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 Entrepreneurship
and Innovations
in E-Business:
An Integrative Perspective

Fang Zhao
Royal Melbourne Institute of Technology University, Australia

IDEA GROUP PUBLISHING

Hershey • London • Melbourne • Singapore
Acquisitions Editor: Michelle Potter
Development Editor: Kristin Roth
Senior Managing Editor: Amanda Appicello
Managing Editor: Jennifer Neidig
Copy Editor: Amanda O’Brien
Typesetter: Cindy Consonery
Cover Design: Lisa Tosheff
Printed at: Yurchak Printing Inc.

Published in the United States of America by

Idea Group Publishing (an imprint of Idea Group Inc.)
701 E. Chocolate Avenue
Hershey PA 17033
Tel: 717-533-8845
Fax: 717-533-8661
E-mail: [email protected]
Web site: http://www.idea-group.com

and in the United Kingdom by

Idea Group Publishing (an imprint of Idea Group Inc.)
3 Henrietta Street
Covent Garden
London WC2E 8LU
Tel: 44 20 7240 0856
Fax: 44 20 7379 0609
Web site: http://www.eurospanonline.com

Copyright © 2006 by Idea Group Inc. All rights reserved. No part of this book may be reproduced,
stored or distributed in any form or by any means, electronic or mechanical, including photocopying,
without written permission from the publisher.

Product or company names used in this book are for identification purposes only. Inclusion of the
names of the products or companies does not indicate a claim of ownership by IGI of the trademark
or registered trademark.

Library of Congress Cataloging-in-Publication Data

Entrepreneurship and innovations in e-business : an integrative perspective / Fang Zhao, editor.

p. cm.
Summary: "The book presents a comprehensive introduction of the concepts and practices of e-
entrepreneurship and e-innovation"--Provided by publisher.
Includes bibliographical references and index.
ISBN 1-59140-920-9 (h/c : alk. paper) -- ISBN 1-59140-921-7 (s/c : alk. paper) -- ISBN 1-59140-
922-5 (ebook : alk. paper)
1. Electronic commerce. I. Zhao, Fang, 1956-
HF5548.32.E586 2006
658.8'72--dc22
2005027701

British Cataloguing in Publication Data

A Cataloguing in Publication record for this book is available from the British Library.

All work contributed to this book is new, previously-unpublished material. The views expressed in this
book are those of the authors, but not necessarily of the publisher.
 Entrepreneurship and
Innovations in E-Business:
An Integrative Perspective

Table of Contents

Preface ........................................................................................................ vi

Chapter I
Entrepreneurship and Innovation in E-Business: An Integrative
Perspective .................................................................................................. 1
Fang Zhao, RMIT University, Australia

Chapter II
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks:
A Deleuzian Approach to Emergent Knowledge Dynamics .................. 18
Alexandra Steinberg, The London School of Economics and
Political Science, UK

Chapter III
Innovation and B2B E-Commerce: Explaining What Did Not
Happen ....................................................................................................... 41
Steve New, University of Oxford, UK

Chapter IV
How E-Entrepreneurs Operate in the Context of Open Source
Software...................................................................................................... 62
Ambika Zutshi, Deakin University, Australia
Samar Zutshi, Monash University, Australia
Amrik Sohal, Monash University, Australia

Chapter V
Personalized Relationship E-Marketing and the Small Medium-Sized
Enterprise .................................................................................................. 89
Clare Brindley, University of Central Lancashire, UK
Diane Wright, Manchester Metropolitan University, UK
Chapter VI
Strategies for Virtual Learning and E-Entrepreneurship in Higher
Education ................................................................................................. 107
Juha Kettunen, Turku Polytechnic, Finland
Mauri Kantola, Turku Polytechnic, Finland

Chapter VII
The Beginnings of a Postal E-Marketplace: Innovation or Natural
Evolution? The Corprocure Story ......................................................... 124
Kim Hassall, Melbourne University, Australia
Karyn Welsh, corProcure, Australia

Chapter VIII
Sensis.Com.Au: An Uprising Star of E-Innovation and
E-Entrepreneurship ................................................................................ 148
Fang Zhao, RMIT University, Australia

Chapter IX
Using E- and M-Business Components in Business:
Approaches, Cases, and Rules of Thumb ............................................. 159
Mikael Collan, Åbo Akademi University, Finland
Anna Sell, Åbo Akademi University, Finland
Ville Harkke, Åbo Akademi University, Finland
Bill Anckar, Omena Hotellit Oy / IAMSR, Finland

Chapter X
Entrepreneurial Opportunities On the Internet .................................. 179
Di Waddell, Deakin University, Australia
Mohini Singh, RMIT University, Australia
Ambareen Musa, General Electric, UK

Chapter XI
Online Information Privacy and Its Implications for
E-Entrepreneurship and E-Business Ethics ........................................ 200
Carmen Gould, RMIT University, Australia
Fang Zhao, RMIT University, Australia

Chapter XII
E-Organisation and Its Future Implication for Small and
Medium-Sized Enterprises .................................................................... 223
Gideon Azumah, University of Sheffield, UK
S.C. Lenny Koh, University of Sheffield, UK
Stuart Maguire, University of Sheffield, UK
Chapter XIII
A Prototype E-Business Model to Create a Competitive
Advantage in SMEs ................................................................................ 238
S. Pavic, University of Sheffield, UK
M. Simpson, University of Sheffield, UK
S. C. L. Koh, University of Sheffield, UK

Chapter XIV
Impact of E-Innovation on Corporate Procurement Control:
Electronic Marketplaces and Broad Spectrum Changes .................... 261
J. Doug Thomson, RMIT University, Australia

Glossary ................................................................................................... 288

About the Authors .................................................................................. 294

Index ....................................................................................................... 301

vi

Preface

The fast growth and business successes of Amazon.com, Dell, travel.com, and
others, and the bankruptcy of numerous dot-com firms worldwide in 1999-2000
have reinforced the importance of entrepreneurship and innovation in e-com-
merce and e-business. E-entrepreneurship and e-innovation are emerging dis-
ciplines for proactively responding to changes in the e-world. The dot-com crash
presented new challenges and new opportunities to entrepreneurs as well as
intrapreneurs and researchers to rethink and redefine the constructs of entre-
preneurship and innovation for e-business. This author argues that a combina-
tion of entrepreneurship and innovation will be a crucial factor to the long-term
sustainability of e-commerce and e-businesses. While in this frenetically changing
competitive landscape, e-entrepreneurship and e-innovation help organizations
to gain competitive advantage, they raise important issues in their practices.
“Entrepreneurship, in its narrowest sense, involves capturing ideas, converting
them into products and/or services and then building a venture to take the prod-
uct to market” (Johnson, 2001, p. 138). A noticeable trend in the study of entre-
preneurship in recent years has been away from the subject of small business
per se toward the concept of entrepreneurship (Cornwall & Perlman, 1990;
Chell, 2001). This book reflects this trend by emphasising the concept of entre-
preneurship itself, rather than the personality or psychology of small e-business
entrepreneurs in e-business.
Entrepreneurship represents organisational behaviour. The key elements of
entrepreneurship include risk-taking, proactivity, and innovation (Miller, 1983).
However, Slevin and Covin (1990, p. 43) argued that the three elements are not
 vii

sufficient to ensure organisational success. They maintained that “a successful

firm not only engages in entrepreneurial managerial behaviour, but also has the
appropriate culture and organisational structure to support such behaviour.”
The book adopts a similar approach and treats entrepreneurship as organisational
behaviour that is related to change and innovation and discusses both external
and internal environmental elements and structures for fostering entrepreneur-
ship and innovation in e-business environment.
From an economic perspective, entrepreneurship increases national prosperity
and competitiveness by virtue of its impact on employment creation and the
development of new goods and services (Zahra et al., 1999). Corporate entre-
preneurship, that is, intrapreneurship, can be used to improve competitive posi-
tioning and transform corporations, their markets, and industries as opportuni-
ties for value-creating innovations are developed and exploited (Miller, 1983;
Naman & Slevin, 1993; Lumpkin & Dess, 1996). There is a firmly established
empirical base for claiming the effectiveness of corporate entrepreneurship
(Lumpkin & Dess 1996; Zahra & Covin 1995). The book examines the rela-
tionship between the economy and e-entrepreneurship and e-innovation and the
effect of corporate entrepreneurship on e-business success.
Is entrepreneurship related to innovation? Studies show that there is consider-
able overlap between entrepreneurship and innovation (Kanungo, 1999; Sundbo,
1998; Drucker, 1994; Schumpeter, 1934). Innovation is the specific tool of en-
trepreneurship by which entrepreneurs exploit change as an opportunity for a
different business or service. Moreover, innovation has to address market needs,
and requires entrepreneurship if it is to achieve commercial success (Zhao,
2004). Entrepreneurship is a change of state, a dynamic process, and a unique
event. Legge and Hindle (1997) believed that people who lead teams and
organisations to introduce innovations are entrepreneurs. Entrepreneurs seek
opportunities, and innovations provide the instrument by which they might suc-
ceed. Corporate entrepreneurship often refers to the introduction of a new
idea, new products, a new organisational structure, a new production process,
or the establishment of a new organisation by (or within) an existing organisation.
As Herbig, Golden, and Dunphy (1994, pp. 37 and 45) have observed: “Innova-
tion requires three basic components: the infrastructure; the capital; and the
entrepreneurial capacity needed to make the first two work.”
Drawing upon the outcomes of the principal studies of entrepreneurship and
innovation, this book opens up a new field of debate and research about the role
of entrepreneurship and innovation in the e-world, namely, e-entrepreneurship
and e-innovation. E-entrepreneurship and e-innovation refer to broadly entre-
preneurship and innovation in the context of e-business activities and opera-
tions. The theoretical constructs and the working concepts of e-entrepreneur-
ship and e-innovation are developed and explored from various perspectives in
the book through comprehensive and collective studies by a number of researchers
and practitioners with e-business and management expertise.
viii

The primary purpose of the book is to explore the changes in the nature, pro-
cess, and practice of entrepreneurship and innovation in e-commerce and e-
business after the dot-com crash. The specific objectives are:

• To characterize and define the main constructs of e-entrepreneurship and

e-innovation;
• To examine the relationships and internal synergies between entrepre-
neurship and innovation in e-commerce and e-business;
• To explore the economical, social, political, and organizational structural
elements in the rise and fall of e-entrepreneurship and e-innovation;
• To investigate the effect of “e-intrapreneurship,” that is, e-entrepreneur-
ship within organizations, on e-business;
• To identify and corroborate best practices in e-entrepreneurship and inno-
vation through best practice case studies;
• To examine ethical issues relating to e-entrepreneurship; and
• To speculate the future trends of the e-dimension of entrepreneurship and
innovation.

You will find the book extremely helpful if you belong to one of the following
groups:

• Entrepreneurs and managers from micro-enterprises to multinational com-

panies who have been engaged in or plan to start, e-commerce and/or e-
business;
• Lecturers and students in the subject areas of entrepreneurship and inno-
vation;
• Researchers and students who study the electronic business and technol-
ogy aspects of entrepreneurship and innovation;
• Government policy-makers and regulators who seek to address the sig-
nificant issues in relation to e-commerce in the small and medium-sized
business sector; and
• Anyone who is interested in the field of study.

This book helps e-business managers to formulate and implement strategies

that foster the development of e-entrepreneurship and e-innovation, and pro-
vides a greater understanding of the crucial issues in e-business operations in a
wide range of fields. As the present study is based upon both empirical and
theoretical research, the book is also a valuable resource for researchers and
students in the study field.
 ix

A review of the current literature about e-business as well as entrepreneurship

and innovation found that there is hardly any English language literature inves-
tigating the dot-com crash from a perspective of entrepreneurship and innova-
tion. The book intends to fill the knowledge gap and entails a better understand-
ing of how significantly e-businesses rely on their entrepreneurial and innova-
tive capacities, and how to develop these capabilities needed for sustainable
success.
The book provides readers with both theoretical and practical guidance to a
further study of e-entrepreneurship and e-innovation. The book presents a com-
prehensive introduction of the concepts and practices of e-entrepreneurship
and e-innovation. The book discusses the application of the concepts in e-busi-
ness operations and management. Readers are able to appreciate the key is-
sues involved in the development of e-entrepreneurship and e-innovation.
The book is organized into 14 chapters, addressing the objectives of the book. A
brief description of each of the chapters follows:
Chapter I sets the theme for the entire book. It identifies and explores the
synergies between entrepreneurship and innovation, analyses the factors that
foster an interaction between the two, and provides an integrative framework
for building entrepreneurial and innovative organization in the e-world. The chap-
ter reports findings from a number of case studies of entrepreneurial and inno-
vative dot-com companies and from a comprehensive review of entrepreneur-
ship and innovation literature. This empirical study contributes to a better un-
derstanding of the existing theories and practices of entrepreneurship and inno-
vation in organisations.
Chapter II introduces the work of Deleuze and Guattari, particularly their no-
tion of rhizomic becomings to the study of emergent knowledge dynamics in
contexts of innovation. It shows how an analysis of rhizomic becomings can
assist to explore new and emergent patterns, channelling interpretation toward
the discovery of new combinations and creative assemblages in knowledge.
This is exemplified by the example of a qualitative study exploring knowledge
dynamics in e-business entrepreneurship since the dot-com crash. The results
highlight the forging of the conditions for innovation in new combinations of
lines of affect and lines of technology.
Chapter III critically challenges the naïve view of Internet innovation and re-
flects on the extraordinary rise and fall of large numbers of e-entrepreneurial
intermediaries. Unlike much of the literature in this area, which has largely
focused on leading companies or the few successful hubs, this chapter concen-
trates more on the opportunities and obstacles that face small and entrepre-
neurial organizations, and the innovations which failed. It addresses two central
questions: Why did the Internet revolution not happen? What substantive ideas
for business practice can be salvaged from the wreckage? Drawing on a multi-
stranded empirical study, this chapter seeks to explain the divergence between
the expected and realised degrees of e-business innovation.
x

Chapter IV presents experiences of two entrepreneurial companies in adopting

e-innovations. The chapter identifies current and future online business envi-
ronments, especially in light of Open Source Software (OSS) being accepted
globally. Unlike proprietary software (such as Windows), OSS comes with its
internal implementation details (source code) visible both to its developers and
users, along with the freedom to change and redistribute this source. The sig-
nificant implications of this unique style of software distribution for e-entrepre-
neurs are examined. Having a flexible strategic plan; possessing management
skills; providing excellent service; and having patience are some of the recom-
mendations provided by interviewed e-entrepreneurs. When made part of the
decision-making process, these recommendations would enhance current and
future e-entrepreneurs in sustaining their business.
Chapter V aims to illustrate how technology innovations can be implemented in
the SME sector and to explore how technology innovation and marketing can
help each other in enhancing e-entrepreneurial companies. The chapter fo-
cuses on a UK-based marketing communications company which has devel-
oped an innovative personalized relationship e-marketing tool, utilizing mobile
technology aimed at the SME sector. Current marketing practices, such as da-
tabase marketing and CRM systems, are discussed in terms of SME adoption.
The chapter provides a pragmatic guide to formulating SME relationship mar-
keting strategies using e-innovations.
Unlike other chapters of the book which predominantly focus on the business
and/or industry sectors, Chapter VI seeks to explore the strategies for virtual
learning and e-entrepreneurship in higher education institutions. The study ex-
amines the pedagogical ICT strategy which is a specific functional strategy
that describes the strategic outlines for virtual learning and e-entrepreneurship.
The aim is also to explore the methods (such as the balanced scorecard (BSC)
approach developed by Kaplan and Norton) to communicate and implement the
strategy in an understandable and efficient manner. This chapter helps educa-
tional administrators to better implement strategies for virtual learning and e-
entrepreneurship.
Chapter VII illustrates the rise and fall of an e-entrepreneurial company em-
bracing e-innovation. The case company corProcure, a postal e-marketplace
founded in partnership with 13 big corporations, was viewed by many as a
promising e-innovation star when it was launched. But the company’s business
model failed. This chapter seeks to answer the questions: Why had the poten-
tially largest buying cartel failed so quickly? What lessons were learned? What
was the right e-business strategy that needed to be implemented? The evolu-
tion of corProcure.com has been a learning curve for those involved, the initial
owners, the new owner Australia Post, but also for all the interested e-business
observers.
 xi

Chapter VIII presents a case study of Sensis Search, a young successful e-

business which was launched in July 2004. The case study sheds light on a
model of best practices in terms of the development of entrepreneurship and
innovation, in the current business environment where the overall economic
conditions worldwide have been improving, and investors’ confidence in high-
tech and e-business industries has been recovering. The e-entrepreneurship
strategy that Sensis Pty, the parent company of Sensis Search, has taken is
actually that of an intrapreneurship, that is, an entrepreneurship within an orga-
nization. The chapter explores the lessons, both good and bad, learned from the
case and identifies the areas for future research.
Chapter IX discusses using e- and m-business components in supporting and
enhancing existing businesses and in creating new business innovations. A frame-
work illustrating two different approaches companies have to the adoption of e-
and m-business components is proposed. Three cases of how Finnish compa-
nies have, in an innovative way, used e- and m-business components to support,
to enhance, and to launch entrepreneurial businesses are presented. Based on
the illustrative framework and the cases, some rules of thumb for using e- and
m-business components are proposed. The aim of this chapter is to offer e-
managers and e-entrepreneurs helpful insights for planning e- and m-business
component investments.
Chapter X explores the main constructs of e-entrepreneurship through a case
study of an Internet start-up company developed by two e-entrepreneurs. The
Internet is a new platform for setting up business providing entrepreneurial
opportunities to those who may not be capital rich. It enables people to turn
innovative business ideas into reality. It is also apparent from the case study
that like any other business, just an innovative idea is not enough, a business
plan and a revenue model are essential for developing the enterprise. The e-
entrepreneurs in the example had to make an enormous effort in marketing and
promotion of the business for customer acceptance.
Chapter XI touches on ethical issues in e-entrepreneurship. It reports the re-
sults of an Australian national survey which studied Australian Internet users’
online information privacy values using a typology that combines specific de-
mographic and attitudinal measurements with behavioural data. The chapter
contains a comprehensive examination of the internal, external/environmental,
and behavioural dimensions of information privacy, incorporating a comprehen-
sive profile of each of the typologies’ categories along with a general profile of
total respondents. The implications of the findings for e-entrepreneurship and
e-business ethics are discussed.
Chapter XII incorporates several perspectives to examine how small and me-
dium-sized enterprises (SMEs) use the network technologies and information
and communication technology (ICT) in their current business environment.
Through a literature review and interviews, the chapter analyses the various
xii

options for managing the transformation, and its effects, to ascertain the appro-
priate strategies within a range of SMEs. The results of this study reveal that
the SMEs’ journey toward becoming e-organisations can be classified into three
stages: 1/2-fusion, fusion, and the ultimate e-organisation stage. Based on this
work, strategic solutions are proposed for future SMEs intending to adopt Internet
and other network technologies.
Chapter XIII explores new ways for SMEs to create a competitive advantage
through the use of e-business. It examines the level of ICT use in SMEs and
identifies the drivers and barriers which owner-managers face in adopting e-
business. Furthermore, it explores the degree of awareness amongst SMEs of
the opportunities available to them for developing their employees, their busi-
ness strategies, and their attitudes toward the range of initiatives and options on
the use of e-business. Industry behaviour and organisational culture in relation
to the creation of competitive advantage through e-business are also explored.
Chapter XIV addresses the very important question of the impact of e-innova-
tion, namely, Web-based global electronic procurement systems and market-
place on corporate governance in relation to organizational purchasing — the
organizational structures and processes for procurement control. This is under-
taken through an action research case study of the failures and successes of
competitor global organizations cooperatively establishing and utilizing a global
electronic marketplace. Specifically, the chapter investigates how electronic
procurement contributes to the adaptation and evolution of control structures
— from highly structured, bureaucratic, and rigid to flexible, adaptable, free-
flowing, and profitable, and these can result in substantial reductions in transac-
tion costs.
In today’s e-business context, technology, customers, competitors, and partners
can change rapidly. E-technology innovations can become obsolete in the blink
of an eye and customers can appear and disappear with a keystroke. In such
circumstances, it is crucial that e-business entrepreneurs, managers, and policy-
makers have an insightful knowledge and understanding of the complexities of
e-business and how to make e-entrepreneurship and e-innovation work for e-
business.
As shown, e-entrepreneurship and e-innovation are critical to the sustainability
of e-business. Unfortunately, they are under-researched areas in e-business
management literature. While there are many publications, both academic and
professional, that talk about e-business and entrepreneurship, such as the books
authored by Timmons and Spinelli (2003) and Allen (2000), most of the publica-
tions place their focus on how to help micro enterprises and entrepreneurs set
up and run e-commerce.
Unlike the existing publications, this book was written from an integrative per-
spective of entrepreneurship and innovation to examine both strategic and op-
erational issues around e-business after the dot-com crash. The book also con-
 xiii

tributes to the development of the emerging disciplines of e-entrepreneurship

and e-innovation both theoretically and practically.

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Drucker, P.F. (1994). Innovation and entrepreneurship: Practice and prin-
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Herbig, P., Golden, E.J., & Dunphy, A. (1994). The relationship of structure to
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 xv

Acknowledgments

The production of this book would not have been possible without the assis-
tance of the institutions and the people to whom I am deeply grateful. I am
greatly indebted to the School of Management and the Business Portfolio of
Royal Melbourne Institute of Technology University, Australia, for their re-
search grants and the time that was needed to undertake this project. I also am
indebted to all the chapter authors for their insights and excellent contributions
to this book. Also, special thanks go to all the reviewers of my proposal of this
book and reviewers of each of the chapters of the book for their constructive
and invaluable reviews and comments. A further special note of thanks goes to
the publisher Idea Group Inc. and Dr. Mehdi Khosrow-Pour for offering me an
opportunity to publish the book, and to the publishing team, in particular, Ms.
Kristin Roth and Ms. Michele Rossi, for helping me keep the project on sched-
ule.
Finally, I wish to thank my parents, Deming and Peishen, and my daughter
Kelly for their love and warm support throughout this project.
 Entrepreneurship and Innovation in E-Business 1

Chapter I

Entrepreneurship
and Innovation
in E-Business:
An Integrative Perspective
Fang Zhao
RMIT University, Australia

Abstract

This chapter argues that a combination of entrepreneurship and innovation

is a crucial factor to the long-term sustainability of e-commerce and e-
businesses. Entrepreneurship and innovation are positively related to each
other and interact to help an organisation to flourish. The chapter takes an
integrative approach to exploring the synergies between entrepreneurship
and innovation and to analysing the factors that foster an interaction
between the two. Case studies of entrepreneurial and innovative dot-com
companies were conducted to complement a comprehensive literature
review of entrepreneurship and innovation. This empirical study contributes
to a better understanding of the existing theories and practices of
entrepreneurship and innovation in organisations.

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permission of Idea Group Inc. is prohibited.
2 Zhao

Introduction

The fast growth and business successes of eBay, Amazon.com, travel.com,

priceline.com, and so forth, and the bankruptcy of numerous dot-com firms
worldwide in 2000 have held potent management implications for IT innovation
and entrepreneurial organizations worldwide. E-entrepreneurship and e-
innovation are emerging disciplines for proactively responding to changes in the
e-business world. The dot-com crash presented new challenges as well as new
opportunities to e-business entrepreneurs and managers to rethink and reshape
their business strategy. This author argues that a combination of entrepreneur-
ship and innovation is a crucial factor to the long-term sustainability of e-
commerce and e-businesses. In this frenetically changing competitive land-
scape, an integrative approach to e-entrepreneurship and e-innovation will
enable organizations to gain competitive advantage and hold the key to e-
business success.
This chapter investigates the relationship between entrepreneurship and innova-
tion and their roles in organizational development, in general, and in dot-com
industries, in particular. A review of the current literature about e-business as
well as entrepreneurship and innovation found that there is hardly any English
language literature investigating dot-com experiences from a perspective of
entrepreneurship and innovation. Some studies have dealt with the process,
structure, and strategy of either entrepreneurship or innovation (Littunen, 2000;
Cornwall & Perlman, 1990: Caird, 1988; Casson, 1982), and others have touched
on the conceptual relationship between the two (Schumpeter, 1934; Drucker,
1994; Legge & Hindle, 1997; Kanungo 1998; Sundbo, 1998). However, there
have been few empirical studies that explore the synergies between the two.
Thus, the aims of this chapter are:

• to contribute to an understanding of the complementary nature of entrepre-

neurship and innovation through an empirical study of dot-com companies,
and
• to develop an integrative framework for building entrepreneurial and
innovative organization.

Data for this qualitative study were collected from three sources, using comple-
mentary methods. First, a review of principal literature about entrepreneurship
and innovation was undertaken to collate the existing theories about the two and
explore the conceptual relationships between them. Second, semi-structured
interviews were conducted to examine the perceptions of senior managers in e-
business regarding entrepreneurship and innovation and the factors that contrib-

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permission of Idea Group Inc. is prohibited.
 Entrepreneurship and Innovation in E-Business 3

ute to the development and integration of entrepreneurship and innovation.

Eleven senior managers involved in e-businesses in Australia were interviewed
between April and August 2004. These interviews focused on how the dot-coms/
e-businesses have been managed, how they have succeeded or failed, and what
lessons can be learned from their experiences. This chapter reports part of
findings of the interviews relevant to the main theme of the study. Third, case
studies of five dot-com companies were undertaken to explore organisational
practice and behaviour, and the correlation between business practice entrepre-
neurship and innovation in dot-com industries. Three of the case studies rely
on documentary research, while the other two rely on semi-structured interviews
with their senior managers. The companies that were selected for the case
studies and interviews encompass various business sectors (e.g., search engine,
online auctioneer and retailing, digital music provider, and online speaker portal),
operating in different nations and cultures, and have different histories, varying
in size and length of existence, but they serve to illustrate the main focus of the
chapter — the interaction between entrepreneurship and innovation in e-
business.

Literature Review

There has been no consensus in defining entrepreneurship and innovation in the

existing literature. Some studies have dealt with entrepreneurship and innovation
by investigating the personality and psychology of entrepreneurs and innovators
(Littunen, 2000; Caird, 1988; Casson, 1982). Others have talked of the nature of
entrepreneurship and innovation in organisations (Goffin & Pfeiffer, 1999;
Martin, 1994). This literature review summarises a diverse spectrum of views
about entrepreneurship and innovation and the relationship between them. The
review also touches on cultural issues because they have a profound influence
on the development of entrepreneurship and innovation (Herbig, Golden, &
Dunphy, 1994).

Entrepreneurship

“Entrepreneurship, in its narrowest sense, involves capturing ideas, converting

them into products and/or services and then building a venture to take the product
to market” (Johnson, 2001, p. 138). A noticeable trend in the study of entrepre-
neurship in recent years has been away from the subject of small business per
se toward the concept of entrepreneurship (Cornwall & Perlman, 1990; Chell,
2001). The chapter reflects this trend by emphasising the concept of entrepre-

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permission of Idea Group Inc. is prohibited.
4 Zhao

neurship itself, rather than the personality or psychology of small business

entrepreneurs.
Entrepreneurship represents organisational behaviour. The key elements of
entrepreneurship include risk-taking, proactivity, and innovation (Miller, 1983).
However, Slevin and Covin (1990) have argued that the three elements are not
sufficient to ensure organisational success. They maintained that “a successful
firm not only engages in entrepreneurial managerial behaviour, but also has
the appropriate culture and organisational structure to support such behaviour”
(Slevin & Covin, 1990, p. 43). This chapter adopts a similar approach and treats
entrepreneurship as organisational behaviour that is related to change and
innovation.

Entrepreneurs and Small Business Owners

Entrepreneurs are different from small business owners. Garland, Hoy, Boulton,
and Garand (1984) and Steward, Watson, Garland, and Garland (1998) argued
that small business owners were concerned primarily with securing an income
to meet their immediate needs and that they did not usually engage in innovation,
whereas entrepreneurs had higher achievement motivation and risk-taking, and
were inclined to innovation and change. This chapter presents a related
perspective in arguing that entrepreneurship and innovation are closely related
and complementary.

Corporate Entrepreneurship or Intrapreneurship

Drucker (1994) made an important contribution to the theoretical construct of

entrepreneurship in large organisations when he referred to “corporate entre-
preneurship” or “intrapreneurship.” Antoncic and Hisrich (2003) argued that
intrapreneurship goes on within organisations, regardless of their size.
Intrapreneurship research has studied the individual intrapreneur, the formation
of new corporate ventures, and the characteristics of entrepreneurial organisation
(Antoncic & Hisrich, 2003). In this chapter, entrepreneurship includes corporate
entrepreneurship and intrapreneurship.

Innovation

For more than half a century, research and development (R&D) has been closely
associated with technological innovation (Miller & Morris, 1999). Invention is the
narrowest definition of innovation. Drucker (1994) maintained that there are

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permission of Idea Group Inc. is prohibited.
 Entrepreneurship and Innovation in E-Business 5

seven basic sources of opportunities to innovate. Only one of them is to do with

inventing something new. Thus, innovation is more than invention and does not
have to be technical. There are numerous examples of social and economic
innovations (Drucker, 1994). Innovation is a proposed theory or design concept
that synthesises extant knowledge and techniques to provide a theoretical basis
for a new concept (Sundbo, 1998; Bright, 1969). Hence, innovation has many
facets and is multidimensional. The most prominent innovation dimensions can
be expressed as dualisms: (i) radical vs. incremental; (ii) product vs. process; and
(iii) administrative vs. technological (Cooper, 1998).
Innovation can be radical and incremental. Radical innovations refer to path-
breaking, discontinuous, revolutionary, original, pioneering, basic, or major
innovations (Green, Gavin, & Aiman-Smith, 1995). Incremental innovations are
small improvements made to enhance and extend the established processes,
products, and services. However, this contradistinction does not “necessarily
[correspond] to the more fine-tuned reality” because “radicality is a continuum”
(Katila, 2002 p. 307). Product innovation, as the name suggests, “reflects change
in the end product or service offered by the organizations, [whereas] process
innovation represents changes in the way firms produce end products or
services” (Utterback cited in Cooper, 1998, p. 498). Some researchers have
categorised innovation into technological and administrative innovations. Tech-
nological innovation is about “the adoption of a new idea that directly influences
the basic output processes, [whereas] administrative innovations include changes
that affect the policies, allocation of resources, and other factors associated with
the social structure of the organization” (Daft, 1978, cited in Cooper, 1998, p.
497).
For the purpose of this chapter, innovation is defined broadly to include new
products, new processes, new services (including new uses of established
products, processes, and services), new forms of organisation, new markets, and
the development of new skills and human capital.

The Conceptual Relationship between Entrepreneurship

and Innovation

The conceptual relationship between entrepreneurship and innovation has been

discussed in the literature for many years. The economics of innovation, in
particular, have attracted increased attention in recent years (Grupp, 2001;
Arora, Fosfuri, & Gambardella, 2002; Stoneman, 1995). Sundbo (1998)
summarised the basic theories of the economics of innovation and identified
three competing paradigms in the current theoretical discussion of innovation: (i)
the entrepreneur paradigm; (ii) the technology-economics paradigm; and (iii) the
strategic paradigm.

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permission of Idea Group Inc. is prohibited.
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