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Why Do Corporate Entrepreneurship Efforts Fail So Often?
Summary
The concept of Corporate Entrepreneurship (CE) is commonly regarded as a set of efficient methods for the generation of competitive advantages, increased financial performance, innovation, and sustainability of business operations. However, the researchers argue that the enforcement of CE principles requires many prerequisites such as flexibility and risk-taking behavior supported by the effective organizational structuring and well-developed organizational culture (Ackermann & Kern 2013).
The realization of innovative ideas and organizational renewal that are inherent with CE is associated with multiple problems. Therefore, in a growing body of literature, the researchers agree on the fact that the implementation of CE is a challenging task and organizational efforts aimed at the integration of CE principles may easily fail. In their article, Ackermann and Kern (2013) suggest that the success of CE employment largely depends on corporate strategy, organizational structure, corporate culture, HR management, and external influences.
The internal factors defining successful CE implementation require adequate allocation of resources and tasks, regulation of entrepreneurial activities, the creation of employee motivation system, and administration of knowledge management practices. Moreover, the organizational strategies, activities, and cultural values should be effectively aligned with the requirements imposed by external social-cultural, political-legal, and economic environments. The researchers claim that the consideration of the mentioned factors in the selection of instruments and methods for the organizational engagement in CE activities may significantly minimize the risks of failure and ensure the sustainable growth of a firm.
Research Method
Ackermann and Kern (2013) employed a qualitative research methodology. The major instrument for data collection and analysis was the literature review. The researchers evaluated over fifty scholarly sources to define the term of CE, identify the major concepts and activities related to it, and explore the potential benefits of CE. The evaluated literature included both recent and some earlier papers written between the 1970s and 1990s. The inclusion of sources published in different periods of global entrepreneurship and management research allowed the scholars to investigate the evolution of the concept and capture its heterogeneous nature.
Most of the reviewed papers include the empirical evidence of CE. Through the inclusion of the quantitative articles and case studies in the body of the research, the authors managed to increase the credibility of their findings and compensate for the lack of own empirical validation of the introduced conceptual frameworks and research results.
Evaluation
It is possible to say that the consideration of corporate culture, organizational structure, strategic and HR management, as well as the external environmental influences as the main decisive factors of success in the performance of CE activities, seems to be right. Corporate venturing is interrelated with innovation, maintenance of risk-taking behavior, and pursuing new opportunities that require an excellent level of coordination and employee commitment. Thus, the selection of appropriate staff members, the division of labor, and organizational hierarchy; development of a smart reward system; and the creation of a good balance between individual and collective efforts may largely support CE processes.
It is possible to say that corporate strategy, HR management, and structuring are the constructional elements of CE – they help to organize the activities and serve as regulatory frameworks, – while corporate culture ensures the provision of the semantic content needed for the encouragement of employee compliance with CE principles. Organizational culture determines patterns of employees’ behavior, communication, and thinking, and, in this way, it also defines the extent of their motivation for the achievement of the desired results. Both cultural and managerial components of organizational performance are complementary to each other, and without the consideration of any factors identified in the article, it will likely be difficult to gain significant advantages through CE implementation.
It is worth mentioning that the conduction of the continuous analysis of external factors is critical to the implementation of strategies and cultural transformation. To increase the chance for success, companies need to focus on the detailed analysis of the conditions and information about the dynamics and changes in the environment. Only in this way it is possible to attain the necessary knowledge needed to close the gap between the present situation and the desired goals.
Conclusion
The main takeaway emerged from the article is the idea that CE’s premises its embedment in an appropriate organizational environment’ (Ackermann & Kern 2013, p. 4). The limited success in the establishment of CE is directly related to the neglect of factors that originate from the internal organizational environment – strategies, values, and structures. Therefore, the initial stage in the corporate reengineering process is the preparation of the adequate context needed for the achievement of positive outcomes.
Consistently with the major finding, it is observed that ‘entrepreneurial organizations reflect flatter hierarchies, broader divisions of labor, a wider span of authority and tend to be decentralized’ (Ackermann & Kern 2013, p. 5). Decentralization of authority and decision making are intrinsic features of CE. Such a structure ensures greater employee involvement and functional flexibility; it allows the consideration of different cross-sectional perspectives and consequently leads to greater creativity and innovation.
It is observed that CE is more effective in the context of ‘balanced individualism-collectivism’, and it is possible to say that an appropriate balancing can be maintained by a well-developed corporate culture (Ackermann & Kern 2013, p. 6). The researchers claim that the culture which may foster CE is non-conservative because only this type of corporate culture supports innovation.
Another important takeaway is the finding that an adequate reward system and employee recognition efficiently stimulate CE activities. The recognition of human capital and the development of positive attitude to employees through multiple HRM practices increase employee commitment and help to raise their awareness of the desired outcomes and purposes of the allocated tasks.
Lastly, the review of the literature conducted by Ackermann & Kern (2013) helped to reveal that ‘dynamic environments have been found to advance CE’ (p. 7). The social, legal, economic, and political contexts always impact organizational performance and are influenced by companies’ behavior as well. While a high level of competition and hostility in the market are commonly regarded as negative phenomena associated with many challenges and risks, they are also related to the increase in the effectiveness of CE practices. Therefore, CE can serve as an effective remedy for the minimization of performance risks and the achievement of organizational sustainability in a highly dynamic environment.
The Influence of Managerial Attribution on Corporate Entrepreneurship
Summary
The study explores links between managerial attribution in the maintenance of CE behaviors and performance outcomes. Jayamohan, McKelvie, and Moss (2014) employ the framework of the Attribution theory to examine how attribution styles may affect the process and results of new venture formation. It is suggested that attribution style may be affected by ‘attributional bias’ – the propensity to credit positive results to oneself and negative results to environmental factors (p. 2). The biased managerial attribution style may significantly affect entrepreneurial behavior and provoke irrational decision making, especially in R&D spending. Additionally, it is observed that managers tend to rely on previous organizational performance when selecting CE instruments. Considering the observations made in the previous literature, Jayamohan, McKelvie, and Moss (2014) argue that attribution can be a mediator in the relationships between performance, various external factors, and CE-related R&D investments.
The analysis of the data revealed that there are dynamic and non-linear relationships between external factors in the market and R&D investments and organizational performance and R&D spending. The researchers make it clear that attribution may be one of the antecedents of CE practices, and ‘how and to what the firm attributes its past performance has an important impact on its future CE activities’ (Jayamohan, McKelvie & Moss 2014, p. 7). Therefore, the findings have important practical and theoretical implications as they broaden the understanding of CE and may help to improve entrepreneurial decision making.
Research Method
The study implements the mixed research methodology including the qualitative literature review and the application of quantitative data analysis tools – statistical and regression testing. The sample included 100 pharmaceutical companies collected via a random sampling technique. The scholars used the Management Discussion and Analysis sections of the selected firms’ Annual Reports for 2005.
The applied mediation model included four basic measures of attribution: internal/external positive attributions, and internal/external negative attributions. Change in future R&D was identified as the dependent variable while the changes in performance and liquidity were used as the independent variables. Moreover, the variable of company size was considered to reduce potential result bias.
Evaluation
Attribution is a psychological conception, and as many other psychological phenomena, the perception of cause-and-effect links between events and factors is subjective in its nature. Since attribution largely affects motivation and behavior, it has significant implications for leadership. The more the performance results are perceived by a leader as influenced by external factors, the more he/she places responsibility for the outcomes on these environmental conditions. In this way, external characteristics may become attributional biases and may interfere with adequate decision-making.
It is possible to say that the manipulation of internal and external negative or positive attributions may provoke motivation errors. Moreover, the internal or external attribution depends on the status of the perceived event/person; and when an individual evaluates own behavior, it can be defined by the level of his/her confidence and personal values. Therefore, to reduce attributional biases and select appropriate CE practices, it can be recommended to implement a decentralized structure of authority and enhance managerial coordination across different organizational units because cross-sectional teams are associated with increased creativity, innovation, and multidimensionality of perspectives.
Conclusion
The paper helped to deepen the comprehension of subjective factors that may define entrepreneurial success. As Jayamohan, McKelvie, and Moss (2014) observe ‘entrepreneurs are more likely to attribute favorable outcomes to their actions and unfavorable ones to factors beyond their control’ (p. 1). However, such a perception may not necessarily be rationalized. Thus, the measures should be undertaken to reduce misinterpretation and increase the rationalization of managerial decision making in CE.
The paper analysis helped to reveal that the greater risk-taking behaviors and more entrepreneurial efforts may be defined by the past positive organizational experiences (Jayamohan, McKelvie & Moss 2014). The experience thus may be regarded as one of the potential antecedents of success in the administration of CE activities. Based on this, to foster better entrepreneurial outcomes, organizations with poor performance need to initiate strategic reorientation to create a favorable environment for innovation and maintenance of sustainable corporate behavior.
In the existing body of literature about CE, there is scarce information regarding the relationships between liquidity and performance of CE activities, and the given paper gives insight regarding this issue. Jayamohan, McKelvie, and Moss (2014) reveal that ‘R&D spending is higher at higher levels of change in liquidity for both high and low attribution firms’ (p. 6). Although there is a small variation in attribution to liquidity in small and large companies, this finding demonstrates that the majority of managers perceive changes in liquidity as the opportunity for organizational development and growth. Nevertheless, the consideration of this factor alone may be misleading, and it is important to take into account a great number of other potential influences.
Traditionally, researchers distinguish between internal and external factors affecting CE efforts, but the reviewed study provides a more detailed view by identifying nine factors: internal factors of corporate performance, and external factors related to legal, and political contexts; partnerships, suppliers, competition, market, regulations, and irregularities in the economy. All these factors are interrelated with managerial attribution and should be properly analyzed and discussed within a team to investigate their links to strategies and entrepreneurial activities.
What Are the Antecedents to Creating Sustainable CE in Thailand?
Summary
The study investigates the important preconditions of CE activities and their effects on business performance in the context of a developing Asian country. The research focuses on such aspects of performance as innovation and financial outcomes.
The Asian economic environment is dynamically changing and generates many competitive pressures on companies in many industries. Lekmat and Chelliah (2014) suggest that the strategic renewal process embedded in CE is a method for survival and sustainable firm growth but the significant investment should be made by management and leadership to create the internal organizational environment that would lead to the positive outcomes in entrepreneurial endeavors. In their article, the authors propose that the internal environment, management support, work discretion, reinforcement, time availability, and organizational boundaries are the prerequisites of entrepreneurial orientation which is closely interrelated with organizational innovation abilities. Moreover, Lekmat and Chelliah (2014) regard innovation as a mediator between entrepreneurial orientation and improved firm performance regarding market operations and finance.
The analysis of the empirical data obtained in Thai companies helped to reveal that the internal environment is the main driving force of CE and management should encourage entrepreneurial behavior at a whole-organization level. In its turn, entrepreneurial behavior supports process innovation which has a positive impact on firm performance. In this way, the implementation of CE with the consideration of all its antecedents may ensure the development of competitive advantages and sustainable growth in the increasingly competitive economic environment.
Research Method
The quantitative research methodology is employed in the study. The main data collection tools were questionnaires based on a 5-point and 16-point Likert-type scales measuring the factors of entrepreneurial orientation and firm performance indicators. The researchers distributed 400 questionnaires among different Thai companies, and over 280 of them were returned. The data was collected from managers operating at different organizational levels to achieve a more comprehensive view of CE antecedents. The considered study variables included company size and firm maturity. Additionally, the t-test was conducted to reduce biases in data analysis and minimize the risks of misinterpretation.
The formulated hypotheses were tested using Structural Equation Modeling. The researchers rationalized their choice of the analysis instrument by its effectiveness in the examination of a series of interdependent relationships simultaneously (Lekmat & Chelliah 2014).
Evaluation
It is possible to say that the effectiveness of innovation activities is one of the key features of CE and the overall corporate management in the modern post-industrial economy. There are a lot of factors that can make a company truly innovative: innovation strategy, leadership strategy, in-depth understanding of environmental shifts and stakeholders’ needs, highly skilled human capital, etc. However, the internal organizational environment or corporate culture which comprises multiple behavioral patterns, values, and stimuli shared by all employees within a company may be considered the most important among all of them.
As the data analysis conducted in the study made it clear, top management support is one of the strongest triggers of entrepreneurial orientation. Therefore, effective leadership is a necessity for effective and sustained performance of CE because it may have a favorable impact on the performance at the whole-organization level. Leadership can guide a firm throughout the renewal and change process. Therefore, through their strategic decisions, leaders should demonstrate and foster the behavior required for the creation of the desired culture and knowledge base, engage all subordinates in the process innovation, and stimulate their entrepreneurial behavior through constant education and communication.
Conclusion
The reviewed study emphasizes the significance of innovation in the CE endeavor. Lekmat and Chelliah (2014) claim that ‘process innovation plays the role of an effective hub that produces a positive impact on entrepreneurial activities’ (p. 187). Through process innovation, companies may gain an opportunity to improve efficiency, reduce costs, increase productivity, and profitability. It is thus possible to recommend managers to regard innovation as a vital element of business conduct and an important value.
The researchers observe that increased innovativeness is associated with indirect positive impacts on the market position. Therefore, entrepreneurial orientation mediated trough process innovation can be applied as a managerial tool for the enhancement of both financial and non-financial aspects of performance.
As it was mentioned in the previous paragraph, the success in the promotion of entrepreneurial behavior among employees can be attributed to a well-developed corporate culture efficient reinforcement system. Leadership may be regarded as the main force in the creation of an appropriate work environment. Supporting, collaboration-oriented, and democratic styles of management are effective in the innovativeness increase while the centralized decision making and highly authoritative top management will likely hinder the achievement of positive outcomes.
It is observed that ‘entrepreneurial activities are inhibited when managers have limited autonomy, work overload, and time constraints’ (Lekmat & Chelliah 2014, p. 195). Thus, it is important to consider the organizational structure. Employers may significantly increase employee commitment by reducing control regulations and increasing individual autonomy in decision making and accomplishment of tasks. The consideration of such factors as the integrity of the working process, work value, working autonomy, and appropriate reward, facilitates the improvement of productivity indicators. If the working process is organized according to these principles, it leads to a high level of employees’ job satisfaction and creates a powerful motivation factor stimulating for the increase in quality of work and the fulfillment of complex tasks.
In conclusion, it is possible to say that the encouragement of entrepreneurial behavior requires a holistic approach. The internal organizational environment is a complex phenomenon comprised of multiple aspects: strategy, integrated values, corporate mission and vision, employee motivation system, leadership, HR practices, etc. Since the internal organizational context is positively related to the outcome of CE endeavors, organizations need to develop and implement an integrated plan aimed to coordinate both horizontal and vertical interactions between different operational sections to maintain the innovative environment through the encouragement of CE activities and supporting their efficiency.
Reference List
Ackermann, M, & Kern, B 2013, ‘Why do corporate entrepreneurship efforts fail so often? Evaluating the decisive factors’, Proceedings of The Multidisciplinary Academic Conference, pp. 1-13, viewed 29 September 2016, via Academic Search Complete.
Jayamohan, P, McKelvie, A & Moss, T 2014, ‘The influence of managerial attribution on corporate entrepreneurship’, Frontiers of Entrepreneurship Research, vol. 34, no. 16, pp. 1-13, viewed 29 September 2016.
Lekmat, L, & Chelliah, J 2014, ‘What are the antecedents to creating sustainable corporate entrepreneurship in Thailand?’, Contemporary Management Research, vol. 10, no. 3, pp. 181-201, viewed 29 September 2016, via Academic Search Complete.
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