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Middle managers perception of the internal environment for corporate entrepreneurship: assessing a measurement scale
Jeffrey S. Hornsbya,1, Donald F. Kuratkoa,*, Shaker A. Zahrab,2
a

Department of Management, College of Business, Ball State University, Muncie, IN 47306, USA b College of Business Administration, Georgia State University, Atlanta, GA 30302-4014, USA Received 1 June 1999; accepted 1 June 2000

Abstract This study assesses the measurement properties of a scale that measures the key internal organizational factors that influence middle managers to initiate corporate entrepreneurship activities. In this study, corporate entrepreneurship is used in a broad sense to include the development and implementation of new ideas into the organization. Using this definition, this study describes an instrument used to empirically identify the internal conditions that influence middle managers participation in corporate entrepreneurship activities. During the last decade, the role of the middle manager in corporate entrepreneurial activity has been recognized in the literature. The empirical research on the internal organizational factors that may foster middle manager activity has been limited, both in volume and scope. However, the literature does converge on at least five possible factors. The appropriate use of rewards: The literature stresses that an effective reward system that spurs entrepreneurial activity must consider goals, feedback, emphasis on individual responsibility, and results-based incentives. This factor, therefore, highlights middle managers role in this regard. Gaining top management support: The willingness of senior management to facilitate and promote entrepreneurial activity in the organization, including championing innovative ideas as well as providing necessary resources, expertise or protection. This factor captures middle managers role in this area. Resource availability: Middle managers must perceive the availability of resources for innovative activities to encourage experimentation and risk taking. Supportive organizational structure: The structure must foster the administrative mechanisms by which ideas are evaluated, chosen, and implemented. Structural boundaries tend to be a major stumbling block for middle management in corporate entrepreneurial activity. Risk taking and tolerance for failure: Middle managers must perceive an environment that encourages calculated risk taking while maintaining

* Corresponding author. Tel.: +1-765-285-5327. 1 Tel.: + 1-765-285-5312. 2 Tel.: + 1-404-355-5839. 0883-9026/02/$ see front matter D 2001 Elsevier Science Inc. All rights reserved. PII: S 0 8 8 3 - 9 0 2 6 ( 0 0 ) 0 0 0 5 9 - 8

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reasonable tolerance for failure. The literature on the internal factors was utilized to develop an assessment instrument called the Corporate Entrepreneurship Assessment Instrument (CEAI). The instrument contained 84 Likert-style questions that were believed to assess a firms internal entrepreneurial environment. Understanding middle manager perceptions about the internal corporate environment is crucial to initiating and nurturing any entrepreneurial process. A scale such as the CEAI, therefore, could be very useful for companies that wish to embark on a strategic transformation through corporate entrepreneurship. The measurement properties of the CEAI, including a factor analysis and reliability assessment, were determined. Results confirmed that five distinct internal organizational factors, similar to those suggested in the literature, do exist. Based on how the items loaded on each factor, the factors were entitled management support, work discretion, organizational boundaries, rewards/reinforcement, and time availability. The reliability of each of these factors also met acceptable measurement standards. From a managerial perspective, the results indicate that CEAI can be a useful tool in diagnosing a firms environment for corporate entrepreneurship, identifying areas where middle managers can make a significant difference, and develop strategies that can positively spur and sustain corporate entrepreneurship efforts. The results of such diagnosis can be useful in designing effective training programs for middle managers. D 2001 Elsevier Science Inc. All rights reserved.
Keywords: Corporate entrepreneurship; Middle managers; Entrepreneurial environment

1. Introduction Guth and Ginsberg (1990) stated strategic management research that contributes to increasing the frequency and success of corporate entrepreneurship will, in our view, be highly valued in the academic and practitioner communities. Yet, while many authors have continued to tout the importance of corporate entrepreneurship as a growth strategy and an effective means for achieving competitive advantage (Dess et al., 1999; Pinchott, 1985; Kuratko, 1993; Merrifield, 1993) the literature has been, until recently, anecdotal and testimonial in nature. Indeed, Zahra (1991, p. 260) observed a lack of compelling empirical evidence on the contributions of corporate entrepreneurship to organizational performance, a factor that raised concerns that corporate entrepreneurship may become just another managerial fad. Even though some research has attempted to fill this gap in the literature (Covin and Slevin, 1991; Zahra and Covin, 1995), there is still much more to be learned about the substance and process of corporate entrepreneurship. Corporate entrepreneurship, also referred to as corporate venturing, or intrapreneurship, has been initiated in established organizations for purposes of profitability (Zahra, 1991), strategic renewal (Guth and Ginsberg, 1990) fostering innovativeness (Baden-Fuller, 1995), gaining knowledge for future revenue streams (McGrath et al., 1994), and international success (Birkinshaw, 1997). However, the concept of corporate entrepreneurship has been evolving over the last 25 years (Peterson and Berger, 1972; Hill and Hlavacek, 1972; Hanan, 1976; Quinn, 1979). Sathe (1989) defined corporate entrepreneurship as a process of organizational renewal. Other researchers have conceptualized corporate entrepreneurship as embodying entrepreneurial efforts that require organizational sanctions and resource

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commitments for the purpose of carrying out innovative activities in the form of product, process, and organizational innovations (Miller and Friesen, 1982; Covin and Miles, 1999; Burgelman, 1984; Kanter, 1985; Alterowitz, 1988; Naman and Slevin, 1993; Zahra and Covin, 1995). While the concept of corporate entrepreneurship may appear straightforward, several authors have concluded that it may take several forms (Sharma and Chrisman, 1999). For instance, Schollhammer (1982) identified administrative, opportunistic, imitative, acquisitive, and incubative, as different forms of corporate entrepreneurial activities. Vesper (1984) developed three major definitions of corporate entrepreneurship, which he identified as (1) new strategic direction; (2) initiative from below; and (3) autonomous business creation. Vespers study shows that corporate entrepreneurship could be any of these individual types, as well as any or all-possible combinations. According to Damanpour (1991, p. 556) innovation would include . . . the generation, development, and implementation of new ideas or behaviors. An innovation can be a new product or service, an administrative system, or a new plan or program pertaining to organizational members. In this context, corporate entrepreneurship centers on re-energizing and enhancing the ability of a firm to acquire innovative skills and capabilities. The present study follows this definition of corporate entrepreneurship that acknowledges the formal and informal aspects of these efforts (Pinchott, 1985), and recognizes the challenges of promoting entrepreneurship within an existing firm. These challenges demand a thorough understanding of the internal conditions that prevail within a firm. These conditions usually shape middle managers views of (and interest in) corporate entrepreneurship efforts (Kuratko et al., 1990). They also determine middle managers support of these activities. This support can determine the fate of corporate venturing activities (Kanter, 1985). The decade of the nineties brought about a greater effort by researchers to conduct empirical studies that examine the antecedents of corporate entrepreneurial activities (Zahra and Covin, 1995). Accumulated research findings consistently suggest that internal organizational factors, in particular, play a major role in encouraging corporate entrepreneurship (Covin and Slevin, 1991). Zahra and ONeil (1998) point out that the factors in the external environment and the organization interact, challenging managers to respond creatively and act in innovative ways. While there is no agreement on which key internal organizational factors stimulate corporate entrepreneurship, research emphasizes the vital role of middle managers in creating an environment that encourages innovation and entrepreneurship (Kanter, 1985; Floyd and Woolridge, 1990, 1992, 1994; Ginsberg and Hay, 1994; Pearce et al., 1997). Not only can middle managers stimulate interest in corporate entrepreneurship but they can also influence their subordinates commitment to these activities once they are initiated; this commitment is necessary for a company to benefit from corporate entrepreneurship activities (Kuratko, 1993; Stopford and Baden-Fuller, 1994). Despite the growing recognition of the role of middle managers in stimulating and sustaining corporate entrepreneurship, little is actually known about the specific factors that can influence middle managers to achieve this objective. One reason for this is the paucity of empirical studies on the topic. Most prior research has focused, instead, on the various activities of top managers in support of corporate entrepreneurship activities (Kanter, 1985) Moreover, little is known about how much weight middle managers place

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on different aspects of the firms internal organization as a means of promoting or facilitating corporate entrepreneurship. This study examines the key internal organizational factors that influence middle managers to stimulate corporate entrepreneurship by developing an instrument that measures these factors. To accomplish this purpose, the study uses data collected from 761 middle managers in 17 organizations. The focus on middle managers is consistent with the growing recognition of the key role these managers play in promoting or stifling corporate entrepreneurship efforts (Burgelman, 1983b; Floyd and Woolridge 1992, 1994; Pinchott 1985; Nonaka and Takeuchi, 1995). Results from the study can thus help to define middle managers zone of influence and set the stage for their greater involvement in enhancing entrepreneurial activities. Having defined the scope and goal of the paper, the following section focuses on the recognition of middle managers involvement with corporate entrepreneurship. This is followed by examining the existing literature for the role of internal factors in stimulating (stifling) corporate entrepreneurship. This discussion is followed by an empirical study conducted to identify these key internal organization factors. The results of the study and their implications for research and managerial practice are discussed in the final section. 1.1. Middle managers and corporate entrepreneurship To date, little systematic attention has been given to empirically documenting and understanding the contribution middle managers make in the context of corporate entrepreneurship. Thus, it remains unclear which roles these managers play and to what extent they emphasize each of these roles. Despite the paucity of past empirical research in this area, some insights can be gained from reviewing recent writings in the fields of strategic management and international business, both of which have begun to recognize the valuable contributions middle managers can make to the process of strategic change and organizational renewal and to fostering entrepreneurial activities. These two fields also identify key factors that can limit middle managers contributions and impact. Bower (1970) was among the very first scholars to draw attention to the importance of middle managers as agents of change in contemporary organizations. However, over the years, little systematic research has been undertaken to define the nature and scope of middle managers contributions to a companys innovation and entrepreneurship. This situation has changed to some extent as companies sought to revitalize their operations as a means of creating strategic change. Several authors (Drucker, 1985; Kanter, 1983, Peters and Waterman, 1982; Burgelman and Sayles, 1986; Pinchott, 1985) have discussed different aspects of middle managers contributions to entrepreneurship. Other researchers (e.g., Schuler, 1986; Woolridge and Floyd, 1990) also examined the contributions of middle managers to a companys strategy, a variable that is intimately connected to corporate entrepreneurship (Guth and Ginsberg, 1990; Zahra, 1991). Quinn (1985) was among the first to recognize the valuable contributions and important roles of middle managers in the innovation process in an established company. Noting senior managers isolation from actual day-to-day activities, Quinn highlighted the

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crucial importance of the roles middle managers can play in fostering communication about the companys mission, goals, and priorities. Middle managers interact with diverse employees, which would allow them to use formal and informal approaches to encourage innovation and calculated risk taking. Middle managers also communicate their ideas for innovations to upper management, thereby creating an opportunity where these ideas are evaluated and considered within the context of the firms overall strategic priorities (Burgelman, 1983a,b). Other writers (e.g., Peters and Waterman, 1982; Pinchott, 1985) have also observed the important roles middle managers play in informally encouraging employees to innovate and take risks. These middle managers provide political and organizational support for skunkwork activities that result in innovative ventures. Kanter (1985, 1988) and Quinn (1985) also note the importance of middle managers in promoting autonomous or informal corporate entrepreneurial activities. Middle managers can do this by providing rewards (mostly intrinsic) that allow employees to experiment with, and explore the feasibility of, innovative ideas. Middle managers can also use different approaches to make the organizational structure less resistant to change thereby allowing corporate entrepreneurial activities to flourish. As noted earlier, some researchers have sought to examine the roles middle managers play in their companys strategic process. In one such study, Floyd and Woolridge (1992) argue that middle managers frequently play pivotal roles in championing strategic alternatives and making them accessible to senior executives. Middle managers synthesize and integrate information, thereby crystallizing the strategic issues facing the company and setting the stage for strategic change; facilitating adaptability by altering the formal structure; and implementing the formal strategy and providing feedback. This feedback can spur future strategic change and organizational renewal efforts. When Floyd and Woolridge results are connected to the early findings of Burgelman and Sayles (1986), it becomes clearer that middle managers play a key role in shaping their companies strategic agenda by influencing the types and intensity of corporate entrepreneurial activities. In their path-breaking analyses of how innovations come about and then create new knowledge that fuels organizational growth, Nonaka and Takeuchi (1995) highlight the central role of middle managers. These researchers suggest that most innovations emanate from the middle of the organization and the promising ones are then sent to upper management for further analysis and evaluation. Those innovations that meet the rigorous standards set by the top management team are then sent back to middle managers who then communicate them to the employees. In this model of innovation, middle managers actively and diligently gather innovation ideas from within and outside the firm. Middle managers work with vendors, observe the market and analyze the competition. As a result, they are well suited to observe areas where innovation and risk taking are needed. Middle managers also become aware of innovation efforts initiated by vendors and competitors. Frequently, middle managers transfer this knowledge to others in their company. Another noteworthy feature of the Nonaka and Takeuchi model is the fact that it recognizes that middle managers frequently work on their ideas, often closely with employees, hoping to refine them and determine their potential. This initial, though informal, testing process can help shape the ideas while creating the administrative structure needed to foster them.

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Building on the work by Nonaka and Takeuchi (1995), Zahra et al. (1999) have also noted the importance of middle managers in facilitating corporate entrepreneurship efforts. Through their effective communication and use of rewards, middle managers create the social capital and trust needed to foster the corporate entrepreneurial process. In a similar fashion, Floyd and Woolridge (1997) observe that this social capital is of great importance because it encourages employees to take risks, without fear for their jobs or reputations. Scholars from the international business discipline have also discussed and recognized the importance of middle managers in promoting and sustaining innovations. Like other larger corporations, some multinationals develop rigid structures that limit employees flexibility and willingness to take risks. However, as Bartlett and Ghoshal (1996) observe, middle managers can create an environment in their respective divisions or subsidiaries where innovations and entrepreneurial activities flourish. In turn, this can allow multinationals to capitalize on the unique resources that exist in their different markets and respond to their customers effectively. Bartlett and Ghoshal (1993) note that the typical multinational has two ongoing but parallel processes. The first centers on integrating the various activities of the firm, aiming to achieve coherence, economies of scope, and economies of scale. The second process is entrepreneurial in nature, centering on creating new businesses and spurring innovation. Bartlett and Ghoshal go on to delineate the different roles of top, middle, and front line managers. In terms of the integration process, middle managers are believed to link different skills, resources, and knowledge in pursuit of those strategic goals defined by senior managers. In terms of the entrepreneurial process, middle managers are viewed as reviewing, developing and supporting initiatives in their units. Recent research by Noble and Birkinshaw (1998) corroborates these assertions. Overall, their research reveals that middle managers influence and shape the types and intensity of various entrepreneurial initiatives of their respective subsidiaries. The literature also highlights several factors that can limit middle managers willingness or ability to facilitate corporate entrepreneurship. Some managers have demanding work schedules that leave little time for innovation and experimentation. This is especially true in companies that have initiated restructuring programs (Floyd and Woolridge, 1994). Resources available for innovations are often constrained and middle managers have to work hard to obtain these resources (Pinchott, 1985). Managers also have to work hard to get senior executives attention to and support of promising innovative ideas. They also have to work through territorial disputes that erupt among different units (groups) in their companies, fearing the consequences of innovation on established lines of communication and access to organizational resources (Kanter, 1988). These are formidable challenges that can stifle middle managers efforts aimed at encouraging and promoting corporate entrepreneurship. To summarize, two decades of research in strategic management, international business, and entrepreneurship suggest that middle managers can have pervasive influences on corporate entrepreneurial activities. This influence can, therefore, determine the viability and survival of the various corporate ventures. Yet, it is surprising that little systematic effort has been made to document and understand how middle managers view the various activities they perform in support of different corporate entrepreneurial activities. Given the organiza-

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tional and political barriers that exist in companies, understanding these views can be an important starting point toward appreciating the contribution middle managers make to their companies. One way to capture these views is to consider middle managers perceptions of the importance they place on the various tasks they perform in support of corporate entrepreneurship. The present study aims to fill this void in the literature. 1.2. Internal factors for corporate entrepreneurship The impact of corporate entrepreneurial activities on successful company performance has attracted research into the organizational factors that can promote (impede) these activities (Zahra, 1991; Zahra and Covin, 1995). Researchers have sought to identify some of the key variables that can affect a companys pursuit of corporate entrepreneurship, including internal organizational factors such as: the companys incentive and control systems (Sathe, 1985), culture (Kanter, 1985; Hisrich and Peters, 1986; Brazeal, 1993), organizational structure (Covin and Slevin, 1991; Naman and Slevin, 1993), and managerial support (Stevenson and Jarillo, 1990; Kuratko et al., 1993). Individually and in combination, these factors are believed to be important antecedents of corporate entrepreneurship efforts, because they affect the internal environment, which determines interest in and support of entrepreneurial initiatives within an established company. Burgelmans (1983a,b) research clearly shows that internal organizational factors influence the types of corporate entrepreneurship activities a company pursues. Pearce et al. (1997), Floyd and Woolridge (1990, 1992, 1994), Ginsberg and Hay (1994), among others, recognized the importance of middle managers in enhancing and cultivating such autonomous behavior and thereby fostering corporate entrepreneurship. However, much of this discussion has been general in nature, failing to provide specific guidance on the exact role middle managers can play. While some of these researchers have noted some of the factors that can influence middle managers (Kanter, 1985; Vesper, 1984), there is no universal agreement on which factors matter the most in promoting corporate entrepreneurship efforts. However, recent writings on the topic appear to converge on at least five factors. The first dimension is the appropriate use of rewards (Scanlan, 1981; Souder,1981; Kanter, 1985; Sathe, 1985; Fry, 1987; Block and Ornati, 1987; Sykes, 1992; Barringer and Milkovich, 1998). Theorists, therefore, stress that an effective reward system that spurs entrepreneurial activity must consider goals, feedback, emphasis on individual responsibility, and results-based incentives. The use of appropriate rewards can also enhance middle managers willingness to assume the risks associated with entrepreneurial activity. A second important dimension is management support, which indicates the willingness of managers to facilitate and promote entrepreneurial activity in the firm (Quinn, 1985; Hisrich and Peters, 1986; MacMillian et al., 1986; Sykes and Block, 1989; Sathe, 1989; Stevenson and Jarillo, 1990; Damanpour, 1991; Kuratko et al., 1993; Pearce et al., 1997). This support can take many forms, including championing innovative ideas, providing necessary resources or expertise, or institutionalizing the entrepreneurial activity within the firms system and processes. The third dimension is resources (that includes time) and their availability for entrepreneurial activity. Accordingly, employees must perceive the availability of resources for

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innovative activities (Von Hippel, 1977; Souder, 1981; Kanter, 1985; Sathe, 1985; Sykes, 1986; Sykes and Block, 1989; Hisrich and Peters, 1986; Katz and Gartner, 1988; Stopford and Baden-Fuller, 1994; Das and Teng, 1997; Slevin and Covin, 1997). The availability of slack resources usually encourages experimentation and risk-taking behaviors (Burgelman and Sayles, 1986). The fourth dimension is the existence of a supportive organizational structure (Souder, 1981; Sathe, 1985; Hisrich and Peters, 1986; Sykes, 1986; Sykes and Block, 1989; Burgelman and Sayles, 1986; Schuler, 1986; Bird, 1988; Guth and Ginsberg, 1990; Covin and Slevin, 1991; Zahra, 1991, 1993; Brazeal, 1993; Hornsby et al., 1993). The structure also provides the administrative mechanisms by which ideas are evaluated, chosen, and implemented (Burgelman and Sayles, 1986). The fifth, and final, dimension is risk taking, which indicates the middle managers willingness to take risks and show a tolerance for failure when it occurs (MacMillian et al., 1986; Sathe, 1985, 1989; Sykes, 1986; Sykes and Block, 1989; Burgelman, 1983a,b, 1984; Quinn, 1985; Kanter, 1985; Ellis and Taylor, 1988; Bird, 1988; Stopford and BadenFuller, 1994). Kuratko et al. (1990) presented an exploratory study that used these five conceptually distinct internal factors that support corporate entrepreneurship (top management support for corporate entrepreneurship, reward and resource availability, organizational structure and boundaries, risk taking, and time availability). However, the empirical analysis conducted by Kuratko et al. reduced these factors were down to three: managerial support, organizational structure, and reward and resource availability. This initial study, while not supporting the hypothesized full five-factor model, established the need for further research on the internal organizational factors that foster entrepreneurship. The Kuratko et al. (1990) results were reinforced by the findings of a study of 119 Fortune 500 CEOs (Zahra, 1991). This study examined several internal organizational factors as well as the association between corporate entrepreneurship and the financial performance of the firm. Specifically, the study examined internal organizational conditions such as: tangible factors (communication, scanning, integration, differentiation, and control) and intangible factors that refer to dominant organizational values. The results showed both tangible and intangible internal factors influence a companys pursuit of entrepreneurship. Consequently, Zahra (1991) called for additional studies that examine managers efforts aimed at shaping or creating an organization supportive of corporate entrepreneurship. Fig. 1 provides a model to illustrate the conceptual idea driving the current study. It suggests that a firms strategy influences the internal factors that affect corporate entrepreneurship, as argued earlier in past research (Burgelman, 1983a,b). Middle managers perceptions of these internal factors determine their relative emphasis on the various activities they undertake to encourage or facilitate corporate entrepreneurship (Kuratko et al., 1990, 1993). This model serves to highlight the need to document the extent to which middle managers perceive the various internal factors (discussed earlier) in the context of corporate entrepreneurship. Once we understand these variations and the extent to which these activities are emphasized, the stage is set for examining how these variations translate into differences in corporate entrepreneurship or gains from these activities.

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Fig. 1. Middle managers perception of the internal environment for corporate entrepreneurship.

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With our studys focus in mind, and based on the literature that conceptually identified five critical organizational dimensions, an 84-item CEAI was developed. The objective was to test the existence of these key organizational factors believed to foster a corporate entrepreneurial environment. The psychometric characteristics of the CEAI, including reliability and validity, were then assessed using two samples, as reported in the following section. The following three hypotheses are provided: Hypothesis 1: The CEAI has a consistent factor structure related to the internal factors identified in the literature. Hypothesis 2: The resulting factor structure will be duplicated or cross-validated with an independent sample. Hypothesis 3: The internal consistency reliability of the factors will be high indicating factor stability.

2. Method In order to investigate the existence of internal organizational factors that encourage corporate entrepreneurship, three analyses were conducted. First, an exploratory factor analysis was conducted to investigate the existence of the factors. Second, using a second sample, a confirmatory factor analysis was conducted to cross-validate the findings of the initial analysis. Third, the internal consistency of each of the resulting factors was determined. This procedure is similar to other recent studies that have endeavored to develop a psychometrically sound entrepreneurial assessment instrument (e.g., Knight, 1997). 2.1. Sample Data were collected from two separate samples that consisted of 231 and 530 midlevel managers, respectively. For the first sample, managers were recruited from continuing education/training programs for middle managers conducted by a large midwestern university. These respondents held middle management positions in their respective firms. Participation in the study was voluntary, resulting in a response rate of approximately 80%. For the second sample, participants were recruited from manufacturing, service, and financial organizations throughout the United States and Canada. Potential respondents were randomly selected from trade association membership directories and were asked to participate in the study. These trade associations include the Standard & Poors Register of Corporations, Directors and Executives, and the Canadian Trade Index of the Canadian Manufacturers Association. A total of 100 were sent and 17 firms agreed to participate (representing a 17% organization participation rate). The participating organizations were asked to identify individuals in middle management positions and give them the survey instrument. Each survey packet included a return envelope to provide confidentiality for respondents. The response rate for managers was approximately 92%.

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As seen in Table 1, the sample demographics for the studys two samples were similar. The only noticeable differences were in average age and organizational tenure. The younger age and shorter tenure of respondents in the first survey may be explained by the fact that they were currently enrolled in middle management training programs. Respondents in the second study, on average, were somewhat more established in their professional careers. 2.2. Data collection procedure The CEAI was developed to gauge the organizational factors that foster corporate entrepreneurial activity within a company. As noted earlier, even though different labels have been used in the literature to describe the dimensions of corporate entrepreneurship, the most widely acknowledged appear to fall into five distinctive areas: management support; organizational structure; risk taking, time availability; and reward and resource availability. These five areas, therefore, constituted the theoretical basis for the 84 items generated for the CEAI. The questionnaire used Likert-type scales with 1 representing strongly disagree to 5 representing strongly agree. Eleven items were negatively worded to avoid response tendencies by the subjects (Cooper and Emory, 1995) and they were reverse-scored for the analysis. The complete list of items can be found in Table 2. 2.3. Analyses 2.3.1. Factor analysis Initially an exploratory factor analysis was conducted to uncover key dimensions in the CEAI. Specifically, a principal components factor analysis with varimax rotation was utilized. In interpreting the results, only items with factor loadings of .40 or above were selected for any particular factor. To enhance the interpretation of the factors, items that loaded significantly on more than one factor were dropped. Next, as stated earlier, the CEAI was administered to a second independent sample. A confirmatory factor analysis was then utilized forcing the factor structure derived in the first factor analysis. Again, only items with an absolute value of .40 factor loading were selected for a given factor, and any item loading significantly on more than one factor was deleted.

Table 1 Sample demographics for experimental samples Variables Average age (years) Sex Males (%) Females (%) Average organization tenure (years) Average job tenure (years) Analysis 1 (n = 231) 32.54 69 31 6.3 3.6 Analysis 2 (n = 530) 39.59 75 25 12.2 4.5

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Table 2 Rotated factor structure for the revised CEAI Factor loadings Factors Factor 1: Management support for corporate entrepreneurship 1. My organization is quick to use improved work methods 2. My organization is quick to use improved work methods that are developed by workers. 3. In my organization, developing ones own ideas is encouraged for the improvement of the corporation. 4. Upper management is aware and very receptive to my ideas and suggestions. 5. Promotion usually follows the development of new and innovative ideas. 6. Those employees who come up with innovative ideas on their own often receive management encouragement for their activities. 7. The doers are allowed to make decisions on projects without going through elaborate justification and approval procedures. 8. Senior managers encourage innovators to bend rules and rigid procedures in order to keep promising ideas on track. 9. Many top managers have been known for their experience with the innovation process. 10. Money is often available to get new project ideas off the ground. 11. Individuals with successful innovative projects receive additional reward and compensation for their ideas and efforts beyond the standard reward system. 12. There are several options within the organization for individuals to get financial support for their innovative projects and ideas. 13. Individual risk takers are often recognized for their willingness to champion new projects, whether eventually successful or not. 14. People are often encouraged to take calculated risks with new ideas around here. 15. The term risk taker is considered a positive attribute for people in my work area. 16. This organization supports many small and experimental projects realizing that some will undoubtedly fail. 17. A worker with a good idea is often given free time to develop that idea. 18. There is considerable desire among people in the organization for generating new ideas without regard to crossing departmental or functional boundaries. 19. People are encouraged to talk to workers in other departments of this organization about ideas for new projects. Factor 2: Work discretion 1. I feel that I am my own boss and do not have to double check all of my decisions. 2. Harsh criticism and punishment result from mistakes made on the job. 3. This organization provides the chance to be creative and try my own methods of doing the job. 4. This organization provides freedom to use my own judgment Analysis 1 .65 .66 .57 .60 .53 .63 .55 .49 .65 .56 .59 Analysis 2 .51 .56 .55 .50 .42 .23a .51 .56 .61 .61 .37a

.63 .72 .68 .65 .64 .60 .60

.56 .69 .67 .61 .68 .54 .47

.55

.44

.69 .45 .55 .66

.68 .43 .61 .68 (continued on next page)

J.S. Hornsby et al. / Journal of Business Venturing 17 (2002) 253273 Table 2 (continued) Factor loadings Factors 5. This organization provides the chance to do something that makes use of my abilities. 6. I have the freedom to decide what I do on my job. 7. It is basically my own responsibility to decide how my job gets done. 8. I almost always get to decide what I do on my job. 9. I have much autonomy on my job and am left on my own to do my own work. 10. I seldom have to follow the same work methods or steps for doing my major tasks from day to day. Factor 3: Rewards/reinforcement 1. My manager helps me get my work done by removing obstacles. 2. The rewards I receive are dependent upon my work on the job. 3. My supervisor will increase my job responsibilities if I am performing well in my job. 4. My supervisor will give me special recognition if my work performance is especially good. 5. My manager would tell his boss if my work was outstanding. 6. There is a lot of challenge in my job. Factor 4: Time availability 1. During the past three months, my work load was too heavy to spend time on developing new ideas. 2. I always seem to have plenty of time to get everything done. 3. I have just the right amount of time and work load to do everything well. 4. My job is structured so that I have very little time to think about wider organizational problems. 5. I feel that I am always working with time constraints on my job. 6. My co-workers and I always find time for long-term problem solving. Factor 5: Organizational boundaries 1. In the past three months, I have always followed standard operating procedures or practices to do my major tasks. 2. There are many written rules and procedures that exist for doing my major tasks. 3. On my job I have no doubt of what is expected of me. 4. There is little uncertainty in my job. 5. During the past year, my immediate supervisor discussed my work performance with me frequently. 6. My job description clearly specifies the standards of performance on which my job is evaluated. 7. I clearly know what level of work performance is expected from me in terms of amount, quality, and timeliness of output.
a

265

Analysis 1 .42 .69 .76 .71 .69 .42

Analysis 2 .55 .77 .72 .75 .74 .50

.44 .45 .65 .61 .76 .49

.44 .56 .53 .76 .64 .27a

.69 .72 .77 .48 .77 .48

.73 .73 .67 .57 .67 .54

.49 .44 .57 .57 .43 .49 .67

.55 .34a .60 .53 .29a .51 .60

Denotes items that did not meet the statistical requirements for inclusion in the CEAI.

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2.3.2. Reliability assessment Internal consistency reliability measures were assessed on the factor structures derived from both analyses reported above, using the Chronbachs procedure available in the SPSSx statistical package. 2.3.3. Managerial level analysis Respondents were also asked to identify their particular level of middle management. Three categories were provided including lower middle, middle level, and upper middle. In order to asses whether or not middle manager level impacted the perception of the corporate entrepreneurial environment, the resulting factor structure was tested for significant differences across managerial level. A multiple analysis of variance (MANOVA) procedure was utilized to assess differences. Follow-up analysis of variance (ANOVA) for each factor was utilized when a significant MANOVA was found. Also, Scheffes tests were utilized to determine specific differences for managerial level on each factor. The second sample was selected since it was larger and provided larger sample sizes for each managerial level.

3. Results 3.1. Factor analysis and reliability 3.1.1. Analysis 1 The results of the exploratory factor analysis yielded five significant factors. Each factor was titled based on the items that comprised them. The factors covered were: management support (19 items), work discretion (9 items), rewards/reinforcement (6 items), time availability (6 items), and organizational boundaries (7 items). The five-factor solution accounted for 46% of variance. These results confirm Hypotheses 1 and 2 in that a set of five factors was determined in the exploratory factor analysis and supported in the confirmatory factor analysis. Next, the items loading on each factor were subjected to an internal consistency reliability analysis. The reliabilities of these factors were then established using Chronbachs a. The resulting reliabilities were .92, .86, .75, .77, and .69 for management support, autonomy, rewards/reinforcement, time, and organizational boundaries, respectively. 3.1.2. Analysis 2 The results of the confirmatory factor analysis also suggested a five-factor solution. The purpose of this analysis was to further confirm that CEAI items fit the pattern predicted by previous theory and research. The resulting factors were: management support (17 items), work discretion (10 items), rewards/reinforcement (5 items), time availability (6 items), and organizational boundaries (5 items). This five-factor solution accounted for 43.3% of variance. However, five items from the original CEAI failed to meet the statistical requirements for inclusion in the second analysis. The results of both

J.S. Hornsby et al. / Journal of Business Venturing 17 (2002) 253273 Table 3 Factor analysis statistics Factor Analysis 1 1 2 3 4 5 Analysis 2 1 2 3 4 5 Eigenvalue 11.03 3.66 3.24 2.46 1.70 Percent of variance 23.0 7.6 6.7 5.1 3.5

267

Cumulative variance 23.0 30.6 37.3 42.5 46.0

10.68 3.07 2.90 2.53 1.59

22.2 6.4 6.0 5.3 3.34

22.2 28.6 34.7 40.0 43.3

the exploratory and confirmatory factor analyses are summarized in Tables 2 and 3 and depicted in Fig. 2. After constructing the relevant corporate entrepreneurship factors, reliability analysis was conducted. The resulting coefficient as were .89, .87, .75, .77, and .64 for management support, autonomy, rewards/reinforcement, time, and organizational boundaries, respectively. Collectively, the findings from the second sample suggests that the fivefactor solution is stable and internally consistent (reliable). These results confirm Hypothesis 3.

Fig. 2. Confirmatory factor analysis results. Percentages in gray overlap areas represent independent variance accounted for in the factor analytic model.

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Table 4 ANOVA follow-up results Dependent variable Management support Discretion Rewards/reinforcement Availability Organizational boundaries Type III sum of squares 6.055 8.582 1.233 4.478 4.043 df 2 2 2 2 2 Mean square 3.028 4.291 0.617 2.239 2.022 F 8.187 10.905 1.578 4.254 6.885 Significance .000 .000 .207 .015 .001

3.1.3. Analysis 3 The overall MANOVA was significant ( F = 3.486) indicating a managerial level difference. The follow-up ANOVA for each of the five factors revealed significant differences for four of the five factors (Table 4). The only factor not showing significance was the rewards/ reinforcement factor. Scheffes tests utilized to determine which managerial levels were significantly different on each factor revealed a consistent finding that upper middle management scores on each factor were significantly higher than the other levels (middle and lower middle managers). Table 5 details these findings for each managerial level and each factor.
Table 5 Scheffes mean comparisons for managerial level analysis Current job level Management support Lower middle management Middle management Upper middle managementa Discretion Lower middle management Middle management Upper middle managementa Rewards/reinforcement Lower middle management Middle management Upper middle managementa Availability Lower middle management Middle management Upper middle managementa Organizational boundaries Lower middle management Middle management Upper middle managementa
a

Mean 2.7376 2.8094 3.0875

S.D. 0.5737 0.6021 0.7157

n 181 282 67

3.5333 3.6824 3.9478

0.6015 0.6434 0.6264

181 282 67

3.4208 3.4655 3.5796

0.6029 0.6179 0.7097

181 282 67

2.3886 2.5267 2.6741

0.6867 0.7471 0.7348

181 267 67

2.8904 2.9981 3.1733

0.5205 0.5612 0.5146

181 282 67

Significant difference from other managerial levels.

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4. Discussion This study contributes to the literature on corporate entrepreneurship by documenting the existence of an underlying set of five stable organizational factors that should be recognized in promoting entrepreneurial activities within an organization. The five factors that were identified (management support, work discretion/autonomy, rewards/reinforcement, time availability, and organizational boundaries) represent a parsimonious description of the internal organizational factors that influence middle managers to foster entrepreneurial activity within established companies. It is important to note that this resulting structure held up on the second confirmatory factor analysis using an entirely separate sample of middle managers. From a theoretical perspective, the current research provides an important step toward understanding the internal factors that spur middle managers towards corporate entrepreneurship. As previously noted, the literature in this area has been primarily normative in that most researchers have developed conceptual schema that have either never been empirically tested, or are based on limited case study analyses. In contrast, this study presented a two-stage empirical analysis that emphasized the key internal factors that are likely to impact corporate entrepreneurial behavior of middle managers. This focus clearly distinguishes this research from previous studies that tend to be concerned with more generalized assessments of organizations readiness to initiate corporate entrepreneurship efforts. The results, which help to integrate major writings in this area, can therefore be used to guide further research into corporate entrepreneurship activities. By examining appropriate rewards and incentives, time available for employees to experiment and innovate, and the level of organizational support, researchers will be able to more clearly measure factors that influence middle managers corporate entrepreneurship efforts. Further research efforts into corporate entrepreneurial environments need to give special attention to the five internal factors uncovered in this study. One of the interesting aspects of this particular studys concentration on middle managers within the domain of corporate entrepreneurship is the difference in perception of the key factors by upper middle managers and middle to lower middle managers. As was demonstrated in the Results section, there were significant differences on all five factors (although the rewards factors demonstrated only slight significance) when comparing between the upper middle level and the middle to lower middle manager level. This emphasizes the importance of future research with the CEAI instrument. Fig. 1 conceptualizes the basis of this research with the existence and perceptions of the organizational factors. It is the perceptual aspect that may become most important for future research, especially if there continues to be significant differences between the levels of management. The instrument developed in this study also has practical implications for managers. For example, the CEAI can be used as an assessment tool for evaluating corporate training needs in entrepreneurship and innovation. Many companies have initiated such programs in recent years to identify areas needing attention to encourage entrepreneurial and risk-taking activities (Kuratko and Montagno, 1989; McWilliams, 1993). The results of one empirical analysis indicated that a training program designed to enhance corporate entrepreneurship significantly affected perceptions of the environment by managers (Kuratko et al., 1990). Therefore, the instrument developed in this study can be used as a diagnostic tool for

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determining areas where training may be needed if a company is considering initiating corporate entrepreneurship activities. Determining these training needs can set the stage for improving middle managers skills and increasing their sensitivity to the challenges of building and supporting a corporate entrepreneurship program. 4.1. Research suggestions While this study suggests the existence of a stable set of factors necessary for a corporate entrepreneurial environment, additional research addressing the validity of the studys instrument is recommended. First, the instrument needs further empirical work to assess its relationship to such measures as the number of ideas generated in an organization; time spent on entrepreneurial ideas; and employee willingness to break through organizational boundaries. Second, while this study has initiated an important exploration, clarification, and refinement of these factors, it is necessary to further support the relationship between the instrument and measures of individual corporate entrepreneurial activities. For example, researchers may link this instruments five dimensions to financial measures of organizational performance. While companies initiate corporate entrepreneurship efforts for varying reasons, ultimately, senior management expects corporate entrepreneurship efforts to improve the companys financial position. Consequently, future researchers should investigate the relationship between corporate entrepreneurship dimensions and financial performance measures. One possible methodology is to compare and contrast firms who score high and low on the five factors of the CEAI. Third, would a study involving CEOs result in similar or different corporate entrepreneurship factors? Finally, additional research into whether or not such variables as industry type and culture play a role in the corporate entrepreneurial environment is necessary. In summary, this study provides empirical evidence regarding the existence of a stable set of five organizational factors believed to enhance corporate entrepreneurship. Grounded in data from two large samples, the current study advances the research on the factors that spur corporate entrepreneurial efforts, and provides researchers with a reliable instrument that examines these factors within an organization. This instrument is used with a sample of middle managers, who are believed to play a key role in determining the success of corporate entrepreneurship. The studys results and proposed instrument offer a foundation for developing a reliable and valid measure of the firms internal factors for corporate entrepreneurship.

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