Entrepreneurship Exam (25 multiple choice question)


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Entrepreneurship Exam (25 multiple choice question)

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Four models of corporate entrepreneurship How corporations can build and foster entrepreneurship Corporate entrepreneurship • The process by which teams within an established company: – Conceive – Foster – Launch – Or manage a new business Corporate entrepreneurship • That business is usually distinct from the parent company • But it leverages the parent’s – Assets – market position – Capabilities – or other resources Corporate entrepreneurship • It is not corporate venture capital – That is an external investment, usually • May involve external partners and capabilities • May involve acquisitions • Engages significant resources of the established company • Internal teams typically manage the projects Corporate entrepreneurship • Different from spinouts – Those are generally constructed as stand-alone enterprises – They don’t require continuous leveraging of current business activities to realize their potential. • It is more than just new product development – can include innovations in service, channels, brands. Corporate entrepreneurship • Traditionally, companies add value through innovations that fit existing business functions and activities. • This approach can limit what a company is willing or even able to bring to market. • Failure to recognize that new products and services can require significantly different business models is often what leads to missed opportunities. Factors in innovation • Organizational ownership – who within an organization has primary ownership for the creation of a new business? • Resource authority – is there a dedicated source of funding allocated to corporate entrepreneurship? Four models matrix Resource Authority Dedicated The Enabler The Producer Company provides senior execs and attention Company establishes full service support The Opportunist The Advocate Company has no formal approach Company strongly evangelizes, but not a formal process Ad hoc Diffused Organizational ownership Focused No formal structure THE OPPORTUNIST MODEL Opportunist model • All companies begin as opportunists. • No dedicated or designated organizational resources or ownership. • Based on serendipity or opportunity. • Individual champions emerge and work against all odds, often in spite of the corporation. Opportunist model • Works well in trusting corporate cultures that are open to – experimentation, – have diverse social networks – have multiple executives that could ok a project. • Opportunist approach is undependable for many companies. Facilitating change ENABLER MODEL Enabler model • Employees across an organization will be willing to develop new concepts if they are given adequate support. • Dedicating resources and process enables teams to pursue opportunities on their own – but without formal organizational ownership Enabler model • Companies provide: – clear criteria for selecting which opportunities to pursue – application guidelines for funding, decision-making transparency – recruit and retain entrepreneurially-minded employees – active support from senior management. • Example: Google Google’s example • Employees can spend up to 20% of their work time to promote ideas • Project groups are created informally • Can apply to the Google Product Council for funding • Teams receive broad strategic support • Google supports up to 100 projects Enabler model goals • Facilitate entrepreneurial employees and teams • Provides independent funding and attention from top executives Enabler model factors • • • • Culture of innovation Structural flexibility to pursue projects Defined executive involvement Effective communication of selection process and criteria Enabler model challenges • Senior executive bandwidth • Maintaining coherence and discipline with respect to existing corporate brands • Finding and satisfying project champions The evangelists ADVOCATE MODEL Advocate model • Company assigns organizational ownership for the creation of new businesses while intentionally providing only modest budgets to the core group. • Advocate organizations act as evangelists and innovation experts, facilitating corporate entrepreneurship in conjunction with business units. • Example: E. I. du Pont de Nemours and Co. du Pont’s example • Provides employees with a wide range of assistance from idea conceptualization through commercialization. • Four-day business-builder sessions teaching employees how to generate ideas and prioritize business concepts. • Teams spend 4 to 8 weeks developing a detailed business plan. du Pont’s example • Includes 180-day contract with senior management to address major uncertainties of the proposed concept. • Then team and facilitator present plan to business-unit senior management for approval. • Dedicated group of consultants. Advocate model goals • Reinvigorate or transform business units (BU) • Support corporate entrepreneurship teams Advocate model factors • Expertise in building new businesses • Significant team facilitation capabilities • Skill in coalition building – Internal and external networking • Senior executive visibility and support Advocate model challenges • Overcoming business unit (BU) nearterm pressures • Finding business builders among executives who are traditionally rewarded more for execution than innovation A commitment to change PRODUCER MODEL Producer model • Establishes and supports formal organizations within the company – significant dedicated funds or active influence over business-unit funding. Producer model • Aims to encourage latent entrepreneurs – also to protect emerging projects from turf battles – encourage cross-unit collaborations – build potentially disruptive businesses – create pathways for executives to pursue careers outside their business units. • Example: Cargill Cargill’s example • Established an Emerging Business Accelerator • Acts like a business incubator for emerging technologies that don’t fit existing business structures • Became a global clearinghouse for new concepts and value propositions Cargill’s example • Company maintains a Web site for submission of new ideas • If opportunity emerges the EBA develops high-level plan – Does due diligence – Recruits talent – Provides capital and funding Producer model goals • Exploit crosscutting or disruptive opportunities • Well-connected corporate leadership with full-time staff • Significant, independent funding Producer model factors • Respected leadership – With internal decision authority • Expertise in building new businesses • Explicit attention to corporate entrepreneurship incentives – For career enhancement or spinouts Producer model challenges • Requires a significant investment over a long period of time to be effective • Integrating successful projects into established BU can be difficult • Project teams can become isolated • New projects can be perceived as threats by existing BU Selecting the right model • Begins with a mandate for growth and a clearly articulated vision • Delineate clear and specific objectives – Corporate cultural transformation? – Renovating particular divisions or brands? – Finding new platforms or “blue oceans?” Selecting the right model • Point the way – Should be consistent with capabilities • Delineate objectives – Start with a small team to build objectives • Neutralize naysayers – Build corporate and division leadership consensus Selecting the right model • Select and support a corporate model – Based on resources and capabilities • Start with quick wins – Build credibility with tangible performance • Evolve – Successful entrepreneurship adapts – Objectives change and so must models The Four Models Corporate entrepreneurship in action Blueprints for success How organizational choices can influence technology start-ups Blueprints for success Baron, J. N., & Hannan, M. T., (2002). Organizational blueprints for success in high-tech startups: Lessons from the Stanford Project on emerging companies. California Management Review, 44(3). Blueprints for success • Eight year study • Tracked over 200 high-tech start ups in the Silicon Valley • Quantitative/qualitative study tracking the founding and evolution of these firms • Examined the factors in organizational structures of the participating ventures Key factors in blueprints • • • • Why team members are attached How team members are selected How team members are controlled How the choice of a company blueprint can impact future development Why do people work? • Love – Family like; emotional bond with others • Work – Project emphasis: interesting and challenging work will be attractive • Money – Work for money; a simple exchange How are workers selected? • Skills – Hire on immediate needs; focus on skills and experience to resolve immediate tasks • Potential – Hire on long term potential • Fit – Hire on cultural fit How are they controlled? • Peer – Informal control through peers or culture • Professional – Assumes people committed to excellence • Formal – Formal procedures and systems • Direct – Direct oversight and control Start-up blueprints Five models of start-up typologies • • • • • Star Engineering Commitment Bureaucracy Autocratic Start-up blueprints Employment Model Attachment Selection Coordination/Control Star Work Potential Professional Engineering Work Skills Peer/Cultural Commitment Love Fit Peer/Cultural Bureaucracy Work Skills Formal Autocracy Money Skills Direct Illustrative model quotes Star: “We recruit only top talent, pay them top wages, and give them the resources and autonomy they need to do their job.” Engineering: “We were very committed. It was a skunk-works mentality and the binding energy was very high.” Commitment: “I wanted to build the kind of company where people would only leave when they retire.” Bureaucracy: “We make sure things are documented, have job descriptions for people, project descriptions, and pretty rigorous project management techniques.” Autocracy: “You work, you get paid.” Star blueprints • Values – Ability, merit, expertise, autonomy • Positives – Suits technical elite, Resonates with academic institutions, Frees core employees from administration Star blueprints • Negatives – Turnover prone, Inequity, Unstable; hard to “scale;” Founder-dependent, Expensive (stock, etc.) • Challenges – Evolving the model – Turnover – Recruit and retain stars Commitment blueprint • Values – Teamwork, “the group,” norms • Positives – Loyalty – Less overhead – Strong brand in labor market – Leverages family associations Commitment blueprint • Negatives – Inflexibility; loyalty to past; Exclusion of diverse types; Burnout – Hard to scale Founder-dependent • Challenges – Keep faith alive; Hard to scale up; Goal conflict; Screen for fit as organization grows; Succession Engineering blueprint • Values – Technology, projects • Positives – Familiar in this context – Adaptable (easy to adopt and evolve) – Low maintenance Engineering blueprint • Negatives – Little differentiation from competition – No loyalty • Challenges – Ongoing stream of exciting projects – Generating “fun” Bureaucracy blueprint • Values – Procedures, rules, accountability • Positives – Efficient, Scales well – Not person dependent – Fair/equitable – If inevitable, best to adopt at start? – Suits diverse firm Bureaucracy blueprint • Negatives – Inflexibility – Overhead expense – Aversion to bureaucracy among employees • Challenges – Managing change – Focus on customers, products, etc. – Commitment to broader vision Autocracy blueprint • Values – Compliance, personal loyalty • Positives – Simple; easy to comprehend – Minimal need for coordination – May suit authoritarian cultures Autocracy blueprint • Negatives – Employee resistance; turnover – Caprice – Hard to scale • Challenges – Motivation – Delegation – Due process Distribution of blueprint Star 15% Commitment 18% Bureaucratic 8% Engineering 49% Autocratic 10% The remainder of firms were mixed High-tech startups in the Palo Alto area Baron et al., AJS, 2001 Characteristics • Commitment firms planned to compete on the basis of superior marketing and positive customer relations – Long-term relations with employees facilitate long-term relations with customers • Star firms most likely to compete through technological leadership • Engineering model quite robust across both strategies • Autocracy and bureaucracy prevalent among firms competing through minimizing costs Blueprint choice effects • Time to Initial Public Offering – Commitment models were the fastest to go public, relative to otherwise comparable companies with different founding models. – Star founder blueprints were the least likely to go public, controlling for age, industry, revenues, venture capital financing, and macroeconomic conditions (the prime interest rate and IPO activity in the company’s industry). • Change to Non-founder CEO – More frequent when founders espoused a Star or Commitment model Blueprint choice effects •Growth in Administrative Overhead –Commitment firms develop least managerial overhead, especially compared to firms founded along Bureaucratic lines which have the largest bureaucracy (administrative employees). –Order: Bureaucratic-AutocraticEngineering-Star-Commitment Blueprint choice effects • Turnover – Among firms retaining the initial HR model: • Star and Autocracy firms have most turnover. • Commitment had the lowest turnover • Possible reasons for Star turnover: – By design (to screen out non-stars) – Reliance on stock options – Resentment of stars as firm matures and broadens its occupational mix – Disillusionment of stars (rise of bureaucracy, maturation of technology, etc.) Blueprint choice effects • Impact of Model Change on Turnover – Changing models leads to higher employee turnover. – Turnover is high among firms that shift from one incongruent (non-type) blueprint to another and among firms that abandon the Commitment or Star models. Blueprint choice effects • Turnover – Changing the model produced less turnover when firms migrated from a neartype or non-type blueprint to one of the basic employment model types (except to “Bureaucracy” or “Autocracy,” which fostered high turnover). – Turnover is generally among the more senior, longer tenured individuals Blueprint choice effects • Effects of gender – Women’s proportional representation in the labor force at the end of the firm’s first year of operations had a statistically significant negative effect on managerial– administrative intensity, even controlling for founder’s model, industry, strategy, organizational age, and whether the firm had gone public Blueprint choice effects • Effects of gender – Males are more likely to define those who are managing and administering as “managers” and “administrators” – Presence of women from start • relying on personal networks • creating a larger stock of social capital • alternative to formalized structures of coordination and control. Blueprint choice effects • Titles – Firms founded along bureaucratic lines develop more elaborate systems of senior management titles than other firms, especially those founded along commitment lines Implications • Founders should carefully consider the type of company blueprint • Choice is based on – Type of venture – Market potential – Human resource requirements – Type of founder ENTR 3312 Lecture Six Dr. Alan Lish Lecture 6 LEADING ENTREPRENEURIAL ORGANIZATIONS Leading the way • Entrepreneurial initiatives are driven by individuals but the practice of corporate entrepreneurship is a collective responsibility • It is imperative that managers provide leadership for corporate entrepreneurship on all levels: –Top-level –Middle-level –Frontline Top-Level managers • Senior level managers are critically important for providing three core responsibilities 1. Compelling vision 2. Well-designed company architecture 3. “Right” personnel “the entrepreneurial message must flow from the top” Hidgon (2000) Top-Level managers • Entrepreneurial imperatives are those aspects of leadership that are inherently entrepreneurial: – Nourish an Entrepreneurial Capability – Protect Disruptive Innovations – Make Opportunities Make Sense – Question the Dominant Logic – Revisit the “Deceptively Simple Questions” – Link Entrepreneurship and Business Strategy Middle-Level Managers • Middle-level managers serve as a conduit between those at the top and those at the operating level • Their central position in the organization allows them to gather and absorb innovative ideas from inside and outside the firm • Middle-level managers: • Endorse • Identify • Refine • Acquire • Shepherd • Deploy Middle-Level Managers The distinction between top-level and middle-level managers: • Top-level managers are senior managers, and often determine strategic actions • Middle-level managers most often implement the strategic entrepreneurial activities designed by top-level management At the Grassroots Level First-level managers have three roles within the corporate entrepreneurship realm: 1. Experimenting roles 2. Adjusting roles 3. Conforming roles First-level managers and non-managerial personnel operate as both: – Order takers – Autonomous actors At the Grassroots Level First level managers and non-managerial personnel are in unique positions to recognize entrepreneurial opportunities because they frequently: 1. Work at positions within the organization where much of the core transformational activity 2. Have boundary-spanning responsibilities or important linkages to key external stakeholders associated with their jobs Entrepreneurial Outcomes When managers engage in entrepreneurial behavior, a number of unique, interrelated outcomes and consequences occur – At the individual-level – At the organizational-level Ethical Dilemmas Occasionally managers involved in CE activity may act in an unethical manner and take on the personality of a “rogue manager.” This happens because of: • “Wilding” • Lack of proper ethics rooted in company culture • Lack of proper ethics rooted in the individual manager Ethical Dilemmas Reasons managers involved in entrepreneurial activity may act in an unethical manner (cont.) • The manager may not clearly grasp their professional responsibilities • Operational factors within the company may cause the manager to deviate from the parameters of the formal organizational structure, such being pulled in two directions Ethical Dilemmas • Moral Management Model – respect ethical considerations and hold the organization to the highest moral standards and demonstrate a strong ethical leadership to all stakeholders • Immoral Management Model – based on the premise that economic opportunities are to be exploited whenever and however possible • Amoral Management Model – managers, while not necessarily acting with malicious intent, believe that the rules of business are different from those of the greater society The end ENTR 3312 Lecture Seven Dr. Alan Lish Lecture 7 CONSTRAINTS TO CORPORATE ENTREPRENEURSHIP Constraints to CE • The pursuit of entrepreneurship within a company creates new and potentially complex ...
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