Creating and Re-Creating Corporate Entrepreneurial Culture

Alzira Salama

• Publisher: Routledge
• Year: 2016
• Topic: Business
• eBook ISBN:
  9781317158615
• Subtopic: Business General
• Index: Business

Entrepreneurship is often considered only in the context of new venture creation, small business issues, and the profiles and personalities of individual entrepreneurs. The emphasis in Creating and Re-Creating Corporate Entrepreneurial Culture is very much on the 'corporate', it focuses on the creation and maintenance of an entrepreneurial management culture that accelerates growth and enhances effectiveness and competitiveness in large organizations. Alzira Salama explains what constitutes entrepreneurial behaviour, how it is facilitated by organizational culture and why entrepreneurial corporate culture is fundamental to business success. She takes you through ways of identifying prevailing cultures and explains how cultures are reinforced or changed. Drawing on exemplary case studies from around the world, she tells the stories both of successful and unsuccessful interventions made in response to the need to move on from bureaucratic or authoritarian cultures. These include specific instances where the context has been privatization, merger and acquisition, transition in the wider economy, or a combination of any of these circumstances. This enlightening book will help managers and consultants, business educators, higher level students and those on executive programmes to understand the nature of an organization's culture, why it is as it is, whether it needs to change, and how it might be changed. Alzira Salama offers real world examples of how to create or re-create an entrepreneurial culture together with tools that will enable corporations to achieve it.

PART I
Entrepreneurial Behaviour: An Overview

1
Unleashing Entrepreneurial Behaviour

Entrepreneurship is the response to the disequilibrium between the perceivable opportunities and their exploitation at any point of time.

Tripathi 1971

Introduction

Corporate entrepreneurial culture is created when employees at all levels of the organization unlock their potential for innovation and proactive thinking. The process of unleashing entrepreneurial behaviour is the leader’s primary task. Entrepreneurship can be seen as a particular style of leadership process. For instance, a leader can adopt a bureaucratic, authoritarian or entrepreneurial style in their approach to managing people within an organization. The aim of this chapter is to explain how top leaders can develop activities which will trigger innovative and entrepreneurial behaviour, that is, how they can develop an entrepreneurial style of leadership.

Stevenson and Gumpert (1985) hold that entrepreneurial management, defined as a set of opportunity-based management practices, can help firms remain vital and contribute to firm and societal-level value creation. Entrepreneurial initiatives are fundamental to the economic growth of a society (Tripathi 1971). As stated by Drucker (1985), ‘the essence of economic activity is the commitment of present resources to future expectations and that means accepting uncertainty and risk’. For Drucker, entrepreneurial activity is a learned behaviour rather than a personality trait. The concept of entrepreneurial behaviour is linked to the acquisition of attitudes and mind sets by management and employees that would create a sustainable competitive advantage. This session focuses on the process of unleashing management and employees’ entrepreneurial behaviour that is necessary for the survival and growth of organizations.

Entrepreneurs are agents of change and growth in a market economy and they can act to accelerate the generation, dissemination and application of innovative ideas. They can act by creating a new venture either for themselves or within an existing firm. Entrepreneurs not only seek out and identify potentially profitable economic opportunities but they are also willing to take calculated risks.

Entrepreneurial events, such as the formation and development of business to pursue an opportunity, have attracted special interest from both scholars and practitioners. The entrepreneurial process – all the functions associated with the abilities to perceive potential opportunities and the creation and the implementation of strategies to pursue them – has generated considerable interest among professionals. Entrepreneurship is central to the functioning of market economies. Hence, promoting entrepreneurship is viewed as part of a formula that will reconcile economic success with social cohesion. Therefore, increasing management attention should be directed towards a greater understanding of the factors that increase the supply of entrepreneurs in an economy.

Traditionally, the entrepreneur has been defined as one who starts their own small business. However, as explained by Drucker (1985), ‘indeed, not every small business is entrepreneurial; in fact just a minority are.’

There is a clear distinction between small business and entrepreneurship. Not all ventures are entrepreneurial. The two critical factors that identify entrepreneurs from non-entrepreneurial managers and small business owners are ‘innovation’ and ‘the growth process’.

There is no agreed definition of entrepreneurship. It is, however, widely recognized that entrepreneurship involves the creation of new business, but if this new business is created within a large organization, the process is called ‘intrapreneurship’. The invention of the iPod by working teams at Apple is an example.

Acquiring Entrepreneurial Skills

Entrepreneurship can be analysed under two different perspectives (Low and MacMillan 1988): the context and the process.

THE CONTEXT

This approach explores how environmental forces can affect entrepreneurial behaviour in individuals, for instance, the influence of national values and industry values.

Environmental characteristics, such as a country’s value systems, can trigger entrepreneurial behaviour. For example, if you were born in Russia, traditionally you would not be encouraged to develop entrepreneurial behaviour. These cultural influences are not linked to innate traits or learning skills but acquired behaviour. Entrepreneurial patterns vary among developed and developing countries and societies in transition. Regulatory and cultural differences between countries may mean that the pursuit of new opportunities for enterprise takes forms other than the founding of a new firm. See, for example, how some European countries and Japan differ in their approach to entrepreneurship.

The characteristics of some industries emphasize creativity and engagement in innovation, that is, advertising and fashion. Other types of industries traditionally require some elements of bureaucratic behaviour in their prevailing culture, such as banking.

THE PROCESS

This approach explores how an individual or group develops new ideas and looks at the steps they follow to achieve innovation. This process can potentially be taught to others – as learning skills – and can be unrelated to the industry or the values of a particular country.

The focus on process is less deterministic and more developmental. The emphasis on process means that it is imperative to investigate the knowledge acquisition required to grow and innovate, that is, the process of the creation of a new idea, product or service. The focus on the ‘discovery’ and ‘exploitation’ of opportunity is a key aspect of the entrepreneurship process and it represents the first step in this whole process of creation.

A focus on process implies:

1. The creation of structures within the firm that will reinforce innovation, that is, team activities.

2. Management training and a reward system that focus on developing and also reinforcing aspects of an entrepreneurial type of behaviour, such as creativity, flexibility, risk taking and problem-solving.

3. Leadership skills that would encourage entrepreneurship to flourish within any type of enterprise or national culture.

Therefore, focus on process is a more dynamic and proactive approach than the previous focus on context only.

Although it is important to analyse the causes of entrepreneurial behaviour – context or process – it is ultimately the outcome of the exploitation of entrepreneurial opportunities that determines the contribution of entrepreneurship to economic growth development.

Entrepreneurial Characteristics: Does the Individual Matter?

Management and consultants have traditionally tried to define the field in terms of the entrepreneur’s psychological traits, such as innate personality traits. In addition, an emphasis on the success or failure of individual entrepreneurs and firms has also been the focus of attention. This approach seems deterministic: it is focused on the entrepreneur’s profile and what exactly successful entrepreneurs have or haven’t achieved. It does not offer too much space for a transformation process – it is a matter of ‘being’, not ‘becoming’.

This book, by contrast, offers a dynamic and transformational perspective on the process of creating and recreating entrepreneurial culture and behaviour within large firms. It assumes that the entrepreneurship process is a learned behaviour.

In order to understand the entrepreneurship process, the following questions need to be answered:

• Why, when and how do opportunities for the creation of new goods and services in the future arise in an organization?

• Why, when and how are some able to discover and exploit these opportunities while others cannot or do not?

• Finally, what are the economic, psychological and social consequences of this pursuit of a future market not only for the pursuer, but also for other stakeholders and for society as a whole?

Shane and Venkataraman (2000) claim that a distinctive way to perceive this field is necessary. As they explain:

Entrepreneurship seeks to understand how opportunities to bring into existence ‘future’ goods and services are discovered, created, and exploited, by whom, and with what consequences.

In summary, one of the most neglected questions in the entrepreneurship field is where opportunities to create future goods and services come from. It is one thing for opportunities to exist, but an entirely different matter for them to be discovered and exploited. At the core of these premises is the belief that people are different and that these differences matter. Some authors believe that there is a genetic component – up to 40 per cent – explaining this entrepreneurial behaviour. Others believe that entrepreneurial behaviour is triggered as a consequence of information received and accumulated and also by specific education. Others believe in a combination of these factors. The possession of useful knowledge varies among individuals. This variable strongly influences the search for and the decision to exploit an opportunity, and also its relative success (Shane and Venkataraman 2000).

The characteristics of a typical entrepreneur or ‘intrapreneur’ vary considerably from those of most people who choose to remain employed by a firm or the government. Independence is the most prominent characteristic of an entrepreneur. Entrepreneurs generally place a higher value on career independence than non-entrepreneurs. Similarly, responsibility and leadership rank very highly with entrepreneurs compared with the general population. Their working values differ: potential entrepreneurs place a higher value on being responsible for their own future, on having a position of responsibility, working in a less hierarchical organization and having more independence than scientific workers with no entrepreneurial interest. By contrast, potential entrepreneurs place less importance on a secure income and pension than do those with no entrepreneurial potential. Entrepreneurial success can be influenced by ethnic background, educational background, and whether the entrepreneur already has had entrepreneurial experience.

As already previously discussed, entrepreneurs/intrapreneurs are agents of change and growth in a market economy. They are also willing to take risks, as their ideas could succeed or fail. Successful entrepreneurs/intrapreneurs are those who try new ideas, implement them and eventually fail, fall and get up again and again and again. Persistence and optimism are two characteristics of successful entrepreneurs/intrapreneurs. The process of entrepreneurship is mainly about recognizing and taking advantage of new profit opportunities – a proactive attitude – instead of focusing on simply maintaining competitive advantage on an existing market position – a reactive attitude.

It is interesting to observe the two quotes below which at first sight seem to have opposite meanings. However, after looking at them carefully they seem to be the same.

Anyone can become an entrepreneur. (Kirzner 1973)

Entrepreneurs have different skills from other people. (Weber, Schumpeter and Knight 2002)

These two statements are not divergent. They both imply that entrepreneurship can be developed in individuals, as skill development. This approach is opposite to the ‘traits theory’ which holds that only certain special groups of individuals are, in fact, able to develop entrepreneurial activities. This book embraces the latter perspective, that is, that there is a need for managers and consultants to further understand the process involved in entrepreneurship (both within the existing corporation and as new ventures) in order to develop models or theories to bridge the gap between normal people and those entrepreneurs, hence, contributing to the creation of more entrepreneurs within the society, a development approach.

An entrepreneur is an innovator who brings change through the introduction of a new technological process or product. An entrepreneur is, therefore, regarded as a creator and a catalyst for change. They are associated with a dream, a vision and an impulse to fight. They exalt the joy of creating and getting things done, which may lead to creative destruction of existing combinations of courses due to new products and processes (Schumpeter 1934).

Summary

It is a common belief that in most societies the majority of markets are inefficient most of the time. Therefore, providing opportunities for enterprising individuals to enhance economic growth by exploiting these inefficiencies is important.

Traditionally, entrepreneurship has primarily been concerned with the start-up of new firms. Recently, however, entrepreneurship has to an increased extent become accepted as a firm-level phenomenon. This is based on the understanding that entrepreneurship is relevant to managers irrespective of the size or age of their organizations. The firm’s degree of entrepreneurship could be seen as the extent to which they take risks, innovate and act proactively. The specific manifestations of opportunity-seeking may vary from one firm to another in industries of a different maturity, technology and market structure. At present, entrepreneurship is encouraged throughout the economy and many managers are looking for ways to make their organizations more entrepreneurial. However, this is not a straightforward process and it requires a change of the old corporate culture into a new corporate culture. This process of organizational culture transformation required for organization survival and growth is explained in detail in the following chapters and illustrated in the stories analysed in Parts II and III of this book.

References

Drucker, P.F. (1985). Innovation and Entrepreneurship: Practices and Principles. New York: Harper and Row.

Kirzner, J.M. (1973). Competition and Entrepreneurship. University of Chicago. USA.

Low, M. and MacMillan, I. (1988). Entrepreneu...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• About the Author
• Preface
• Introduction: Corporate Entrepreneurial Culture – Continuous Innovation in the Existing Organization
• Part I Entrepreneurial Behaviour: An Overview
• Part II Biography of Organizations and Culture Transformation
• Part III From Bureaucracy and Inertia to Entrepreneurship: Preparing Firms for Organic Growth
• Part IV Creating Entrepreneurial Synergies Through Cross-Border Acquisitions
• Bibliography
• Index