1

Entrepreneurial Organizational Culture as a Predictor of Entrepreneurial Outcomes

Stephen J.J. McGuire California State University Los Angeles, 5151 State University Drive, Los Angeles, CA 90032, USA. E-mail: smcguir@calstatela.edu

Ellen A. Drost* California State University Los Angeles, 5151 State University Drive, Los Angeles, CA 90032, USA. E-mail: edrost@calstatela.edu

* Corresponding author

Abstract: This paper defines a firm-level construct, entrepreneurial organizational culture (EOC), and presents a validated instrument via survey of multiple respondents in organizations. Evidence of EOCs content, construct, concurrent, and discriminant validity are provided for a subsample of these organizations. The paper also tests hypotheses regarding the relationship between EOC and (1) entrepreneurial business strategy, (2) firm-level entrepreneurial outcomes and (3) entrepreneurial strategic posture for a sub-sample of 119 organizations. Results indicate support for the constructs reliability and validity. Moreover, EOC was positively related to the type of business strategy espoused by CEOs, to the firms degree of entrepreneurial strategic posture, and to certain entrepreneurial outcomes including revenue from new sources.

Keywords: entrepreneurial organizational culture; business strategy; firm-level entrepreneurial outcomes; entrepreneurial strategic posture; entrepreneurship; business strategy types; construct validity; corporate culture

Introduction

At the societal level of analysis, culture has long been recognized as a critical variable in the explanation of variances in entrepreneurial activity. In fact, it has been claimed that the most important barriers to entrepreneurship are non-economic and that what does matter is culture. At the firm level, researchers of corporate entrepreneurship have postulated that both business strategy and organizational culture are antecedents to corporate entrepreneurship (Zahra, 1993). Empirical evidence of such a relationship is scarce, particularly regarding organizational culture. In order to study the relationship between organizational culture and entrepreneurship, researchers need validated measures that are grounded in theory. Building on previous research, this study defines entrepreneurial organizational culture and its factors, validates a measurement instrument, and tests the relationships between Entrepreneurial Organizational Culture

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

2

(EOC) and business strategy and certain entrepreneurial outcomes, as depicted in Figure 1. Conceptual Model

Figure 1. Conceptual Framework of Organizational Entrepreneurship (adapted from Zahra, 1993) Entrepreneurship is the transformation of innovation (no matter what the source) into a new product, service, or business in order to take advantage of a market opportunity (Covin and Slevin, 1991). Entrepreneurship occurs when a person (a single entrepreneur) or group attempts to capture revenue from new sources - previously untapped, under-exploited, or previously inexistent market opportunities. Entrepreneurship implies recognizing and seizing opportunities, either innovating or developing someone elses innovation, and converting opportunities into marketable ideas by adding time, effort, money, skills and by assuming the risk associated with the opportunity. Entrepreneurship can be described at the individual level (the garage tinkerer), the organizational level, and the societal level. Independent entrepreneurship is entrepreneurship through the creation of a new, independent organization. Corporate entrepreneurship, on the other hand, is entrepreneurship within (or in association with) an existing organization, which may or may not lead to creation of a new organization. Corporate entrepreneurship, intrapreneurship, corporate venturing and other terms have been advanced for entrepreneurship within (or in association with) an existing organization. Culture and entrepreneurship

3

Conceptually, culture shapes how groups attempt to solve the problems presented to them by their environment; solutions that are successful tend to be repeated and taught to new members (Schein, 1985). Cultural values affect how organizational members perceive opportunities in their environment, and the decisions that they make about innovation, risk-taking, and the urgency of changing. If meaning is socially constructed, then it is through social interaction that members of any group make sense of their observations and behaviors. Over time, the different perceptions of members of any group tend to converge as they mutually influence each other (Weick, 1995). Since the work of Jaques (1952), it has been accepted (and later deemed obvious) that not only societies but also organizations have cultures. Like members of all other groups, members of organizations develop a culture that they pass on from current to new members. Organizational culture influences how members view the world in which their organization exists. It includes implicit, shared values, beliefs, and behavioral norms about how the world works, what is human nature, how work is or should be organized, and on what criteria decisions should be made. Organizational Entrepreneurship Organizational entrepreneurship is the transformation of innovation (no matter what its source) into a new product, service, or business venture in order to take advantage of a market opportunity by (or in association with) an existing firm. Entrepreneurship is an ongoing process that neither requires nor precludes the creation of a new organization (Zahra, 1993; Covin and Slevin, 1991). The antecedents of organizational entrepreneurship include the external environment (namely market growth and opportunities, access to capital, etc.), business strategy, and internal resources including organizational culture. Measures of organizational entrepreneurship are, for instance, the extent to which the organization obtains revenues from new sources (new products, services, or business ventures) in the medium term, often measured in research as three years. A second measureperhaps less informativeis the overall growth of revenue in the same period. Both measures suggest the extent to which an organization identifies and exploits market opportunities. Entrepreneurial Organizational Culture Entrepreneurial Organizational Culture (EOC) is a system of shared values, beliefs and norms of members of an organization, including valuing creativity and tolerance of creative people, communicating openly and frequently, believing that innovating and risk taking to seize opportunities are appropriate behaviors to deal with problems of survival and environmental uncertainty, and expecting organizational members to behave accordingly. Intrapreneurship Pinchot (1985) coined the term intrapreneurship to refer to autonomous initiatives by employees that may lead to innovation. Pinchot claimed that granting power and autonomy to employees would lead to the development of innovations by employees who had not been specifically directed to do so by senior management. Conceptually, intrepreneurship is compatible with Entrepreneurial Organizational Culture.

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

4

Security-oriented Norms Norms are expectations of behaviour shared by members of a group. Security-norms are characteristic of groups that avoid or minimize interpersonal conflict, avoid risks, rely on a supervisor to assume accountability for decisions, and seek to avoid being blamed for mistakes (Rousseau, 1991). Conceptually, security-oriented norms are incompatible with an entrepreneurial organizational culture. Rousseau (1991) found a negative relationship between unit performance and three out of four unit-level scores on security-oriented norms: (1) approvalagreeing with and being liked by others, (2) conventionalconforming and following the rules, and (3) dependentdo as told and clear all decisions with a superior. The final norm, (4) avoidanceemphasis on avoiding blame and punishment for mistakes, was negatively correlated but not statistically significant. Strategy and Organizational Entrepreneurship

Strategy is typically described as a rational activity, preceding and influencing the decisions that managers make. Grant (1991) defined strategy as a set of guidelines for how an organization will achieve its goals: the means by which an organization will survive in the long run. A less conventional definition of strategy is a pattern in a stream of decisions; deliberate strategies are planned while emergent strategies are patterns realized despite, or in the absence of, intentions (Mintzberg and Waters, 1985). Espoused strategy is the way an organizations leaders describe how their organization attempts to achieve its overall mission and survive in the long term. In other words, sometimes CEOs talk the strategy that their organizations may or may not walk. In other cases, strategy is described only after observing how the organization has been performing. Espoused strategy is not necessarily consistent with actions taken, and plausibly follows, rather than precedes, tactical choices. Miles and Snow (1978) described four strategy types that an organization can pursue: prospector, analyzer, defender, and reactor, they are described next. Prospectors seek to obtain and retain competitive advantage by creating change within their industry through new product development and the introduction of new technologies. Conceptually, organizational entrepreneurship fits closer with a prospector strategy than with any other type (Segev, 1998). Analyzers identify and exploit new ideas, products/ services and markets, while simultaneously maintaining a base of traditional products and customers in their core area of activity. Analyzers are less likely to lead innovation in their industry sector and more likely to imitate innovations first introduced by othersperhaps high-profile firms, market leaders or direct competitors. Analyzers may have a dual approach to technology, seeking incremental improvements in the core area of activity and radical changes in peripheral or new products/services or markets. An analyzer strategy, therefore, corresponds to entrepreneurial strategies. Defenders try to create a stable domain by being efficient very focused on, and very good at, what they do. Defenders do little scanning for opportunities to launch new products/services. A successful defender obtains and holds onto a niche within its industry that other firms can only penetrate with great difficulty (Segev, 1998). Defenders may be innovative in that they develop and/or adopt technologies and new processes in order to increase efficiency. Defenders are decidedly not innovative, when it

5

comes to launching new product/services or business ventures that deviate from established product lines or markets. Reactors respond to changing conditions without a clear commitment either to efficiency, focus or differentiation and expansion of services. While reactors may have an advantage over organizations with other strategies in the short term, the reactor strategy is the only one of the four that is unlikely to be successful in the long term (Miles & Snow, 1978). Next our research methodology, which describes our sample description, development of the EOC scale, hypotheses testing the validity of the EOC scale and the relationship between EOC and (1) entrepreneurial business strategy, (2) firm-level entrepreneurial outcomes and (3) entrepreneurial strategic posture.

Research Methodology Sample

Data were collected from 119 organizations of three types: 66 technology firms, 48 nonprofit organizations, and 5 U.S. state departments of motor vehicles (DMVs). The technology firms were randomly selected from a database of U.S. technology firms. Nonprofit organizations and state departments of motor vehicles (DMVs) were also invited to participate in the research project (convenience samples). Multiple key informants from the organizations completed surveys on entrepreneurial organizational culture and other variables, totaling 627: 443 from technology firms, 147 from nonprofits, and 37 from DMVs. Tech firms on average had 7,228 employees and US$ 1.2 billion in revenue (range US$ 1.5m to 12.9b). Of the 66 Tech firms, 16 (24.2%) were from the software and services industry, 15 (11.2%) were from the telecommunication industry, and the remaining were from other tech industries. Three types of reliability tests were applied to the measures used in the study. (1) When information was available in the database, it was compared with data provided by firms. (2) Tests of interrater reliability were applied to data obtained from firms. (3) Each scales reliability was expected to meet or exceed a Cronbachs alpha of 0.70. Development of Entrepreneurial Organizational Culture (EOC) Scale Eleven Subject Matter Experts (SMEs) reviewed the proposed EOC dimensions and items. All proposed dimensions and 75 (out of 78) items were retained, thus providing initial evidence of content validity. A pilot study of the EOC instrument was then conducted in 13 organizations, and results discussed with the management teams of these organizations. Subsequently, revisions were made taking into account feedback from the 12 organizations and methodologists recommendations for item and scale development. The proposed EOC model was then subjected to confirmatory factor analysis. Results indicated moderate to good fit between the model and the data. A review of the errors produced by the model led to a revised model, a six-factor EOC model, including: Tolerance of Creative Deviance; Risk Taking; Open Communication; Cooperation; Proactive Innovation and Voice. These six factors or dimensions are defined next. Tolerance of Creative Deviance. The extent to which members accept and value diverse approaches to work, and in particular tolerate differences in behavior by creative

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

6

or talented members who challenge the status quo. The belief that an essential role of management is to find talented people and provide them conditions in which they can be entrepreneurial. Risk Taking. The degree to which members believe that reasonable risks should be taken by people at all levels of the organization, and that failure is a source of learning rather than a source of shame. The extent to which members believe that successes as well as intelligent failures should be rewarded. Open Communication. The extent to which members believe that frequent and open communication with each other and with outsiders, and relatively unfettered access to information by all, is an appropriate approach to work. The belief that ideas and suggestions can come from many sources, including employees at all levels. Cooperation. The extent to which people value the achievement of goals through collective effort and by cooperating with one another. Proactive Innovation. The extent to which members find it legitimate and appropriate to think and act ahead of the customer/ beneficiary, rather than only satisfying current or emerging needs. The belief that proactive innovation is an appropriate means of organizational survival. Voice. The extent to which members believe it appropriate to allow people to express their dissatisfaction with the organization in an attempt to improve it, rather than suffering in silence or leaving the organization, as well as the extent to which it is seen as appropriate to accommodate and thus retain talented people, even if doing so requires creative or unusual solutions to resolve dissatisfaction. In-group consensus was verified by several tests, including r*WG(J) and ADM(J), thus justifying aggregating data to constitute organizational-level scores. All data included in the study demonstrated sufficient in-group consensus. Independent and Dependent Variables Entrepreneurial Organizational Culture. Data were collected from multiple respondents per firm on the EOC Scale and mean scores calculated per confirmed factor, converted to a 0 to 100 scale. The scales included Proactive Innovation (8 items, x = 40.62, = 0.89), Cooperation (6 items, x = 30.87, = 0.91), Open Communication (4 items, x = 24.9, = 0.88, Risk Taking (6 items, x = 26.37, = 0.85, Tolerance of Creative Deviance (6 items, x = 27.16, = 0.83) and Voice (4 items, x = 28.24, = 0.75). An index is a composite measure of a construct constructed by adding or averaging the scores of distinct indicators or scales An index is one useful way to combine the measures of multiple, related constructs into a single value. For the purpose of the present study, the EOC Index was computed as the average of the scores of the six confirmed EOC factors, divided by 7, times 100, thus generating an easy-to-interpret single value per organization from 0 to 100. The Cronbachs alpha of the EOC Index was 0.94. Intrapreneurship. Intrapreneurship was assessed using the 6-item second scale ( = .78) by Kuratko, Montagno and Hornsbys (1990). Security-Oriented Norms. Security-oriented Norms were assessed using a 4-item scale ( = .82) from Rousseau (1990). Business Strategy. Business strategy was identified by the firms CEO on a continuum from 1 to 7 identifying relative change in products/services or markets, using a scale

7

developed by Zajac and Shortell (1989). Strategy was treated as a continuous variable, or responses were collapsed into discrete groups of defenders, analyzers, and prospectors. Organizational Entrepreneurship. Organizational Entrepreneurship was operationalized using both objective and subjective measures. The primary outcome of corporate entrepreneurship was revenue from new sources, as per our definition of the construct. Therefore, corporate entrepreneurship was operationalized as the percentage of revenue obtained from new products, services, and business ventures over three years. Organizational Performance. The CEOs subjective assessments of their firms entrepreneurial performance was assessed with Zahras (1996) Commitment to Innovation scale (5 items, = .86) and Venturing Activities Scale (5 items, = .72), as well as the importance of new products and services, a single item used by Pearce and Carland (1999). Entrepreneurial Strategic Posture (ESP). ESP was measured by asking CEOs to indicate their firms orientation on Covin and Slevins (1989) adaptation of Miller and Friesens (1982) scale, which represents a unidimensional construct (9 items, = .924). ESP indicates the extent to which the implementation of strategy is entrepreneurialthe extent to which an organization enacts its strategy by innovating, taking risks and acting proactively (Shortell and Zajac, 1990). Interrater reliability was assessed obtaining data from a second executive in the participating firm. The second executive completed a follow-up questionnaire, in an identical format as the original. Responses from the two executives were significantly correlated.

Firm size (revenues and number of employees) and industry type were control variables. Results Within-Group Consensus Conceptually, organizational culture was represented by the shared perceptions of organizational members. Individuals have experiences and form perceptions, which over time become shared phenomena. It is the requirement of shared that differentiates the group-level construct culture from individual perceptions (Kozlowski & Klein, 2000). This study follows what Martin (1992) called the uniformity perspective. In other words, the researchers assumed that an organization has a predominant, characteristic organizational culture. For this purpose, data were first analyzed for within-group consensus using three different tests: SDX, r*WG(J), and ADM(J). SDX, the standard deviation of group members ratings, was calculated to report the disagreement (lack of consensus) of members of a group. Higher scores indicated higher levels of dissensus, but there are no standard cutoff values. r*WG(J) was designed as measures of agreement or consensus among members of a group when using multiple items in a scale, and is specifically recommended for research in which individual perceptions are aggregated to represent group-level constructs (Klein, et al., 2001). Values of r*WG(J) were tested for statistical

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

8

significance using a chi square test. The higher the coefficient, the higher the within group agreement, and scores below 0.0 suggest insufficient consensus to justify aggregating individual scores to group level constructs. ADM(J) is a measure of the average deviation of interrater agreement on one scale on a single occasion (Burke & Dunlap, 2002). Like SDx, it is a measure of within-group dissensus. The measure provides an easily interpretable statistic in the metric of the original unit of measurement, here a 7-point Likert-type scale. The lower the score, the less dispersion around the mean of all raters on the items of a scale. The cut-off score was determined by dividing the number of response options by six for a 7-point scale (1.167), above which there is insufficient agreement to justify aggregating individual responses. We eliminated any organization where the key informants had insufficient agreement. Confirmatory Factor Analysis A confirmatory factor analysis (CFA) was performed of the proposed EOC model, based on the covariance matrix of responses from key informants on 75 items. Skewness and kurtosis were verified and indicated that the data were distributed normally. The analysis used the maximum likelihood estimation procedure, as implemented in LISREL v8.53 (Joreskog and Sorbom, 1996; Kelloway and Kelvin, 1998). Based on the analysis of the proposed EOC model, six factors were extracted: (1) Proactive Innovation (PRO), (2) Cooperation (COOP), (3) Open Communication (OC), (4) Risk Taking (RISK), (5) Tolerance of Creative Deviance (TOL), and (6) Voice (VOICE). The model demonstrated a good fit with the data (Chi Square = 2328.45, p = 0.00; RMSEA = 0.079; GFI = .80.) These six factors were used to test the hypotheses in this study. Convergent Validity The first hypothesis assessed the degree to which EOC scores converged with scores on an instrument that assesses a construct tapping into a similar latent construct, intrapreneurship, specifically,

Hypothesis 1: There is a positive relationship between EOC and intrapreneurship.

The first test examined the bivariate correlations between scores on the EOC Instrument and the IAI scale. Correlations ranged between 0.64 and 0.80 for the six confirmed EOC factors (p < 0.01), and IAIs correlation with the EOC Index is 0.84 (p < 0.01). Correlations with each of the six EOC factors was positive and significant, ranging from r = 0.69 to r = 0.808, p < .01). The second test used least squares regression for both the EOC Index and Intrapreneurship (R2 = 0.707, p =0.000), and then all six EOC factors simultaneously with IAI (R2 = 0.746, p =0.000). The standardized betas for each EOC predictor were not all significant, only the betas corresponding to Open Communication and Voice met the 0.05 significance threshold. In summary, each EOC factor had a positive and significant relationship with IAI. When examined as a composite index, EOC had a positive and significant relationship with Intrapreneurship. However, when examined in a multivariate analysis, results indicated that the overall relationship was positive and significant, but that the individual

9

contributions of some of the factors to that relationship were small and nonsignificant. Examined collectively, results provide support for Hypothesis 1. Concurrent Validity Five hypotheses were tested to establish the degree of concurrent validity of the EOC Instrument. Hypotheses 2, 3 and 4 tested strategy and strategic posture, while hypotheses 5 and 6 addressed EOCs relationship with measures of corporate entrepreneurship. Because the methodology to test Hypothesis 3 is different, it will be discussed later. The following five hypotheses were tested through an examination of the bivariate and multivariate relationships between EOC and other variables:

Hypothesis 2. There is a positive relationship between EOC and espoused entrepreneurial strategy (STRAT). Hypothesis 4. There is a positive relationship between EOC and entrepreneurial strategic posture (ESP). Hypothesis 5. There is a positive relationship between EOC and the percentage of a firms revenues from products, services, and business ventures introduced within the past 3 years (NEWREV). Hypothesis 6. There is a positive relationship between EOC and CEOs subjective assessments of their firms entrepreneurial performance (CE1, CE2, NPS). The first set of hypotheses tests regarding concurrent validity examined the bivariate

correlations (Pearsons r) between EOC and the measures of strategy, ESP, and corporate entrepreneurship, as shown in Table 1. The EOC Index had a positive relationship with each one of the strategy and corporate entrepreneurship variables.

Table 1. Bivariate Correlations EOC, Strategy, ESP, and Corporate Entrepreneurship

Variable STRAT ESP CEI CE2 NPS NEWREV

EOC Index .462 * * .557 * * .362 * * .350 * * .379 * * .312 * PRO .472 * * .624 * * .520 * * .347 * * .549 * * .359 * * COOP .384 * * .500 * * .290 * .360 * * .294 * .283 * OC .383 * * .493 * * .335 * .384 * * .318 * 0.237 RISK .340 * * .402 * * .208 .14 .19 0.245 TOL .435 * * .466 * * .266 * .293 * .352 * * 0.253 VOICE .429 * * .498 * * .320 * .328 * .325 * .292 * * * Correlation significant at the 0.01 level (2-tailed). * Significant at the 0.05 level (2-tailed). N = 55 all cells.

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

10

The second set of hypotheses tested concurrent validity through least squares regression. The results indicated partial support for four of the five hypotheses concerning EOCs concurrent validity. For Hypothesis 2 (EOC and strategy), all bivariate correlations are positive and significant with the EOC Index and each of the six confirmed EOC factors. The regression analysis detected as positive but small (R2 = 0.214, p < 0.01) relationship between the EOC Index and Strategy. The multivariate analysis also revealed a significant relationship between EOC and Strategy (R2 = 0.247, p < 0.05), however a t-test of the beta coefficients corresponding to the six independent variables (6 EOC factors) do not indicate significance at the 0.05 level. For Hypothesis 4 (EOC and ESP) a similar result occurs when testing. All bivariate correlations are positive and significant, from 0.402 (RISK and ESP) to 0.624 (PRO and ESP). The relationship between the EOC Index and ESP is significant, as shown by the regression (R2 = 0.214, p < 0.01). When testing all 6 EOC factors simultaneously, the relationship with ESP remains significant (R2 = 0.4, p < 0.01), however only the beta corresponding to Cooperation (COOP) is significant at the 0.05 level. For Hypothesis 5 (EOC and Percentage Revenue from New Sources) results were less compelling. When the EOC Index was regressed on NEWREV, the equation was significant but very small (R2 = 0.097, p

11

entrepreneurship (H6). When EOCs relationship with these variables is examined via multivariate analysis with the six confirmed EOC factors, the results are not statistically significant. Therefore, Hypotheses 2, 4, 5, and 6 were partially supported. Results from Hypothesis 3 were not supported.

Discriminant Validity The construct validity of the EOC Instrument was also assessed taking into account the degree to which EOC scores differentiated the construct from other distinct constructs, two hypotheses were advanced to ascertain the discriminant validity of the EOC Instrument. EOC should have a negative relationship with security-oriented norms and defender strategies.

The first hypothesis to be tested refers strategy types. While EOC did not differentiate between the two entrepreneurial strategies, Analyzers and Prospectors, it should be negatively related to a non-entrepreneurial strategy type: Defender.

Hypothesis 7. There is a negative relationship between EOC and an espoused defender strategy. Logistical regression was used to test Hypothesis 7, in order to determine the

likelihood that EOC scores negatively predict a defender strategy. Results indicated that EOC, when the composite index is used in the regression, negatively predicted a defender strategy (R2 = 0.134, R2 = 0.218, p < 0.05). When all EOC factors were entered into the equation, the prediction rate improves, but the coefficients for the independent variables were not significant at the 0.05 level. Hypothesis 7 was partially supported.

The next hypothesis concerned EOCs relationship with shared norms about security, such as avoiding risks and blame.

Hypothesis 8. There is a negative relationship between EOC and security-oriented norms (SON).

Hypothesis 8 was first tested for its bivariate correlations. The EOC Index indicated

a negative correlation with SON (r = - .644, p < 0.01), as well as for each one of the six EOC factors individually with SON (r = - .457 to -.653, p < 0.01). Next, regression analysis tested the relationship between the set of EOC factors and SON. Both the bivariate and multivariate equations indicated a strong relationship (R2 = 0.415 for the EOC Index, 0.746 for the multivariate predictor set of all EOC factors, p < 0.01). Open Communication, Risk Taking, Tolerance of Creative Deviance, and Voice were significant at the 0.05 level. Surprisingly, and contrary to expectation, the relationship between Risk Taking and SON was positive, whereas (as expected) relationships of the other three factors were negative. Hypothesis 8 was partially supported. Control Variables We controlled for industry and firm size. Control variables were entered directly into regression equations, rather than selected on the basis of their incremental contribution. When controlling for firm size, results did not produce a significant change in R2.

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

12

In conclusion, results of hypotheses tests provided evidence of construct validity of the EOC Instrument. When the relationship between EOC and other variables was tested using the composite EOC Index, results suggested adequate convergent, concurrent, and discriminant validity. Tests using the six EOC factors together and simultaneously also produced significant relationships in the direction hypothesized, but the contribution of the individual factors was not always statistically significant.

Discussion Researchers of corporate entrepreneurship agree that organizational culture is related to entrepreneurial outcomes at both the societal and organizational level. In fact, it has been claimed that the most important barriers to entrepreneurship are non-economic and that what does matter is culture. Nonetheless, little evidence so far has been presented of such a relationship. In order to study the relationship between organizational culture and entrepreneurship, researchers need validated measures that are grounded in theory. The present study set out to define an entrepreneurial organizational culture and what, if any, are its factors. In this study, an Entrepreneurial Organizational Culture (EOC) was defined as a system of shared values, beliefs and norms of members of an organization, including valuing creativity and tolerance of creative people, believing that innovating and seizing market opportunities are appropriate behaviors to deal with problems of survival and environmental uncertainty, and competitors threats, communicating openly with one another, and thinking and acting ahead of customer, and believing that proactive innovation is an appropriate means of organizational survival, and expecting organizational members to act and behave accordingly. These shared beliefs, values, and norms are manifested in the reported attitudes of the employees of an organization. The main contribution of the research is its clarification of the role that organizational culture plays in relation to corporate entrepreneurship. The framework of corporate entrepreneurship that helped shape the present study includes organizational culture as one among the antecedents of corporate entrepreneurship alongside strategy, the external environment, and other internal resources such as HR practices and organizational structures. The relationship between organizational culture and organizational performance is another area in which the research makes a contribution to the body of available knowledge. The number of studies that have empirically tested the organizational culture firm performance relationship remains small, and a study of culture and corporate entrepreneurship is a welcome addition. In the context of management research and education, having evidence that culture matters to organizational outcomes is critical. For practicing managers, the study depicts of the organizational culture that is associated with entrepreneurial strategies and performance, backed up by research evidence. Practitioners may also benefit from obtaining a tool and procedures for assessing organizational culturesa tool specifically designed for detecting the degree to which a firm has an EOC. Management consultants may also find the tool useful. This study may help participants identify aspects of their organization that facilitate and impede entrepreneurship, and determine actions they can take to become more entrepreneurial.

13

References

Burke, M. J. & Dunlap, W.P. (2002) Estimating Interrater Agreement with the Average Deviation Index: A User's Guide. Organizational Research Methods. 5 (2). p. 159-172. Covin, J.G., & Slevin, D.P. (1991) A Conceptual Model of Entrepreneurship as Firm Behavior. Entrepreneurship Theory and Practice. 16 (1). p. 7-25. Covin, J.G., & Slevin, D.P. (1989) Strategic Management of Small Firms in Hostile and Benign Environments. Strategic Management Journal. 10 (1). 75-87. Grant, R. (1991). Contemporary Strategy Analysis: Concepts, Techniques and Applications. Cambridge, MA: Blackwell, 1991. Jaques, E. (1952). The changing culture of a factory. London: Tavistock Publishers. Joreskog, K. G. & Sorbom, D. (1996) Lisrel 8 User's Reference Guide. Chicago, IL. Kelloway, K. (1998) Using Lisrel for Structural Equation Modeling: A Researcher's Guide. Thousand Oaks, CA: Sage. Klein, K., Conn, A.B., Smith,D.B. & J.S. (2001) Everyone in Agreement? An Exploration of Within-Group Agreement in Employee Perceptions of the Work Environment. Journal of Applied Psychology. 86 (1). p. 3-16. Kozlowski, S.W. & Hattrup, K. (1992). A Disagreement about within-Group Agreement: Disentangling Issues of Consistency Versus Consensus,. Journal of Applied Psychology, 77 (2). p.161-167. Kozlowski, S.W. & Klein, K.J. (2000). A multilevel approach to theory and research in organizations: Contextual, temporal, and emergent processes. In Klein, K.J. & Kozlowski, S.W. (Eds.), Multilevel theory, research, and methods in organizations: Foundations, extensions, and new directions, 3-90. San Francisco: Jossey-Bass. Kuratko, D. F., Montagno, R.V. & Hornsby, J. F. (1990) Developing an Intrapreneurial Assessment Instrument for an Effective Corporate Entrepreneurial Environment. Strategic Management Journal. 11. p. 49-58. Martin, J. (1992). Cultures in organizations: Three perspectives. New York: Oxford University Press. Miles, R.E. and Snow, C. C. (1978) Organizational Strategy, Structure, and Process. New York: McGraw-Hill. Miller, D. & Friesen, P. (1982) Innovation in Conservative and Entrepreneurial Firms: Two Methods of Strategic Momentum. Strategic Management Journal. 3 (1). p. 1-25. Nunnally, J.C. (1978). Psychometric theory, 2nd Ed. New York: McGraw-Hill.

This paper was presented at The XXVI ISPIM Conference Shaping the Frontiers of Innovation Management, Budapest, Hungary on 14-17 June 2015. The publication is available to ISPIM

members at www.ispim.org.

14

Ostroff, C., Knicki, A.J. & Tamkins, M.M. (2003) Organizational culture and climate. In Borman, W.C., Ilgen, D.R. & Klimoski, R.J. (eds.). Handbook of Psychology. 12. p. 565-593. New York: Wiley. Pearce, J. W., & Carland, C. (1999) Intrapreneurship and Innovation in Manufacturing Firms: An Empirical Study of Performance Implications." Academy of Entrepreneurship Journal 1 (2). Rousseau, D. M. (1990) "Normative Beliefs in Fund-Raising Organizations." Group & Organization Studies. 15 (4). p. 448-460. Schein, Edgar H. (1992). Organizational Culture and Leadership, 2nd Ed. San Francisco: Jossey-Bass. Schneider, B. & Reichers, A.E. (1983). On the etiology of climate, Personnel Psychology. 36. p.19-39. Segev, E. (1998) A Systematic Comparative Analysis of Two Business-Level Strategic Typologies. Strategic Management Journal 10 (5). p.487 - 505. Shortell, S. M. & Zajac, E. C. (1990) Perceptual and Archival Measures of Miles and Snow's Strategic Types: A Comprehensive Assessment of Reliability and Validity. Academy of Management Journal 33 (4). p. 817-832. Singleton, R. A., Straits, B.C. & Miller Straits, M. (1993) Approaches to Social Research. 2nd Ed. New York: Oxford University Press. Weick, K.E. (1995). Sensemaking in organizations, (3). Sage Publications. Zahra, S. A. (1993) A Conceptual Model of Entrepreneurship as Firm Behavior: A Critique and Extension. Entrepreneurship Theory and Practice. 17 (4). p. 5-21. Zahra, S. A. (1996) Governance, Ownership, and Corporate Entrepreneurship: The Moderating Impact of Industry Technological Opportunities. Academy of Management Journal. 39 (6). p. 1713-1735. Zajac, E. J. & Shortell, S.M. (1989) Changing Generic Strategies: Likelihood, Direction, and Performance Implications. Strategic Management Journal. 10. p. 413-430. Zohar, D. (2010). Thirty years of safety climate research: Reflections and future directions. Accident Analysis and Prevention. 42. p.1517-1522.