Organisational and Global Context

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Organisational and Global Context of Entrepreneurship

Introduction

Although culture has a significant impact on entrepreneurship and how it is practiced, it is not the

only element of a context that is significant. This theme will explore two other contextual factors of

importance to entrepreneurship: organisations and global trends. Looking more specifically at the

organizational context that many entrepreneurs need to operate within for the life time of their

initiatives (intrapreneurs) or temporarily (spinouts), reveals the challenges and support that

entrepreneurs face by working within and through established organisations.

On the other hand global trends offer insights into opportunities, new and different ways of

operating and of external threats that historically might have been negligible simply due to

geographical distance. As the world becomes more connected and travel is easier, new ways of

doing and thinking are becoming possible.

Learning Objectives

This theme aims to provide a broad perspective of entrepreneurship within organizations by

addressing the following key questions:

o How does organizational context impact on an individual's thinking?

o What forms can entrepreneurship take within different organisational contexts?

o How do we measure the impacts and benefits of entrepreneurship on organizations?

o What scope is there for entrepreneurship for organisations within the broader context of

the global environment?

Key content topics for this theme are:

o Introduction to the organisational context of entrepreneurship

o Organisational Context underlying factors

o Contextual Factors and how they manifest in organizations

o Entrepreneurship and Innovation in a corporate environmento Entrepreneurship in other organisational contexts

o Global trends: Political, Economic, Social, Technological, Environmental and Legal (PESTEL)

Analysis

By the end of this theme you should be able to:

o Assess the impact of organizational context on your own entrepreneurial ambitions and

enterprise ideas


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o Understand that entrepreneurship has a role to play in all kinds of organisations and can

take different forms.

o Analyse global trends and identify how these may impact you in terms of opportunities or

threats.

1. Introduction to the Organisational and Global Context of Entrepreneurship

Organisational context is the way an organisation is structured and operates. Key elements of

organisational context are the corporate strategy, organisation type and structure and

organisational culture.

Later in the programme, we will discuss strategy as one of the key business concepts which is

essential to understand where within an existing industry, and how, a new venture can create and

capture value. For now our focus needs to be on how strategy can influence the organisational

structure and culture and how this in turn might influence entrepreneurship within the organisation.

During the course of this theme we will consider various underlying contextual factors of strategy,

structure and culture as well as practices within organisations that influence and support

entrepreneurship. Organisations themselves exist within a much broader and global environment

and it is the organisations relationship with this environment and its ability to actively scan this

environment for opportunities and then act upon them that reaps the rewards of entrepreneurship.

So as a prelude to forthcoming themes we will explore the use of PESTEL analysis to explore the

macro environment and the drivers of trends which might result in new opportunities for

organisations.

The contents of this lesson are:

o Organisational strategy, structure and culture

o Organizational context - underlying factors

o Contextual factors and how they manifest in organisations

o Entrepreneurship in a corporate environment

o Entrepreneurship in other organisational contexts

o Global trends - Political, Economic, Social, Technological, Environmental and Legal (PESTEL)

analysis.


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2. Strategy, Structure and Culture

Strategy

The strategic intent of a business plays a major role in influencing the organisational context. In

order to understand and advance the strategic intent, Michael Porter (1980) suggests three keyquestions that will drive the assessment process:

o What is the business doing? What is its implicit/explicit current strategy?

o What is happening in the external environment, in terms of the industry, competitors and

the society?

o What should the business be doing in response to the happenings in the environment?

Understanding the strategic intent of the organisation and its influence through these three key

questions is critical towards promoting entrepreneurial thinking and action within an organisational

context. Having a clear view of the primary motive of the business and how the organisation can act

decisively by using its capabilities in response to what is happening in the external environment

enables the entrepreneurial individual within an organisation to succeed.

From an organisational context, Mintzbergs (1987, 1992) definition of strategy as 5 Ps offers a very

useful framework to understand strategy in all its manifestations and not simply as an organisations

actions in pursuing its business activities.

o Plan: Strategy is a plan - as a kind of consciously intended course of action, a guideline (or

set of guidelines) to deal with a situation.

o Ploy: As plan, a strategy can also be a ploy, as a specific manoeuvre intended to outwit a

rival or competitor.

o Pattern: Strategy is a pattern - specifically, a pattern in a stream of actions.

o Position: Strategy is a position - specifically a means of locating an organisation in an

"environment".

o Perspective: Strategy is a perspective - its content consisting not just of a chosen position,

but of an ingrained way of perceiving the world.

Structure

Structure refers to the manner in which the activities of an organisation are coordinated. It allows

the responsibilities of running the organisation to various units that focus on a specific range of

activities such as marketing, finance, manufacturing and support. For large companies that have

operations in more than one country, these units may be replicated within each country, with a local

reporting structure.

The four basic forms of organisational structure are:

o Functional: Business units are organised according to functional units such as marketing,

finance, manufacturing etc.


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o Divisional: Organised according to product lines with individual functional units for each

product line

o Matrix: Organised according to specific project needs and dismantled once the project is

completed

o Network: A decentralised, team-based and distributed structure that is connected throughinformation and communication technologies.

Organisational culture

Organisational culture refers to a system of shared meaning held by members that distinguishes the

organisation from other organisations (George and Jones, 2008) and where a strong organisational

culture exists the firms core values are both intensely held and widely shared (Robbins, 2001).

Within an organisation, culture serves to define boundaries of acceptable behaviour, conveys a

sense of identity amongst the employees, facilitates commitment to organisational goals and

objectives and sets the rules of the game that everyone is expected to follow. In this form,

organisational culture is viewed as integrative, the glue that holds the organisation together

(Martin and Meyerson 1988)

However, two additional types of organisational culture, those of differentiation and ambiguity have

also been defined which provide a better understanding of how culture manifests in organisations

(Marting and Meyerson, 1988). These are not mutually exclusive with the integration oriented view

of culture. Rather, they serve to explore culture as it exists in reality (see diagram below).


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a) primary motive for being in business whether to make profits or to provide a service for social

and economic development

Schein (2004) suggests that organisational culture has become increasingly important. Competition,

globalisation, mergers and acquisitions (M&A), strategic alliances and developments in workforce

have all combined to create a greater need, among other things, for:

Product innovation, creation of new products and services for a global market

Strategy innovation, dealing with a very complex external environment

Process innovation and the ability to successfully introduce new technologies, such

as information technology

References

George, J. and Jones, G. (2008). Understanding and Managing Organizational Behavior. 5th ed.Upper Saddle River, NJ: Pearson Prentice Hall 4

thed. HD58.7.G46 2005

Martin, J. and Meyerson, D. (1988) Organizational Culture and the Denial, Channelling and

Acknowledgement of Ambiguity. In: Pondy, L. R., Boland Jr, R. J. and Thomas, R. J. (eds) Managing

Ambiguity and Change. New York: John Wiley & Sons

Mintzberg, H. (1987).Another Look at 'Why Do Organizations Need Strategies'. California

Management Review, 30(1): pp. 25-32

Mintzberg, H. (2003). Five P's for Strategy. In: Mintzberg, H. and Quinn, J. B. (eds.) The Strategy

Process. 4th

ed. London: Prentice-Hall HD30.28.M56 S7 2003

Porter, M. (1980). Competitive Strategy. New York: Free Press HD41.P67 S7

Robbins, R. H. (2001). Global Problems and the Culture of Capitalism. Upper Saddle River, NJ:

Pearson Prentice Hall

Schein, E. H. (2004). Organizational Culture and Leadership. 3rd

ed. San Francisco: Jossey Bass

HD58.7.S33 2004

3. Organisational Context Underlying Factors

The organisational context for entrepreneurship is heavily influenced by the strategy, the

organisational structure and culture. Understanding these factors and their characteristics will

enable an entrepreneur operating within an organisation to better understand the context and plan

his/her actions to make the entrepreneurial venture succeed.

The strategy for an organisation is built on the basis of


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b)competitive position - in terms of resources that are available at the organisations disposalc)capability - the ability to effectively mobilise the available resources

Typically, organisational strategy influences the level of entrepreneurial thinking and actions that

enable the recognition and exploitation of entrepreneurial opportunities.

The structure of an organisation is geared towards efficiency, that enables the available resources to

be deployed effectively to perform its operations. However, the focus on efficiency could limit the

potential for characteristics that promote entrepreneurial thinking and action such as flexibility in

resource deployment and decision making processes.

Finally, organisational culture influences the potential to innovate by supporting risky ventures, the

employment practices that empower the employees and the organisations primary orientation

(Customer vs Product vs Process).

The table below lists this set of organizational contextual factors, how they manifest in a variety of

organizations and their influence on entrepreneurial thinking and action within.


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Primary motive for

being in business

Profits and growing

market share

Profits and maintaining

market share

Decision making

FlexibilityStructure

Coordination

capability

Inflexible

organisational

structure

Coordinate large-scale

initiatives

Hierarchical decision-

making

Organisational

culture

Orientation

(Customer vs

Product vs process)

Potential to

innovate

Employment

practices

Contextual

Factor

Strategy

Characteristic

Competitive

position assets

Ability to mobilise

resources

Large Companies

Established assets &

cash flow

Good access to capital

from a variety of

sources

SMEs

Cash flow

challenges

Capital constrained

Self employed

Profits and sustaining

livelihood

Low cash flow levels

Low to non-existent

capital

Not-for profit and

social ventures

Targeted service

delivery for social and

economic

improvementCash flow challenges

Capital constrained,

relying on donations

and other sources

Public-sector

Equitable distribution

of essential goodsand services to

societyEstablished assets

and cash flow

Good access to

capital from public

purse

Family Businesses

Profits and growth

Established assets and

cash flow

Access to limited

family money

Organisation type

Influence on entrepreneurial thinking

and action

Governance rules

make smaller,

uncertain initiatives

harder to pursueStandardised, inflexible

employment practices

Product or service

focused

Limited focus on

entrepreneurship.

Forays into new

markets, products and

services mostly

initiated due to

competitive pressures.

Flexible

organisational

structure

Narrower, sharper

focus

Faster Decision-

Making

Greater potential

for continuous

innovation

Ability to offer

flexible

employment

packagesCustomer focused

Entrepreneurial

thinking and action

directed towards

establishing

competitive

advantage.

N/A

Limited to individual

capability

Owner-driven

decision making, very

fast

Limited potential to

innovate due to lack

of resources

N/A

Customer focused

Entrepreneurial

thinking and action

directed to ensure

business survival.

Flexible, project

oriented

organisational

structureCoordinate large-

scale initiatives

Typically hierarchical

decision-making, but

field staff have more

autonomy

Potential for

innovation exists

Flexible employment,

relying on a mix own

employees and

volunteers

Customer focused

Entrepreneurial

thinking and action

geared towards

acquiring resources

and managing with

available resources.

Inflexible

organisational

structure

Coordinate large-

scale initiatives

Hierarchical decision-

making often

influenced by

political imperatives

Governance rules

make smaller,

uncertain initiatives

harder to pursue

Standardised,

inflexible

employmentracticesProcess oriented

Limited to no focus

on entrepreneurship.

Primarily driven by

policy directives and

guidelines.

Flexible to non-existent

structure

Limited to

organizational

ca abilitDecision making

influenced by head of

family

Limited, bound by

traditional family

values

Unstructured, often

driven by instinct

Depends on the nature

of the business

Entrepreneurial

thinking and action

aligned with family

aspirations and

priorities.


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4. Entrepreneurship in a Corporate Environment

Corporate Entrepreneurship

Corporate entrepreneurship refers to the identification of new business opportunities anddevelopment of new ideas and ventures to exploit those opportunities within organisations.

(Stevenson, Roberts and Grousbeck, 1989) define corporate entrepreneurship as the process by

which individuals inside organisations pursue opportunities without regard to the resources they

currently control.

Birkinshaw, (2003) has identified four schools of thought on entrepreneurship in a corporate

environment as follows:

1.Corporate Venturing: New business ventures created from the mainstream business but managed

separately.

2.Intrapreneurship: Empowering the individual employee and his or her propensity to act in an

entrepreneurial way.

3.Entrepreneurial Transformation: Manipulating the firms culture and organization systems,

thereby inducing individuals to act in a more entrepreneurial way.

4.Bringing the Market Inside: Managing the organisations resource allocation and people

management systems and use of market techniques such as spin-offs and corporate venture capital

operations.

Innovation

In a corporate environment, entrepreneurship (or intrapreneurship) is also closely linked with the

term innovation and often the terms are used interchangably. Freeman and Engel (2007) refer to

innovation as 'a process that begins with a novel idea and concludes with market introduction'. They

also highlight two forms of the innovation process in relation to technological innovations - the

Corporate Model and the Entrepreneurial Model. In a related article, Engel (2011) considers how

disruptive innovations go beyond the novel technical breakthrough and involve disruptive business

models. In these cases corporates may gain insights into managing innovation and corporate

entrepreneurship from exploration of the processes by which venture capital supports the

entrepreneurial model.

Open Innovation

Over the last decade innovations within established corporate organisations has become more open

(Chesbrough, 2003a) by exploiting the flow of knowledge between an organisation and its external

environment as a fundamental part of the innovation process. 'Firms can and should use external

ideas as well as internal ideas and internal and external paths to market as firms look to advance

their technology' (Chesbrough, 2003b). Open innovation exists in both small and large firms, but are

most prevalent in high technology industries such as electronics, telecommunications and


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pharmaceuticals. These organisations may either implement open innovation to strengthen their

existing innovation pipeline, or they may be striving to innovate beyond their core business. Mortara

and Minshall (2011) that adoption of open innovation is not only dependant on their innovation

reqiurements, but also on timing and the culture of the organisation.

Skunk Works and Semco

Whilst many innovation processes are highly managed, others happen within organisations but

much more informally and not hampered by the bureaucracy of organisational life. One early

example of this is 'Skunk Works' a term originally coined by Lockheed Martin in the USA as a special

team worked on the development of fighter jets during World War II. The term is now often used to

describe teams working on special or secret projects. Skunk works can result in successful

innovations and entrepreneurial activity especially where it is part of the cultural fabric of an

organisation.

Another and very extreme example of more informal innovation is the Brazilian manufacturing

machinery company Semco, a highly unusual workplace 'led' by Ricardo Semler, where the entire

culture of the organisation is based upon the natural motivations of the employees and where none

of the more conventional 'rules of work' apply, enabling creativity to be exploited to the full (Semler,

2007).

References

Birkinshaw, J. (2003). Strategy+Business, 30(Spring)

Chesbrough, H. W. (2003a).The Era of Open Innovation. MIT Sloan Management Review, 44(3):

pp. 35-41

Chesbrough, H. W. (2003b). Open Innovation: The New Imperative for Creating and Profiting from

Technology. Boston: Harvard Business School Press HD45.C43

Engel, J. S. (2011).Accelerating Corporate Innovation: Lessons from the Venture Capital Model.

Research Technology Management, 54(3): pp. 36-43

Freeman, J. and Engel, J. S. (2007).Models of Innovation: Start-ups and Mature Corporations.

California Management Review, 50(1): pp. 94-119

Mortara, L. and Minshall, T. (2011).How Do Large Multinational Companies Implement OpenInnovation? Technovation, 31(10/11): pp. 586-597

Semler, R. (2007).Out of This World: Doing Things the Semco Way. Global Business &

Organizational Excellence, 26(5): pp. 13-21

Stevenson, H., Roberts, M. and Grousbeck, I. (1989) New Business Ventures and the Entrepreneur.

Homewood, IL: Irwin


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5. Example Entrepreneurship in 3M

3M was founded in 1902 at the Lake Superior town of Two Harbors, Minn. In 2004, sales topped $20

billion for the first time, with innovative new products contributing significantly to growth. Recent

innovations include Post-it Super Sticky Notes, Scotch Transparent Duct Tape, optical films for LCD

televisions and a new family of Scotch-Brite Cleaning Products.

During this time, 3M had diversified into a range of markets with innovative products, regularly

earning top-10 rankings in Fortune magazines annual survey of Americas Most Admired

Corporations. In 1995, 3M was awarded the National Medal of Technology , the U.S. governments

top award for innovation.

3Ms accomplishments in innovation have come about through a sustained focus on innovation and

entrepreneurship throughout its history. The organisational culture that supported this focus had its

origins in the basic rules of management set out by William L. McKnight, its President, in 1948:

"As our business grows, it becomes increasingly necessary to delegate responsibility and to

encourage men and women to exercise their initiative. This requires considerable tolerance. Those

men and women, to whom we delegate authority and responsibility, if they are good people, are

going to want to do their jobs in their own way.

"Mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as

serious in the long run as the mistakes management will make if it undertakes to tell those in

authority exactly how they must do their jobs.

"Management that is destructively critical when mistakes are made kills initiative. And it's essentialthat we have many people with initiative if we are to continue to grow."

These principles have been manifest in 3Ms strategy, structure and culture through the

establishment of strategic objectives, mobilisation of resources, employment policies, remuneration

and recognition of success (Collins and Porras, 1995).

The table below summarizes the contextual factors supporting entrepreneurship within 3M.


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Contextual

FactorCharacteristic Manifestation at 3M

Strategy Primary motive for

being in business

30 Percent Rule: Thirty percent of business unit revenues

must come from products introduced within the last four

years.

Competitive

position assets

R&D Spending: Approximately 67 percent of sales

revenue is spent on research and development at 3M and

has consistently increased R&D spending. Compared to

other manufacturing companies, the 3M spends on average

twice the amount in R&D enabling it to establish a

competitive position in innovative ideas.

Ability to mobilise

resources

Availability of Seed Capital: Seed capital can be raised from

within the business unit, other business units or from thecorporate office. After securing seed capital, the product

champion assembles a venture team to develop the

product.

Structure Flexibility Dual-Ladder Career Path: There are two career ladders on

the technical and management tracks, both allowing equal

advancement opportunities, enabling employees to stay

focused on their research and professional interests.

Coordinationcapability

Internal Technology Forums: 3M supports formal andinformal forums for sharing knowledge through a Technical

Council and a Technology Forum for exchange of ideas

between scientists. Other mechanisms for technology sharing

include email directories, an annual in-house trade show, and

awards for successful sharing of new technology between

business units.

Decision making Internal organisation: Each business unit is run as a profit

centre. The product champion is given the opportunity to

head the new business unit.

Organisational

culture

Potential to

innovate

Three-Tiered Research: Performed by laboratories running at

the business unit, Sector and corporate levels, focusing on

specific markets, applications with 3-to-10 year time horizon

for product viability and basic research with a time horizon of

as many as 20 years, respectively.

Employment

practices

15 Percent Option: Many employees can spend up to 15

percent of their workweek pursuing individual projects of

their own choice with no need to disclose the project to a

manager.


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Orientation

(Customer vs

Product vs process)

Customer Contact: Regular interactions between 3M

scientists and customers to learn how 3M products are being

used and to generate new product ideas.

References

Collins, J. C. and Porras, J. L (2005). Built to Last: Successful Habits of Visionary Companies. 10th

ed.

London: Random House HF5386.C64

6. Entrepreneurship in Other Organisational Contexts

So far within this theme we have focused on enrepreneurship within the corporate organisationalenvironment and in the previous theme we have looked at entrepreneurship within sustainability

and the context of social enterprises. For much of this programme we will be considering

entrepreneurship and the business start-up, however, entrepreneurship also exists within the public

sector, universities and family businesses, so it is relevant to mention each of these here.

Entrepreneurship within the Public Sector

Entrepreneurship within the public sector is often less about bringing new products to market, but

more normally concerned with more effectively servicing the needs of its users or 'customers'

through greater efficiency or by developing new processes or ways of working i.e. by enhancing

performance. Kearny et. al. (2007) propose a model for corporate entrepreneurship within the

public sector which highlights the dynamic, complex and political external environment and how

public sector organisations although they exist within bureaucratic structures with rules, structures

and processes that may act as barriers to entrepreneurship. But they highlight that entrepreneurship

could provide a valuable route to meet the ever changing requirements and wants of clients.

Entrepreneurship within Universities

Higher education and more specifically universities are often considered as a place for

entrepreneurship to thrive.Indeed many universities have technology transfer operations which

assist academic inventors in licensing out novel science and technology or creating spin off

companies, with the academic inventors either balancing a dual entrepreneurial and academic role

or making a choice between two possible career pathways. Over the last decade or so universities inthe UK and around the world have initiated entrepreneurial education programmes and are

increasingly interacting more frequently and closely with businesses, and at the same time students

are initiating more entrepreneurial activities and societies, with the aim of increasing the number of

graduates who become entrepreneurs.

Entrepreneurship within Family Businesses

Entrepreneurship and especially necessity entrepreneurship has triggered the formation of many

family businesses, however research into the extent to which family business hinder or promote

entrepreneurship is somewhat inconclusive finding that whilst some provide environments that

support entrepreneurial activities, others are risk averse and slow to change. One factor that mayaffect entrepreneurship within family firms is the time horizon for decision making and action, as


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within family firms there is much greater interest in the long-run performance especially where the

businesses are being passed on to succeeding generations of the family owners (Lumpkin et. al.,

2010).

References

Kearney, C., Hisrich, R. and Roche, F. (2007).Facilitating Public Sector Corporate Entrepreneurship

Process: A Conceptual Model.Journal of Enterprising Culture, 15(3): pp. 275-299

Lumpkin, G. T., Brigham, K. H., and Moss, T. W. (2010).Long-term Orientation: Implications for the

Entrepreneurial Orientation and Performance of Family Businesses. Entrepreneurship & Regional

Development, 22(3/4): pp. 241-264

7. Global Trends: Political, Economic, Social, Technological, Environmental, Legal (PESTEL) Analysis

The macro-environment has many factors which affect organisations and a knowledge of the key

features, the changes taking place within them and the drivers behind those changes is essential for

entrepreneurs and managers of established organisations alike. One way to think about the macro-

environment and to help categorise thinking and knowledge around this is to use a model such as

PESTEL. PESTEL classifies the key components of the macro-environment as:

o Political factors - government policies and political decisions which may impact on vital areas

for business for example, health, infrastructure and so on

o Economic factors - for example, economic growth (or recession), inflation, interest rates,

exchange rates and taxation

o Social factors - changes in social trends, values, lifestyles, demographics etc that may impact

on both the workforce and demand for products

o Technological factors - research and development and new technologies which can create

new products and processes

o Environmental factors - climate change and the weather for example and the growing desire

to protect the environment

o Legal factors - the legal environment in which firms operate. Changes here can affect costs,

as well as demand for products.

Although the model serves to assist classification and thinking around different aspects of the

macro-environment it is essential to think of the macro-environment as a system (Fahey and

Narayanan, 1986) in that the factors are related and each factor affects every other factor.

Entrepreneurs need to go beyond listing the changes in each component but need to really assess

the driving forces beneath as it will be these which provide sources of opportunity.

It is also important for entrepreneurs to determine at what level to apply a PESTEL analysis. For an

early stage entrepreneur with global aspirations, it may be necessary to consider each element at a

national or even local level as well as the global trends. For more established organisations a global

view may be the most appropriate level, but a focus on a particular business or product area may be

most helpful.


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References

Fahey, L. and Narayanan, V.K., (1986). Macroenvironmental Analysis for Strategic Management.

West Publishing, St Paul, MN.

Oxford University Press (2007) Foundations of Economics

(http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm)

Core and Additional Readings

Core Reading:

Entrepreneurship and Small Business - Start-up, growth andmaturity, P. Burns: Palgrave (2010), 3rd

Edition - Chapters 8 and 18

Freeman, J. and Engel, J.S., (2007). Models of Innovation: Start-ups and Mature Corporations.

California Management Review, Fall 2007, Vol. 50, No. 1, p94-119

Lichtenthaler, U., (2011). Open Innovation: Past Research, Current Debates and Future Directions.

Academy of Management Perspectives, Vol. 25 Issue 1, p75-93

You are encouraged to search the literature to review at least one journal article which provides

relevant insights for your entrepreneurial venture.

Additional reading:

Timmons, A. New Venture Creation, 4th Edition, Irwin/McGraw-Hill, 1995

Schumpeter, J.A. Capitalism, Socialism and Democracy, George Allen & Unwin, 1941
http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm)http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm)http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm)http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm)


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Organisational and Global Context

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