ORGANIZATIONAL CHANGE AND CORPORATE ENTREPRENEURSHIP
Corporate entrepreneurship has developed as a prominent way by which organi- zations change and transform (Covin & Miles, 1999; Lumpkin & Dess, 1996).
In 1990, Guth and Ginsberg described corporate entrepreneurship as comprising two types of change: (1) the birth of new businesses within existing organizations (i.e. internal innovation or venturing); and (2) the transformation of organizations through strategic renewal. The first type of change is most often referred to as corporate venturing and is defined as “an activity which seeks to generate new businesses for the corporation in which it resides through the establishment of
The Relevance of Theories of Change 75 external or internal corporate ventures” (Von Hippel, 1977, p. 163). Corporate venturing has been well documented in the corporate entrepreneurship literature (cf.Block & MacMillan, 1993; Burgelman, 1983). The second type of change described byGuth and Ginsberg (1990) is transformation through strategic re- newal. Strategic renewal “refers to the revitalization of the company’s operations by changing the scope of its business, its competitive approach, or both” (Zahra, 1996, p. 1715). Stopford and Baden-Fuller (1994) found that troubled firms in hostile environments can adopt policies fostering entrepreneurship, thereby strategically renewing their organizations and significantly impacting the industry rules and structures.
Covin and Miles (1999, p. 48)point to a third type of change that is finding prominence in corporate entrepreneurship literature – that of “an entrepreneurial philosophy that permeates an entire organization’s outlook and operations.”
Organizations seek to develop this entrepreneurial philosophy as a way to per- manently transform rather than to regularly implement some new change ideas.
This entrepreneurial philosophy has been described in the literature in various terms including entrepreneurial management (Brown, Davidsson & Wiklund, 2001; Stevenson & Jarillo, 1990), entrepreneurial posture (Covin & Slevin, 1991), and entrepreneurial orientation (Lumpkin & Dess, 1996; Ramachandran
& Ramnarayan, 1993). According to Stevenson and Jarillo (1990, p. 25), en- trepreneurial management concerns “the quest for growth through innovation, be this technological or purely managerial.”Brown, Davidsson and Wiklund (2001) developed a twenty-item testing instrument for Stevenson’s conceptualization of entrepreneurial management. Through factor analysis, they found six dimensions of entrepreneurial management: strategic orientation, resource orientation, man- agement structure, reward philosophy, growth orientation, and entrepreneurial culture. This research points to the importance of opportunity-based management practices in the quest for growth and value creation through innovation.
Covin and Slevin (1991) contend that organizational posture involves three types of organizational-level behaviors: risk taking, extensiveness and frequency of product innovation, and the pioneering nature of the firm (propensity to complete aggressively).Lumpkin and Dess (1996, p. 136)defined entrepreneurial orientation as the “processes, practices, and decision-making activities that lead to new entry” and identified five dimensions of an entrepreneurial orientation:
autonomy, innovativeness, risk taking, proactiveness, and competitive aggressive- ness. Several empirical studies have relied upon these five dimensions to identify corporate entrepreneurship (cf.Wiklund, 1999; Zahra & Covin, 1995).
In each of the three types of corporate entrepreneurial change listed above (corporate venturing, transformation and the development of an entrepreneurial
76 DAWN R. DETIENNE philosophy), innovation plays a critical role.Stopford and Baden-Fuller (1994, p. 522)observed “most authors accept that all types of entrepreneurship are based on innovations that require changes in the pattern of resource deployment and the creation of new capabilities.”Dougherty (1996, p. 424)describes this relationship between change and innovation when she states “innovation enables organizations to improve the quality of their output, revitalize mature businesses, enter new markets, react to competitive encroachment, try out new technologies,...develop alternative applications for existing product categories, to name just a few outcomes.” Innovation, in this context, most certainly refers to product innovation, but could also include innovations in processes, structure, and human resources.
To the observer, the constructs of organizational change, corporate entrepreneur- ship, and innovation can seem convoluted. What occurs first? Which construct leads to the other? It might help to use the analogy of an automobile. The auto- mobile serves as a vehicle of change for individuals. It allows people to get from point A to point B (a desired future state). Corporate entrepreneurship is also a vehicle of change. It allows organizations to get to some desired future state. The type of automobile you choose is dependent upon your destination/needs/desires.
The same is true for change within corporate entrepreneurship. Some firms will find that they are best suited to adapt/change through the creation of new ven- tures, others through strategic renewal and still others through the development of an entrepreneurial philosophy. Despite the type of vehicle you choose, you still need a driver of change. Even if you have purchased the right vehicle you will not get to point A until you actually drive the vehicle away from the curb. Inno- vation plays that role within the entrepreneurial organization. Innovation is the action that is undertaken and a driver of change in the organization.March (1981, p. 569)states “students of innovation in organizations have persistently observed that both innovations and organizations tend to be transformed during the process of innovation.”
Without innovation, corporate entrepreneurship would be analogous to a beautiful automobile without a driver – attractive, appealing, and useless to move in the desired direction. CEOs and/or entrepreneurial champions can “talk”
entrepreneurship, but until they understand how change occurs and take steps to enhance the corporate environment for innovation, they will be constantly trying to catch those who do.Covin and Miles (1999, p. 49)state it succinctly “without innovation there is no corporate entrepreneurship.”
I now turn to discussions of each of the theoretical perspectives. These perspec- tives were chosen because they provide insight into change at all levels of analysis – beginning with a macro perspective which focuses on the role of the environ- ment and working toward the micro level which focuses on the role of individual thought.
The Relevance of Theories of Change 77