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Chapter 2 Entrepreneurial Intentions and Corporate Entrepreneurship

LEARNING OBJECTIVES

1: To understand the causes of interest in corporate entrepreneurship.

2: To introduce the “entrepreneurial” mode of managing firms and distinguish it from the
traditional mode.

3: To provide a scale for capturing the extent to which management adopts entrepreneurial or
traditional behaviors.

4: To discuss how established firms can develop an entrepreneurial culture and the challenges of doing
so.

5: To acknowledge that projects fail and people feel bad about it, and to introduce the dual process model
for maximizing learning from failure experiences.
 2-1
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

OPENING PROFILE—Robert Mondavi

I. CAUSES FOR INTEREST IN In the Press: In the late 1990’s, 3-M Learning objective 1:
CORPORATE ENTREPRENEURSHIP executives decided innovation needed a jump- To understand the causes of interest in
start. Larry Wendling, in charge of R&D, was corporate entrepreneurship.
A. Interest in entrepreneurship within organizations
tapped as the man to do this. He says, ―The
has resulted from events occurring on social, best ways to transfer ideas is to transfer
cultural, and business levels. people.‖ Scientists had for too long worked in
narrow product lines so the rotation exposed
1. There is an increasing interest in them to new people, new products, and new
“doing your own thing.” ideas. Income has doubled in five years. (Del
a. Individuals frequently desire to Re, Daniel ―Pushing Past Post-Its‖ Business
2.0 November 2005, pg. 54
create something of their own.
http://money.cnn.com/magazines
b. They want responsibility and want /business2/business2_archive/
more freedom in their work 2005/11/01/8362801/index.htm)

environment.
c. When the freedom is absent frustration
can develop and result in the employee
becoming less productive or leaving
the organization.
d. This has recently caused more
discontent in structured organizations.
e. When meaning is not provided
within the organization, individuals
often search for an institution that
will provide it.
2. Corporate entrepreneurship is one method
for stimulating and capitalizing on those

2-2
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLINE A ND TE A C H ING NO TE S

who think that something can be

In the Press: Many firms are finding the
done differently and better, such as best way to solve problems in their
Xerox Corporation’s commitment to companies is to have executives try jobs
Xerox Technology Ventures. at lower levels. At Southwest Airlines
your baggage checker may be a senior
B. It is important to instill the entrepreneurial officer. The registration clerk at the
spirit in an organization in order to innovate Regal Hotel may be the accountant
and grow. getting insight into a different job. Such
experiences have led to executives
1. In a large organization problems occur
making better decisions about the
that thwart creativity and innovation. direction of the company and have led
2. This growth and diversity that can result to ideas that make them more efficient.
(Pfeffer, Jeffrey ―A Field Day for
are critical, since large corporations are
Executives‖ Business 2.0, December
more efficient in a competitive market than 2004 pg. 88
are smaller firms. http://www.mbadepot.com
/redir.php?id=5255)
C. The resistance against flexibility, growth, and
diversification can, in part, be overcome by K EY
TERM
developing a spirit of entrepreneurship, called
corporate entrepreneurship, within the existing Corporate entrepreneurship
Entrepreneurial action within an
organization. established organization
D. There are social, cultural, and business pressures
for corporate entrepreneurship.
1. Hypercompetition has forced companies
to focus on new product development,
increased productivity, and decreasing
costs.
E. Entrepreneurial endeavors consist of four key
elements.
1. New business venturing refers to the

2-3
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

creation of new business within an existing

organization.
2. Organizational innovativeness refers to
product and service innovation with an
emphasis on development and innovation
in technology.
3. Self-renewal reflects the transformation
of organizations through the renewal of
the key ideas on which they are built.
4. Proactiveness includes initiative and risk
taking, as well as competitive
aggressiveness and boldness.
Learning objective 2:
II. MANAGERIAL VERSUS To introduce the ―entrepreneurial‖ mode
ENTREPRENEURIAL of managing firms and distinguish it from
the traditional mode.
DECISION MAKING
A. Entrepreneurial management is distinct from
traditional management in terms of strategic Text Table 2.1 ―Distinguishing
Entrepreneurially from Traditionally
orientation, commitment to opportunity, Managed Firms‖ (Text figure)
commitment to resources, control of resources,
management structure, reward philosophy,
growth orientation, and entrepreneurial culture.
1. Strategic Orientation and Commitment to
Opportunity
a. An emphasis on strategy in developing a
deeper understanding of
entrepreneurship at the firm level is not
2-4
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

surprising because both

K EY
entrepreneurship and strategy have TERM

important implications for the Strategic orientation

performance of the firm. A focus on those factors that are inputs
b. Strategic orientation refers to into the formulation of the firm’s strategy

those factors that are inputs into the

formulation of the firm’s strategy.
c. The strategy of entrepreneurial
management is driven by the presence
or generation of opportunities for new
entry and is less concerned about the
resources that may be required to
pursue such opportunities.
d. Resources do not constrain the strategic
thinking of an entrepreneurially
managed firm. In contrast, the strategy
K EY
of traditional management is to use the TERM

resources of the firm efficiently. Entrepreneurial orientation toward

e. More entrepreneurially managed firms opportunity.
have an entrepreneurial orientation A commitment to taking action on
potential opportunities.
toward opportunity and therefore can
pursue opportunities rapidly, making
the most of windows of opportunity.
f. In contrast, traditionally managed firms
tend to place considerable emphasis on
information. If the traditionally managed
firm chooses to pursue the

2-5
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

given opportunity, it would be with a

much larger initial investment and the
intention of remaining in that line of
business for a considerable time.
2. Commitment of Resources and Control
of Resources
a. It is important to note that K EY
TERM
entrepreneurs still care about the
Entrepreneurial orientation toward
resources they must commit to the commitment of resources.
pursuit of an opportunity, but they A focus on how to minimize the
have an entrepreneurial orientation resources that would be required in the
pursuit of a particular opportunity
toward the commitment of resources
that is focused on the opportunity.
b. By minimizing the resources that the
firm must invest to initially pursue an
opportunity, the amount of resources
at risk if the opportunity does not “pan
out” is also minimized.
c. In contrast, when traditionally managed
firms decide to commit resources to an
opportunity, they do it on a large scale.
They use in-depth analysis of available
information to go for it or not—and if
they do go for it, then the investment of
resources is not easily reversed.
d. Entrepreneurially managed firms are
less concerned about the ownership of

2-6
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

resources and more concerned about K EY

TERM
having access to others’ resources.
Entrepreneurial orientation toward
e. In contrast, traditionally managed control of resources.
firms focus on the ownership of A focus on how to access others’
resources and the accumulation of resources A focus on how to access
others’ resources
further resources. They believe that if
they control their own resources then
K EY
they are self-contained. For these TERM

firms, the control that comes with Entrepreneurial orientation toward

ownership means that resources can be resources.
deployed more effectively for the A focus on how to minimize the
resources that would be required in the
benefit of the firm. They have an pursuit of a particular opportunity and
entrepreneurial orientation toward how to access others’ resources
the control of resources.
3. Management Structure and K EY
TERM
Reward Philosophy
Entrepreneurial orientation toward
a. An entrepreneurial orientation toward
management structure.
management structure is organic. More organic focus—has few layers of
Therefore, entrepreneurially managed bureaucracy between top management
and the customer and typically has
firms are able to capture and
multiple informal networks
communicate more information from
the external environment and are
ETHICS:
sufficiently “fluid” to be able to take
Do Entrepreneurs and
quick action based on that information. Managers differ in
b. In contrast, the traditionally managed Ethical Conduct?
firm has a structure well suited for the
internal efficiencies of allocating (Box in text)

2-7
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

controlled resources. They have

K EY
structures that are typically inwardly TERM

focused on efficiency rather than on Entrepreneurial philosophy toward

detecting and rapidly acting on changes rewards.
in the external environment. One that compensates employees based
on their contribution toward the
c. The entrepreneurially managed firm is discovery/generation and exploitation of
focused on pursuing opportunities for opportunity
new entry that represent new value for
the firm. It is not surprising then that
entrepreneurially managed firms have K EY
TERM
an entrepreneurial philosophy toward
Entrepreneurial orientation toward
rewards. growth.
d. The traditionally managed firm A focus on rapid growth
rewards management and employees
based on their responsibilities, where K EY
TERM
responsibilities are typically
determined by the amount of resources Culture.
The environment of a particular
that this manager or employee controls. organization
4. Growth Orientation and
K EY
Entrepreneurial Culture TERM

a. In a firm that has an entrepreneurial Entrepreneurial orientation toward

orientation toward growth, there is a culture.
great desire to expand the size of the A focus on encouraging employees to
generate ideas, experiment, and engage
firm and do so at a rapid pace. in other tasks that might produce
b. Traditionally managed firms prefer opportunities
growth to be slow and at a steady pace.
c. Culture also distinguishes

2-8
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

entrepreneurially and traditionally

managed firms.
d. A firm with entrepreneurial orientation Text Table 2.2 ―Scale to Capture How
toward culture encourages employees Entrepreneurially a Firm Is Managed‖

to generate ideas, experiment, and

engage in other tasks that might produce
creative output.
e. In contrast, the traditionally managed
firm begins with an assessment of the
resources that it controls, and this is
reflected in its organizational culture.
f. It is unlikely that there are many firms
that are “purely” entrepreneurially
managed or purely traditionally
managed; most firms fall somewhere
in between.

5. Establishing a Culture for Learning Objective 3

To provide a scale for capturing the
Corporate Entrepreneurship extent to which management adopts
a. In establishing a corporate entrepreneurial or traditional behaviors.
entrepreneurial environment, certain
factors and leadership characteristics
In the Press: Seth Godin a serial
need to be present. entrepreneur can sum up a successful
b. The organization operates on entrepreneur in one sentence. ―You
the frontiers of technology. have to figure out how to fail and how to
fail often,‖ he says. (Krauss, Michael
i. Research and development are key ―Godin Offers Old-Schoolers New
Growth Tips‖ Marketing News, May 1,
2-9
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLINE AND TEACHING NOTES

sources for new product ideas. 2006, pg. 7

http://www.marionpartners.com/
i. The firm must operate on the
publications/marketingnews/
cutting edge of technology and mkn05012006.htm)
encourage and support new ideas
instead of discouraging them.
c. Experimentation, or trial and error, is
encouraged. Text Table 2.3 ―Characteristics of an
i. Successful new products usually Entrepreneurial Environment‖
do not appear fully developed;
instead they evolve.
ii. A company has to establish an
environment that allows mistakes
and failures.
iii. Without the opportunity to fail,
few corporate entrepreneurial
ventures will be developed.
d. An organization should make sure
that there are no initial organizational
obstacles, such as turf protection,
inhibiting creativity in new product
development.
e. The resources of the firm need to be
available and easily accessible.
i. Often, insufficient funds are
allocated to creating something
new, but instead to problems that
have an immediate effect on the

2-10
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
Chapter 02 - Corporate Entrepreneurship

CHAPTER OUTLIN E AND TEA CHIN G NOTES

bottom line. Entrepreneur in Action: Carl Zeiss, a

160 year old German optics firm has its
ii. Some companies, such as Xerox,
Research and Development teams
3M, and AT&T have established present their concepts to a ―venture
separate venture capital areas for board‖ which decides which ones to
funding new internal and external fund using the same criteria a venture
capitalist would use. (Meyer, Jens
ventures. ―Priming the R&D Machine‖ Business
iii. Even when resources are available, 2.0 September 2006, pg. 60) Motorola is
another firm that uses the same
the reporting requirements can
technique (Lev-Ram, Michel ―Unwiring
become obstacles to obtaining Motorola‖ Business 2.0 September 2006,
them. pg. 103)
f. A multidiscipline team approach
needs to be encouraged.
i. One key to corporate
entrepreneurial success is the
existence of “skunkworks”
involving key people.
ii. Another complication is the fact
that a team member’s promotion
within the corporation is based on
performance in the current
position, not in the new venture.
iii. The corporate environment must
establish a long time horizon for
evaluating the success of the
overall program and that of each
individual venture.
g. The spirit of corporate entrepreneurship

2-11
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw -Hill Education.
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