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Entrepreneurial Intentions and Corporate Entrepreneurship

McGraw-Hill/IrwinEntrepreneurship, 7/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

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The Intention to Act Entrepreneurially

Entrepreneurial intentions: motivational factors that influence individuals to pursue entrepreneurial outcomes.

Perception of feasibility leads to an entrepreneur’s self-efficacy. Entrepreneurial self-efficacy: conviction that one

can successfully execute the entrepreneurial process.

Perceived desirability: degree to which an individual has a favorable or unfavorable evaluation of the potential entrepreneurial outcomes

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Entrepreneur Background and Characteristics

Education Age Past Work Experience Role Models and Support Systems Moral Support Network (Psychological Support to

an entrepreneur) Professional Support Network

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Entrepreneur Background and Characteristics: Education

Research findings indicate that education is important in the upbringing of an entrepreneur. This is reflected in: Level of education. Role it plays in helping entrepreneurs cope with

the problems they confront. Ability to communicate clearly is important

Education does not determine whether an entrepreneur will create a new business to exploit the discovered opportunity.

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Entrepreneur Background and Characteristics: Personal Values

Entrepreneurs diverge significantly from the bureaucratic organization in: Nature of the enterprise. Opportunism. The institution. Individuality.

Ethics and ethical behavior of the entrepreneur is also of importance.

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Entrepreneur Background and Characteristics: Age

Most entrepreneurs initiate their entrepreneurial careers between the ages of 22 and 45.

Other factors needed to launch and manage a new venture successfully: Experience. Financial support. High energy level.

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Entrepreneur Background and Characteristics: Work Experience

Dissatisfaction with aspects on one’s job often motivates launch of a new venture. Previous technical and industry experience is

important once decision to launch is made. Experience in the following areas is important:

Financing. Product or service development Manufacturing Development of distribution channels Preparation of a marketing plan.

Previous start-up experience is a relatively good predictor of starting subsequent businesses.

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Role Models and Support System

Role models can be parents, family members, or other entrepreneurs. Successful entrepreneurs are viewed as catalysts

by potential entrepreneurs. Role models serve in a supportive capacity as

mentors during and after launch of a new venture. Entrepreneurs need to establish connections and

eventually networks early in the new venture formation process.

Strength of the ties between the entrepreneur and any individual in the network is dependent upon the frequency, level, and reciprocity of the relationship.

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Moral-Support Network

Individuals who give psychological support to an entrepreneur.

Entrepreneurs need to establish a moral-support network of family and friends—a cheering squad. Friends can provide:

Advice. Encouragement. Understanding. Assistance.

Relatives can be strong sources of moral support, particularly if they are also entrepreneurs.

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Professional-Support Network

Entrepreneurs need advice and counsel throughout the establishment of the new venture which can be obtained from: Mentors Business associates Trade associations Personal affiliations

Entrepreneurial activity is embedded in networks of interpersonal relationships.

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Minority Entrepreneurs

Male vs Female Other communities like Asian American, African,

Hispanic Bohra, Memon, Dewan, Chinoti, etc

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Male Entrepreneur Characteristics

Motivation Make Things Happen, Role In Corp. Not Important, Desire To Be In Control

Departure Point Dissatisfied With Present Job, Sidelines, Discharged/Laid-Off, Acquisition Opportunity

Fund Sources Personal Assets/Savings, Bank, Investors, Family/Friends Loans

Occupational Background

Experience, Recognized Specialist, Competent In Business Functions

Personality Opinionated/Persuasive, Goal-Oriented, Innovative/Idealistic, Self-Confident, Energetic

Background Age = 25-35, Father Self-Employed, College-Educated, Firstborn Child

Support Groups Friends, Professional Acquaintances (Lawyers, Accountants), Associates, Spouse

Business Started Manufacturing/Construction

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Female Entrepreneur Characteristics

Motivation Accomplishment Of Goal, Do It Alone

Departure Point Job Frustration, Recognition Of Opportunity, Change In Personal Circumstance

Fund Sources Personal Assets/Savings, Personal Loans

Occupational Background

Experience, Mid-Management/Administrative Experience, Service Occupation

Personality Flexible/Tolerant, Goal-Oriented, Creative & Realistic, Self-Confident, Energetic, Social

Background Age = 35-45, Father Self-Employed, College Educated (Liberal Arts), Firstborn Child

Support Groups Friends, Spouse, Family, Women’s Prof. Groups, Trade Associations

Business Started Service-Related

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Comparison of Male and Female Entrepreneurs (1 of 2)

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Comparison of Male and Female Entrepreneurs (2 of 2)

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Minority Entrepreneurship

Research on minority entrepreneurship has been sporadic.

Problem is in understanding differences in: Behavior of various ethnic groups in the context

of the environment. Economic opportunities (or lack thereof) available

in the societal context.

Future research needs to focus on the overall process used by ethnic entrepreneurs in developing and maintaining an enterprise.

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Entrepreneurial Intentions within Existing Organizations

Underlying assumption Acting entrepreneurially is something people

choose to do. Top management of an organization can influence

that choice by the corporate environment that it creates.

Fostering environment Enhances organizational members’ perceptions of

entrepreneurial action as both feasible and desirable.

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Managerial vs. Entrepreneurial Decision Making

Entrepreneurial Management is distinct from traditional management in terms of eight dimensions (Table 2.1)

1. Strategic Orientation2. Commitment to Opportunity3. Commitment to resources4. Control of Resources

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Managerial vs. Entrepreneurial Decision Making

5. Management Structure6. Reward Philosophy7. Growth Orientation8. Entrepreneurial Culture

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Causes for Interest in Corporate Entrepreneurship

Interest in entrepreneurship within established businesses has intensified due to events occurring on: Social. Cultural. Business levels.

Social reasons: Increasing interest in “doing your own thing” and

doing it on one’s terms. New search for meaning and impatience involved,

causes more discontent in structured organizations.

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Corporate Entrepreneurship (1of 2)

Resistance against flexibility, growth, and diversification can, in part, be overcome by developing a spirit of entrepreneurship within the existing organization. A method of stimulating, and capitalizing on,

individuals in an organization who think that something can be done differently and better.

Example: Xerox

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Corporate Entrepreneurship (2 of 2)

Increase in corporate entrepreneurship reflects an increase in social, cultural, and business pressures.

Hypercompetition has forced companies to have an increased interest in certain areas: New product development. Diversification. Increased productivity. Decreasing costs by methods such as reducing

the company’s labor force.

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Entrepreneurial Endeavors

Consist of the following four key elements: New business venturing: corporate venturing;

refers to creation of a new business within an existing organization.

Innovativeness: refers to product and service innovation, with emphasis on development and innovation in technology.

Self-renewal: transformation of an organization through renewal of the key ideas on which it is built.

Proactiveness: includes initiative and risk taking, competitive aggressiveness and boldness – particularly reflected in orientations and activities of top management.

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Comparison of Independent Entrepreneurs, Corporate Entrepreneurs, and Traditional

Managers

Source: An extensively modified version of a table in G. Pinchot, Intrapreneuring (New York: Harper & Row, 1985), pp. 54–56.

Table 3.2

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Establishing a Culture for Corporate Entrepreneurship

Corporate Entrepreneurship means entrepreneurial action within an established organization

In establishing an entrepreneurial environment within an established organization, certain factors and leadership characteristics need to be present (Table 2.3)

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Culture/Climate/Environment for Corporate Entrepreneurship

Organization operates on frontiers of technology. New ideas encouraged. Trial and error encouraged. Failures allowed. No opportunity parameters. Resources available and accessible. Multidiscipline teamwork approach. Long time horizon. Volunteer program. Appropriate reward system. Sponsors and champions available. Support of top management.

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Leadership Characteristics of Corporate Entrepreneurs

Understands the environment. Reflected in individual’s level of creativity.

Visionary and flexible. Creates management options. Encourages teamwork. Encourages open discussion. Builds a coalition of supporters. Persistence.

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Establishing Corporate Entrepreneurship in the Organization (1of 4)

Step One: Secure a commitment to corporate

entrepreneurship in the organization by top, upper, and middle management levels.

Establish initial framework and embrace the concept.

Identify, select, and train corporate entrepreneurs.

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Establishing Corporate Entrepreneurship in the Organization (2 of 4)

Step Two: Identify ideas and areas that top management is

interested in supporting. Identify amount of risk money available to

develop the concept. Establish overall program expectations and target

results of each corporate venture. Establish mentor/sponsor system.

Step Three: use of technology to ensure organizational flexibility.

Step Four: imanagers who will train employees as well as share their experiences.

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Establishing Corporate Entrepreneurship in the Organization (3 of 4)

Step Three: Use of technology to ensure organizational

flexibility. Step Four:

Identify interested managers to train employees and share their experiences.

Step Five: Develop ways for organization to get closer to its

customers. Step Six:

Learn to be more productive with fewer resources.

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Establishing Corporate Entrepreneurship in the Organization (4 of 4)

Step Seven: Establish a strong support structure for corporate

entrepreneurship. Step Eight:

Involve tying rewards to the performance of the entrepreneurial unit.

Finally: Implement an evaluation system that allows

successful entrepreneurial units to expand and unsuccessful ones to be eliminated.

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Problems and Successful Efforts (1 of 2)

A study found that new ventures started within a corporation performed worse than those started independently by entrepreneurs.

Reasons cited: Corporation’s difficulty in maintaining a long-term

commitment. A lack of freedom to make autonomous decisions. A constrained environment.

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Problems and Successful Efforts (2 of 2)

On average, independents become: Profitable twice as fast. End up twice as profitable.

Examples of companies that have adopted their own version of the implementation process to launch new ventures successfully: Minnesota Mining and Manufacturing (3M). Hewlett-Packard (HP). IBM.