Entrepreneurial Orientation and Corporate Entrepreneurship Performance of

Government-Linked Companies in Malaysia

Harry Entebang
Queen’s University Management School
Queen’s University Belfast, 25 University Square
BT7 1NN Norther Ireland, UK

ABSTRACT

In the pursuit of socio-economic growth, senior politicians and civil servants in developing
countries have long believed that the roles of public enterprises are vital. This notion
subsequently leads to the establishment of public enterprise (PE) in most of the developing
world. Although it has been argued that public enterprises in these countries have reached a
crossroads and their futures are uncertain. Nevertheless, the strategic importance of PEs to the
national economy is undeniable and they continue to have a significant presence in a number of
regions and countries including Malaysia. In fact, the Government argues that over the past
several decades PEs or government-linked companies (GLCs) have played an important role in
nation building and there is an inextricable link between the nation’s overall economic success
and GLCs performance. However, the overall performance of GLCs continues to be a major
concern.

In search of high performance, research has shown that the ability of organisations to achieve
superior financial performance is associated with corporate entrepreneurship (CE). However, CE
has been defined inconsistently over the years. More over, previous empirical evidences suggest
that investigation of entrepreneurial orientation (EO) and CE on organisations has focused on the
private business enterprise and the financial performance of the firm. In this thesis, CE is
regarded as the pursuit of strategic organisational innovation, strategic renewal and corporate
venturing initiatives or activities (corporate entrepreneurship performance) achieved through
entrepreneurial orientation (i.e., risk-taking, proactiveness and innovativeness) by established
organisations facilitated by efficient and effective management of both internal and external
corporate entrepreneurship factors for the purpose of improving organisational overall
performance. In view of the present performance of GLCs and their strategic role in nation
building, the consequences of an entrepreneurial orientation or strategic posture and the effects
of key organisational antecedents on organisational entrepreneurial activities (i.e. innovation,
strategic renewal and corporate venturing) in GLCs have remained unexplored.

Grounding on the resource-based theory and the institutional theory, this thesis was built on the
premise that the capacity to innovate, drive renewal and create new business comes from the
strategic EO of a firm. In pursuing this, the importance of the internal and external CE factors
was considered. To guide the investigation further, a framework was developed and tested within
GLCs in Malaysia. Subsequently, nine key hypotheses were developed and tested: (1) that EO
will be positively associated with innovation, strategic renewal and corporate venturing
performance in GLCs (H1-H3), (2) that the internal CE factors will moderate the relationship
between EO and innovation, strategic renewal and corporate venturing performance in GLCs

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(H4-H6), and (3) that the external CE factors will moderate the relationship between EO and
innovation, strategic renewal and corporate venturing performance in GLCs (H7-H9).

To address these hypotheses, a cross-sectional study was carried out. Agreed GLCs have
responded to the survey questionnaire and participated in the semi-structured interview. A mixed
method strategy was employed during data collection because it provides more comprehensive
evidence than either quantitative or qualitative research alone. The results from the survey were
analysed using descriptive and inferential statistics. To ensure high reliability and validity of the
quantitative study, each of the constructs were subjected to rigourous statistiscal testings. These
includes, performing both exploratory and confirmatory factor analyses prior to carrying out the
multiple and moderated multiple regression analyses. To assess the interaction effects between
the independent and moderated variables on dependent variables, the interaction terms were
created. Subsequently, to provide a deeper understanding of the process of corporate
entrepreneurship in GLCs, a semi-structured interview was carried out with managers who deal
with CE activities only. This approach helps to examine closely how CE related activities occur
in GLCs. Hence, it provides better insights into entrepreneurial activities in GLCs. The outcomes
of the semi-structured interview were examined and analysed using the conceptual approach of
content analysis. In total, data have been collected from 359 respondents in 19 GLCs, while the
semi-structured interviews have been undertaken with 35 senior executives in these companies.
Given a direct impact on the entrepreneurial potential, behaviour and effectiveness of firms, the
study was operationalised to executives and/or managers who are based in the head office only.

The findings reveal that EO constructs have positive and statistical significant association with
CE performance in GLCs, except for H2c which was partly supported. These findings suggest
that the extent to which CE activities have occurred and will be developed in GLCs is associated
with the degree of their organisational EO. On the other hand, the results of the thesis also
indicate that CE activities in GLCs were not solely affected by EO but also by the internal and
external CE factors of the organisations. From the investigation, the outcomes of the research
demonstrate that top support, work discretion, reward and organisational boundary remain as
important direct components of the internal organisational factors. Added to this, the findings
from the interview also indicate the importance of top management, reward, culture, open
communication, strategic planning, entrepreneurial skill/competency, and funding in creating and
fostering CE performance in GLCs. However, based on the overall interaction hypothesised in
this thesis, only 10% (10/98) have a moderation effect. More importantly, government policy,
environmental hostility and technological sophistication emerged as important direct predictors
of CE performance in GLCs. Finally, the thesis highlights various challenges relating to
innovation, strategic renewal and corporate venturing activities in GLCs. Drawing from GLCs in
Malaysia, theoretically, this thesis has expanded the existing knowledge of EO and CE literature
by demonstrating that EO constructs are strongly associated with CE activities, and the non-
financial performance of a firm. Accordingly, this thesis has shown that EO did not emerge as
three conceptual models as claimed by several CE scholars in the past and that the strength of
EO on CE performance varies. In pursuit of organisational growth and competitiveness through
corporate entrepreneurship activities, the findings revealed in this thesis may also provide
additional managerial lessons to senior executives not only within GLCs but also in private
enterprises.

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1 Introduction

Practitioners and scholars have long believed that entrepreneurship can affect an economy. However,
earlier studies in the area of entrepreneurship have focused on examining the traits and behaviours of
individual entrepreneurs (Cole, 1946; Collins & Moore, 1964; Hartman, 1959; Schumpeter, 1942). Later,
building on the work of Miller and Friesen (1982) and Miller (1983), research in entrepreneurship has
considerably shifted to investigating entrepreneurship from an organisational perspective. In fact, as cited
in Sembhi (2002), viewing entrepreneurship from an organisational perspective appears to be consistent
with the views of Schumpeter who posits that entrepreneurship will eventually be dominated by
organisations that are capable of devoting or allocating more resources to entrepreneurial
activities/initiatives. Schumpeter (1942) also suggests that firms should increase their entrepreneurial
activity because entrepreneurially-driven economic activity leads to higher levels of income and this in
turn will benefit the economy as a whole. Since then, scholars continue to argue that entrepreneurship can
impact an economy by increasing productivity, improving best practices, creating new industries, and
enhancing international competitiveness (Wennekers & Thurik, 1999).

Accordingly, some writers have claimed that entrepreneurship is an important feature of high-performing
organisations (Covin & Slevin, 1991a; Peters & Waterman, 1982). In fact, other scholars have strongly
advocated that the practice of corporate entrepreneurship leads to superior organisation performance
(Covin & Slevin, 1989; Zahra, 1991). The extent to which corporate entrepreneurship does affect
organisational performance is further strengthened by the work of Antoncic and Hisrich (2004b) who find
that an organisation’s growth, profitability and wealth creation have been strongly, positively and
significantly related to the practice of corporate entrepreneurship. The impacts of global competition,
rapid technological changes, speedy flow of information and communication, increasing business
complexity, pervasive globalisation and deregulation of trade barriers continue to appear among others as
factors that force today’s managers to constantly seek better alternatives to achieve sustainable
competitive advantage. Hence, corporate entrepreneurship (CE) continues to be posited as another
strategy for improving organisational overall growth, competitive position as well as performance.

Corporate entrepreneurship (CE) refers to entrepreneurial activities within existing business organisations
(Schollhammer, 1982). Later, Antoncic and Hisrich (2004b) appear to share the same view and define CE
as entrepreneurship within an established organisation. Alternatively, Zahra (1995) views CE as the sum
of an organisation’s innovation, renewal, and venturing efforts. An alternative view is that CE is a process
whereby the organisations engage in diversification through internal development (Burgelman, 1983b).
Stevenson, Robert and Grousbeck (1989) also perceive CE as a process which individuals _ either on their
own or inside organisations _ pursue opportunities without regard to the resources they currently control.
Within the same line of thought, CE is further defined as the process whereby an individual or a group of
individuals, in association with an existing organisation, create a new organisation or instigate renewal or
innovation within that organisation (Sharma & Chrisman, 1999). However, other scholars suggest that CE
is primarily concerned with entrepreneurial behaviour inside established mid-sized and large
organisations (Morris & Kuratko, 2002).

Therefore, corporate entrepreneurship appears to have a multiple definitions, nonetheless most

entrepreneurship scholars seem to agree that CE activities focus primarily on innovation, strategic
renewal and corporate venturing aspects of the organisation (Teng, 2007; Zahra, 1993). Consequently,
scholars argue that organisations with high levels of corporate entrepreneurship are more likely to
perform better than those with lower levels of CE (Antoncic & Hisrich, 2004b). In fact, they find that
corporate entrepreneurship is strongly, positively and significantly related to organisational growth,
profitability and new wealth. Hence, they argue that corporate entrepreneurship appears to be a good
direct predictor of organisational performance (i.e. wealth creation, growth and profitability).

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Building on a corporate entrepreneurship perspective, scholars also continue to advocate that an
entrepreneurial orientation (EO) of an organisation is a key ingredient for organisational success
(Lumpkin & Dess, 1996b). Subsequently, it was argued that an organisation’s performance is strongly
associated with its entrepreneurial orientation (Covin, Green & Slevin, 2006; Covin & Slevin, 1989;
Covin & Slevin, 1991a; Wiklund, 1999; Wiklund & Shepherd, 2005). Morris and Sexton (1996) in
particular noted a significant positive relationship between entrepreneurial intensity and increased growth,
except profitability while Covin at al. (2006) discovered that EO has a positive effect on organisation’s
performance (i.e. sales growth rate). In addition, others have noted that increases in organisation
performance related to EO are sustainable over long periods of time (Wiklund, 1999; Zahra & Covin,
1995).

Therefore, collectively entrepreneurship scholars have consistently found that the entrepreneurial
orientation of an organisation which can be measured in terms of organisational risk-taking,
proactiveness, and innovativeness as important strategic entrepreneurial postures and determinants of
organisation performance. Later, other researchers contend that EO constructs should also incorporate the
competitive aggressiveness and autonomy of a firm as additional sub-dimensions in determining an
organisation’s overall entrepreneurial orientation (Lumpkin & Dess, 1996b). In sum, corporate
entrepreneurship and strategic entrepreneurial orientation have been pursued to achieve organisational
growth, competitive advantage and overall performance.

On the other hand, studies on organisational entrepreneurship and strategic management have pointed out
that an organisation’s ability to perform entrepreneurially depends on several key internal organisational
factors that the organisation is adopting or practising. For example, past studies reveal that organisational
antecedents appear to have an affect either by promoting or impeding the entrepreneurial actions taken to
pursue corporate entrepreneurship (CE) activities (Zahra, 1991; Zahra & Covin, 1995; Zahra, Nielsen &
Bogner, 1999). Recently, Covin et al. (2006) discover that when major operating and strategic decisions
are made in autocratic/less participative style of top management, EO has a more positive effect on sales
growth rate.

Internally these factors include organisational size (Aldrich & Auster, 1986), organisational age (Adizes,
1989; Chandler, 1962; Chandler, 1977; Mintzberg & Waters, 1982), incentive and control systems (Sathe,
1985), mission strategy (Schein, 1983), culture (Brazeal, 1993; Hisrich & Peters, 1986; Kanter, 1984),
structure (Burns & Stalker, 1961; Covin & Slevin, 1991a; Dess, Lumpkin & McGee, 1999; Khandwalla,
1977; Naman & Slevin, 1993), top management support (Kuratko, Hornsby, Naffziger & Montagno,
1993; Stevenson & Jarillo, 1990), strategic planning (Robinson & Pearce II, 1983), strategic leadership
(Daily, McDougall, Covin & Dalton, 2002; Dalton, Daily, Ellstrand & Johnson, 1998; Drucker, 2002) and
board of directors (Bantel & Jackson, 1989; Chen, Zhu & Anquan, 2005). Similarly, Miller (1983) also
examines variables such as organisation type, environment, structure, and decision making which also
have potential effects on entrepreneurial performance. Therefore, identifying those factors likely to
moderate the EO-organisation performance (i.e. CE activities) relationship in GLCs warrants particular
investigation.

Similarly, the external environmental factors can also affect the entrepreneurial activity of an organisation
(Sathe, 2003). This includes, for example, government policy (Kent, 1984; Kilby, 1971), hostility,
heterogeneity and dynamism (Lumpkin & Dess, 2001; Miller, 1983; Miller & Friesen, 1982), volatility
(McKee, Vadarajan & Pride, 1989), technological sophistication and industry life cycle stage (Covin &
Slevin, 1989; Covin & Slevin, 1991a; Lumpkin & Dess, 2001). Similarly, the extent to which the external
organisational factors of the firm have influenced the EO-firm performance relationship also requires
immediate attention. In short, past studies within the stream of CE seem to point out that an organisation’s
internal and external factors can influence its overall performance.

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While research on CE and its related fields (i.e. EO) has been established more than two decades (Hill &
Hlavacek, 1972), past studies have been anecdotal and testimonial in nature and there is still much more
to be learned about the substance and process of CE (Hornsby, Kuratko & Zahra, 2002). In fact, most of
the previous empirical work has focused solely on the private sector entities in the US using data
collected from the manufacturing sector. In addition, previous studies have used CE as an independent
variable while using the financial performance indicators such as profitability, wealth creation and sales
growth rate as the dependent variables. None, however, look at the holistic impact of EO on corporate
entrepreneurship activities (i.e. innovation, strategic renewal and corporate venturing) in a single study
within the public enterprise or government-linked company (GLC) business environment.

This research investigates the unique relationship between entrepreneurial orientation constructs (i.e.
innovativeness, proactiveness, and risk-taking), and organisation entrepreneurial performance (i.e.
innovation, strategic renewal, and corporate venturing activities), as well as determining the moderating
impact of the internal organisational and external environmental factors on this relationship within
government-linked companies in Malaysia. This is important because scholars have tended to limit the
study of corporate entrepreneurship and its related fields to the private sector entities thus ignoring the
extent to which EO exists in the public enterprises or government-linked companies. Given the existing
environments and the roles of these organisations in transforming the economy of the nation particularly
in Malaysia, a study of GLCs from the context of corporate entrepreneurship is appropriate and timely.

For summary purposes, the thesis is structured as follows; first it establishes the research context and this
is followed by a literature review, in which extant literature on firm-level entrepreneurship, organisational
antecedents (i.e. internal and external) and firm’s performance and other related fields as well as relevant
theories are reviewed. Subsequently, the paper presents the hypotheses of the thesis and this is followed
by the methodologies employed in data collection. This includes research design and approach, sample,
the method, the selection and operationalisation of the variables for quantitative and qualitiative studies.
The paper then summarises both of the quantitative and qualitative findings. Finally, the paper analyses
and discusses the outcomes, the conclusions and their theoretical and practical implications and the
recommendations for future research.

2 Research Context and Literature Review

In the pursuit of socio-economic growth, senior politicians and civil servants in developing countries have
long believed that the roles of public enterprises are vital. This notion subsequently leads to the
establishment of public enterprise (PE) in most of the developing world. Nonetheless, the rise of these
enterprises was due to the “industrial Revolutions in the 18th and 19th centuries in the West and the
colonial rule in a number of Asian and African countries which had led to massive societal imbalances”
(Basu, 2005, p. 9). However, in the first half of the 20th century, more public enterprises were established
due to the concentration of economic power and intensity of poverty among the population (Basu, 2005).
Since then, the subject of Government or State intervention has been an issue of continuous debate
particularly when the contribution of PEs in many countries is relatively low compared with the private
sector (United Nations, 2005). In fact, Heath (1990) has argued that public enterprises in these countries
have reached a crossroads and their futures are uncertain. Nevertheless, the strategic importance of PEs to
the national economy is still significant even though the role of the state-owned enterprises in the Chinese
economy is declining (Anderson, Jin-Hai, Harrison & Robson, 2003). Overall, government ownership
still has a significant presence in a number of regions and countries including Malaysia.

Malaysia achieved national independence from the British government in 1957. In order to expedite
socio-economic growth, the Malaysian government assumed a proactive role in implementing various

5
economic programmes. In 1970, the government launched a New Economic Policy (NEP) (Economic
Planning Unit, 2004) and in this national policy the Government decided to incorporate several PEs
through wholly-owned undertakings or joint ventures with the private sector (Asian Organisation of
Supreme Audit Institutions (ASOSAI), 1989).

Initially, most of these enterprises provided essential public services in the transport, communications,
utilities, and in the natural resources development sectors (Putrajaya Committee on GLC High
Performance, 2006). However, over the years the growth of public enterprises has been phenomenal in
terms of investment, production, revenue and range of activities and they constitute a significant part of
the economic structure of the nation (Putrajaya Committee on GLC High Performance, 2005). These
government-owned public enterprises are generally known as Government-Linked Companies (GLCs).

Following the introduction and implementation of the New Economic Policy, more GLCs were
established from the 1970s onwards. According to the Government Enterprises Division of the Ministry
of Finance (MOF) in 2005 a total of 82 government-linked companies (listed and non-listed), in various
key sectors, have been established and put under the direct control of this ministry. Apart from holding
shares directly through MOF Incorporated, the Federal government has also invested through various
Government-Linked Investment Companies (GLICs) such as Khazanah or Khazanah Nasional Berhad,
Employees Provident Fund (EPF) or Kumpulan Wang Simpanan Pekerja (KWSP), Pilgrims Fund Board
Malaysia or Lembaga Tabung Haji (LTH), Armed Forces Fund Authority or Lembaga Tabung Angkatan
Tentera (LTAT), and National Equity Corporation or Permodalan Nasional Berhad (PNB). As of 30th
November 2006, there are 50 listed GLCs and they represent 8 per cent of all listed companies in
Malaysia. However, in terms of market capitalisation, GLCs have approximately Ringgit Malaysia (RM)
295 billion, representing 36 per cent of Bursa Malaysia, the Malaysian stock market (see Putrajaya
Committee on GLC High Performance, 2006). On the part of the State Governments, the state-owned
enterprises have been initiated and undertaken either by the State Financial Offices, State Economics
Development Corporations (SEDCs) or the relevant Statutory Bodies in the respective states (Entebang,
Puah & Abu Mansor, 2006).

Lately, government argues that over the past several decades GLCs have played an important role in
nation building and there is an inextricable link between the nation’s overall economic success and GLCs
performance (Putrajaya Committee on GLC High Performance, 2006). Although GLCs represent only 8
per cent of listed companies they constitute 41 per cent of the market capitalisation of the benchmark of
Kuala Lumpur Composite Index (KLCI) (Putrajaya Committee on GLC High Performance, 2005).
Because of their significant presence in the economy, Government posits that GLCs can play a crucial
role in economic development as well as the future industrialisation of the nation. However, based on
several reports/publications concerning GLCs by the Committee in 2005 and 2006 respectively and a
recent study on state owned enterprises in Malaysia reveal that many of these companies have not really
performed well in the past (Entebang et al., 2006).

In short, questions have been raised particularly regarding the financial performance of GLCs in
Malaysia. On the other hand, scholars/researchers within the fields of strategic management and corporate
entrepreneurship have consistently argued that organisational performance is strongly, positively and
significantly related to corporate entrepreneurship (Antoncic & Hisrich, 2004b; Covin & Slevin, 1991a;
Zahra, 1991). On this basis, an investigation into GLCs in the context of strategic corporate
entrepreneurship was carried out. In particular, the study seeks to examine the extent to which EO
becomes the predictor of CE performance in GLCs and the effects of external environment and
organisational antecedents on this relationship.

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2.1 What is Corporate Entrepreneurship?

According to Burgelman (1984), the term “corporate entrepreneurship” seems oxymoronic. This can be
substantiated by the following works of entrepreneurship scholars. For example, the body of literature on
CE suggests that CE has been interpreted in various ways: as corporate venturing, or intrapreneurship in
established organisations for the purposes of profitability and to enhance firms’ competitive position
(Zahra, 1991); strategic renewal (Guth & Ginsberg, 1990); product innovation, proactiveness, and risk-
taking (Miller, 1983); the development of new products and/or new markets (Jennings & Lumpkin,
1989); development of corporate cultures and institutional processes which the organisation embraces
(Kuhn, 1993); fostering innovativeness (Baden-Fuller, 1995); gaining knowledge for future revenue
streams (McGrath, 1994); international success (Birkinshaw, 1997); product, process, and administrative
innovations (Covin & Miles, 1999); radical product innovation, risk-taking and proactiveness (Covin &
Slevin, 1991a); diversification (Burgelman, 1991); and processes through which individuals’ ideas are
transformed into collective actions through the management of uncertainties (Chung & Gibbons, 1997).
More generally, Morris and Kuratko (2002) have used the term to describe the entrepreneurial behaviour
inside established organisations.

In short, scholars and researchers in the field of corporate entrepreneurship (CE) have not defined CE
consistently. A further review of CE literature continues to suggest that CE has multiple definitions. In
fact, CE has been commonly defined either as an entrepreneurial activity, as an entrepreneurial process, or
as an entrepreneurial behaviour, and sometimes CE has been perceived as a strategy to enhance
organisational competitive position. However, all of these tend to occur in established organisations.
Within the stream of CE literature, there has been no clear definition. Building on past literature, it is
clear that CE can be viewed from four perspectives namely: as an activity, as a process, as a strategy and
as a firm behaviour and the following review extends these four perspectives of CE.

CE as an Activity
Schumpeter (1934) has long believed that entrepreneurship is about new combinations, encompassing the
doing of new things or the doing of things that are already being done in a new way. Specifically, he
argues that new combinations include: (1) introduction of new goods, (2) new methods of production, (3)
opening of new markets, (4) new sources of supply, or (5) new organisations. Later, Drucker (1985)
defines entrepreneurship as an act of innovation that involves endowing existing resources with new
wealth-producing capacity. Low and MacMillan (1988) and Rumelt (1987) respectively claim that
entrepreneurship is concerned with the creation of new business. Subsequently, Sharma & Chrisman
(1999) regard entrepreneurship as organisational creation, renewal, or innovation that occurs within or
outside an existing organisation. More specifically, another scholar argues that internal or intra-corporate
entrepreneurship refers to all formalised entrepreneurial activities within existing business organisations
and this can be in the form of administrative, imitative, acquisitive and incubative initiatives of the
organisation (Schollhammer, 1982). In addition, Zahra (1991) advocates that CE may be formal or
informal activity aimed at creating new business in established organisations through product and process
innovations and market developments for the purposes of profitability. Later, Zahra (1995) views CE as
the sum of a company’s innovation, renewal, and venturing efforts. Others view CE as entrepreneurship
activities within an existing organisation that encompasses the creation of new business ventures and
other innovative activities as well as orientations such as development of new products, services,
technologies, administrative techniques, strategies and competitive postures (Antoncic & Zorn, 2004),
while McFadzean et al. (2005) define CE as the effort of promoting innovation from an internal
organisational perspective, through the assessment of potential new opportunities, alignment of resources,
exploitation and commercialisation of said opportunities. In summary, entrepreneurship scholars have
defined CE as entrepreneurial activities occurring in established organisations.

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CE as a Process
Initially, Gartner (1988) tends to argue that entrepreneurship is the creation of organisations but later the
author perceives entrepreneurship as the process by which new organisations come into existence.
However, Kirzner (1973) considers entrepreneurship as the ability to perceive new opportunities and
similarly Morris (1998) also appears to agree that entrepreneurship is the process through which
individuals and teams create value by bringing together unique packages of resource inputs to exploit
opportunities in the environment which eventually results in a variety of possible outcomes such as new
ventures, products, services, processes, markets, and technologies. Similarly, Burgelman (1983a)
advocates that corporate entrepreneurship is a process whereby the firms engage in diversification
through internal development. Stevenson et al. (1989) also propose that entrepreneurship as a process in
which individuals - either on their own or inside organisations - pursue opportunities without regard to the
resources they currently control. Subsequently, several scholars continue to claim that CE is the process
whereby an individual or a group creates a new venture within an existing organisation, revitalizes, and
renews an organisation or innovates regardless of its size (Antoncic & Hisrich, 2001; Dess et al., 1999).
Alternatively, Ucbasaran, Westhead and Wright (2001) view CE as a process of organisational renewal
associated with two distinct but related dimensions: (1) creating new businesses through market
developments or by undertaking product, process, technological and administrative innovations, (2)
redefinition of the business concept, reorganisation, and the introduction of system-wide changes for
innovation. Recently, Ireland, Kuratko and Morris (2006) postulate that corporate entrepreneurship is a
process through which individual in an established organisation pursues entrepreneurial opportunities to
innovate without regard to the level and nature of currently available resources. Therefore, collectively,
researchers have argued that corporate entrepreneurship is best defined as an entrepreneurial process that
occurrs within established organisations.

CE as a Strategy
A review of the literature indicates that viewing CE as a strategy has not received much attention among
entrepreneurship scholars. However, discussion and prior research on key strategic variables and their
influence on a firm’s entrepreneurship activities have been quite extensive. In addition, strategies that
emphasise innovation and new product introductions are generally associated with an entrepreneurial
approach to competitive advantage (Dess et al., 1999). To allow further analysis of whether or not CE has
been viewed as a strategy, the key strategy variables namely: generic strategies, functional strategies, and
the entry strategy of Porter (1980) are briefly discussed. Generically, researchers in the field of
organisational behaviour believe that a firm’s competitive strategy can foster its entrepreneurship
activities. Consequently, the low-cost strategy and differentiation strategy of Porter have been considered
as strategic issues in CE (Dess et al., 1999). They argue that the demands of global competition have
heightened the need for cost-based strategies and suggest that successful CE may hinge on a firm’s ability
to “fit” with strategic approaches that emphasise quality and effectiveness. On the other hand, they appear
to question whether cost-based approaches can be useful to corporate entrepreneurs or whether firms can
pursue CE successfully by using low-cost strategies as well as differentiation strategies. On the other
hand, Burgelman (1984) develops a model of the strategic process and shows how two different strategic
behaviours of managers (i.e. autonomous strategic behaviour and induced strategic behaviour) can go on
simultaneously in large, complex organisation when they are faced with entrepreneurial activities/projects
such as new product development, market development, strategic capital investment, or engage in project
championing efforts. Hence, whether or not CE can be perceived as a strategy is yet to be established
through empirical study but the use of various strategic approaches within the context of large, established
organisations in relation to corporate entrepreneurship activities continues to generate much interest
among organisational scholars.

CE as a Firm Behaviour
According to Dess et al., (1999, p.85), “all organizations are striving to exploit product-market
opportunities through innovative and proactive behaviour.” Later, Morris and Kuratko (2002) suggest that

8
CE is a term used to describe entrepreneurial behaviour inside established mid-sized and large
organisations. Subsequently, Kuratko, Ireland, Covin and Hornsby (2005) postulate CE as a type of
proactive behaviour that can stimulate desired innovation. They argue that there is a link between
successful corporate entrepreneurship and the entrepreneurial behaviour of middle-level managers.
Nonetheless, the most notable work of CE as a firm behaviour comes from Covin & Slevin (1991a). In
presenting their argument, Covin & Slevin propose a conceptual model of entrepreneurship as firm
behaviour which later becomes well accepted among CE scholars particularly in advancing research on
CE and its related fields.

In summary, entrepreneurship scholars appear to perceive CE as an entrepreneurial activity, as a process,

as a strategy and as a behaviour executed by a group of employees in existing organisation for the purpose
of creating organisational growth and improving competitive position through innovation, strategic
renewal, and corporate venturing activities. Following this line of argument, CE has been perceived as an
entrepreneurial activity, an entrepreneurial process, an entrepreneurial strategy and as a behaviour of a
firm persistently pursued by individuals (a group of employees) within or outside organisations to
generate a stream of continuous innovation, strategic renewal, and corporate venturing activities for the
purposes of creating and improving organisational growth, competitive position and the overall financial
performance of firms.

2.2 The Emergence of Corporate Entrepreneurship

Bulgelman (1984, p.154) posits that “as firms grow large, their capacity to maintain a certain growth rate,
based on pursuing opportunities in their mainstream areas of business, eventually diminishes and sooner
or later firms have to find and exploit opportunities in marginally related, even unrelated, areas through
internal corporate venturing and/or acquisition.” In the same line of thought, Neal Thornberry in his book
“Lead Like An Entrepreneur”, claims that “companies have suffered from a lack of both sustainable
profitable growth and the creation of economic value for the owners” (Thornberry, 2006, p.3) and
suggests that there is a need for corporations to stay entrepreneurial.

Over the last decade, organisations in North America, Europe and Asia have undergone unprecedented
transformation. In Asia particularly, forces like market changes, rapid technological changes, industry
life-cycle, government intervention, uncertainty of the financial markets and the effects of the Asian
1997/1998 economic crisis, as well as the need to deliver high quality products and services due to an
intensity of competitive pressures resulting from the implementation of the ASEAN Free Trade Area
(AFTA), have also forced many Asian corporate leaders to rethink the strategic positioning of their
business organisations. In fact, Dess et al. (1999, p.85) observe that “intensifying global competition,
corporate downsizing and delaying, rapid technological progress, and other organisational factors have
heightened the need for organisations to become more entrepreneurial in order to survive and prosper.”
Subsequently, scholars within the field of strategic corporate entrepreneurship suggest that to be
successful firms must have the capacity to innovate faster than their best competitors (Teng, 2007) and
stay entrepreneurial (Thornberry, 2006).

Consequently, corporate entrepreneurship is fast becoming a weapon of choice for many large,
established companies or organisations because it entails both the mindset and skills demonstrated by
successful start-up entrepreneurs, and the inculcation of these entrepreneurial characteristics into the
culture and activity/behaviours of the large organisations (Thornberry, 2001). In fact, many authors have
singled out CE as an organisational process that contributes to organisation survival and performance
(Covin & Slevin, 1989; Drucker, 1985; Lumpkin & Dess, 1996a; Miller, 1983; Zahra, 1993). Others
postulate that CE is concerned with various forms of novelty (e.g., organisational renewal, innovation,

9
and establishing new ventures) and has its consequences for organisational survival, growth, and
performance (Kazanjian, Drazin & Glynn, 2001).

In addition, Schollhammer (1982) for instance notes that there is a need for firms to be competitive and he
argues that CE is the key for gaining competitive advantage and consequently greater financial rewards.
Writing slightly later, Peters & Waterman (1982) claim that CE activities improve organisations’ financial
performance. Subsequently, researchers note that continuous emphasis has been placed on encouraging
entrepreneurial activities in corporations (see Gartner, 1988; Wortman, 1987).

Guth & Ginsberg (1990) have taken the argument further and postulated that CE provides a potential
means for revitalising established organisations through risk taking, innovation, and proactive competitive
behaviour. However, Covin & Slevin (1991a) suggested that CE can be used for renewing established
organisations. Immediately after that the entrepreneurial behaviour of organisations is associated with
superior financial performance (Zahra, 1991). On the other hand, the explosive growth in globalization,
constantly changing in terms of market, consumers, competitors, and technology are the causes for
corporate entrepreneurship to occur in established organisations (Adler, 1997). Thornberry also contends
that issues such as bureaucracy, complex processes, hierarchy in large organisations, and failure of
obtaining the continual innovation, growth, and value creation that they once had are presented as the
main factors contributing to CE (Thornberry, 2001). However, Postigo (2002) claims that corporate
entrepreneurship is necessary when organisations are struggling to find new ways to accomplish growth,
profitability, and competitiveness.

From another perspective, Miles and Covin (2002) highlight that the emergence of CE as a field has been
hindered by issues of solid theoretical frameworks, and as a result empirical and managerial prescriptions
involving CE have not progressed as quickly as enthusiasm for the practice. In contrast, the emergence of
CE as a field of research and practice is related to perceived weaknesses of the traditional methods of
corporate management such as high/heavy regulation, strict hierarchy, short-term focus, premeditation
with cost minimisation and cutting slack, narrowly defined jobs (Maes, 2003). Alternatively, issues such
as fast-changing business environments, changing business structures, and technological changes have led
organisations to reduce their workforce, downsizing, rightsizing and budget cuts among the most
pronounced factors that create the emerging of corporate entrepreneurship (Christensen, 2004).

Based on the above literature, it can be summarised that the emergence of corporate entrepreneurship and
its related issues are due to the internal and external forces of the organisation. It is anticipated that as
organisations struggle to create their competitive position and superior growth performance, these forces
will continue to stifle or impede the extent to which organisations can be entrepreneurial. In short, CE and
its entrepreneurial orientation are the manifestation of organisation’s attitudes and behaviours which are
necessary for organisations of all sizes to be successful in today’s competitive environments.

2.3 What is Entrepreneurial Orientation?

Continuous technological change and increasing global competition among large, established
organisations in the last few years have forced managers to be more entrepreneurial in their approach.
Goosen, de Coning and Smit (2002, p.21) state that “corporate entrepreneurship or intrapreneurship has
been viewed as a means of invigorating corporate organisations and this view is based on the belief that
intrapreneurial elements will assist the organisation to be more dynamic and more competitive.” Scholars
then argue that an entrepreneurial organisation possesses three main characteristics: innovation, risk-
taking, and proactiveness (Covin & Slevin, 1989; Miller, 1983; Miller & Friesen, 1982). Later, Lumpkin
and Dess (1996a) suggest that an entrepreneurial orientation of an organisation can be assessed in terms
of its innovativeness, risk-taking, proactiveness, competitive aggressiveness, and autonomy.

10
According to Lumpkin and Dess (2001), organisational innovativeness reflects its tendency to engage in
and support new ideas, novelty, experimentation, and creative processes that may result in new products,
services, or technological processes, while the risk-taking aspect of an organisation refers to its proclivity
to engage in risky projects and managers’ preferences for bold versus cautious acts to achieve
organisation performance. On the other hand, proactiveness refers to how organisations relate to market
opportunities by seizing the initiative in the market place, while competitive aggressiveness of an
organisation is merely concerned with how the organisation reacts to competitive trends and demands that
already exist in the market-place. Mean while, the extent to which an independent action of an individual
or a team in bringing forth an idea or a vision and carrying it through to completion is defined as the
autonomy orientation of an organisation. Therefore, entrepreneurial orientation (EO) explains “the mind
set of firms engaged in pursuing new ventures or undertaking organizational renewal” activities (Lumpkin
& Dess, 1996a, p. 48). Within the same line of thought, EO also appears to represent the “extent to which
top managers are inclined to take business-related risks (the risk-taking dimension), to favour change and
innovation in order to obtain a competitive advantage for their organisation (the innovation dimension),
and to compete aggressively with other organisations (the proactiveness dimension) ” (Covin & Slevin,
1988, p. 218).

Within the stream of corporate entrepreneurship, scholars have persistently argued that entrepreneurial
orientation has a significant effect/influence on organisation performance (Covin & Slevin, 1991a; Zahra,
1993; Zahra & Covin, 1995). For instance, previous empirical evidence suggests that in certain situations,
organisations exhibiting high levels of entrepreneurial orientation will achieve superior performance to
organisations possessing low levels of entrepreneurial orientation (see Covin & Slevin, 1991a; Zahra,
1993; Zahra & Covin, 1995). In fact, Wiklund (1999) finds that increases in organisation performance
related to EO are sustainable over long periods of time. However, such a relationship may be contingent
on the environmental context in which the organisation is operating (Covin & Miles, 1999; Lumpkin &
Dess, 1997; Zahra, 1993; Zahra & Covin, 1995). Accordingly, aggregated measures of entrepreneurial
orientation have also been linked to other important determinants of organisation performance, such as
marketing orientation (Morris & Paul, 1987), strategy formation (Knight, 2000) and employee satisfaction
(Pearce, Kramer & Robbins, 1997). Covin and Slevin (1991a) also posit that for an organisation to
achieve high performance, innovation, risk-taking and proactiveness must all exist, however, Lumpkin
and Dess (1996a) contend that such a case is not necessary. They find that some firms can do well even
with one of the sub-dimensions. In sum, an entrepreneurial orientation (EO) of organisation reflects the
organisation’s orientation in terms of commitment, ability and desire to pursue entrepreneurial activity or
projects and that the practice of EO will lead to better firm performance.

The Relationship between EO and Firm Performance

The most powerful way to prevail in global competition is still unknown to many organisations (Prahalad
& Hamel, 1997). However, over the last decades scholars and practitioners have attempted several ways
to uncover the secrets of achieving continuous organisational growth and competitiveness.

In pursuing growth and competitiveness, organisations have attempted to implement and use various
programmes, activities and approaches such as total quality management (TQM), business process re-
engineering (BPR), strategic planning, Six Sigma, balanced scorecard, activity-based costing, value
change management and many more. In particular, some scholars posit that TQM and BPR have been
used as complementary approaches in organisational change strategies (Hill & Collins, 2000). However,
some organisations have set themselves to be more entrepreneurial than their rivals. Interestingly, in
exploiting potential market opportunities, more successful organisations have been associated with their
entrepreneurial orientation (Covin & Slevin, 1991a; Lumpkin & Dess, 1996a).

11
Subsequently, scholars advocate that organisations that adopt a more entrepreneurial orientation perform
better (Wiklund, 1999; Zahra, 1991; Zahra & Covin, 1995). In particular, entrepreneurial orientation is a
significant and positive predictor of the net income to sales ratio (Zahra, 1986), companies that
consistently outperformed industry norms on key financial performance measures tend to demonstrate
more entrepreneurial orientation than other organisations (Peters & Waterman, 1982), a positive and
significant correlation between entrepreneurship and performance (Covin & Slevin, 1989). Hence, Morris
and Sexton (1996, p.7) state that “there is reason to believe that the level of entrepreneurial intensity may
positively affect performance outcomes in a company ”.

Despite previous empirical evidence of EO-organisation positive performance relationship, there is still
some debate about this. Auger et al. (2003) and Smart and Conant (1994), for example, have not found a
significant relationship between EO and performance, while Hart (1992) claim that poor performance of a
firm could be due to entrepreneurial-type strategies employed. Others posit that differences in findings
may be due to differences in research design or methodological idiosyncrasies (Rauch, Wiklund, Frese &
Lumpkin, 2005). Accordingly, Covin and Slevin (1989) find different results in different samples,
however, Lumpkin and Dess (1996a) posit that certain variables could have moderated the relationship
between the two.

3 Hypotheses Generation

Changes in customer needs, new technologies, and shifts in the business environment demand that
organisations should continually engage in innovation, strategic renewal and corporate venturing
activities. However, in order to achieve successful corporate entrepreneurship, organisations need to have
an entrepreneurial orientation (EO). EO reflects the strategy-making practices that businesses use to
identify and launch new ventures/initiatives (Dess, Lumpkin & Eisner, 2007). More importantly, EO is
the essence of risk-taking, proactiveness and innovativeness (Covin & Slevin, 1989), major components
for corporate entrepreneurship initiatives/activities.

Past empirical evidence suggests that an organisation’s entrepreneurial orientation can affect its
performance (Miller & Friesen, 1982). In particular, scholars also have examined the direct effects of EO
or CE on firms’ financial performance and the extent to which other internal as well as external
organisational factors influenced firm performance (see Antoncic & Hisrich, 2004b; Lumpkin & Dess,
1996a; Lumpkin & Dess, 1997; Rauch et al., 2005; Smart & Conant, 1994; Wiklund, 1999; Zahra, 1991,
1995; Zahra & Covin, 1993). However, scholars of strategic management as well as corporate
entrepreneurship have neglected the extent to which EO can potentially contribute to CE performance
(innovation, strategic renewal and corporate venturing) in a firm. Therefore, building on the review of the
literature, EO may have a positive and significant effect on CE performance in GLCs. Therefore, the
following hypotheses (H1-H3) were proposed for testing;

H1: EO will be positively associated with innovation performance in GLCs.

H2: EO will be positively associated with strategic renewal performance: mission reformulation (a),
reorganisation (b), divestment (c) and system wide changes (d) in GLCs

H3: EO will be positively associated with corporate venturing performance: CV-New Business Creation
(a) and CV-Merger & Acquisition (b) in GLCs

12
In particular, it has been constantly argued that internal variables such as rewards/reinforcement,
management support, time availability, work discretion and organisational boundaries were identified to
affect/influence CE performance (Hornsby, Kuratko & Montagno, 1999; Hornsby et al., 2002; Morris,
Kuratko & Covin, 2008). Others also posit that organisational internal factors can promote or impede firm
performance (see for example Antoncic & Hisrich, 2004b; Covin & Slevin, 1991a; Hornsby et al., 1999;
Sathe, 2003; Zahra, 1991; Zahra & Covin, 1995). Building on the review of the literature, it is argued that
the internal CE factors of organisation will moderate the relationship between EO and CE activities in
GLCs. Thus, the following hypotheses (H4-H6) were developed for testing:

H4 That internal CE factors will moderate the relationship between EO and innovation performance in
GLCs

H5 That internal CE factors will moderate the relationship between EO and strategic renewal
performance: mission reformulation (a), reorganisation (b), divestment (c), and system wide
changes (d) in GLCs

H6 That internal CE factors will moderate the relationship between EO and corporate venturing
performance: CV-New Business Creation (a) and CV-Merger & Acquisition (b) in GLCs

In addition, corporate entrepreneurship literature also recognises that the external environments of a firm
such as environmental dynamism, environmental heterogeneity, and environmental hostility can
potentially affect its entrepreneurial performance (see Miller & Friesen, 1982). They conclude that the
more dynamic, hostile, or heterogeneous the environment, the higher the level of innovation in
conservative firms. Within the same line of thought, building on four environment settings namely,
dynamic growth environment, hostile but technologically rich environment, hospitable and product-driven
growth environment and finally static and impoverished environment, it was argued that firms in different
environmental clusters appeared to engage in different corporate entrepreneurship activities believing that
each cluster presents its own opportunities and threats (Zahra, 1993).

Recently, Kearney et al. (2007) also postulate that the external environment such as political, complexity,
munificence and change can affect organisational entrepreneurship activity (innovation) and performance
(i.e. growth, development and productivity). Alternatively, Sathe (2003) also contends that several factors
in the external business environment such as customer pressures, supplier’s innovation and productivity
capability, threat of substitutes, industry and other external forces like strong patents, government
regulations, industry standards, new technology and external advisors, for instance, can facilitate or
hinder the corporate entrepreneurship performance (i.e. new business creation) of a firm. Therefore, it is
hypothesised that the external CE factors of organisations will moderate the relationship between EO and
CE performance in GLCs. Thus, the following hypotheses (H7-H9) were developed for testing:

H7 The external CE factors will moderate the relationship between EO and innovation performance in
GLCs

H8 That external CE factors will moderate the relationship between EO and strategic renewal
performance: mission reformulation (a), reorganisation (b), divestment (c) and system wide changes
(d) in GLCs

H9 That external CE factors will moderate the relationship between EO and corporate venturing
performance: CV-New Business Creation (a) and CV-Merger & Acquisition (b) in GLCs

13
4 Research Methodologies

As pointed out by some scholars, the field of entrepreneurship continues to lack a unifying theoretical
base that can be used to explain, predict, and empirically examine entrepreneurial phenomena (Alveraz &
Barney, 2006). Given this state of affairs, the study was grounded on two firm theories, namely the
resource-based view and institutional theory. A multiple-perspective approach was used because there
appears to be no one best approach that can fully explain entrepreneurship and its relationship with
organisation performance.

The cross-sectional study was targeted at all public listed GLCs comprising of multiple sectors in
Malaysia as listed by the Putrajaya Committee on GLC High Performance report (Putrajaya Committee
on GLC High Performance, 2006). Based on a pilot study of six GLCs conducted in May 2007, the study
was carried out using a survey questionnaire and a semi-structured interview (mixed methods) (Creswell
& Plano Clark, 2007). According to these writers, this is because mixed methods research provides
strengths that offset the weaknesses of both quantitative and qualitative research. More importantly,
Creswell & Plano Clark argued that this method “provides more comprehensive evidence for studying a
research problem than either quantitative or qualitative research alone” (Creswell & Plano Clark, 2007, p.
9). Figure 1 below depicts the triangulation design of the thesis.

Figure 1 Triangulation Design: Convergence Model

Source: Creswell & Plano Clark (2007)

Quantitative Data
Quantitative Data Quantitative
Analysis:EFA,
Collection: Results
CFA & Regression
Survey (N=359) (Chapter 6)
Analyses
Compare, contrast, Interpretation of
validate, confirm both results
or corroborate both (Chapter 8)
results

Qualitative Data Qualitative Data Qualitative

Collection: Analysis: Results
Semi-Structured Content Analysis (Chapter 7)
Interview (N=35)

Accordingly, to investigate the unique relationship between entrepreneurial orientation, and CE

performance (i.e. innovation, strategic renewal, and corporate venturing activities), as well as to
determine the moderating impact of the internal and external environmental factors of this relationship, a
survey questionnaire that measures the relationship between the above variables was administered to
executives and managers who deal with CE activities in GLCs.

An instrument related to EO developed by Covin & Slevin (1989), based on the earlier work of
Khandwalla (1977), Miller & Friesen (1982) and Miller (1983), was used. The scale has been found to
possess high reliability and validity in numerous studies (see Covin & Slevin, 1989; Khandwalla, 1977;
Knight, 1997; Miles & Snow, 1978) including in other countries (see Knight, 1997; Kreiser et al., 2002).
The outcomes of EO were assessed in terms of the organisational entrepreneurship activities/CE
performance (i.e. innovation, strategic renewal and corporate venturing).

To measure the effects of EO on CE performance, a research instrument developed by Zahra (1993) was
employed but modified to reflect the organisational setting of GLCs in Malaysia. Then, the extent to
which the EO-CE relationship is moderated/affected by the organisational internal factors was
investigated using an instrument developed by Hornsby et al. (2002) and Morris et al. (2008) while

14
external factors were tested utilising a scale developed by Covin & Slevin (1989; Covin & Slevin, 1990).
These researchers claim that all of their instruments are proven to have high reliability and validity.
However, in relation to the extent to which government policy will affect or influence the EO-CE
performance relationship, a new instrument that captures this relationship was developed accordingly
based on informed literature. To do this, the procedure for developing better measures, suggested by
Churchill (1979), was adapted. To ensure the reliability and validity of the instruments, several statistical
tests were carried out accordingly. In total, data have been collected from 359 respondents in 19 GLCs.
Table 1 below depicts the demographic of the respondents.

Table 1 Demographic of Respondents (N=359)

Frequency Percent Cumulative

Percent
Gender Male 223 62.10 62.10
Female 136 37.90 100.00
Age 30-35 years old 97 27.00 27.00
36-40 years old 87 24.20 51.30
41-45 years old 98 27.30 78.60
46-50 years old 47 13.10 91.60
Above 50 30 8.40 100.00
Highest Education Diploma 21 5.80 5.80
Bachelor degree or 253 70.50 76.30
professional
Masters degree 79 22.00 98.30
PhD 2 .60 98.90
None of these 4 1.10 100.00
Number of years 3-5 years 48 13.40 13.40
working experience
6-10 years 60 16.70 30.10
11-15 years 99 27.60 57.70
16-20 years 75 20.90 78.60
Above 20 years 77 21.40 100.00
Category of First-line manager/ 119 33.10 33.10
Position Executive
Middle-line manager 118 32.90 66.00
Senior-level manager 89 24.80 90.80
Top-level manager 28 7.80 98.60
Director-level 5 1.40 100.00

Prior to hierarchical regression analysis, the independent and moderator variables were centred before the
computation of the interaction terms/product terms. In order to assess the relationship between the
predictor and the outcomes variables, all major analyses such as correlations between the variables, the
unstandardised regression coefficient (B) and intercept, standard error (SE B), the standardised
coefficients (β), R, R2, adjusted R2, F ratio, mean and standard deviation should be examined (Tabachnick
& Fidell, 2007). In addition, Field (2005) and Brace et al. (2006) suggested that R, R2, Adjusted R2, R2
Change and β should be used to help interpret the impact of predictors on the criterion (outcome)
variables. According to Field (2005), R can be used to determine the value of multiple correlation
coefficient between the predictors and the outcomes while R2 should be used to measure how much of the
variability in the outcome is accounted for by the predictors. In addition, interaction effect is present

15
when the difference between the two R2 values are statistically significant (Cohen, Cohen, West
& Aiken, 2003; Field, 2005; Jaccard, Turrisi & Wan, 1990) and “the signicance of R2 can
actually be tested using an F-ratio” (Field, 2005, p.188).

Given the nature of the study, several tests were carried out: (1) reliability test, and validity test to assess
the survey instrument, (2) exploratory factor analysis test to determine the existence of the underlying
factors, (3) confirmatory factor analysis in order to determine the adequacy of its goodness of fits to the
sample data, (4) multiple regression analysis to assess the differential relationship of EO to CE
performance and (4) moderated multiple regression analysis to analyse the moderating effects of
organisational internal and external factors on EO-CE performance relationship. However, prior to data
analysis and interpretation, the outcomes of both multiple regression and moderated multiple regression
were checked for any presence of multicollinearity, outliers, normality, linearity, homoscedasticity of
variance, and independence residuals (errors) (Field, 2005; Pallant, 2007). The outcomes of regressions
revealed that none of the results demonstrated strange cases which could have an undue influence on the
results of the research. Table 2 below depicts a summary of the outcomes of the constructs after
performing confirmatory factor analysis.

Table 2 A Summary of Measures after Confirmatory Factor Analysis

Standard
Measure Item Range Factors Mean Deviation Alpha
Top Support 11 1-7 2 4.5 0.9 0.91
Work Discretion 7 1-7 2 4.4 1.0 0.87
Reward 6 1-7 1 5.1 0.9 0.81
Organisational Boundary 3 1-7 1 4.8 0.9 0.78
Government Policy 4 1-7 1 5.2 0.9 0.77
Environmental Hostility 3 1-7 1 3.9 1.2 0.79

Technological Sophistication 3 1-7 1 4.4 1.3 0.72

Entrepreneurial Orientation 6 1-7 2 3.9 1.0 0.78

CE-Innovation 5 1-5 1 3.3 0.7 0.92
CE-Strategic Renewal 12 1-5 4 3.4 0.7 0.91
CE-Corporate Venturing 7 1-5 2 3.2 0.8 0.86

In addition, semi-structured interviews have been undertaken with 35 senior executives in these
companies. When conducting the survey, executives and managers who deal directly with corporate
entrepreneurship activities based in head office were targeted. This is because managers can have a direct
impact on the entrepreneurial potential, behavior and effectiveness of firms (Deeks, 1976). A similar
approach was used by Kelley et al. when they investigated CE initiatives through radical innovation in ten
large multinational firms (Kelley, Neck, O' Connor & Paulson, 2005). The interview was recorded and
subsequently transcribed. This is necessary because most studies related to CE concentrate on what
organisations do and have ignored another important aspect of CE processes such as why and how they
carry out CE activities. Moreover, this approach appears suitable because it provides better insights into
entrepreneurial activities in GLCs.

16
The outcomes of the interview resulted in large amounts of written data. Since data reduction is a key
element of qualitative analysis, effort was made to ensure the quality of the qualitative data was respected
and this was achieved through content analysis procedures (Cohen, Manion & Morrison, 2007). Content
analysis is a process by which “many words of texts are classified into much fewer categories” (Weber,
1990, p. 15) and a reduction of the material in different ways (Flick, 1998). It is also a process of
summarising and reporting the main contents of data and their messages (Cohen et al., 2007). In addition,
some argue that it is a strict and systematic set of procedures for the rigorous analysis, examination and
verification of the contents of written data (Flick, 1998; Mayring, 2004). But Krippendorp (2004, p. 18)
defines content analysis as “a research technique for making replicable and valid inferences from texts (or
other meaningful matter) to the contexts of their use” and texts are any form of written communicative
materials which are intended to be read, interpreted and understood (Krippendorp, 2004).

Upon examination of the interview transcripts, the results were divided into three major themes, namely;
innovation, strategic renewal and corporate venturing initiatives in GLCs. This is in line with the view
that corporate entrepreneurship is the sum of a company’s innovation, strategic renewal and corporate
venturing (see Teng, 2007; Zahra, 1993, 1995). Subsequently, relevant sub-themes from each of the major
themes were also identified. Table 3 below depicts the major themes and the sub-themes of the data.

Table 3 Major Themes and Sub-Themes of the Qualitative Study

Major Themes Sub-themes

Innovation Motivating factors, sources of innovation; driver & nature of innovation;

organisational factors and challenges

Strategic Renewal Motivating factors, forms & challenges

Corporate Venturing Motivating factors, forms & challenges

5 Research Findings
The findings of the thesis are divided into two categories: quantatitative and qualitative.

5.1 Research Findings for Quantitative Study

Table 4 below depicts the overall results of the hypotheses. Based on the outcomes of the regression
analyses, hypotheses 1 to 3 must be accepted except for EO (M2) in hypothesis 2c. This suggests that EO
constructs were directly and significantly associated with CE performance in GLCs. Subsequently, the
interaction effects between EO constructs and the internal CE factors did not appear to moderate the EO-
CE performance relationship in H4, H5a, H5c, H5d, H6a and H6b except for H5b. Instead, top support,
work discretion, reward and organisational boundary emerged as direct and strong predictors of EO-CE
performance. Accordingly, the overall interaction effects between EO constructs and the external CE
factors were found to have no moderation effect on the EO-CE performance relationship in H7, H8b, H8d
and H9a even though, EO (M1) x GP, EO (M1) x EH, EO (M1) x TSop and EO (M2) x TSop were found
significant in these hypotheses. However, the relationship between EO-mission reformulation (R), EO-
divestment (D) and EO-merger & acquisition (CV-M2) of CE activities in GLCs were significantly
moderated through EO (M1) x EH, EO (M1) x TSop, EO (M2) x TSop, EO (M2) x EH and EO (M2) x

17
TSop respectively. Hence, moderation effects prevailed in H8a, H8c and H9b. In addition, government
policy was directly related to mission reformulation while technological sophistication and environmental
hostility were directly associated with organisational innovation, reorganisation, system-wide changes,
new business creation and merger & acquisition activities in GLCs.

18
Table 4 Overall results of the Hypotheses

Hypothesis Description Model Regression Analysis

H1 EO will be positively associated with innovation performance in GLCs EO (M1 & M2) → CE (I) Supported
H2a EO will be positively associated with strategic renewal performance in GLCs EO (M1 & M2) → CE (SR-MR) Supported
H2b EO will be positively associated with strategic renewal performance in GLCs EO (M1 & M2) → CE (MR-R) Supported
H2c EO will be positively associated with strategic renewal performance in GLCs EO (M1 & M2) → CE (SR-D) Only EO (M1) was supported
H2d EO will be positively associated with strategic renewal performance in GLCs EO (M1 & M2) → CE (MR-SWC) Supported
H3a EO will be positively associated with corporate venturing performance in GLCs EO (M1 & M2) → CE (CV-M1) Supported
H3b EO will be positively associated with corporate venturing performance in GLCs EO (M1 & M2) → CE (CV-M2) Supported
H4 That internal CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (I) Significant
innovation performance in GLCs Internal CE Factors → CE (I) Only TS was significant
Interaction Terms Not Supported
H5a That internal CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-MR) Significant
strategic renewal (mission reformulation) performance in GLCs Internal CE Factors → CE (SR-MR) Not Significant
Interaction Terms Not Supported
H5b That internal CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-R) Significant
strategic renewal (reorganisation) performance in GLCs Internal CE Factors → CE (SR-R) Only TS was significant
Interaction Terms Supported but only EO (M2) x
OB was significant
H5c That internal CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-D) Not Significant
strategic renewal (divestment) performance in GLCs Internal CE Factors → CE (SR-D) Only TS was significant
Interaction Terms Not Supported
H5d That internal CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-SWC) Significant
strategic renewal (system wide changes) performance in GLCs Internal CE Factors → CE (SR-SWC) Only TS & R were significant
Interaction Terms Not Supported
H6a That internal CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (CV-M1) Significant
corporate venturing (M1) performance in GLCs Internal CE Factors → CE (CV-M1) Only TS & OB were significant
Interaction Terms Not Supported
H6b That internal CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (CV-M2) Only EO (M1) was significant
corporate venturing (M2) performance in GLCs Internal CE Factors → CE (CV-M2) Only WD was significant
Interaction Terms Not Supported

19
Table 4 Overall results of the Hypotheses (continued)

Hypothesis Description Model Regression Analysis

H7 That external CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (I) Significant
innovation performance in GLCs External CE Factors → CE (I) Only EH & TSop were significant
Interaction Terms Not Supported
H8a That external CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-MR) Significant
strategic renewal (mission reformulation) performance in GLCs External CE Factors → CE (SR-MR) Only GP was significant
Interaction Terms Supported but only EO (M1) x
EH was significant
H8b That external CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-R) Significant
strategic renewal (reorganisation) performance in GLCs External CE Factors → CE (SR-R) Only TSop & EH were significant
Interaction Terms Not supported but EO (M1) x GP
& EO(M1) x EH were significant
H8c That external CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-D) Only EO (M2) was signficant
strategic renewal (divestment) performance in GLCs External CE Factors → CE (SR-D) Not significant
Interaction Terms Supported but EO (M1) & EO
(M2) x TSop and EO (M2) x EH
were significant
H8d That external CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (SR-SWC) Significant
strategic renewal (system wide changes) performance in GLCs External CE Factors → CE (SR-SWC) Only TSop & EH were significant
Interaction Terms Not Supported
H9a That external CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (CV-M1) Significant
corporate venturing (M1) performance in GLCs External CE Factors → CE (CV-M1) Only TSop & EH were significant
Interaction Terms Not supported but EO (M1 & M2)
x TSop were significant
H9b That external CE factors will moderate the relationship between EO and EO (M1 & M2) → CE (CV-M2) Significant
corporate venturing (M2) performance in GLCs External CE Factors → CE (CV-M2) Only TSop & EH were significant
Interaction Terms Supported but only EO (M2) x
TSop was significant

20
5.2 Research Findings for Qualitative Study

A total of thirty five managers were interviewed and each interview lasted between forty-five minutes and
an hour. The interviewees held different executive positions in their organisations ranging from executive
director (14.3%), chief executive officer (2.9%), senior manager (71.4%) to manager (11.4%). They came
from major sectors/industries of the Malaysian economy: construction & property development,
asset/facility management, manufacturing, pharmaceutical, energy, telecommunication & ICT, aviation,
automotive, heavy equipment/machinery, oil & gas and banking & finance. These companies employed
between 2000 to 26000 employees nationwide. Based on major themes and sub-themes of the study, the
findings are discussed below.

Factors Motivating GLCs to Pursue CE Initiatives/Activities

From the scripts, 25 out of 35 or 71% of the interviewees stated that competition/market pressure,
technological changes, and increase in operational costs have become major determinants for GLCs to
pursue CE activities.

Sources of Innovation in GLCs

In search of better growth and performance, GLCs have also recognised the importance of innovation and
decided to pursue it. In attempting to capture the sources of innovation, managers were asked about how
innovative ideas were conceptualised in their organisations over the years. It was noted that most of the
companies appeared to have a formal programme/project/event declared around innovation
initiatives/activities. In addition, most of these companies have also set up a dedicated
division/centre/committee to manage this process/function separately. Apart from this, ideas were also
generated from ad hoc proposals.

Initiative and Nature of Innovation in GLCs

In attempting to answer questions such as: (1) do innovation initiatives/activites usually come from the
top or bottom? and (2) what is the nature of innovation initiatives/activities in GLCs over the years?
Given the organisational structure of GLCs, it is not a surprise that top management is the mover or driver
of such initiatives, while the people on the ground will work out the details. From the interview,
innovation initiatives have come from both ways. The top management tends to come up with more
strategic and directional types of ideas, while the people on the ground often come up with operational
types of proposals/suggestions. Of 27 interviewees who have responded to this question, only 10 or 37%
of them said that the ideas have come from the top management.

Organisational Factors that Foster Innovation in GLCs

It has been argued that organisational factors such as top management, organisational resources and
competencies, organisational culture, organisational structure, mission strategy (Covin & Slevin, 1991a),
strategy, processes, culture, top management (Lumpkin & Dess, 1996a), leadership (Sathe, 2003),
strategic planning (Ansoff, Avner, Brandenburg, Portner & Radosevich, 1970; Bracker, Keats & Pearson,
1988), reward/compensation (Hornsby et al., 2002), resources (Maidique & Zirger, 1984) may foster or
impede organisational performance. In consideration of these views, managers were asked about
organisational factors that would have fostered or impeded innovation initiatives in their organisations.
From the transcripts, these factors were categorised into top management, reward, culture, resources
(funding), structure (open communication) and strategic planning.

Challenges to Innovation in GLCs

In pursuit of innovation, managers have encountered several key challenges to innovation in government-
linked companies. From the scripts, a total of 14 challenges (issues/problems) were identified, however,
only the top five of these challenges were discussed. The challenges were categorised into; staff attitude,

21
behaviour and skill, lack of appropriate and established assessment for innovation, lack of appropriate
reward and appreciation, resources (funding & budget bound) and management

Strategic Renewal Initiatives in GLCs

According to Miller (1983), strategic renewal activity is the second dimension of corporate
entrepreneurship that may enhance an organisation’s ability to compete and assume risks. Strategic
renewal activities include among others reformulation, reorganisation, introduction of system-wide
changes for innovation (Zahra, 1993), redefinition of a firm’s mission through creative redeployment of
resources, leading to new combinations of products and technologies (Guth & Ginsberg, 1990),
developing or adopting new organisational structures that stimulate innovation and venturing (Zahra &
Zahra, 1992) as well as selling off unprofitable ventures (divestment) (Maes, 2006). From the transcripts,
strategic renewal initiatives in GLCs can be categorised into four namely: reorganisation, reformulation,
putting more emphasis on revenue generation and better cost control and implementation of system-wide
changes.

As far as GLCs are concerned, strategic renewal-reorganisation activities include: consolidation or merger
between subsidiary companies or divisions, divestment, and selling off of non-active assets. In this study,
reformulation represents the second highest form of strategic renewal initiative in GLCs. 50% (16/32) of
the managers in GLCs claimed that their organisations have pursued some form of reformulation activity
over the years. Reformulation initiatives include mostly rebranding/putting up a new image and revising
the business/business turnaround. Apart from reorganisation and reformulation, 19% (6/32) of the
managers in GLCs said that their organisations were putting more emphasis on revenue generation and
cost control initiatives, while 15% (5/32) were pursuing system wide changes such as replacing old
systems with new ones.

Strategic Renewal Initiatives and Challenges

In pursuing strategic renewal initiatives, managers were asked about the challenges they have encountered
over the years. From the scripts, 69% (9/13) said that the greatest challenge was trying to get their
employees to accept change. Resistance to change is the biggest challenge, commented one senior
manager. Therefore, as far as the strategic renewal initiatives are concerned in GLCs, key challenges
include the difficulty of the staff in accepting changes in terms of new policy, new culture, new
remuneration packages, new positions, new locations, and new systems in the restructured entity. While
strategic renewal initiatives may help to position GLCs competitively and strategically either locally or
internationally, several issues appeared to emerge and they require additional attention as well as different
solutions from the management.

Corporate Venturing Initiatives in GLCs

Corporate venturing (CV) or new business creation is the third dimension of corporate entrepreneurship
activities (Zahra, 1995) and it usually occurs outside the organisation (MacMillan, Block &
Subbanarasimba, 1986). These external efforts of CE entail mergers, joint-ventures, or acquisitions
(Zahra, 1995), joint corporate R&D, new venture development (Sathe, 2003), new venture division
(Sharma & Chrisman, 1999), and corporate venturing activities by entering new markets (Block &
MacMillan, 1993; Guth & Ginsberg, 1990; Zahra, 1993). From the interview transcripts, new market
entry of corporate venturing or new business creation initiatives in GLCs were carried out through merger
& acquisition, strategic alliance and establishment of new company/new branch/new division or new
plant either locally or overseas.

22
Merger & Acquisition Initiative
In this research, merger and acquisition is the most common form of corporate venturing initiative among
GLCs in Malaysia and it happened across various sectors. 33% (10/30) of the managers indicated that
their organisations had engaged in M&A over the years. The goals include to: increase the existing core
competencies, support growth and expand the size/market of their organisations.

Strategic Alliance Initiative

Apart from acquisition, some GLCs have entered into several joint-venture or strategic alliance initiatives
with foreign companies when they entered their market. For example, one senior manager stated that
“While in Saudi Arabia, we joint-ventured with another company to build a power plant.”

Establishment of New Entity Initiative

From the scripts, 20% (6/30) of the managers mentioned that their organisations have incorporated a new
company, formed a new branch or established a new division including setting up a new plant. For
example, one senior manager clarified that, “...we have also formed new companies but overseas.”

Overall, as far as corporate venturing initiatives are concerned, entry into new markets was explored via
merger & acquisition, strategic alliance/joint-venture and establishment of new companies or new
offices/branches over the years. These initiatives appeared to be consistent with previous literature on
corporate venturing or new business creation in large, established organisations (Block & MacMillan,
1993; Guth & Ginsberg, 1990; Sathe, 2003; Sharma & Chrisman, 1999; Zahra, 1993, 1995).

Corporate Venturing and Challenges

However, new venturing initiatives have been associated with high risk. To minimise business risk, some
GLCs have entered the market via merger & acquisition, strategic alliances and establishment of new
companies/offices. They argued that strategic alliances, for instance, enable them to reduce their learning
curves in several areas such as the political, legal and social/culture systems of that country.

In summary, from the scripts, the perception of managers concerning various corporate entrepreneurship
initiatives and activities were categorised and analysed systematically. Given the existing market
conditions, keen competition, technological changes and an increase in operational costs have pushed
GLCs to pursue and engage in various innovations, strategic renewal and corporate venturing initiatives
and activities over the years. Most importantly, the findings of this qualitative study allow the researcher
to answer some important questions within the mainstream of CE which has received very minimal
attention among CE scholars in the past: (1) how CE initiatives and activities were carried out in public
enterprises, (2), what drives CE initiatives in GLCs and, (3) what were the key challenges
(issues/problems) associated with CE implementation in government-linked companies/public enterprises.
A careful study and analysis of these findings should benefit not only GLCs but other organisations as
well.

6 Discussion

Given the central research question of the thesis, the extent to which EO affects CE performance, the non-
financial performance aspect of a firm has not been investigated. Past empirical work has extensively
examined the effects of EO and CE on firms’ financial performance, including growth (see Antoncic &
Hisrich, 2004a; Antoncic & Scarlat, 2005; Covin et al., 2006; Eliasson & Davidsson, 2004; Ferreira &
Azevedo, 2007; Lumpkin & Dess, 1996a; Lumpkin & Dess, 2001; Rauch, Wiklund, Frese & Lumpkin,
2004; Wiklund, 1999; Wiklund & Shepherd, 2005; Zahra, 1991, 1993; Zahra & Garvis, 2000; Zain &
Hassan, 2007). This implies that most scholars believe the financial performance of a firm is the ultimate
measure of a firm’s success or failure. As a result, the potential of EO as a predictor of CE

23
initiatives/activities (corporate entrepreneurship) has been ignored in the past even though, for instance,
Covin & Miles (1999 p. 49) have strongly argued that “without innovation there is no corporate
entrepreneurship” and corporate entrepreneurship can have substantial implications on the performance
and growth of firms (Barringer & Bluedorn, 1999).

This thesis was built on the premise that without a stream of continuous innovation or strategic renewal or
corporate venturing or a combination of these three activities in established firms, there will be poor
financial performance or even no growth. In other words, for a firm to achieve superior financial
performance (Zahra, 1991), growth (Covin, Slevin & Heeley, 2001), competitive advantage and greater
financial reward (Schollhammer, 1982), or wealth creation (Antoncic & Hisrich, 2004a), CE
initiatives/activities must exist and for such initiatives/activities to occur, EO has been identified as a
reliable and significant predictor of CE activities in GLCs. This implies that CE activities are dependent
on the extent to which an organisation or a firm demonstrates its degree of proactiveness, innovativeness
and risk-taking, the core dimension of EO. Based on the outcomes of this study, it is clear that EO
constructs emerged as strong, positive and statistically significant predictors of organisational innovation,
strategic renewal and corporate venturing initiatives or activities (CE performance) in government-linked
companies (H1-H3).

In addition, the extent to which GLCs have pursued CE activities can be substantiated by the findings
from the qualitative study. The results of the study reveal that GLCs did pursue and engage in various
innovation, strategic renewal and corporate venturing initiatives/activities over the years.

As far as innovation initiatives are concerned, ideas were coming from both ways (management as well as
employees). However, strategic and directional ideas were came mostly from the top and this is consistent
with Huat (2004) who found that successful organisational change initiatives in manufacturing companies
are mostly initiated by their top management. Notably, only a small amount of ideas came from specific
or established departments/committees in GLCs. This appears to be consistent with “The Closed
Innovation Model” where companies generate, develop and commercialize their own ideas, a popular
self-reliance philosophy by many leading industrial corporations in the 20th century (Chesbrough, 2003a).
This also implies that they have not openly and aggressively adopted “open search strategies that involve
the use of a wide range of external actors and sources to help them achieve and sustain innovation”
(Laursen & Salter, 2006, p.131) even though there were several collaboration initiatives through JV,
strategic alliance or M&A with external parties over the years.

The findings also point to the fact that innovation initiatives/activities in GLCs were determined by the
top management through formal programmes/projects/initiatives. In fact, Zahra (1991) has argued that CE
activity may be formal as well as informal. This implies that innovation might not occur if the top
management in GLCs did not introduce formal programmes/projects/initiatives. At the same time, only
initiatives that received approval and sanction from the management will have their funding or resource
allocation. This finding provides further support for Schollhammer (1982) who argues that formalised
internal entrepreneurial activities are those which received explicit organisational sanction and resource
commitment for the purpose of innovative corporate endeavour, such as new product developments,
product improvement, and new methods or procedures. At the same time, inability of the established
department/committee to generate more creative/innovative ideas within the organisation may lead one to
question the effectiveness of this department/committee in generating continuous and sustainable
innovation initiatives in the future. Therefore, the argument presented by Chesbrough regarding declined
advantages that organisations gain from internal R&D expenditure or internal initiatives of innovation
should be carefully noted (see Chesbrough, 2003a; Chesbrough, 2003b; Laursen & Salter, 2006).

As a new initiative in most GLCs, the preferred choice of incremental over radical did not come as a
surprise as this is considered a “safe” approach prior to radical changes, suggesting that GLCs preferred

24
to approach innovation gradually and this also in line with previous literature (Covin & Slevin, 1991a;
Covin & Slevin, 1991b; Huat, 2004; Morris et al., 2008). In fact, the choice of incremental innovation
over radical was also prevalent in another multinational corporation in Malaysia (Zain, Richardson &
Adam, 2002). However, the consequences of incremental innovation should be noted. For example, as
cited in Brentani (2001), some argued that incremental innovation may generate returns but they are less
significant (Millson, Raj & Wileman, 1992; Song & Montoya-Weiss, 1998) as such initiatives are mostly
concentrated on process innovation: operational efficiencies, cost-cutting and staff-reducing measures by
implementing several processes namely business process reengineering (BPR), Lean, Six Sigma, TQM,
Lean Sigma, etc. (Tucker, 2008). Tucker argued that these activities tend to increase the spread between
gross and net but they cannot increase top-line revenue; they cannot fuel growth. Considering this, much
of Tucker’s observations appeared to be consistent with the actual scenario in GLCs (see Chapter 7).

In short, this study argues that short-term benefits resulting from incremental innovation
initiatives/activities will easily become irrelevant when major market disruption, technological and
policies changes occurred. In fact, Hamel (2000, p. xi) argued that “we’ve reached the end of
incrementalism, and only those companies that are capable of creating industry revolutions will prosper in
the new economy”. Hence, to fuel growth, achieve competitive advantage and generate superior financial
performance, GLCs should consider implementing higher degree innovation initiatives (i.e. substantial
and radical types of innovation).

From the quantitative study, internally top management and organisational boundary appeared to have a
direct effect on innovation performance, while the qualitative study suggests that appropriate support
from top management, reward/compensation directed at innovation achievement, entrepreneurial culture,
access to ready resources for experimentation, structure in terms of open communication and clear
strategic planning on innovation have been identified as important determinants of innovation initiatives
in GLCs. Although the extent to which EO affects innovation performance could not be compared with
previous studies, the potential effects of CE internal factors on organisational performance are consistent
with previous writings on CE (Covin & Slevin, 1991a; Covin et al., 2001; Hashim, Zakaria & Ahmad,
2004; Hornsby et al., 2002; Huat, 2004; Kearney et al., 2007; Morris et al., 2008).

Externally, quantitative research suggests these factors include technological sophistication and
environmental hostility, while findings from the interview revealed that competition and market pressure,
technological changes and increase in operational costs have triggered GLCs to pursue innovation
initiatives recently. In other words, innovation performance in GLCs was highly associated with
technological changes, increase in competition/market pressure and operational costs. In fact, Myers &
Marquis (1969) have found that more than half of firms’ products and technological innovations were
developed in response to market, competition, and other external environmental influences. Hence, the
findings in this study are consistent with previous empirical evidence on CE related initiatives in
established organisations (Covin et al., 2001; Hill & Collins, 2000; Sathe, 2003).

Besides innovation, GLCs also pursued several strategic renewal initiatives recently. From the
quantitative study, EO constructs have a direct effect on reformulation, reorganisation, system-wide
changes and partly divestment, while internally only top support appeared to influence reorganisation,
divestment and system-wide change initiatives in GLCs. On the other hand, government policy was
associated with reformulation initiatives, while technological sophistication and environmental hostility
were significantly related to reorganisation and system-wide change initiatives in GLCs. Previous
empirical evidence suggests that EO, top support, technological sophistication and environmental hostility
did influence firm performance (Covin et al., 2001; Hornsby et al., 2002; Wiklund, 1999); this research
reveals that EO, top support, technological sophistication, environmental hostility and government policy
appeared to affect/influence strategic renewal initiatives in GLCs.

25
From the interview, reorganisation and reformulation emerged as the most common strategic renewal
activities/initiatives in GLCs. Reorganisation was in the form of consolidation or merger between
subsidiary companies/divisions/units, divestment and selling off of non-active assets, while reformulation
involved rebranding, changing of business image/concept and business turnaround. These findings are in
support of Zahra (1993) even though Tucker (2008) argued that making small or minor improvement such
as changing business image may often be quickly matched by competitors and consequently, any “first
mover” benefit to the initiating firm’s bottom line will be eliminated. On the other hand, in pursuit of
renewal initiatives, GLCs have faced several challenges such as difficulty to convince their staff to accept
changes in terms of new policy, new culture, new remuneration, new position, new location and new
system and these findings have been widely discussed by Morris et al. (2008).

The study also finds that EO constructs have a strong and significant effect on corporate venturing
initiatives in GLCs. Internally, top support and organisational boundary were strongly and significantly
related to new business creation, while only work discretion appeared to be associated with merger &
acquisition activities in GLCs. In fact, the effects of CE internal factors such as top support and
organisational boundary on firm performance are in line with evidence found by Hornsby et al. (2002).
On the other hand, technological sophistication was positively and significantly related to new business
creation, while environmental hostility appeared to have a negative but significant relationship with new
business creation and merger & acquisition initiatives.

In this study, the extent to which EO, technological sophistication and environmental hostility affected
corporate venturing initiatives suggested a new empirical finding within the field of EO/CE literature. For
instance, environmental hostility tends to have a negative association with CE activities. This suggests
that when environmental hostility is high, GLCs appeared reluctant to pursue CE activities and this
finding is consistent with Zahra (1996).

In respond to competition and market pressure, technological changes and increase in operational costs,
GLCs have no choice but to search for new markets. From the interview, GLCs have ventured into new
markets locally as well as within the region and this was achieved through merger & acquisition, strategic
alliance/joint-venture and establishment of new entity initiatives. However, differences in terms of
business culture, politics and legal systems were identified as further challenges in corporate venturing
initiatives among GLCs. The findings from this study provide further support for new business creation
activities, as noted and discussed by Sathe (2003).

Overall, these findings imply that GLCs seem to believe CE activities will lead them to achieve better if
not superior financial performance, a proposition which many scholars have prophesied over the years
(Antoncic & Hisrich, 2004a; Barringer & Bluedorn, 1999; Covin & Miles, 1999; Covin & Slevin, 1991a;
Covin & Slevin, 1991b; Ferreira, 2001; Wiklund, 1999; Zahra, 1986, 1991).

Accordingly, factors such as competition and market pressure, technological changes and increased in
operational costs have become the major motivating factors for GLCs to pursue CE activities. Similarly,
Hill & Collins (2000) also found that factors such as cost reduction, market changes, keen competition,
and new technology were identified as motivations for organisations to implement business process
reengineering (BPR) when they studied the roles of total quality management (TQM) and BPR in
organisational change strategies in Northern Ireland. Therefore, the findings in this study indicated that, in
pursuit of CE initiatives/activities which in turn will lead to superior financial performance, the
significance of EO has been clearly demonstrated.

Beyond this, the role of CE internal and external factors as well as several issues/problems raised by the
corporate leaders/managers in this study suggest that they should be addressed as they may block or stifle

26
CE initiatives/activities in any established organisations (Hornsby et al., 2002; Huat, 2004; Kuratko,
Montagno & Hornsby, 1990).

Subsequently, to determine the extent to which EO will affect CE performance, interaction variables were
introduced but the effects of interaction variables on the EO-CE performance relationship as predicted
appeared to be unsatisfactory, suggesting that the role of interaction effects in GLCs’ business
environment has been very minimal. However, the results show that EO constructs remain as strong,
positive and statistically significant contributors of CE performance (H4, H5a, H5b, H5d, H6a, partly
H6b, H7, H8a, H8b, partly H8c, H8d, H9a and H9b). In fact, the results reveal that internal CE factors
conceptualised from the confirmatory factor analysis which includes top support, work discretion, reward
and organisational boundary, have emerged as good and direct predictors of CE performance. The same
results were also achieved for the external CE factors: government policy, environmental hostility and
technological sophistication respectively. Therefore, the use of CFA prior to moderated regression
analysis appeared to provide stronger empirical evidence regarding the effects of EO on the CE
performance relationship.

7 Conclusion

This study sets out to investigate and examine the extent to which EO contributes to entrepreneurial/CE
performance in GLCs and the effects of CE internal and external factors on this relationship.

Hypothesis 1 posits that EO will be positively associated with innovation performance in GLCs. The
findings indicate that EO constructs were strongly, positively and significantly related to innovation
activities/initiatives in GLCs. The findings also reveal that the combined effect of proactiveness and
innovativeness of EO emerged as a better predictor of innovation activity than risk-taking.

Hypothesis 2 hypothesises that EO will be positively associated with strategic renewal performance in
GLCs. The findings indicate that EO constructs were strongly, positively and significantly related to
mission reformulation, reorganisation, and system-wide changes activities/initiatives in GLCs but only
partly for divestment. The results also show that the combined effect of proactiveness and innovativeness
of EO emerged as a better predictor of strategic renewal activities/initiatives than risk-taking.

Hypothesis 3 posits that EO will be positively associated with corporate venturing performance in GLCs.
The findings indicate that EO constructs were strongly, positively and significantly related to corporate
venturing activities/initiatives in GLCs. However, in pursuit of new business creation or (CV-M1), risk-
taking accounted for higher variability but not for merger and acquisition or (CV-M2) activities/initiatives
in GLCs.

Hypothesis 4 states that the internal CE factors will moderate the relationship between EO and innovation
performance in GLCs. The findings indicate that none of the interaction variables were significant.
Hence, the overall interaction effects did not moderate the relationship; instead EO constructs and top
support were positively and significantly related to innovation activities/initiatives in GLCs.

Hypothesis 5 posits that the internal CE factors will moderate the relationship between EO and strategic
renewal performance in GLCs. Apart from M2 x OB or EO (M2) x OB, the rest of the interaction
variables were not significant. Hence, the overall interaction effects did not moderate the relationships
between EO and other renewal activities, namely mission reformulation (H5a), divestment (H5c) and
system-wide changes (H5d) except for reorganisation (H5b). Instead, the findings reveal that EO
constructs emerged as positive and significant predictors of mission reformulation, reorganisation and
system-wide changes activities in GLCs. The results also show the importance of top support in

27
reorganisation, divestment and system-wide changes activities across GLCs, while reward only appeared
to be another important predictor in the system-wide change initiatives.

Hypothesis 6 hypothesises that the internal CE factors will moderate the relationship between EO and
corporate venturing (CV) performance in GLCs. The findings reveal that the interaction effects did not
moderate the relationship between EO and corporate venturing-M1 or new business creation (H6a) and
corporate venturing-M2 or merger & acquisition (H6b) activities respectively. On the other hand, EO
constructs, top support and organisational boundary become direct predictors of new business creation,
while only the combination effect of proactiveness and innovativeness or EO (M1) and work discretion
were associated positively and significantly with CV-M2 activities/initiatives in GLCs.

Hypothesis 7 posits that the external CE factors will moderate the relationship between EO and
innovation performance in GLCs. The findings indicate that the overall interaction effects did not
moderate the relationship. The findings instead suggest that EO constructs and environmental hostility
were significantly associated with innovation activities but in opposite directions.

Hypothesis 8 states that the external CE factors will moderate the relationship between EO and strategic
renewal performance in GLCs. The overall results show that the interaction effects did moderate the
relationships between EO and mission reformulation (H8a) and divestment (H8c) but not for
reorganisation (H8b) and system- wide change (H8d) activities/initiatives. Moderation effects for mission
reformulation (H8a) emerged significantly from M1 x EH or EO (M1) x EH (see Table 57), while M1 x
TSop or EO (M1) x TSop, M2 x EH or EO (M2) x EH and M2 x TSop or EO (M2) x TSop were found
significant for divestment activities (H8c) respectively (see Table 63). Although M1 x GP or EO (M1) x
GP and M1 x EH or EO (M1) x EH were significant (H8b), the overall interaction effects were not
significant (see Table 60). On the other hand, EO constructs directly and strongly affected reformulation,
reorganisation, system-wide changes and partly divestment. Accordingly, government policy was
positively and significantly related to reformulation, while technological sophistication was positively and
significantly related to both reorganisation and system-wide changes respectively. But environmental
hostility was negatively and significantly related to reorganisation and system-wide change initiatives.

Hypothesis 9 posits that the external CE factors will moderate the relationship between EO and corporate
venturing performance in GLCs. The results show that only M2 x TSop or EO (M2) x TSop was
negatively significant. Hence, the overall interaction effects did appear to moderate the relationships
between EO and CV-M2 or merger & acquisition activities/initiatives in GLCs (H9b) but found no
moderation/interaction between EO and CV-M1 or new business creation activities (H9a) even though
M1 x TSop or EO (M1) x TSop and M2 x TSop or EO (M2) x TSop were significant. However, apart
from environmental hostility, EO constructs and technological sophistication directly, positively and
significantly affected CV activities/initiatives in GLCs.

In support of the quantitative findings, the results of the qualitative study also help to shed additional light
on overall corporate entrepreneurial behaviour, activities, strategies and processes in GLCs. As far as CE
activities/initiatives are concerned, major and strategic issues in GLCs appeared to be decided and driven
from the top while welcoming ideas from below even though a channel for communicating ideas was yet
to be properly established.

From the findings, innovation initiatives were pursued incrementally and this mostly concentrated on
process innovation involving cost-cutting measures for the purposes of improving operational efficiencies
and not so much in terms of coming up with new products/services that can totally disrupt the entire
operation. However, in pursuit of organisational innovation, several organisational issues/challenges were
identified to affect such initiatives either by promoting or impeding it. These include support from top
management, funding, skills, reward, culture, communication, attitude and resistance to change.

28
In terms of strategic renewal, renewal initiatives were pursued via reorganisation of business entities such
as consolidation or merger between units/companies and selling off of non-performing assets;
reformulation of business concept such as rebranding, changing of corporate image, new value-added
services as well as slashing unprofitable initiatives; and finally putting more emphasis on revenue
generation and cost control initiatives. However, strategic renewal initiatives were constrained by staff
resistance to change, complacency, different culture and operating system in the merged entity as well as
several human resource related issues.

In search of higher performance, corporate venturing or new business creation initiatives in GLCs were
established by entering new markets. Strategically, these initiatives were achieved via merger &
acquisition, strategic alliance/joint-venture and establishment of new entity. However, differences in
terms of culture, politics and legal systems continue to appear as continuous struggles among GLCs.

8 Contribution of the Research

Theoretical & Managerial Implications

A large number of previous studies on EO/CE have predominantly been based on private entities in
Western economies, but this study was based on large, established government-linked companies in
Malaysia. Within the stream of EO/CE literature, scholars argued that entrepreneurial orientation and
corporate entrepreneurship are positively associated with company’s financial performance (Antoncic &
Hisrich, 2004a; Covin & Slevin, 1989; Covin et al., 2001; Lumpkin & Dess, 1996a; Wiklund, 1999;
Zahra, 1991, 1993). From the findings, EO constructs were strongly, positively and significantly
associated with CE performance, the non-financial performance of a firm. The current research adds and
expands the strategic aspects of EO, suggesting that EO constructs not only have a significant effect on
the financial performance of a firm, but also on its non-financial performance i.e. CE activities. Notably,
in Malaysia, the findings also suggest that EO did not emerge as three constructs, as claimed by several
scholars (see Covin & Slevin, 1989; Covin & Slevin, 1991a; Knight, 1997) but two. Further more, EO
constructs have different impacts on CE performance and this view is consistent with that of Lumpkin &
Dess (1996a), Kreiser et al. (2002) and others (Brockhaus, 1980; Schollhammer, 1982), thus
strengthening the belief that organisations may exert different degrees of proactiveness, innovativeness
and risk-taking under different environments.

Nonetheless, others argue that CE activities in large, established organisations will be affected by the
internal and external organisational factors (CE factors) (Antoncic & Hisrich, 2004a; Covin & Slevin,
1989; Covin & Slevin, 1991a; Covin et al., 2001; Hornsby et al., 2002; Sathe, 1989; Sathe, 2003). In the
current research, the moderating effects of the internal and external CE factors on the EO-CE
performance relationship in GLCs were mostly insignificant, while those that were found to be significant
seemed to be modest. At the same time, these factors appeared to be reliable and significant direct
predictors of CE activities, thus further contributing to our understanding on the role of internal and
external CE factors in the study of CE within large and established organisations.

Building on the resource-based view, both the quantitative and qualitative findings have demonstrated the
importance of internal and external organisational resources in creating and driving corporate
entrepreneurship activities/initiatives in GLCs. Even though the greatest potential returns of CE are yet to
be seen or established, the results from the quantitative research indicate that top support, reward, work
discretion, and organisational boundary emerge as important and significant internal CE factors within
government business enterprises in Malaysia. In particular, the findings indicate further theoretical
support for the work of Honsby et al. (2002).

29
In terms of external CE factors, a new construct for government policy appeared to be a significant
predictor of mission reformulation initiative/activity in GLCs, while technological sophistication and
environmental hostility remain as reliable direct predictors in EO/CE studies. Therefore, using
government policy as an additional construct in this thesis has expanded the existing domain of EO/CE
studies beyond the normal privately-owned business entities, while the significant presence of
technological sophistication and environmental hostility continue to reaffirm the previous empirical
works of EO/CE using these variables (see Covin & Slevin, 1989; Covin et al., 2001; Zahra, 1993).

The results of the qualitative research also reveal how various organisational or entrepreneurial resources
were used over the years in GLCs. Barney argued that resources include physical capital, human capital
and organisational capital (Barney, 1991). Building on this perspective, entrepreneurial resources in
GLCs were demonstrated by way of: having appropriate support from top management, tying key
performance indicators with reward, creating an entrepreneurial culture, implementing a flexible
organisational boundary/structure, introducing new systems or processes, coming up with a new
image/logo as part of their rebranding exercise, encouraging open communication, making financial
resources available to finance new ideas, acquiring technological resources, continuous R&D,
strengthening cognitive resources, pursuing merger & acquisition, forming strategic alliances, and
maintaining close links with the policy maker. On this basis, the usefulness and appropriateness of RBV
was clearly demonstrated in this study, thus investigating EO/CE activity/initiative in public business
enterprises has provided additional empirical evidence.

While aiming for high performance through effective and efficient management of entrepreneurial
resources, as GLCs, their behaviour and action tend to be shaped by social norms, expectations, and their
own perception. In fact, Meyer & Rowan (1977) argued that when this occurred organisations tend to use
strategies, structures and practices that are socially expected of them (as cited in Johnson & Greenwood,
2007). In the context of GLCs, meeting social and economic expectations of the nation have become an
important agenda for the Government, and GLCs continue to be entrusted with this responsibility.
Following the introduction of the GLCs Transformation Programme, GLCs appeared to have been
directly and indirectly forced to implement strategies, structures and practices in line with this progamme.
Hence, in pursuit of corporate entrepreneurship, government expectations and policies may imply that
GLCs may not have the freedom to fully act entrepreneurially and go beyond the prescribed strategies,
structures and practices as they wish even though the main objective of the programme is to revive and
reinvigorate the whole operation of GLCs in the country.

Therefore, it is clear that the Government wants GLCs to do well but on the other hand, GLCs must
behave within certain expectations of their shareholders and this in turn may inhibit their full
entrepreneurial potential. The findings of this study can help to justify the consequences of this
expectation.

From the interview, most GLCs were pursuing incremental innovation (i.e. mostly continuous
improvement), reorganisation, reformulation and, cost reduction, while some had started with corporate
venturing initiatives over the years. But in terms of organisational innovation initiatives, GLCs tended to
pursue incremental over radical innovation. This is because managers argued that such initiatives are still
new and therefore they felt much safer exploring it gradually via continuous improvement. However, as
cited in Hill & Collins (2000), scholars argue that continuous improvement is not enough to enhance an
organisation’s ability to support its own strategy in dynamic and hostile business environments (Hamel &
Prahalad, 1994; Hammer, 1990; King, 1994). In fact, in another study on the state-owned companies,
Entebang et al. (2006) found that changes of product/service lines were mostly of a minor nature and they
acknowledged a strong proclivity for low risk projects, while major investments were made after they had
received approval from their shareholders (the state governments). Therefore, in pursuit of high
performance through CE activities, at the same time they have to behave within certain prescriptions,

30
making the full entrepreneurial potential of the GLC difficult to achieve. In short, using institutional
theory to view the EO-CE relationship has advanced our understanding of the extent to which the
expectations from the Government as shareholder in particular have affected/influenced the EO-CE
performance relationship in GLCs’ business environment in Malaysia.

In terms of managerial implications, several key implications can be inferred from this study. Firstly, the
findings reveal that EO affects CE performance and the effects are of different magnitudes. From the
findings, management may learn that the ability to exert proactiveness, innovativeness and risk-taking
behaviour would determine the extent to which their organisations will pursue CE initiatives/activities.
More importantly, different CE initiatives/activities require different degrees of EO.

Secondly, management may observe that the top support dimension of the internal organisational factor
was strongly and significantly associated with CE activities. As others have argued, having a high level of
support for entrepreneurship activities is key to building competitive advantage (Maidique, 1988; Twiss,
1986). Top management should realise that not giving enough and appropriate support to entrepreneurial
activities may in turn jeopardise their outcomes/performance. In fact, Spender & Kessler (1995)
advocated that this is important because the support from the top may increase a project’s visibility and
legitimacy, and signals the importance of the ventures.

Drawing from the findings, management should also recognise the importance of work discretion, reward
and organisational boundary as organisational factors in fostering CE activities in GLCs. In particular, the
ability of top management to tolerate failure/unsuccessful projects, promote empowerment, highlight and
reward significant achievements, and develop a formal way for knowledge sharing and distribution of
ideas/proposals are also important. In pursuit of CE activities, the results of the interviews, for instance,
suggest that management should develop a proper strategy to deal with staff attitudes whenever new
changes need to be made. More importantly, organisations should consider developing a practical method
for assessing their innovation capability, allocate ready funding for testing new ideas, and recognise that
CE activities take time before they can improve the firm’s performance. In fact, the same was noted by
Biggadike (1979) and Miller & Camp (1985).

Accordingly, as suggested by a senior manager of a GLC, organisations should also provide appropriate
trainings and skills related to staff responsibility on a continuous basis. This is in line with the view that
in order to implement successful CE activities, senior executives and staff experts should have
appropriate entrepreneurial skills, because without this CE activities may be damaged (Chakravarthy &
Lorange, 2008). In fact, Chakravarthy & Lorange argued that a dedicated and special kind of manager is
needed to execute renewal activities. At the same time, the business model or strategic planning of the
organisation should reflect CE activities/initiatives if management is serious about achieving high
organisation performance.

In pursuing corporate entrepreneurship initiatives/activities, senior executives should also recognise the
importance of the external organisational forces. As GLCs where the government has a direct controlling
interest in the organisations suggesting that changes in government policy may directly or indirectly
influence their business perceptions, strategies, structures and practices. Consequently, this may shape
their entrepreneurial strategic choices.

Within the Malaysian market, most GLCs are market leaders in their respective products or services.
However, the continuous pressures brought by various political, economic and social factors within the
domestic and Asian regions will soon cause the business environment to be more hostile, thus making
business conditions more difficult. To be more competitive, the management of GLCs should continue to
improve and increase their organisational technological sophistication ability through various R&D
activities or open innovation strategies as advocated by Chesbrough (see Chesbrough, 2003b). In fact, a

31
study on small and medium-sized enterprises (SMEs) in Ghana reveals that firms which did not invest in
R&D were found to be more likely to encounter business barriers (Robson & Obeng, 2008). Hence, R&D
is important regardless of the size of an organisation.

Finally, as far as CE activities are concerned, particularly innovation, managers should recognise that
incremental innovation initiatives which involve mostly process improvement is more of a short term
measure for improving organisational performance, but such initiatives will not withstand any major
market disruptions brought by competition and changes in technology as well as liberalisation of trade
policies. Given the significance of GLCs to the future prosperity of the nation, perhaps GLCs should
focus more on creating/developing substantial and radical types of innovation initiatives such as new
value-added services, strategy innovation, new distribution methods, new business models, new market
channels, branding and building new markets for their products/services (see Tucker, 2008), and these can
be achieved by way of implementing an open innovation policy to harness “external ideas while
leveraging their in-house R&D outside their current operations” (Chesbrough, 2003b, p.35). In fact,
Tucker argues that these are proven initiatives that fuel high growth among top innovators in the world
(Tucker, 2008). According to Tucker, his investigations into high performing organisations like
Whirlpool, Progressive Insurance, Citigroup, EDS, BMW, Procter & Gamble and many others, revealed
that for these organisations to achieve high growth, CE activities, such as innovation for instance, were:
(1) directed from the top and involve the total organisation, (2) approached as a disciplined process, (3)
approached comprehensively, (4) included as an organised, systematic, and continual search for new
opportunities, and (5) customer-centred. At the same time, due to the rapidly changing competitive
environment (Harrison & Leitch, 2005) caused by increased globalisation (Kumar & Usunier, 2001) and
changes in the technological, social, political, and economic situation (Nonaka, Tayama & Konno, 2000;
Starkey, 1996; Stata, 1996), as new adapters to CE initiatives, GLCs should provide a conducive
environment for organisational/entrepreneurial learning to occur not only because of the value of learning
and knowledge but, most importantly, these concepts can provide managers with competitive advantage
(Harrison & Leitch, 2005) in public enterprises.

In addition, given the existing CE factors and the development of innovation, strategic renewal and
venturing activities/initiaties in GLCs, the proposal to use the Balanced Scorecard methodology to
integrate environmental and social issues with the general management system of the organisation, by
Figge et al. (2001, 2002), should be considered by GLCs because this concept helps to overcome the
shortcomings of available conventional approaches. In fact, they argue that by integrating the
environmental, social and economic performance into the general business management system of the
firm would benefit the organisation because sustainability management that is economically sound will
not be endangered by economic crises. Moreover, organisations that promote or reinforce their
environmental and social management usually align themselves with the competition. Finally, an
integration of environmental and social aspects into general business management ensures that corporate
sustainability management incorporates economic, ecological and social aspects of the firm which are
necessary for sustainable corporate development (Figge et al., 2001, 2002).

9 Revised Framework/Model

Based on the findings in this thesis, the proposed final integrated model of CE is depicted in Figure 2. The
model takes into account the direct effect of EO as well as the direct and indirect influence of the internal
and external CE factors on CE activities in government-linked companies in Malaysia.

Figure 2 Revised Integrated Framework of CE for GLCs

32
 
Internal CE Factors


Top support


Work discretion


Reward


Organisational boundary/structure


Culture, Funding


Strategic planning


Communication
Skill/Competency
Corporate
Entrepreneurship

 Innovation
Entrepreneurial Performance

 Proactiveness &  Strategic renewal

Orientation

 Corporate venturing
 Risk-taking
Innovativeness

 Government policy
External CE Factors

 Technological sophistication
 Environmental hostility

Indicates direct effect

Indicates moderation effect

10 Limitations of the Study

Based on the outcomes of the study, several limitations were noted. Firstly, the results and the findings of
the present study were drawn from nineteen out of fifty public listed GLCs in Malaysia. Therefore, the
inability to include all the companies suggests that the outcomes did not reflect the entire GLCs’ EO-CE
performance relationship in Malaysia and this may limit the generalisability of the thesis.

Secondly, due to the time limitation, only a cross-sectional study was employed. This approach has
limited the author’s abilities to examine the full effect of the EO-CE performance relationship. This
implies that the thesis may not fully benefit from the real impacts of EO on CE performance as most of
the CE activities in GLCs were relatively new.

The study suggests that EO constructs affect CE performance. However, as argued by Zahra (1993), one
must be careful in interpreting the outcomes/findings because they do not suggest a cause-effect
relationship as the reverse relationship is also plausible. The same consideration should be given when
interpreting the outcomes in this study. More over, the overall correlations between EO-CE performances
were mostly moderate.

On top of the interaction variables/interaction terms, several moderator variables were introduced into the
regression to gauge the potential effects of the internal and external CE factors on the EO-CE
performance relationship, but this study did not use control variables such as organisational size and age

33
to assess the confounding effects of these variables on the EO-CE performance relationship. Moreover,
Covin et al., (2006) also did not find any significant effect by using these variables as control variables
when they investigated the EO-sale growth rate relationship. In fact, due to rapid changes in the external
environments, organisation size and/or age no longer matters (Morris et al., 2008).

In addition, the presence of non-interaction effects in most of the hypotheses (H4-H9) may be criticised
by suggesting that this approach may not be suitable to assess the EO-CE performance relationship in
public enterprises.

Although the overall fit of the measurement models was adequate, the short coming of the thesis was
found in the RMSEA of some models when the models were tested using confirmatory factor analysis
(see Appendix A). For example, most of the models recorded above .9 or close to 1 for GFI, AGFI, CFI,
TLI, RFI and IFI respectively and should be below .05 for RMSEA, while >.10 indicates a poor fit
(Loehlin, 2004). But RMSEA for work discretion was .059, .073 for reward, .120 for organisational
boundary, .052 for EO, .160 for government policy, .067 for environmental hostility, .228 for
technological sophistication, .206 for innovation, .064 for strategic renewal and .064 for corporate
venturing respectively. This suggests that the models may not fit the data very well. However, given the
exploratory nature of the thesis, the use of exploratory factor analysis maybe sufficient to establish the
reliability and validity of the constructs. However, the inability of the constructs to record below .05 for
RMSEA as desired must not allow the significant contribution of other measurements of goodness of fit
in this study to be totally discounted.

The extent to which EO affects CE performance in GLCs was assessed using three dimensions of EO (i.e.
innovativeness, proactiveness and risk-taking) even though innovativeness and proactiveness emerged as
one dimension in this study. Hence, the competitive aggressiveness and autonomy dimensions of EO
proposed by Lumpkin & Dess (1996a) were excluded from the study.

Although the study recognises the positive effect of EO on CE performance, it did not assess the
effectiveness of various innovation, strategic renewal and corporate venturing initiatives/activities
implemented by GLCs over the years.

11 Future Research

From the outcomes of this study, new empirical evidence was established that EO affects CE performance
particularly in public business enterprises. This implies that EO not only contributes to companies’
financial performance but also to CE activities i.e. non-financial performance of a firm. However, given
the financial performance of a firm as the bottom line of corporate performance measurement, future
study in Malaysia may examine: (1) the effects of EO on the financial performance of GLCs, (2) the
effects of CE initiatives on the financial performance of GLCs, and (3) the effects of the EO-CE-financial
performance relationship in GLCs (three-way interaction).

Given the outcomes of the initial pilot study, data were collected from managers who deal with CE
activities/initiatives in the head office only. Future studies should try to include respondents/managers
from state and divisional offices. This is because, although strategic CE activities/initiatives appeared to
be decided by the head office, this does not mean that CE activities/initiatives could not emerge from
other divisions of the organisation. More importantly, the implementation of CE activities/initiatives may
involve managers throughout the organisation. Therefore, by taking such an approach, the findings of
future studies will be more representative of CE performance in GLCs.

34
Due to the limited sample, the generalisability of the findings could not be fully established. Future
research should encourage more GLCs, including state-owned companies, to participate so that a stronger
empirical evidence of EO/CE practices in GLCs can be developed in Malaysia. This is important because
research suggests that EO is related to CE activities, while past studies found that EO and CE are
associated with companies’ superior financial performance. By this, companies in Malaysia can benefit
from such empirical evidence.

The outcomes of this thesis were based on the cross-sectional study. However, as noted from the
interview, most of the CE activities/initiatives were relatively new to GLCs. In fact, as cited in Zahra
(1993), scholars noted that CE activities need time before the organisation’s performance can be
improved (Biggadike, 1979; Miller & Camp, 1985). As a result, this research has not fully benefited from
the actual impact of EO on CE performance. To address this, future research may benefit by employing a
longitudinal method of data enquiry as this will allow a longer period of data collection which is suitable
for studying the full effect of EO on CE performance.

Based on the outcomes of the interaction variables, most of them were not significant. Instead, EO, the
internal and external CE factors emerged as direct and significant predictors of CE performance. In fact,
when Dess et al. (1997) studied the nature of entrepreneurial strategy and its relationship with strategy,
environment and firm performance, they also found that so many of their two-way effects were not
significant. Accordingly, Covin et al. (2006) noted that the interaction terms have mostly negative beta
indicating that EO has a more positive effect on itself on sales growth rate. These outcomes may suggest
that in examining the effect of EO on the CE performance relationship, one may want to explore the
organisational and environmental factors (moderators) on CE performance directly and this was strongly
recommended by Rauch et al. (2009).

As far as the psychometric properties of the scales are concerned, previous studies claimed that the
reliability and validity of EO were well tested and established even across several countries (Knight,
1997; Kreiser et al., 2002). The same reliability and validity were also found in Malaysia. However, the
findings of the study show that EO emerged as two main constructs instead of three. On the other hand,
Hornsby et al. (2002) claimed that the Corporate Entrepreneurship Assessment Instrument (CEAI) used to
assess the entrepreneurial performance of a firm is also highly reliable and valid (see also Morris et al.,
2008). However, in this study, the organisational boundary and time availability (which was dropped after
the exploratory factor analysis) did not fit the data very well. The same applies to environmental hostility
and technological sophistication (Covin, Prescott & Slevin, 1990; Covin & Slevin, 1989; Covin et al.,
2001), innovation, strategic renewal and corporate venturing (Maes, 2006; Zahra, 1993). This is because
the RMSEA for these constructs were found to exceed .05, suggesting that the models may not fit the data
very well (Hu & Bentler, 1999). In fact, most of the conclusions of the above constructs in the past were
based on the value of their Cronbach’s alpha. Future researchers may want to carry out a further
psychometric properties test on these scales to reconfirm the evidence established in this thesis by
employing the same confirmatory factor analysis technique using AMOS.

Although the RMSEA for government policy was above the .05 cut off, this construct appeared to be
reliable under exploratory factor analyis. Future research may want to use the same construct developed
in this thesis to test the effect of government policy on CE activities in a non-GLC business setting.

At the same time, the study shows that CE activitities do affect firm performance. Hence, future research
should try to explore the effectiveness of various CE initiatives/activities implemented by GLCs over the
years and assess how these initiatives/activities will contribute to organisations’ financial and non-
financial performance.

35
This study also highlights several key challenges relating to innovation, strategic renewal and corporate
venturing activities in GLCs. Therefore, future research should try to investigate these challenges in more
detail.

Given the unprecedented dynamism and hostility of the global environment, future research should
consider the competitive aggressiveness and autonomy dimensions of EO to assess/measure the extent to
which EO may affect CE performance of firms (see Lumpkin, Cogliser & Schneider, 2009; Lumpkin &
Dess, 1997).

Future studies should also use the revised framework/model to assess the effect of EO and other
organisational factors on CE performance not only within large public and listed business enterprises but
also to established private and listed companies in Malaysia.

Although the methods of data enquiry have contributed several limitations to the study, these limitations
were discussed adequately in this thesis. On the other hand, the limitations should serve as the basis for
future studies on EO-CE performance relationship. In fact, as cited in Harrison & Leith (2005), given the
evolution of entrepreneurship as a field of study, “the conscious and critical transfer and application of
theories and methodologies from one research area to another may stimulate creative advances in both,
and may provide the basis for the resolution of old problems in new ways” (Harrison & Leitch, 1994,
p.112) should be highly observed in examining the EO-CE performance relationship in the future. More
importantly, given the “age of instant information, ever-increasing development and application of
technology, experimental change, revolutionary processes, and global competition” (Kuratko, 2009, p.
427) as well as unsustainable economic/financial models and continuous liberalisation of government
policies, the need to innovate and, pursue renewal and corporate venturing is the key entrepreneurial
imperative of the 21st century, and this entrepreneurial imperative of firms was clearly established through
the contributions of EO on CE performance in government-linked companies in Malaysia.

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