual-Level Outcomes and Consequences
Effective entrepreneurial behavior is the major outcome managers experience
following their attempts to behave in ways required to implement corporate
entrepreneurship. In this context, effectiveness has two dimensions – the extent
to which managers’ behavior contributed positively to implementation of the
?rm’s corporate entrepreneurship actions and the degree to which the behavior
enhanced each manager’s skills set and value to the organization, as indicated by
recognition and rewards.
Objective measures are critical to assessing performance relative to the two
dimensions; however, subjective measures are also important. The primary reason
for this is that the long-term commercial value of entrepreneurial behavior,
especially when that behavior results more from autonomous than induced strate-
gic behavior is dif?cult to assess by using only objective measures. Moreover,
the ultimate value of more intricately developed networks and relationships –
ones that are based on tacit knowledge – that evolve from managers’ intense
entrepreneurial behavior innovations is hard to judge without at least some degree
30 DONALD F. KURATKO ET AL.
relying on subjective measures. However, introspection may play a prominent role
in each individual manager’s analysis of skills set improvements and the value of
formal (i.e. organizational) and informal (i.e. personal) recognition and rewards.
For managers, entrepreneurial behavior’s consequences are of two types
– intrinsic (i.e. psychological) and extrinsic (i.e. tangible). While very little
entrepreneurship research has addressed speci?c incentive/renewal programs,
Block and MacMillan (1993) cite four possible types of incentives for internal
entrepreneurial behavior. These incentives include: (1) equity and equity equiv-
alents; (2) bonuses; (3) salary increases and promotions; and (4) recognition
systems and rewards. Block and Ornati (1987) studied the use of incentives for
internal entrepreneurs and found that more than 30% of the ?rms compensated
venture managers differently than other managers; over half of all respondents
believed that variable bonuses based on ROI should be used; and internal equity
was the major obstacle cited by organizations with no incentive program. Firms
with an incentive program cited the dif?culty of determining venture goals as the
most signi?cant obstacle. All outcomes will have some level of perceived value
to the manager. Each manager will have his or her own system to value outcomes.
One inference in the model is the manager’s perception that the outcomes of
entrepreneurial behavior will meet or exceed expectations. According to Porter
and Lawler (1968), the relationship between individual effort and performance is
moderated by individual skills, abilities and role perceptions and the relationship
between performance and outcomes affects whether or not the individual is likely
to repeat the behavior. Also, the individual’s satisfaction with the outcome is
dependent on a perception of equity between his or her performance-outcome
relationship and a reference person’s (e.g. coworker or employee in another
organization performing similar work) performance-outcome relationship. It
is proposed that the manager enters the process with expectations of extrinsic
and intrinsic outcomes that will result from the inception of the entrepreneurial
behavior. The speci?c expectations may vary for each individual. These expec-
tations may evolve over time as new opportunities present themselves or as the
reality of operation emerges. For corporate entrepreneurship, the corresponding
outcome expectations are: (1) independence, autonomy, and control; (2) ?nancial
considerations; and (3) signi?cant sales and pro?t growth, respectively. Naffziger
et al. (1994) argued that individuals demonstrate sustained entrepreneurial
behavior if the achievements of the entrepreneurial venture meet or exceed the
expectations or goals that were initially believed. Kuratko et al. (1997) found the
importance of initial goals was vital to the sustained entrepreneurial activity of
business owners.
Huseman, Hat?eld and Miles (1987) identi?ed three response patterns to
perceived equity or inequity. The ?rst response type is a benevolent response
Corporate Entrepreneurship Behavior Among Managers 31
where the individual is only satis?ed when they are under-rewarded and feels
guilty when equitably rewarded or over-rewarded. The second response type is
the equity sensitive response where the individual perceives that everyone should
be rewarded fairly based on the inputs (e.g. effort, skills, abilities, etc.) invested.
The third response type is the entitlement response where the individual believes
everything they receive is due them. They are only satis?ed when they perceive
that they are over-rewarded or receive the highest possible reward. According to
Huseman et al. (1987) it is the equity sensitive response type that can be explained
by Equity Theory. Greenberg (1988, 1990) and Miles, Hat?eld and Huseman
(1994) empirically supported the existence of these three response types and
their impact on work outcomes. It is hypothesized that managers that decide
to behave entrepreneurially are equity sensitive and will compare the outcomes
received for their entrepreneurial actions to counterparts in their organization
or in other organizations. Also, managers must perceive that they have some
control over their environment. In other words, they must believe that their efforts
will impact performance and that performance will result in desired outcomes
(Gatewood et al., 2002).
Therefore, the similarities to Porter and Lawler (1968) include: the impact of
both intrinsic and extrinsic rewards on sustained entrepreneurial behavior (i.e.
satisfaction and reinforcement of the behavior) and the value of rewards and their
impact upon sustained entrepreneurial behavior.
Organizational-Level Outcomes and Consequences
Changes in the ?rm’s external and internal environment may increase both
pressures for, and resistance to, change. Changes in the external environment and
changes in the internal environment may lead to pressure for change by providing
feedback that a ?rm is misaligned with its economic environment (Lundberg,
1984). This misalignment in turn decreases the effectiveness of continuing with
the strategy and increases the ef?ciency of engaging in multifaceted and radical
change (Friesen & Miller, 1986).
Performance outcomes may in?uence changes by providing feedback that
indicates whether or not the current strategy is effective or ef?cient. Alternatively,
they may provide feedback regarding the ?rm’s willingness or capacity to
change to a new strategy (Ginsberg, 1988). Success of entrepreneurial actions
can be based on either ?nancial outcomes such as increased sales, productivity,
market share, reduced waste, and labor ef?ciencies or on behavioral criteria
such as number of ideas suggested; number of ideas implemented; amount of
time spent working on new ideas, and amount of time spent outside of normal
32 DONALD F. KURATKO ET AL.
channels to pursue an idea (Hornsby, Kuratko & Montagno, 1999). The more
traditional ?nancial criteria can be heavily in?uenced by factors unrelated to the
corporate entrepreneurial process. External factors such as the economy, tech-
nology, suppliers, competitors, and governmental regulation may confound the
relationship between the entrepreneurial strategy and outcomes. The behavioral
criteria, however, can provide a less confounded assessment of the success of the
entrepreneurial strategy since they are more directly tied to organizational control.
Both organizational and individual (managers) outcomes play a key role in
sustaining corporate entrepreneurship. In an equity theory framework, these
outcomes will reinforce or sustain future entrepreneurial behavior only if the
rewards are valued by those who receive them and perceived to be linked directly
to the manager’s decision to behave entrepreneurially. Also, the outcomes received
by the organization and the manager must be perceived to exceed the possible
outcomes received from a different choice of strategy or behavior.
It is hypothesized that perceptual interpretations of the overall outcomes made
by the organization’s executive management play a key role in the entrepreneurial
strategy process, as illustrated in the implementation-to-outcome relationship
in the Porter and Lawler (1968) model. One important perceived relationship
is the strength of the relationship between the entrepreneurial strategy and ?rm
outcomes. Executive management must believe that strategic and managerial
actions will lead to speci?c outcomes achieved by the ?rm, such as increased en-
trepreneurial behaviors, increased sales, pro?t, and/or market share. The proposed
model hypothesizes that the more positive this relationship is perceived to be, the
stronger will be the resulting motivation to continue this strategy to encourage
entrepreneurial behaviors and actions, either in the form of continued pursuit of
the current projects or initiation of further projects. It is also hypothesized that
these perceptions will have a feedback effect on succeeding strategies, strategy
implementation, and management of the ?rm. This hypothesis is consistent
with Ginsberg’s (1988) framework for modeling changes in strategy. According
to Ginsberg, performance outcomes in?uence changes by providing feedback
indicating whether the chosen strategy is effective and assess the organization’s
willingness to retain the strategy or change to a new strategy.
Effective entrepreneurial behavior on the part of managers should bene?t the
organization as well as the managers. Appropriate individual-level rewards for
those who display requested entrepreneurial behavior reinforce those individuals’
decision to sustain their entrepreneurial behavior while achievement of desired
organizational outcomes reinforces the ?rm’s decision to continuing pursuing and
reinforcing entrepreneurial behavior as a vital aspect of effective CE operating-
level managers. Hornsby and Kuratko (2003) investigated the relationship
between the previously identi?ed antecedents and self-reported outcomes from
Corporate Entrepreneurship Behavior Among Managers 33
managers including the number of new ideas suggested, the number of new ideas
implemented, the number of times recognized for new ideas, method of recog-
nition, time spend thinking about new ideas and job satisfaction. Based on data
obtained from 530 managers, signi?cant support (based on stepwise regression
analysis) for a relationship between the environmental antecedents and outcomes
was established. Speci?cally, the following relationships were identi?ed:

An overall composite score on the CEAI (a composite score across all ?ve
factors), was related to total satisfaction, use of bonuses and times recognized
for new ideas.

Management support was related to total satisfaction, times recognized for new
ideas, use of bonuses and rating of effectiveness of bonuses.

Work discretion was related to total satisfaction and unof?cial improvements
implemented.

Rewards/reinforcement was related to total satisfaction, use of pay raise and
times recognized for new ideas.

Time availability was related to total satisfaction and use of “other” method of
pay raise.

Organizational boundaries were related to total satisfaction, times recognized
for job improvement and use of bonuses.
Perhaps the most important ?nding of these results is that total satisfaction was
highly related to the existence of a corporate entrepreneurial environment. Total
satisfaction accounted for the most variance in all of the stepwise analyses.
EXPERIENCE FROM A CORPORATE
ENTREPRENEURSHIP STRATEGY
A corporate entrepreneurship strategy is best illustrated with an example of The
Associated Group. Under the vision and direction of L. Ben Lytle, Chairman and
CEO of The Associated Group, a startling restructuring plan was put into effect
during 1986 in order to facilitate the entrepreneurial process. In 1983 the company
was operating as Blue Cross/Blue Shield of Indiana and was literally bogged down
in its own bureaucracy. As a result the Associated Group (the new name taken by
the company rather than Blue Cross/Blue Shield of Indiana) was losing ground
in a fast-paced, changing insurance industry. However, in 1986 after initiating a
corporate entrepreneurship training program, Lytle divided the company legally,
emotionally, physically, geographically, and culturally into operating companies
named Acordia Companies, ranging in size from 42 to 200 employees.
34 DONALD F. KURATKO ET AL.
The opportunities for entrepreneurial individuals within the organization
began to expand with the development of these “mini-corporations,” which were
designed to capture market niches and innovatively develop new ones. Each
separate Acordia company had an individual CEO, Vice President, and outside
board of directors which delegated full authority to run the business. In 1986 The
Associated Group was one large corporation with 2,800 employees serving only
the state of Indiana with all revenue generated fromhealth insurance. By the end of
1991, a ?ve-year strategic plan to restructure and infuse entrepreneurial thinking
into the organization was completed. The results had the company employing
7,000 people in 50 different companies, serving 49 states and generating over
25% of its $2 billion in revenue in lines of business outside health insurance. It
provides an example of effectiveness that corporate entrepreneurship can have in
capturing the imagination of the entire company. It uncovers “builder-types” in
the company seeking challenge and accountability of their ideas and innovative
abilities.
By 1996 there were 32 Acordia Companies where corporate clients could obtain
all types of insurance-related services including commercial property and casualty
coverage, group life and health insurance, third party claims administration for
self-insured bene?t plans, and employee bene?ts consulting. In order to institute
self-perpetuating change in the Acordia network, the mini-corporation CEOs
were encouraged (and rewarded through stock options) to expand business and
then spin off certain parts of the business either geographically or by specialty
when there were 200 employees or there would be too many management layers.
In addition, the CEOs were evaluated on their ability to identify and nurture
additional potential CEOs within their own organization.
Acordia’s experience with entrepreneurial actions as the foundation of its
corporate entrepreneurship strategy offers several insights that inform managerial
practice. Entrepreneurial actions and the corporate entrepreneurship strategy for
which they are a foundation result from intentional decisions. Analysis of the
Acordia, Inc., experience suggests that forming an entrepreneurial vision, using
new-venture teams, and relying on a compensations system that encourages
and supports creative and innovative behaviors are products of careful and
deliberate planning.
Upper-level managers must support the importance of entrepreneurial actions,
through both words and deeds. Watching managers behave entrepreneurially,
including actions taken to deal with the consequences of those behaviors, demon-
strates that all parties will work together to cope with the disruption to existing
work patterns that novel behaviors create (Kuratko, Ireland & Hornsby, 2001).
The corporate entrepreneurship strategy of Acordia, Inc., was a success, with
entrepreneurial actions being used throughout the Acordia companies. Innovative
Corporate Entrepreneurship Behavior Among Managers 35
processes helped to streamline company operations. The ?rm became more
diversi?ed in its products and markets, in that new products were introduced
into multiple markets, while new markets with speci?c customer needs were
regularly identi?ed. The commitment to serve new, highly focused markets led to
additional Acordia companies. Using its original competitive advantages, as well
as innovation, a new advantage was formed in many of the individual companies.
Acordia’s entrepreneurial journey proved to be the foundation for The Associated
Group’s success in the early 1990s.
Impressive ?nancial results were recorded during implementation of the
corporate entrepreneurship strategy. At the end of 1991, The Associated Group
(TAG), the parent organization for all Acordia companies, was earning more
than one-fourth of its $2 billion sales revenue from business lines outside Blue
Cross/Blue Shield of Indiana’s original core product – health insurance. In early
1992, Acordia, Inc., completed a successful IPO. Subsequently, the ?rm’s stock
traded on the NYSE. In June of the same year, Business Insurance ranked Acordia,
Inc., as the 10th largest insurance broker in the United States and 14th largest in
the world (Kuratko et al., 2001).
Eliciting entrepreneurial actions is challenging. An obvious indicator of a
manager’s success is the degree to which employees change their behavior
to begin acting entrepreneurially. A second and complementary performance
measure is the processes the manager used to elicit those behaviors. For example,
did the manager begin to act entrepreneurially? Did he or she involve all relevant
parties when forming an entrepreneurial vision, organizing new-venture teams,
and developing a compensation system? Particularly in ?rms unaccustomed to
focusing on entrepreneurial actions and innovation, processes are as important as
content or outcomes.
CONCLUSION/DISCUSSION
Corporate entrepreneurship is a risk and it has to start somewhere – sometimes
small and corporate-controlled. But if it starts, there is the likelihood of greater
success. Managers become more comfortable with the idea, con?dence builds,
results occur, and soon the ?rst corporate-assigned projects evolve into more
autonomous ventures that reach farther out before being required to report into
administrative structure.
The major thrust behind corporate entrepreneurship is a revitalization of
innovation, creativity, and leadership in our corporations. It appears that corporate
entrepreneurship may possess the critical components needed for the future
productivity of our organizations. If so, the recognizing the objectives, requisites,
36 DONALD F. KURATKO ET AL.
and range of potential training activities are most important in establishing
entrepreneurial strategies in contemporary organizations.
Our focus has been on the antecedents, behaviors, and outcomes related to
the various levels of managers involved with corporate entrepreneurship. It is
proposed that entrepreneurial actions are the result of the perception of the
existence of several organizational antecedents such as top management support,
autonomy, rewards, etc. The outcomes realized from this entrepreneurial behavior
are then compared at both the individual and organizational level to previous
expectations. Thus, it is contended that corporate entrepreneurial behavior is
a result of both an equity perception by the individual and the organization.
Both must be satis?ed with the outcomes for the entrepreneurial behavior to
continue from the organizational strategy perspective as well as the individual
perspective. The impact of performance outcomes on sustaining a strategy is
consistent with Ginsberg’s (1988) strategic change model. Satisfaction with
performance outcomes serves as a feedback mechanism for either sustaining
the current strategy or selecting an alternative one. The model further suggest
that managers, as agents of the strategic change, must also be satis?ed with the
intrinsic and extrinsic outcomes they receive for their entrepreneurial behavior.
While it may be a “chicken-and-egg” question as to whether individual behavior
or organizational strategy should change ?rst, the model suggests that in a major
strategic change, both are instrumental in making the change successful.
This proposed model is integrative in nature since it builds on previous work
in the entrepreneurship/corporate entrepreneurship literature (Hornsby et al.,
1993; Naffziger et al., 1994), as well as the theoretical propositions from other
disciplines such as Porter and Lawler (1968), Adams (1965), Vroom (1964), and
Ginsberg (1988). It is believed that this model will add to the body of literature
related to corporate entrepreneurship since it focuses on the importance of the
managers’ role in a corporate entrepreneurship strategy.
Based on the compilation of ideas presented in this work, at least three areas
for future research can be suggested. First, issues related to entrepreneurship as
a strategic choice need to be studied. One issue is that of governance. How is
the organization owned and governed? In corporate restructuring, governance
has been shown to be a major concern (Hoskisson, Johnson & Moesel, 1994;
Hoskisson & Turk, 1990). Ownership issues may arise where investors do not
seek the same entrepreneurial goals for the ?rms (Kochhar & David, 1996).
Therefore, the governance issue needs to be examined in conjunction with this
proposed model. Another issue is the pacing of strategic change (Gersick, 1994)
and the timing of entrepreneurial progress (Bird, 1997). Short-term vs. long term
actions may reveal interesting results for the corporate entrepreneurial strategy.
Corporate Entrepreneurship Behavior Among Managers 37
Finally, research is needed concerning the impact of environment, and prior
history of changes, related to corporate entrepreneurship strategy.
The second area for future research involves a ?rm’s performance outcomes re-
lated to successful strategic implementation. Which outcomes (either behavioral or
?nancial) account for more of the variance whenthe organizationevaluates whether
or not corporate entrepreneurship as a strategy should continue? Furthermore, do
organizations utilize the concept of equity when determining their satisfaction
with outcomes? Research into these questions as well as how the feedback loop
develops in ?rms may provide guidance for the future use of this strategy.
The third area of research focuses on the manager’s role in the success of a
corporate entrepreneurial strategy. How do organizational antecedents in?uence
or moderate the manager’s decision to behave entrepreneurially? Research is
necessary to determine how critical these antecedents are compared to other
in?uencing factors such as the manager’s past work experience and demographic
factors (i.e. age, gender, culture, etc.). The antecedents suggested in the model
should account for a signi?cant portion of the variance for entrepreneurial
decision making by the manager. Research is necessary to determine the degree to
which these antecedents must exist, and how they coexist, in order for successful
entrepreneurial behaviors to occur. Furthermore, once the manager initiates
entrepreneurial behavior, which outcomes are valued as a result of their behavior?
Also, does the manager desire more intrinsic outcomes or extrinsic outcomes
when determining whether they have received equitable outcomes.
In summary, organizations are choosing to pursue entrepreneurial strategies.
However, it is the entrepreneurial behavior of managers that needs to be focused
upon. The concepts proposed in this article should provide insights for researching
corporate entrepreneurship strategy from the managers’ perspective. This area is
ripe for research in terms of its impact on organizational change and ultimately
on organizational success. Furthermore, a successful implementation of CE
was offered to highlight the importance of transitioning theory and research
into practice. The results of the organizational change effort conducted by
Anthem emphasize the need to focus on identifying the level of individual and
organizational antecedents that facilitated the CE change strategy.
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CENTRAL PROBLEMS IN
MANAGING CORPORATE
INNOVATION AND
ENTREPRENEURSHIP
Andrew H. Van de Ven and Rhonda M. Engleman
INTRODUCTION
Few issues are characterized by as much agreement as the role of innovation
and entrepreneurship for social and economic development. Schumpeter’s (1942)
emphasis on the importance of innovation for the business ?rm and society as a
whole is seldom disputed. Although entrepreneurship is widely recognized as a
central dynamic in the startup of new small companies (e.g. Vesper, 1980), it is
equally crucial to revitalizing and sustaining established companies and renewing
their ability to compete in a dynamic and global economy.
Corporate entrepreneurship (hereafter CE) is typically de?ned as new business
creation within an existing organization as well as renewal and innovation of the
organization (Block & MacMillan, 1993; Dess et al., 2003; Sharma & Chrisman,
1999; Zahra, Kuratko & Jennings, 1999). CE differs in several important ways
fromnewcompany startups, which have been the traditional focus of entrepreneur-
ship scholars. CE focuses on an organization (not an individual) as the “leading
actor” of a new business creation story (new products, services, and programs)
through any of the following routes: internal innovation, strategic alliances, joint
ventures, and other network arrangements. In addition, CE focuses on innovation
Corporate Entrepreneurship
Advances in Entrepreneurship, Firm Emergence and Growth, Volume 7, 47–72
Copyright © 2004 by Elsevier Ltd.
All rights of reproduction in any form reserved
ISSN: 1074-7540/doi:10.1016/S1074-7540(04)07003-5
47
48 ANDREW H. AND RHONDA M. ENGLEMAN
and transformation of an ongoing enterprise, as opposed to the startup of a new
organization.
In new company startups, entrepreneurship is personi?ed in the founders who
typically develop a single business by managing a small number of employees
with direct, personal, and often daily interactions. In contrast, leadership of CE is
more indirect and institutional. Most large established companies have so many
employees, businesses, and subsidiaries located in many different countries that it
is not possible for a top management team to personify entrepreneurial behaviors.
Instead, corporate executives must work through others and institutional structures
to accomplish their objectives. Their central challenges include building relation-
ships with key constituents within and outside of the organization, mobilizing
and aligning activities in support of an innovation from units with divergent
interests, and building an infrastructure that legitimates, enables, and constrains
innovation. Barkema and Chvyrkov (2002, p. 289) argue that this setting requires
entrepreneurial executives “who are able to link loosely connected groups, as
well as handle the many other complexities associated with running such ?rms.”
These macro institutional structures for CE in?uence micro individual behav-
ior by directing the attention of employees in who, what, where, when, and how
work activities are performed. One important distinction for CE is exploration
and exploitation activities. “The basic problem confronting any organization is to
engage in suf?cient exploitation to ensure its current viability and, at the same
time, to devote enough energy to exploration to ensure its future viability. Survival
requires a balance, and the precise mix of exploitation that is optimal is hard to
specify” (Levinthal & March, 1993, p. 105). How might large established com-
panies develop and maintain attention to innovation and entrepreneurship while
simultaneously harvesting, improving, and protecting their existing and pro?table
businesses? CE entails an ongoing struggle in balancing attention of employees to
exploration and exploitation activities.
CE is centrally concerned with innovation. An innovation is a new idea that
may be a recombination of old ideas, a scheme that challenges the present order,
a formula, or a unique approach which is perceived as new by the individuals
involved (Rogers, 1982; Zaltman, Duncan & Holbek, 1973). As long as the idea is
perceived as new to the people involved, it is an “innovation,” even though it may
appear to others to be an “imitation” of something that exists elsewhere. The pro-
cess of innovation is de?ned as the development and implementation of new ideas
by people who over time engage in relationships with others within an institutional
context. This de?nition of innovation includes four key concepts: new ideas,
people, relationships, and institutional context. These concepts embody some of
the central challenges or problems just mentioned in managing CE. They include:
(1) a people problem of managing attention; (2) a process problem of pushing
Central Problems in Managing Corporate Innovation and Entrepreneurship 49
new ideas into good currency; (3) a structural problem of managing relationships;
and (4) a leadership problem of managing the context for innovation. Van de Ven
(1986) provided an initial discussion of these “central problems for managing
innovation.” This paper revises and applies the four problems for managing
corporate entrepreneurship. Such a revision is needed to address a dramatically
different landscape of CE that has emerged over the past 15 years or so.
The liabilities of bureaucracy and inertia that accompany organizational size
and aging have contributed to a common perception that large established ?rms
are less innovative than new small company startups – a perception that Chandy
and Tellis (2000) called the “incumbent’s curse.” A study by the U.S. Department
of Commerce (Charpie, 1967) called attention to this disparity. Based on a study
of 635 innovations that reached the marketplace, Gellman (1976) found that small
?rms (with fewer than 500 employees) produced 2.5 times as many innovations
as large ?rms per employee, and that small ?rms bring their innovations to
market 27% faster than large ?rms. A longitudinal study of 93 consumer durables
and of?ce product innovations by Chandy and Tellis (2000) found that over a
150-year period, small and non-incumbents introduced slightly more radical
product innovations than large ?rms that were incumbent or established in
the marketplace. However, these ?ndings appear to apply to companies before
World War II.
After the War, Chandy and Tellis (2000) found that large incumbent ?rms intro-
duced signi?cantly more radical innovations than small ?rms and nonincumbents.
Soresen, Chandy and Prabhu (2003) obtained further evidence substantiating
this post-war ?nding in a study of 255 pharmaceutical innovations. Chandy and
Tellis (2000, p. 12) conclude that the “incumbent’s curse may apply, but to an
older economic period.” They (as well as Burgleman, 2002; Christensen, 1997;
MacMillan & McGrath, 2000) suggest that dynamic organizational structures
and cultures, intensive interorganizational relationships to build strong techno-
logical competencies, and cannibalizing practices may keep large, incumbent
organizations nimble and innovative.
Growth of the services sector and a knowledge-based global economy are trans-
forming the basis of corporate innovation and entrepreneurship. Quinn, Baruck and
Zien (1997) report that three-fourths of all U.S. economic activity is based on man-
aging intellectual activities and the interface to their service outputs. The value of
most products and services depends primarily on the development of knowledge-
based intangibles, like technological know-how, product design, marketing,
understanding of customers, personal creativity, and innovation. Generating these
intangible technologies depends more on managing intellectual resources and
information than on directing the physical actions of people or the deployment of
tangible assets. In these economies, the basis for sustained competitive advantage
50 ANDREW H. AND RHONDA M. ENGLEMAN
is managing human attention and energies toward building distinctive competence
and knowledge that are used to create these products or services.
This competence often develops in several locations simultaneously and cuts
across the boundaries of ?rms, industries, and nations. As a result, knowledge-
intensive industries have no nationality (Murtha, Lenway & Hart, 2001). Given
these trends, how might ?rms gain sustained competitive advantage from intangi-
ble knowledge-based products? As products become more knowledge-intensive,
Quinn et al. (1992), among others, advise ?rms to: (1) shift from product- to
knowledge-driven strategies; (2) focus on building a distinctive competence; (3)
establish a leadership niche in a value chain network; and (4) outsource the rest
of its functions to “best in world” suppliers.
One implication of following this advice is that CEis no longer just internal ven-
turing. Increasingly, CE involves developing and managing external relationships
with other organizations and groups. This implication is evident by comparing
the topics and issues addressed in leading CE texts over time, such as Block and
MacMillan (1993) with MacMillan and McGrath (2000). CE models that view
the ?rm as going it alone to develop its own innovations within the company are
being replaced with a more collective model that takes a broader institutional,
and political view of business enterprise (Schoonhoven & Romanelli, 2001).
Because knowledge-intensive technologies cut across organization, industry, and
national boundaries, a single ?rm seldom has the resources, power, or legitimacy
to develop and commercialize innovations on its own (Van de Ven & Hargrave,
2003). Instead, collective action is necessary to build an industrial infrastructure
that reduces the time, costs, and risks for all participating members. As discussed
below, we think that mobilizing external relationships to build an industrial
infrastructure for entrepreneurship is a central problem of CE.
The next sections of this paper examine how this changing landscape in?uences
the following problems or challenges in managing corporate entrepreneurship
and innovation.
First, there is the human problemof managing attention because people and their
organizations are largely designed to focus on and exploit existing practices rather
than pay attention to exploring new ideas. The more successful an organization
has been in exploiting its products and markets, the more dif?cult it is to trigger
peoples’ attention thresholds to explore new ideas, needs, and opportunities.
Second, the process problem is managing ideas into good currency so that
innovative, entrepreneurial ideas are implemented and institutionalized. While
the invention or conception of new ideas may be an individual activity, corporate
innovation and entrepreneurship (inventing and implementing new ideas) is a
collective achievement of pushing those ideas into good currency or legitimacy.
The politics of innovation represents a major challenge for most CE managers
Central Problems in Managing Corporate Innovation and Entrepreneurship 51
who need to engage in social movements to gain support of key constituents who
have divergent interests and allegiances within and outside of the organization.
Third, there is a structural problem of building an industry infrastructure
for entrepreneurship. A common characteristic of the innovation process is that
multiple functions, resources, and disciplines that span organizational boundaries
are needed to transform an innovative idea into a concrete reality. As noted
before, mobilizing external relationships to build an industrial infrastructure for
entrepreneurship is a central problem of CE.
Finally, the diverse interests of internal and external constituents involved in cor-
porate entrepreneurshippoint tothe leadershipproblemof managingthe context for
entrepreneurship. Corporate innovation and entrepreneurship activities not only
adapt to existing organizational and industrial arrangements, but they also trans-
form the structure and practices of these environments. The leadership problem is
one of heedfully accommodating the divergent but legitimate views of pluralistic
actors who are distributed, partisan, and embedded in the innovation process.
We now discuss each of these four central problems in managing corporate
innovation and entrepreneurship.
THE HUMAN PROBLEM – MANAGING ATTENTION
Much of the folklore and applied literature on the management of innovation has
failed to incorporate the research by cognitive psychologists and social psycholo-
gists about the limited capacity of human beings to handle complexity and maintain
attention. As a consequence, one often gets the impression that inventors or inno-
vators have superhuman creative heuristics or abilities to “walk on water” (Van de
Ven & Hudson, 1985). A more realistic view of innovation should begin with an
appreciation of the physiological limitations of human beings to pay attention to
non-routine issues, and their corresponding inertial forces in organizational life.
William James, a 19th century psychologist, de?ned attention as follows:
Everyone knows what attention is. It is the taking possession by the mind in clear and vivid
form, of one out of what seem several simultaneously possible objects or trains of thought.
Focalization, concentration of consciousness are of its essence. It implies withdrawal from
some things in order to deal effectively with others . . . (1890, p. 403).
Ocasio takes an attention-based view of ?rm behavior, arguing that . . .
?rm behavior is the result of how ?rms channel and distribute the attention of their decision
makers. What decision makers do depends on what issues and answers they focus their attention
on. What issues and answers they focus on depends on the speci?c situation and on how the
?rm’s rules, resources, and relationships distribute various issues, answers, and decision makers
into speci?c communications and procedures (1997, p. 187).
52 ANDREW H. AND RHONDA M. ENGLEMAN
Although individuals differ greatly, most people have very limited spans of
attention. The average person can retain raw data in short-term memory for only
a few seconds. Most people are able to process only seven (plus or minus two)
objects or digits at any one time (Miller, 1956). Although human information-
processing abilities are limited, we have developed the ability to cope with these
limitations by storing highly abstract mental models of our world based on prior
experiences (Kiesler & Sproull, 1982). Rasmussen (1986) describes the power
of mental models in guiding human behavior, saying that, “The ef?ciency of
humans in coping with the complexity of the physical world is due to an ability
to apply knowledge from previous experience to new situations by selecting and
freely combining models, rules, and strategies that have proven successful sepa-
rately in other situations” (1986, p. 117). Mental models facilitate decision making
by providing rapid solutions to problems based on what we have learned in past
situations. Memory, it turns out, requires relying on “old friends,” which Simon
(1947) describes as a process of linking raw data with pre-existing schemas and
worldviews that an individual has stored in long-term memory.
The organizational equivalent of an individual mental model is the dominant
logic of organization members de?ned as “a mind set or a world viewor conceptu-
alization of the business and the administrative tools to accomplish goals and make
decisions in that business. It is stored as a learned, problem-solving behavior”
(Prahalad & Bettis, 1986, p. 491). As organizational members grapple with the
problems associated with managing their business, their collective experiences
distill into shared beliefs, theories, and propositions about how best to manage
this business and the appropriate responses to different situations. This dominant
logic helps organizational members establish priorities, coordinate their actions,
make timely decisions, and assess the potential consequences of their actions as
they manage critical tasks related to their established technologies and businesses.
While this ability to develop and apply mental models from past experience
serves us well much of the time by allowing us to overcome our natural cognitive
limitations, this ability can also lead us astray. Barr, Stimpert and Huff (1992)
summarize how our individual mental models can also constrain us in our ability
to make sense of the world around us. Mental models determine what information
will receive attention by focusing an individual’s attention on some stimuli rather
than others. The stimuli gaining attention tend to be interpreted in relation to the in-
dividual’s current mental model. These interpretations limit the range of problems
perceived and solutions identi?ed to those that ?t our current mental model.
Starbuck and Milliken (1988) argue that problems of individual attention are in-
stitutionalized at the organizational level when resources are devoted to track those
stimuli that managers have identi?ed as important while other stimuli may go un-
noticed simply because no effort is made to track them. Managers’ belief systems
Central Problems in Managing Corporate Innovation and Entrepreneurship 53
regarding what is important in the environment are more likely to direct their atten-
tion away frominformation that might indicate the need for revised mental models,
pushing it to the background of attention where it is unlikely to be acted upon.
According to March (1991), organizations divide their attention between
two main activities, exploiting existing capabilities and exploring potential
capabilities. Levinthal and March (1993) argue that an organization must engage
in suf?cient exploitation to ensure its current viability while engaging in enough
exploration to ensure its future viability. However, organizations often struggle to
?nd a balance between exploration and exploitation. Ahuja and Lampert (2001)
describe some of the learning traps that limit organizations’ ability to engage in
exploration activities. For example, an organization caught in the familiarity trap
pays more attention to exploiting familiar technologies than to exploring new
technologies that are less familiar. An organization in the maturity trap devotes
more attention to exploiting mature technologies rather than to exploring the am-
biguities of emerging technologies. In the propinquity trap, an organization seeks
solutions to its problems by relying on solutions that have worked in the past rather
than attempting potentially superior novel solutions. As a result of these types of
learning traps, the older, larger, and more successful organizations become, the
more likely they are to have a large repertoire of structures and systems that dis-
courage innovative and entrepreneurial activities while encouraging tinkering with
their existing businesses.
The limitations posed by mental models based on established technologies
and businesses are compounded in conditions of discontinuous environmental
change. Barr, Stimpert and Huff (1992) argue that when facing discontinuous
change in the environment, managers’ mental models must change in order to
develop effective methods of coping with these changes. Delays in mental model
change may limit the organization’s ability to change and adapt, and ultimately
threaten the organization’s survival. Christensen (1997) emphasizes this problem,
saying that, “Perhaps the most powerful protection that small entrant ?rms enjoy
as they build the emerging markets for disruptive technologies is that they are
doing something that simply does not make sense for the established leaders to
do . . . uccessful companies populated by good managers have a genuinely hard
time doing what does not ?t their model for how to make money.” According to
Whetten (1988), organizational decline is the result of signi?cant changes in the
environment that either go unnoticed, are improperly interpreted, or are addressed
through inappropriate actions by managers.
Barr and Huff (1997) found that a necessary condition for strategic actions
in response to discontinuous environmental change is that ?rms perceive their
welfare will be directly affected by the change. Firms do not act until they identify
multiple effects of environmental change, and these effects are supported by other
54 ANDREW H. AND RHONDA M. ENGLEMAN
indicators of the need for strategic change. However, it is exceedingly dif?cult
for members of existing organizations to entertain threatening information, which
is inherent in many innovative, entrepreneurial ideas. Staw, Sandelands and
Dutton (1981) found that organizations experiencing threat show a restriction in
information processing and constriction of control. Organizations experiencing
threat to their survival often turn inward, focusing on improving internal ef?ciency
and controlling costs instead of focusing outward to understand the dynamics of
the changing environment and develop new responses to these changes. D’Aveni
and Macmillan (1990) found that the focus of organizational attention predicts
survival and failure in ?rms facing discontinuous environmental change. Surviving
?rms tend to focus on the external environment in response to the change while
failing ?rms tend to focus on the internal organizational environment.
Mental models in?uence organizational members’ perceptions, values, and
beliefs. These mental models direct organizational members’ attention, focusing
their efforts in prescribed areas but also blinding them to other issues. The impli-
cation is that without the intervention of leadership (discussed below), structures
and systems developed in support of existing technologies and businesses focus
the attention of organizational members to routine activities, not innovative
ideas. For all the rational virtues that structures and systems provide to maintain
existing organizational practices, these “action generators” make organizational
participants inattentive to shifts in organizational environments and the need for
innovation and entrepreneurship (Starbuck, 1983).
Davenport and Beck warn that, “Not everything we pay attention to succeeds, but
things that we don’t pay attention to nearly always fail” (2002, p. 54). The manage-
ment of attention must be concerned not only with triggering the attention thresh-
olds of organizational participants, but also of channeling that attention toward
actions with constructive ends. Constructive attention management is a function
of how other central problems are addressed, namely, the implementation process
and developing an industry infrastructure as discussed in the following sections.
THE PROCESS PROBLEM – IMPLEMENTING
IDEAS INTO GOOD CURRENCY
Whereas the management of attention deals with the allocation of efforts to
innovative entrepreneurial versus ongoing organizational operations, the process
problem focuses on how innovative entrepreneurial ideas are developed and
implemented. This process is not just a rational process of investing in and
pursuing the technically best opportunities. It is also a political process of
mobilizing campaigns to legitimate innovative ideas (Rao, 2001) and push them
Central Problems in Managing Corporate Innovation and Entrepreneurship 55
into good currency (Schon, 1971). CE ventures not only compete for resources
and support with established operating units, but also for all other entrepreneurial
opportunities being explored by an organization. As Schoonhoven and Romanelli
(2001) discuss, the process problem is legitimating and implementing – not
inventing – ideas. “The challenge is for innovators to obtain buy-in from area
experts and from those who in?uence resource allocation for new product
development” (Schoonhoven & Romanelli, 2001, p. 389).
Organizational sociologists have emphasized that legitimacy has both cognitive
and sociopolitical dimensions (Aldrich, 1999; Hannan & Freeman, 1989;
Stinchcombe, 1965). Cognitive legitimacy refers to the taken-for-granted assump-
tion that an entrepreneurial venture is desirable, proper, and appropriate within a
widely shared system of norms and values (Scott, 2001). Sociopolitical legitimacy
consists of endorsements and support of external organizational constituents,
such as ?nancial investors, government regulators, consumers, and others who
play key roles to develop and implement an innovation (Hannan & Carroll, 1992;
Rao, 2001). Innovation ventures gain cognitive legitimacy when entrepreneurs
or activists succeed in framing their project as valid, reliable, and useful (Rao,
2001). To accomplish this, entrepreneurs and activists must often engage in a
sociopolitical process that often resembles a social movement (DiMaggio &
Powell, 1991; Fligstein, 1996; Snow & Benford, 1992).
Schon’s (1971) description of the emergence and institutionalization of public
policies illustrates the sociopolitical process of pushing and riding innovative
ideas into good currency. Figure 1 illustrates the process.
Schon states that what characteristically precipitates change in public policy
is a disruptive event which threatens the social system. Invention is an act of
appreciation, which is a complex perceptual process that melds together judgments
of reality and judgments of value. A new appreciation is made as a problem or
opportunity is recognized. Once appreciated, ideas gestating in peripheral areas
begin to surface in the mainstream as a result of the efforts of people who supply
the energy necessary to raise the ideas over the threshold of public consciousness.
As these ideas surface, networks of individuals and interest groups gravitate to
and galvanize around the new ideas. They, in turn, exert their own in?uence on
the ideas by reframing them, often with a catchy slogan that provides emotional
meaning and energy and cognitive legitimacy to the idea.
However, Schon indicates that ideas do not achieve cognitive legitimacy and
potency to change policy unless they become an issue for political debate and un-
less they are used to gain in?uence and resources. The debate turns not only on the
merits of the ideas, but also on who is using the ideas as vehicles to gain power. As
the ideas are taken up by people who are or have become powerful, the ideas gain
legitimacy and power to change institutions. After this, the ideas that win out are
56 ANDREW H. AND RHONDA M. ENGLEMAN
Fig. 1. Managing Life Cycle of Ideas in Good Currency. Source: Van de Ven (1986).
implemented and become institutionalized – they become part of the conceptual
structure of the social system and appear obvious in retrospect. However, the idea
remains institutionalized only as long as it continues to address critical problems
and as long as the regime remains in power. Schon’s description of the stages
in which ideas become institutionalized is instructive in its focus on the social-
political dynamics of the innovation process. The description emphasizes the
centrality of ideas as the rallying point around which collective action mobilizes.
Organizational structures emerge and are modi?ed by these ideas. Moreover,
it is the central focus on ideas that provides the vehicle for otherwise isolated,
disconnected, or competitive individuals and stakeholders to come together and
contribute their unique frames of reference to the innovation process. Schon (1971,
p. 141) states that these stages characteristically describe the process features in
the emergence of public policies “regardless of their content or conditions from
which they spring.” Analogous descriptions of this social-political process have
been provided by Quinn (1980, especially p. 104) for the development of corporate
strategies and by March and Olsen (1976), for decision making in educational
institutions.
As Schon’s political process model implies, the people involved in en-
trepreneurial ventures are not just impartial role actors playing out their
scripts as detached outside observers. Instead, they are active participants who
Central Problems in Managing Corporate Innovation and Entrepreneurship 57
become embroiled in developing an industry infrastructure in diverse, partisan,
and increasingly embedded ways (Garud et al., 2002; Van de Ven & Garud, 1993).
Actors are distributed in the sense that many different public and private
actors perform essential functions in developing an infrastructure that supports
and enables technological development. Rarely does a single actor control the
technology development process. New technologies and related institutions are
socially constructed and co-evolve.
Actors are embedded in the sense that because technology development is a
collective process; their actions are constrained by and must be taken in concert
with the actions of other actors in the process. Thus, technology development is
partially a path dependent process in which both initial context and conditions
matter. However, the trajectory of actions is not completely path dependent
because learning can occur as the process unfolds. Actors invent new technologies
and institutions and achieve legitimacy by recombining existing skills and
knowledge.
Finally, actors are partisan in the sense that they participate from their own
frames of references and often have different, even con?icting, interests. For
example, the interests of researchers, producers, regulators, and customers
engaged in the development of an innovation are obviously not alike. Their
partisan interests are worked out through collective action processes in which
actors use strategies and tactics of partisan mutual adjustment and political
entrepreneurship, such as those described by Schon (1971), Lindblom (1965),
Alinsky (1971), Fligstein (1997), and Braithwaite and Drahos (2000).
These political behaviors of entrepreneurs demonstrate that the innovation
process is not merely a technical and rational process; it is also a contested and
negotiated political process. Indeed, we propose that while technical competence
is necessary, it may not be suf?cient to mobilize entrepreneurial ventures. Also
needed is political savvy. Braithwaite and Drahos (2000) describe processes of
regulation as “contests of principles” and “contests of actors” in which weak
actors can gain power by “enrolling” more powerful actors to their viewpoints.
This view is reminiscent of the Lipsky (1980) model of protest as a political
resource for in?uencing policy makers through the media who cover and report
on protests and riots in the streets. Garud et al. describe technology development
in terms of mobilization and counter-mobilization and as a “battle fought in
political and cognitive realms” (2002, p. 210). Politically savvy innovators
and entrepreneurs recognize that their interests are both intertwined with and
diverge from those of other individuals and groups in the organization. Therefore
they simultaneously cooperate and compete with these other organizational
members.
58 ANDREW H. AND RHONDA M. ENGLEMAN
THE STRUCTURE PROBLEM – BUILDING THE
INFRASTRUCTURE FOR ENTREPRENEURSHIP
We have noted that CE cuts across the boundaries of organizations, industries, and
nations. Entrepreneurship is more of a collective than it is an individual achieve-
ment. No single ?rm commands the resources, competence, power, or legitimacy
to go it alone. As a result, we need an augmented macro view of the industrial
infrastructure for developing and commercializing an entrepreneurial venture.
The infrastructure for technological innovation does not emerge at random;
rather it emerges to serve the interests of those who become involved in creating
it. This is evident in Quinn and colleagues’ description of competition taking
place not among individual ?rms but rather among “spider’s webs” of organi-
zations, which are networks of ?rms that have specialized knowledge and are
geographically widely dispersed yet need to interact often and in depth (1997,
pp. 228–229). Similarly, Porter links regional prosperity to the development of
economic clusters, which are “geographically proximate groups of interconnected
companies and associated institutions in a particular ?eld, linked by commonalities
and complementarities” (2001, p. 26).
These networks enhance competitiveness by providing ?rms with ready access
to specialized suppliers, facilitating communication so that new needs and new
processes come to light, giving ?rms the support and ?exibility they need to
take risks, and fostering the creation of entrepreneurial startups and spin-offs.
Gulati, Nohria and Zaheer (2000) note that strategic networks provide access to
information, resources, markets, and technologies; allow ?rms to share risks and
outsource value-chain stages; and confer advantages from learning and scale and
scope economies.
Many studies have found there is a systemic nature to technological advances,
as demonstrated by Hughes (1983) of electrical power; Ruttan and Hayami
(1984) of agricultural innovations; Kuhn (1962/1982) and Hull (1988) of sci-
enti?c advances, Tushman and Anderson (1986) of technological revolutions in
cement, minicomputers, and glass; Powell (1998) and Zucker and Darby (1997)
of biotechnology, and Van de Ven and Garud (1993) of biomedical devices.
Many complementary innovations in technical and institutional arrangements
are usually required before a particular technology is suitable for commercial
application (Binswanger & Ruttan, 1978). Developments in other complementary
technologies and institutions often explain bottlenecks and breakthroughs in
the development of a given technology. Thus, as Rosenberg (1983, p. 49) says,
“What is really involved is a process of cumulative accretion of useful knowledge
to which many people from business, education, research, and government
make essential contributions, even though the prizes and recognition are usually
Central Problems in Managing Corporate Innovation and Entrepreneurship 59
Fig. 2. An Infrastructure for Entrepreneurship. Source: Van de Ven, Polley, Garud and
Venkataraman (1999).
accorded to an actor who happens to have been on the stage at a critical
moment.”
The speci?c characteristics of an industrial infrastructure vary with the technol-
ogy on which it is based. In general, Van de Ven and Garud (1989, 1993) propose
a framework, shown in Fig. 2 that identi?es the key infrastructure components
for most industries. The framework adopts an augmented view of an industry as
consisting not only of the set of ?rms producing similar or substitute products
(Porter, 1980), but also many other public and private sector actors who perform
critical roles in developing and commercializing a new technology. This industrial
infrastructure includes the following four sub-systems:
Institutional arrangements: The governmental agencies, professional trade associations, and
scienti?c/technical communities that legitimate, regulate, and standardize a technology.
Resource endowments, which include advancements in basic scienti?c and technological
knowledge, ?nancing and insurance arrangements, and training of competent professionals.
Consumer demand. For new-to-the-world technologies, informed, competent, and responsible
consumers do not pre-exist; the market must be created.
Proprietary activities, which transform the available supply of public resources (scienti?c
knowledge and work force competence) into proprietary products and services to meet
customer demand.
60 ANDREW H. AND RHONDA M. ENGLEMAN
This framework, developed initially from studies of the development of the
cochlear-implant technology by Van de Ven and Garud (1989, 1993), has been
extended in studies of technological communities by Garud and Rappa (1994);
new business startups by Aldrich and Fiol (1994); the American ?lm industry
by Mezias and Kuperman (2000); ?at panel display technologies by Murtha,
Lenway and Hart (2001); and Java technology standards by Garud, Jain and
Kumaraswamy (2002). As Powell argues, the organizational ?eld of an emerg-
ing industry is not only multi-disciplinary but also multi-institutional. He writes
that all the necessary skills and organizational capabilities needed to compete are
not readily found under a single ?rm’s roof and that technological process goes
hand-in-hand with the evolution of the industry and its supporting institutions
(1998, p. 233).
Thus, notwithstanding common folklore of the entrepreneur as a rugged
individualist working alone, innovation is a collective achievement. This vision
of corporate entrepreneurship as collective and emergent does not deny the
importance of the role of individual entrepreneurs; instead it celebrates collective
entrepreneurship. Numerous entrepreneurs in the public and private sectors play
crucial roles in the construction of institutions for social and technical change.
This collective view of corporate entrepreneurship leads to the proposition
that the entrepreneurs who run in packs will be more successful than those
who go it alone. Traditional models of CE have emphasized that entrepreneurs
act independently and compete to be the ?rst into the market in order to reap
monopoly pro?ts from their new product or service. This strategy may be
successful when the institutions of property rights to knowledge and technologies
are clear and enforceable (e.g. with strong patents). Such situations seldom exist
for knowledge-intensive service innovations because the institutions that govern
intellectual property rights may not yet exist or need to be constructed while
the innovation is being commercialized. In these situations, entrepreneurs place
themselves into a risky and costly position if they choose to “go it alone.” Running
in packs means that entrepreneurs coordinate (i.e. simultaneously cooperate
and compete) with others as they develop and commercialize their innovation.
Running in packs is analogous to bicycle racers who cue their pace to one another
and take turns breaking wind resistance until the ending sprint.
The argument for running in packs emphasizes that the interests of en-
trepreneurs with stakes in a technological innovation are both intertwined and
divergent (Ben-Ner, 1993). The actors seek both to maximize their total surplus
and their respective shares in the surplus. The total surplus amounts to creating
an industry infrastructure that makes it collectively possible to commercialize a
new technology. This draws actors together and drives them to cooperate because
no one actor has suf?cient resources, competence, or legitimacy to do it alone.
Central Problems in Managing Corporate Innovation and Entrepreneurship 61
The goal of maximizing individual shares propels actors to compete with
each other to reap entrepreneurial rents that derive from introducing a dominant
technology or service. However, enlightened corporate entrepreneurs realize that
the total expected value of reaping monopoly shares of an orphan technology
are much lower than they are from gaining relatively small shares of a larger
and growing new industry. This is perhaps why population ecology studies have
found that having more competitors in a new organizational niche increases
the survival probability of its members until a threshold level is reached where
resource scarcity limits the growth of all members of a population (Carroll &
Swaminathan, 2000; Hannan & Freeman, 1989). Gaining legitimacy is a key
problem in the emergence of a new technology, and the growth of a critical mass
of actors is often a prerequisite for legitimacy.
Large corporate entrepreneurs who go it alone to be the ?rst movers often expe-
rience the greatest con?icts of interest because they tend to generate the greatest
amount of visibility, which limits their abilities to capture signi?cant proprietary
advantages. This is because their dominance serves as a model that is imitated by
others and diffused throughout the industry. Thus, the single actor who chooses to
“go it alone” must bear signi?cant ?rst mover burdens which permit free-riding by
others. In return for these burdens, ?rst movers are generally believed to have the
greatest degrees of freedom to shape institutional rules, standards, and legitimacy
in the directions that bene?t them the most (Porter, 1985).
However, studies show that these ?rst-mover bene?ts are seldom achieved
for technologies with weak appropriability regimes (i.e. those that are easy to
imitate, reverse engineer, or substitute) (Teece, 1987). For example, Anderson
and Tushman (1990) found that the original breakthroughs in cement, glass, and
minicomputers almost never became the dominant design except where strong
patent protection existed. As a result, the technological designs of the ?rst movers
often do not become the dominant design that ultimately yields the greatest pro?ts.
This is because while striking out to be the ?rst to introduce a new technology,
the ?rst mover inevitably makes mistakes. And the followers, who are observing
the practice of the ?rst mover, can make adjustments in their own technologies.
As a result, after the ?rst mover has introduced the product in the market, then the
second, third, and fourth movers, who have been carefully following the leader,
often can rapidly introduce a more signi?cant, advanced, and better product
or service.
In short, there are strong economic motives for ?rst movers to run in packs,
not alone. Running in packs is necessary during highly ambiguous periods of
innovation development when knowledge and interests change rapidly, when the
costs of innovation exceed their proprietary bene?ts, and when property rights to
an innovation are dif?cult to protect.
62 ANDREW H. AND RHONDA M. ENGLEMAN
THE LEADERSHIP PROBLEM – BALANCING
PLURALISTIC INTERESTS
As we have discussed, CE involves many groups of people with potentially
competing mental models and political interests from within and outside of the
organization. The diverse views and interests of internal and external constituents
involved in CE point to the leadership problem of managing entrepreneurship in
pluralistic settings.
Pluralisminvolves interactions between powerful, interdependent groups within
a social system, each with different, legitimate, and potentially competing interests.
In a pluralistic organization, leadership roles between these interdependent groups
are shared, objectives are often divergent, and power is diffuse (Denis, Lamothe &
Langley, 2001). Van de Ven highlights the importance of pluralismin management
research and practice in his 1999 Academy of Management meeting call for papers:
Organizations are growing larger in vertical and virtual connections, merging and acquiring
others with colliding cultures, hiring more technical/professional workers . . ., interfacing in
more competitive, international and global economies, and adopting widely distributed infor-
mation technologies. The net result is pluralistic organizations, or the co-existence of groups
with different, legitimate, and potentially competing strategies and mental models within the
same organization, which itself is in the process of movement. In these pluralistic settings, we
are challenged to examine how different mutually dependent groups accommodate and learn
from each other as they co-evolve in their change and development journeys (2000, p. 3).
Katz and Kahn (1978) de?ne leadership as acts of in?uence beyond mechanical
compliance with routine directives on organizational-relevant matters by any
member of the organization. This view suggests that almost any individual in
an organization may act as a leader and that different persons may contribute in
different and diverse ways to the leadership of the organization. In their review
of leadership research, Katz and Kahn (1978) linked the distribution or sharing
of leadership behavior with organizational effectiveness. Because the sharing of
in?uence increases the quality of decisions and the motivation of organizational
participants, Katz and Kahn proposed that the more in?uential leadership acts are
widely shared, the more effective the organization.
This view of leadership calls attention to the difference between leadership as
something done by a person, and leadership as a function shared by many people.
Baveles (1960) distinguishes between leadership as a personal quality and leader-
ship as an organizational function. The ?rst remains the dominant view of leader-
ship and leads us to look at the qualities, abilities, or behaviors of the individual
leader at the top of the organizational pyramid. The latter refers to the distribution
of decision-making power and in?uence throughout an organization. It leads us to
Central Problems in Managing Corporate Innovation and Entrepreneurship 63
look at the patterns of in?uence and power exercised by organizational participants
and the speci?c conditions or situations in which they exercise leadership.
In these terms we come close to the notion of leadership, not as a personal quality, but as an
organizational function. Under this concept it is not sensible to ask of an organization, ‘who is
the leader?’ Rather we ask ‘how are the leadership functions distributed in this organization?’
The distribution may be wide or narrow. It may be so narrow – so many of the leadership
functions may be vested in a single person – that he [she] is the leader in the popular sense. But
in modern organizations this is becoming more and more rare (Baveles, 1960, pp. 494–495).
The practice of shared leadership roles among many members of an organization
is essential in managing pluralistic organizations. CE leaders are engaged in
inherently paradoxical processes. Ford and Backoff de?ne a paradox as “some
‘thing’ that is constructed by individuals when oppositional tendencies are
brought into recognizable proximity through re?ection or interaction” (1988,
p. 89). When an established organization initiates an entrepreneurial venture,
members must develop new understandings about the emerging innovations
and businesses that may differ from their understandings about established
technologies and businesses. Innovative and entrepreneurial activities require
exploring new ideas, bending the rules, and creating new structures-actions that
?t poorly within established organizational practices (Jelinek & Litterer, 1995).
Organizations engaging in corporate innovation and entrepreneurship must strike
a delicate balance between allowing members to develop their innovative and
entrepreneurial ideas, yet also facilitating relationships and integration among all
of the organization’s members. This balancing extends beyond the organization’s
boundaries to include other organizations involved in building the infrastructure
for developing and commercializing an entrepreneurial venture.
Leaders at all levels shape the internal and external contexts that either foster
or impede effective social exchanges between the actors involved in managing
the paradoxical tensions and con?icts that arise in corporate innovation and
entrepreneurship within an existing organization and the larger industry. However,
developing and applying the skills needed to manage these tensions and con?icts
is not easy. Quinn’s (1988) competing values framework of leadership roles
(Fig. 3) emerged from a series of studies by Quinn and Rohrbaugh (1983)
that identi?ed the criteria of successful organizational leaders. They found
that complex and dynamic organizations require managers to ful?ll the many
competing expectations. Quinn develops a typology of eight leadership roles.
Innovator: Creative, future-oriented, monitors external environment.
Broker: Politically astute, maintain external legitimacy, spokesperson.
Producer: Task-oriented, motivated to increase production, goal-oriented.
Director: Planning, goal setting, evaluates performance.
64 ANDREW H. AND RHONDA M. ENGLEMAN
Fig. 3. Innovation Leader Roles Superimposed on Robert Quinn’s (1988) Competing Val-
ues Framework of Leadership Roles. Source: Van de Ven et al. (1999, p. 114). Used with
permission.
Coordinator: Scheduling, organizing, crisis management.
Monitor: Rule-oriented, assures compliance.
Facilitator: Build cohesion, con?ict management, problem solving.
Mentor: People development, training, skill building.
Quinn (1988) argues that organizational effectiveness is the result of leaders
maintaining a creative tension between contrasting organizational demands of
control versus ?exibility and internal focus versus external focus. Quinn ?nds
that effective managers are able to move in and out of these various leadership
roles while ineffective managers have great dif?culty balancing competing
philosophies and roles. Ineffective managers “. . . become trapped in their biases.
Effective managers have a variety of styles. Although they may have one or two
roles that are underplayed, their pro?les are far more balanced than the pro?les
of ineffective managers” (1988, p. xviii).
Bartunek (1993) points out that achieving balanced diversity as required in a
pluralistic organization calls for strong leadership to tolerate the ambiguity of
holding multiple perspectives, balance the power among managers with different
perspectives, and enable their interaction toward a creative outcome. In the cases
where she observed such balanced internal diversity, leaders used a negotiation
Central Problems in Managing Corporate Innovation and Entrepreneurship 65
approach to issue management, like that described by Ury, Brett and Goldberg
(1988). Bartunek notes that where a negotiation style was used, the eventual
resolution of con?icts brought about a more complex and creative understanding
than had been present before. The outcomes occurred in part because powerful
people were able to hold their own perspectives while also respecting and
understanding alternative perspectives of others.
Leading in pluralistic settings represents a signi?cant departure from popular
treatments of leadership, which emphasize unity and consensus among the
organization’s leaders around a single, common strategic vision. A uni?ed
homogeneous leadership structure is effective for routine trial-and-error learning
by making convergent, incremental improvements in relatively stable and
unambiguous situations. However, this kind of learning is a conservative process
that serves to maintain and converge organizational routines and relationships
toward the existing strategic vision. As Levinthal (1997) discusses, while such
learning is viewed as wisdom in stable environments, it produces in?exibility and
competency traps in changing worlds.
Peter Senge (1994) argues that the search for heroic leaders may be a critical
factor diverting our attention away from building organizations that, by their very
nature, continually adapt and reinvent themselves.
It is extremely easy to think of “leaders” as those few special people who bring about signi?-
cant institutional change. This leads to an endless search for real Leaders, heroic ?gures who
can rescue us from recalcitrant, non-competitive institutions. But the search for leaders might
actually divert our attention from a deeper need – the need to understand why it is that those
institutions ?nd it so hard to evolve in the ?rst place. Failing to create institutions that, by their
very nature, continually adapt and reinvent themselves keeps us “hooked” on heroic leaders as
our only hope for survival. This sets up a reinforcing spiral of crisis and responses in the form
of new, still more heroic leaders. The price we pay is incalculable: institutions that lurch from
crisis to crisis, continually stress on the members of those institutions . . . the belief that the
common people are powerless to change things – only the mythical leaders have such power
(Senge, 1994, p. 2).
Pluralistic leadership encourages expression of the requisite variety of diverse
perspectives that are needed for learning by discovery (Polley & Van de Ven,
1995). This type of learning entails mindful alertness to anomalies (Jelinek,
1997) shifting core assumptions and decision-making premises, developing new
interpretive schemes (Bartunek, 1993), unlearning prior premises and established
routines (Virany, Tushman & Romanelli, 1992), and creating a learning com-
munity (Senge, 1994). While routine trial-and-error learning reduces variety by
focusing on a singular vision, learning by discovery increases the variety and
diversity of perspectives from which new understandings and objectives can
emerge (Hedberg, Nystrom & Starbuck, 1976). Thus, a pluralistic leadership
66 ANDREW H. AND RHONDA M. ENGLEMAN
structure increases the chances for technological foresights and decreases
the likelihood of oversights, enhancing an organization’s ability to engage in
innovative and entrepreneurial activities.
CONCLUSION
Corporate entrepreneurship has been de?ned as new business creation within
an existing organization as well as renewal and innovation of the organization.
CE is centrally concerned with innovation. Innovation is the development and
implementation of new ideas by people who engage in transactions with others
within the organizational and industry contexts over time.
As these de?nitions suggest, four basic concepts are central to studying CE
over time: people, process, industry, and leadership. Associated with these four
concepts are four central problems in the management of CE: managing attention,
developing ideas into good currency, developing the industry infrastructure, and
managing the pluralistic context. Although these concepts and problems have
diverse origins in the literature, previously they have not been combined into
an interdependent set of critical concepts and problems for studying corporate
innovation and entrepreneurship management.
What leads people to pay attention to new ideas? We argued that an understand-
ing of this issue should begin with an appreciation of the physiological limitations
of human beings to pay attention to non-routine issues and their corresponding
inertial forces in organizational life. The more specialized, insulated, and stable
an individual’s job, the less likely that individual will recognize a need for change
or pay attention to innovative ideas. Likewise, as established organizations
develop a dominant logic about how to manage existing businesses, the less likely
organizations will be to pay attention to innovative and entrepreneurial ideas even
when environmental signals of the need for change are abundant. It was proposed
that attention must be managed in organizations to trigger the action thresholds
of members to innovate and engage in entrepreneurial activity.
An invention or creative idea does not become an innovation until it is imple-
mented or institutionalized. Indeed by most standards, the success of an innovation
is largely de?ned in terms of the degree to which it gains good currency (i.e.
becomes an implemented reality and is incorporated into the taken-for-granted
assumptions and thought structure of organizational practice). Thus, a key
measure of innovation success or outcome is the currency of the idea, and a basic
research question is howand why do some newideas gain good currency while the
majority do not? Based on work by Schon (1971), Quinn (1980), and others, we
think the answer requires longitudinal study of the social and political processes
Central Problems in Managing Corporate Innovation and Entrepreneurship 67
by which people become invested in or attached to new ideas and push them
into good currency.
Once people begin to pay attention to new ideas and become involved in a
social-political process with others to push their ideas into good currency, a third
problem of developing the industry infrastructure emerges. A common charac-
teristic in the development of innovations is that multiple functions, resources,
and disciplines are necessary to transform innovative ideas into reality – so much
so that individual organizations involved in speci?c transactions or parts of the
innovation lose sight of the whole innovative effort. If left to themselves, they will
design impeccable microstructures for the innovation process that often result
in macro-nonsense. The running in packs metaphor was proposed for designing
the innovation process in such a way that individual organizations cooperate with
other organizations, industries, and nations since no actor has suf?cient resources,
competencies, or legitimacy to do it alone. The growth of a critical mass of actors is
often a prerequisite for gaining the legitimacy needed to establish an innovation or
new venture.
Finally, members of entrepreneurial organizations often hold different mental
models and competing political interests and work within an environment of
other actors with equally diverse views. This points to the leadership problem
of managing the context for corporate innovation and entrepreneurship. In order
to capitalize on internal and external diversity, we argued that leaders must
engage in pluralistic leadership to manage the tensions created by contrasting
organizational and industry demands. Pluralistic leadership involves sharing and
rotating leadership roles with others, developing mindful alertness to anomalies,
absorbing ambiguity by means of mutual support, and information sharing within
the organization and across organizational boundaries.
ACKNOWLEDGMENTS
We thank Jerry Katz, Carole Estabrooks, Ian MacMillan, Henry Mintzberg, James
Brian Quinn, Harry Sapienza, and Jisun Yu for insightful conversations and useful
comments on this chapter.
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THE RELEVANCE OF THEORIES OF
CHANGE FOR CORPORATE
ENTREPRENEURSHIP SCHOLARS
Dawn R. DeTienne
INTRODUCTION
Corporate entrepreneurship is a process of organizational change within estab-
lished ?rms, which involves creation, transformation and/or the development of
an entrepreneurial philosophy (Covin & Miles, 1999; Guth & Ginsberg, 1990;
Schendel, 1990; Sharma & Chrisman, 1999; Zahra, 1993). Researchers and ex-
ecutives alike emphasize the importance of change in corporate entrepreneurship.
According to Stevenson and Jarillo-Mossi (1986, p. 14), “If a company wishes
to continue to be entrepreneurial, it must convince everyone that change is the
company’s overriding goal,” or, as stated by Michael Dell, “The only constant in
our business is that everything is changing” (Brown & Eisenhardt, 1998, p. 1).
Various theoretical perspectives have been developed to explain organizational
change, yet these theories have had limited use in entrepreneurship literature.
The objective of this chapter is to explore how these theories explain change
in entrepreneurial organizations and to highlight important streams of research
and research questions. This chapter is not completely inclusive of all the-
oretical perspectives. Rather, it highlights those perspectives (organizational
ecology, evolutionary, continuous change, and cognitive theory) wherein the
basis for change is transformation through technology or product innovation.
Because innovation is a primary way by which organizational change occurs
(Burgelman, 1991; Chakravarthy, 1997; Eisenhardt &Tabrizi, 1995), this research
Corporate Entrepreneurship
Advances in Entrepreneurship, Firm Emergence and Growth, Volume 7, 73–99
© 2004 Published by Elsevier Ltd.
ISSN: 1074-7540/doi:10.1016/S1074-7540(04)07004-7
73
74 DAWN R. DETIENNE
points to the importance of an in-depth understanding of these theoretical
perspectives.
Underlying each of these theories are differing perspectives on the role of the
environment, the organization, the leadership, and the individual members of the
organization. For example, theories of population ecology have focused primarily
upon “selection processes as represented by the study of organizational mortality”
(Swaminathan, 1996, p. 543) and the role of the environment. Other theoretical
perspectives on organizational change have focused upon individual cognition
and how individuals “uniquely interpret complex and changing environments, and
howknowledge informs action” (Huff &Huff, 2000, p. 14). Each of the theories of
change addressed in this chapter will be explored through historical development
(original thinkers, ?elds of study and in?uential research that brought the theories
to the organization), level of analysis, time frame, change agents, contributions
to corporate entrepreneurship, and ?nally future research questions proposed by
each of the prominent theories.
This chapter begins with a discussion of the relationship between organizational
change and corporate entrepreneurship followed by a section on each of the
theoretical perspectives. These individual sections will include the historical de-
velopment of the theory and current and potential contributions of the theory. Each
section will conclude with future research questions. Charts are provided that allow
the reader to analyze the differing aspects of each theory. This chapter does not
suggest that there is one theory that is best suited to explain corporate entrepreneur-
ship, but, to borrow a phrase from strategic management scholars Prahalad and
Hamel (1994, p. 15), there is “an abundance of issues which can be studied from
a multiplicity of theoretical vantage points.” This is certainly true for corporate
entrepreneurship.
ORGANIZATIONAL CHANGE AND CORPORATE
ENTREPRENEURSHIP
Corporate entrepreneurship has developed as a prominent way by which organi-
zations change and transform (Covin & Miles, 1999; Lumpkin & Dess, 1996).
In 1990, Guth and Ginsberg described corporate entrepreneurship as comprising
two types of change: (1) the birth of new businesses within existing organizations
(i.e. internal innovation or venturing); and (2) the transformation of organizations
through strategic renewal. The ?rst type of change is most often referred to as
corporate venturing and is de?ned as “an activity which seeks to generate new
businesses for the corporation in which it resides through the establishment of
The Relevance of Theories of Change 75
external or internal corporate ventures” (Von Hippel, 1977, p. 163). Corporate
venturing has been well documented in the corporate entrepreneurship literature
(cf. Block & MacMillan, 1993; Burgelman, 1983). The second type of change
described by Guth and Ginsberg (1990) is transformation through strategic re-
newal. Strategic renewal “refers to the revitalization of the company’s operations
by changing the scope of its business, its competitive approach, or both” (Zahra,
1996, p. 1715). Stopford and Baden-Fuller (1994) found that troubled ?rms
in hostile environments can adopt policies fostering entrepreneurship, thereby
strategically renewing their organizations and signi?cantly impacting the industry
rules and structures.
Covin and Miles (1999, p. 48) point to a third type of change that is ?nding
prominence in corporate entrepreneurship literature – that of “an entrepreneurial
philosophy that permeates an entire organization’s outlook and operations.”
Organizations seek to develop this entrepreneurial philosophy as a way to per-
manently transform rather than to regularly implement some new change ideas.
This entrepreneurial philosophy has been described in the literature in various
terms including entrepreneurial management (Brown, Davidsson & Wiklund,
2001; Stevenson & Jarillo, 1990), entrepreneurial posture (Covin & Slevin,
1991), and entrepreneurial orientation (Lumpkin & Dess, 1996; Ramachandran
& Ramnarayan, 1993). According to Stevenson and Jarillo (1990, p. 25), en-
trepreneurial management concerns “the quest for growth through innovation, be
this technological or purely managerial.” Brown, Davidsson and Wiklund (2001)
developed a twenty-item testing instrument for Stevenson’s conceptualization of
entrepreneurial management. Through factor analysis, they found six dimensions
of entrepreneurial management: strategic orientation, resource orientation, man-
agement structure, reward philosophy, growth orientation, and entrepreneurial
culture. This research points to the importance of opportunity-based management
practices in the quest for growth and value creation through innovation.
Covin and Slevin (1991) contend that organizational posture involves three
types of organizational-level behaviors: risk taking, extensiveness and frequency
of product innovation, and the pioneering nature of the ?rm (propensity to
complete aggressively). Lumpkin and Dess (1996, p. 136) de?ned entrepreneurial
orientation as the “processes, practices, and decision-making activities that lead
to new entry” and identi?ed ?ve dimensions of an entrepreneurial orientation:
autonomy, innovativeness, risk taking, proactiveness, and competitive aggressive-
ness. Several empirical studies have relied upon these ?ve dimensions to identify
corporate entrepreneurship (cf. Wiklund, 1999; Zahra & Covin, 1995).
In each of the three types of corporate entrepreneurial change listed above
(corporate venturing, transformation and the development of an entrepreneurial
76 DAWN R. DETIENNE
philosophy), innovation plays a critical role. Stopford and Baden-Fuller (1994,
p. 522) observed “most authors accept that all types of entrepreneurship are based
on innovations that require changes in the pattern of resource deployment and the
creation of new capabilities.” Dougherty (1996, p. 424) describes this relationship
between change and innovation when she states “innovation enables organizations
to improve the quality of their output, revitalize mature businesses, enter new
markets, react to competitive encroachment, try out new technologies, . . . develop
alternative applications for existing product categories, to name just a few
outcomes.” Innovation, in this context, most certainly refers to product innovation,
but could also include innovations in processes, structure, and human resources.
To the observer, the constructs of organizational change, corporate entrepreneur-
ship, and innovation can seem convoluted. What occurs ?rst? Which construct
leads to the other? It might help to use the analogy of an automobile. The auto-
mobile serves as a vehicle of change for individuals. It allows people to get from
point A to point B (a desired future state). Corporate entrepreneurship is also a
vehicle of change. It allows organizations to get to some desired future state. The
type of automobile you choose is dependent upon your destination/needs/desires.
The same is true for change within corporate entrepreneurship. Some ?rms will
?nd that they are best suited to adapt/change through the creation of new ven-
tures, others through strategic renewal and still others through the development of
an entrepreneurial philosophy. Despite the type of vehicle you choose, you still
need a driver of change. Even if you have purchased the right vehicle you will
not get to point A until you actually drive the vehicle away from the curb. Inno-
vation plays that role within the entrepreneurial organization. Innovation is the
action that is undertaken and a driver of change in the organization. March (1981,
p. 569) states “students of innovation in organizations have persistently observed
that both innovations and organizations tend to be transformed during the process
of innovation.”
Without innovation, corporate entrepreneurship would be analogous to a
beautiful automobile without a driver – attractive, appealing, and useless to
move in the desired direction. CEOs and/or entrepreneurial champions can “talk”
entrepreneurship, but until they understand how change occurs and take steps to
enhance the corporate environment for innovation, they will be constantly trying
to catch those who do. Covin and Miles (1999, p. 49) state it succinctly “without
innovation there is no corporate entrepreneurship.”
I now turn to discussions of each of the theoretical perspectives. These perspec-
tives were chosen because they provide insight into change at all levels of analysis
– beginning with a macro perspective which focuses on the role of the environ-
ment and working toward the micro level which focuses on the role of individual
thought.
The Relevance of Theories of Change 77
ORGANIZATIONAL ECOLOGY
Historical Development
The theory of organizational ecology has been de?ned as “sociology’s quan-
titative study of organizational vital rates (founding, growth, and mortality)
that emphasizes the force of external selection over internal adaptation” (Van
Witteloostuijn, 2000, p. vi). This perspective “argues that organizational survival
is determined by environmental selection . . .. While managers develop and
implement strategies, these strategies do not directly determine success. Instead,
they are one of many sources of random variation that will be selected –
for, or against – by the environment” (Tsai, MacMillan & Low, 1991, p. 9).
Although the terms organizational ecology and population ecology appear to
be used synonymously at times, real differences exist. Population ecology was
?rst introduced by bioecologists and is an extension of Darwinian biology.
Organizational ecology (OE), ironically, “is an adaptation of the population
ecology model of bioecologists to populations of organizations” (Hawley, 1988,
p. xii). Some of the primary concepts of population ecology models have been
carried over to organizational ecology (i.e. environmental selection) and others
have been developed speci?cally for organizational ecology (i.e. niche density)
(Table 1).
Although researchers (i.e. Carroll, 1988) contend that the organization ecology
movement began with Hannan and Freeman’s (1977) revolutionary article on
the population ecology of organizations, the earlier work by Campbell (1969)
had an impact on theoretical development. According to Campbell (1969), three
generic processes occur as organizations struggle over scarce resources: variation,
selection, and retention. In the OE perspective, the process of variation occurs at
the birth of the organization and is introduced through new organizations.
However, OE is primarily a selection model of organization change, wherein
selection processes are the result of a ?t between organization and environment
(Carroll, 1988). The dynamics that determine organizational selection are the con-
ditions at organization founding (Boeker, 1988) such as legitimacy (Aldrich &Fiol,
1994), inertial forces such as barriers to entry and sunk costs (Hannan & Freeman,
1984), and the density (number) of organizations in a given population (Hannan
& Freeman, 1988). For example, ?rms founded during high-density periods have
genetic weaknesses due to scarceness of resources. In addition, “selection pro-
cesses favor large, generalist organizations” (Agarwal, Sarkar &Echambadi, 2002,
p. 975). However, as market concentration increases, large incumbents are pushed
toward the center of the resource space, which frees up niche opportunities for
smaller, specialized entrants.
78 DAWN R. DETIENNE
Table 1. Theories of Change and Historical Development.
Date Original Thinkers and Classic Works Field of Study
Organizational ecology theory
1950, 1968 Hawley questions why there are so many kinds of
organizations and contends that the diversity of
organizational forms is isomorphic to the diversity of
environments; populations studied must have unitary
character.
Human ecology
1961 Burns and Stalker contend that organizations are subject to
inertial pressures.
Management
1969 Campbell identi?es three generic processes that occur as
orgs struggle over scarce resources: variation, selection and
retention.
Sociology
1977 Hannan and Freeman extend the work of Hawley; they
contend that there are large limitations on the ability of
organizations to adapt (through strategic choices); patterns
of organizations are due to selection processes; explicit
focus on populations of organizations.
Sociology
1984 Hannan and Freeman contend that individual organizations
are subject to such strong inertial forces that they are unable
to make radical changes in strategy or structure in the face
of environmental threats.
Sociology
1988 Hawley states “organizational ecology is an adaptation of
the population ecology model of biologists to populations
of organizations.”
1988 Carroll contends cross-sectional data is not appropriate for
OE studies which must employ longitudinal data.
1988 Hannan and Freeman further develop niche concept and
density dependence.
1988 Boeker contend choices made early in the development of
organizations shape and constrain future options.
1999 Aldrich reminds us that selection processes, within ecology
models, result from degree of ?t between organizations and
their environments; DV is usually events – foundings,
disbandings and occasionally transformations.
2002 Agarwal, Sarkasr & Echambadi ?nd that it is vital to
incorporate the effects of time in OE models.
Evolutionary theory
1859 Darwin publishes “Origin of the species” Biology
1899 Mead is one of the ?rst to apply evolutionary theory to
social science in his work on social reform in the American
Journal of Sociology.
Sociology
1961 Ginsberg proposes that the development of the
Indo-European languages shows evolutionary processes as
early as 1788.
Linguistics
The Relevance of Theories of Change 79
Table 1. (Continued )
Date Original Thinkers and Classic Works Field of Study
1969 Campbell brings evolutionary theory to the social sciences
with his classic “Variation and Selective Retention in
Socio-Cultural Evolution.” He focuses upon those social
processes (variation, selection and retention) which would
make an evolutionary process possible at the societal level.
1982 Nelson & Winter developed an evolutionary theory of the
capabilities and behavior of ?rms operating in a market
environment.
Economics
1994 Baum & Singh edited “Evolutionary Dynamics of
Organizations.” The principle focus was on the hierarchical
nature of organizational evolution. The four sections were
divided into intraorganization, organization, population and
community evolution.
1996 Schendel edited a special issue of Strategic Management
Journal on Evolutionary Perspectives on Strategy
1999 Baum & McKelvey
1999 Aldrich (1999: 40) publishes the “encyclopedia” on
evolutionary theory contending that “evolutionary theory
applies to many levels of analysis: groups, organizations,
populations and communities” and that external selection
forces are not deterministic.
Continuous change theory in management literature
1963 Maruyama contends through work in cybernetics that small
changes do not stay small
1996 Orlikowski ?nds fundamental changes occur as the result of
a series of ongoing and situated accommodations
1997 Brown and Eisenhardt explore processes of ?rms that
continuously innovate
1999 Weick and Quinn contrast episodic change with continuous
change and contend that change is an ongoing mixture of
reactive and proactive modi?cations, guided by purposes at
hand
1999 Covin and Miles use the term “sustained regeneration” to
refer to continuous change
2001 Pettigrew, Woodman and Cameron call for research into
continuous change
2001 Peterson & Meckler ?nd that radical changes can be
directly dependent on incremental, predictable change
80 DAWN R. DETIENNE
Other major components of OE theory include the unitary characteristic of
populations wherein members of a given population are affected similarly by
changes in environment (Hawley, 1968), and the inability of organizations to
change form – at least quickly or routinely (Hannan & Freeman, 1988). Other
components include a competitive interdependence which drive organizations to
?nd niches (Hawley, 1988), a long-term perspective (Dess & Beard, 1984), use of
longitudinal data rather than cross-sectional data (Barnett & Burgelman, 1996),
events (foundings, transformations and disbandings) as dependent variables
(Baum & Singh, 1994), and levels of analysis that tend to be at the organization
and population levels (Dess & Beard, 1984).
A current issue in OE theory is whether the theory should evolve to include
other concepts or whether it is suf?cient as it stands. Some current researchers
(i.e. Pfeffer, 1993) have called for a relatively rigid adherence to the theoretical
perspectives of the founders in order to maintain a high degree of consensus, as
well as consistency, in methods and dependent variables. Others indicate that the
tenants of the theory should be relaxed. They contend that the tenants have become
blurred with other theoretical perspectives, such as transaction cost theory and
evolutionary theory. For example, Amburgey and Rao (1996), in their introduction
to an Academy of Management Special Issue on Organizational Ecology, suggest
that OE should include concepts of adaptation and become a theory that “can
include new concepts and technique that arise.”
Another current issue is the appropriate level of analysis. Early theoretical
development (i.e. Hannan & Freeman) proposed that the population is the correct
level of analysis. This tenant has been relaxed to include both the population
(industry) and the organization (Van Witteloostuijn, 2000). Other researchers (i.e.
Swaminathan, 1996, p. 543) call for the use of OE to include “problems at the
intraorganizational and community levels of analysis.” For example, Shane and
Stuart (2002) use data on the life histories of 134 ?rms, founded to exploit MIT
inventions, to investigate the question of how the initial resource endowments of
the entrepreneur affect organizational survival.
Potential Contributions to Corporate Entrepreneurship
Recent research into OE, innovation, and entrepreneurship have included the
following research streams: liability of newness (Shepherd, Douglas & Shanley,
2000), liability of smallness (Venkataraman & Van deVen, 1998), liability of
adolescence (Mahmood, 2000), and national environments for entrepreneurs
(Shane & Kolvereid, 1995). What other topics in corporate entrepreneurship and
innovation can OE theory address? Three areas of corporate entrepreneurship
The Relevance of Theories of Change 81
research amenable to the OEperspective include: (1) Internal venture applications;
(2) Environmental effect on project retention; and (3) Absorptive capacity. I now
propose future research questions that may be explored using OE theory.
Previous research indicates that there is a liability of newness and smallness
in entrepreneurial ventures. However, we have yet to explore these phenomena
in a corporate entrepreneurship context. Future research should explore whether
liability of newness is more prevalent in start-ups or in internal ventures. We may
discover that internal ventures are protected from liability of newness pressures or
that the honeymoon period is extended because of better or longer term funding
through the parent organization. If empirical research bears out this proposition,
internally funded ventures may have the ability to reach positive cash ?ow faster
than start-ups.
Organizational ecology theory indicates that the environment is the primary
selector of ?rms that survive. A signi?cant rich area of research is how the
environment affects projects within the ?rm. Speci?cally, do environmental jolts
affect all projects evenly or are ?rms more likely to eliminate “new” projects? For
example, if a ?rm experiences an environmental jolt (e.g. terrorism threat for an
airline), is the ?rmlikely to move resources fromone project to meet an immediate
need? Which projects are most likely to be eliminated or no longer funded?
Furthermore, which types of projects are likely to be funded? Do some ?rms seek
to “hit the big one” thereby minimizing their long-term liability while other ?rms
are more likely to fund several small projects rather than a fewlarge ones (a reverse
application of the liability of smallness perspective)? What affect does this have on
survival rates?
Organizational ecology also anticipates that organizational slack or absorptive
capacity will affect the survival of ?rms. Hannan and Freeman (1977, p. 949) state:
“populations of organizational forms will be selected for or against depending upon
the amount of excess capacity they maintain and how they allocate it.” Future
research will be important to understand the relationship between the amount and
type of absorptive capacity and ?rm survival. For example, will generalist ?rms
(those with high levels of absorptive capacity) be better positioned to survive
in chaotic environments? What is the appropriate amount of absorptive capacity
given a particular industry? Research should explore the possibility that there is an
inverse U-shaped relationship between opportunity recognition and/or innovation
and absorptive capacity (e.g. Nohria & Gulati, 1996) wherein both too little and
too much may be detrimental.
Another area of interest in relation to absorptive capacity and corporate
entrepreneurship is how to operationalize the construct of absorptive capacity.
Currently much of the empirical research has operationalized it as investments
in R&D personnel, R&D intensity and/or investments in scienti?c and technical
82 DAWN R. DETIENNE
training. Although these variables may contribute to the construct, it is likely
that absorptive capacity should include some measure of how “?rms acquire,
assimilate, transform and exploit knowledge” (Zahra & George, 2002, p. 186).
Further development of the construct will make it possible to better empirically
test the relationships between absorptive capacity and ?rm survival.
Each of the three areas listed above discusses important areas of research within
OE and the entrepreneurial ?rm. Although many questions were posed, they cer-
tainly are not inclusive. The research in OE is in position to guide our thinking
toward some of these questions.
EVOLUTIONARY THEORY
Historical Development
Evolutionary theory provides a generic framework for understanding social change
by focusing on processes of variation, selection, retention, and struggle (Aldrich,
1999). Although most individuals contend socio-cultural evolution began with
the work of Darwin, others propose that these perspectives appeared in early
linguistics and were apparent in early Greek literature (Campbell, 1969; Ginsberg,
1961). The ?rst to bring evolutionary theory to the social sciences, Campbell
(1969, p. 69) explains evolutionary theory in this manner: “. . . it is technology,
language, social organization, and culture that are evolving,” through processes
of variation, selection, and retention. He goes on to point out the importance of
evolutionary theory to our understanding of innovation: “The fact that variation-
and-selective-retention theory strongly predicts independent invention makes it
very appropriate to the data on independent discovery and invention in science and
technology” (Campbell, 1969, p. 78). Campbell’s work was followed by Nelson
and Winter’s (1982) application of evolutionary theory to economic change.
Nelson and Winter (1982, p. 18) were primarily concerned “with the dynamic
process by which ?rm behavior patterns and market outcomes are jointly deter-
mined over time.” Their view of evolutionary theory (ET) was designed as a major
reconstruction of orthodox economics and follows this logic: Firms have, at any
given time, certain capabilities and routines that are modi?ed over time as a result
of both random events and deliberate problem-solving efforts. Over time, natural
selection processes occur as the market determines which ?rms are pro?table and
which need to be winnowed out (Nelson & Winter, 1982). Although organizations
are selected through processes of external selection, these processes are not deter-
ministic. According to Aldrich (1999, p. 40), “indeterminacy is a key feature of
evolutionary analysis, and human agency is very much a part of the explanation.”
The Relevance of Theories of Change 83
Although often misidenti?ed as a clone to population ecology theories, ET
should be viewed as having a more distinct DNAstream– more of a “cousin.” Evo-
lutionary theory borrows from population ecology no more than it borrows from
other theoretical perspectives (e.g. organizational learning, institutional theory
and resource dependence theory). Van Witteloostuijn (2000, p. vii) contends that
organizational ecology is a “branch of the evolutionary tree” and is in the center
of evolutionary approaches. Aldrich (1999) argues that the differences between
ET and population ecology theories are based upon how the different perspectives
view the four generic processes: variation, selection, retention, and struggle over
scarce resources. The discussion below regarding these differences ?ows directly
fromAldrich (1999). Evolutionary theorists viewthe process of variation as having
one of two possible sources: intentional (problemistic search) and blind (accidents,
chance). Population ecologists view the process of variation as having occurred at
the birth of the organization with variation introduced through new organizations.
The generic process of selection is also different. Evolutionary theorists view
selection processes as both external (market forces, competitive pressures) and
internal (bureaucratization) and population ecologists view selection processes as
resulting from a ?t between organization and environment. Retention in the evo-
lutionary model occurs when selected variations (routines, structures, procedures)
are preserved. The population ecology view is that organizations are structurally
inert with decision makers retaining those traditional practices that lock existing
structures in place. Finally, evolutionary theorists argue that underlying selection
is the issue of scarcity of resources that causes organizations and individuals to
struggle for legitimacy. In short, ET borrows from several theoretical perspectives
in combining its overall theoretical perspective. For example, it borrows heavily
fromthe organizational learning literature in the retention phase, frominstitutional
theory in the internal selection phase, and from resource dependence theory in the
struggle phase. Aldrich (1999) asserts there are at least six different theoretical per-
spectives on which evolutionary explanations can draw: the four discussed above
(organizational ecology, organizational learning, institutional theory, and resource
dependence theory) as well as interpretive theory and transaction cost economics.
Potential Contributions to Corporate Entrepreneurship
Because of the number of theoretical perspectives that are subsumed within
evolutionary theory, it is not surprising that it is the most used theory in recent
organizational studies. The number of peer reviewed articles utilizing ET is
remarkable. Strategic Management Journal published a special issue in 1996
on evolutionary perspectives on strategy and since that time has published two
84 DAWN R. DETIENNE
dozen articles utilizing an evolutionary perspective. During that same time
frame, Management Science published over a dozen articles, and the Academy of
Management Journals published nearly a dozen.
However, very few of these articles addressed corporate entrepreneurship or
innovation. A few exceptions are the use of ET to explain the technological
positions of the ten largest Japanese semiconductor producers from 1982 to 1992
(Stuart & Podolny, 1996), a study of the U.S. bicycle industry from 1880 to
1918 (Dowell & Swaminathan, 2000), an evolutionary perspective on corporate
restructuring including entry and exit (Chang, 1996), an evolutionary model that
contrasts hot spots and blind spots in geographical cluster of ?rms and innovation
(Pouder & St. John, 1996), and a study into how initial resource endowments
affect organizational life chances (Shane & Stuart, 2002). It is surprising that
little research in entrepreneurship utilizes the evolutionary approach when “an
evolutionary approach studies the creation of new organizational structures
(variation), the way in which entrepreneurs modify their organizations and use
resources to survive in changing environments (adaptation), the circumstances
under which such organizational arrangements lead to success and survival
(selection), and the way in which successful arrangements tend to be imitated and
perpetuated by other entrepreneurs (retention) (Aldrich & Martinez, 2001).”
What are the important topics in corporate entrepreneurship and innovation that
ET can address? Applying Aldrich and Martinez’s (2001) four conceptualizations
of the value of evolutionary theory to entrepreneurship, I propose that ET may
be positioned to help understand the following phenomena: In the arena of varia-
tions, areas of future research may include the question of how ?rms create new
entrepreneurial ventures – is it primarily through external alliances (Legnick-Hall,
1992), acquisitions (Zahra, 1995), spin-offs, venture incubation (Lee, 2003), or
management buy-outs (Singh, 1990)? For example, it would be bene?cial for both
researchers and practitioners to understand how the different variations of new
ventures affect the life cycle of the ?rm, the time to ?rst sale, the long term per-
formance, and ultimately the survival. We may ?nd that one form (e.g. spin-offs)
leads to a reduced time to ?rst sale and therefore allows these ?rms to become
market leaders. Or we may ?nd that another form (e.g. venture incubation) leads
to an inability to separate the ?rm from the parent ?rm and therefore stalls in its
development.
Furthermore, we might be interested in the relationship between the existing ?rm
and the new ?rm (despite the form of creation). How should these relationships
be structured to provide synergy for both ?rms? Since at least 90% of all radical
innovation comes from small and emerging ?rms, perhaps large ?rms would be
better served to “plant newventures” through spin-off processes. We might actually
be experiencing a reverse of the acquisition logic, which assumes that ?rms can
The Relevance of Theories of Change 85
“purchase” resources and capabilities, to a perspective wherein ?rms spin-off new
ideas and opportunities. These ventures may not be subjected to liability of newness
pressures because of the networking and resource sharing of the larger ?rm.
In the area of adaptation, we investigate the use of resources as vehicles for
adaptation. For example, can opportunity recognition become a valuable and rare
resource for the corporate venture (Alvarez & Busenitz, 2001), and if so, how do
we develop that resource? Future research should explore how opportunities are
currently identi?ed in the ?rm. At the individual level there are several theoretical
perspectives (e.g. systematic search, passive search, fortuitous discovery, and
learning) that suggest processes of opportunity identi?cation. Whether these
theoretical perspectives are valid in the corporate entrepreneurial environment
remains to be explored. If they are not, grounded theory methods should be
employed to better understand how opportunities are identi?ed in the ?rm and
whether individuals can be trained or conditioned to become alert to opportunity
identi?cation. Furthermore, researchers interested in human resources, might
explore how compensation and reward systems might lead to opportunity
recognition as a competitive advantage. For example, would individuals be
motivated to recognize opportunities if they were rewarded for doing so? What
type of rewards (extrinsic vs. intrinsic) would best motivate employees?
In the areas of selection and retention, we might ask how a ?rm’s orientation
affects its ability to develop innovation and to survive. Speci?cally, does the
development of an entrepreneurial philosophy (Covin & Miles, 1999) positively
relate to innovation and ?rm performance and is therefore part of the selec-
tion/retention process? Future research should explore what components of an
entrepreneurial philosophy (e.g. entrepreneurial orientation factors [Lumpkin &
Dess, 1996]; entrepreneurial management factors [Stevenson & Jarillo, 1990]) are
critical success factors. Each of the four areas of ET conceptualized by Aldrich
and Martinez (2001) as adding value to entrepreneurship literature are explored
above. Some (certainly not all) future research questions are listed. ET is, and will
continue to be, an important theoretical perspective to guide our thinking about
innovation and corporate entrepreneurship.
CONTINUOUS CHANGE
Historical Development
Continuous change is a theoretical framework used to describe organizational
changes that are ongoing and cumulative. “Continuous change is driven by
alertness and the inability of organizations to remain stable. Change is an
86 DAWN R. DETIENNE
ongoing mixture of reactive and proactive modi?cations, guided by purposes
at hand” (Weick & Quinn, 1999, p. 379). In their challenge for future research
into organizational change, Pettigrew, Woodman and Cameron (2001, p. 704)
call for the “rare, but much-needed research” that “treats change as a continu-
ous, non-episodic phenomenon.” They describe continuous change as “small,
uninterrupted adjustments, created simultaneously across units, which create
cumulative and substantial change.” For example, Hewlett Packard transformed
from an instrument company to a computer company through continuous changes
in new product development. Covin and Miles (1999), use the term “sustained
regeneration” to describe the type of change in which corporate entrepreneurial
?rms regularly and continuously introduce new products or services.
The de?nitions should not be construed to imply that continuous change is
incremental innovation. On the contrary, researchers are quick to point out that
continuous change is cumulative and substantial. In his research on complexity
theory and second cybernetics, Maruyama (1963) showed that small changes do
not stay small. Continuous change can in fact be quite paradigm breaking if it
occurs at the edge of chaos. This viewpoint is succinctly stated by Orlikowski
(1996, p. 66) in her work on continuous change: “Each variation of a given form
is not an abrupt or discrete event . . .. Rather, through a series of ongoing and
situated accommodations, adaptation and alteration, suf?cient modi?cation may
be enacted over time so that fundamental changes are achieved . . .. Each shift in
practice creates the conditions for further breakdowns, unanticipated outcomes
and innovation which in turn are met with more variations.”
An organization that is poised to change continuously is associated with
many of the following characteristics: task authority rather than hierarchical
authority; self-organizing rather than ?xed systems; ongoing job rede?nition;
transformation through continuous altering of products; and mindful construction
of responses in the moment rather than mindless application of past routines
(Brown & Eisenhardt, 1997; Burgelman, 1991; Weick & Quinn, 1999; Wheatley,
1992). Brown and Eisenhardt (1998, p. 4) referred to those ?rms that are able to
continuously innovate as ?rms “competing on the edge.” These ?rms are able to
balance the structure necessary to be functional with the agility required to change
continuously.
As one looks to the market for examples of ?rms that appear to include some
of the above characteristics, we think of ?rms such as Dell, GE, and 3M. These
?rms exhibit continuous change and provide examples of ?rms where change is
not planned, deliberate, routine, standardized, or controlled. Rather, change in this
context is unscheduled, emergent, non-routinized and at times uncontrollable.
The research into this type of change is relatively new, but early work seems
to suggest that the processes of improvisation, experimentation, translation,
The Relevance of Theories of Change 87
learning and time-paced transitioning are valuable for ?rms that continuously
change. Improvisation is described as something performed or done without any
preparation or set text to follow(Orlikowski, 1996). Experimentation is an attempt
“to gain insight into the future through small, fast and cheap probes” (Brown &
Eisenhardt, 1998, p. 131; Sitkin, 1992). Both improvisation and experimentation
have been found to predict innovation in high technology ?rms (DeTienne &
Koberg, 2002). Translation is the “continuous adoption and editing of ideas that
bypass the apparatus of planned change . . . [wherein] the ?rst actor in the chain
is no more important than the last; ideas do not move from more saturated to
less saturated environments . . . and are implemented depending on the purpose at
hand” (Weick &Quinn, 1999, p. 376). Learning may be conscious or unconscious,
and intentional or unintentional. However, it generally results in signi?cant new
insights and awareness. Time-paced transitioning – rhythmic, time paced transi-
tions that “create an almost seamless switch from one project to the next” (Brown
& Eisenhardt, 1997, p. 21) have also been shown to be highly correlated with
product innovation within high technology ?rms (DeTienne & Koberg, 2002).
Potential Contributions to Corporate Entrepreneurship
In the continuous change view, organizations change through both reactive and
proactive modi?cations that are guided by individuals within the organization. This
viewsuggests that processes canbe put intoplace that helpthe organizationmonitor
environmental changes (e.g. economic, technological, competitors) in order to be
able to react to unexpected changes. These processes might include environmental
scanning and time-paced transitioning. However, it also suggests that there is a
role for organizations to be proactive – that is – to be enactors of change. Some
processes that have been linked to the continuous change view that are proactive
include improvisation, experimentation and translation.
In addition, each of the processes listed above must be explored within the
context of corporate entrepreneurship. First, we must ask if the processes of im-
provisation, experimentation, translation, learning, and time-paced transitioning
are prevalent in entrepreneurial ?rms. Second, we must ask if they should be. Do
these processes lead to higher levels of innovation and ultimately performance?
Because these measures are in the early stage of development, the initial research
should seek to develop valid and reliable measures followed by rigorous empirical
testing.
The theory of continuous change is relatively new to the organizational liter-
ature, yet scholars are optimistic that the view of organizations as continuously
changing is consistent with actual practice within organizations. Grounded theory
88 DAWN R. DETIENNE
development may be a necessary step to further develop the continuous change
perspective. As Shaffer and Hillman (2000, p. 178) noted “It [grounded theory] is
particularly useful for studying issues that are without much existing theoretical
development.” Certainly, the observations of entrepreneurs and CEOs suggest that
change is continuous and guided by individuals within the organization. Further
development of this theory is warranted as well as the processes that allow ?rms
to continuously change.
COGNITIVE THEORY
Historical Development
Cognition, “the process of knowing or perceiving” (Webster’s 20th Century Dic-
tionary, 1979), is the basis for many cognitive theories within the social sciences.
Much of this research has built upon the work of Simon (1947), who proposed
that the world is much more complex than the human brain and humans have
limited information-processing capabilities. In order to cope with the magnitude
of stimuli coming into the brain, individuals develop schemas, cognitive maps,
mental models, or knowledge structures that organize the stimuli into manageable
components.
According to Mintzberg, Ahlstrand and Lampel (1998), cognition can be viewed
fromvarying perspectives: First are the objectivists, whose work focuses on biases
and heuristics, viewing the mental limitations of human cognition as the most
important perspective. An example of this type of work is the research on the
biases and heuristics in strategic decision making (Busenitz & Barney, 1997).
Second, researchers, with an information processing view, suggest that decisions
within ?rms are the result of a process of attention, encoding, storage and retrieval,
and choice (Corner, Kinicki & Keats, 1994; Simon & Houghton, 2002). Third,
some cognitive researchers focus upon cognitive maps (Huff, 1990), which, as in
geography, give us direction and guidance. Finally, there are the constructionists
who suggest that “the information ?owing in through ?lters, supposedly to be
decoded by cognitive maps, in fact interacts with cognition and is shaped by it”
(Mintzberg et al., 1998, p. 165), suggesting that the mind creates its own reality.
How do these concepts relate to corporate entrepreneurship? Huff and Huff
(2000, p. 14) contend that “cognitive theories . . . are uniquely equipped to ask,
‘how do individuals and collectives uniquely interpret complex and changing
environments.’ ” At the organizational level, researchers are seeking to understand
the impact that organizational cognition (social cognition) has on decisions of the
?rm. According to Fiske and Taylor (1984), social cognition refers to how people
The Relevance of Theories of Change 89
make sense of other people and themselves within organizations. It is the way in
which individuals within an organization think about that organization and “lies at
the heart of decision making, communication, strategic action, and virtually every
important organizational process” (Sims & Gioia, 1986, p. ix). Social cognition
argues that teams are “social artifacts of shared cognitive maps or enactments
of a collective mind, rarely a simple combination of the cognition of individual
members” (Allaire & Firsirotu, 1984; Hayes & Allinson, 1988; Shepherd &
Krueger, 2002).
Other research asserts that the learning of individual members of a team may
accumulate over time and result in a shared mental model (March, 1991), thereby
suggesting that events in the past may impact shared cognition. According to Ickes
and Gonzalez (1996), social cognition is the subjective reactions of at least two
individuals to their interaction experiences and is the shared meaning that they
jointly construct through their interaction behaviors. As Shamir (1990) points out,
many of the neworganizational structures are built on cooperation, requiring strong
linkages between individual and collective effort.
Potential Contributions to Corporate Entrepreneurship
What cognitive theories then will inform corporate entrepreneurship? Huff and
Huff (2000, p. 20) contend that four potential cognitive theories of the ?rm are: (1)
decision making and choice; (2) culture; (3) knowledge acquisition and use; and
(4) sensemaking. In this section, I address the potential of each of these theoretical
perspectives to inform corporate entrepreneurship and change. In the area of de-
cision making and choice, two important research questions emerge for corporate
entrepreneurship. The ?rst is “under what conditions do corporate entrepreneurs
rely upon heuristics for decision making?” Busenitz and Barney (1997) found
that entrepreneurs were much more likely than managers to use at least two types
of biases and heuristics – overcon?dence and representativeness – as simplifying
mechanisms. Future research should explore these biases and heuristics to
determine if their ?ndings are generalizable across industries and organizations of
varying size. An appropriate question might be “do entrepreneurs use biases and
heuristics more or less, given different environmental conditions and organiza-
tional structures?” In addition, other biases and heuristics should be explored. For
example, the consistency bias suggests that as individuals we are nearly obsessive
about our desire to appear consistent with previous decisions. “Once we make
a choice or take a stand, we will encounter personal and interpersonal pressures
to behave consistently with that commitment” (Cialdini, 1993). This bias may
explain why individuals are likely to escalate their commitment to a losing
90 DAWN R. DETIENNE
project or venture and may have a signi?cant impact on the decisions made by
entrepreneurial managers.
Secondly, “can entrepreneurs be taught to recognize their own inherent biases
and those bestowed upon them by the ?rm?” Research has shown that individuals
are boundedly rational and their decisions ultimately affect all aspects of the
organization. Therefore, it is critical to understand why an individual makes a
particular decision, despite economic evidence suggesting an alternative decision.
DeTienne, Shepherd and DeCastro (2002) found perception of other opportunities
and personal sunk costs to be cognitive factors relating to the persistence of
poorly performing ?rms. Other research into escalation of commitment (e.g. Ross
& Staw, 1993) contends that decision makers will continue to fund projects even
though economic indicators suggest they should be eliminated. What then are the
cognitive factors that lead decision makers to use biases and heuristics and can
individuals learn to recognize inherent biases?
In the area of culture, an important area of research is how organizations should
develop an entrepreneurial culture. If the goal is to develop an entrepreneurial
philosophy, how then do we do that? Burns and Stalker (1961, p. 10) were
among the ?rst to suggest that an organizational “code of conduct” is important
to organizational managers and policy makers because it “anchors individuals
inside organizations to a dependably constant system of shared beliefs.” Russell
and Russell (1992, p. 644) contend that “in uncertain contexts such as innovation,
norms and shared beliefs become the primary source of guidance because formal
organizational procedures become ineffective.” Norms, “those overarching
‘shalts and shalt nots’ ” (Cabrera & Bonache, 1999, p. 54), are fairly resistant to
short-term changes and therefore take time to permeate the souls of organization
members. Therefore, future researchers may choose to explore how norms and
shared beliefs can be used in the implementation of an entrepreneurial philosophy.
In the area of knowledge acquisition and use, an important question posed by
Huff and Huff (2000, p. 20) is “what needs to be known in order to act and howcan
?rms effectively acquire, store, update, and use knowledge?” Smilor (1997) argues
that learning is central to entrepreneurship because effective entrepreneurs are
exceptional learners. Therefore, research is indicated which explores the idea that
successful entrepreneurs are “better learners” than the general population. Another
important area of inquiry is “how much information do entrepreneurs require in
order to act?” Research in this area should further explore if the important question
is how much information or if it is how valuable is the information. And ?nally,
in the area of knowledge acquisition and use, a primary line of inquiry revolves
around where knowledge resides in the organization and how can it be captured.
Research should explore whether knowledge is embodied in machines locations,
individuals, processes or competencies and whether it can be codi?ed. Some
The Relevance of Theories of Change 91
knowledge stores are tacit and reside in individuals who cannot explain the process
they go through in applying their skills (Dollinger, 2003, p. 99). This is a rich area
of research and an important one to corporate entrepreneurship scholars who study
corporate venturing.
In the area of sensemaking, an important research question becomes “how do
individuals within the ?rm interpret stimuli?” Secondly, “why is it interpreted this
way?” and ?nally “does the way in which individuals make sense of a situation
impact the decisions they make?” For example, take a ?rm that has recently
received some information that suggests a competitor may be close to releasing
a product similar to one the current ?rm expects to release the following year.
Some individuals may interpret that information as a motivating factor to speed
up release of the product; others may interpret it as a need to add features to the
existing product in order to achieve differentiation and still others may interpret
it to mean that they had better look for new employment. Why do individuals
interpret the information differently and how does that impact the decision that
is made?
Cognitive theories in corporate entrepreneurship are relatively unexplored and
much of the leading edge research by entrepreneurship scholars is engaged in
exploring these new avenues. What impact these theories will have on corporate
entrepreneurship and the ability of ?rms to be able to change through technological
innovation remains to be seen. However, further development of these theories is
warranted as entrepreneurship scholars seek to understand the individual within
the social fabric of the organization.
DISCUSSION
This chapter explored four of the prominent theoretical perspectives associated
with technological and innovative change in the entrepreneurial organization.
Each of the theories of change was explored through historical development
(original thinkers, ?elds of study and in?uential research that brought the theories
to the organization), and current contributions to corporate entrepreneurship.
Future research questions of interest to entrepreneurship scholars were examined.
During this exploration, important distinctions among the theories of change
in this chapter have surfaced, including the level of analysis, the time frame of
analysis, the initiator of change, and the role of the entrepreneur. Each of these
distinctions is discussed below and Table 2 describes these distinctions in detail.
The level of analysis appropriate within each theoretical lens is especially
important for entrepreneurship researchers who often claim(at least by the articles
that are published) that entrepreneurship research is concerned with multiple
9
2
D
A
W
N
R
.
D
E
T
I
E
N
N
E
Table 2. Theories of Technological Change.
Theory Primary Level Secondary Levels Time Frame for Initiator of Change Role of the Entrepreneur
of Analysis of Analysis Change to Occur
Organization
Ecology
Population Organization Long Environment Fit the organization to its
environment
Evolutionary
Theory
Population
Organization
Community
Intraorganization
Moderate to Long Random events Deliberate
problem solving efforts
Find solutions to speci?c
problems, direct organizational
resources
Continuous
Change
Organization Groups
Individuals
Short to Continuously Decision makers within
the ?rm
Make sense of environment,
redirect individuals, enact
change
Cognitive
Theory
Individual Organization Varies Individual sensemaking,
organizational culture
(including subcultures),
knowledge acquisition
and learning
Create cultures conducive to
change, provide opportunities
for individuals to acquire
knowledge, provide training
The Relevance of Theories of Change 93
levels of analysis. In order to legitimize the ?eld it is critical that we use theoretical
perspectives at the appropriate level of analysis. The organizational ecology
perspective allows researchers to explore foundings, transformations, and disband-
ings within populations (Baum & Singh, 1994). Therefore, this perspective looks
at populations of organizations that have a unitary characteristic – primarily indus-
tries, but also might revolve around organizational structure, size, age, or dominant
designs. For example, a population might be described as those organizations
that use a particular dominant technology rather than those that are in the same
industry. The evolutionary perspective, in its all-encompassing approach, has been
used at the intraorganization, organization, population, and community levels. The
primary levels of analysis in continuous change theory are the organization and
the individual. In cognitive theory, the primary level of analysis is the individual,
his or her cognitive structures and how individual cognition affects social
(group) cognition.
Another distinction among theories is the time frame for change. In the OE
perspective, change occurs to populations over long periods of time. Researchers
can use longitudinal analysis to explore how these populations change. In the
evolutionary perspective, the time frame varies from moderate to long depending
upon how long of an evolutionary period we are investigating. In the continuous
change perspective, change is constant and cumulative. In the cognitive view,
change varies depending upon the theoretical perspective.
A third varying distinction of the theoretical perspectives is the initiator of
change, or what causes changes to occur. In the organizational ecology perspec-
tive, change occurs in the environment and ?rms that best ?t to the changes will
survive. In the evolutionary perspective, change can occur from random events as
well as deliberate problem-solving efforts. In the continuous change perspective,
change occurs fromwithin the organization as decision makers anticipate and even
enact change in the environment. In the cognitive perspective, change occurs as
individuals make sense of the environment and can include the impact of culture,
knowledge acquisition and learning.
A ?nal distinction is the role of the entrepreneur in each theoretical perspective.
In the OE perspective, the role of the entrepreneur is to ?t the organization to
its environment. In the evolutionary perspective, it is to ?nd solutions to speci?c
problems and direct organizational resources in such a way that the ?rm will not
be selected out. In the continuous change perspective, the role of the entrepreneur
is to make sense of his/her environment and redirect individuals as well as to enact
change in the environment. The role of the entrepreneur in the cognitive perspective
is to understand why individuals do the things they do, to create cultures conducive
to change, and to provide opportunities for individuals to acquire knowledge and
training.
94 DAWN R. DETIENNE
Cross Level Research
The purpose of this chapter has been to present theoretical perspectives on
technological change that have been applied in other research areas, but less so
in entrepreneurship. Throughout this chapter I have pointed to the difference
between the theoretical perspectives and how different perspectives lead us to
explore different units of analysis. However, I would be remiss not to point out
the importance of cross-level research. Many researchers (e.g. Goodman, 2000)
have observed that our obsession with the single unit of analysis has limited our
understanding of the effect that an activity or outcome at one level has on the
outcomes at another level. In this ?nal section, I describe how cross-level (meso)
research may inform corporate entrepreneurship.
Because corporate entrepreneurship is a process of organizational change it
has applications at all levels of change. Some changes made in ?rms are of
the system-wide variety – for example, a decision to install an enterprise-wide
software (e.g. SAP) program. It is quite obvious that this type of change affects
all individuals, groups and subcultures within the organization and the effect of
such a change should be studied at all levels. However, there are other types of
change, which seemingly occur and affect only one functional area or one SBU.
For example, a decision to move to a paperless communication system in the
accounting department of a large ?rm seemingly affects only the subgroup in
which the change is instilled. However, “initial small changes can have long-term
reverberations, non-linearities in changes, and incubation periods before positive
accelerating feedback cycles begin” (Goodman, 2000; Shulman & Rowe, 2003,
p. 333). The paperless decision in fact might affect how top management presents
materials to the board of directors and how the board interprets that decision
which could have long term rami?cations for the organization.
How then do researchers investigate the effect of change without becoming
caught up in the mess of feedback loops, control variables and cause-and-effect dis-
crepancies? There is no simple answer. But there are processes which exist which
allowus to delve into cross-level research. For example, Goodman (2000) suggests
that by studying organizational linkages, we can explain the generative mecha-
nisms that account for when and how one system affects another system (Shulman
& Rowe, 2003). Monge and Contractor (2003) provide a toolbox of multilevel,
organizational form network modeling tools that provide insights into modeling
these complex relationships. As anyone who has been involved with cross-level re-
search can attest to, there are many dif?culties with this type of research. Random
trigger events, the required complex tracking system, complex decisions about
control variables and the sheer magnitude of decision points deter scholars from
using cross-level research. However, entrepreneurship scholars, with our ability to
The Relevance of Theories of Change 95
explore new venture creation, may be better positioned to explore/track changes
using a cross-level approach giving us a “competitive advantage” over other
disciplines.
The objective of this chapter was to explore current theories of change in the
context of corporate and to highlight important streams of research and research
questions. As I stated in the beginning, this chapter is not inclusive of all theo-
retical perspectives, but the desire is that enough perspectives were included to
encourage entrepreneurship scholars to apply and develop these theories for use
in entrepreneurship literature.
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EQUIFINALITY, CORPORATE
ENTREPRENEURSHIP AND
STRATEGY-STRUCTURE-
PERFORMANCE RELATIONSHIPS
Daniel F. Jennings and Kevin G. Hindle
INTRODUCTION
Zahra and Covin (1995, p. 46) report that “the current interest in corporate en-
trepreneurship arises from its potential usefulness as a means for renewing es-
tablished organizations and increasing their ability to compete in their chosen
markets.” In addition, a number of researchers support a contention made by
Schollhamer (1982, p. 82), that “corporate entrepreneurship is a key element for
gaining competitive advantage and consequently greater ?nancial strength” (Covin
& Slevin, 1991; Peters & Waterman, 1982; Zahra & Covin, 1995). Interestingly,
however, other researchers argue that corporate entrepreneurship can be risky and
may be detrimental to a ?rm’s short-term ?nancial performance (Burgelman &
Scales, 1986; Fast, 1981).
Thus, the preceding statements have created considerable interest in research on
corporate entrepreneurship. However, from time to time, researchers in the area of
corporate entrepreneurship provide new research directions by suggesting future
avenues of research inquiry. One such future area for inquiry has been suggested
by Dess, Lumpkin and McGee (1999) who posit that the relationship among tra-
ditional models of business-level strategy, organizational structure, organizational
processes and corporate entrepreneurship is not well understood and that future
Corporate Entrepreneurship
Advances in Entrepreneurship, Firm Emergence and Growth, Volume 7, 101–143
© 2004 Published by Elsevier Ltd.
ISSN: 1074-7540/doi:10.1016/S1074-7540(04)07005-9
101
102 DANIEL F. JENNINGS AND KEVIN G. HINDLE
research should explore those relationships. Further, Dess, Lumpkin and McKee
(1999) state that the relationship between corporate entrepreneurship and orga-
nizational performance is not “immediately apparent” because Zahra and Covin
(1995) report that the bene?ts of corporate entrepreneurship often take many years
to reach fruition.
In order to explore the relationship among strategy-structure-performance and
corporate entrepreneurship we used the notion of equi?nality and investigated
148 U.S. electrical distribution ?rms from 1998 to 2002. We identi?ed both en-
trepreneurial and non-entrepreneurial (conservative)
1
electrical distributors and
then examined their strategy-structure-performance relationships.
In the following section we discuss theoretical arguments pertaining to the link-
age of equi?nality with strategy-structure-performance in entrepreneurial and con-
servative organizations and then apply those arguments to electrical distributors in
order to develop speci?c operational hypotheses.
THEORETICAL APPROACH AND HYPOTHESES
Equi?nality
About seventy-?ve years ago, the biologist Ludwig von Bertalanfy (1930) began
a study to investigate the movement of organisms within a biological system. von
Bertalanfy (1930) formulated certain concepts concerning the organismas an open
system. He also de?ned the principle of equi?nality by stating that “a particular
outcome can be reached by different paths from the same starting condition and
different starting conditions may also lead to the same outcome” (von Bertalanfy,
1960, p. 29).
2
Figure 1 depicts the concept of equi?nality.
In the process of using the open systems model to legitimize organizational
studies, Katz and Kahn (1966) discussed the properties of open systems and
included the notion of equi?nality. By 1972, the systems paradigm had peaked
and eventually went out of fashion by 1976 (Ashmos & Huber, 1987). However,
in the strategic management and strategic marketing literature, many statements
have been made that within a certain strategic typology, no one strategy is neither
inferior nor superior to that of another strategy (Despande & Farley, 1998; Kald,
Nilsson & Rapp, 2000). In fact, Miles and Snow (1978) and Porter (1980) argue
that the strategies described in their respective typologies are neither inferior
nor superior. Certain researchers have posited that the notion of equi?nality may
offer insights into that superiority-inferiority argument (Gresov & Drazin, 1997;
Jennings, Rajaratnam & Lawrence, 2003; Jennings & Seaman, 1994; Matsuno
& Mentzer, 2000). Also, strategic management research has focused on the notion
Equi?nality, Corporate Entrepreneurship 103
Fig. 1. An Illustration of Equi?nality. Source: von Bertalanfy (1960).
of equi?nality pertaining to strategy, structure, and performance relationships.
At ?rst, a conceptual argument developed in the strategic management literature
in which it was argued that an optimal strategy-structure match yields a superior
performance (Boeker & Goodstein, 1991; Ford & Baucus, 1987; Sharma &
Vredenburg, 1998; Van de Ven & Drazin, 1985). In fact, the notion that strategy
and structure in?uences the success of an organization has been expressed rather
clearly in Chandler’s (1962) study of industrial organizations. The issue in those
conceptual arguments was that equi?nality, a characteristic of open systems,
allows a feasible set of equally effective, internally consistent patterns of strategy
and structure. Next, several empirical research studies on equi?nality reported that
an optimal-strategy-structure match yields a superior performance (Doty, Glick
& Huber, 1993; Jennings & Seaman, 1994; Matsuno & Mentzer, 2000). However,
research from the perspective of equi?nality has not received much attention
from researchers of corporate entrepreneurship. Interestingly, Dess, Lumpkin
and McGee (1999, pp. 88–89) noted the following:
One might expect that ?rms seeking to be more entrepreneurial should adopt differentiation
strategies rather than cost leadership strategies. However a study by Dess, Lumpkin and Covin
(1997) indicated that cost leadership strategies were associated with higher performance in ?rms
where managers used an entrepreneurial approach to decision making. Further, contrary to their
expectations, Zahra and Covin (1993) found that cost leadership was positively associated with
new product development.
Following the preceding observation, Dess et al. (1999, p. 88) posited that “the
conceptualization of entrepreneurial strategies may be too narrow.” Thus, we
argue that the notion of equi?nality may well explain the preceding concern
expressed by Dess et al. (1999).
104 DANIEL F. JENNINGS AND KEVIN G. HINDLE
Corporate Entrepreneurship
Zahra, Jennings and Kuratko (1999) report that in de?ning corporate entrepreneur-
ship, most researchers have used either Miller and Friesen’s (1982) measure of cor-
porate entrepreneurship or Covin and Slevin’s (1988) modi?ed version of that in-
strument. Miller and Friesen’s (1982) conceptualization of corporate entrepreneur-
ship focuses on three related dimensions: proactiveness, innovation, and risk tak-
ing. Covin and Slevin (1988) extended Miller’s (1982) instrument to gauge a ?rm’s
disposition towards achieving a competitive advantage and added Khandwalla’s
(1977) measure of the proclivity for risks of projects. Covin and Slevin (1988)
referred to their measure of corporate entrepreneurship as “entrepreneurial style”
and stated that entrepreneurial style is an aggregate measure of three dimensions:
the willingness to take business risks, the willingness to be proactive when com-
peting with other ?rms, and the willingness to innovate, i.e. to favor change and
innovation in order to obtain a competitive advantage. Zahra, Jennings and Kuratko
(1999) argue that the consistent use of the two preceding measures of corporate
entrepreneurship has created a serious mis?t between the construct of corporate
entrepreneurship and its measurement, raising a question about the meaning of
what has been found and its theoretical and practical importance. Further, Zahra,
Jennings and Kuratko (1999) state that one notable exception to the measurement
of corporate entrepreneurship is the research of Jennings and Lumpkin (1989)
who utilized the work of Schumpeter (1947), Ansoff (1979) and Hambrick (1983)
to de?ne corporate entrepreneurship as the extent to which new products are de-
veloped. Jennings and Lumpkin (1989) also used archival data to measure new
product additions. For this study we used Miller and Friesen’s (1982) measure
of corporate entrepreneurship and speculated that our sample of electrical distrib-
utors would include both entrepreneurial and conservative (non-entrepreneurial)
organizations.
Strategy
A strategy is a plan for interacting with the competitive environment to achieve
organizational goals. Generally, organizational science researchers do not con-
sider goals and strategies to be interchangeable. Instead, a goal de?nes where
the organization wants to go, and strategy de?nes how the organization will get
there (Chaffee, 1985; Mintzberg, 1978). Researchers have developed classi?ca-
tions called typologies to provide operational de?nitions of business-level strategy.
Two widely used typologies are Porter’s (1980) Generic Strategies and the Miles
and Snow (1978) Typology.
Equi?nality, Corporate Entrepreneurship 105
Porter’s (1980) Generic Strategies
Porter (1980) conceptualized that organizations cope with competitive forces by
using certain generic strategic approaches to outperformother ?rms. Porter (1980)
designated these strategic approaches as three generic strategies: (1) overall cost
leadership; (2) differentiation; and (3) focus. According to Porter (1980), no or-
ganization can successfully perform at an above-average level by trying to be all
things to all people. Porter (1980) proposes that management must select a strategy
that will allow an organization to attain a competitive advantage. The strategy that
management chooses depends on the organization’s strengths and its competitor’s
weaknesses. When an organization sets out to be the low-cost producer in its in-
dustry, it is following a cost-leadership strategy. Success with this strategy requires
that the organization be the cost leader and not merely one of the contenders for
that position. Organizations can achieve a cost advantage by ef?ciency in opera-
tions, economies of scale, technological innovation, low-cost labor, or preferential
access to raw materials.
An organization that seeks to be unique in its industry in ways that are widely
valued by buyers is following a differentiation strategy. It might emphasize high
quality, extraordinary service, innovative design, technological capability, or an
unusually positive brand image. The key is that the attribute chosen must be differ-
ent from those offered by rivals and signi?cant enough to justify a price premium
that exceeds the cost of differentiating.
Porter’s (1980) ?rst two generic strategies (overall cost leadership and differ-
entiation) seek to achieve a competitive advantage in a broad range of industry
segments. The focus strategy aims at either a cost advantage (cost focus) or differ-
entiation advantage (differentiation focus) in a narrowsegment. Thus, management
will select a segment or group or segments in an industry (such as product variety,
type of end buyer, distribution channel, or geographical location of buyers) and
tailor a strategy to serve them at the exclusion of others. The goal is to exploit a
narrow segment of a market. Research suggests that a focus strategy may be the
most potent for a small business ?rm. This is because a small business does not
have the economies of scale or internal resources to successfully pursue one of the
other two strategies (Zahra, 1993).
Miles and Snow’s (1978) Typology
The Miles and Snow (1978) typology is based on three premises. The ?rst is that
over a period of time successful organizations develop a systematic, identi?able
approach to environmental adaptation as they focus on three types of problems: (1)
anentrepreneurial problemthat deals withthe de?nitionof market-product domain;
(2) an engineering probleminvolving the organization’s technical problem; and (3)
an administrative problem arising from structure and process issues. The second
106 DANIEL F. JENNINGS AND KEVIN G. HINDLE
premise is that four identi?able strategic orientations exist within an industry:
Defenders, Prospectors, Analyzers, and Reactors. According to Miles and Snow
(1978), Defenders emphasize a narrow domain by controlling secure niches in
their industries. They engage in little or no product/market development and stress
ef?ciency of operations. Prospectors constitute the other end of the continuum;
they constantly seek newopportunities and stress product development. Analyzers
exhibit characteristics of both Defenders and Prospectors. Finally, Reactors do not
follow a conscious strategy and are viewed as a dysfunctional organizational type.
The third premise of the Miles and Snow (1978) typology is that the Defender,
Analyzer, and Prospector strategies, if properly implemented, can lead to effective
performance. Much depends on the internal consistency among the three elements
of the adaptive cycle. Each type emphasizes different functions to produce a set
of sustainable, distinctive competencies. The Reactors lack a coherent strategy.
Therefore, the Miles and Snow (1978) typology proposes that Defenders, Analyz-
ers, and Prospectors will outperform the non-adaptive Reactors.
Anumber of researchers state their preference for using Miles and Snow’s strat-
egy types because it is the only typology that characterizes an organization as a
complete system and it provides a useful format for studying successful imple-
mentation of different strategies (Conant, Mokwa & Varadarjan, 1990; Croteau
& Bergeron, 2001; Hrebiniak & Snow, 1980; Lengnick-Hall, 1992; McDaniel &
Kolari, 1987; Zahra & Pearce, 1990).
Several researchers report that entrepreneurial and conservative organizations
can employ either a prospector or defender strategy (Dess, Lumpkin & Covin,
1997; Lengnick-Hall, 1992; Zahra & Covin, 1993; Zahra & Pearce, 1990). Thus,
we speculate that entrepreneurial and conservative electrical distributors in our
study will also employ either a prospector or defender strategy.
Structure
Organizational structure refers to how the various parts of an organization are ar-
ranged to achieve consistency and coherence. The seminal work on structure is
Weber’s (1947) description of the ideal type of bureaucracy. Burns and Stalker
(1961) discovered a relationship between the external environment and an organi-
zation’s internal management structure. For example, when the environment was
stable, the internal organization was characterized by rules, procedures, and a clear
hierarchy of authority. These organizations were formalized and decision making
was centralized. Burns and Stalker (1961) called this a mechanistic structure.
In rapidly changing environments, the internal organization was much looser,
free ?owing, and adaptive. Rules and regulations often were not written down, or
Equi?nality, Corporate Entrepreneurship 107
if written down, were ignored. The hierarchy of authority was not clear. Decision-
making authority was decentralized. Burns and Stalker (1961) used the term or-
ganic to characterize this type of management structure.
Burns and Stalker (1961) also learned that as environmental uncertainty in-
creases, organizations tend to become more organic, which means decentralizing
authority and responsibility to lower levels, encouraging employees to take care of
problems by working directly with one another, encouraging teamwork, and taking
an informal approach to assigning tasks and responsibility. Thus, the organization
becomes more ?uid and is able to adapt continually to changes in the external
environment (Courtright, Fairhurst & Rogers, 1989).
Using the work of Kast and Rosenzweig (1973) and Dunn (1971), Chakravarthy
(1982) conceptualized that organizations use different strategies to match their
structural arrangements and argued that organizations with a prospector strategy
will adopt an organic structure while organizations with a defender strategy will
adopt a mechanistic structure. Jennings and Seaman (1994) found support for
Chakravarthy’s (1982) preceding conceptual argument.
We present the following research hypotheses based upon Chakravarty’s (1982)
conceptual argument together with the empirical ?ndings of Jennings and Seaman
(1994).
H1a: Entrepreneurial electrical distributors with a prospector strategy will have an organic
structure.
H1b: Entrepreneurial electrical distributors with a defender strategy will have a mechanistic
structure.
H1c: Conservative electrical distributors with a prospector strategy will have an organic struc-
ture.
H1d: Conservative electrical distributors with a defender strategy will have a mechanistic
structure.
Performance
While organizational performance has been described as the achievement of a
?rm with respect to some criterion or criteria, certain researchers have argued that
organizational performance is a complex and multidimensional phenomenon (Dess
& Robinson, 1984; Dutton & Duncan, 1987; Hart & Banbury, 1994; Jennings &
Young, 1990).
Performance Frameworks
Avariety of frameworks have been developed to conceptualize organizational per-
formance. Three such frameworks have been widely used and involve: (1) the goal
108 DANIEL F. JENNINGS AND KEVIN G. HINDLE
approach (Etzioni, 1961) in which performance is viewed as attaining some goal or
objective; (2) the systems resource approach (Yuchtman & Seashore, 1967) which
is the organization’s ability to exploit its environment in the acquisition of scarce
and valued resources to sustain its functioning; and (3) the constituency approach
(Thompson, 1967) whereby constituents contribute their activities to organizations
in return for incentives, the contribution of each in the pursuit of his or her par-
ticularistic ends being a contribution to the satisfaction of the ends of others. This
approachdoes not consider organizational success interms of goals beingachieved,
but rather through its capacity to survive through being able to gain enough con-
tributions from the members by providing suf?cient rewards or incentives.
Other researchers have tended to avoid these perspectives and have used eco-
nomic dimensions of organizational performance such as rate of return, cash ?ow,
and sales growth (Hambrick, 1981). Also, Hart (1992) built upon the work of
Venkatraman and Ramanujam (1986) and argues that performance consists of the
three constructs of ?nancial performance, operational performance, and organiza-
tional performance. According to Hart (1992) and Venkatraman and Ramanujam
(1986) ?nancial performance involves such indicators as return on investment, re-
turn on sales, return on equity, earnings per share, and sales growth. Operational
performance involves business-level activities such as new product introduction
and marketing effectiveness. Organizational performance re?ects broad organiza-
tional outcomes and capabilities such as employee satisfaction and an organiza-
tional focus on quality or adaptability.
Some researchers argue that multiple measures of performance should be uti-
lized while others assert that a single measure will suf?ce (Hirsch, 1975; Lenz,
1980). Also, Jennings and Seaman (1994) noted that generally it is the researcher
who selects the particular performance measure that is being investigated. How-
ever, it may be more appropriate to use performance measures that are utilized by
managers in the organizations being studied because such measures tend to re?ect
organizational speci?c objectives.
For the present study, we surveyed industry executives to determine a perfor-
mance measure that re?ected a ?nancial condition for electrical distribution ?rms.
Based on the responses of those industry executives, two performance ratios, earns
and turns, were utilized in the present study. The earns ratio measures pro?tability
by using gross margin divided by net sales and the turns ratio re?ects the amount
of inventory used by the ?rm and is de?ned as net sales divided by inventory. The
earns and turns ratios were used for a ?ve-year period, 1998 through 2002. Many
industry analysts (Bates, 2001) argue that, when used together, the earns and turns
ratios provide the “real health” of an electrical distributor.
A review of the literature on corporate entrepreneurship research for the years
1990 through 2002 indicated that sixty-eight articles have been published in
Equi?nality, Corporate Entrepreneurship 109
peer-reviewed academic journals pertaining to how certain factors affect the
performance of entrepreneurial organizations. Twenty-two of the preceding
sixty-eight articles were theoretical while the remaining forty-six were empir-
ical studies. None of those sixty-eight articles published from 1990 through
2002 focused on the effects of the strategy-structure match on performance
in entrepreneurial organizations (EO) or on the notion of equi?nality. Further,
none of the preceding studies considered how the various factors that were
investigated affect non-entrepreneurial organizations. Table 1 illustrates those
studies describing the factors that affect organizational performance in EO.
Chakravarthy (1982) also posited that organizations having speci?c strategy-
structure arrangements will have differences in performance because of the notion
of inertia. For example, investments in technologies and human skills are costly
and may not always be made (Hart, 1992; Homburg, Krohmer & Workman, 1999;
McKelvey & Aldrich, 1983). The availability of organizational slack provides re-
sources for adaptation, innovation, and improved decision making (Barney, 1986;
Singh, 1986) while reduced slack, or a scarcity or resources, induces a managerial
paralysis causing rigidity which propels the organization to a decreased perfor-
mance (Bozeman & Slusher, 1979; Priem, Rasheed & Kotulic, 1995; Varadarajan,
Jayachandran & White, 2001). Jennings and Seaman (1994) report a perfor-
mance differences among organizations having a prospector strategy-organic
structure and also among organizations with a defender strategy-mechanistic
structure.
We anticipate, based on Chakravarthy’s (1982) conceptualization, the empiri-
cal ?ndings of Jennings and Seaman (1994), and our discussion of organizational
inertia, that performance differences will occur among entrepreneurial and con-
servative organizations having similar strategy-structure arrangements as follows:
H2a: Performance differences as measured by an earns and turns ratio will occur among
entrepreneurial electrical distributors that have a prospector strategy-organic structure.
H2b: Performance differences as measured by an earns and turns ratio will occur among
entrepreneurial electrical distributors that have a defender strategy-mechanistic structure.
H2c: Performance differences as measured by an earns and turns ratio will occur among
conservative electrical distributors that have a prospector strategy-organic structure.
H2d: Performance differences as measured by an earns and turns ratio will occur among
conservative electrical distributors that have a defender strategy-mechanistic structure.
Strategy-Structure Match
Two sets of pervasive arguments exist among contingency theorists with respect
to how ?t affects performance. One such argument suggests that a one-best
110 DANIEL F. JENNINGS AND KEVIN G. HINDLE
Table 1. Research Studies on How Certain Factors Affect the Performance of
Entrepreneurial Organizations (EO).
1. The relationship of the corporate entrepreneurial (CE) construct to performance.
Kemelgor (2002), Brown, Davidsson and Wiklund (2001), Thornton (1999), Lumpkin and Dess
(1996), Bruton et al. (1996), Granstrand and Alange (1995), Jennings and Young (1990)
2. The relationship between marketing strategies and performance in (EO).
Matsuno, Mentzer and Ozsomer (2002), Menon (1997)
3. The relationship between marketing mix and performance in EO.
Barrett (2000)
4. The relationship between marketing orientation and performance in EO.
Wood, Bhuian and Kiecker (2000), Barrett and Weinstein (1998, 1997)
5. The relationship between marketing pioneering and performance in EO.
Simon et al. (2002), Covin, Slevin and Heeley (1999)
6. The relationship between business strategies and performance in EO.
Kuratko, Ireland and Hornsby (2001), Twomey and Harris (2000), Blanchard (1999), Floyd and
Wooldridge (1999), Lengnick-Hall (1992), Chittipeddi and Wallett (1991)
7. The relationship between ?nancial strategies and performance in EO.
Vozikis et al. (1999), Keels, Bruton and Scifres (1998), Pearce, Kramer and Robbins (1997), Park
and Kim (1997), Zahra (1995, 1991), Jennings and Seaman (1990)
8. Environmental effects on performance in EO.
Hostager et al. (1998), Dess, Lumpkin and Covin (1997), Slevin and Covin (1997), Parnell, Wright
and Tu (1996), Zahra and Covin (1995), Zahra (1993)
9. Effect of international environmental hostility on performance in international EO.
Zahra and Garvis (2000)
10. Technology effects on performance in EO.
West (1998), Zahra (1996), Covin and Slevin (1994), David (1994)
11. Leadership effects on performance in EO.
Floyd and Wooldridge (1994)
12. Top management effects on performance in EO.
Hitt (1999), Herron (1992), Grinyer and McKiernan (1990), Lant and Mezias (1990), Ross (1990)
13. Effects of the differences in innovative ?nesse and traditional managerial activities on per-
formance in EO.
Brazeal (1996)
14. Innovation effects on performance in EO.
Ahuja and Lampert (2001), Attuahene-Gima and Ko (2001), Drazin and Schoonhoven (1996),
Baden-Fuller (1995), Guth (1995), Lengnick-Hall (1991)
15. Differences between intrapreneurship and entrepreneurship on performance in EO.
Antoncic and Hisrich (2001), Shrader and Simon (1997), Carrier (1994, 1996)
16. Effects of growth strategies on performance in EO.
Koen (2000), Kilmer (1990)
17. Effects of strategic management practices on performance in EO.
Barringer and Bluedorn (1999)
18. Effects of organization culture on performance in EO.
Choueke and Armstrong (2000)
19. Effects of learning strategies on performance in EO.
Liu, Luo and Shi (2002), Honig (2001)
Equi?nality, Corporate Entrepreneurship 111
Table 1. (Continued )
20. Effects of knowledge and competence development on performance in EO.
Zahra (1999)
21. Effects of networking optimization on performance in EO.
Birkinshaw (1998)
22. Effects of being a multinational corporation on performance in EO.
Birkinshaw (1999, 1997)
23. Effects of ?rm resources and strategic orientation on performance in EO.
Borch (1999)
24. Effects of strategy structure and process on performance in EO.
Dess, Lumpkin and McGee (1999)
25. Effects of ownership and governance on performance in EO.
Zahra, Neubaum and Huse (2000)
26. Effects of post acquisition success on performance in EO.
Thomson and McNamara (2001)
27. Effects of bureaucratic pathologies on performance in EO.
Dixon, Kouzmin and Korac-Kakabadse (1998)
strategy-structure arrangement exists to ?t a given industry environment (Dill,
1958; Hage & Aiken, 1970; Lawrence & Lorsch, 1969; Lorsch & Morse, 1974).
The other argument is that organizational effectiveness results in ?tting certain
characteristics to contingencies that re?ect the situation of the organization (Burns
& Stalker, 1961; Galbraith, 1973; Pugh et al., 1969). These contingencies include
the environment (Burns & Stalker, 1961), organizational size (Child, 1975), and
strategy (Ansoff, 1988; Chandler, 1962; Datta, 1991; Seth, 1990).
Another group of researchers have conceptualized that ?t occurs with the or-
ganization’s external environment as the driving force and that managers seek to
align and integrate their internal processes with the organization’s external domain
(Covin &Slevin, 1991; Govindarajan, 1988; Naman &Slevin, 1993; Venkatraman,
1989; Venkatraman & Prescott, 1990) to maintain or improve effectiveness.
An overriding premise from these perspectives of ?t is that certain moderating
factors may affect an optimal strategy-structure match and that organizations with
a certain strategy-structure con?guration may have a higher or lower performance
than do other organizations with similar strategy-structure con?gurations (Dess,
Lumpkin & Covin, 1997; Dess et al., 1995; Langnick-Hall, 1992).
Thus, in considering the moderating effects of an optimal strategy-structure
match we anticipate the following hypotheses:
H3a: Entrepreneurial electrical distributors that have the best prospector strategy-organic struc-
ture match will have the highest performance as measured by an earns and turns ratio,
compared to other entrepreneurial prospector strategy-organic structure electrical dis-
tributors.
112 DANIEL F. JENNINGS AND KEVIN G. HINDLE
H3b: Entrepreneurial electrical distributors that have the best defender strategy-mechanistic
structure match will have the highest performance as measured by an earns and turns ra-
tio, compared to other entrepreneurial defender strategy-mechanistic structure electrical
distributors.
H3c: Conservative electrical distributors that have the best prospector strategy-organic struc-
ture match will have the highest performance as measured by an earns and turns ratio,
compared to other conservative prospector strategy-organic structure electrical distribu-
tors.
H3d: Conservative electrical distributors that have the best defender strategy-mechanistic
structure match will have the highest performance as measured by an earns and turns
ratio, compared to other conservative defender strategy-mechanistic structure electrical
distributors.
Equi?nality
In an earlier section we discussed the notion of equi?nality from the perspective
of strategy management. In that argument, equi?nality, a characteristic of open
systems, is the notion that allows a feasible set of equally effective internally
consistent patterns of strategy and structure (Jennings & Seaman, 1994; Van de
Ven &Drazin, 1985). Further, a group of contingency theorists argue that a variety
of strategy-structure con?gurations are possible (Donaldson, 2001; Pfeffer, 1997;
Scott, 1992). Our ?nal hypothesis pertains to the issue of equi?nality.
H4: Equal levels of performance as measured by an earns and turns ratio will occur among:
(a) entrepreneurial electrical distributors with a prospector strategy-organic structure hav-
ing the best strategy-structure match; (b) entrepreneurial electrical distributors with a
defender strategy-mechanistic structure having the best strategy-structure match; (c) con-
servative electrical distributors with a prospector strategy-organic structure having the
best strategy-structure match; and (d) conservative electrical distributors with a defender
strategy-mechanistic structure having the best strategy-structure match.
RESEARCH METHODS
We elected to study electrical distribution ?rms based on Starbuck’s (1993) argu-
ment that when attempting to understand the dynamics of organizational phenom-
ena and to develop understanding, insight is more likely to result from a study
of extreme cases than from traditional ?rms. Electrical distribution ?rms repre-
sent such extreme cases. For example, an electrical distributor moves goods and
services from producers to consumers to overcome major time, place, and pos-
session gaps that separate goods and services from those who would use them. In
2002, total U.S. sales of electrical distribution ?rms were $67 billion and the total
Equi?nality, Corporate Entrepreneurship 113
population of U.S. electrical distribution ?rms in 2002 consisted of 1500 ?rms.
Sales of these ?rms ranged from US$5 Million to US$9 Billion (NAED, 2002).
Further, many electrical distribution ?rms started as small businesses and evolved
to large-size ?rms with multiple operations located in different cities. Also, elec-
trical distributors are both family-owned businesses as well as being part of major
international conglomerates.
Measuring Corporate Entrepreneurship
Miller and Friesen’s (1982) index was used to measure corporate entrepreneurship.
As we discussed in an earlier section, such an index has been widely used and vali-
dated. The seven scale items, presented in Appendix 1, were rewritten to con?rmto
the electrical distribution channel. While Miller and Friesen’s original instrument
solicited responses using a 7-point Likert scale, our scale was reduced to a 5-point
rating category for questionnaire design consistency and to facilitate participant
responses. Aiken (1987) studied the effects on ratings using different scales and
found that two-category scales were signi?cantly different from three, four, ?ve,
six, or seven category scales, but that no signi?cant difference existed among 3, 4,
5, 6, or 7-point scales. Aiken (1987, p. 54) concludes that “using a small number of
categories (but greater than two) is as effective as a larger number of categories.”
Thus our use of a 5-point Likert scale to measure corporate entrepreneurship is no
different from Miller and Friesen’s (1982) 7-point Likert scale.
Measuring Strategy
Snow and Hrebiniak’s (1980) procedure describing the strategy types of the Miles
and Snow(1978) typology was used to measure strategy. As described in Appendix
2, study participants were asked to check the type best describing the strategic
behavior of their ?rm. This paragraph approach has been commonly used and
validated extensively (James & Hatten, 1995; Rajagopalan, 1986) and is consid-
ered more convenient than the lengthy multi-item strategy typologies used by
Hambrick (1981). Also, several studies have validated the ability of managers to
self-diagnose their ?rm’s strategic orientation using the Miles and Snow strategy
typology (Conant, Mokwa & Varadarajan, 1990; Shortell & Zajac, 1990; Slater &
Narver, 1993). Further, an argument has been made that practicing managers have
the cognitive ability to identify the type of strategy employed by their ?rmand that
researchers should utilize this knowledge (Dean & Sharfman, 1996; Downey &
Ireland, 1979; Hunt & Power, 1985; Kiesler & Sproull, 1982). Several researchers
114 DANIEL F. JENNINGS AND KEVIN G. HINDLE
Table 2. Hage’s (1965) Organizational “Means” Variables Related to Organic
and Mechanistic Structures.
Variables Structural Value
Organic Mechanistic
Formalization
1. Codi?ed jobs Low High
2. Variations within jobs Low High
Strati?cation
3. Status among jobs Low High
4. Mobility barriers between low and high jobs Low High
Complexity
5. Number of specialties High Low
6. Required level of high training High Low
Centralization
7. Number of decision-making jobs High Low
8. Number of areas where decisions are made by decision-makers High Low
Note: Adapted from J. Hage (1965, pp. 293, 305).
state that the most appropriate and relevant way in which key issues pertaining
to types of strategies employed by ?rms and the selection of competitive posi-
tions can be assessed is to ask the involved managers (Day & Nedungadi, 1994;
Geletkanycz & Black, 2001; Morgan & Piercy, 1998).
Measuring Structure
In this study, we used Hage’s (1965) instrument that measures organic and mech-
anistic structures. This instrument which is described in Appendix 3, includes two
items for each of four variables (formalization, strati?cation, complexity, and cen-
tralization) was rewritten to conform to the electrical distribution channel. Table 2
illustrates howHage’s (1965) four variables relate toorganic andmechanistic struc-
tures. Study participants were asked to indicate the extent to which these structural
variables described their electrical distributorship. Responses were measured using
a 5-point Likert scale.
Measuring Performance
The two performance ratios (earns and turns) depicted in Appendix 4 were reported
by study participants for the years 1998–2002. Because many of the ?rms included
Equi?nality, Corporate Entrepreneurship 115
in our study are privately-owned, our performance measures are subjective. In
some instances, retrospective interviews with top managers are the only possible
source of performance data. While such interviews may provide inaccurate and
biased data, Huber and Power (1985) defend this methodology and offer certain
prescriptions for improving this research technique. Also, an argument persists that
dysfunctional aspects of research may occur with respect to utilizing subjective
measures of organizational performance. However, Downey and Ireland (1979,
p. 632) provide the following rationale for the use of subjective data:
An objective-subjective categorization has had, however, at least two dysfunctional effects on
organizational research. First, it has tended, a priori, to push research away from qualitative
data when they might be useful for assessing some performance dimensions. The objective-
subjective dilemma has equated objectively, and thus scienti?c inquiry, with quanti?cation. As
a result, qualitative assessments have been avoided by researchers because of an understandable
desire not appear “unscienti?c.”
Second, the objective-subjective categorization has equated subjective measures with mea-
surement of perceptions. The de?ning of all measures of perceptions as subjective is based
on a confusion over whose subjectivity is involved. The objectivity that is desired in scienti?c
inquiry refers to objectivity on the part of the researcher. Subjective behavior on the part of
those being studied, however, may well be a legitimate topic for scienti?c inquiry.
Two empirical research studies (Dess &Robinson, 1984; Jennings &Young, 1990)
have found no signi?cant differences between subjective and objective measures.
3
Sample Selection
Using a mailing list provided by the National Association of Electrical Distributors,
a random sample of 460 electrical distribution ?rms were selected from the 2002
total population of 1,500 electrical distribution ?rms. The ?rms that were selected
had 2002 sales ranging from US$ 5 Million to US$ 9 Billion, were both privately
and publicly owned, had been in existence for at least ten years, and were located
throughout the U.S.
Data Collection
A pilot-tested questionnaire, together with a cover letter was sent to the top two
senior managers of each electrical distributor in the sample. Each manager was
requested to respond to questions pertaining to the entrepreneurial style of their
?rm (Appendix 1) and their ?rm’s particular strategy and structure (Appendices
2 and 3). Only the most senior manager was asked to respond to the performance
question (Appendix 4). The two top managers from 166 electrical distributors
116 DANIEL F. JENNINGS AND KEVIN G. HINDLE
provided responses that identi?ed the entrepreneurial style, strategy and structure
of their respective ?rms while the senior most managers fromeach of the preceding
166 ?rms provided performance data. Such a reply from 166 ?rms is a response
rate of 36.1%. However, 148 replies (a response rate of 32.2%) was used for data
analysis. Such a usable response rate of 32.2% is considerable to be acceptable
for ?eld research in the area of corporate entrepreneurship (Zahra & Covin, 1995).
Senior managers of non-responding ?rms were contacted by e-mail and these
managers cited lack of time as the major reason for not responding.
Data Analysis
A major objective of our study is to investigate those electrical distributors hav-
ing either a prospector or defender strategy. Thus, those responding ?rms that
reported employing either an analyzer or reactor strategy were excluded from the
study. Accordingly, the 18 electrical distributors (166 less 148) whose responses
were received but not used reported employing either an analyzer or reactor strat-
egy. In fact, 16 of those ?rms reported an analyzer strategy and two indicated a
reactor strategy. Also replies from 11 of the 18 unusable responses were from
electrical distributors reporting that their ?rm classi?cation was entrepreneurial
and the remaining nine unusable responses indicated a conservative ?rm
classi?cation.
A frequency table was developed to identify those 148 responding electrical
distributors as being either entrepreneurial or conservative. Seventy-two ?rms re-
ported being entrepreneurial while 76 ?rms indicated a conservative orientation.
Thirty-three of the responding 72 entrepreneurial electrical distributors reported
the use of a prospector strategy while the remaining 39 indicated a defender strat-
egy. Twenty-nine of the responding 76 conservative electrical distributors reported
employing a prospector strategy while the remaining 47 reported using a defender
strategy. Table 3 details the distribution of responding electrical distributors by
both organizational (entrepreneurial or conservative) classi?cation and by type of
strategy (prospector or defender) and structure (organic or mechanistic) employed.
Our next approach was separate the responding electrical distributors into the
following four categories:
Category 1 – entrepreneurial ?rms having a prospector strategy-organic
structure.
Category 2 – entrepreneurial ?rms having a defender strategy-mechanistic
structure.
Category3–conservative ?rms havinga prospector strategy-organic structure.
Equi?nality, Corporate Entrepreneurship 117
Table 3. Study Respondents.
Number Percent
Sample size 460 100.00
Respondents 166 36.10
Usable responses 148 32.20
Organizational Classi?cation Prospector Strategy Defender Strategy Total
Organic Structure Mechanistic Structure
Entrepreneurial 33 39 72
Conservative 29 47 76
Total 62 86 148
Category 4 – conservative ?rms having a defender strategy-mechanistic
structure.
Size Effects
Certain researchers (Lindsay & Rue, 1980; Robinson, 1982) have argued that
small-sized ?rms may exhibit different characteristics than large-sized ?rms and
should be considered as a separate class in data analysis. As organizations in-
crease in size, they emphasize predictability and formalized roles which cause or-
ganizational behavior to become rigid, predictable, and in?exible (Downs, 1967;
Quinn & Cameron, 1983). Since differences in size can in?uence a ?rm’s per-
formance, as well as other organizational variables, a covariance analysis (AN-
COVA) was used to control for organizational size for each of the four categories
of electrical distributors described in the preceding section. F-ratios for differences
in performance (earns and turns ratios) means were 47.83 (p < 0.0001), 43.78
(p < 0.0001), 222.97 (p < 0.0001), 273.55 (p < 0.0001), respectively. These test
statistics suggest that performance mean differences were not simply an artifact of
electrical distributor size.
Non-Response Bias
An analysis of non-response bias (Armstrong & Overton, 1977) was conducted.
The procedure requires that responses be numbered sequentially in the order in
which they are received. Next, mean scores of the ?rst quartile (which are assumed
to be most motivated) are compared to those of the last quartile (assumed to be
118 DANIEL F. JENNINGS AND KEVIN G. HINDLE
most similar to non-respondents). No signi?cant difference in means (p < 0.05)
were revealed, indicating that there is no evidence of response bias.
RESULTS
Entrepreneurial Type, Strategy and Structure Characteristics
As mentioned earlier, respondents were asked to identify their ?rms as being either
entrepreneurial or conservative using the questionnaire described in Appendix 1.
Cronbach’s (1951) coef?cient alpha for our corporate entrepreneurship measure
(the seven scale items in Appendix 1) was 0.79 – exceeding the value of 0.70
which would indicate construct validity (Van de Ven & Ferry, 1980). Scores on
the seven-scale items were averaged to produce an overall corporate entrepreneur-
ship index. A high score on the index indicates entrepreneurial activity and vice
versa. The 72 entrepreneurial ?rms had an index of 4.25 while the 76 conserva-
tive ?rms had an index of 1.56. Further, the index scores of the entrepreneurial
and conservative ?rms were signi?cantly different (t = 42.93, p < 0.0001). The
coef?cient alpha for the structural variables of formalization, strati?cation, com-
plexity, and centralization were 0.89, 0.87, 0.81, and 0.84, respectively. Inter-
rater reliabilities for the responses of the two top managers were: (1) a range of
0.82–0.90 for the eight structural means; and (2) 0.88 for organizational strategy.
Mean scores, standard deviations, inter-rater reliabilities and alpha coef?cients
for organizational classi?cation, strategy and structure are presented in Tables 4
and 5.
The eight structural variables loaded on one factor using a factor analysis with
an orthogonal varimax rotation and were highly correlated. Table 6 illustrates the
Pearson correlation coef?cients for these items.
Hypotheses
As indicated in Table 7, all thirteen hypotheses were supported.
Hypotheses 1a and 1b
We predicted in the ?rst two hypotheses that entrepreneurial electrical distributors
with a prospector strategy will have an organic structure and that entrepreneurial
electrical distributors with a defender strategy will have a mechanistic structure.
Statistical analyses (chi-square value of 148.37, p < 0.0001 and a t test; t = 4.11,
p < 0.0001) provide support for both hypotheses.
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Table 4. Means
a
, Standard Deviations, and Reliabilities for Entrepreneurial (EO) Organizational Type, Strategy and
Structure Characteristics.
Strategy Variables EO Type and Prospector EO Type and Defender Inter-rater Reliability Alpha Coef?cient
Strategy (N = 33) Strategy (N = 39)
Means S.D. Means S.D.
Formalization 0.89
1. Codi?ed jobs 1.82 0.68 3.83 0.64 0.90
2. Variation within jobs 1.89 0.73 3.91 0.75 0.86
Strati?cation 0.87
3. Status among jobs 1.78 0.64 3.64 0.71 0.88
4. Mobility barriers between low
and high jobs
1.92 0.62 3.51 0.68 0.85
Complexity 0.81
5. Number of specialties 2.88 0.92 1.94 0.81 0.80
6. Required level of training 3.01 0.97 1.86 0.92 0.82
Centralization 0.84
7. Number of decision making 3.06 1.01 2.01 0.95 0.82
8. Number of areas where
decisions are made
2.97 0.99 1.87 0.83 0.85
a
1 = never; 5 = always. Table 2 details how the structural variables are related to both organic and mechanistic structure while Appendix 3 describes
the research questionnaire.
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Table 5. Means
a
, Standard Deviations, and Reliabilities for Conservative (CO) Organizational Type, Strategy and
Structure Characteristics.
Structural Variables CO Type and Prospector CO Type and Defender Inter-rater Reliability Alpha Coef?cient
Strategy (N = 29) Strategy (N = 47)
Means S.D. Means S.D.
Formalization 0.92
1. Codi?ed jobs 3.14 0.71 3.83 0.79 0.88
2. Variation within jobs 3.28 0.73 3.87 0.82 0.86
Strati?cation 0.88
3. Status among jobs 3.34 0.69 3.79 0.86 0.76
4. Mobility barriers between low
and high jobs
3.07 0.75 3.98 0.77 0.74
Complexity 0.74
5. Number of specialties 2.01 1.13 2.45 0.72 0.78
6. Required level of training 2.07 1.28 2.32 0.87 0.84
Centralization 0.85
7. Number of decision making 1.86 1.37 2.26 0.92 0.87
8. Number of areas where
decisions are made
2.12 1.01 2.18 0.81 0.79
a
1 = never; 5 = always. Table 2 details how the structural variables are related to both organic and mechanistic structure while Appendix 3 describes
the research questionnaire.
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Table 6. Pearson Correlation Coef?cients
a
for Structural Variables.
V1 V2 V3 V4 V5 V6 V7 V8
V1 – Codi?ed jobs 1.000
V2 – Variation within jobs 0.774 1.000
V3 – Status among jobs 0.785 0.825 1.000
V4 – Mobility barriers among low and high jobs 0.763 0.748 0.782 1.000
V5 – Number of specialties ?0.739 ?0.772 ?0.822 0.792 1.000
V6 – Training ?0.744 ?0.753 ?0.797 ?0.748 0.876 1.000
V7 – Decision making jobs ?0.786 ?0.741 ?0.811 ?0.821 0.763 0.692 1.000
V8 – Decision making areas ?0.752 ?0.778 ?0.782 ?0.811 0.792 0.705 0.744 1.000
a
All correlation coef?cients signi?cant at 0.0001 level.
122 DANIEL F. JENNINGS AND KEVIN G. HINDLE
Table 7. Hypotheses of Investigation and Levels of Support.
Hypotheses Summary Indication F Value
of Support
1a. Entrepreneurial electrical distributors with a prospector
strategy will have an organic structure
Supported