Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

CHAPTER 1

The Entrepreneurial

Revolution

PART 1

THE ENTREPRENEURIAL

DNA

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

The antecedence of modern

entrepreneurship

1755 Cantillon

1803, 1815 Jean Baptist Say

1871, 1981 Carl Menger

1983 Ely and Hess

1911/1934, 1928 Schumpeter

1921 Knight

1948, 1952, 1967 Hayek

1975, 1984, 1985 Shapero

1974 Drucker

1973, 1979, 1997, 1999 Kirzner

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Highlighted Antecedence of Modern

Entrepreneurship Date Author Concept

1755 Cantillon Introduced the concept of entrepreneur from

‘entreprendre’ (ability to take change).

1803, 1815 Jean-Baptiste

Sya

Emphasized the ability of the entrepreneur to

‘marshal’ resources in order or respond to unfulfilled

opportunities.

1911/1934,

1928

Schumpeter Envisioned that entrepreneurs proactively ‘created’

opportunity using ‘innovative combination’ which often

included ‘creative destruction’ of passive or lethargic

economic markets.

1974 Drucker Attributed to entrepreneurs a sense to ‘foresee’

market trends and make a timely response.

1973, 1979,

1997, 1999

Kirzner Attributed to entrepreneurs a sense of ‘alertness’ to

identify opportunities an exploit them accordingly.

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Drucker Views

Business has only two basic functions:

marketing and innovation. Marketing and

innovation produce results. All the rest

are costs. (Peter F. Drucker 1997)

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Entrepreneurs

Entrepreneurs use innovation to exploit or

create change and opportunity for the

purpose of making profit.

They do this by shifting economic resources

from an area of lower to an area of higher

productivity, accepting a high degree of risk

and uncertainty in doing so

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Entrepreneurs

Owner-managers

in small firms

Managers in large

firms

Entrepreneurs

Defined by their actions

Not the size of organisation they work in

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

What Is Corporate

Entrepreneurship?

• Independent entrepreneurship is the process

whereby an individual or group of in individuals

acting independently, create a new organization.

• Corporate entrepreneurship is the process

whereby an individual or a group of individuals,

in association with an existing organization,

create a new organization or instigate renewal or

innovation within that organization.

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Continue…

• Corporate entrepreneurship or Corporate

venturing exists within the Research and

Development (R&D) department within an

organization to support and create value for

the other functional departments in the

corporation.

• Provide outstanding value for consumers

which need to be communicated through the

marketing and other functional departments

as the entire corporate process is essential

to creating superior value for customers or

end-users.

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Schools of thought

Corporate venturingConcerned with:

• The need for larger firms to manage new, entrepreneurial businesses separately from their mainstream activity

• Investment by larger firms in strategically important smaller firms

• Organisation structures needed to encourage new businesses

• Management of disruptive technologies

Galbraith (1982), Burgelman (1983), Drucker (1985), Christensen (1997)

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Corporate Venturing

• Refers to corporate entrepreneurial efforts that

lead to the creation of new business

organizations within the corporate

organization.

• They may follow from or lead to innovations

that exploit new markets, or new product

offerings, or both.

• These venturing efforts may or may not lead to

the formation of new organizational units that

are distinct from existing organizational units

in a structural sense (e. g., a new division).

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Schools of thought

IntrapreneurshipConcerned with:

• How individuals may be encouraged to act more entrepreneurially in a large organisation

• Systems, structures and cultures that inhibit entrepreneurship

• The character and personality of the individual behaving in this way

Kanter (1982), Pinchot (1985)

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

What is intrapreneurship

• Pinchot (1985):

„Intrapreneuring ... as entrepreneurship

inside of the corporation.“

• Knight (1987):

An intrapreneur is a employee who:

introduces and manages an innovative

project within the corporate environment

as if he or she were an independent

entrepreneur.

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Schools of thought

Bring the market insideConcerned with:

• Structural changes needed to encourage entrepreneurial behaviour

• Market approach to resource allocation and people management

• Spin offs and venture capital operations

Hamel (1999), Foster & Kaplan (2001)

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Schools of thought

Entrepreneurial transformationConcerned with:

• The need for large firms to adapt to an ever-changing environment

• Changes in systems, structure and culture that encourage entrepreneurship

• Leadership and strategies that encourage entrepreneurship

Peters & Waterman (1982), Ghoshal & Bartlett (1997), Kanter (1989), Tushman &

O’Reilly (1996), Burns (2005)

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Objective of CE

To gain competitive advantage by

encouraging innovation at all levels in the

organization-corporate, division, business

unit, functional or project team levels.

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Traditional Management

Control

Uniformity

Effectiveness

Efficiency

Conformity

Contracts

Functional

management

Training

Long-term

planning

See change

as a threat

Create

certainty

Discourage

failure

Avoid risk

Compartmentalised

knowledge Discipline

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Entrepreneurial Management

Innovation

Opportunity

seeking

Relationships

Drive

Question status quo

Not controlling

Co-operation

Rapid transfer

of knowledge

Strategising

at all levels

Embrace change

Tolerate

uncertainty

Vision

Take risk

Allow failureLearning

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Corporate entrepreneurship: identifying and

pursuing discontinuous opportunities...

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Entrepreneurial architecture

Entrepreneurial management is about creating

and managing an entrepreneurial architecture –

the network of relational contracts within and

around an organization - with customers,

suppliers and staff.

It is based on trust and underpinned by mutual

self-interest.

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Entrepreneurial Management

Entrepreneurial

ManagementKnowledge

management

Learning

organisation

Innovation

and creativity

Entrepreneurship

Marketing

Strategy

Leadership

Culture

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Wrap up

• Corporate entrepreneurship can be defined

as the process whereby an individual or

group of individuals, in association with an

existing organization, create a new

organization or instigate renewal or

innovation within that organization.

• Other reasons to develop corporate

entrepreneurship are among others retaining

and motivating the brightest staff.