Sustaining corporate entrepreneurship M odelling perceived im plem entation and outcom e com parisons at organizational and individual levels Donald F. Kuratko, Jeffrey S. Hornsby and Michael G. Goldsby Abstract: This paper seeks to develop an exploratory model illustrating the critical elements needed for a sustained corporate entrepreneurship. Specifically, the model integrates and extends previous models that have examined the organizational or individual components of entrepreneurial activity. The proposed model provides additional theoretical foundation emphasizing the importance of perceived implementation/output relationships at both the individual and organizational level. The perceived satisfaction of these relationships provides the basis for whether or not a corporate entrepreneurial activity will be sustained. Keywords: corporate entrepreneurship; entrepreneurial behaviour; entrepreneurial strategy; entrepreneurship The authors are with the Entrepreneurship Program, College of Business, Ball State University, Muncie, IN 47306, USA. Tel: +1 765 285 9002. Fax: +1 765 285 9003. E-mail: [email protected].

As the corporate landscape becomes more complex, competitive and global, established organizations have increasingly embraced corporate entrepreneurship for the purposes of profitability (Zahra, 1991), strategic renewal (Guth and Ginsberg, 1990), fostering innovativeness (Baden-Fuller, 1995), gaining knowledge for future revenue streams (McGrath, Venkataraman and MacMillan, 1994), and international success (Birkinshaw, 1997). However, the concept of corporate entrepreneurship (also discussed in the literature as corporate venturing, or intrapreneurship) has been evolving for at least 30 years (Peterson and Berger, 1971; Hill and Hlavacek, 1972; Hanan, 1976; Quinn, 1979). Sathe (1989), for example, defined it as a process of organizational renewal. Other researchers have conceptualized corporate entrepreneurship as embody-

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ing entrepreneurial efforts that require organizational sanctions and resource commitments for the purpose of carrying out innovative activities in the form of product, process and organizational innovations (Schollhammer, 1982; Burgelman, 1984; Kanter, 1985; Alterowitz, 1988; Jennings and Young, 1990). This view is also consistent with Damanpour (1991) who pointed out that corporate innovation was a very broad concept encompassing, . . . the generation, development and implementation of new ideas or behaviors. An innovation can be a new product or service, an administrative system, or a new plan or program pertaining to organizational members (p 556).

In this context, corporate entrepreneurship centres on reenergizing and enhancing the ability of a firm to acquire innovative skills and capabilities.

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Zahra (1991) observed that, corporate entrepreneurship may be formal or informal activities aimed at creating new businesses in established companies through product and process innovations and market developments. These activities may take place at the corporate, division (business), functional, or project levels, with the unifying objective of improving a company’s competitive position and financial performance.

Guth and Ginsberg (1990) stressed that corporate entrepreneurship encompasses two major types of phenomena: new venture creation within existing organizations and the transformation of organizations through strategic renewal. While there have been a number of studies focusing on various factors contributing to or enhancing the establishment of corporate entrepreneurship, this paper develops an exploratory model for the reinforcement of corporate entrepreneurial activity within the firm. Therefore, this paper follows the second component of Guth and Ginsberg’s (1990) definition of corporate entrepreneurship, which acknowledges the transformation of organizations through strategic renewal and recognizes the challenge of fostering entrepreneurial behaviours within an existing firm. As Miller and Camp (1985) warn, managers who attempt to practise ‘business as usual’ when they move from positions with mature businesses may well misapply management practices that have worked before but will not work now. Zahra and O’Neil (1998) also point out that when the factors in the external environment and the internal organization interact, managers are challenged to respond creatively and act in innovative ways. Thus, established organizations seeking to ‘refocus’ or ‘transform’ themselves through entrepreneurial behaviours and actions are finding the challenges daunting but the outcomes productive. Barringer and Bluedorn (1999) suggested that increasingly, ‘. . . entrepreneurial attitudes and behaviors are necessary for firms of all sizes to prosper and flourish in competitive environments’. In this paper, we propose a model that illustrates how firms can sustain these entrepreneurial activities. While many researchers have continued to tout the importance of corporate entrepreneurship as a growth strategy for established organizations and an effective means for achieving competitive advantage (Pinchott, 1985; Zahra, 1991; Kuratko, 1993; Merrifield, 1993; Lumpkin and Dess, 1996; Thornhill and Amit, 2001; Kuratko, Ireland and Hornsby, 2001), there has been a greater effort by researchers to conduct empirical studies that examine the elements of corporate entrepreneurial activities (Zahra and Covin, 1995 and Lumpkin and Dess, 2001). Findings suggest that internal

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organizational factors in particular play a major role in encouraging entrepreneurial activities, and determine the pay-off from these efforts (Covin and Slevin, 1991; Hornsby, Kuratko and Zahra, 2002). For example, some researchers have emphasized the vital role of middle managers in developing innovative and entrepreneurial behaviours within an organization (Kanter, 1985; Floyd and Woolridge, 1990, 1992, 1994; Ginsberg and Hay, 1994; Pearce, Kramer, and Robbins, 1997; Hornsby, Kuratko and Zahra, 2002). Not only can middle managers develop entrepreneurial behaviours resulting in entrepreneurial activities, but they can also influence their subordinates’ commitment to these activities once they are initiated. The study of middle managers is consistent with the growing recognition of the key role internal organizational factors play in promoting or stifling entrepreneurial behaviour (Burgelman, 1983; Pinchott, 1985; Floyd and Woolridge, 1992; Ginsberg and Hay, 1994; Day, 1994; Nonaka and Takeuchi, 1995; Pearce, Kramer, and Robbins, 1997). Despite the growing recognition of the role of middle managers in developing entrepreneurial behaviours, more needs to be known about the specific factors that can influence all organizational members to achieve this objective. Moreover, the perception of different aspects of the firm’s corporate organization, as well as the formal strategy that the organization develops, is important to the facilitation of corporate entrepreneurship. Therefore, this paper seeks to examine some of the critical organizational factors that must exist and be perceived within the firm in order to develop and sustain entrepreneurial activities. More specifically, this paper integrates and extends previous models by Hornsby, Naffziger, Kuratko and Montagno (1993), Naffziger, Hornsby and Kuratko (1994), Antoncic and Hisrich (2001) and Hornsby, Kuratko and Zahra (2002), which provide organizational and individual factors necessary for influencing the implementation of corporate entrepreneurial activity. The model proposed here provides additional theoretical foundations on the importance of perceived implementation/output relationships at the organizational and individual levels for sustaining corporate entrepreneurship. As seen in Figure 1, an organization’s sustained effort in corporate entrepreneurship is contingent upon individual members continuing to undertake innovative activities and upon positive perceptions of the activity by the organization’s executive management, which will in turn support the further allocation of necessary organizational antecedents. The first part of the model is based on theoretical foundations from previous strategy and entrepreneurship research. The empirical research on organizational factors is also discussed thoroughly in the paper. The

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Sustaining corporate entrepreneurship

Figure 1. A model for sustained corporate entrepreneurial strategy.

second part of the model then considers the comparisons made at the individual and organizational level on organizational outcomes, both perceived and real, which influence the continuation of the entrepreneurial activity. In addition, the second part of the model’s theoretical underpinnings are based on Porter and Lawler’s (1968) Integrative Model of Motivation, which incorporates important elements of Adams’s (1965) Equity Theory of Motivation and Vroom’s (1964) Expectancy Theory of Motivation. Propositions for the newly developed links are also presented. Each stage of the model is discussed, beginning with the transformational triggers that cause the pursuit of entrepreneurial activities in the first place.

Transformational triggers Environments often surprise organizations. Although abrupt changes in environments are commonly thought to jeopardize organizations, environmental jolts are found to be ambiguous events that offer propitious opportunities for organizational learning, administrative drama and introducing unrelated changes. The term ‘jolts’ is used to distinguish external events from their disparate interpretations within organizations as opportunities, threats, crises or catastrophes (Meyer, 1982). Tushman and Romanelli (1985) argued that the ‘reorientation’ of companies (reorientations involve metamorphic changes in internal and external relations as structures, systems, processes and commitments are transformed and rebuilt) is triggered by the emergence

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of a dominant design, substitute products and/or technologies, or by major legal/social events. Meyer (1982) developed a model of antecedents, dynamics and consequences of organizational adaptations to environmental jolts. The model incorporates the stimulus-response paradigm and the variation– selection–retention mechanism (Weick, 1976) in proposing that when jolts emanate from environments, organizations select and interpret stimuli according to theories of action (Argyris, 1976) encoded in prevailing strategies and ideologies (Miles and Snow, 1978). Kelly and Amburgey (1991) studied organizational inertia and momentum and pointed out the need for extrapolating past trends in the face of organizational change. What could be seen as discontinuous change may actually be momentum. Miller and Friesen (1980a) have shown that momentum is a pervasive force in organizations; that past practices, trends and strategies tend to keep evolving in the same direction, perhaps eventually reaching dysfunctional extremes. Firms with a propensity to innovate become still more innovative, sometimes passing the point of dramatically diminished returns. Conservative firms, however, may sometimes drift towards complete stagnation. Organizational adaptation is characterized by periods of dramatic revolution in which there are reversals in the direction of change across a significantly large number of variables of strategy and structure (Miller and Friesen, 1980a). Tushman, Newman, and Romanelli (1986) argued that most reorientations were triggered by

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performance crises that pushed organizations to replace managers who could not or would not adapt. However, they found that the most successful reorientations occurred in organizations whose managers foresaw the need for radical change and initiated it before crises occurred. Decision makers, therefore, are the architects of their environments and adapt to these interpretations. Managers must minimize misfits between their strategy– structure matches as they prepare their organizations to deal with organizational changes (Jennings and Seaman, 1994). The transformational trigger provides the impetus to behave entrepreneurially when other conditions are conducive to such behaviour. Zahra (1991) identified a number of influencing factors in corporate entrepreneurship that could be viewed as types of precipitating or transformational triggers. These include environmental factors such as hostility (threats to a firm’s mission through rivalry), dynamism (instability of a firm’s market because of changes) and heterogeneity (developments in the market that create new demands for a firm’s products). Some specific examples of transformational events in the corporate entrepreneurship process could include: a change in company management; a merger or acquisition; a competitor’s move to increase market share; the development of new technologies; change in consumer demand; and economic changes. Schindehutte, Morris, and Kuratko (2000) identified a comprehensive list of 40 triggering events that were classified into five distinct categories: internal/external source; opportunity-driven/threat-driven; technologypush/market-pull; top-down/bottom-up; and systematic or deliberate search/chance or opportunism. Kuratko, Ireland and Hornsby (2001) found that external circumstances caused one particular organization to institute a more entrepreneurial strategy that helped the company to regain its position as a market leader. Therefore, as seen in the model, a transformational trigger (or precipitating event) will cause executive management to pursue a corporate entrepreneurial strategy to cope with the change.

Corporate entrepreneurial strategy In the broadest sense, all activities undertaken in an organization under any type of change or transformation can be considered to be part of the organization’s strategy. The formulation and implementation of a strategy aimed at achieving the firm’s goals are the responsibilities of the organization’s executive management, as is the evaluation of the firm’s progress towards its strategic objectives. Research has shown that a number of strategic options are available to the organization, including diversification (Palepu, 1985;

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Davis and Duhaime, 1992; Markides, 1995; Hitt, Hoskisson and Kim, 1997), acquisition (Hitt, Hoskisson and Ireland, 1990; Hitt, Hoskisson, and Ireland, 1994), rightsizing (Hitt, Keats, Harback, and Nixon, 1994), turnaround (Robbins and Pearce, 1991), and innovation (Dougherty and Hardy, 1996; Lawless and Anderson, 1996; Klein and Sorra, 1996). Transformational models focus on metamorphic changes in organizations, which evolve through a series of fundamentally different periods or stages. While much of this transformational literature has postulated a predictable set of developmental stages (eg Greiner, 1972), others have argued for non-deterministic patterns in the transformation of organizations (Filley and Aldag, 1980; Mintzberg and Waters, 1982). Tushman and Romanelli (1985) proposed a model with an underlying premise that organizations can and do undergo radical transformations of strategic orientations and supporting values, power systems, formal structure and controls. Miller and Friesen (1982) developed a corporate entrepreneurial model that applies to firms that innovate boldly and regularly while taking considerable risks in their product market strategies. The corporate entrepreneurial strategy might be followed, for example, by Mintzberg’s (1973) entrepreneurial firms, Miles and Snow’s (1978) prospectors, and Miller and Friesen’s (1980b) adaptive, innovative and impulsive firms. According to the corporate entrepreneurial model, being innovative is seen as good in itself, as a vital and central part of strategy. The corporate entrepreneurial model postulates that firms will engage in innovation unless there are certain key obstacles acting to stop it. Tushman, Newman and Romanelli (1986) discussed the challenges of managing the unsteady pace of organizational evolution. A snug fit of external opportunity, company strategy and internal structure is a hallmark of successful companies. The real test, however, is in maintaining this alignment in the face of changing competitive conditions, which they believed could bring renewed vigour to an enterprise. Their discussion identified forces leading to ‘frame-breaking change’ (defined as revolutionary changes of the system as opposed to incremental change in the system). Organizations facing a rapidly changing, faster-paced competitive environment need to initiate more entrepreneurial activity (Lumpkin and Dess, 1996). This activity engages in product/market innovation, undertaking somewhat risky ventures, and seeking a proactive approach towards innovation to excel over competitors. Lumpkin and Dess (2001) emphasized the importance of proactiveness (seizing initiative in the market) and competitiveness (reaction to competitive trends in the market). Thus, entrepreneurial activity will determine the future direction of the organization.

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However, Dess, Lumpkin, and Covin (1997) warn of the uncertainty as to whether entrepreneurial activity exists independent of other organizational factors, and suggest that this strategic process is difficult to disentangle within the organizational context. Therefore, the best strategy for entrepreneurial activity will be influenced by many factors, among them the abilities of the organization to understand the interactive influence of the organizational antecedents.

Organizational antecedents The importance of antecedents and outcomes during corporate refocusing has been established (Johnson, 1996). In addition, there has been some recent research into the organizational antecedents that can promote or impede corporate entrepreneurial activities (Zahra, 1991; Zahra and Covin, 1995; Antoncic and Hisrich, 2001). Specific attention has been given to internal organizational factors such as: the company’s incentive and control systems (Sathe, 1985); culture (Kanter, 1985; Hisrich and Peters, 1986; Brazeal, 1993); organizational structure (Covin and Slevin, 1991; Naman and Slevin, 1993); managerial support (Stevenson and Jarillo, 1990; and Kuratko et al, 1993); internal fit (Thornhill and Amit, 2001); and communication and organizational values (Antoncic and Hisrich, 2001). Individually, and in combination, these variables are believed to be important antecedents of corporate entrepreneurial efforts, because they affect the internal environment that determines interest in and support of entrepreneurial initiatives within a company. McNamara and Bromiley (1997) established that organizational factors overwhelmingly influenced risky decision making. One of the more influential studies on the firm’s internal organization in the context of corporate entrepreneurship emerged from Miller (1983), who correlated several macro-level variables such as company type, environment, structure and decision making with the intensity of entrepreneurial activity. Quinn (1985) identified several factors for large corporations seeking to develop the right ‘atmosphere’ for such activities and structuring the organization for innovation by counteracting bureaucratic barriers to innovation. Sathe (1985) also recognized the dilemma of a large institution attempting to nurture an atmosphere conducive to entrepreneurial behaviour. Souder (1981) found that six specific management practices were associated positively with performance in 100 new ventures in 17 organizations. Fry (1987) and Kanter (1985) identified a set of factors that were associated with successful corporate entrepreneurship. Schuler (1986) outlined the essential structural practices that

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corporations need in order to facilitate corporate entrepreneurial activities. To identify the different factors involved in establishing corporate entrepreneurial activity, Burgelman (1983) noted that innovation was the result of induced strategic behaviour, which was the outcome of the company’s official strategic behaviour, which might reinforce, challenge, influence or expand the company’s formal corporate strategy. Burgelman suggested that as long as middle managers and employees saw opportunities that exceeded the ‘opportunity set’ proffered by the company’s top management, autonomous strategic behaviour (resulting in entrepreneurial outcomes) would occur. A key contribution of Burgelman’s work is its recognition of the impact of the firm’s culture, organizational structure and strategy in promoting and focusing on autonomous behaviour. Later research by Floyd and Woolridge (1992, 1994) and Hornsby, Kuratko and Zahra (2002), among others, also recognized the importance of middle managers in enhancing and cultivating such autonomous behaviour and thereby fostering entrepreneurial activities. To summarize, as research on corporate entrepreneurial behaviour continues to evolve, numerous researchers (eg Kanter, 1985; Vesper, 1984; Guth and Ginsberg, 1990; Covin and Slevin, 1991; Zahra, 1991; Brazeal, 1993; Hornsby, Naffziger, Kuratko, and Montagno, 1993; Hornsby, Kuratko and Montagno, 1999; Thornhill and Amit, 2001; Antoncic and Hisrich, 2001; and Hornsby, Kuratko and Zahra, 2002) have recognized the importance of internal organizational factors in promoting and supporting corporate entrepreneurship. While the previously cited literature demonstrates a wide variety of factors that influence corporate entrepreneurship, most contributions emphasize five dimensions of the firm’s internal (organizational) factors, which are summarized in Table 1. Kuratko, Montagno, and Hornsby (1990) established top management support, autonomy/work discretion, rewards/reinforcement, resources/time availability and organizational boundaries as the underlying environmental factors required for individuals to behave entrepreneurially. Their results were reinforced by the findings of a study of 119 CEOs of US-based corporations (Zahra, 1991). This study examined these antecedents as well as the association between internal entrepreneurship and the financial performance of the firm. Hornsby, Kuratko and Montagno (1999) supported the existence of these factors in a cross-cultural study of Canadian firms. Hornsby, Kuratko and Zahra (2002) established sound psychometric properties measuring the factors. For this reason, as demonstrated in our model, when

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Sustaining corporate entrepreneurship Table 1. Internal organizational factors. Factor

Research citations

Rewards/reinforcement

Scanlan, 1981; Souder, 1981; Kanter, 1985; Sathe, 1985; Block and Ornati, 1987; Fry, 1987; Sykes, 1992; Barringer and Milkovich, 1998; Covin and Miles, 1999; and Kuratko, Ireland and Hornsby, 2001.

Top management support

Souder, 1981; Quinn, 1985; Hisrich and Peters, 1986; MacMillan, Block and Narasimha, 1986; Sykes, 1986; Sathe, 1989; Sykes and Block, 1989; Stevenson and Jarillo, 1990; Damanpour, 1991, Kuratko et al, 1993; Pearce, Kramer and Robbins, 1997; Lyon, Lumpkin and Dess, 2000; Antoncic and Hisrich, 2001; Kuratko et al, 2001; and Morris and Kuratko, 2002.

Resources/time availability

Von Hippel, 1977; Souder, 1981; Kanter, 1985; Sathe, 1985; Burgelman and Sayles, 1986; Hisrich and Peters, 1986; Sykes, 1986; Katz and Gartner, 1988; Sykes and Block, 1989; Damanpour, 1991; Stopford and Baden-Fuller, 1994; Das and Teng, 1997; and Slevin and Covin, 1997.

Organizational boundaries

Souder, 1981; Burgelman, 1983; Sathe, 1985; Burgelman and Sayles, 1986; Hisrich and Peters, 1986; Schuler, 1986; Sykes, 1986; Bird, 1988; Sykes and Block,1989; Guth and Ginsberg, 1990; Covin and Slevin, 1991; Damanpour, 1991; Zahra, 1991, 1993, 1995; Brazeal, 1993; Hornsby et al, 1993; Hornsby et al, 1999; Antoncic and Hisrich, 2001; and Hornsby et al, 2002.

Work discretion (autonomy)

Burgelman, 1983, 1984; Kanter, 1985; Quinn, 1985; Sathe, 1985; MacMillan, Block and Narasimha, 1986; Sykes, 1986; Bird, 1988; Ellis and Taylor, 1988; Sathe, 1989; Sykes and Block, 1989; Stopford and Baden-Fuller, 1994; Hornsby et al, 1999; Zahra, Kuratko and Jennings, 1999; Morris and Kuratko, 2002; and Hornsby et al, 2002.

an organization initiates a corporate entrepreneurial strategy, organizational antecedents including top management support, use of rewards, flexible organizational boundaries, resource availability and work discretion/autonomy must be present to influence an individual’s decision to behave entrepreneurially. Therefore, the greater the degree to which the individual perceives the existence of rewards, management support, flexible organizational boundaries, resources and autonomy, the higher the probability of the individual’s decision to behave entrepreneurially.

Individual entrepreneurial behaviour Researchers who have investigated the role of individual characteristics in the entrepreneurship domain have focused either on the differences between entrepreneurs and successful business managers, or on differences between entrepreneurs and the general population (Brockhaus and Horwitz, 1986; Gartner, 1988; Busenitz and Barney, 1997; Chen, Greene, and Crick, 1998; Stewart, Watson, Carland, and Carland, 1999). Shaver and Scott (1991) concluded that there were a few psychological characteristics that distinguished entrepreneurs, such as locus of control, risk-taking propensity and achievement motivation. Earlier findings have included variables such as energy level, conformity and a need for autonomy (Sexton and Bowman-Upton, 1986); a need for achievement, a need for autonomy,

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dominance, high energy level, persistence (Neider, 1987); and a desire for personal control (Greenberger and Sexton, 1988). More recently, findings include a proactive personality (Crant, 1996); and self-efficacy (Chen, Greene, and Crick, 1998). Busenitz and Barney (1997) explored the differences between entrepreneurs and managers in large organizations with regard to their decision-making processes. They contended that entrepreneurs would apply biases and heuristics – specifically overconfidence and representativeness. Stopford and Baden-Fuller (1994) examined five ‘bundles’ of attributes believed to be associated with different types of internal entrepreneurship in 10 firms in four European industries. These bundles, or common attributes, included proactiveness, aspirations beyond capability, team orientation, capability to resolve dilemmas, and learning capability. In that same vein, Pearce, Kramer and Robbins (1997) conducted an empirical study of 833 immediate subordinates of 102 individual managers and found that as the entrepreneurial behaviour of managers increased, subordinates’ satisfaction with supervision increased. In addition, these individual behaviours helped subordinates accept internal entrepreneurship even when it was running counter to the organization’s pre-existing culture. The research of Chen, Greene, and Crick (1998) on self-efficacy extends this concept by acknowledging that an environment that is perceived to be more supportive will increase entrepreneurial self-efficacy

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because individuals assess their entrepreneurial capacities with reference to perceived resources, opportunities and obstacles existing in the environment. Forlani and Mullins (2001) examined entrepreneurs’ risk-taking propensity and perceptions of risk. They found that differences in entrepreneurs’ new venture choices were influenced not only by differences in the risks inherent in the patterns of anticipated outcomes for different ventures, but also by differences in the entrepreneurs’ perceptions of these risks. This leads to the importance of anticipated and perceived outcomes.

Outcomes If the corporate entrepreneurial strategy of organizational members is successful, then the outcomes or rewards should be received by both the organization and the individual(s). Individual outcomes or rewards will reinforce the individual’s decision to act entrepreneurially, while organizational outcomes will reinforce the organization’s strategy for entrepreneurial activity. The following is a description of possible individual and organizational outcomes that could follow corporate entrepreneurial activity. Individual Outcomes will either be intrinsic or extrinsic (psychological or tangible) in nature. Extrinsic outcomes will include financial or other tangible rewards made possible by the financial performance of the firm. Intrinsic rewards, often cited by managers, centre around the satisfaction of developing one’s own idea, being more in control of one’s own destiny, and having ultimate responsibility for the success of the project idea. While very little entrepreneurship research has addressed specific incentive/renewal programmes, Block and MacMillan (1993) cite four possible types of incentives for internal entrepreneurial activity. These incentives include: (1) equity and equity equivalents; (2) bonuses; (3) salary increases and promotions; and (4) recognition systems and rewards. Block and Ornati (1987) studied the use of incentives for internal entrepreneurs, and found that more than 30% of firms compensated venture managers differently from other managers; over half of all respondents believed that variable bonuses based on return on investment (ROI) should be used; and internal equity was the major obstacle cited by organizations with no incentive programme. Firms with an incentive programme cited the difficulty of determining venture goals as the most significant obstacle. All outcomes will have some level of perceived value to the manager, and each manager will have his or her own system of valuing outcomes.

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Organizational Performance outcomes may influence changes by providing feedback that indicates whether or not the current activity is effective or efficient (Lumpkin and Dess, 2001). Alternatively, they may provide feedback regarding the firm’s willingness or capacity to change to a new strategy (Ginsberg, 1988). Success of an internal entrepreneurial activity can be based on either financial outcomes such as increased sales, productivity, market share, reduced waste and labour efficiencies, or on behavioural criteria such as number of ideas suggested, number of ideas implemented, amount of time spent working on new ideas, and amount of time spent outside of normal channels to pursue an idea (Hornsby, Kuratko and Montagno, 1999). The more traditional financial criteria can be heavily influenced by factors unrelated to the corporate entrepreneurial process. External factors such as the economy, technology, suppliers, competitors and governmental regulation may confound the relationship between the entrepreneurial activity and outcomes. The behavioural criteria, however, can provide a less confounded assessment of the success of the entrepreneurial activity since they are more directly tied to organizational control. Both organizational and individual outcomes play a key role in sustaining corporate entrepreneurship. In an equity theory framework, these outcomes will reinforce or sustain future entrepreneurial activity only if the rewards are valued by those who receive them, and are perceived to be linked directly to the individual’s decision to behave entrepreneurially. Also, the outcomes received by the organization and individual must be perceived to exceed the possible outcomes received from a different choice of strategy or activity.

Perceived entrepreneurial strategy– outcome relationship We hypothesize that perceptual interpretations of the overall outcomes made by the organization’s executive management play a key role in the entrepreneurial strategy process, as illustrated in the implementation-tooutcome relationship in the Porter and Lawler (1968) model. One important perceived relationship is the strength of the relationship between the entrepreneurial activity and firm outcomes. Executive management must believe that strategic and managerial actions will lead to specific outcomes achieved by the firm, such as increased individual entrepreneurial behaviours, increased sales, profit, and/or market share. The proposed sustained corporate entrepreneurial strategy model hypothesizes that the more positive this relationship is perceived to be, the stronger will be the resulting motivation to continue this strategy to encourage

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entrepreneurial behaviours and activity, either in the form of continued pursuit of the current projects or initiation of future projects. Recent findings by Baum, Locke and Smith (2001) that draw from entrepreneurship models confirm that the motivations of top executive management are critical for the success of a strategy for entrepreneurial activity. In a study of 307 architectural woodworking companies, they found that the CEO’s motivations were a direct predictor of venture growth. More specifically, they state that top executives pursuing venture growth must be committed to a vision of growth, have confidence that their firm has the ability to attain the growth, and provide challenging goals to allow those inside the firm to be a part of the growth. Consequently, the perceptions and commitment of top executive management will have great influence on the pursuit of entrepreneurial activities. It would make sense, then, that if top management perceived the entrepreneurial activity to be successful in attaining targeted firm outcomes, they would also continue to support similar activities in the future. Therefore, it is also hypothesized that perceptions of top executive management will have a feedback effect on succeeding activities, strategy implementation, and management of the firm. This hypothesis is consistent with Ginsberg’s (1988) framework for modelling changes in strategy. According to Ginsberg, performance outcomes influence changes by providing feedback indicating whether the chosen strategy is effective, and assess the organization’s willingness to retain the strategy or change to a new strategy. For this reason, our model proposes: Proposition 1: The more positive the perceptual interpretations made by the organization’s executive management concerning the overall outcomes of the corporate entrepreneurial strategy, the stronger the motivation of management and subordinates to continue to pursue entrepreneurial activities.

Perceived decision–outcome relationship Baum, Locke and Smith (2001) also believe that their most important finding is that a thorough understanding of venture growth requires the employment of a multilevel perspective. The ongoing success of any strategy seeking entrepreneurial activity would require the commitment of others inside the organization besides the top executive management. The top executive management can introduce and support an entrepreneurial activity, but its success will ultimately depend on others implementing it. As Drucker (1985) notes, entrepreneurship is behaviour, not personality

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traits, and consequently can be learned under the appropriate circumstances. If someone perceives entrepreneurial activities to be rewarding, they will probably continue undertaking such activities in the future. Conversely, if they perceive them as troublesome or unrewarding, they will probably avoid undertaking future entrepreneurial activities and maintain static work conditions. Therefore, the final aspect of the model is identified as the individual’s perception that the outcomes of entrepreneurial behaviour will meet or exceed expectations. According to Porter and Lawler (1968), the relationship between individual effort and performance is moderated by individual skills, abilities and role perceptions, and the relationship between performance and outcomes affects whether or not the individual is likely to repeat the behaviour. Also, the individual’s satisfaction with the outcome is dependent on a perception of equity between his or her performance– outcome relationship and a reference person’s (eg a co-worker or employee in another organization performing similar work) performance–outcome relationship. It is proposed that the individual enters the process with expectations of extrinsic and intrinsic outcomes that will result from the inception of the entrepreneurial behaviour. The specific expectations may vary for each individual. These expectations may also evolve over time as new opportunities present themselves or as the reality of operation emerges. For corporate entrepreneurship, the corresponding outcome expectations are (1) independence, autonomy and control; (2) financial considerations; and (3) significant sales and profit growth, respectively. Naffziger et al (1994) argued that individuals demonstrated sustained entrepreneurial behaviour if the achievements of the entrepreneurial venture met or exceeded the expectations or goals that were initially believed. Kuratko et al (1997) found that the importance of initial goals was vital to the sustained entrepreneurial activity of business owners. Huseman, Hatfield and Miles (1987) identified three response patterns to perceived equity or inequity. The first response type is a benevolent response, in which the individual is only satisfied when he or she is underrewarded and feels guilty when equitably rewarded or overrewarded. The second response type is the equity-sensitive response, in which the individual perceives that everyone should be rewarded fairly based on the inputs (eg effort, skills, abilities, etc) invested. The third response type is the entitlement response, in which the individual believes that everything he or she receives is due to him or her. Individuals are only satisfied when they perceive that they are overrewarded or receive the highest possible reward. According to

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Huseman et al (1987), it is the equity-sensitive response type that can be explained by Equity Theory. This theory is most closely related to the work of Adams (1965), which deals with the exchange relationships among individuals and groups. The theory holds that, in deciding whether or not they are being treated equitably or fairly, people compare what they are giving to an organization with what they are getting from the organization. When the person concludes that, in comparison with others, what they are receiving is equal to or greater than what they are giving, equity exists. If any one side of the equation is larger, then imbalance exists and motivation is affected (Cosier and Dalton, 1983). Greenberg (1988, 1990) and Miles, Hatfield and Huseman (1994) empirically supported the existence of these three response types and their impact on work outcomes. It is hypothesized that individuals who decide to behave entrepreneurially are equity-sensitive and will compare the outcomes received for their entrepreneurial actions with counterparts in their organization or in other organizations. Also, individuals must perceive that they have some control over their environment. In other words, they must believe that their efforts will impact on performance and that performance will result in desired outcomes. This hypothesis regarding entrepreneurial behaviour resembles similar assumptions in a model on job crafting by Wrzesniewski and Dutton (2001). Their model examines the degree to which individuals are willing to change the nature of their work beyond static job designs. Similarly, they state that certain organizational features, such as flexible organizational boundaries, must first be in place for the effect to happen to a significant degree. Results perceived as favourable to themselves will also serve as feedback for further job crafting in the future, ultimately leading to the individual redefining his or her work in a new way. Likewise, in our model, as an individual undertakes more entrepreneurial activities with positive results, he or she will develop a more positive entrepreneurial perspective towards his or her work and organization. Therefore, applying the findings of Porter and Lawler (1968), Baum, Locke, and Smith (2001), and Wrzesniewski and Dutton (2001), the critical factors for ongoing entrepreneurial behaviour include: the impact of both intrinsic and extrinsic rewards on sustained entrepreneurial behaviour (ie satisfaction and reinforcement of the behaviour) and the value of rewards and their impact upon sustained entrepreneurial behaviour. For this reason, the model proposes: Proposition 2: The greater the degree to which an individual perceives that his or her entrepreneurial

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expectations are met or exceeded by the outcomes resulting from an entrepreneurial behaviour, the stronger will be the motivation to engage in entrepreneurial behaviour in the future.

Discussion The model described in this paper proposes that a transformational trigger initiates the need for strategic adaptation or change. One such change that can be chosen is corporate entrepreneurial activity. Based on this choice of strategic direction, the proposed model centres around the individual’s decision to behave entrepreneurially. It is proposed that sustained entrepreneurial activity is the result of the perception of the existence of several organizational antecedents such as top management support, autonomy, rewards, resources and flexible organizational boundaries. The outcomes realized from this entrepreneurial activity are then compared at both the individual and organizational level with previous expectations. Thus, it is contended that corporate entrepreneurial activities are a result of an equity perception by both the individual and the organization. Both must be satisfied with the outcomes for the entrepreneurial activities to continue, from the organizational perspective as well as the individual perspective. The impact of performance outcomes on sustaining a strategy for entrepreneurial activity is consistent with Ginsberg’s (1988) strategic change model. Satisfaction with performance outcomes serves as a feedback mechanism for either sustaining the current strategy or selecting an alternative one. The model further suggests that individuals, as agents of the strategic change, must also be satisfied with the intrinsic and extrinsic outcomes they receive for their entrepreneurial behaviour. While it may be a ‘chicken-and-egg’ question as to whether individual behaviour or organizational strategy should change first, the model suggests that in a major strategic change, both are instrumental in making the change successful. This model is integrative in nature since it builds on previous work in the entrepreneurship/corporate entrepreneurship literature (Hornsby et al, 1993; Naffziger et al, 1994; Hornsby, Kuratko and Zahra, 2002), as well as theoretical propositions from other disciplines such as those of Porter and Lawler (1968), Adams (1965), Vroom (1964) and Ginsberg (1988). It is believed that the model proposed in this paper will add to the body of literature related to corporate entrepreneurship since it focuses on the importance of both the initiation and sustainment of entrepreneurial activities.

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Suggestions for future research Based on the model and propositions presented in this paper, at least three areas for future research can be suggested. First, issues related to corporate entrepreneurial activity as a strategic choice need to be studied. One issue is that of governance. How is the organization owned and governed? In corporate restructuring, governance has been shown to be a major concern (Hoskisson, Johnson and Moesel, 1994; Hoskisson and Turk, 1990). Ownership issues may arise when investors do not seek the same entrepreneurial goals for firms (Kochar and David, 1996). Therefore, the governance issue needs to be examined in conjunction with this proposed model. Another issue is the pacing of strategic change (Gersick, 1994) and the timing of entrepreneurial progress (Bird, 1997). Short-term versus long-term actions may reveal interesting results for the strategy of pursuing corporate entrepreneurial activity. Finally, research is needed concerning the impact of environment and prior history of changes related to corporate entrepreneurial behaviour. The second area for future research involves a firm’s performance outcomes related to successful strategic implementation. Which outcomes (either behavioural or financial) account for more of the variance when the organization evaluates whether or not a strategy for corporate entrepreneurial activity should continue? Furthermore, do organizations utilize the concept of equity when determining their satisfaction with outcomes? Is there an implied rationality at work within equity theory? If so, what specific examples of a stimulus-response nature have been successful in companies pursuing entrepreneurial activity? Research into these questions, as well as how the feedback loop develops in firms, may provide guidance for future implementation of corporate entrepreneurial activity. The third area of future research focuses on the middle manager’s role in the success of a corporate entrepreneurial strategy. As the literature continues to develop on corporate entrepreneurship (CE), there is a need for researchers to understand the entrepreneurial activities from a middle manager’s perspective. How do organizational antecedents influence or moderate the middle manager’s decision to behave entrepreneurially? Research is necessary to determine how critical these antecedents are compared with other influencing factors such as the manager’s past work experience and demographic factors (ie age, gender, culture, etc). The antecedents suggested in the model should account for a significant portion of the variance for entrepreneurial activities by the manager. Research is necessary to determine the degree to which these antecedents must exist, and how they coexist, in order for successful

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entrepreneurial behaviours to occur. Furthermore, once the manager initiates entrepreneurial behaviour, which outcomes are valued as a result of this behaviour? Also, does the middle manager desire more intrinsic outcomes or extrinsic outcomes when determining whether he or she has received equitable outcomes? It is important to recognize that both levels of managers, executive and middle-level, have the ability to influence the success of entrepreneurial activity, although in quite different ways. Executive-level managers influence the likelihood of success by establishing the strategy and developing an environment conducive to the entrepreneurial activities of middle-level managers (Miller and Camp, 1985). Mid-level managers must perceive this internal environment as conducive to their entrepreneurial behaviour in order for the entrepreneurial activity to be implemented. In summary, it has been established that change or transformational triggers cause organizations to pursue strategies for entrepreneurial activities and to institute certain internal organizational factors to ensure their implementation. As proposed in our model, it is the degree of ongoing entrepreneurial behaviour of individuals and the perceptions of an organization’s executive management towards entrepreneurial activities that need to be focused upon in future research. The model that is proposed in this paper should provide insights for researching the entire corporate entrepreneurship process from both the individual and organizational levels. This area has great potential for research in terms of its impact on organizational change and ultimately on organizational success.

Acknowledgments An earlier version of this paper was accepted and presented at the Academy of Management National Conference, 2002.

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