A framework to analyze environmental conditions affecting corporate entrepreneurship
| Autor | Jokin Cearra Mendialdua/María Saiz Santos |
| Cargo | Profesor de dirección financiera y creación de empresas (EUCCB) y Licenciado en empresariales (UPV/EHU) y MBA (IESE)/Profesora de emprendimiento y creación de empresas (UPV/EHU), Doctora en CC Económicas y Empresariales (UPV/EHU), Investigadora del proyecto internacional GEM (Global Entrepreneurship Monitor) |
| Páginas | 94-111 |
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The aim of the study is to deepen in the understanding of the environmental factors affecting intrapreneurship or corporate entrepreneurship, what it can be understood as entrepreneurship in an existing organization.
The environment conditions in a global market make that settled organizations adopt entrepreneur strategies as a way to success (McGrath and MacMillan, 2000); (Morris, Kuratko and Covin, 2008).
It has been verified (Schwab et al., 2010) that countries and regions go through different phases in theirdevelopment.In the beginning, there are economies based in the traditional production factors, in which the extraction processes of raw materials are the main source of exports and wealth generation. In a next stage, there are economies based on the efficiency of the production factors, because the intensiveness of production is the main element of exports and wealth generation, and it is based, for example, in acquiring economies of scale. And in the most developed stage, there are economies driven by innovation, in which the main factor to generate wealth and exports is the production of new products and services, created by big innovations and that many times are pioneers in the market.
As the country goes through these different stages of development, and the factors that hold its economy change, it is verified how the environment factors that boost the entrepreneur activity also change.
So, in the first stage, the main requirements are the basic conditions such as health care. In the second one, the objective is to push the activity of those entrepreneurs driven because they detect an opportunity more than those others which are driven because they need an income source, so the objective is to promote the efficiency in the production factors. And in the last one, as the developed economies already have the basic requirements and the efficiency ones, what they try to push es the innovative character and the orientation to growth of the new projects.
As we will see, the Economic Institutional Theory, with the approach proposed by Douglass North (1990), gives a theoretical framework to analyse how environmental factors affect intrapreneurship. Its approach allows to understand the different kinds of human interaction in the general frame of established rules of the game (property rigths, commercial law, incorporation procedures, cultural beliefs, ideas, attitudes, etc.) that influence favourably or unfavourably in economic development, and as a result of it, in business creation(North, 1990).
We also review the state of the art of research on intrapreneurship, and we extract some information from Global Entreneurship Monitor survey, which will serve as data source for the empirical contrast.
In this sense, it is important to note that this is the first of what it is expected to be a deeper and more extensive research.
This issue is relevant both at theoretical and practical level. In fact, it is relevant under three points of view, different between them but complementary: academic, business and policy.
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From the academic point of view: although it has been studied the effect of institutional environmental factors (formal and informal) on entrepreneurship, the analysis whether there are differences when it comes to business arising from already existing businesses it is not enough.
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From the business point of view: the study can serve as guidance to companies in the intrapreneurial process, which may have beneficial effects on the growth of the company and its profitability, measured both in absolute and relative terms.
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From the point of view of economic policy: the study can be used to adjust the supply of supportive measures to the needs of companies.Increasingly, economic growth, new jobs generation and business innovation concern society and various governments and public administrations. And the creation of new firms affects simultaneously in the solution of the three mentioned problems.
As we said above, the aim of the work is to study how the environmental factors affect intrapreneurship, for what we will use the conceptual framework of Economic Institutional Theory as explained below.
In this way, authors as Urbano, DíazCasero y Hernández Mogollón (2007) proposed to use the principles of Institutional Theory to analyse the impact of environmental factors over the entrepreneurshipphenomenom.
Tolbert et al. (2011) note that to date there have been few published analysis of entrepreneurship using the Institutional Theory focus. One reason may be the different background of the academics of each discipline, as there aremainly sociologists in one side and business school economists in the other. In the last two decades there have been one or two articles using this focus in the main magazines of entrepreneurship, although in 2008 there was a rise to eight papers.
Historically, the Resource Based Vision (Barney, 1991)had been one of the main theories to analyse entrepreneurship as the access to resources is crucial to start a business (Bhide, 2000).
But, although the resources are important, it is increasingly clear that issues as culture, legal environment, tradition,economic incentives and others can affect to a sector, and therefore, to entrepreneurial success(Baumol, Litan and Schramm, 2009). Institutional Theory facilitates the approach to identify and address these issues because these authors state that the entrepreneurial level of a society is directly related with the society regulations and the policies controllingtheincentives fixing.
North develops a complete theory about institutional change to understand the different performances of economies over the time, giving significant importance to the culture and history of different countries and regions.
The Institutional Economic Theory is adequate to analyse how environmental factors affect the creation of companies (Veciana, 1999)since goes further than pure
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economic matters to study how political and socio-cultural factors affect the behaviour of individuals(Urbano, 2006).
We will use the conceptual framework proposed by Douglass North in his work Institutions, Institutional Change and Economic Performance (1990). North bases himself on the neoclassical theory and assumes the scarcity hypothesis and analysis tools of classical microeconomic theory, but he refuses and modifies the instrumental rationality hypothesis considering that the information is incomplete and that a subjective model of reality exists. He adds that institutions do not fit the assumption of instrumental rationality and takes into account the temporal dimension which is ignored by the neoclassical analysis.
Northsaysthat institutions are the rules of the game in a society or, more formally, are the standards developed by society to govern relations between people. And in his book, he analyses institutions, changes occurring to them and their effects on economic performance over time.
This involves using the concept “institution” very broadly, as institutions would be restrictive standards and rules that govern society, conditioning the framework of relations that occur to them. And institutions affect economic performance since the actions of the various actors in society are conditioned by the existing institutional framework by the structure of incentives and opportunities.
The process of cumulative learning in human beings develops over time and is transmitted from generation to generation by their cultural beliefs and, in this manner the institutions are developed.Therefore, time is the dimension in which collective learning processes are shaping the institutional evolution through continuous elections(North, 1994).
North distinguishes between institutions, that as it said above, are the rules, regulations or public policies; and organizations, that would be the players, groups of individuals with common goals and interests. And in the end, the interactions between players and the rules can shape or change institutions. Interactions are basically elections. The players are making choices based on the cost of their actions and the benefit they expect to achieve, but these choices are often based on subjective perceptions, as they are often based on imperfect information. So sometimes their decisions and the changes they cause are not optimum for improving the welfare of organizations.
North, also distinguishes between formal (rules, laws, policies and agencies) and informal (culture, beliefs, values, ideas, habits and attitudes of society) factors.
Formal factors refer to a set of formal written rules, while informal ones refer to unwritten codes of behaviour. And both of them compound an institutional matrix that shapes the relationships of all kinds produced in the society.
Therefore, restrictions imposed by the institutional framework determine the opportunities for the birth of the organizations, as well as the type of organization that is created.
For North, organizations tend to achieve their goals (win elections in the case of a political party or maximize profit in the case of a company) and reinforce themshelves acquiring skills and knowledge to ensure their survival.
If the institutional framework encourages piracy, then pirate organizations that invest in skills and knowledge that make...
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