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 The antecedence of modern entrepreneurshipentrepreneurship

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 Highlighted Antecedence of Modern Entrepreneurship 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 ViewsDrucker 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

EntrepreneursEntrepreneurs

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

EntrepreneursEntrepreneurs

Owner-managers in small firms

Managers in large firms

Entrepreneurs

Defined by their actionsNot the size of organisation they work in

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Schools of thoughtSchools 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

Schools of thoughtSchools 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 Corporate What Is Corporate Entrepreneurship?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…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

Corporate VenturingCorporate 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

What is intrapreneurshipWhat 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 thoughtSchools of thought

Bring the market inside Concerned 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 thoughtSchools of thought

Entrepreneurial transformationConcerned with:• The need form 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

Traditional ManagementTraditional 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 ManagementEntrepreneurial 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 andCorporate entrepreneurship: identifying andpursuing discontinuous opportunities...pursuing discontinuous opportunities...

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Entrepreneurial architectureEntrepreneurial 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 ManagementEntrepreneurial Management

Entrepreneurial Management

Knowledge management

Learning organisation

Innovation and creativity

Entrepreneurship

Marketing

Strategy

Leadership

Culture

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

Wrap upWrap 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.