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Guest Editors' Introduction: Corporate Entrepreneurship

Author(s): William D. Guth and Ari Ginsberg

Source: Strategic Management Journal, Vol. 11, Special Issue: Corporate Entrepreneurship
(Summer, 1990), pp. 5-15
Published by: Wiley
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Strategic Management Journal, Vol. 11, 5-15 (1990)


Stern School of Business, New York University, New York, New York, USA

When Schendel and Hofer (1979: 515) formally strategic renewal. Studies of corporate entrepre-
proposed a new way of viewing the business neurship have tended to focus on internal
policy and planning field a little over a decade innovation or venturing. However, we believe
ago, they identified a number of areas in which that studies of strategic renewal will command
research needs and opportunities existed 'to increasing attention in corporate entrepre-
modify, broaden, and test the strategic manage- neurship research.
ment paradigm.' Among those they suggested This special issue focuses on the state of
was the topic of 'entrepreneurship and new theory, methods, and findings in corporate
ventures.' In discussing the importance of this entrepreneurship research. We proposed a special
topic within the rubric of strategic management, issue of the Strategic Management Journal on
Schendel and Hofer pointed out that the 'birth corporate entrepreneurship to Dan Schendel for
process is necessary; and survival, regardless of several reasons: (1) policy analysts and business
size requires a renewal of key ideas on which leaders have increasingly recognized the need for
the organization is built' (p. 526). widespread revitalization of corporations and
Entrepreneurship involves the identification have called for greater emphasis on entrepreneur-
of market opportunity and the creation of ial activity within large companies; (2) scholars
combinations of resources to pursue it (Kirzner, and practitioners have become increasingly atten-
1973; Schumpeter, 1934). The de novo develop- tive to questions that concern the management
ment of new businesses within established firms of organizational transformation and strategic
reflects the process of corporate entrepre- renewal; and (3) we were convinced that a
neurship. Renewal of key ideas on which organi- special SMJ issue could facilitate progress in the
zations are built also reflects the process of developient and testing of theories on corporate
corporate entrepreneurship; renewal of key ideas entrepreneurship by clarifying and presenting a
requires the ability to manage transformation and more coherent view of current research.
discontinuous change. As argued by Stevenson
and Jarillo-Mossi (1986: 14), 'if a company wishes
to continue to be entrepreneurial, it must THE DOMAIN OF CORPORATE
convince everyone that change is the company's ENTREPRENEURSHIP
overriding goal.'
The topic of corporate entrepreneurship In his introduction to last year's special issue on
encompasses two types of phenomena and the strategic leadership, Donald Hambrick (1989)
processes surrounding them: (1) the birth of new observed that compared to the topic of the
businesses within existing organizations, i.e. previous special issue-strategy content-the
internal innovation or venturing; and (2) the domain of strategic leadership was relatively
transformation of organizations through renewal diffuse and unmapped. In focusing this special
of the key ideas on which they are built, i.e. issue on the topic of corporate entrepreneurship,

? 1990 by John Wiley & Sons, Ltd.

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6 W.D. Guth and A. Ginsberg

we too have set sail on a relatively uncharted competitively, making major changes in market-
sea; for despite the growing interest in corporate ing or distribution, redirecting product develop-
entrepreneurship, there appears to be nothing ment, and reshaping operations. In addition,
near a consensus on what it is. Some scholars, strategic renewal includes making acquisitions
emphasizing its analog to new business creation resulting in new combinations of resources for
by individual entrepreneurs, view corporate businesses within the acquiring firm. In contrast,
entrepreneurship as a concept that is limited to financial restructuring is directed at financing an
new venture creation within existing organizations exisiting combination of resources in a way that
(Vesper, 1985). Others argue that the concept yields a higher return to shareholders. This
of corporate entrepreneurship should encompass includes actions such as increasing leverage and
the struggle of large firms to renew themselves stock repurchase programs.
by carrying out new combinations of resources Thus far, we have argued that all changes in
that alter the relationship between them and firms' pattern of resource deployment stemming
their environments (Baumol, 1986; Burgelman, from the carrying out of new combinations should
1983a; Kanter, 1989). be considered in the domain of corporate
In our call for papers for this special issue we entrepreneurship. From this perspective, research
decided to cast our net based on a broad, rather on venturing within established firms only looks
than a narrow, view of corporate entrepre- at one aspect of corporate entrepreneurship.
neurship. In constructing a list of phenomena We turn now to an overview of research on
that fall under this broad conception, we were corporate entrepreneurship based on this broader
heavily influenced by Schumpeter's (1934) view perspective.
of the entrepreneur as one who 'carries out new
combinations.' As applied to entrepreneurial
activities in large, complex organizations, this A FRAMEWORK FOR MAPPING
definition implies that the essential ingredient in CORPORATE ENTREPRENEURSHIP
corporate entrepreneurship is that decisions are RESEARCH
made and actions are taken that result in new
combinations of resources being carried out The guest editor of the previous special issue,
(Ellsworth, 1985). This carrying out of new Donald Hambrick, attempted to put strategic
combinations translates into changes in strategy leaders 'back into the strategy picture.' Although
that alter the pattern of resource deployment in his discussion centered on top managers, middle
an existing firm versus changes in strategy that managers also have a role in strategic leadership.
modify the magnitude of resource deployment The 'autonomous strategic behavior' of middle
(Ginsberg, 1988). managers 'provides the raw material-the requi-
Changes in the pattern of resource site diversity-for strategic renewal' (Burgelman,
deployment-new combinations of resources in 1983a). Top management actions and responses
Schumpeter's terms-transform the firm into in relation to the autonomous strategic behavior
something significantly different from what it was of middle managers may significantly influence
before-something 'new.' This transformation of the frequency and success of entrepreneurial
the firm from the old to the new reflects effort in the firm.
entrepreneurial behavior. Corporate venturing, Building on earlier models of strategic manage-
or new business development within an existing ment (Guth, 1971; Schendel and Hofer, 1979;
firm, is only one of the possible ways to achieve Hambrick, 1989), Figure 1 portrays the theoretical
strategic renewal. Corporate venturing may or connections that can be drawn from corporate
may not be directed at, or result in, strategic entrepreneurship to the other conceptual
renewal. elements of the field of strategic management.
Strategic renewal is different from financial Researchers in strategic management generally
restructuring, though in current practice they agree that organization form/conduct includes
are sometimes linked (Lewis, 1990). Strategic strategy, structure, and management process
renewal involves the creation of new wealth (Hambrick, 1989). Increasingly, organization
through new combinations of resources. This theorists argue for including core organization
includes actions such as refocusing a business values or beliefs among the conduct variables,

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Guest Editors' Introduction 7


* Competitive . Characteristics - * Strategy * Effectiveness
* Technological * Values / Beliefs * Structure * Efficiency
* Social * Behavior * Process * Stakeholder
* Political * Core Values/ Beliefs Satisfaction

Figure 1FiigCpreErrnra(2) t (3) M


Innovation /Venturing Strategic Renewal

within Established )(of Established)
< Corpo~~rations Corporations

Figure 1: Fitting Corporate Etrepreneurship Into Strategic Management

pointing to the fundamental role these play in in strategy in a non-random way, with
effective and efficient implementation of strategy organizations (in the aggregate) moving
structure, and process (Tushman and Romanelli, away from one generic strategy towards
1985). Empirical research on the relationships other generic strategies (Zajac and Shor-
between core organizational values/beliefs and tell, 1989).
other conduct variables is in an early stage of (b) The more dynamic and hostile the environ-
development in the field. There seems to be ment, the more firms will be entrepreneur-
some agreement, however, that conduct variables ial (Miller, 1983).
must be configured in relation to each other, (c) Industry structure affects opportunities
such that significant change in one variable- for successful new product development
such as strategy-must be accompanied by change (Cooper, 1979).
in the others, or the organization (viewed as a Clearly, changes in industry competitive struc-
system) will lose effectiveness and/or efficiency tures and the technologies underlying them affect
(Miller and Friesen, 1980). Without getting corporate entrepreneurship. Opportunities for
into many possible multi-way interactions and new products and services stem from development
feedback loops, we have identified five classes of new technology and/or commercialization of
of inquiry into corporate entrepreneurship (see technologies developed by others. Both oppor-
the numbered lines in Figure 1). tunities and problems stem from the potential of
the firm and its competitors in an industry to

1. Environment inifluences corporate find new combinations of resources that lead to

entrepreneurship competitive advantage.

Examples of previous research findings in this 2. Strategic leaders inifluence corporate

category include: enatrepreneurship

(a) The impact of major environmental shifts, Examples of previous research findings in this
such as deregulation, can influence changes category include:

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8 W.D. Guth and A. Ginsberg

(a) The management style of top managers (a) Successful firms make more radical and
affects the level and performance of new more frequent product and process inno-
corporate ventures (Kanter, 1983). vations than unsuccessful firms (Mansfield,
(b) Middle manager effectiveness at building 1963).
coalitions among peers and higher-level (b) Organizations which experience perfor-
managers in support of their entrepreneur- mance downturns tend to innovate new
ial ideas affects the degree of success in practices and change strategic directions
their implementation (Burgelman, 1983b). only after prolonged decline leads to
(c) Banks that are more innovative are man- changes in top management (Tushman,
aged by more highly educated teams, who Virany, and Romanelli, 1985).
are diverse with respect to their functional
Innovation and radical change may be precipi-
areas of expertise (Bantel and Jackson,
tated when firms have excess resources that allow
them to seize upon opportunities that arise; they
Many would argue that entrepreneurial behavior also may be induced by crises or severe external
in organizations is critically dependent on the threats. More research is needed to shed light
characteristics, values/beliefs, and visions of their on questions concerning the conditions that
stategic leaders. The role of both individual moderate the influence of organizational perfor-
managers and management teams in corporate mance on innovation and strategic renewal. For
entrepreneurship warrants considerable further example, in what kinds of competitive environ-
research. ments do successful firms make more radical and
more frequent product innovations? Under what
3. Organization formlconduct influences conditions does renewal take place without
corporate entrepreneurship
change in top management?
Examples of previous research findings in this
category include: 5. Corporate entrepreneurship influences
(a) Firms pursuing strategies of acquisitive
growth have lower levels of R&D intensity Examples of previous research findings in this
than firms pursuing strategies of internal category include:
growth through innovation (Hitt et al.,
(a) Scale of entry in new product introductions
affects performance (Biggadike, 1979).
(b) Creating new business venture units in
(b) Independent, venture-backed start-ups, on
larger organizations does not affect the
average, reach profitability twice as fast
level of sales from new products (Hisrich
and end up twice as profitable as corporate
and Peters, 1984).
start-ups (Weiss, 1981).
(c) Early entry in new-product markets does
Bureaucratic structures and management pro-
not affect performance (Cooper, 1979).
cesses are widely regarded as anathema to
innovation and change within organizations. Yet The short-run performance orientation of many
there have *been reports in the literature of managements has often been cited as a deterrent
high levels of new product introduction in to innovation and change. It is clear that new
organizations observed to have highly bureau- ventures often take several years to turn into
cratic structures and processes (Sathe, 1985). contributors to overall corporate profit perfor-
More rigorous empirical research is needed on mance. Organizational re-creations may often
the combined effects of organization structure, have short-run negative performance conse-
strategy, and core organizational values/beliefs quences. Defining success and failure of corporate
on corporate entrepreneurship. entrepreneurship is a major issue not well
addressed in the literature.
4. Organizational performance influences
From the above perspective on findings and
corporate entrepreneurship
issues in corporate entrepreneurship research, we
Examples of previous research findings in this turn now to a discussion of the papers in this
category include: special issue.

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Guest Editors' Introduction 9

THE PAPERS the authors develop propositions about character-

istics of organizations that affect the degree of
The review process yielded nine papers for the entrepreneurial behavior they will exhibit.
special issue out of 62 submitted. The reviewers Michael Hitt, Robert Hoskisson, and Duane
used two criteria in the first cut: (1) Is the paper Ireland, in their paper, 'Mergers and Acquisitions
currently or potentially publishable on criteria and Managerial Commitment in M-Form Firms,'
used by SMJ? (2) Does the paper meet the analyze the impact of corporate acquisitive
additional criterion of contribution to the theme growth strategies on managerial commitment
of the special issue? The reviewers, in consultation to innovation in acquiring firms. This theory
with the guest editors, subjected those that construction study focuses on an important issue
remained to one additional criterion: (3) Did the in the trend among large companies to pursue
paper reach its potential in time to meet the growth through acquisition. Their analysis per-
publication schedule for the special issue? Table suasively leads to the major proposition that such
1 classifies the accepted papers on six dimensions: strategies result in reduction of entrepreneurial
effort to develop new technologies and products.
1. The primary Figure 1 focus: the strategic
While new wealth may be created by some
management relationships, as numbered in
synergistic acquisitions, the preponderance of
Figure 1.
evidence is that mostly neutral and sometimes
2. The research question addressed: these vary
negative results are achieved by acquiring firms.
widely from why it is difficult for corporate
The authors' hypothesis that acquisitive growth
venture managers to use social transaction
strategies reduce entrepreneurial efforts raises
strategies to what factors affect major change
serious questions not only about the long-run
in stagnating companies.
implications of these strategies for firms that
3. The primary aspect of corporate entrepre-
pursue them, but also for the American economy
neurship studied: five of the papers focus on
as a whole, given the high frequency of acquisition
innovation/venturing within existing organi-
efforts among large American firms. Empirical
zations and four focus on strategic renewal of
research suggested by this study promises to
existing organizations.
yield findings of major importance to corporate
4. The unit of analysis: seven of the papers focus
strategists and public policy analysts.
on the organization and two focus on individual
The next paper, by Donald Kuratko, Ray
new products or ventures within the organi-
Montagno, and Jeffrey Hornsby, 'Developing an
Intrapreneurial Assessment Instrument for An
5. Key concepts and theories: a wide variety of
Effective Corporate Entrepreneurial Environ-
concepts and theoretical perspectives are used ment,' examines the organizational context within
in the papers to study corporate entrepre- which new products/ventures develop. Using a
neurship. quasi-experimental design within one organi-
6. The theoretical intent and method: eight of zation and factor-analytic techniques, this study
the nine papers intend to build theory; one empirically documents a parsimonious set of
intends to test theory. The theory-building organizational context factors that may encourage
papers employ a variety of methods. or inhibit venturing behavior among middle-level
The first five papers examine corporate entrepre- managers. Prior to this study, much of the
neurship as entrepreneurial processes, or venture research on the influence of organizational
activities, within existing firms. Howard Steven- context variables on intrapreneurship was based
son and Jose-Carlos Jarillo, in their paper, 'A on case studies or anecdotal evidence. More
Paradigm of Entrepreneurship: Entrepreneurial rigorous empirical methods, like those used in
Management,' develop a view of corporate this study, are needed to develop theory in this
entrepreneurship, which they argue facilitates the important area of corporate entrepreneurship.
application of previous findings in individual As yet, there is no systematic evidence regarding
entrepreneurship research. Building on earlier the impact on venturing behavior of effectively
work to conceptualize entrepreneurship based managing the factors documented in this study.
on extensive case observation of individual The next paper, by Deborah Dougherty,
entrepreneurs (Steveinson and Gumpert, 1985), 'Understanding New Markets for New Products',

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10 W.D. Guth and A. Ginsberg



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Guest Editors' Introduction 11















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12 W.D. Guth and A. Ginsberg

examines why the process of understanding new phosis, evolution, and revolution-and argue that
markets is difficult for innovators of new products less is known about the strategic management
in large firms. In her grounded theory study of implications of revolutionary industry change
18 new product innovation cases embedded in than the other three. They studied the hospital
five firms, the author found three distinct market industry in the San Francisco area over the period
knowledge creation cycles operating at the from the 1960s through the 1980s, noting that
departmental, interdepartmental, and project-to- the type and level of change in the industry
firm levels. varied at different points in that period. Their
Developing knowledge about new markets for analysis identified corresponding patterns of
new products in established firms is a more change among firms within the industry, highligh
complex process than in start-up firms. The ing the entrepreneurial responses of these firms
structure and processes in place to manage to the revolutionary industry level changes of
established products may inhibit or enhance the 1980s. Their paper develops researchable
development of knowledge about new opportuni- propositions that are linked to their study. The
ties. Dougherty's study suggests that how depart- occurrence of revolutionary change during the
mental, interdepartmental, and project-to-firm past decade in a number of industries, e.g.
knowledge cycles are managed in established financial services, electric power, and airline
firms may be critical to new product success or transportation, provides a plethora of opportuni-
failure. ties for researchers to contribute to our under-
Jennifer Starr and Ian MacMillan's paper, standing of the impact of such change on
'Resource Cooptation via Social Transactions: corporate entrepreneurship.
Resource Acquisition Strategies for new Ven- Harbir Singh, in his paper, 'Management
tures,' analyzes resource acquisition strategies of Buyouts: Distinguishing Characteristics and
individual entrepreneurs, and explores why social Operating Changes Prior to Public Offering,' also
transaction strategies used frequently and exten- focuses on corporate entrepreneurship as a
sively by individual entrepreneurs may be more process of strategic renewal or rebirth. His study
difficult for corporate venture managers to centers on the controversial issue of whether or
pursue. They argue that social transactions not radical transformations in the ownership and
strategies reduce the investment required in new governance structure of management buyouts
ventures and, among other virtues, increase the result in radical (and positive) changes in the
amount of 'network' commitment and support firm's post-buyout operations, or whether they
available to new ventures. Both these outcomes simply induce a market correction in the value
serve to increase returns on investment and the of the assets involved. Put simply, do management
speed with which these returns are achieved, buyouts result in new wealth creation?
compared to ventures developed without exten- Singh's findings support those who see manage-
sive use of social transaction strategies. Starr ment buyouts as resulting in increased entrepre-
and MacMillan's paper provides an interesting neurial drive in the management of their assets.
theoretical explanation for Weiss's (1981) empiri- Managers of the firms in his large sample
cal findings that independent start-ups dramati- demonstrated a willingness to make drastic
cally outperformed corporate ventures in terms changes in the operations of their respective
of the time it took them on average to become firms, and to maintain large holdings of their
profitable, and in terms of return on investment. stock when their firms went public. Although
Their paper is indicative of the potential for concern remains about the high levels of debt
advancement of knowledge about corporate normally associated with management buyouts,
entrepreneurship through cross-fertilization with Singh hypothesizes that management buyouts
theory and findings from independent entrepre- may be a sign of a new era of governance of
neurship. firms and divisions. From the point of view of
The next four papers examine corporate corporate entrepreneurship, management
entrepreneurship as strategic renewal. In analyz- buyouts of divisions of larger firms may be a
ing the impact of industry-level change on manifestation of failure of those larger firms to
organizatioial responses. Alani Meyer, Geoffrey
solve the problem of providiing ince ntives to
Brooks, anid James Goes conceptualize f ur types
division managers to seek opportui-ity tlhrehg
new combintations of resouirces.
of industry-level change--adlaptation, mnetarnor-

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Guest Editors' Introduction 13

In the next paper, 'Generating Major Change most respected managers, observes that 'today,
in Stagnating Companies,' Peter Grinyer and the spirit of the entrepreneur has entered the
Peter McKiernan examine how the 25 firms they mainstream of U.S. management. Entrepre-
studied changed to 'sharp-bend' their perform- neurship is transforming the corporate bureau-
ance from stagnation or decline relative to their cracy' (1990: 79). We believe that corporate
competitors to sustained superior performance. entrepreneurship will become an increasingly
Drawing on earlier work, including Cyert and important topic over the next decade, as competi-
March (1963), the authors develop a model that tive, technological, social, and political change
predicts why and how organizations change in the environment of U.S. firms continues to
radically. They confront this model with the data accelerate. Strategic management research that
from their more general longitudinal study of the contributes to increasing the frequency and
sharp-bending companies (Grinyer, Mayes, and success of corporate entrepreneurship will, in our
McKiernan, 1988). view, be highly valued in the academic and
Their findings about the frequency, type, practitioner communities.
and conditions surrounding the organizational Of course, such research needs to be theory-
transformations observed are interesting in based and confronted with good data. Theory
relation to corporate entrepreneurship as strategic development has not progressed in the area of
renewal. These findings suggest that, for the corporate entrepreneurship as far as it has in
sharp-bending firms, external and internal 'trig- some other streams of research in strategic
gers' for organizational change provided oppor- management. That the overwhelming majority of
tunity for strategic renewal, which was seized by papers submitted for review were theory-building
old or new top managers in many of the firms. in intent, rather than theory-testing, did not
There was no support in the data for the authors' surprise us. One of our principal objectives in
proposition that managers make strategic changes proposing the special issue was to facilitate
only after finding functional changes inadequate. progress in theory development on corporate
The last of the papers examining corporate entrepreneurship.
entrepreneurship as strategic renewal is by Identifying corporate entrepreneurship topics
Theresa Lant and Stephen Mezias, 'Managing in need of further systematic research is easy in
Discontinuous Change: A Simulation Study of the sense that there is much room for across-the-
Organizational Learning and Entrepreneurship.' board theoretical and methodological progress.
Using a simulation methodology, this study However, deciding on specific topics most in
develops theory about longitudinal patterns of need of study is rather challenging. The topics
entrepreneurship across a population of organi- of the previous two special issues-strategy
zations, and the implications of different patterns content and strategic leadership-and the topic
for organizational performance. Among the many of the next special issue-global strategy-
intriguing findings of their study is that firms provide some useful leads. Among the most
with adaptive strategies do less well over the interesting strategy content questions identified
long run than firms with imitative strategies, under by Montgomery (1988) are those that relate to
conditions of high environmental ambiguity. the scope of the firm-the combination of markets
Longitudinal research on strategic renewal, in which firms participate. Of particular interest
involving field study methods, tends to be rather are the questions of why firms participate in
costly and difficult to implement. Lant and multiple and particular combinations of markets,
Mezias's paper applies an innovative methodology and what accounts for the performance differ-
that makes it possible to address theoretical issues ences repeatedly observed across firms. Among
in corporate entrepreneurship that might be these questions, we would include: What impact
prohibitively expensive to investigate solely does participation in particular combinations of
through traditional methods. markets have on strategic renewal? What accounts
for performance differences between entry into
new markets through internal venturing versus
CONCLUSION acquisition? The flourishing economics literature
on transaction cost analysis and principal-agent
In a recent article on the state of American relations holds much promise for explaining
management, Walter Wriston, one of America's the transformation of organizational governance

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14 W.D. Guth and A. Ginsberg

structures, and the governance needs of internal The reviewers listed at the end, shaped the final
venturing in established firms. outcome with their constructive criticisms and
Among the strategic leadership topics identified judicious evaluations of the papers.
by Hambrick (1989: 13) as most in need of study
were: 'the processes by which some executives
inspire and energize large organizations.' To REFERENCES
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Changes in the international environment have Biggadike, R. 'The risky business of diversification',
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Finally, we thank the authors who submitted
Entrepreneurship in the Amlerican Corporation,
their papers and the referees who reviewed them.
Simon & Schuster, New York, 1983.
The authors of the submitted papers provided Kanter, R. M. When Giants Learn to Dance, Simon
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