The environmental determinants of corporate entrepreneurship
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THE ENVIRONMENTAL DETERMINANTS OF CORPORATE ENTREPRENEURSHIP by BAKAE AUBREY MOKOENA DISSERTATION submitted in partial fulfilment of the requirements for the degree MAGISTER COMMERCII in BUSINESS MANAGEMENT in the FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES at the RAND AFRIKAANS UNIVERSITY STUDY LEADER: PROF. W.M. CONRADIE NOVEMBER 1999
Transcript of The environmental determinants of corporate entrepreneurship
THE ENVIRONMENTAL DETERMINANTS
OF CORPORATE ENTREPRENEURSHIP
by
BAKAE AUBREY MOKOENA
DISSERTATION
submitted in partial fulfilment
of the requirements for the degree
MAGISTER COMMERCII
in
BUSINESS MANAGEMENT
in the
FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES
at the
RAND AFRIKAANS UNIVERSITY
STUDY LEADER: PROF. W.M. CONRADIE
NOVEMBER 1999
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FOREWORD AND ACKNOWLEDGEMENTS
I dedicate this dissertation to the Almighty God who has given me the talents and
grace to complete this study.
I would like to express my gratitude and appreciation to the following people who
have made a contribution to the successful completion of my study:
My study leader, Prof. Willie Conradie, for his guidance and continued
support.
My wife, Thondiwe and daughters Mpumi and Dudu and especially my son,
Lehlohonolo, who have been my inspiration and had to make a lot of sacrifices
on my behalf.
My parents, for the encouragement and financial support, parents-in-law and
other family members for their continued support and interest in my study.
Mrs. Ria Uys for her invaluable contribution to the editing and refinement of my
dissertation.
My colleagues for their interest and understanding when it was not always
possible to give my best.
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SYNOPSIS
DIE OMGEWINGSDETERMINANTE VAN
KORPORATIEWE ENTREPRENEURSKAP
Die milieu waarbinne organisasies hul sake bedryf word toenemend kompleks,
onseker en onstuimig. 'n Bydraende faktor hiertoe is die toenemende
integrasie en globalisasie van die wereldekonomie. Laasgenoemde faktor dra
daartoe by dat die bestuur van ondernemings gedwing word om na uitwee te
soek, ten einde die onderneming te laat oorleef en om ook in die toekoms
suksesvol te wees. Werknemers se aangebore en inherente talente om
skeppend en innoverend op te tree, maar wat meerendeels deur burokratiese
reels, optredes en ander faktore onderdruk word, blyk om meer en meer 'n
uitkoms moontlikheid te bied.
Een van die grootste uitdagings wat voor die deur van ondernemingsbestuur la,
is dan die uitdaging om die onderneming se oorheersende kultuur, asook om al
die individuele werknemers se waardesisteme en werkspraktyke, meer en meer
in 'n entrepreneuriese gedragsmanifestasie te stuur. Hierdeur kan aan die
lewensnoodsaaklike eise van deurlopende innovasie en die kontinue daar-
stelling van mededingende voordele vir die wen-onderneming voldoen word.
Bovermelde entrepreneuriese kultuur, deurlopende innovasie en mededing-
ende voordele sal alleenlik realiseer indien bestuur aan sekere voorwaardes
voldoen. Een sodanige eis is dat daar 'n deeglike kennis en begrip vir die
besonderse omgewingsdeterminante wat 'n direkte invloed op die aanwesig-
heid (of afwesigheid) van sodanige entrepreneuriese gedragsmanifestasies
van werknemers moet wees. Deur oor 'n deeglike kennis van die tersake om-
gewingsdeterminante te beskik, kan die bestuur van 'n onderneming daad-
werklike stappe neem om die negatiewe omgewingsinvloede te minimaliseer,
asook om die positiewe omgewingsdeterminante te optimaliseer. Sodoende
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TABLE OF CONTENTS
Page
FOREWORD AND ACKNOWLEDGEMENTS
SYNOPSIS ii
LIST OF TABLES vii
LIST OF FIGURES vii
CHAPTER 1: INTRODUCTION
1.1 Background to the study 1
1.2 Problem definition 5
1.3 Objectives of the study 7
1.4 Methodology of the study 8
1.5 Demarcation of the study 10
CHAPTER 2: THE NATURE OF ENTREPRENEURSHIP AND
PERSPECTIVES ON INTRAPRENEURSHIP
2.1 Introduction 12
2.2 Defining entrepreneurship 13
2.2.1 A proposed definition of entrepreneurship 16
2.3 The evolving nature of entrepreneurship 17
2.3.1 The trait approach 17
2.3.2 The behavioural approach 18
2.3.3 The multidimensional approach 20
2.4 Myths and realities about entrepreneurship 22
2.5 Corporate entrepreneurship 23
2.5.1 The necessity for intrapreneurship and intrapreneurs 25
2.5.2 The intrapreneurial process 29
2.5.3 Different types of corporate entrepreneurs 32
2.6 Comparisons and contrasts between entrepreneurship and
intrapreneurship 34
Page
2.7 Summary
36
CHAPTER 3: MACRO ENVIRONMENTAL FACTORS
3.1 Introduction 38
3.2 The economic environment 40
3.2.1 The specific economic system 41
3.2.2 The industrial structure 42
3.3 Social and cultural environment 43
3.4 The technological environment 45
3.5 The marketing environment 47
3.5.1 Marketing strategy 49
3.5.2 Industry environment 50
3.5.3 Competitors 51
3.5.4 Suppliers 52
3.6 International environment 52
3.7 Education and training 55
3.8 Environmental turbulence 57
3.9 The legal-political environment 59
3.10 Summary 60
CHAPTER 4: MICRO ENVIRONMENTAL FACTORS
4.1 Introduction 62
4.2 Innovation 63
4.2.1 Individual and organisational qualities in innovation 64
4.3 Opportunity recognition 67
4.4 Management support 69
4.4.1 Training 70
4.4.2 Intrapreneurship programs 71
4.4.3 Sponsorship or mentors in intrapreneurship 73
4.5 Availability of corporate resources 75
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Page
4.5.1 Corporate financing 76
4.5.2 Human resources practices 77
4.6 Corporate bureaucracy 79
4.7 Summary 81
CHAPTER 5: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary 83
5.2 Conclusion 85
5.3 Recommendations 87
BIBLIOGRAPHY 90
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Page
LIST OF TABLES
Table 2.1: Summary of approaches in defining entrepreneurship 15
Table 2.2: The factors that necessitate intrapreneurship 28
Table 2.3: The different types of corporate entrepreneurs 33
LIST OF FIGURES
Figure 2.1: The entrepreneurial processes 20
Figure 2.2: The four major dimensions of the entrepreneurial process 21
Figure 2.3: The innovation gap 26
Figure 2.4: The intrapreneurial process 32
Figure 3.1: A model of environmental turbulence as a determinant of
intrapreneurial activity 57
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CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
We are in mid stride between an old and a new era, and we have not yet found
our way. We know the old no longer works, the new is not yet formed clearly
enough to be believed. We are developing a new story and in the process
altering much of what we think, feel and do" (Nicole, as quoted by Veldsman,
1995:1).
This statement implies that the business environment, in which organisations
have to operate, is like weather, which is predicted poorly. However, what
happens in the business environment is more important than what the weather
might be. The business environment has become increasingly complex,
uncertain and turbulent and has manifested an ever-increasing rate of change
... changes, which are for example, raising and shifting stakeholder's
expectations and reconstructions.
The impact of business on our world is profound and growing. For
organisations to cope with such a turbulent, an ever-changing business
environment, management must be aware of tendencies in the macro
environment so as to provide a positive climate for creativity and innovation.
Everyone has a working knowledge and experiences of the changes occurring
in the business world. Business today has great, and far more influence on
entrepreneurship than government or education because it creates the culture
and society in which children will grow up.
Change is no longer an option. Numerous macroscopic changes are expected
to transform the business environment of the new millennium. Rapid and often
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dramatic change is almost a given in contemporary South African business life.
Effective catalysts or change agents to facilitate meaningful change as a
strategic business target are needed. 'It is time to light the fires of change for if
we don't change history, history will change us" (Fuhr, 1995:17).
Understanding these changes is important because South Africa, as a
developing country, has to solve its problems and create its future in the
context of globalisation.
The speed and extent of change and its acceleration present great
opportunities for those who are alert and nimbler. We need to be at the
forefront to attain world class ourselves, or the opportunities will pass us by
and we will be eclipsed by our local and international competitors" (Allen,
1996:26). To deal with these extensive changes, present day corporations
have to continuously examine their policies in order to determine appropriate
strategies. The route to success in the corporate Olympics means operating
under a new, apparently strategic imperative; "to do more with less".
Today's world is a competitive one. Globalisation has made a going-it-alone
strategy both expensive and risky. Global events, industrial and technological
growth and development, international marketing and finance - all create both
opportunities and pressures for organisations to perform (Stolovitch & Keeps,
1992:xix). It is in the area of competitive strategy that entrepreneurship will be
pervasive. Successful organisations must provide quality products and
services, demonstrate flexibility and adaptability to changing client needs and
manage internal resources cost effectively and efficiently. While the spotlight
is on such technical innovations, the less dramatic yet essential role that
entrepreneurs play as they perform there daily tasks remain paramount.
Certain leadership and management truths from the past have endured
because they are consistent with human nature and the need to adapt to
change. They must be preserved and melded with new truths, as they are
discovered (Allen, 1996:26). One such truth is that the ethos of
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entrepreneurship will be pervasive among successful firms, a development that
augurs well for the field of entrepreneurship research (Chittipedi & Wallet,
1990:94).
'It is much easier and safer for companies to stay with the familiar than to
explore the unknown', assert Stevenson and Gumpert (1985: 85). Staying with
the familiar may have its dangers, however, in today's fast changing world.
With dramatically changing environments, the strategic thinking of the past may
be less relevant. An injection of entrepreneurship, by which creative people
are encouraged to strike out and come up with new products or services, may
be very important to the financial health of organisations. The notion that
entrepreneurship is an all-or-none trait that some people or organisation
possesses and others don't should be discarded. Rather, intrapreneuring
should be viewed in the context of a range of behaviour.
In the past four decades, most firms pursued the 'economic scale of approach"
for managing organisations. 'Big Corporations': the Fortune 500's were the
preferred way of doing business (Ivancevich, Lorenzi & Skinner, 1994:xi).
However, today big" has been replaced with concern about strategic issues
like global competitiveness and the need to change and entrepreneurship.
Manning (1987:3) is of the opinion that the vital step in competing for the future
is the quest for industry foresight. This is the race to gain an understanding
deeper than competitors of the trends and discontinuities that could be used to
transform the business environment of the millennium.
When an organisation has a steady growth, people feel secure, is more
productive, and has more fun. Even an existing status quo does not mean
standing still, it means replacing old products with new and good ones
(Stevenson & Gumpert, 1985:86). South Africa and South African companies,
in particular, are faced with fundamental changes. Entrepreneurship is one of
the tools companies must possess and know how to acquire as a prerequisite
to success.
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To cope with the business challenges of the new millennium, turning to
corporate entrepreneurship or intrapreneurship as an apparent strategic
imperative and a means of growth is recommended by the author as explained
later in subsection 2.5.1.
Intrapreneurship can thus be seen as one of the most important ingredients
within every successful organisation. Corporate entrepreneurs are dedicated,
hard working employees whose efforts keep the machinery going.
Intrapreneurs, are the people who have the broad authority to bring together
resources and to initiate actions that will achieve the objectives of their
companies. They want the freedom to innovate and to realise their vision.
The business leaders of the future will turn to entrepreneurship in a truly
effective way. They will have to go the standard route of running a search and
open candidacy to anyone in the company, who chooses to put himself/herself
forward. Nasser and Viviers (1993:10) found out that the most important
success factor in coping with change in the South African business
environment is the mind shift (gear change) by management in adopting new
ways of thinking about the fundamentals of business, when facing a
substantially new set of circumstances.
In adopting a new way of thinking about the fundamentals of business, an
injection of corporate entrepreneurship by management is needed. An injection
of that intrapreneurship, by which creative people are encouraged to strike out
and come up with new products and services, may thus be one of the most
important survival skills in the new millennium.
Many authors, captains of industry and politicians talk about this need for
entrepreneurial behaviour, but few are able to define entrepreneurship and
fewer are able to indicate the environmental factors enhancing or impeding that
entrepreneurial orientation.
1.2 PROBLEM DEFINITION
As product life cycles are contracting, entrepreneurs, who attempt to create
new ventures within the context of existing corporations, find themselves on
unfamiliar ground. Organisations frequently remain the same over time and
any attempts to alter their form, tend to fail. Attempting to create new ventures
within a mature business demands an approach that differs significantly from
traditional ways of doing things (Shays & Chambeau, 1984:17). Very few
organisations provide an environment conducive to the cultivation of new ideas
to stay ahead of global competitors.
As mature businesses look for growth opportunities by entering new markets
and introducing new products and services, a new style of management is
required. Companies are feeling the pinch and realise that they cannot keep
the products or markets to themselves for long. If a company is to remain
productive and competitive, its managers need to be semi autonomous; they
must believe that they have the freedom to take the initiative by trying new
ideas and be entrepreneurial (Pryor & Shays, 1993:43). The latest trend in
management style is not to try and implement each and every style that may
crop up. Companies should rather look at their specific circumstances and fit
the management style they think is best for their specific environment ...
whatever management chooses, will have to be adapted to their specific
environment.
One of the biggest challenges facing organisations today, is the ability to
develop their entrepreneurial orientation. They do not know how to develop
that entrepreneurial construct within their business environment. According to
Pryor and Shays (1993:44) part of the problem is that existing management
models are not adequate for developing products and services that are truly
new and not simply line extensions.
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The entrepreneurial process recognises that structure in the traditional sense
(for instance policies, budgets, and the like) is still a necessary instrument of
organisational change but that flexible fast moving structures are required to
cope with our current and future environment. This paradox aggravates the
problem - how can a sense of innovation, autonomy and entrepreneurship be
encouraged despite the organisational trappings? Also, how can large
seemingly bureaucratic organisations create an environment that will foster
entrepreneurship and innovation? (Cornwall & Perlman, 1990:3).
In the broader context, the nature of the problem lies in the situation in our
organisations. As Du Rand (1993:3) puts it We are at times obsessed with a
problem while ignoring change or improvement': This is true of the world's
external business environment. The rules of the game change, and to keep on
playing according to a previous set of rules, is suicide. As a rapidly changing
environment generates appearing and disappearing opportunities, the
proportions of opportunities that are successfully identified and developed
should be balanced against those that were lost (Maas & Fox, 1997:8-10).
Organisations and individuals finding themselves in the midst of a rapidly
changing environment have increasingly to rely on unique solutions to survive
and grow. Long term competitiveness depends on managers' willingness to
continually challenge their managerial frames. The challenge is for
organisations to change from what they are, without losing sight of what they
are all about. More specifically, it is implied that if a business organisation is to
remain competitive, it must continuously adapt to its environment.
The role of entrepreneurship as the key solution to the country's socio-
economic problem, cannot be understated as it is the most satisfying one, both
in terms of financial gain and self-actualisation needs (De Coning, 1985:6).
Unlocking latent entrepreneurial potential within all population groups is then
one of the priorities in the work situation of various organisations.
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There is absolutely no doubt that most organisations do not respond to
environmental changes appropriately. This is evident given the complexities of
the South African business environment. Entrepreneurship offers a sound way
to respond to the business challenges of 2000 and beyond. New competition
at home and abroad is rapidly demonstrating that large firms must innovate or
die.
For organisations to cope with the challenges of modern business management
must be able to improve on their existing practices, expand on their current
practices and act innovately (Drucker, 1985:16). A climate of innovation and
creativity must be provided, because the efficiency of organisational outputs
like global competitiveness etc. will be the result of management's attempt to
create congruity between the external and the internal environments. In order
to do so, organisations need to develop a clear understanding of the nature of
corporate entrepreneurship and the environment within which it functions. This
understanding will enable organisations to provide conditions or climates within
which intrapreneurs may pursue their own creative and innovative ideas to the
benefit of both parties (Cornwall & Perlman, 1990:26).
intrapreneurs will make all the difference between our firm's success and
failures. Without them, innovations remain potential or moves at the glacial
pace of the bureaucratic process that no longer suffices in an environment
filled with competition': asserts Pinchot (1985:xiii). This dissertation considers
research into the nature and contributions of the environment in which
intrapreneurs act.
1.3 OBJECTIVES OF THE STUDY
The overall purpose of this study is to attain an understanding of the
determinants and real driving forces in the environment that can either impede
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or enhance corporate entrepreneurship. To achieve this purpose, the following
objectives are set:
The first objective is to look at the nature, differences and links between
entrepreneurship and intrapreneurship, and thus to assess and to look at
intrapreneurship as a strategic management tool to maintain organisational
competitiveness and to innovate constantly.
Secondly to achieve a clear understanding of the external or macro
environment in which intrapreneurship will flourish or decay. The purpose
is to categorise and analyse the roles played by these almost
uncontrollable variables on intrapreneurial behaviour.
The third objective of this study is to identify some of the most important
internal or micro-environmental factors (within the individual organisation)
promoting or impeding intrapreneurship within that organisation.
A last objective is to conclude on the major findings of the study and to
propose some recommendations
1.4 METHODOLOGY OF THE STUDY
The method used in this dissertation is that of a literature study. A literature
survey is conducted on the latest viewpoints concerning entrepreneurship and
intrapreneurship. By analysing the available literature, the research objectives
are refined. The literature survey is the primary source of information.
The collected information is described, interpreted and evaluated on a
qualitative basis to address the purpose as well as the objectives of the study.
The availability of literature specifically describing the impact of external or
macro environmental factors on intrapreneurship is lacking and this could be
attributed to poor research on intrapreneurship. Fourie (1995:5) further claims
that the field of study of intrapreneurship is still very new and poorly
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researched. However, most of this (Bateman & Zeithmal, 1993:249 as quoted
by Fourie, 1995:6 and Pinchot, 1995:3) describes intrapreneurs as venture
creators in big corporations. These authors further describe entrepreneurs as
people who fill the role of an intrapreneur outside an organisation.
The author was compelled to adapt most of the information on entrepreneurs to
intrapreneurs and to change the concept of entrepreneurship quoted by most
outside sources to intrapreneurship.
Conradie (1996:8-9) refers to a study that was done of the writings of more than
seventy acclaimed authors on the topic of entrepreneurship, its definition and
meaning. That study's conclusion was that the terms entrepreneur and
entrepreneurship are being used haphazardly by many authors and that this
indicates an untidiness of viewpoints. Another point to emerge for the author's
argument in changing entrepreneurship to intrapreneurship is that Oliver, Pass,
Taylor and Taylor (1991:10) report that most intrapreneurs they interviewed in
their studies, said there were times when they had to go outside their
organisations and take the role of entrepreneurs to start off projects before
bringing it back into their companies for acceptance and further development.
In Chapter 2 the nature of entrepreneurship and some perspectives on
intrapreneurship is presented. It is pointed out that the actual behaviour and
actions of entrepreneurs are quite the same as those of intrapreneurs ... it is
only the environment in which they act that are different. The entrepreneur is
self-employed while the intrapreneur works for a (big) organisation as an
employee. McGinnes and Verney (1987:19) explain that the purpose of
intrapreneurship is to harness the entrepreneurial spirit of an organisation.
They indicate that the terms "intrapreneurship and entrepreneurship within the
firm" could just as well be called "managing innovation". The concept
intrapreneur and entrepreneur are synonymous with initiated and added value
innovation.
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The approach followed in this study in order to deal with the above-mentioned
confusion is to refer sometimes to entrepreneurs and intrapreneurs as
synonymous concepts. Whenever the actual source consulted referred to
entrepreneur(s), whilst this study mentions intrapreneur(s), this will be indicated
by an asterisk throughout this study.
1.5 DEMARCATION OF THE STUDY
Chapter 2: The nature of entrepreneurship and perspectives on
intrapreneurship.
This chapter deals with the theoretical underpinnings and previous research on
both entrepreneurship and intrapreneurship as concepts. Entrepreneurship
and intrapreneurship are terms used widely in the literature and management
discussions of today. The aim of the chapter is to review what is known about
both concepts. Parallels are drawn between both concepts as well as their
implications.
Chapter 3: Macro-environmental factors.
The macro or external environmental infrastructure consists of elements
outside an organisation that are relevant to its operations. Organisations are
not self-sufficient and exchange resources with the environment and depend on
it for survival. This chapter is aimed at the identification of those elements that
present certain opportunities and threats to any organisation.
Chapter 4: Micro-environmental factors.
The objective of this chapter is to identify some of the micro or internal
environmental factors that may either impede or promote an intrapreneurial
behaviour. These determinants are important in shaping the organisation's
management in devising successful competitive strategies for the future, which
must be highly intrapreneurial in nature.
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Chapter 5: Summary, Conclusions and Recommendations.
Intrapreneurs are culture heroes today and one of the questions most
frequently asked is how established companies can get some intrapreneurial
spirit that is appealing to their employees. A summary with conclusions of the
study is given and recommendations are made where appropriate.
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CHAPTER 2
THE NATURE OF ENTREPRENEURSHIP AND
PERSPECTIVES ON INTRAPRENEURSHIP
2.1 INTRODUCTION
Entrepreneurs and intrapreneurs are terms used widely and are almost
synonymous with innovation initiated by employees. A certain amount of
ambiguity in these concepts has necessitated at this literature overview on both
concepts. It is therefore important to look more closely at the concepts on
which entrepreneurship was coined and to the main trends within this field of
intrapreneurship. The evolution of both concepts provides a foundation for
further scrutiny of these dynamic business philosophies.
Finding ways to increase productivity is a major challenge for South Africa.
Intrapreneurship is accepted as one of the instruments able to generate
prosperity in a rapidly changing environment. This leads to among other
things, job creation.
Intrapreneurship involves identifying an opportunity within an existing
enterprise and creating a profitable reality for the enterprise from this
opportunity in spite of the resources available. An opportunity is a single spark
that ignites an entrepreneurial explosion because there seems not to be a lack
of resources for improved products or services (Hannan & Freeman, 1989:312).
Corporate entrepreneurship allows corporations to tap the innovative talents of
their own workers and managers.
Although the initiative for the implementation of intrapreneuring might come
from an entrepreneur, it is the executive sponsor's responsibility to assist within
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the survival and prosperity of the company. In doing so, organisations need to
be better equipped and responsive in today's highly turbulent environment.
The aim of this chapter is to look into the theoretical perspectives of both
entrepreneurship and intrapreneurship. The chapter reviews what is known
about the nature of the practice and the practitioners of each. Differences and
the significance thereof, are also discussed.
2.2 DEFINING ENTREPRENEURSHIP
There is generally no accepted definition or model of what the entrepreneur is
or does (Churchill & Lewis, 1986:45). Theorists cannot agree on who
entrepreneurs are, what they do or why they do it. Little is known about
entrepreneurs, even though there is so much interest and many publications on
the subject. Indeed, many people who have long perceived themselves to be
successful entrepreneurs would not fit some of the definitions, which are now
being proposed (Cunningham & Lischeron, 1991:45). O'Neil, Terblanche and
Keyter (1997:2) argue that vague and sometimes contradictory definitions of
entrepreneurship proposed, as well as perception of the entrepreneur as kind
of mystical and complex character, have contributed to uncertainty as to what
an entrepreneur is.
As no single agreed on definition of entrepreneurship exists, defining and
understanding entrepreneurship has created a challenge for academic
researchers and writers (Cunningham & Lischeron, 1991:45). A study of the
concepts of "entrepreneur" and "entrepreneurship" reveals a number of varied
meanings. Although there is no single definition of entrepreneurship, and no
single profile that can represent today's entrepreneur, ongoing research
provides an increasingly focus on what an entrepreneur is (Bowler & Dawood,
1996:1).
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The word entrepreneurship" is derived from the French word: " entreprendre"
which is defined as a person who undertook the risk of a new enterprise
(Burch, 1986:13). The recognition of entrepreneurs also dates back to the
eighteenth century when Richard Cantillon used the term entrepreneur" to
refer to 'an originator" (O'Neil, et al. 1997:3). In business terms an
entrepreneur is a person who:
Recognises and seizes business opportunities.
Converts these opportunities into marketable ideas.
Adds value through time, effort and money.
Assumes the risks to implement ideas.
Realises the reward from these efforts (Bowler & Dawood, 1996:1).
Definitions of the entrepreneur generally refer to one who organises, manages
and assumes risks of a business or enterprise. Risk, novelty, initiative and
independence are found in most of these definitions (Hirsrich & Peters, 1989:8;
Timmons, 1994:5; Schollhammer & Kuriloff, 1979:7; Kroon & Moolman,
1992:20; Maas & Fox, 1979:3). Additional key concepts explored in greater
depths by Mare (1996:3) and O'Neil et al. (1997:3) includes:
Revitalised circumstances i.e. using or creating opportunities arising from
changing circumstances to bring about successful new circumstances;
Capitalising on opportunities; and
Generating increased prosperity.
Schumpeter (1934:8) added the notion of innovator and former of new combinations.
According to Drucker (1985:26) entrepreneurs are in fact, people who innovate and
innovation is the distinctive element of entrepreneurship.
Although an agreed upon definition may serve to unite the field of entrepreneurship,
research activity seems to fall within six schools of thought. These six schools of
thought view the notion of entrepreneurship from fundamentally different perspective
as illustrated by Cunningham and Lischeron (1991:47-56). See table 2.1.
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Table 2.1: Summary of approaches in defining entrepreneurship
Entrepreneurial Model
Central Focus Or Purpose
Assumption Definition
Great Person School
The entrepreneur has an initiative ability (a sixth sense) traits and instincts he/she is born with.
Without this inborn intuition, the individual would be like the rest of us, a mortal who lacks "what it takes".
Extra-ordinary achievers.
Psychological Characteristic School
Entrepreneurs have unique values, attitudes and needs, which drive them.
People behave in accordance with their values.
Founder. Control over means of production.
Classical School The central characteristic of entrepreneurial behaviour is innovation.
The critical aspect of entrepreneur- ship is in the process of doing rather than owning.
People who make innovations, bearing risk and uncertainty "Creative Destruction".
Management School
Entrepreneurs are organisers of an economic venture; they are people who organise, own, manage and assume the risk.
Entrepreneurs can be developed or be trained in the technical functions of management.
Creating value through the recognition of business opportunity, and the management of risk taking through the communicative and management skills.
Leadership School Entrepreneurs are leaders of people; they have the ability to adapt their style to the needs of the people.
An entrepreneur cannot accomplish his or her own goals alone, but depends on others.
"Social architect". Promotion and protection of values.
Intrapreneurship School
Entrepreneurial skills can be useful in complex organisations. Intrapreneurship is the development of independent units to create, market, and expand services.
Organisations need to adapt in order to survive. Entrepreneurial activity leads to organisational building and entrepreneurs becoming managers.
Those who pull together to promote innovation.
Source: Adapted from Cunningham and Lischeron (1991:47-56)
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The six schools of thought offer unique viewpoints to illustrate what the
entrepreneur does and what the functions and processes are. Although each
school provides different insights, there is a need to reconcile these various
schools of thought by recognising the importance of all of them. Trying to
suggest that one school of thought or set criteria is more important than others,
is like trying to suggest that one religion is more godly than another, because
each of the schools might provide insight into different aspects of the
phenomena (Cunningham & Lischeron, 1991:55).
2.2.1 A proposed definition of entrepreneurship
Although a single definition of entrepreneurship does not exist, a guiding
definition of entrepreneurship is proposed for the purpose of this study.
Based on the behavioural approach of entrepreneurship, the following
definition by Timmons (1994:5) is preferred in this context:
Entrepreneurship is a process of creating or seizing an opportunity and
pursuing it regardless of the resources currently controlled.
There are three main components to this definition:
Firstly, the process involves the creating and building something of value.
Fundamentally entrepreneurship is a human creative art.
Secondly, the business opportunity recognised should be viable for
successful implementation of the venture; i.e. the opportunity should be
durable, timely and attractive.
Thirdly, the business opportunities should be pursued successfully
regardless of resources available.
17
Entrepreneurship is creating and building something of value from practically
nothing.
2.3 THE EVOLVING NATURE OF ENTREPRENEURSHIP
2.3.1 The trait approach
This approach is grounded in the study of successful people who tend to
exhibit similar characteristics that, if copied, would increase success
opportunities for those involved. This reasoning also provides the belief that
certain traits that are established and supported in life lead to entrepreneurial
success.
In general, most past research studies seem to suggest that in order to identify
entrepreneur from non-entrepreneur, one should examine the characteristic of
an individual to see whether they are consistent with the common set of
characteristics as revealed and confirmed by various research findings in the
study of entrepreneurs. However a review of literature does not provide us
clear and conclusive remarks on what those common characteristics are (Lau
& Chan, 1994:49).
The trait approach, building on the earlier psychological work on entrepreneur-
ship by McClelland (1961:8) and his associates, focuses on the personal
disposition of the individual and the personality theory underlying individual
behaviour which could then be identified as entrepreneurial or non-
entrepreneurial (Lau & Chan, 1994:48).
There is no stereotypes of an entrepreneur, nor is there a foolproof list of do's
and don'ts. Over the years, entrepreneurs have displayed certain
characteristics (Bowler & Dawood, 1996:3):
18
The fortitude to continue despite obstacles.
The ability to cope effectively in an ever-changing competitive environment.
A willingness to take risks.
Supreme confidence in their own abilities; and
The ability to identify business opportunities to which others are blind.
Sexton and Bowman-Upton (1991:9) used the following factors to describe the
entrepreneur:
Creativity or innovation;
High needs for achievement;
Internal locus of control; and
A strong commitment.
The literature on entrepreneurship research reveals some similarities as well
as a great many differences in the characteristics of entrepreneurs (Kuratko &
Hodgetts, 1995:4). It would be an over simplification trying to explain or predict
successful entrepreneurship by basing it merely on the psychological
characteristic of a person.
2.3.2 The behavioural approach
Entrepreneurship is a complex concept and efforts to understand and explain it,
based on the psychological characteristics of entrepreneurs have probably
made it more complex instead of helping to explain the concept (Coetsee,
1992:15). The behavioural approach does offer an alternative for the study of
entrepreneurship given the limited success and methodological difficulties
inherent in pursuing the trait and demographic approaches. The behavioural
approach looks at the entrepreneur's process in terms of the entrepreneur's
activities rather than specific individual traits (Jacobs, 1998:18).
19
To really understand the entrepreneurial behaviour requires a more direct
explanation on the activities undertaken by entrepreneurs. As Gartner
(1988:12) argues, "we should focus on what the entrepreneur does, and not
who the entrepreneur is". Robinson, Stimpson, Huefner and Hunt (1991:36)
argue conceptually and theoretically that attitude approach is more close to the
measurements of entrepreneurial behaviour because attitudes are less stable
than traits and they will change both across time and across situations, through
interactive processes with the environment.They then developed an
Entrepreneurial Attitude Orientation (EAO) scale.
Lau and Chan (1994: 48-51) on the other hand propose an alternative-incident
method, which combines the advantages of the survey method and case study
method in studying entrepreneurial behaviour. Lau and Chan (1994: 53)
developed a number of incidents through actual company consultancy
experiences. All the incidents were written with reference to entrepreneurial
attributes, with theoretical basis and empirically tested evidences. The
behaviour responses of entrepreneurs for each incident were then analysed to
see the degree of entrepreneurship that the respondents displayed. These
incidents are then described and identified with reference to entrepreneurial or
non-entrepreneurial attributes. These entrepreneurial attributes are vital to the
success in the organisation's continuing development (Reilly & DiAngelo,
1987:27).
Possible advantages of studying works on this subject for a would-be-
entrepreneur may include insights into, kinds of cultural blocks that may
unknowingly be retarding entrepreneurial performance and tuning from the
winners i.e. information about how different groups operate (Vesper, 1980:11-
12).
Cunningham and Lischeron (1991:55-58) view the entrepreneurial process as
reiterative and emphasised personal evaluating, planning, acting and
reassessing which encourages people to take on responsibility for creation and
innovation. This process assumes that entrepreneurs have the responsibility
20
for the venture or share some of the risks and rewards of it. This process can
be illustrated as follows: (see figure 2.1)
Figure 2.1: The Entrepreneurial Process
RECOGNISING OPPORTUNITIES
REASSESSING NEED FOR CHANGE
EVALUATING SELF ACTING AND MANAGING
Source: Adapted from Cunningham and Lischeron (1991:57)
2.3.3 The multidimensional approach
Another approach worth mentioning towards understanding entrepreneurship is
the multidimensional approach. In this view entrepreneurship is a complex,
multidimensional framework that emphasises the individual, the environment
and the venture process (Kuratko & Hodgetts, 1995:24).
Entrepreneurship is a process of innovation and venture creation through the
interaction of the above-mentioned dimensions. The individual is an
entrepreneur who uses purposeful, searching and sound judgement in carrying
out the entrepreneurial process. The environment includes the opportunities,
resources, and competitors' and so forth that will affect the entrepreneurial
events at different stages. The environment also poses certain threats to the
entrepreneurial process. To understand, explain and predicts entrepreneurship
behaviour it is necessary to look at the individual (with his/her unique
characteristics) in interaction with the situation (the organisation) in which the
individual finds himself/herself. The environment in which the interaction takes
21
place influences the interaction between the individual and the organisation. It
is the type of process depicted by figure 2.2 that moves entrepreneurship from
segmented school of thoughts to a dynamic interactive approach.
Figure 2.2: The four major dimensions of the entrepreneurial process
INDIVIDUAL(S) Need for achievement Locus of control Risk-taking propensity Job satisfaction Previous work experience Entrepreneurial parents Age Education
ENVIRONMENT Venture capital availability Presence of experienced entrepreneurs Technically skilled labour force Accessibility of suppliers Accessibility of customers or new markets Governmental influences Availability of the area population Availability of supporting services Living conditions High occupational and industrial differentiation High percentage of recent immigrants in the population Large industrial base Availability of financial resources Barriers to entry Rivalry among existing competitors Pressure from substitute products Bargaining power of buyers Bargaining power of suppliers
ORGANISATION Overall cost leadership Differentiation Focus The new product or service Parallel competition Franchise entry Geographical transfer Supply shortage Tapping unutilised resources Customer contract Becoming a second source Joint venture Licensing Market relinquishment Sell-off of division Favoured purchasing by government Governmental rule changes
PROCESS Locates a business opportunity Accumulates resources Markets products and services Produces the products Builds an organisation Responds to government and society
Source: Jacobs (1998:22).
22
2.4 MYTHS AND REALITIES ABOUT ENTREPRENEURSHIP
Entrepreneurship can also have a negative image because of suppositions and
myths that have arisen throughout the years. These generally held myths
about entrepreneurs could prevent clear thinking about entrepreneurship and
their relationships to organisations. These myths and stereotypes, which are
the results of a lack of research in entrepreneurship, may apply to certain types
of entrepreneurs and particular situations but the great variety of entrepreneurs
tend to defy these generalisations. Some of the most common myths and their
realities are briefly discussed below (Kuratko & Hodgetts, 1995:6-10; Pinchot,
1985:65-74; Timmons, 1994:23-24; Bowler & Dawood, 1996:3-5).
MYTH 1 Entrepreneurs are born not made
While it is true that entrepreneurs have innate traits with which one must be
born, (for instance analytical ability) most characteristics valuable and useful to
entrepreneurs can be learned and developed through training. The focus
today is on education directed to entrepreneurship development hence the
advent of outcome-based education (e.g. case studies, models, etc.) and
courses on entrepreneurship offered at universities and technikons (Mare,
1996:13).
MYTH 2 Entrepreneurs are doers and gamblers, not thinkers
Although it is true that entrepreneurs have a tendency towards action, they are
definitely planners and thinkers. Entrepreneurs thrive on tackling new
challenges and are more inclined to take calculated risks and reduce existing
ones.
MYTH 3 An entrepreneur has to be young and energetic
While these qualities may help, age is no barrier. What is critical possesses
the relevant know-how, and recognising and pursuing opportunities. It is also
true that it is never too late to begin a business venture.
23
MYTH 4 The entrepreneur's primary motivation is a desire for wealth
What drives the entrepreneur is a deep, personal need for achievements that
becomes generally wedded to a rather specific vision. The driving emotion is
to realise their visions and be able to say, "I did it".
MYTH 5 Entrepreneurs are completely independent
Entrepreneurs are in a position where they have to interact with other parties.
Moreover, it is extremely difficult and rare to build a business beyond R1 million
to R3 million in sales, single-handedly.
MYTH 6 Entrepreneurs strike success in their first business venture
Lemons ripen in two and half years, but the pearls take seven or eight. Most
entrepreneurs suffer a number of failures or minor successes before they
become successful. Failure can teach many lessons to those willing to learn
from mistakes and often lead to future successes.
These myths have been presented to provide a background for today's current
thinking on entrepreneurship. With these myths dispelled, organisations can
build a foundation for critically researching the contemporary theories and
processes of entrepreneurship.
2.5 CORPORATE ENTREPRENEURSHIP
In the context of increasing market globalisation and free trade, firms must
innovate constantly to improve their flexibility, competitiveness and reactivity.
lntrapreneurship as a stimulus to innovation in organisations has been
highlighted (Struwig, 1991:2). It is therefore important to look more closely at
the concept on which intrapreneurship is based and the main trends in the
research on intrapreneurship.
24
The infusion of entrepreneurial thinking into larger bureaucratic structures is
referred to as corporate entrepreneurship or intrapreneurship (Kuratko &
Hodgetts, 1995:95). Intrapreneurship is a process of profitably creating
innovation within an organisation setting. Regardless of the label, corporate
entrepreneurship refers to the process of creating new business within
established firms, to improve organisational profitability and enhance a
company's competitive position (Carrier, 1996:5). Carrier (1996:8) further
maintains that although the term has almost always been used implicitly to
describe a situation occurring in a very large organisation, this does not imply
that the organisation has to be large: there is also a need for intrapreneurship
in small and medium sized business.
An analysis by Carrier (1996:8-10) of the literature on intrapreneurship reveals
the following two main trends in the research which has mostly approached the
phenomenon within the context of large organisations.
The first of these trends is concerned primarily with the individuals who
implement innovations in the firms that employ them i.e. associate
intrapreneurship with the ventures that are generated within an ongoing
organisation. The authors who subscribe to this approach fall into two
groups. The first group presents intrapreneurship as a set of psychological
characteristics and personal attributes. Examples are Pinchot (1985:8) and
Luchsinger and Bagby (1987:10). They seem to believe that the profiles of
intrapreneurs and entrepreneurs are fairly similar, even though the contexts
in which they act are different. The second group concentrates on the rules
and functions of intrapreneurs and presents them as visionaries, change
agents, corporate entrepreneurs and champions of innovation. Examples
include Lee and Zemke (1985:28).
The second main trend identified is concerned with the intrapreneurial
process, the factors leading to its emergence and the conditions required.
Some of the authors, like Chisholm (1987:36), who have adopted this trend
25
view intrapreneurship as an organisation mode, characterised by the factors
of freedom and autonomy, allowing employees to innovate. Other authors
view intrapreneurship as a management strategy aimed at stimulating
entrepreneurial behaviour among employees to become intrapreneurs, with
the support of the organisation through a process of spinning off (Jacobs,
1998:28).
2.5.1 The necessity for intrapreneurship and intrapreneurs
Intrapreneuring is a noble idea. This is essential for the future welfare of the
corporation as it continually identifies and exploits opportunities. An
intrapreneur is any of the dreamers who do and take on responsibility for
creating innovations of any kind within an organisation. The intrapreneur may
be the creator or inventor but is always the dreamer who figures out how to turn
an idea into a profitable reality (Pinchot, 1985:ix).
Jay (1976:4) captured the essence of the paradox by pointing out that all
organisations need some managers who are yogis and some that are
commissars. Yogis are the essential developers of ideas that help corporations
adapt to the demands of uncertainties while commissars can set goals and
implement plans, get the job done at least in the short run but lacks vision.
Seldom is an abundance of both attributes found in a single person.
This dichotomy is perhaps one of the major factors in the current popularity of
intrapreneurship. The ideas of intrapreneurs promise to rescue us from the
paradox of order and innovation that confuses and confounds our conventional
wisdom about management and organisation (Duncan, Ginter, Rucks & Jacobs,
1988:17).
Current management thought is focused on the organisational character that
fosters innovation and creativity. These include an open, interdisciplinary
structure, an orientation towards the consumer and traits of successful
...' e , a' ••• e. e 40 , ,4.4, At 41. ". ',4. ,Itt." ." .. ii. , e ,e,, ..e A e, , ...., + -
..,,...„. . sf,..it
ti
26
intrapreneurs such as a value of independence and a propensity to take risk
(Brockhaus, 1982:8). Indeed, according to Graham (1985:106), it is an
unfortunate fact that the entrepreneurial spirit is not enough to guarantee
success in business. Pinchot's Ten Commandments for the spirit of
intrapreneurs provides the current tonic as they are inspiring and truly capture
the spirit of entrepreneurship turned inward (Pinchot, 1985:22). Sauser
(1987:33) further lauded the intrapreneurial spirit and challenged firms to
recognise and encourage experimentation and innovation by rewarding product
champions and implementing creative ideas.
The difficulty most large organisations have with intrapreneurs comes directly
from trying to proceed without empowering intrapreneurs. If intrapreneurs are
not present, attempts to innovate often fail and look like the diagram in figure
2.3.
Figure 2.3: The Innovation Gap
Source: Pinchot (1985:35)
27
The roles individuals assumes in business lifecycle can be placed on a
spectrum starting from one end with idea people and inventors and moving
through intrapreneurs in the middle to professional managers at the other end.
The blank in the centre shows that several vital steps are omitted between the
creation of ideas and their delivery to the market (Pinchot, 1985:35-37).
Ross (1987:76) argues that an organisation without an intrapreneurial spirit
becomes a bureaucracy. The notion of the intrapreneur is catching the fancy of
many experts who are addressing most countries competitiveness (Kolchin &
Hclak, 1987:14). An examination of business journal articles in recent years
reveals a growing number of entries of the topics "Corporate Venturing" "Small
Business" and "Entrepreneurs". Today, business school curricula on small
business management and entrepreneurship are accelerating. State
governments are sponsoring small business development centres (SBDC's).
This is as it should be. It reflects the widespread recognition that new small
firms are important in job generation and economic development (Ross
1987:79). Peters and Waterman (1982:200) suggest that the most
discouraging fact of life in big corporations is the loss of what got them big in
the first place - innovation. If this dimension of entrepreneurial behaviour could
be operationalised and become part of company, there would be an enormous
potential for productivity improvement in all companies, large and small. Du
Preez (1992:74-78) mentions the following factors as demanding the attention
of management world wide and placing greater pressure on business to
innovate and demanding managerial skills and creativity. (See table 2.2
below.)
28
Table 2.2: The factors that necessitate intrapreneurship
FACTORS TENDENCIES/CHARACTERISTICS
1. Economic factors. Loss of competition in the world
markets.
Slow economic growth.
Globalisation.
No workable economic theory.
2. Technological factors. . Discovery of super conductors.
Biotechnology.
Optical technology.
3. Competitive advantage. Positioning of an organisation.
Cost structures
Customer services.
4. Information technology. Structural change.
Information era.
Century of innovation.
5. Quality of life. Use of information technology in
medical education and other fields.
Creation of new products and
services.
Location of workplace.
Environmental conservation.
6. Productivity. Emphasis on customer satisfaction.
Use of robotics and computers.
Office automation.
7. Management. More complex.
Creative thinking is a priority.
Changing profile of employees.
Participative management.
Quality circles.
Source: Adapted from Du Preez (1992:74-78).
29
Intrapreneuring allows the organisation to retain the services of its finest
innovators by providing them with the opportunity to implement their ideas
without them having to leave the company. Van Greunen (1994:31) thus
contends that it offers a sound way to respond to the challenges of the 1990's
and those that will occur beyond that date.
As an individual in an existing business, the intrapreneur investigates potential
marketing possibilities, identifies attractive possibilities and indicates
production and sales. In fact, intrapreneurs, according to Kierluff (1979:6),
starts a business within the firm and therefore duplicates the energy,
resourcefulness and innovation of independent entrepreneurs and it is the
corporation, which supports him/her that provides the tools to do it with.
2.5.2 The intrapreneurial process
The work of intrapreneurs and the exact process of intrapreneurship differ from
organisation to organisation, from idea to idea. Yet while there is no one
formula into which to place and understand the intrapreneurial process, there
are common elements to this process and common behaviours (Cunningham &
Lischeron, 1991:54). Intrapreneurs engage in wherever they work and
whoever they are. The corporate entrepreneur/intrapreneurial process
constitutes of at least four phase's being:-
Defining a problem;
Coalition building;
Mobilising and completing the task; and
Finding a successor to the entrepreneur or dismantling the project (Cornwall
& Perlman, 1990:177-182).
Kanter (1983:217-236) also discusses the first three stages.
30
Defining a problem
For some intrapreneurial work, it is the first stage in the process, defining a
problem that takes three months or even years to clarify. This is the phase of
gathering information and is accomplished through daydreaming and fact
finding. Ascertaining, whatever the products or process slots with the
organisation objectives is also an important task. Once the concept has been
defined and approved, resources need to be acquired so that work can begin.
Coalition building
Coalition building involves finding sponsors and receiving blessings (active
support of benign neglects) from superiors. The order of coalition building
generally resembles a zigzag more than an orderly progression up the chain
command.
The first step typically involves "clearing the investigation investment with the
immediate boss or bosses" i.e. first explaining the project idea and later
keeping the boss informed about status. The most common pattern of support
seeking after approaching the boss, is to go lower, then higher in the
organisation because early supporters in an innovative project are generally at
much lower organisational ranks than last supporters. Higher executives often
want evidence that peers back a project before committing themselves to it.
Intrapreneurs cannot continue their work without co-operative and support:
they must find sponsors, and they must receive the approval of their superiors.
Mobilisation and completion
Now the qualities required by the intrapreneur are flexibility and enthusiasm
because his/her hard won support must be retained and nurtured. In this step
the project is both active and visible and the innovating manager's role is to
mobilise key players to carry out the project.
31
During this action phase innovating managers have four central organisational
tasks (Kanter, 1983:229-236):
1 To handle interference or opposition that may jeopardise the project.
Maintaining momentum and continuity - here interference comes from
internal rather that external forces e.g. foot-dragging or inactivity.
To engage in whatever secondary redesign (other changes made to
support the key change) is necessary to keep the project going e.g.
introducing new arrangements to conjoin with the core tasks and,
External communication i.e. brings the accomplishment full circle.
It is vital to (as several managers put it) "manage the press" so that peers and
key supporters have an up-to-date impression of the project and its success.
To cope successfully with competitors and detractors, the intrapreneur turns
inward members of the organisation for sustained endorsement (Kanter,
1983:235).
Successors or dismantling
This fourth stage is on managing the innovation once it is complete and
successful or dismantling it, if it is unsuccessful. If the project has been a
success and has therefore become part of the organisation's status, someone
in the organisation has to take it over. As intrapreneurs most times lack
business skills to maximise profitability, he/she is replaced or as is frequently
the case, steps down voluntarily from the project (Cornwall & Perlman,
1990:179).
If the product or process is a failure, the team must be dismantled and all
associated with the project. This is done swiftly and decisively.
COALITION BUILDING
SUCCESS OR DISMANTLING
MOBILISATION AND COMPLETION
32
Given a good idea, any manager or researcher can become an entrepreneur
by: -
Understanding the entrepreneurship process.
Possesses the skills needed to be successful and,
Working within any entrepreneurial organisation (Cornwall & Perlman,
1990: 177).
Figure 2.4 suggests that intrapreneurship might be viewed as a reiterative
process and each of the steps might provide insights into different aspects of
the phenomenon.
Figure 2.4: The Intrapreneurial Process
DEFINING A PROBLEM
Source: Adapted from Cornwall and Perlman (1990:175-182)
2.5.3 Different types of corporate entrepreneurs
Ivancevich, Lorenzi and Skinner (1994:559) have identified the following five
types of corporate entrepreneurs evolving within organisations: (table 2.3)
33
Table 2.3: The different types of corporate entrepreneurs
TYPES OF CORPORATE ENTREPRENEURS
ROLE AND FUCTIONS
Administrative entrepreneurs • The champion supports research and development.
• Provides or helps secure needed resources to develop ideas.
• Moves an idea from laboratory to the market.
• View idea or concept as important enough to invest his/ her time, energy or creativity.
Opportunist entrepreneurs • The champion is provided freedom to seek and take opportunities.
• Individuals join the firm as training representatives.
• After completion become representatives.
• Individuals continue to be promoted and earn more incentives.
Acquisition entrepreneurs • Firm encourages a strategy to court other firms that have knowledge, ideas or promising products.
• Creation of joint ventures, new subsidiaries or adding innovative product lines to existing portfolios through acquisitions.
Imitative entrepreneurs • Takes advantage of and extend the use of other firm's ideas, products and technology.
• However imitation may be flattery. Incubative entrepreneurs • Involves subjecting a new idea,
technology or innovation to experimentation and testing.
• Considered semi autonomous new venture development unit that can either take the product from development to market or stop it from moving.
Source: Adapted from Ivancevich, et al. (1994:559-560)
The use of a champion (a highly enthusiastic or committed individual who is
willing to ensure the success of an idea or innovation) is important in each of
the five types of corporate entrepreneurs (Ivancevich, et al. 1994:559).
34
Drucker (1985:143) described the entrepreneurial role as one of gathering and
using resources to produce results and must be allocated to opportunities
rather than to problems. Redirection of resource is an important concept in
illustrating how an intrapreneur differs from traditional managers.
The classification system used above also shows that opportunities to be self-
reliant and creative can exist in most firms. The challenge for corporations is to
attract, retain and reward and support the commandos who can move products
from the idea stages to commercialisation (Sykes, 1986:34).
2.6 COMPARISONS AND CONTRASTS BETWEEN ENTREPRENEUR-
SHIP AND INTRAPRENEURSHIP
While the behaviour of intrapreneurs and entrepreneurs are similar some
intriguing differences should be pointed out. What essentially distinguishes
intrapreneurship in most works if not all, is first and foremost the context in
which the entrepreneurial act takes place.
This difference in context generates a number of other differences for the
actors concerned with regard to autonomy, type of risk and anticipated
rewards. Entrepreneurs select themselves while intrapreneurs must be
selected or, in some cases, be recognised by or impose themselves on the
organisation with structural and procedural constraints (Carrier, 1996:8).
Luchsinger and Bagby (1987:11) argues that although both depends heavily on
the innovative process and stimulates increased productivity and efforts that
adds value, however, the setting differs. The entrepreneur provides his or her
own setting while the intrapreneur operates within the setting of an established
organisation.
35
The intrapreneur has similar characteristics with the entrepreneur but operates
in a corporate environment, actively seeking opportunities and deliberately
risking the introduction of chance and improvements (Ross, 1987:76).
As Luchsinger and Bagby (1987:12) observed "the intrapreneur is considered
to have a more difficult job than the entrepreneur (the independent self
starter)". Entrepreneurs have more control over their environments, especially
the internal environment. However financial risk is carried by the intrapreneur's
company, whereas the entrepreneur bears his/her own. Failure means
bankruptcy to the entrepreneur but the intrapreneur can return to the parent
organisation. The entrepreneur is the boss while intrapreneurs must still report
to superiors to seek sponsorship.
Intrapreneurs do not wish to manage an independent business and prefer the
security of a regular salary (Feinberg, 1989:100). Entrepreneurs must also,
above all, possess professional skills (Ross, 1987:79; Pinchot, 1985:65).
Intrapreneurs also possess good managerial abilities and prefer an integrated
environment where ideas can flow freely across the borders and where
resources are available (Kanter, 1983:212).
"Few of us are not so well rounded to direct all phases of a project. But even if
we were, many challenges, e.g. the development of Post-It-Notes, require so
many skills, so much that one person could not meet them in a lifetime" (Fry,
1987:4). The best of both worlds is the organisation managed by intrapreneurs
who follow the principles of entrepreneurship. People motivated to achieve,
need both wherever they might work or build independent ventures (Luchsinger
& Bagby, 1987:13).
The role of an intrapreneur offers an alternative to directing all phases of a
project. A team can be put together and form a new corporate body with more
time and talent. Some of the people on the team may be intrapreneurs in a
36
sense that is true, but are investing a smaller portion of their time and talents
than an intrapreneur working in a smaller area or in a particular project.
2.7 SUMMARY
With such a variation in viewpoints, it is not surprising that a consensus has not
been reached about what entrepreneurship is. The various schools of thought
provide different insights for recognising underlying values and responding to
the future. It is therefore important to look more closely at the concept on
which entrepreneurship is based and to the main trends in the research on
entrepreneurship.
The trait approach is an attempt to answer the question of who the
entrepreneur is and focuses on the personality theory. This approach
concentrates on the underlying individual characteristics, which could then be
identified as either entrepreneurial or non-entrepreneurial. The behavioural
approach on the other hand looks at the entrepreneurial process in terms of the
entrepreneurial activities rather than specific individual traits. Using this
approach to the study of entrepreneurship is more reliant than the trait
approach since it rests on a solid conceptual and empirical basis. A
multidimensional approach is required for the successful introduction of
entrepreneurship. Entrepreneurship is an interdisciplinary concept. As such, it
contains various approaches that can be used to increases one's own
understanding and helps in the study of entrepreneurial behaviour.
While the behaviour of intrapreneurship and entrepreneurship are similar,
some intriguing differences should be pointed out. Although the setting differs,
each depends heavily on teamwork and group innovation.
Instilling a positive attitude and approach to entrepreneurial activity is an
important aspect and need to be taken into account, for instance, when
37
entrepreneurial development programs are drafted. Folklore and myths will
tend to prevail until they are dispelled with contemporary research findings.
The classification system to describe intrapreneurship shows that opportunities
to be self-reliant and creative can exist in most companies. Global competition
will probably encourage even more of the five types of corporate
entrepreneurship activities. A number of authors have concluded that
intrapreneurship may take several forms depending on environmental factors.
The need to pursue intrapreneurship has arisen from a variety of pressing
problems. There has been a growing interest in the use of entrepreneurship as
a means to enhance the innovative abilities of employees. The purpose of this
chapter was not to advocate for a new approach to entrepreneurial orientation
or construct, but to put both intrapreneurship and entrepreneurship in
perspective.
---o0o---
38
CHAPTER 3
MACRO ENVIRONMENTAL FACTORS
3.1 INTRODUCTION
Corporate entrepreneurship (or intrapreneurship) has become a key activity for
business development. Intrapreneurship involves identifying an opportunity
within an existing enterprise and creating a profitable reality for the enterprise
from this opportunity.
Throughout time, people have been concerned with predictions of what will
happen in future e.g. witchdoctors. The right forecast could mean power and
wealth; the wrong forecast could mean ruin and death. Nevertheless, today's
organisations must continue to seek models for how to drive corporate
entrepreneurship successfully. Today businesses use sector forecasts and
formulates alternative scenarios to gaze into the future in their frantic attempt to
unlock potential to competitiveness and survival (Kanter, et al., 1987:11).
Management should be aware that entrepreneurship typically occurs in a real
world environment and that any business venture cannot exist in isolation. A
basic set of environmental factor needs to be established before organisations
can implement intrapreneurial concepts already discussed in the previous
chapter. These compounding factors which either impedes or promotes
intrapreneurship needs to become an integral facet of intrapreneurial
orientation. Experience shows that the micro environmental factors can be
assessed and that the key to success in corporate entrepreneurial behaviour is
a continual, careful and realistic assessment of these variables (Timmons,
1994:17).
39
The pursuit of corporate entrepreneurship, creates a new and potentially more
complex set of challenges with the macro environment. The interface between
corporate entrepreneurship and the external environmental variables has
received a considerable attention in recent years and has been the subject of
numerous published articles and special issues of major journals (Morris &
Lewis, 1995:31). Researchers and scholars of entrepreneurship need
continually to assess the components or dimensions of the macro environment
in which corporate entrepreneurship flourishes or decays.
A discussion of the almost uncontrollable important macro environmental
factors, which include amongst other economical, social, legal politics,
technological and international factor follows. Understanding the macro
environment means acknowledging the realities of the organisation and its
environment. This will help in a later stage to identify elements that will impact
and be impacted upon by intrapreneurship.
Most of the sources consulted for this chapter, did their writings and research
with the entrepreneur (self-employed) in mind. Research and textbooks on the
influence of macro environmental variables on intrapreneurship are found few
and far between. It can be argued that the macro environment has, at least in
principle and in effect, the same impact on intrapreneurship as on
entrepreneurship ... it is the detail that may differ. Per example: The self-
employed entrepreneur may face serious problems in raising finance during an
economic recession... the same applies for the employed intrapreneur. The
only real difference is that the entrepreneur has to convince his banker and the
intrapreneur has to convince the treasury department (or management) of the
merits of their requests. The same arguments will apply to the other macro
environmental variables.
Throughout this study, an asterisk is used to denote instances where the
author changed entrepreneurship into intrapreneurship as the author is of the
opinion that the stated circumstances as quoted by the outside sources are
40
also relevant in intrapreneurship as already explained in Chapter 1 (par. 1.4).
Another argument is that the word intrapreneur is derived from intracorporate or
internal entrepreneur (Bowler & Dawood, 1996:9).
3.2 THE ECONOMIC ENVIRONMENT
The economic environment determines to a great extent what resources,
labour, materials and capital intrapreneurs can use to produce a particular
service or product. Any intrapreneur needs to have a clear picture of the
economy when starting a new business within an existing organisation. The
economic climate of a country plays a large role in the availability of capital,
trained labour and materials.
Oliver, Pass, Taylor and Taylor research (1991:8-11) report that most
* intrapreneurs who failed to get their projects implemented, cited an
unfavourable economic climate as being the reason for failure. Fourie
(1995:26) is also of the opinion that increased growth leads to increased
expectations of return of investment and capital is then more freely available.
Again the reverse is true for declining economic conditions.
An external unfavourable economic climate is a true barrier to * intrapreneurial
success. It is also of further interest to note that this is an external factor that is
determined primarily by the presence of a free enterprise system which forms
the basis on which to create a setting to promote * intrapreneurial activity (Mare,
1996:17). The outstanding feature of a free enterprise system is that
intrapreneurs are catalysts who generate wealth and thus a higher standard of
living. The economic climate, however, on its own, offers no guarantee of
economic progress or of successful intrapreneurship.
Mare (1996:17) has further identified the following economic factors that
influences the level of an * intrapreneurial activity at a given time:
41
the presence of an economic recession which could lead to borderline
business not succeeding.
a high, double-digit inflation rate will limit the implementation of new ideas
and new business, as it leads to a decrease in the amount of expendable
income. It can also make the cost to finance new developments too
expensive;
a strong monetary policy over the long term has a restricting influence on
the financing of new business;
the influence of high standards, legal limitations and bureaucracy could
retard economic development and stifle * intrapreneurs' initiatives; and
high interest rates cause the spendable income of consumers to dwindle.
All of the above means that when decisions are taken, the economic climate
must be an important consideration. If it is poor, this may mean that the
intrapreneur needs to defer his/her venture until conditions have improved.
The economic characteristics need to support the fundamental attractiveness of
a business opportunity.
3.2.1 The specific economic system
The specific economic system followed in a country is of vital importance to
intrapreneurship (Van Wyk, 1992:149). To a great extent, in the past, the
South African economy was characterised by a dichotomy, as a result of the
particular composition of its population and the accompanying political
situation. During the past decade, laws and regulations, which resulted in the
suppression of entrepreneurship, have been repealed, thus facilitating
42
circumstances for intrapreneurs. Morris and Lewis (1995:36-37) provides the
following key aspects of the economic system that need to be considered:
individual freedom. Every individual has the freedom and opportunity to
participate economically in a chosen manner;
freely, fluctuating prices in the markets for products, capital and labour;
private ownership with strong profit incentives;
limited taxation and a limited rate for government;
welfare goal, which grants * intrapreneurs an opportunity to improve the
country's welfare in a specific way;
economic growth which places a responsibility on the * intrapreneur and
influences his/her economic decisions.
Each of these is an incentive for individual action and helps ensure that scarce
economic resources are allocated to value creating activities. It is
subsequently clear that the free market system presents room for realising
* intrapreneurship.
3.2.2 The industrial structure
This is another economic factor that shapes the country's products and
services needs, income level and offer new market opportunities employment
levels. The four types of industrial structures that may underlie
* intrapreneurship success or failure according to Kotler and Armstrong
(1996:635-637) are
subsistence economies. The vast majority of people consumes most of
their output and thus offers few market opportunities.
raw material-exporting economies. These economies are rich in one or
more natural resources but poor in other ways e.g. Saudi Arabia in oil.
These economies are also a market for luxury goods
43
industrialising economies. Industrialisation typically creates a demand for
new types of imported goods
industrial economies. The varied manufacturing activities make them rich
markets for all sorts of goods.
In the current South African context, intrapreneurs face many challenges in
understanding how the economic environment will affect decisions about new
products and services. The industrial structure's characteristics need to
support the fundamental attractiveness of a business opportunity.
3.3 SOCIAL AND CULTURAL ENVIRONMENT
Social values are the foundations of our lives and our world (Stoner &
Freeman, 1989:83). They drive all the other social, political, technological and
economic changes and determine all the choices we make in life. Social
values also set the guidelines that determine how most organisations and
employees will operate. Sometimes the guidelines will be relatively narrow
(restrictions on workers) and in other areas guidelines may be quite broad.
Social structures that foster attitudes of individual freedom and an orientation
towards self-direction are conducive to * intrapreneurship initiatives. Because
people often strive towards higher social classes, marketers frequently use the
symbols of higher-class membership in advertisements of lower classes (Kotler
& Armstrong, 1996:87).
A factor, which makes the task of South African intrapreneurs particularly
demanding, is the great variety of cultural and ethical differences in a
community. The culture of the community as far as business and
intrapreneurship are concerned, influences the views of that community for
44
instance, until very recently an entrepreneurial culture did not exist among
blacks in South Africa. A strong need for security was the reason why risks
were avoided (Van Rensburg, 1992:35).
It is often difficult for an * intrapreneur to analyse the distinctive patterns of
spending and the needs of every group. The amount of expandable income of
a community determines to a great extent the viability of business. An
. intrapreneurs ability to adjust to the communities' changing needs and
circumstances are often the determining factors in achieving long-term payoff
(Finnemore & Van der Merwe, 1996:41). * Intrapreneurs should keep pace with
the changing social and cultural aspects of their markets and constantly search
for and shape superior opportunities. The influence of certain observable
social and cultural aspects includes the following (Cronje, Du Toit, Mol, Van
Reenen & Motlatla, 1997:75-78): -
Lifestyle changes which includes a trend towards education. Higher
education will result in new demand for quality articles like magazines and
newspapers.
Social forces that protects consumers in the form of a co-ordinating
consumer council. The council should endeavour to act in the consumer's
best interest.
Change in the growth and composition of populations probably causes most
changes in the market by altering peoples way of life.
Social relationships, which provide a forum for entrepreneurs to share
information, identify opportunities and marshal resources.
45
3.4 THE TECHNOLOGICAL ENVIRONMENT
New technological developments can present certain opportunities and for
many organisations, the impact of technology can present a threat (Twiss,
1990:1). A comparison of today's industrial leaders with those of even ten
years ago shows how many of the once great names have declined in
importance or disappeared from the business scene. Twiss (1990:1) maintains
that in almost all cases, this was caused by their inability to anticipate the effect
of a new technology whereas their competitors has served the opportunity for
growth which it had offered. (See also figure 2.3, p. 24.)
Technological developments cause new ways of doing all kinds of work in all
business functions, and working differently across these functions. Against this
background Mare (1 . 996:18) and Cronje, et al. (1997:71) highlight the following
trends:
Unpredictable consequences: Possible implications of new findings or
improved technology cannot be accurately or frequently predicted.
Technological innovations are a critical factor for survival and growth of an
organisation and thus should not to be left to chance if it can be planned
and controlled in a meaningful way.
Rapid outdating of existing prospects: * Intrapreneurs have to stay on top
of new developments and technology so as to constantly adapt, upgrades
and remain competitive. The * intrapreneur who wishes to remain in
business will have to adjust to technological developments so that he/she
remains on the forefront of the competitive market.
The call to adapt: Changes in technology sometimes require
intrapreneurs to make urgent adaptations to enable them to continue
providing goods and services demanded. Analysis of past technological
innovations reveals a number of factors, all of which appear to be present in
46
many successes. Intrapreneurs need continual access to the company
property technology to stay competitive. Failure to adapt and plan for
emergencies could doom even the most persistent * intrapreneur.
The demand for new knowledge and skills: obtaining these skills and
knowledge could offer numerous opportunities.
Keener competition, which compel organisations to reassess for instance
their marketing strategies.
Creation of complexities, for instance, the effect of a complex production
system creates new demands.
Use of labour intensive technology to ease pressure on demands for
capital and provisional employment.
It can be argued that similarities of wage and supervision of technology makes
all jobs look more similarly at the bottom of the hierarchy in any organisation
engaged in mass production. The reason that the bottom" is generally the
most routinised end of any organisation and as such tends to be subject to
rules of efficiency that can homogenise job designs. Kanter (1983:405) argues
that there is greater technological determinism as one move down the
organisation to production tasks, as well as greater desire of managerial
control over the jobs at the bottom. In short an organisation can contain
variations on its basic entrepreneurial culture depending on the specific tasks
and pressures facing different parts of the organisation. Neglect is the fact that
the other functions operate in different macro environments.
Technology has been and will remain the prime stimulus for intrapreneurship in
the society. Most major organisations owe their origin and their continued
existence to the successful application of technology in evolving new products
or services and improved manufacturing processes. Nowadays when it is
47
fashionable to attack technology because of its effect upon our environment,
we must not undervalue its continuing contribution to the quality of twentieth
century life': asserts Twiss (1990:2). According to Chittipeddi and Wallet
(1991:94-95), among the implications of technological change for organisations
are the following:
to maintain overall technological leadership;
redesign or restructure work environments; and
not to forget, that it is dreamers who make the difference;
a new technology does not necessarily smother the old technology but can
stimulate growth because the threatened organisation can improve;
in most cases firms involved in the old technology have a substantial
amount of time to react to new technology;
new technology tends to create new markets instead of simply encroaching
on the existing markets, as it is relatively difficult to predict the outcome of
new technology.
3.5 THE MARKETING ENVIRONMENT
From a managerial standpoint, the process of marketing entails environmental
scanning, analysing market opportunities, designing marketing strategies,
implementing and controlling market programs. Approached in this manner,
Hills and Lafarge (1995:33) have identified numerous interfaces between
marketing and *intrapreneurship. For instance, the business plan which
includes market feasibility analysis and marketing strategy. In some
corporations, the marketing plan and an economic justification are the only
formal documents needed for program approval.
The main objective of the marketing function in an organisation is to acquire a
sufficient understanding of customer needs, present and future, to be able to
contribute to the development of the overall objectives (Whittaker, 1990:42).
48
The marketing department seeks to achieve this by generating the right mix of
products, at the right time, in the right place, and with the right promotion
leading to a joint plan of the feature.
Carson (1985:9) has suggested not only that marketing and * intrapreneurship
interact but that marketing is the logical home for the * intrapreneurial process in
organisations. In this view, marketing is a boundary function in organisations
and must be both opportunity-driven and flexible in order to address turbulence
in the external environment. Marketers are engaged in a process not only of
identifying change in their organisations. Marketing and innovation are not
separate functions. Rather, innovation is at the core of marketing, so those
marketers could not expect to adapt passively to market place conditions.
The marketing and * intrapreneurial orientations of established firms were
empirically examined by Morris and Lewis (1995:34-34) in two related streams
of research. The first of these involved work on failure and success rates of
new products and new business and did consistently demonstrate the critical
impact of a marketing orientation on performance. The second studies found
that the * intrapreneurial orientation of firms was significantly and positively
related to a number of market outcomes.
Both studies demonstrated that being marketing oriented and * intrapreneurial is
part of the same underlying business philosophy. These studies also suggest
that a significant relationship exist between a firm's marketing and
* intrapreneurial orientations. Such findings have led some observers to
conclude that marketing and intrapreneurship are highly interdependent, if not
part of the same construct (Carson, 1985:9). For this reason, it would seem
crucial that * intrapreneurs understand marketing as one of the forces that
facilitates * intrapreneurship. To the extent that marketing affects the success of
* intrapreneurial approaches, it is vital for * intrapreneurs to understand
marketing.
49
Marketing inefficiency could be seen as the common killer - the key reason for
failure. Too often the technical and manufacturing problems are overcome, but
the product or service is a marketing failure. An assessment of the market
potential for new products or services, the competition and what is required to
bring and sell the product or service to the customer, are major challenges to
an intrapreneur.
The most important significant variables in the marketing function are (Shatzer
& Schwartz, 1991:15-18):
the marketing strategy,
the competitors,
the suppliers, and
the industry environment.
3.5.1 Marketing strategy
Every aspect of marketing strategy has behavioural implications and has to be
evaluated according to its effect on consumer behaviour. The corporate
entrepreneur might first want to consider some questions in the market
strategy, like, should one get into a new venture? And how should one get into
this venture?
According to Shatzer and Schwartz (1991:15), in considering the first question,
a major consideration is the strategic fit with the mission of the corporation.
Without this fit, the new venture may not receive the level of support required
for successful launch. Throughout, it is a trial-and-error interactive process of
finding out what it takes, the gaps faced as the venture unfolds and how to
shape a good fit (Timmons, 1994:18).
50
Shatzer and Schwartz (1991:16) further suggest two approaches in entering a
new business: buy or build. The first approach of buying will be most
appropriate under the following conditions:
when marketing leadership is required for profitability;
if the window of opportunity is brief;
if the distribution channels are not in place and when the capabilities of the
technology already exist within the corporation.
The second approach to getting into a new business is to build within the
corporation:
build, if in-house expertise is sufficient and
build, if the window of opportunity is longer owing to slow diffusion of
innovation.
3.5.2 Industry environment
Porter's model as described by Pearce and Robinson (1991:88) should be
implemented. Attention should be paid to the analysis of the elements in the
model because the particular outcome will dictate why the specific products or
service could be introduced in this environment. The * intrapreneur should
definitely provide input and information on the specifics of the new products or
service, but the company's overall strategies and goals will determine the
outcome.
The contending forces are according to Pearce and Robinson (1991:88-90):
threats of new entrants. New entrants to an industry bring in new capacity
in their desire to gain market share.
51
rivalry among existing competitors. Rivals are diverse and have very
different ideas of how to compete; they are likely to cross paths often and
challenge each other's position.
threats of a substitute product or service. All corporations within one
industry are competing with other firms in other industries that produces
products or services that appear to be different but can satisfy the same
need as their product.
power of suppliers through their ability to raise prices or reduce the quality
of products and services.
power of buyers through their ability to force down prices or bargain for
higher quality or more services.
3.5.3 Competitors
For * intrapreneurs, the gathering of the necessary information about
competitors, seeing possibilities and making linkages where others see only
chaos, are essential (Bowler & Dawood, 1996:42; Cronje, et al., 1997:66). The
marketing concept states that to be successful, an organisation must provide
greater customer value and satisfaction than its competitors.
Competitors are important dimensions of the operating environment and play a
significant role in analysing the company's position in the industry. A
competitor analysis that will help in determining the relative strength of each
competitor in the marketplace should be drawn up. One need to know the
enemy if one wants to stand a chance of victory.
52
3.5.4 Suppliers
Suppliers are an important link in the organisation's overall customer value
delivery system as they provide the resources needed by the organisations to
produce its goods and services. * lntrapreneurs should watch supply
availability, shortages or delays and other supplier development events, which
can seriously affect marketing (for instance labour strikes) and thus damage
customer satisfaction in the long run (Bowler & Dawood, 1996:42; Cronje, et
al., 1997:64).
3.6 INTERNATIONAL ENVIRONMENT
The rapid and sustained growth of international business over the past
decades has been one of the most important agents of change in the world in
giving rise to sweeping changes in international business environment.
Developments in the international environment, for instance information
technology, create an interconnected and increasingly boundaryless world, and
have a direct influence on local business. Although * intrapreneurs are usually
affected indirectly, the effect in the international environment could also be
experienced directly when new technology or new products, competing with
local products and services are imported (Mare, 1996:19). Selling outdated
packages can also cause the consumers to change to outlets that sells the
latest products.
Over the last two decades a number of developing countries have emerged as
highly successful exporters of manufactured products with an increasing range
and sophistication of products exported. This has created tension in the
international trading environment as most industrial countries have experienced
erosion of their market shares (Cronje, et al., 1997:101). Most developments at
international level go together with a degree of influence on local business.
53
The emergence of some developing countries as successful exporters or
manufacturers has also set an important example for other developing
countries to emulate. This explains why for almost all economies today,
international competitiveness has become critically.
Most organisations in their respective industries reflect high levels of interest in
the opportunities and threats associated with the advent of globalisation.
Organisations such as Barlows have shown considerable foresight in recent
years and examined the underlying issues related to business practices in
foreign environment (Nasser & Vivier, 1993:47). With South Africa's re-
admission to the international economic community, South Africa's business
needs to find new opportunities. The new economic order that is taking shape
world-wide is indicative of increasing globalisation of the world economy.
Other organisations on the other hand appear to have been caught flatfooted
and are faced with challenges such as:
grasping global issues and opportunities; and
lack of a venturing approach especially on foreign soil.
There is also considerable emphasis placed on the importance of international
competitiveness in the light of recent trends towards globalisation.
Globalisation means that the number of competitors with a world wide reach is
increasing and markets that were traditionally considered impenetrable are
slowly opening up competition from other countries (Chittipeddi & Wallet,
1991:94). Some of its implications for companies are the following:
price, quality and service standards will have to be met on a global level;
traditional management philosophies and practices will have to be changed;
and
successful competitive strategies of the future must be highly intrapreneurial
in nature.
54
Understanding changes in the international environment is important because
South African as a developing country has to solve its problems and create its
future in the context of globalisation - an increasing interconnected world. A
major aspect of global change is the shift in the political and economic division
of the world, which have a direct bearing on * intrapreneurship.
The task of an international organisation management therefore differs from
that of a company operating in the local market and it is therefore imperative
that management be informed about variables in the international business
environment which poses challenges as well as opportunities for
*intrapreneurship (Mare, 1996:20). The influence of international economic and
political developments on local firms is multiple. Innovations are excellent
export products especially South Africa's ability and experience in mining, oil
from coal technology and veterinary sciences.
Businesses that operate internationally find themselves in a more complex
business environment, because every country has its own peculiar
environmental factors different from other countries (Cronje, et al., 1997:82-83;
Mare, 1996:20). International and multinational organisations are susceptible
to all kinds of international currents and trends. Some of the factors in the
international environment that curtails the entrepreneurial activities of an
organisation include (De Villiers & Slabbert, 1996:2):
the marketing environment e.g. how can the product be effectively
distributed.
the legal-political environment e. g. antitrust laws limiting monopoly.
the technological environment which determines the competitiveness of a
business.
the cultural environment containing such variables as the values and
languages of a particular country.
the economic environment e.g. natural resources and infrastructure of host
country.
3.7 EDUCATION AND TRAINING
Against the background of lack of work, schools should launch a wide ranging
program to produce entrepreneurs which will contribute significantly to creating
a better quality of life for those involved (Whittaker, 1990:44). Teachers
recognise that education has to grow and adapt. In staffrooms, they will talk
about the curriculum that no longer meet their needs. They advocate a change
and know precisely what that change, ought to be. Occasionally a teacher will
not only adopt the role of intrapreneur but will be allowed by management to
develop an area until it is accepted as a permanent part of the curriculum.
Then the school will have pushed through a successful innovation change.
Mare (1996:8-12) and Whittaker (1990:44-47) discusses objectives of
entrepreneur-directed education and the following important issues are among
those discussed:
promoting economic prosperity. Throughout the world, prosperity is
primarily attributed to entrepreneurial activity.
combating unemployment. A staggering number of opportunities for work
can be created among the handicapped, people from any economic or
sociocultural background, people of any age group, both sexes and people
who choose to work flexitime.
improved perspectives of the future. Students who include entrepreneurial
activities in their options have unlimited opportunities.
promoting a spirit of enterprise. Students generally respond well to the idea
of managing their own business as evident from the advent of outcome-
based education.
55
56
promoting community involvement. There are many competitions for
entrepreneurs which students could enter and greater association between
students and their communities' needs to be achieved as a matter of
priority.
meeting the need for vocation-directed education, which becomes a reality
when it meets the needs of the labour market. Teachers also need to use
the possibilities, which exists within their subjects.
the training curriculum consist of a mix of short lectures, planning, doing
and group support. Topics are all within the context of what was absolutely
needed at that time in the intrapreneurs own development.
Many innovations in education have produced more satisfactory results in
terms of improved pupil motivation and enthusiasm for what they were doing
and a better quality of teaching (Whittaker, 1990:46). Records of achievement
(ROA) can be cited as an example in that emphasis here is placed on what the
pupils can do and the way in which the pupils themselves are involved in
negotiating the learning process rather than having it always imposed on them
by teachers.
A more intrapreneurial approach is seen today, even with large organisations to
be a decisive factor in achieving long-term growth. Education, which caters for
entrepreneurship, could lead employers to think more intrapreneurial. This
could increase intrapreneurial approaches to problems within organisations,
which could in turn lead to greater prosperity
Environmental turbulence ' intrapreneurial activity
Dynamic
Hostility Diversity Degree of innovativeness, risk-taking and proactiveness
57
3.8 ENVIRONMENTAL TURBULENCE
The tendency towards innovation, risk and productivity is not so much innate to
people or society, nor is it a random or chance event. Rather it is determined
by environmental conditions operating at a number of levels. Morris and Lewis
(1995:34) in their model of determinants on * intrapreneurship cite the degree of
environmental turbulence present in a society as one of the general categories
of environmental determinants.
Figure 3.1: A model of environmental turbulence as a determinant of intrapreneurial activity
Source: Adapted from Morris and Lewis (1995:34)
As illustrated above, Zahra (1991:263-264) points out the following implications
of the key aspects of environmental turbulence:
Dynamism, which refers to the perceived instability of a firms market
because of continuing changes. It is conducive to the pursuit of corporate
entrepreneurship. Changes in the external environment open many new
windows of opportunity and intensify rivalry by encouraging entry into the
market. This entry is supported by newer technologies and innovative
marketing practices, which already exist in the industry.
Environmental hostility. Faced with unfavourable environmental conditions,
a company may opt to differentiate its products in order to sustain customer
loyalty or increase penetration of existing segments.
58
Opportunity also emerges from the heterogeneity of the environment.
Heterogeneity indicates the existence of multiple segments, i.e. where
development in one market creates new pockets for demand for a firm's
products in related areas.
Heterogeneity means diversity of customer needs and expectations among
different segments served by the firm, which offers a company many
opportunities for additional innovation and market development.
From the model it appears that the intrapreneurial process is also fostered
under conditions of environmental turbulence. The term environmental
turbulence describes both the speed and the scope of change that occurs in
the environmental change complexity as well as rapid change of technological
advances (Wagner & Hollenbeck, 1998:325). The result has been intensified
pressure for innovation and a dramatic increase in corporate entrepreneurship
for over the past two decades.
Historically, environmental turbulence has been a factor in a large percentage
of new products and technological innovations. Change is a catalyst for
intrapreneurial efforts and intrapreneurial behaviours are virtually a necessity
for coping with environmental changes. These efforts in turn create additional
environmental turbulence by bringing product and process innovations to
markets and changing the way business is done.
The level of * intrapreneurial intensity in society will be the combined effect of all
environmental influences. Where higher levels of * intrapreneurial intensity
occur, not only are economic growth and development facilitated, but the
nature of the marketing function as well (Morris & Lewis, 1995:36).
Intrapreneurship may be fostered as environmental turbulence increases but
extreme levels of turbulence may make it impossible to innovate successfully or
59
may remove the incentive for doing so. Turbulence creates both threats and
opportunities for organisations, changing the way they have to compete.
Intrapreneurship plays a key role as it produces an opportunistic approach to
environmental change and thus a steady stream of new products and services.
3.9 THE LEGAL-POLITICAL ENVIRONMENT
This includes a country's legislation as well as the conditions set by host
countries regarding the firm's products, the employment of local workers,
foreign exchange regulations and many other stipulations (Cronje, et al.,
1997:82).
All governments, no matter what system they have in place, set economic
objectives. The nature of these policies depends on the form of government.
Entrepreneurship is particularly sensitive to government policy, laws and
regulations.
Legislation prescribes the framework within which enterprises must operate.
The aim of many of these acts, rules and regulations is to encourage
competition. One of the fundamental issues to entrepreneurial success is the
necessity of the government to understand the mechanics and the mindset
required ensuring wealth creation and thus being able to stimulate
intrapreneurship (Nasser & Vivier, 1993:13).
Among the political action and regulatory standards which affect competition
and influences the way * intrapreneurs perform their functions, according to
South African Foundation (1996:1-10), are the following:
• Tax incentives, reductions of corporate taxes and tax holiday programs for
up to ten years, which stimulates new investment in competitive and labour
intensive projects.
60
Labour legislation, which defines the relationships between employees and
the employer e.g. in respect of the need to freedom, which is a distinctive
characteristic of intrapreneurs.
The extent of international sanctions or investments has particular
regulating effect on national economy e.g. limitations on certain exports.
The government could also through price fixing, impose a measure of state
regulation and so create a monopoly on certain products.
An increase in state regulations has the effect of decreasing innovative
opportunities thus limiting possibilities for forming new business. Such a
policy that supports deregulation encourages creativity and innovation.
The political system fosters intrapreneurship when it is build around democratic
rules. Such designs are apt to be more tolerant of diversity, more conducive to
on-going change and more accepting innovation in all walks of life (Morris &
Lewis, 1995:36). Successful corporate careers are built at least in part on
understanding the power structure and doing what the powers want done. This
requires caution, trust and subordination of the urging intrapreneurial needs.
3.10 SUMMARY
Intrapreneurs seldom have any control over the state of external factors and in
most cases, they can to a certain extent prevent negative influences. The
limited control which intrapreneurs have over external factors often creates a
degree of frustration amongst them as they prefer to take control of matters in
order to provide directly for their own needs. Although these environmental
influences are admittedly interdependent, each represents a relatively distinct
orientation that has a different impact on intrapreneurship.
61
The economic environment forms the basis on which to create a setting to
promote intrapreneurial activities. Any intrapreneur will have to be aware and
be sensitive to this remote environment. Ultimately economic factors will have
certain social and cultural implications. Every intrapreneur is also part of a
specific community and therefore has to keep pace with the changing social
and cultural aspects of their market.
Marketing should be a comprehensive plan of actions as the firm's products
and customers primarily through the marketing function define the
intrapreneurial activity. Technology has been and will remain the prime
stimulus for intrapreneurship in the society. It is a development that poses
problems for those that fail to perceive changes quickly.
There is also a considerable emphasis placed on the importance of
international competitiveness in the light of recent trends towards globalisation.
Global changes are impacting on the government's ultimate authority to take
decisions within the borders of a country or state. As one successful
entrepreneur puts it "people with business acumen make good intrapreneurs
but people with political savvy get ahead".
Vast potential lies within the employees of an organisation and
intrapreneurship is a proven solution as it combines the resources that an
organisation can provide with the creative skill and motivation that only
individuals can bring to an endeavour. An educational and training
dispensation, which promotes entrepreneurship basic training and cultivates a
positive attitude to intrapreneurship orientation among employee, is required.
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CHAPTER 4
MICRO ENVIRONMENTAL FACTORS
4.1 INTRODUCTION
In the previous chapter, the focus was on the macro environmental factors, but
it is also pertinent to look at the micro environmental issues impinging on
corporate entrepreneurship directly at the workplace. The micro environment
comprises the internal environment of a firm and is made up of the firm itself.
The micro environmental factors form the context within which employees and
executives perceive opportunities for new ventures. These organisational
variables also constitutes the context within which corporate entrepreneurship
ventures are evaluated, accepted or rejected (Zahra, 1991:265).
Internal factors are the greatest cause of the failure or success of most
business ventures (Prasad, 1993:35). Some reasons for this failure are the
nature of management skills, business philosophy and planning. Analysis of
the internal makeup of an organisation should not just concentrate on its
internal strength and weaknesses as is often the case, but should also include
a continual search for new opportunities and ideas that exists within its
boundaries.
Like all the structural components in the open system, the different
environmental inputs are interdependent, integrated and almost indivisible.
Beer (as quoted by De Villiers & Slabbed, 1996:1), even stated that the
efficiency of organisational outputs in terms of profitability, global
competitiveness etc. will be the result of management's attempt to create
congruity between the external and the internal environments. The micro
environmental factors are linked to the external environment, for instance,
management decisions impact on the market environment.
63
The purpose of this chapter is to highlight the importance of some micro
environmental factors for the pursuit of corporate entrepreneurial activities.
The typology used in this chapter, is based on the analysis of the
multidimensional scale (The Intrapreneurial Assessment Instrument) developed
by Kuratko, Montagno and Hornsby (1990:49-58) and undertaken as an
attempt to summarise the major subdimensions of the micro environment or
infrastructure. However, the microenvironment varies from one firm to the next,
as do interfaces between organisations and environments.
4.2 INNOVATION
While the definition of innovation varies from author to author the following
definition by Herbert A. Sheperd (as quoted by McGinnis & Verney, 1987:19)
best fits the needs of business executives and the concept of intrapreneurship:
'Innovation is when a firm either learns to do something it did not know how to
do before, and then proceeds to do it in a sustained way - or - learns not to do
it in a sustained way" Executives should think of innovation in the broadest
context i.e. what matters is that the idea is new to the firm not whether an idea
was internal or external to the firm. In this context innovation is to be seen as
the practical application of creative ideas towards performing a task in a better
and/or cheaper ways, as is suggested by Lumpkin and Dess (1996:146) it is a
major dimension of an entrepreneurial orientation or construct.
The purpose of intrapreneurship as explained by McGinnis and Verney
(1987:19) is to harness the entrepreneur's spirit of an organisation and blend it
into the culture or set of shared vision of the larger, more established firm. The
authors further maintained that a substantial literature, which developed during
the 1960's on such topics as Managing innovation", could have been called
'Intrapreneurship" or 'entrepreneurship within the firm". The concept of
64
intrapreneur is almost always synonymous with innovation initiated and
implemented by employees.
Organisational issues on the other hand provide insights that develop
management to improve the climate after innovation and lead the conclusion
regarding intrapreneurship.
Intrapreneurship is not a quick fix. 'If you want to explore the edges,
intrapreneuring is a way to do it" comments Fry (1987:9). Developing an
appropriate climate requires a commitment over a period of time. First, top
level management identifies the company's strengths and weaknesses.
Second, top management commitment is essential. Without a top management
commitment over a period of years, intrapreneurship will be just another
management fad that appears, glows brightly and then fades (Duncan, et al.
1988:19).
Innovation reflects a firm's tendency to engage in and support new ideas,
novelty, experimentation and creative processes that may result in new
products and services or technological processes. It is an important
component of an intrapreneurial orientation because it reflects an important
means by which individuals pursue new opportunities (Jacobs, 1998:38).
4.2.1 Individual and organisational qualities in innovation
According to McGinnis and Verney (1987:20-23) the following individual
variables could be identified: -
belief in innovation, which refers to a person who believes and acts while
others may only talk innovation.
creative but pragmatic imagination which effectively balance ideas and
realities to develop new workable ideas.
65
These first two attributes can be summarised as vision i.e. the ability to
integrate past experiences into new arrays that permit one to be innovative.
Psychological security, autonomous nature and achievement-orientation
variables constitute self-motivation being the ability to engage in activities
for their intrinsic rewards.
Psychological security and an autonomous nature refers to the tendency of
the innovative person to look inward for life's rewards rather than depend on
outside forces for a sense of well being.
Achievement-orientation refers to the ability to seek accomplishment for it's
own sake rather than as a way to obtain outside recognition.
The final three individual variables could be called 'killer instinct" and refer to
individual implementations skills:
Interpersonal skills are the ability to work effectively with others. Specific
skills include the ability to organise, to enlist support, to collaborate with
others, and to interact effectively with others.
Energy, determination and persistence which enables the innovative
individual to continue when others might give up.
Sense of timing balances the previous two issues in that the innovative
individual knows when to push forward and when to back off.
These nine organisational factors that affect innovation are also affected by the
firm's policies and by the example set by top management (Burns & Stalker,
1961:40-42; Utterback, 1971:82-83). A commitment by top management
66
results in innovation only if the firm exhibits most of the organisational
characteristics discussed next.
The first two factors that help open the firm to new ideas and concepts are:
Good user designer working relationship which is crucial to the identification
of new opportunities and solving of problems. This involves frequent
monitoring of customer needs, which helps to maintain strong market
positions.
Interaction of the firm with its environment increases the number of
innovations to which the organisation is exposed.
Three organisational factors that help to create a performance gap that
motivates the organisation to challenge itself are:
Ambiguity in goals and processes that create a sense of uncertainty that
frees the organisation to search and experiment.
High standards of performance, which creates a performance gap between
actual and expected performance.
Positive value for innovation.
The two organisational factors that enables organisations to exploit new ideas
and close the performance gap are:
Teams of professional people (who are competent to exercise judgement
when there is a lack of agreement) which are important because many
innovations cut across departmental lines and
Diversity of experience which refers to a wide range of experience.
67
Two final organisational factors help the firm to 'focus efforts on external
challenges': These factors are organisational adaptability and superordinate
goals (problem solving orientation) (McGinnis & Verney, 1987:23).
Organisational adaptability allows boundaries within the company to be
crossed freely as the situation dictates.
Superordinate goals (problem-solving orientation) refers to the firm's ability
to work as a team to solve problems. Corporate-wide goals encourage
functional departments to resolve their restricted interests and co-corporate
in the interest of common objective
4.3 OPPORTUNITY RECOGNITION
Opportunity recognition appears to be a consistent, effective element for
intrapreneuring in that employees and management must be able to identify
opportunities internally, be willing to take a risk and have a tolerance for failure
should it occur (Hornsby, Naffzinger, Kuratko & Montagno, 1993:31).
However many organisations fail to take even the first step in identifying
opportunities internally. Managers fail to see some viable ideas right under
their noses because they fail to scan for any new ideas through to those who
can act on them.
An opportunity has the qualities of being attractive, durable and timely, and is
anchored in a product or service which creates or adds value for its buyers or
end users (Timmons, 1994:87). To be an intrapreneurial opportunity, a
prospect must represent a desirable future state, involving growth (the window
of opportunity should remain open long enough) and the individual must
believe it is possible to reach the state (entry into a market is feasible).
68
Stevenson and Gumpert (1985:87) identified the following external pressures
that stimulate opportunity recognition:
technology which opens new doors and closes others;
consumer economies which alters both the ability and willingness to pay for
new products and services;
social values which defines new styles and standards of living; and
political action and regulatory standards, which affect competition.
These external pressures impose a cost that many executives resist, being the
necessity to change. It is not unusual because like most people, these
executives tend to take comfort in routine and predictable situations.
Pinchot (1985:105-119) cites the following examples of durable and attractive
opportunities:
Complementary products
These work together with products that already exist and depend on being
part of the corporation. These products generate sponsors because
whoever is responsible for the product that an intrapreneurs idea enhances,
will more than likely want to support the effort.
Marketing products used inside
Intrapreneurs should look at their own corporations to find any major
internal capacities that could also be used outside.
69
Training
Committed people are given special training to be successful in their
entrepreneurial role and pursue their ideas in a low risk, low cost
environmental way. There is a boom in training intrapreneurs and most
companies have taken educational programs developed inside their
companies, to market outside these companies.
Falling off-a-log products
Are recognised opportunities for new products or improvements that follow
from what the company already does. These are opportunities to use better
what already exists. Getting at these opportunities is easy and has an
outrageously high Return on investment.
The intrapreneur must analyse and judge the market situation to select the best
time for utilising the opportunity. Its duration varies from business to business
and is dependent on the developmental level in the market.
4.4 MANAGEMENT SUPPORT
This is the extent to which the management structure itself encourages
employees to believe that innovation is in fact part of the role set for all
members of the organisation. This element relates to the willingness of
managers to facilitate corporate entrepreneurial behaviour or construct
(Hornsby, et al., 1990:239).
Some employees are individuals who have both the vision to see an idea and
the practical sense and energy to drive these ideas from concept to product. If
these intrapreneurs do not get support and encouragement, they become
frustrated and leave the company or become nagging negative forces in the
company.
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Intrapreneurship is one way to harness excess energy and therefore has to be
cultivated. An innovative company should be able to tap into the ability and
seize the moment when an employee is fired up with intrapreneurial flair.
4.4.1 Training
Intrapreneurs could also be helped along, by being given training and
resources they need to bring their projects to market. A prime objective of
intrapreneurial training is to get each intrapreneur to his or her customer as
quickly as possible.
Even those intrapreneurs that have formal business education generally find
that their training is of limited value in certain start up situations. Pryor and
Shays (1993:46) believes strongly that providing the space and opportunity is
not enough as intrapreneurs are often inexperienced business people with little
formal training. They have to proceed by trial and error to improve their
chances of success in a generally hostile environment.
Training should focus on the immediate needs of intrapreneurship in
overcoming internal and external barriers.
Kuratko and Montagno (1989:83) acknowledges that training programmes have
the following implications:
identifying potential * intrapreneurs or champions early in their careers;
sponsoring * intrapreneurial projects;
establishing both diversity and order in a firm's strategic activities;
rewarding success; and
* The asterisk is used by author to indicate instances where the author has effected a change
from entrepreneurship to intrapreneurship, when quoting an outside source's viewpoints.
71
developing new managerial approaches and innovative administrative
arrangements so that intrapreneurs and their organisation co-corporate
effectively.
4.4.2 Intrapreneurship programs
One of the reasons, according to Fourie (1995:3) why intrapreneurship is not
seen more often in South African companies could perhaps be that large
companies do not know what to do with what Kanter (1983:27) calls the
intrapreneurial spirit" The result is that the potential intrapreneurs become
frustrated and eventually leave the company. If programmes were available on
how to manage intrapreneurship, both from the company's management as well
as the intrapreneur's point of view, it would assist companies in fostering
intrapreneurship.
Unless there exists an intrapreneurial culture in an organisation, the
intrapreneur will walk up against bureaucratic walls, which he or she may find
impenetrable. Like a cork submerged in water, they will just pop up every time
with energy, until they jump right out of the organisation (Fourie, 1995:56).
Pryor and Shays (1993:44) maintain that an intrapreneurship program will
create a different kind of environment in which:
people with ideas are encouraged to step forward and talk about them;
people who want to do something with ideas, and who have the will, energy
and determination to see them through are allowed to pursue them;
the company gives intrapreneurs the space and freedom they need to
assess, test and modify their ideas;
everyone accepts small failures as the essential forerunners of big
successes.
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Stevens (1998:48) refers to intrapreneurship programmes as 'Integral parts of
the culture companies whose life blood depends on new-product development"
For instance, the 15% rule at 3M, which allow Research and Development
employees to spend 15% of their time on their own ideas which led to products
such as Post-it-Notes and 3M's microreplication-technology core competency.
If a company is to remain proactive and competitive, its managers need to be
semi-autonomous and to believe that they have the freedom to take the
initiative, try new ideas and be intrapreneurial (Pryor & Shays, 1993:42). The
focus on pyramid organisations that most large companies have developed, is
on minimising risk. As long as people within an organisation stick to their job
descriptions, they have little to worry about as they stay within budgets and
meet their targets
A management approach that gives free rein to individual employees and good
ideas encourages innovation (Pryor & Shays, 1993:43). A company with an
entrepreneurial approach encourages the person who introduced the idea to
follow through. Even if the idea does not have merit, the company benefits
from having nurtured an intrapreneur. After all, an intrapreneur who quickly
and inexpensively proves that an idea will not work and why, has also served
the company well.
In this way, if the idea has merit, the company benefits, directly with a new
product or service. The result of such intrapreneurial endeavours is that new
ideas begin to snowball throughout the company, and employee morale and
motivation surge (Pryor & Shays, 1993:43).
Unless top management commits them to an entrepreneurial culture, not only in
words but in actions too, intrapreneurship programmes are doomed.
Intrapreneurship has to be cultivated.
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4.4.3 Sponsorship or mentors in intrapreneurship
Intrapreneurs being goal orientated and self-motivated may also be cynical
about the corporate system but optimistic that they have the ability to outwit
and manipulate it (Oliver, et al., 1991:8). To do this they need a protector or
mentor from within their company to support them whilst they are taking risks.
Therefore, the existence of sponsors is perhaps the most important aspect of
the intrapreneurial culture.
Once an intrapreneur has an idea, the next step would be finding a sponsor. 'It
is impossible to develop and lead a new intracorporate business and at the
same time protect your political flanks" asserts Pinchot (1985:143) who also
referred to sponsors as the 'protectors of new ideas" For these reasons
intrapreneurs almost always need active sponsors. Sponsors ensure that the
enterprise gets the required resources and take care of the day-to-day support
needs of the venture.
Sponsors help keep intrapreneurs in large companies in more ways than just
keeping them from being fired. The existence of sponsors and protectors is
perhaps the most important aspect of intrapreneurial climate as they may have
the ability to solve most of the basic barriers to intrapreneuring being: -
lack of resources as most intrapreneurs cannot authorise their own activities
or budgets
lack of funding at every setback and
Political attacks: their support deters those who would attack (Pinchot,
1985:144-146).
Mentors appear to have a fairly common quality of desire to see innovation
happen. They are more concerned with career strategies as with business
strategies. The mentor therefore should posses the desire to advance the
company through the intrapreneur's development. The systems and
74
bureaucracies of a corporation generally reject anything new as well as other
concerns that delay processes and smother initiative. Mentors should be in a
position of authority within the company so that they are able to protect their
intrapreneur.
In addition to having the support sponsor/mentor especially in organisations
whose cultures lack entrepreneurial vision, it is most important for the
intrapreneur to enlist the support at an early stage of the people whom will be
involved in the implementation of the project (Oliver, et al., 1991:9). This would
help ensure the project's success by instilling a feeling of ownership in those
people. Intrapreneurial projects have their ups and downs, they can be
ordeals. Sponsors are a necessary ingredient in this process. To fill the
innovative needs of the company, it would be necessary for larger
organisations to have several mentors.
Most sponsors do more than protect and fund. They also help the intrapreneur
think thorough and execute his/her enterprise. One person's sponsor is
another persons intrapreneur as the more a sponsor works on a project, the
more the sponsor becomes part of the intrapreneurial team. By definition,
sponsors are generally intrapreneurial in that they take risks to make a vision of
something new happen within the company.
Sponsors are the basic antidotes to the bureaucratic inertia of the corporation
and the nearly endless official innovation processes that exist in most large
firms (Pinchot, 1985:159). In traditional organisation, when people get in
trouble, they are often left to struggle and extricate themselves alone. In an
entrepreneurial organisation sponsors can help someone through a tough time.
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4.5 AVAILABILITY OF CORPORATE RESOURCES
Identifying, attracting and managing the resources needed to execute
opportunities, is another driving force in intrapreneurship. When all corporate
resources are committed to what is planned, nothing is left for trying the
unplannable. Companies that successfully innovate, empower their employees
to use corporate resources in ways that cannot always be predicted or justified
(Pinchot, 1985:211).
Fry (1987:8), Kanter (1983:46) and Hisrich and Peters (1986:317) suggested
that resources availability is an essential organisational characteristic to the
implementation of an intrapreneurial idea.
Pinchot (1985:211-218) recommends the following measures of resources
control:
Headcount controls
Refers to limiting the number of people each division can have instead of
just funds. Headcount restrictions rarely produce good allocation. They
are, however, a powerful force for the status quo, because when head
counts are frozen, existing activities generally keep their people.
Discretionary time
Organisations must moderate the workload of people and allows them to
work with others on long-term problem. solving. The most basic form of
corporate freedom is to use a portion of one's time exploring new ideas
without knowing where they will lead. Without discretionary time, new ideas
remain just that: ideas. The intrapreneur needs time to prove new ideas
without showing them to others and being forced to raise expectations that
are likely to be dashed. Every job needs innovation and innovators need
time to think and try new things. The fostering of new and innovative ideas
requires that individuals have time to incubate the ideas. Timing is critical.
76
• Discretionary funds
When the products of discretionary time prove interesting, discretionary
funds must be available to continue the increasingly promising exploration.
Minds that are denied the ability to explore and test are being wasted.
When discretionary funds are scarce, people give up innovating and
become resigned or bitter. Rather than beg for funds, the idea makers take
their creativity home and become deadwood at work.
A company that provides a variety of funding channels, encourages the
pursuit of alternative approaches, particularly during the early stages of a
new idea development. In fact no activity should be without discretionary
funds.
4.5.1 Corporate financing
Intrapreneurs should be expected to assume some potential risks. Inadequate
financing is one of the varied reasons for failure due to the fact that an
entrepreneurial spirit is not enough to guarantee success in a business
(Duncan, et al., 1998). Even the most dedicated intrapreneur will have a hard
time procuring additional funds to prop up a sinking venture. Their zeal,
enthusiasm and optimism to the harsh realities of the business world blind too
many of them, if they grossly underestimate their needs for capital. They fail to
grasp the concepts of financial management and jump into business 'On a
shoestring': After sorrowful months of low sales and low income in the face of
steadily mounting bills, they sorrowfully fold their tents and fade away (Sauser,
1987:7).
A shortage of own capital and capital reserves decreases the chances of
survival especially during a recession. While a recession can damage the
success of a powerful business, its influence on the smaller business is
77
catastrophic. Pinchot (1985:276) defines intracapital as a timeless
discretionary budget, earned by the intrapreneur and used to fund the creation
of new enterprises and innovation for the corporation. Intracapital works like a
bank account and is debited by withdrawals and credited by deposits and it's
available to use at own discretion. The advantages attached to this system is
that intrapreneurs are not dependent on the normal capital approval systems,
but can use the available capital as and when required, as if they owned it
(Fourie, 1995:64). Intrapreneurs have total freedom to exploit their creativity.
The risk attached to intracapitalism is that once it is exhausted, intrapreneurs
will return to being ordinary employees with the normal restrictions of the
organisation. Despite this, freedom is a reward for the intrapreneur. The
employees also carry part of the risk of the company and this might stimulate
intrapreneurs to be innovative and creative.
4.5.2 Human resources practices
Growing evidence suggests that an intrapreneurial orientation is especially
critical in highly turbulent times. Companies are looking for ways to foster the
intrapreneurial spirit within their ranks. Intrapreneurship involves a process of
value creation in which an individual or team brings together a unique package
of resources to exploit an opportunity.
According to Jones, Morris and Rockmore (1995:86), for most firms, the issue
is not whether they should embrace * intrapreneurship, but how they can
embrace * intrapreneurship's dimensions being innovation, risk taking and
practice which are especially critical for encouraging * intrapreneurial behaviour.
Jones, et al. (1995:86-87) undertook a survey to determine which human
resources practises promote and facilitate * intrapreneuring. Their main findings
identified practices that those successful firms' use to provide * intrapreneurship
and are summarised briefly.
• The asterisk is used by author to indicate instances where the author has effected a change
from entrepreneurship to intrapreneurship, when quoting an outside source's viewpoints.
78
Firms with a more * intrapreneurial orientation tend to encourage higher
levels of employee involvement in the appraisal process. These firms are
more concerned with evaluating results rather than the methods used to
achieve them.
The firms complement the intrapreneurial emphasis by building a greater
tolerance for failure into their appraisal process and evaluating
performance.
In compensation practises, they tend to base pay roles on market
comparisons and providing significantly greater opportunities in the form of
perform based pay incentives.
These organisations are characterised by providing rewards contingent on
performance, providing challenge and meddling the ideas of innovative
people known to others to in the organisation hierarchy.
More time and effort is spending on orienting new employees and helping
them to adapt to organisation's culture.
Training in these firms is more likely to be approached as on ongoing
activity linked to an employee's career.
On the basis of these survey findings, it appears that human resources systems
can be designed to promote and reinforce intrapreneurial behaviours in
employees. The challenge for human resources managers is to identify the
desired levels of intrapreneurship or human resources practises required in
promoting intrapreneurial behaviours.
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4.6 CORPORATE BUREAUCRACY
The history of organisation theory is to some extent, a review of the various
techniques that have been used to organise the efforts of humanity. As
originally described by Weber (Chisholm, 1987:36), bureaucracy was created
as a highly rational alternative for organisational chaos and inconsistency.
Rules and regulations were designed to achieve organisational consistency
and efficiency. But in order to guarantee uniform decisions, the regulations
multiplied to a point where procedure became far more important than what
was done. The bureaucratic rationale for survival are based on the belief that
one could not be blamed for blunder as long as one could prove that the
correct set of company's rules were followed.
Weber developed a structural model that he argues was the most efficient
means by which organisations achieved their ends and it became the design
prototype for the structure of most of today's large organisations. The model
was characterised by division of labour, a clear authority, hierarchy, detailed
rules and regulations and impersonal relationships (Robbins, 1990:37).
Policy implementation is the source of organisational change due to the fact
that the policy is firmly rooted in the past (Chisholm, 1987:36). By following a
policy of incremental change, organisations tend to back into the future, always
carefully measuring its progress in terms of past achievements. In such a
setting, change is smothered by the need to justify the present and approach
the future in terms of the past.
To the intrapreneur, such an organisational attitude is intolerable and creates
an atmosphere that one cannot breathe. In this managerial philosophy, the
usual result is, there are no surprises at all, either pleasant or unpleasant.
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There are no perfect models on how to succeed as an entrepreneur outside or
inside an organisation (Ross, 1987:79). However the development of the
organisation proceeds in three stages namely:
the entrepreneurial stage;
the process of transition; and
the maturity stage (Reilly & DiAngelo, 1987:25-28).
During the entrepreneurial stage, personnel and resources are designed to
respond to both product and the demands of the external environment. The
environment is open to both innovation and change.
The transitional stage is more formal than the previous stage as organisation
charts are drawn and clear lines of authority are established. It is usually at
this stage that the organisation bureaucratises" and becomes an
administrative entity. The relationship toward employees becomes segmented
and tends to require compliance rather than self-defined activity. The parts of
the organisation have become more important than the whole.
The next phase in the evolution of a business can be termed, 'Maturation"
The firm grows older, more complex and there is a greater need to delegate
decision-making.
Creativity and close regulations are antithetical. The organisation's challenge
is to establish those policies necessary to meet the preservation requirements
of the corporation while at the same time allowing the intrapreneur the
organisational freedom to achieve.
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4.7 SUMMARY
This chapter represents the contribution to the literature study that suggests
that there may be consistent organisational characteristics that lead (or not
lead) to intrapreneurial behaviour. Innovation is one of the critical dimensions
that characterises and distinguishes key intrapreneurial orientation because it
reflects an important means by which individuals pursue new opportunities.
However intrapreneurship typically occurs in a real world environment that is
characterised by turbulence and uncertainties. Environmental turbulence
creates both threats and opportunities for intrapreneurial organisation.
Innovation is also an unpredictable, ambiguous and uncertain adventure.
Bureaucracy is another intricate infrastructure, that management build because
they cannot keep innovation under control. Management will also try by all
means to condition employees that stability and control are the most important
attributes of good management.
The three primary driving forces behind intrapreneurship are opportunity
recognition, resource requirements and management support programs.
Opportunity recognition is a critical factor for intrapreneurial success because
an idea is not necessarily an opportunity. There are more ideas than business
opportunities. Opportunities are created because of changing and turbulent
environment. The challenge facing intrapreneurs is the recognition of an
opportunity buried in an often-chaotic change and turbulent market.
In grasping opportunities most institutions with vast resources are tempted to
commit resources heavily. However success is unrelated to massive resources
commitment. Thus intrapreneurs should seek to control resources rather than
owning them as they are guided by the strategic imperative to do more with
less" in managing the resources required to execute the opportunity. For
existing businesses to survive in the long run, they must be ready and able to
take advantage of new opportunities. Intrapreneurship programs not just
82
encourage staff to innovate but also empower them to make ideas work and
encourage the whole organisation to become more commercially aware by
acting intrapreneurally. Intrapreneurship is designed to uncover and channel
entrepreneurial talent wherever it may lurk within an organisation.
Sponsoring ideas is prevalent in situations where high levels of internal
management support for innovation exist and also encourages individuals with
high need for achievement to be more likely engaged in intrapreneurial activity.
A successful program need to train sponsors, protectors, coaches and mentors.
Senior managers need to help the intrapreneurs deal with corporate
bureaucracy and gain access to resources. Intrapreneurship is a proven
solution as it combines the resources that an organisation can provide with the
creative skills and motivation that only individuals can bring to an endeavour.
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CHAPTER 5
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY
The approach followed in this study was first to look at the evolving nature of
entrepreneurship as well as the necessity of intrapreneurship. Typical macro
and micro environmental factors were highlighted with a view to identify the
implications of the said variables on corporate entrepreneurship.
In this dissertation, the guiding definition of entrepreneurship adopted is based
on one offered by Timmons (1994:7), which acknowledges the existence of
central driving forces within the environment that accounts for the success
rates in intrapreneurship. The study of entrepreneurship seeks to understand a
rich and complex intellectual policy agenda inherent in the evolution of the field
of entrepreneurship. As was suggested by the proposed definition earlier on,
entrepreneurship is not just the domain of new and emerging business. The
literature review demonstrated that entrepreneurship is possible in all segments
of life and in all organisations and institutions.
In analysing the entrepreneurial process, it was found that relying only on
traditional models such as the trait method to describe and understand
entrepreneurship and intrapreneurship is not useful. A multidimensional
approach is required for successful conceptualisation of intrapreneurship. The
literature survey on the evolution of entrepreneurship provides a foundation for
further study of this dynamic and developing discipline.
Entrepreneurs and intrapreneurs have been used by many authors and are
also mentioned somewhat interchangeably in this study, but there are
differences between the two concepts. The intrapreneur (the corporate
84
innovator) is considered to have a more difficult job than the entrepreneur (the
independent self-starter) does. The entrepreneur provides own setting while
the intrapreneur operates within the setting of an established organisation with
structural and procedural constraints. Nevertheless, each relies heavily on
teamwork and group innovation.
The environment is often presented as an outside force that is the cause of
many of the problems confronting the organisation. The environment is
turbulent, endlessly changing, elusive and unforeseeable. A basic set of
environmental factors needs to be established before organisations can
implement intrapreneurial concepts. These compounding factors create
potentially more complex set of challenges within the macro environment. The
macro environment entails influences or inputs from the systems in the broader
community. By being aware of the tendencies in the macro environment, it is
possible for management to identify threats and opportunities in this macro
environment, which could then be used as a reference framework for the
identification of strong and weakpoints in the micro environment.
The micro environment focuses on factors within the business organisations
and consist of factors inherent in the conditions prevailing within the firm or in
the management styles that facilitates the emergence of intrapreneurship. The
intrapreneur must consider the micro environmental factors in advocating
innovation within his/her company because the intrapreneur is an
organisational member who goes beyond his/her required duties to promote an
innovative change. A successful organisational member is one who can utilise
corporate and human resources to get things done. Failure to do so may mean
wasting time, effort and resources that could have been deployed more
productively elsewhere.
All the listed macro and micro environmental factors, are important in fostering
or impeding the intrapreneurial behaviour, but none of these factors is sufficient
on its own to explain the emergence of intrapreneurship. These factors interact
85
and influence each other through a dynamic chain of cause and effect. This
suggests that intrapreneurship should be studied from an interactionist
perspective. Both the situation and the person (individual) and the interaction
that unfolds over time and must be explained fully to understand the
interdependency and interaction of an organism in its environment (Carrier,
1996:16).
The assumptions about the macro environment, the micro environment and the
intrapreneur must fit reality. The assumption in all these three areas have to fit
one another. This is perhaps 3M's and other Fortune 500's organisation's
strength in the long decades of ascendancy. These assumptions should be
known and understood throughout the organisation and the culture adopted
from such has to be tested.
5.2 CONCLUSION
Critical examination of the literature on intrapreneurship and entrepreneurship
has led to the acceptance that change need to be applied within all
organisation to foster an environment of creativity and innovation. Innovation is
seen to be a priority to dealing with changes imposed on businesses to ensure
long time success.
The theme that is occurring at all levels of the South Africa's workforce is
employee contribution. To understand the nature of intrapreneurship, it is
important to consider the environment in which an intrapreneur acts. One of
the basic emphasis of an intrapreneurial orientation is the external business
environment or macro environment. Structures, personnel and resources are
assigned to respond to both product and the demands of this external
environment. All environmental factors discussed in this dissertation, affect an
organisational level of uncertainty (posed by lack of information) and
86
dependence (posed by the need for vital resources from outside forces).
These environmental factors are rules rather than expectations.
The growing interest in the study of corporate entrepreneurs is a response to
the belief that such behaviour can lead to improved competitiveness and
survival of established organisations.
Corporate entrepreneurship has the potential to ensure a future successful
business. However, a holistic approach involving synergy between top
management, organisations and employees is required for its successful
implementation. It is an opportunity driven and value creating process that can
be applied in a variety of contexts. Organisations will have to become
opportunity rather than resource driven. The identification, tracking and
resolution of opportunities that could impact on the venture are fundamentally
activities in intrapreneuring. The environment on which intrapreneurial
activities occur is more uncertain and less easy because of the variable and
precipitating event that are more differentiated.
Corporate entrepreneurship is set in time and also set in context of
organisation, legal systems, a political system, and so forth. It is not only a
product of environmental forces but also an agent of change in the
environment. At the organisational level, environments that are conducive to
creativity and innovations are likely to induce intrapreneurial behaviour. Macro
environmental factors play an important role by placing constraints, pressures
and incentives on the organisation.
An intrapreneur is an organisational member who goes beyond his/her required
duties to promote an innovative change and thus organisational politics has a
direct bearing on the intrapreneurial mission in advocating innovation within the
firm. Intrapreneurship is not simply a super idea scheme nor bed of roses to lie
on. Intrapreneurship is a non-starter in environment where restrictive
perception of reality exists. Unless both the macro and micro environments are
87
supportive towards intrapreneuring, little success would be achieved by
implementing any other actions to set up intrapreneurial orientation within a
corporation. Once the internal environment is understood monitoring and
comparing the trends in comparable organisations will help to show whether
existing management policies are improving or not.
A better understanding of environmental determinants and of the dynamics of
environmental-intrapreneurship interfaces will enable scholars and
practitioners to capitalise on the full potential of theories and ideas that
constitute contemporary entrepreneurship knowledge. Intrapreneurship is an
emerging corporate strategy to foster intrapreneurial activities within the larger
corporate domain. As Fuhr (1995:19) points out, " * Intrapreneurship adds
excitement and interest in our lives. It enables us to some control in our lives.
It is a way of exploring the edges".
5.3 RECOMMENDATIONS
Future research into the environmental determinants of corporate
entrepreneurship can proceed along a number of important paths. Much of the
work on interface issues has dealt with the role of marketing in start-up
ventures and less on other essential elements of the organisational
environment as discussed in this study. Some attention has also been devoted
to examining the application of entrepreneurial thinking to the marketing efforts
but there is still much research needed to be done concerning the interfaces
between intrapreneurship and environmental dimensions. The recommen-
dations that can be made in the light of the findings of the study may include
the following.
• Researchers interested in corporate entrepreneurship need to continuously
reassess the components or dimensions of the environment that predict,
explain and shape the environment in which intrapreneurs flourishes or
88
decays. They have to continue to seek models for how to drive
intrapreneurship successfully because it is quite clear that the environment
is receptive for making substantial contribution to theory development.
Business leaders of the future will have to turn to intrapreneurship in a truly
effective way. They should go to the standard route of opening the
candidacy of intrapreneurship to anyone in the company who choose to put
himself/herself forward.
Top management's task should be that of a true transformational leader,
who provides the necessary infrastructure in the organisational subsystems
and streamline them to enable employees to proactively identify and exploit
opportunities. This includes such elements as establishing and maintaining
a culture conducive to intrapreneurship (the keepers of the corporate
culture). They should further formulate and test future-oriented visions for
the organisations and continuously coach and sponsor intrapreneurial
activities and ideas.
In today's highly turbulent environment, companies need to be more
responsive through a broader range of co-ordinated strategies and on-going
development of new products and services. With effective competitive
strategies in today's context of increasing market globalisation,
organisations should provide internal alternatives and structures that
develop people in that spirit and that maintain their commitment to the
organisation.
The innovation gap, which exists between the role of the entrepreneurs and
the managers, should be filled with the intrapreneur who essentially uses a
combination of entrepreneurial and managerial skills (as illustrated in figure
2.3).
89
• It is also advisable to train intrapreneurs properly for the task on hand. This
will help streamlining the implementation of intrapreneurship programmes
and management support, which is irreplaceable. A company should first
investigate the applicability of intrapreneuring to their type of business
before deciding on the adoption of the intended programme of action.
Lastly, there are three areas where management can look for support to deal
with business challenges and impacts. First, one can learn from successes of
the past in terms of how to organise and instil an intrapreneurial spirit. Second,
management may use methods that have been employed in other
organisations over the past 100 years, for instance the 15% rule at 3M. Lastly,
management can turn to technology for tools to support the methods and
procedures conducive to intrapreneurial spirit for instance, information
technology, which makes the world boundaryless and thus enhances
globalisation (and thus new markets) which encourages intrapreneuring
through innovation
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90
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