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Organisational and Global Context of Entrepreneurship Introduction Although culture has a significant impact on entrepreneurship and how it is practiced,

it is not the only element of a context that is significant. This theme will explore two other contextual factors of importance to entrepreneurship: organisations and global trends. Looking more specifically at the organizational context that many entrepreneurs need to operate within for the life time of their initiatives (intrapreneurs) or temporarily (spinouts), reveals the challenges and support that entrepreneurs face by working within and through established organisations. On the other hand global trends offer insights into opportunities, new and different ways of operating and of external threats that historically might have been negligible simply due to geographical distance. As the world becomes more connected and travel is easier, new ways of doing and thinking are becoming possible.

Learning Objectives This theme aims to provide a broad perspective of entrepreneurship within organizations by addressing the following key questions:
o How does organizational context impact on an individual's thinking? o What forms can entrepreneurship take within different organisational contexts? o How do we measure the impacts and benefits of entrepreneurship on organizations? o What scope is there for entrepreneurship for organisations within the broader context of

the global environment? Key content topics for this theme are:
o Introduction to the organisational context of entrepreneurship o Organisational Context underlying factors

o Contextual Factors and how they manifest in organizations o Entrepreneurship and Innovation in a corporate environment o Entrepreneurship in other organisational contexts o Global trends: Political, Economic, Social, Technological, Environmental and Legal (PESTEL)

Analysis By the end of this theme you should be able to:


o Assess the impact of organizational context on your own entrepreneurial ambitions and

enterprise ideas

o Understand that entrepreneurship has a role to play in all kinds of organisations and can

take different forms.


o Analyse global trends and identify how these may impact you in terms of opportunities or

threats. 1. Introduction to the Organisational and Global Context of Entrepreneurship Organisational context is the way an organisation is structured and operates. Key elements of organisational context are the corporate strategy, organisation type and structure and organisational culture. Later in the programme, we will discuss strategy as one of the key business concepts which is essential to understand where within an existing industry, and how, a new venture can create and capture value. For now our focus needs to be on how strategy can influence the organisational structure and culture and how this in turn might influence entrepreneurship within the organisation. During the course of this theme we will consider various underlying contextual factors of strategy, structure and culture as well as practices within organisations that influence and support entrepreneurship. Organisations themselves exist within a much broader and global environment and it is the organisations relationship with this environment and its ability to actively scan this environment for opportunities and then act upon them that reaps the rewards of entrepreneurship. So as a prelude to forthcoming themes we will explore the use of PESTEL analysis to explore the macro environment and the drivers of trends which might result in new opportunities for organisations. The contents of this lesson are:
o Organisational strategy, structure and culture o Organizational context - underlying factors o Contextual factors and how they manifest in organisations o Entrepreneurship in a corporate environment o Entrepreneurship in other organisational contexts o Global trends - Political, Economic, Social, Technological, Environmental and Legal (PESTEL)

analysis.

2. Strategy, Structure and Culture Strategy The strategic intent of a business plays a major role in influencing the organisational context. In order to understand and advance the strategic intent, Michael Porter (1980) suggests three key questions that will drive the assessment process:
o What is the business doing? What is its implicit/explicit current strategy? o What is happening in the external environment, in terms of the industry, competitors and

the society?
o What should the business be doing in response to the happenings in the environment?

Understanding the strategic intent of the organisation and its influence through these three key questions is critical towards promoting entrepreneurial thinking and action within an organisational context. Having a clear view of the primary motive of the business and how the organisation can act decisively by using its capabilities in response to what is happening in the external environment enables the entrepreneurial individual within an organisation to succeed. From an organisational context, Mintzbergs (1987, 1992) definition of strategy as 5 Ps offers a very useful framework to understand strategy in all its manifestations and not simply as an organisations actions in pursuing its business activities.
o Plan: Strategy is a plan - as a kind of consciously intended course of action, a guideline (or

set of guidelines) to deal with a situation.


o Ploy: As plan, a strategy can also be a ploy, as a specific manoeuvre intended to outwit a

rival or competitor.
o Pattern: Strategy is a pattern - specifically, a pattern in a stream of actions. o Position: Strategy is a position - specifically a means of locating an organisation in an

"environment".
o Perspective: Strategy is a perspective - its content consisting not just of a chosen position,

but of an ingrained way of perceiving the world. Structure Structure refers to the manner in which the activities of an organisation are coordinated. It allows the responsibilities of running the organisation to various units that focus on a specific range of activities such as marketing, finance, manufacturing and support. For large companies that have operations in more than one country, these units may be replicated within each country, with a local reporting structure. The four basic forms of organisational structure are:
o Functional: Business units are organised according to functional units such as marketing,

finance, manufacturing etc.

o Divisional: Organised according to product lines with individual functional units for each

product line
o Matrix: Organised according to specific project needs and dismantled once the project is

completed
o Network: A decentralised, team-based and distributed structure that is connected through

information and communication technologies. Organisational culture Organisational culture refers to a system of shared meaning held by members that distinguishes the organisation from other organisations (George and Jones, 2008) and where a strong organisational culture exists the firms core values are both intensely held and widely shared (Robbins, 2001). Within an organisation, culture serves to define boundaries of acceptable behaviour, conveys a sense of identity amongst the employees, facilitates commitment to organisational goals and objectives and sets the rules of the game that everyone is expected to follow. In this form, organisational culture is viewed as integrative, the glue that holds the organisation together (Martin and Meyerson 1988) However, two additional types of organisational culture, those of differentiation and ambiguity have also been defined which provide a better understanding of how culture manifests in organisations (Marting and Meyerson, 1988). These are not mutually exclusive with the integration oriented view of culture. Rather, they serve to explore culture as it exists in reality (see diagram below).

Schein (2004) suggests that organisational culture has become increasingly important. Competition, globalisation, mergers and acquisitions (M&A), strategic alliances and developments in workforce have all combined to create a greater need, among other things, for: Product innovation, creation of new products and services for a global market Strategy innovation, dealing with a very complex external environment Process innovation and the ability to successfully introduce new technologies, such as information technology

References George, J. and Jones, G. (2008). Understanding and Managing Organizational Behavior. 5th ed. Upper Saddle River, NJ: Pearson Prentice Hall 4th ed. HD58.7.G46 2005 Martin, J. and Meyerson, D. (1988) Organizational Culture and the Denial, Channelling and Acknowledgement of Ambiguity. In: Pondy, L. R., Boland Jr, R. J. and Thomas, R. J. (eds) Managing Ambiguity and Change. New York: John Wiley & Sons Mintzberg, H. (1987). Another Look at 'Why Do Organizations Need Strategies'. California Management Review, 30(1): pp. 25-32 Mintzberg, H. (2003). Five P's for Strategy. In: Mintzberg, H. and Quinn, J. B. (eds.) The Strategy Process. 4th ed. London: Prentice-Hall HD30.28.M56 S7 2003 Porter, M. (1980). Competitive Strategy. New York: Free Press HD41.P67 S7 Robbins, R. H. (2001). Global Problems and the Culture of Capitalism. Upper Saddle River, NJ: Pearson Prentice Hall Schein, E. H. (2004). Organizational Culture and Leadership. 3rd ed. San Francisco: Jossey Bass HD58.7.S33 2004

3. Organisational Context Underlying Factors

The organisational context for entrepreneurship is heavily influenced by the strategy, the organisational structure and culture. Understanding these factors and their characteristics will enable an entrepreneur operating within an organisation to better understand the context and plan his/her actions to make the entrepreneurial venture succeed. The strategy for an organisation is built on the basis of a) primary motive for being in business whether to make profits or to provide a service for social and economic development

b) competitive position - in terms of resources that are available at the organisations disposal c) capability - the ability to effectively mobilise the available resources Typically, organisational strategy influences the level of entrepreneurial thinking and actions that enable the recognition and exploitation of entrepreneurial opportunities. The structure of an organisation is geared towards efficiency, that enables the available resources to be deployed effectively to perform its operations. However, the focus on efficiency could limit the potential for characteristics that promote entrepreneurial thinking and action such as flexibility in resource deployment and decision making processes. Finally, organisational culture influences the potential to innovate by supporting risky ventures, the employment practices that empower the employees and the organisations primary orientation (Customer vs Product vs Process). The table below lists this set of organizational contextual factors, how they manifest in a variety of organizations and their influence on entrepreneurial thinking and action within.

Contextual Factor Strategy

Characteristic Primary motive for being in business

Large Companies Profits and maintaining market share

SMEs Profits and growing market share

Competitive position assets

Established assets & cash flow Good access to capital from a variety of sources Inflexible organisational structure Coordinate large-scale initiatives Hierarchical decisionmaking

Cash flow challenges Capital constrained

Organisation type Not-for profit and Self employed social ventures Profits and sustaining Targeted service livelihood delivery for social and economic improvement Low cash flow levels Cash flow challenges Low to non-existent capital N/A Capital constrained, relying on donations and other sources Flexible, project oriented organisational structure Coordinate largescale initiatives Typically hierarchical decision-making, but field staff have more autonomy Potential for innovation exists

Public-sector Equitable distribution of essential goods and services to society Established assets and cash flow Good access to capital from public purse Inflexible organisational structure Coordinate largescale initiatives Hierarchical decisionmaking often influenced by political imperatives Governance rules make smaller, uncertain initiatives harder to pursue Standardised, inflexible employment practices Process oriented

Family Businesses Profits and growth

Established assets and cash flow Access to limited family money Flexible to non-existent structure

Ability to mobilise resources Structure Flexibility

Flexible organisational structure Narrower, sharper focus Faster DecisionMaking

Coordination capability Decision making

Limited to individual capability Owner-driven decision making, very fast Limited potential to innovate due to lack of resources N/A

Limited to organizational capability Decision making influenced by head of family Limited, bound by traditional family values Unstructured, often driven by instinct

Organisational culture

Potential to innovate

Employment practices

Governance rules make smaller, uncertain initiatives harder to pursue Standardised, inflexible employment practices

Greater potential for continuous innovation Ability to offer flexible employment packages Customer focused

Orientation (Customer vs Product vs process) Influence on entrepreneurial thinking and action

Product or service focused Limited focus on entrepreneurship. Forays into new markets, products and services mostly initiated due to competitive pressures.

Customer focused

Flexible employment, relying on a mix own employees and volunteers Customer focused

Depends on the nature of the business Entrepreneurial thinking and action aligned with family aspirations and priorities.

Entrepreneurial thinking and action directed towards establishing competitive advantage.

Entrepreneurial thinking and action directed to ensure business survival.

Entrepreneurial thinking and action geared towards acquiring resources and managing with available resources.

Limited to no focus on entrepreneurship. Primarily driven by policy directives and guidelines.

4. Entrepreneurship in a Corporate Environment

Corporate Entrepreneurship Corporate entrepreneurship refers to the identification of new business opportunities and development of new ideas and ventures to exploit those opportunities within organisations. (Stevenson, Roberts and Grousbeck, 1989) define corporate entrepreneurship as the process by which individuals inside organisations pursue opportunities without regard to the resources they currently control. Birkinshaw, (2003) has identified four schools of thought on entrepreneurship in a corporate environment as follows: 1. Corporate Venturing: New business ventures created from the mainstream business but managed separately. 2. Intrapreneurship: Empowering the individual employee and his or her propensity to act in an entrepreneurial way. 3. Entrepreneurial Transformation: Manipulating the firms culture and organization systems, thereby inducing individuals to act in a more entrepreneurial way. 4. Bringing the Market Inside: Managing the organisations resource allocation and people management systems and use of market techniques such as spin-offs and corporate venture capital operations. Innovation In a corporate environment, entrepreneurship (or intrapreneurship) is also closely linked with the term innovation and often the terms are used interchangably. Freeman and Engel (2007) refer to innovation as 'a process that begins with a novel idea and concludes with market introduction'. They also highlight two forms of the innovation process in relation to technological innovations - the Corporate Model and the Entrepreneurial Model. In a related article, Engel (2011) considers how disruptive innovations go beyond the novel technical breakthrough and involve disruptive business models. In these cases corporates may gain insights into managing innovation and corporate entrepreneurship from exploration of the processes by which venture capital supports the entrepreneurial model. Open Innovation Over the last decade innovations within established corporate organisations has become more open (Chesbrough, 2003a) by exploiting the flow of knowledge between an organisation and its external environment as a fundamental part of the innovation process. 'Firms can and should use external ideas as well as internal ideas and internal and external paths to market as firms look to advance their technology' (Chesbrough, 2003b). Open innovation exists in both small and large firms, but are most prevalent in high technology industries such as electronics, telecommunications and

pharmaceuticals. These organisations may either implement open innovation to strengthen their existing innovation pipeline, or they may be striving to innovate beyond their core business. Mortara and Minshall (2011) that adoption of open innovation is not only dependant on their innovation reqiurements, but also on timing and the culture of the organisation. Skunk Works and Semco Whilst many innovation processes are highly managed, others happen within organisations but much more informally and not hampered by the bureaucracy of organisational life. One early example of this is 'Skunk Works' a term originally coined by Lockheed Martin in the USA as a special team worked on the development of fighter jets during World War II. The term is now often used to describe teams working on special or secret projects. Skunk works can result in successful innovations and entrepreneurial activity especially where it is part of the cultural fabric of an organisation. Another and very extreme example of more informal innovation is the Brazilian manufacturing machinery company Semco, a highly unusual workplace 'led' by Ricardo Semler, where the entire culture of the organisation is based upon the natural motivations of the employees and where none of the more conventional 'rules of work' apply, enabling creativity to be exploited to the full (Semler, 2007). References Birkinshaw, J. (2003). Strategy+Business, 30(Spring) Chesbrough, H. W. (2003a). The Era of Open Innovation. MIT Sloan Management Review, 44(3): pp. 35-41 Chesbrough, H. W. (2003b). Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston: Harvard Business School Press HD45.C43 Engel, J. S. (2011). Accelerating Corporate Innovation: Lessons from the Venture Capital Model. Research Technology Management, 54(3): pp. 36-43 Freeman, J. and Engel, J. S. (2007). Models of Innovation: Start-ups and Mature Corporations. California Management Review, 50(1): pp. 94-119 Mortara, L. and Minshall, T. (2011). How Do Large Multinational Companies Implement Open Innovation? Technovation, 31(10/11): pp. 586-597 Semler, R. (2007). Out of This World: Doing Things the Semco Way. Global Business & Organizational Excellence, 26(5): pp. 13-21 Stevenson, H., Roberts, M. and Grousbeck, I. (1989) New Business Ventures and the Entrepreneur. Homewood, IL: Irwin

5. Example Entrepreneurship in 3M

3M was founded in 1902 at the Lake Superior town of Two Harbors, Minn. In 2004, sales topped $20 billion for the first time, with innovative new products contributing significantly to growth. Recent innovations include Post-it Super Sticky Notes, Scotch Transparent Duct Tape, optical films for LCD televisions and a new family of Scotch-Brite Cleaning Products. During this time, 3M had diversified into a range of markets with innovative products, regularly earning top-10 rankings in Fortune magazines annual survey of Americas Most Admired Corporations. In 1995, 3M was awarded the National Medal of Technology , the U.S. governments top award for innovation. 3Ms accomplishments in innovation have come about through a sustained focus on innovation and entrepreneurship throughout its history. The organisational culture that supported this focus had its origins in the basic rules of management set out by William L. McKnight, its President, in 1948: "As our business grows, it becomes increasingly necessary to delegate responsibility and to encourage men and women to exercise their initiative. This requires considerable tolerance. Those men and women, to whom we delegate authority and responsibility, if they are good people, are going to want to do their jobs in their own way. "Mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do their jobs. "Management that is destructively critical when mistakes are made kills initiative. And it's essential that we have many people with initiative if we are to continue to grow." These principles have been manifest in 3Ms strategy, structure and c ulture through the establishment of strategic objectives, mobilisation of resources, employment policies, remuneration and recognition of success (Collins and Porras, 1995). The table below summarizes the contextual factors supporting entrepreneurship within 3M.

Contextual Factor

Characteristic Primary motive for being in business

Manifestation at 3M 30 Percent Rule: Thirty percent of business unit revenues must come from products introduced within the last four years.

Strategy

Competitive position assets

R&D Spending: Approximately 67 percent of sales revenue is spent on research and development at 3M and has consistently increased R&D spending. Compared to other manufacturing companies, the 3M spends on average twice the amount in R&D enabling it to establish a competitive position in innovative ideas.

Ability to mobilise resources

Availability of Seed Capital: Seed capital can be raised from within the business unit, other business units or from the corporate office. After securing seed capital, the product champion assembles a venture team to develop the product.

Structure

Flexibility

Dual-Ladder Career Path: There are two career ladders on the technical and management tracks, both allowing equal advancement opportunities, enabling employees to stay focused on their research and professional interests.

Coordination capability

Internal Technology Forums: 3M supports formal and informal forums for sharing knowledge through a Technical Council and a Technology Forum for exchange of ideas between scientists. Other mechanisms for technology sharing include email directories, an annual in-house trade show, and awards for successful sharing of new technology between business units.

Decision making

Internal organisation: Each business unit is run as a profit centre. The product champion is given the opportunity to head the new business unit.

Organisational culture

Potential to innovate

Three-Tiered Research: Performed by laboratories running at the business unit, Sector and corporate levels, focusing on specific markets, applications with 3-to-10 year time horizon for product viability and basic research with a time horizon of as many as 20 years, respectively.

Employment practices

15 Percent Option: Many employees can spend up to 15 percent of their workweek pursuing individual projects of their own choice with no need to disclose the project to a manager.

Orientation (Customer vs Product vs process)

Customer Contact: Regular interactions between 3M scientists and customers to learn how 3M products are being used and to generate new product ideas.

References Collins, J. C. and Porras, J. L (2005). Built to Last: Successful Habits of Visionary Companies. 10th ed. London: Random House HF5386.C64

6. Entrepreneurship in Other Organisational Contexts So far within this theme we have focused on enrepreneurship within the corporate organisational environment and in the previous theme we have looked at entrepreneurship within sustainability and the context of social enterprises. For much of this programme we will be considering entrepreneurship and the business start-up, however, entrepreneurship also exists within the public sector, universities and family businesses, so it is relevant to mention each of these here. Entrepreneurship within the Public Sector Entrepreneurship within the public sector is often less about bringing new products to market, but more normally concerned with more effectively servicing the needs of its users or 'customers' through greater efficiency or by developing new processes or ways of working i.e. by enhancing performance. Kearny et. al. (2007) propose a model for corporate entrepreneurship within the public sector which highlights the dynamic, complex and political external environment and how public sector organisations although they exist within bureaucratic structures with rules, structures and processes that may act as barriers to entrepreneurship. But they highlight that entrepreneurship could provide a valuable route to meet the ever changing requirements and wants of clients. Entrepreneurship within Universities Higher education and more specifically universities are often considered as a place for entrepreneurship to thrive.Indeed many universities have technology transfer operations which assist academic inventors in licensing out novel science and technology or creating spin off companies, with the academic inventors either balancing a dual entrepreneurial and academic role or making a choice between two possible career pathways. Over the last decade or so universities in the UK and around the world have initiated entrepreneurial education programmes and are increasingly interacting more frequently and closely with businesses, and at the same time students are initiating more entrepreneurial activities and societies, with the aim of increasing the number of graduates who become entrepreneurs. Entrepreneurship within Family Businesses Entrepreneurship and especially necessity entrepreneurship has triggered the formation of many family businesses, however research into the extent to which family business hinder or promote entrepreneurship is somewhat inconclusive finding that whilst some provide environments that support entrepreneurial activities, others are risk averse and slow to change. One factor that may affect entrepreneurship within family firms is the time horizon for decision making and action, as

within family firms there is much greater interest in the long-run performance especially where the businesses are being passed on to succeeding generations of the family owners (Lumpkin et. al., 2010). References Kearney, C., Hisrich, R. and Roche, F. (2007). Facilitating Public Sector Corporate Entrepreneurship Process: A Conceptual Model. Journal of Enterprising Culture, 15(3): pp. 275-299 Lumpkin, G. T., Brigham, K. H., and Moss, T. W. (2010). Long-term Orientation: Implications for the Entrepreneurial Orientation and Performance of Family Businesses. Entrepreneurship & Regional Development, 22(3/4): pp. 241-264

7. Global Trends: Political, Economic, Social, Technological, Environmental, Legal (PESTEL) Analysis The macro-environment has many factors which affect organisations and a knowledge of the key features, the changes taking place within them and the drivers behind those changes is essential for entrepreneurs and managers of established organisations alike. One way to think about the macroenvironment and to help categorise thinking and knowledge around this is to use a model such as PESTEL. PESTEL classifies the key components of the macro-environment as:
o Political factors - government policies and political decisions which may impact on vital areas

for business for example, health, infrastructure and so on


o Economic factors - for example, economic growth (or recession), inflation, interest rates,

exchange rates and taxation


o Social factors - changes in social trends, values, lifestyles, demographics etc that may impact

on both the workforce and demand for products


o Technological factors - research and development and new technologies which can create

new products and processes


o Environmental factors - climate change and the weather for example and the growing desire

to protect the environment


o Legal factors - the legal environment in which firms operate. Changes here can affect costs,

as well as demand for products. Although the model serves to assist classification and thinking around different aspects of the macro-environment it is essential to think of the macro-environment as a system (Fahey and Narayanan, 1986) in that the factors are related and each factor affects every other factor. Entrepreneurs need to go beyond listing the changes in each component but need to really assess the driving forces beneath as it will be these which provide sources of opportunity. It is also important for entrepreneurs to determine at what level to apply a PESTEL analysis. For an early stage entrepreneur with global aspirations, it may be necessary to consider each element at a national or even local level as well as the global trends. For more established organisations a global view may be the most appropriate level, but a focus on a particular business or product area may be most helpful.

References Fahey, L. and Narayanan, V.K., (1986). Macroenvironmental Analysis for Strategic Management. West Publishing, St Paul, MN. Oxford University Press (2007) Foundations of Economics (http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm)

Core and Additional Readings Core Reading: Entrepreneurship and Small Business - Start-up, growth andmaturity, P. Burns: Palgrave (2010), 3rd Edition - Chapters 8 and 18 Freeman, J. and Engel, J.S., (2007). Models of Innovation: Start-ups and Mature Corporations. California Management Review, Fall 2007, Vol. 50, No. 1, p94-119 Lichtenthaler, U., (2011). Open Innovation: Past Research, Current Debates and Future Directions. Academy of Management Perspectives, Vol. 25 Issue 1, p75-93 You are encouraged to search the literature to review at least one journal article which provides relevant insights for your entrepreneurial venture. Additional reading: Timmons, A. New Venture Creation, 4th Edition, Irwin/McGraw-Hill, 1995 Schumpeter, J.A. Capitalism, Socialism and Democracy, George Allen & Unwin, 1941

Discussion Entrepreneurship within Corporate Organisational Contexts

Using the examples of 3M, what types of corporate entrepreneurship do this company display and what practices do 3M has in place which stimulate entrepreneurship and innovation? Please put forward other relevant examples of companies and their contextual factors which have linkages with your own entrepreneurial area. Which factors do you feel have influenced the company's success to date? What insights does this provide which may assist you as you develop your own enterprise project?

Theme Assignment Organisational and Global Context of Entrepreneurship

Now that you have worked through all of the materials this theme, you should start to reflect on what you have learned and how this might apply to your own enterprise project. Think about the following: Global context: Which global trends are of relevance to your idea? Are they likely to help you or create barriers and challenges? What can you do to capture any opportunities that may be materialising and what can you do to protect your idea? Organisational Factors (as applicable) - What are the organizational contextual factors of strategy, structure and culture that are relevant to your enterprise project. These may be part of the existing business or if you are starting afresh, how can the framework help you to define the questions you need to ask yourself and other founders Entrepreneurial Thinking and Action - How does your entrepreneurial thinking and the actions that you propose to get your venture underway fit with either the existing organisational context or the aspirations you have for defining the start-up context? Are there any actions you need to take to ensure that the fit is comfortable? Impact - what impact will your actions have on the organization and its context? These may be financial, resource, process or even a complete refocus of the organization. Benefit - What will be the resulting benefit or outcome if the entrepreneurial action is a success? You will need to have a clear understanding of the impacts and benefits if you are working within an existing organisation or for possible investors if you are to secure buy-in.