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06-Linking Corporate Entrepreneurship

06-Linking Corporate Entrepreneurship

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1042-2587-99-233$1.50Copyright 1999 byBaylor University
Linking CorporateEntrepreneurship toStrategy, Structure, andProcess: SuggestedResearch Directions
Gregory G. DessG. T. LumpkinJeffrey E. McGee
We endeavor to propose counterintuitive ideas or, alternatively, deny the "assumptionbases" (Davis, 1971) of
readers. Major sections of the paper suggest research ques-tions concerning strategies, structures, and processes in the context of corporate entre-preneurship (CE). The issues we propose inciude: Are cost leadership strategies and cor-porate entrepreneurship inherently at odds? Are contemporary organizationai forms alwaysmore compatibie with CE than traditionai structures? and; How can the normative guidancethat permeates the popuiar press on entrepreneuriai processes iead managers astray?Corporate entrepreneurship's unique relationship to strategy, structure, and process issuesand future research questions are discussed.
Xntensifying global competition, corporate downsizing and delayering, rapid tech-nological progress, and many other factors have heightened the need for organizations tobecome more entrepreneurial in order to survive and prosper. Few firms are exempt.Rather, virtually all organizations—new start-ups, major corporations, and alliancesamong global partners^—are striving to exploit product-market opportunities throughinnovative and proactive behavior. Understanding entrepreneurial processes has been acentral theme in a good deal of both the strategic management (e.g.. Miller, 1983; Miles& Snow, 1978) and entrepreneurship (e.g., Covin & Slevin, 1991; Sandberg & Hofer,1987) literatures.Although the concept of entrepreneurship has been limited to new venture creationby some scholars (e.g.. Vesper, 1985), corporate entrepreneurship (CE) may be viewedmore broadly as consisting of two types of phenomena and processes: (1) the birth ofnew businesses within existing organizations, whether through internal innovation orjoint ventures/alliances; and (2) the transformation of organizations through strategicrenewal, i.e., the creation of new wealth through the combination of resources (Guth &Ginsberg, 1990).Bringing about strategic renewal requires both sound
strategies, i.e.,addressing product-market scope, and
strategies, i.e., identifying sourcesof sustainable competitive advantage. But, in a sense, this is only a starting point. Weconcur with Paul Allaire, CEO of Xerox, that a firm must also have a good fit among thethree components of an organization's "architecture": hardware, people, and software(Howard, 1992). Elements of each component are depicted in Table 1.
Table 1
Components of an Organization's Architecture^
H;irdware Organization StruclureBusiness Planning SystemsControl MechanismsMeasuremcnl SyslemsReporting RelationshipsReward SystemsPeople Skills Managers NeedPersonalityCharacterSoftware Informal Neiworks
and Practices
Value SystemCulture'Source: Howard. 1992
The attributes in Table 1 roughly parallel Banlett and Ghosal's (1990) essentialorganizational challenges for strategic innovation including developing the organiza-tion's
(goals, formal structure),
(systems and relationships thatallow the lifeblood of information to flow through the organization), and
(theshared norms, values, beliefs that shape the way individual managers think and act).Although such concepts are highly interrelated and interdependent, we feel that theycapture the salient attributes inherent in successful corporate entrepreneurship. Also,given the virtue of parsimony, they provide a framework for how we have decided todivide our paper. In the three paragraphs below, we summarize the major sections of ourpaper that address what we believe are some important research questions associatedwith strategies, structures, and processes in the context of corporate entrepreneurship.These three domains are also consistent with what strategic management researchershave considered to be the essence of organization form and content (Hambrick, 1989;Miles & Snow, 1978).Strategic issues associated with corporate entrepreneurship are addressed in the firstsection. In particular, we ask whether Porter's (1980) "traditional" strategies—low-costleadership, differentiation, and focus—remain valid in the context of corporate entre-preneurship. The demands of global competition have heightened the need for cost-basedstrategies at the same time that advances in technology are requiring firms to update anddifferentiate by innovating and reengineering. Thus, we suggest that successful corporateentrepreneurship may hinge on a firm's ability to combine structural approaches thatfocus on efficiencies, processes, and 'tit" with strategic approaches that emphasizequality and effectiveness. We also take a close look at the usefulness of cost cutting andcontrol techniques as a means to achieve competitive advantage and posit a curvilinearreiationship between cost-based strategies and performance.The second section addresses the difficulties of fostering corporate entrepreneurshipin traditional, hierarchy-driven organizational models, The central premise is that suchmodels impede entrepreneurial behavior because their emphasis on clearly definedboundaries tends to limit fiexibility and choke communications. We suggest that toovercome this impediment, firms need to embrace the concept of "boundarylessness" byadopting innovative organizational configurations. We present three such configura-tions—the modular firm, the virtual firm, and the barrier-free firm—and discuss theirusefulness in enhancing performance by reducing or even eliminating the conventionalboundaries found within firms and between firms.86 ENTREPRENEURSHIP THEORY and PRACTICE
The third major section addresses process issues associated with CE. In it, we buildon the authors' previous work on the concept of "entrepreneurial orientation" (Lumpkin& Dess, 1996). An underlying theme is our position that much of the normative literatureon entrepreneurial processes is overly simplistic and may be counterproductive to mana-gerial practice. We suggest how an appreciation of the multidimensionality and inde-pendence of the subdimensions of an "entrepreneurial orientation" (e.g., risk taking,proactiveness, innovativeness) can enhance normative and descriptive theory building.We draw on examples from John Deere & Company and ADP.In developing our ideas, we have adopted Murray Davis's guidance from histhought-provoking article
That's Interesting!
(Davis, 1971) as our intellectual compass(summarized in Rosenzweig, 1980). That is, we have tried to pose research questions andpropositions that we believe "[deny] some aspect of the assumption ground of (our)audience ... it tells them some truth they already knew was wrong" (Davis
p. 329).We have also attempted to avoid the three traps that Davis claims give rise to uninter-esting propositions:
It affirms some aspect of their assumption-ground. . . . The proposition is sayingto its audience: "What seems to be the ca.se is in fact the case." "What you alwaysthought was true is really true. . . ." The audience's response to propositions ofthis type will be: "That's obvious!"
It does not speak to any aspect of their assumption-ground at all. . . . The propo-sition is saying to its audience: "What is really true has no connection with whatyou always thought was true. . . ." The audience's response to propositions of thistype will be: "That's irrelevant!"
It denies their whole assumption-ground.... The proposition is saying to itsaudience: "Everything you always thought was true is really false. . . ." Theaudience's response to propositions of this type will be: 'That's absurd!"
in the following sections, we have tried to raise some "interesting" ideas. (And, onthe downside, we sincerely hope that we have not been overly "obvious," "irrelevant,"or "absurd"!) We will gauge our overall success by the extent to which we are able toencourage critique, debate, and the further exchange and development of ideas.One caveat: We believe that the ideas in this paper are largely "context-free." That
we feel they are relevant for the entrepreneurial processes of strategic renewal or newventure development within existing corporations, but also in strategic alliances betweenfirms and within smaller firms including, in many cases, start-ups. Thus, in manyinstances, the modifier in the term "corporate entrepreneurship" has been omitted.
Does corporate entrepreneurship (CE) require new approaches to strategy or will"traditional" methods of competitive positioning, resource deployment, and industryadaptation still be effective? For example, are cost-based approaches useful to corporateentrepreneurs? Strategies that emphasize innovation and new product introductions aregenerally associated with an entrepreneurial approach to competitive advantage whereasstrategies based on cost control and incremental process improvements tend to be in thedomain of established firms seeking to sustain advantage by erecting scale economybarriers. Can firms pursuing CB successfully use low-cost strategies as well as differ-entiation strategies? In this section, we will consider the strategic implications of cor-porate entrepreneurship. We will first revisit Porter's (1980) framework in terms of its
1999 87

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