Chapter3

Chapter Objectives Studying this chapter should provide you with the entrepreneurial knowledge
needed: to define the term corporate entrepreneurship To illustrate the need for corporate
entrepreneuring To describe the corporate obstacles preventing innovation from existing in
corporations To discuss the intrapreneurship considerations involved in reengineering corporate
thinking To describe the specific elements of an entrepreneurial strategy To profile intrapreneurial
characteristics and mythsTo illustrate the interactive process of intrapreneurship© 2007
Thomson/South-Western. All rights reserved.3–2

The Entrepreneurial Economy

Factors in the emergence of the entrepreneurial economy:The rapid evolution of knowledge and
technology promoted high-tech entrepreneurial start-ups.Demographic trends adding fuel to the
proliferation of newly developing ventures.The venture capital market became an effective funding
mechanism.American industry began to learn how to manage entrepreneurship.

Who Are Intrapreneurs?Intrapreneurs are sometimes captured by the description as “a dreamer who
does.” They tend to be action oriented. They can move quickly to get things done.They are goal
oriented, willing to do whatever it takes to achieve their objectives. They are also a combination of
thinker, doer, planner, and worker. They combine vision and action.© 2007 Thomson/South-
Western. All rights reserved.

5 The Nature of Intrapreneurship

Defining The ConceptCorporate EntrepreneurshipActivities that receive organizational sanction and
resource commitments for the purpose of innovative results.A process whereby an individual or a
group of individuals, in association with an existing organization, creates a new organization or
instigates renewal or innovation within the organization.A process that can facilitate firms’ efforts to
innovate constantly and cope effectively with the competitive realities that companies encounter
when competing in international markets.© 2007 Thomson/South-Western. All rights reserved.

6 The Need for Corporate Entrepreneurship

Rapid growth in the number of new and sophisticated competitorsSense of distrust in the traditional
methods of corporate managementAn exodus of some of the best and brightest people from
corporations to become small business entrepreneursInternational competitionDownsizing of major
corporationsAn overall desire to improve efficiency and productivity© 2007 Thomson/South-Western.
All rights reserved.

7 Table 3.1 Sources Of and Solutions To Obstacles In Corporate Venturing

Source: Reprinted by permission of the publisher from “Corporate Venturing Obstacles: Sources and
Solutions,” by Hollister B. Sykes and Zenas Block, Journal of Business Venturing (winter 1989): 161.
Copyright © 1989 by Elsevier Science Publishing Co., Inc.© 2007 Thomson/South-Western. All
rights reserved.

8 Successful Innovative Companies

Factors in large corporations that are successful innovators:Atmosphere and visionOrientation to the
marketSmall, flat organizationsMultiple approachesInteractive learningSkunkworks© 2007
Thomson/South-Western. All rights reserved.

9 Reengineering Corporate Thinking

Steps to develop policies that will help innovative people reach their full potential:Set explicit
goalsCreate a system of feedback and positive reinforcementEmphasize individual
responsibilityGive rewards based on resultsDo not punish failures.© 2007 Thomson/South-Western.
All rights reserved.

10 Assessing Support for Innovation

Does the firm encourage self-appointed intrapreneurs?Does the firm provide ways for intrapreneurs
to stay with their enterprises?Are people permitted to do the job in their own way, or are they
constantly stopping to explain their actions and ask for permission?Has the firm evolved quick and
informal ways to access the resources to try new ideas?Has the firm developed ways to manage
many small and experimental products and businesses?© 2007 Thomson/South-Western. All rights
reserved.

11 Assessing Support for Innovation (cont’d)

Is the system set up to encourage risk taking and to tolerate mistakes?Can the firm decide to try
something and stick with the experiment long enough to see if it will work, even when that may take
years and several false starts?Are people in your company more concerned with new ideas or with
defending their turf?How easy is it to form functionally complete, autonomous teams in the firm’s
corporate environment?Do intrapreneurs face monopolies, or are they free to use the resources of
other divisions and outside vendors if they choose?© 2007 Thomson/South-Western. All rights
reserved.

Innovative Philosophy
Encourage action.Use informal meetings whenever possible.Tolerate failure and use it as a learning
experience.Persist in getting an idea to market.Reward innovation for innovation’s sake.Plan the
physical layout of the enterprise to encourage informal communication.Expect clever bootlegging of
ideas—secretly working on new ideas on company time as well as personal time.Put people on
small teams for future-oriented projects.Encourage personnel to circumvent rigid procedures and
bureaucratic red tape.Reward and promote innovative personnel.© 2007 Thomson/South-Western.
All rights reserved.

13 Encouraging an Intrapreneurial Environment

Steps to help restructure corporate thinking and encourage an intrapreneurial environment:Early
identification of potential intrapreneursTop management sponsorship of intrapreneurial
projectsCreation of both diversity and order in strategic activitiesPromotion of intrapreneurship
through experimentationDevelopment of collaboration between intrapreneurial participants and the
organization at large© 2007 Thomson/South-Western. All rights reserved.

14 Benefits of an Entrepreneurial Philosophy

Leads to the development of new products and services and helps the organization expand and
grow.Creates a work force that can help the enterprise maintain its competitive posture.Promotes a
climate conducive to high achievers and helps the enterprise motivate and keep its best people.©
2007 Thomson/South-Western. All rights reserved.

15 Conceptualizing a Corporate Entrepreneurial Strategy

Corporate Entrepreneurship (CE) StrategyA vision-directed, organization-wide reliance on
entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes
the scope of its operations through the recognition and exploitation of entrepreneurial opportunity.It
requires the creation of congruence between the entrepreneurial vision of the organization’s leaders
and the entrepreneurial actions of those throughout the organization.© 2007 Thomson/South-
Western. All rights reserved.
16 Conceptualizing a Corporate Entrepreneurial Strategy (cont’d)
Critical steps of a corporate entrepreneurial strategy:Developing the visionEncouraging
innovationStructuring for an intrapreneurial climateDeveloping individual managers for corporate
entrepreneurshipDeveloping venture teams.© 2007 Thomson/South-Western. All rights reserved.

17 Figure 3.1 The Corporate Entrepreneurship Strategy Process

Source: Adapted from R. Duane Ireland, Donald F. Kuratko, and Jeffrey G. Covin, “Antecedents,
Elements, and Consequences of Corporate Entrepreneurship,” Best Paper Proceedings: National
Academy of Management (August 2003) CD Rom: L1–L6; and R. Duane Ireland, Jeffrey G. Covin,
and Donald F. Kuratko, Corporate Entrepreneurship Strategy (in press, 2007).© 2007
Thomson/South-Western. All rights reserved.

18 Model of the Corporate Entrepreneurship Strategy Process

Corporate entrepreneurship strategy is manifested through the presence of three elements:An
entrepreneurial strategic visionA proentrepreneurship organizational architectureEntrepreneurial
processes and behavior as exhibited across the organizational hierarchy.© 2007 Thomson/South-
Western. All rights reserved.

19 Model of the Corporate Entrepreneurship Strategy Process (cont’d)

Linkages in the model:Individual entrepreneurial cognitions of the organization’s membersExternal
environmental conditions that invite entrepreneurial activityTop management’s entrepreneurial
strategic vision for the firmOrganizational architectures that encourage entrepreneurial processes
and behaviorThe entrepreneurial processes that are reflected in entrepreneurial
behaviorOrganizational outcomes resulting from entrepreneurial actions.© 2007 Thomson/South-
Western. All rights reserved.

20 Figure 3.2 Shared VisionSource: Jon Arild Johannessen, “A Systematic Approach to the
Problem of Rooting a Vision in the Basic Components of an Organization,” Entrepreneurship,
Innovation, and Change (March 1994): 47. Reprinted with permission from Plenum Publishing
Corporation.© 2007 Thomson/South-Western. All rights reserved.

Objectives And Programs For Venture Development

Source: Adapted by permission of the publisher from “Supporting Innovation and Venture
Development in Established Companies,” by Rosabeth Moss Kanter, Journal of Business Venturing
(winter 1985): 56–59. Copyright © 1985 by Elsevier Science Publishing Co., Inc.© 2007
Thomson/South-Western. All rights reserved.

22 Types of Innovation Radical Innovation Incremental Innovation

The launching of inaugural breakthroughs.These innovations take experimentation and determined
vision, which are not necessarily managed but must be recognized and nurtured.Incremental
InnovationThe systematic evolution of a product or service into newer or larger markets.Many times
the incremental innovation will take over after a radical innovation introduces a breakthrough.© 2007
Thomson/South-Western. All rights reserved.

23 Figure 3.3 Radical Versus Incremental Innovation

Source: Harry S. Dent, Jr., “Reinventing Corporate Innovation,” Small Business Reports (June
1990): 33.© 2007 Thomson/South-Western. All rights reserved.
24 Table 3.3 Developing And Supporting Radical And Incremental Innovation
Source: Adapted from Harry S. Dent, Jr., “Growth through New Product Development,” Small
Business Reports (November 1990): 36.© 2007 Thomson/South-Western. All rights reserved.

25 3M’s Innovation Rules Don’t kill a project Tolerate failure

Keep divisions smallMotivate the championsStay close to the customerShare the wealth© 2007
Thomson/South-Western. All rights reserved.

26 Structuring for a Corporate Entrepreneurial Environment

Reestablishing the drive to innovate:Invest heavily in entrepreneurial activities that allow new ideas
to flourish in an innovative environment.Provide nurturing and information-sharing
activities.Employee perception of an innovative environment is critical.Corporate
VenturingInstitutionalizing the process of embracing the goal of growth through development of
innovative products, processes, and technologies with an emphasis on long-term prosperity.© 2007
Thomson/South-Western. All rights reserved.

27 Figure 3.4 Intrapreneurial Development: Joint Function of Individual and Organizational

Factors
Source: Deborah V. Brazeal, “Organizing for Internally Developed Corporate Ventures,” Journal of
Business Venturing (January 1993): 80.© 2007 Thomson/South-Western. All rights reserved.

28 Developing Individual Managers for Corporate Entrepreneurship

Corporate Entrepreneurship Training Program (Corporate Breakthrough Training)The Breakthrough
ExperienceBreakthrough ThinkingIdea Acceleration ProcessBarriers and Facilitators to Innovative
ThinkingSustaining Breakthrough TeamsThe Breakthrough Plan© 2007 Thomson/South-Western.
All rights reserved.

29 Corporate Entrepreneurship Assessment Instrument

Key Entrepreneurial Climate FactorsManagement supportAutonomy/work
discretionRewards/reinforcementTime availabilityOrganizational boundary© 2007 Thomson/South-
Western. All rights reserved.

30 Facilitating Intrapreneurial Behavior

Organizations foster intrapreneurial behavior by:Encouraging—not mandating—intrapreneurial
activityProper control of human resource policies related to “selected rotation”Sustaining a
commitment to intrapreneurial projects long enough for momentum to occur.Bet on people, not on
analysis.Rewarding intrapreneuring:Allow inventor to take charge of the new ventureGrant
discretionary time to work on future projectsMake intracapital available for future research ideas©
2007 Thomson/South-Western. All rights reserved.

31 Table 3.4 The Ten Commandments Of An Intrapreneur

Source: Adapted from Intrapreneuring by Gifford Pinchot III, 1985, 22. Copyright © 1985 by Gifford
Pinchot III. Adapted by permission of HarperCollins Publishers.© 2007 Thomson/South-Western. All
rights reserved.

32 Developing Venture Teams

A semiautonomous, self-directing, self-managing, high-performing group of two or more people who
formally create and share the ownership of a new organization.The leader is called a “product
champion” or an “intrapreneur.”Collective EntrepreneurshipIndividual skills are integrated into a
group; this collective capacity to innovate becomes something greater than the sum of its parts.©
2007 Thomson/South-Western. All rights reserved.

33 Figure 3.5 An Interactive Model of Corporate Entrepreneuring

Source: Jeffrey S. Hornsby, Douglas W. Naffziger, Donald F. Kuratko, and Ray V. Montagno, “An
Interactive Model of the Corporate Entrepreneurship Process,” Entrepreneurship Theory and
Practice (spring 1993): 31.© 2007 Thomson/South-Western. All rights reserved.

34 Sustaining Corporate Entrepreneurship

Sustained Corporate Entrepreneurship ModelBased on theoretical foundations from previous
strategy and entrepreneurship research.Considers the comparisons made at the individual and
organizational level on organizational outcomes, both perceived and real, that influence the
continuation of the entrepreneurial activity.Transformational triggerSomething external or internal to
the company (e.g., corporate entrepreneurial activity) that causes a change to take place) initiates
the need for strategic adaptation or change.© 2007 Thomson/South-Western. All rights reserved.

35 Figure 3.6 A Model of Sustained Corporate Entrepreneurship

Source: Donald F. Kuratko, Jeffrey S. Hornsby, and Michael G. Goldsby, “Sustaining Corporate
Entrepreneurship: Modeling Perceived Implementation and Outcome Comparisons at Organizational
and Individual Levels,” International Journal of Entrepreneurship and Innovation 5(2) (May 2004):
79.© 2007 Thomson/South-Western. All rights reserved.

36 Corporate Entrepreneurship at IBM

Emerging Business Opportunity (EBO) Program Key Rules:Think big really big.Bring in the A-
team.Start small.Establish unique measurement techniques.© 2007 Thomson/South-Western. All
rights reserved.

37 Key Terms and Concepts bootlegging champion

collective entrepreneurshipcorporate entrepreneurshipCorporate Entrepreneurship Assessment
Instrument (CEAI)entrepreneurial economyincremental innovationinteractive
learningintracapitalintrapreneurshipradical innovationskunkworkstop management supportventure
team