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Creating a supportive culture for corporate entrepreneurship: Balancing creativity and discipline for the development of radical innovation by interfirm cooperation

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3. Creating a supportive culture
for corporate entrepreneurship:
balancing creativity and discipline
for the development of radical
innovation by inter rm cooperation
Bob Walrave, Victor Gilsing, Michiel de Jager
The creation and successful commercialization of radical innovation is
becoming a topic that dominates the strategic agenda of many technology-
driven rms on an increasing basis. One of the key organizational chal-
lenges is that radical innovation requires the development of a speci c
organizational capability, which deviates from existing capabilities in
established  elds of expertise. Typically, these established domains come
with a corporate culture that severely inhibits the development of radical
innovation as it does not allow for the risk, ambiguity and uncertainty
arising from the creation and development of radically new products and/
or processes (Christensen and Overdorf, 2000). Nevertheless, the capabil-
ity to identify new ways of doing business and to develop new (disrup-
tive) technologies and products becomes increasingly more important for
rms in order to innovate faster than competitors (Teng, 2007). Such a
capability is also referred to as corporate entrepreneurship (CE) and can
be de ned as ‘the sum of a company’s innovation, renewal and venturing
e orts’ (Zahra, 1995). CE allows for the deviation from the corporate
culture of the parent company and thus circumvention of the lethargy
and bureaucracy that comes with company size and/or age, which inhibits
the development of radical innovation (Christensen and Overdorf, 2000).
Meanwhile, the literature has described what types of measures and
activities are required to implement CE (Christensen and Overdorf, 2000;
Bergek and Norrman, 2008). Here, one of the key ideas is that CE is best
developed when operating at some degree of organizational distance from
the parent company. In this way, corporate entrepreneurs or ‘intrapre-
neurs’ (Menzel, 2008) can escape from conservative corporate pressures,
thereby gaining the opportunity to be di erent and enjoy su cient room
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Creating a supportive culture for corporate entrepreneurship 61
to manoeuvre and experiment freely.1 This raises an interesting question,
though, because if CE units are required to deviate from established prac-
tices that come with the dominant corporate culture, what then constitute
key characteristics of their own internal culture that would be supportive
of such entrepreneurial activities? In addition to this, how could such a
corporate culture be given shape?
These two questions form the core of this chapter and after brie y
discussing the theories about innovation, corporate entrepreneurship
and culture we will analyse what constitute the key features of CE units’
organizational culture. The analysis will start by optimizing the six dimen-
sions of organizational culture (Hofstede et al., 1990) for the development
of radical innovation. This has been done by performing a comprehensive
literature review on how the six dimensions could possibly enable and con-
strain CE activities. As this chapter will illustrate, the key characteristics
of a CE culture are that it should be result- oriented, externally focused
(pragmatic), is both job and employee oriented, loose in work discipline,
have a professional focus of interest, and be very open to the external
environment.
After the theoretical description, we brie y compare the theoretical
estimates with empirical  ndings on research to the corporate cultures
of various CE units within two large, high- tech companies located in the
Netherlands. The theoretical propositions were con rmed by the empirical
ndings, which also indicated that a corporate culture of a CE unit is very
likely to change during the innovation process. In that sense, we found
that central to a CE culture is that it strikes a careful (moving) balance
between ‘creativity and discipline’. Indeed, an emphasis on creativity is
needed for the  rst phases of the innovation process, the initiation phase
(Johne, 1984; Nakata and Sivakumar, 1996), where it is required to create
a potential for Schumpeterian novel combinations. Later the focus needs
to shift towards business discipline in view of the implementation phase
(Johne, 1984; Nakata and Sivakumar, 1996). Nevertheless, note that the
main focus of this chapter is placed on the phase when CE units start to
develop a business with the invention.
Hereafter, we will discuss an interesting way of how such a CE- ‘friendly’
culture may be created. We speci cally discuss the role of strategic alli-
ances (SA) as a means to accomplish a CE culture in such a way that it
indeed di ers in essential ways from the dominant parent culture. In the
literature, SAs have been described as positively stimulating the devel-
opment of innovation as they form an e ective way to acquire novel
knowledge (Hagedoorn and Duysters, 2002; Nooteboom, 2004). Here,
we see SAs in a new and complementary way as we will argue that care-
fully chosen SAs might also be useful to establish or (further) optimize
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62 Strategic alliances, mergers and acquisitions
an innovative CE culture by adopting practices from the alliance partner
needed for the development of radical innovation. We will end this chapter
with our conclusions.
INNOVATION
The importance of innovation is emphasized by many authors in the
literature of the last decades. Technological progress and productivity
improvements, competitive advantage and economic growth are men-
tioned, among much more (Cooper, 1993; Souder, 1987; Dogson, 2000;
Narayanan, 2001; Miller, 2001; Debruyne et al., 2002). Many of today’s
leading  rms grew out of technological changes they were able to exploit
(Porter, 1985) and innovation thus plays a major role in the structural
change of industries. Schumpeter (1942, 82), the  rst author to write about
the importance of innovation, is even more straightforward in his view. He
stated that: ‘The process of Creative Destruction is the essential fact about
capitalism . . . It is not [price] competition which counts but the competi-
tion from new combinations of technology. This competition strikes not
at the margins of pro ts of existing  rms but at their foundations and
their very lives.’ Indeed, innovation is vital for  rms wanting to survive
(inter)national markets (Porter, 1985), even if it destroys the current
value of established products (Christensen and Overdorf, 2000). From
this, it becomes clear that (radical) innovation should be on the agenda
in the highest levels of the organization; it should be incorporated in the
corporate strategy by top- management.
Scholars have researched and developed a plethora of de nitions of
innovation, which has resulted in an ambiguity in the way the terms ‘inno-
vation’ and ‘innovativeness’ are operationalized and utilized in the new
product development literature (Garcia and Calantone, 2002). Here, we
de ne a technological innovation as the iterative process initiated by the
perception of a new market and/or service opportunity for a (technology-
based) invention which leads development, production and marketing
tasks striving for the commercial success of the invention. Furthermore,
the widespread distinction is made between incremental innovation and
radical innovation.
Incremental innovations are mostly add- ons to existing products or
services, to make them perform better and thus merely add some value
to the existing installed customer base (Christensen and Overdorf, 2000).
This type of innovation is the most common and the most pursued by
large  rms as they have a greater chance of making money since there is
less risk involved (Henderson and Clark, 1990). According to Anderson
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Creating a supportive culture for corporate entrepreneurship 63
and Tushman (1990), it is for this reason that large  rms prefer gradual
incremental innovation and tend to delay radical innovation as long as
possible, even though the returns may be lower than the returns associated
with radical innovation.
Radical innovations, or breakthrough innovations, are often associ-
ated with the discovery of radical new technologies. The di erence from
the former discussed type of innovation is that radical innovation both
overturns core concepts, and creates new linkages between the core con-
cepts and components (Henderson and Clark, 1990). This type is very
risky and can be very expensive, which makes it hard for companies to
justify the upfront investment needed (Christensen and Overdorf, 2000).
Nevertheless, once an invention turns into a radical innovation,2 it may
bring substantially larger returns than incremental innovation and, maybe
even more important, a competitive advantage (Porter, 1985). Indeed,
radical innovation brings the ability for strategic change (Birchall and
Tovstiga, 2005, 79), and for this reason we will focus on this type of inno-
vation in the remainder of this chapter. The chapter will now continue
with a concept designed for developing radical innovation; namely CE.
CORPORATE ENTREPRENEURSHIP
Once successful,  rms sometimes become blind to opportunities other
than those that sustain their current customers, as their main focus is on
selling more technologically advanced and richly featured products to
their installed consumer database. This phenomenon has been a problem
for many large  rms, which were unable to commercialize what they
already technically could do (Christensen and Bower, 1996). One of the
reasons for this failure is that the current practices do not allow for the
risk, ambiguity and uncertainty needed for the development of radical
innovation. These values and processes are put in place to let employ-
ees work in consistent and predictable ways (Christensen and Overdorf,
2000), but will erode their entrepreneurial underpinnings (Thornberry,
2003). Indeed, there is a fundamental con ict between a new venture’s
and mature company’s management requirements, due to the di erent life
cycle stage which asks for di erent practices; for the latter the focus is on
an installed customer base (Sykes and Block, 1989).
Christensen and Overdorf (2000) therefore recommended that incum-
bents should set up a separate organization for venturing into disruptive
technologies, to circumvent the problems as described above. The need for
separation is con rmed by O’Connor and DeMartino (2006), who stated
that for radical innovation, the organizational entity must be physically
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64 Strategic alliances, mergers and acquisitions
and culturally separated from the mainstream organization. For this the
concept known as CE can be utilized. CE is also referred to as corporate
venturing, intrapreneurship or corporate venturing (Hornsby et al., 2002;
Burgelman, 1983; Cooper et al., 1997). However, given our interest in
radical innovation, corporate entrepreneurship seems the most appropri-
ate name; indeed it should be of concern at the corporate level: at top
management level. Besides, intrapreneurship has also been linked with
innovation on a divisional level (more often associated with incremental
innovation) (Menzel, 2008). CE essentially involves starting a business
within a business, self- nanced and sta ed with some of the  rm’s own
personnel (de ned as new business ventures). It is an attempt to create
the mindset and behaviour that entrepreneurs have, in a large organiza-
tion, with the main purpose to allow large organizations to overcome the
di culties of achieving radical innovation. Indeed, small  rms are able to
ourish in smaller market niches which may be unattractive to larger  rms
(Bessant and Tidd, 2007, 265).
The literature has described the types of measures and activities which
are required to implement CE (Christensen and Overdorf, 2000; Bergek
and Norrman, 2008). Also, the capabilities that are needed for successful
innovation have been elaborated on (Birchall and Tovstiga, 2005, 226).
However, these works all remain vague about the cultural aspects, and it is
here that this chapter provides profound insight into the most appropriate
organizational culture for CE.
Indeed, essentially, CE helps to create an organizational culture, devi-
ating from the corporate culture, which will allow for radical innovation
as it encompasses a set of practices believed to enable large companies to
regain this ability (Thornberry, 2001). The implementation of CE is thus
becoming an important activity for growth- oriented business.
It is important to realize that innovations, in the end, are the result of
a long and complex process. Johne (1984) suggests an innovation process
that consists of two main phases: the initiation phase and the implemen-
tation phase. In the former, creativity can be seen as a very important
starting point, as without it no (radical) innovation would be possible. It is
about the conceptualization of the product, covering idea generation and
concept testing (Nakata and Sivakumar, 1996). The latter is about embrac-
ing product development, or in the case of CE, business development and
the actual product launch. Its aim is thus on ful lling the concept (Nakata
and Sivakumar, 1996). Our focus is on the start of this second phase, when
new business ventures start to develop businesses with the inventions. This
focus has been chosen for two reasons: (1) during the initiation phase, the
‘team’ is often comprised of only a few individuals, intrinsically having
no organizational culture; and (2) during the implementation phase, costs
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Creating a supportive culture for corporate entrepreneurship 65
tend to rise exponentially, and the possibility to ‘steer’ the project decreases
as it progresses (Afuah, 2003). One could therefore emphasize the impor-
tance of understanding the optimal organizational culture at the beginning
of the implementation phase, as the gains here can be profound.
Simply deciding to be innovative in the future is not enough. This deci-
sion has to backed by actions that create an environment, a culture, in
which the employees are so comfortable with innovation that they create
it themselves (Ahmed, 1998). The next section therefore gives more insight
into cultures.
CULTURE
In general, the term ‘culture’ refers to a group, sector or society. It is
a characteristic of intelligent beings and refers to the human ability to
classify, codify and communicate. It can be de ned as: ‘the collective
programming of the mind which distinguishes the members of one group
or category of people from those of another’ (Hofstede, 1980). Di erent
cultures re ect di erent theoretical bases for understanding and evaluat-
ing. The way people live in harmony with their history, belief, language,
and so on, can be de ned as their culture. It says something about what
makes that particular group stand out, or distinguish itself from other
groups (Hofstede, 2000). Although it is not an aspect of individuals, it is
manifested within individuals, and can be measured from the verbal and
non- verbal behaviour of individuals, aggregated to the level of their unit,
whether this is a society, organization or group (Hofstede, 1998).
A research project into national cultures was executed and published
by Hofstede (1980) in order to locate the value dimensions across which
national cultures may vary. The result of this study was the identi ca-
tion of four dimensions that he labelled as individualism, masculinity,
power distance and uncertainty avoidance. Later, the Chinese Culture
Connection (1987) identi ed a  fth dimension: long- term orientation
versus short- term orientation to life. These  ve value dimensions cannot
exhaust all the di erences between national cultures, but have been empir-
ically demonstrated to be related to many aspects of national cultures
(Kolman et al., 2003). National culture is being taught from early infancy
and, for this reason, values are deeply imbedded into people. Values can
be de ned as: ‘a broad tendency to prefer certain states of a airs over
others’ (Hofstede, 1998), and are comprised of values, norms and beliefs
(Cormican and O’Sullivan, 2004).
Peters and Waterman (1982), and subsequent research, argued that
shared values also represent the core of a corporate cultures, just as is the
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66 Strategic alliances, mergers and acquisitions
case with national cultures. In contrast, Hofstede et al. (1990) empirically
proved that shared perceptions of daily practices, and not values, are at
the core of a corporate culture. The research showed that the practice3
dimensions4 have a much higher explanatory power for di erentiating
between corporate cultures than the value dimensions,5 which di erentiate
so much across countries. The di erence between the two concepts is that
values describe what employees feel ‘should be’, and practices show what
people feel ‘is’ (Hofstede et al., 1990). Just as values are acquired from
family, school and our surroundings in our early youth, so organizational
practices are learned, through socialization, at the workplace. This con-
clusion can be understood in the way that researchers in line with Peters
and Waterman (1982) have almost always only surveyed top management
(instead of the whole organization), and there is little disagreement about
the fact that top management (or the founders of a company), put their
own values into the design of the practices for their company, simply
because they have developed a theory of how to succeed according to the
roots of their own culture in which they grew up (Schein, 1983; Hofstede,
1998; Christensen and Overdorf, 2000; Menzel, 2008).
It follows that employees may work according to, and adapt to, the
practices designed following the values of top management, but this does
not mean that they have to confess to these values personally. Indeed, as
outlined by (Christensen and Overdorf, 2000), within the highly success-
ful company McKinsey and Company, top management’s values have
become so strong that it almost does not matter which people get assigned
to which projects. In this way, people with di erent basic assumptions
(values, which tend to depend on demographics) can still cooperate in
an organization without signi cantly a ecting the corporate culture
(Hofstede, 2000). In that sense: ‘leaders’ values become followers’ prac-
tices’ (Hofstede, 1998). If these values are  awed, the company will likely
fail, but if they are sound, the employees will experience for themselves the
validity of the founder’s values in problem- solving and decision- making
(Christensen and Overdorf, 2000).
These practices re ect the symbols, heroes and rituals6 of a speci c
organization and form the visible part; values form the invisible part of
a corporate culture. Following this reasoning, the  ve (value) dimensions
composing national culture should indeed not be applied for discrimi-
nating on other cultural distinctions, such as organizations (Hofstede,
1980, p. 464). This is illustrated in Figure 3.1, which shows that corporate
culture is mainly formed by the perception of practices.
Note that there is also the notion of professional culture, which is
formed by education and professionalization and consists of a combina-
tion of values and practices (Ulijn et al., 2004). It is about the extent to
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Creating a supportive culture for corporate entrepreneurship 67
which professionals identify with their professional discipline relative to
the culture of their organization (Ulijn et al., 2004). Van Luxemburg et
al. (2002) describe that (the type of) innovation success might also be a
matter of professional cultures, as research and development (R&D) engi-
neers might prefer a di erent direction to success than other functional
specialisms (for example managers or marketers). Indeed, because of
their chosen professions, R&D engineers may prefer a technology- push
approach while marketers usually opt for a market- pull solution (van
Luxemburg et al., 2002). Note that this closely relates to the parochial
versus professional focus of interest dimension, as we will discuss later
on.
All three forms of culture are constructs and therefore not directly
observable. Nevertheless, when talking about corporate culture, employ-
ees work mainly according to (perceived) set practices, designed according
to top management’s values. Practices are less basic than values and are
subject to intended change; in contrary to values, which also change, but
not according to planned change (Hofstede, 1998). So, although di cult,
it is possible to change a corporate culture by changing the (perceived)
practices; this is in contrast with the other two types of culture, making
corporate culture the most appropriate type of culture for this research.
This then explains the focus on corporate culture in this chapter.
According to Martins and Terblanche (2003), corporate culture is the
result of basic assumptions that worked very well in the past and for this
reason are accepted as truth, as valid practices within the organization.
Employees will start to work according to these assumptions rather than
by conscious choice (Christensen and Overdorf, 2000). Indeed, these prac-
tices are taken for granted (Lewis and Thornhill, 1994), a pattern of basic
assumptions (Schein, 1990; Martins and Terblanche, 2003), and become
less and less open to discussion, which obviously make them di cult
Level of culture
National culture
Professional culture
Corporate culture Workplace
Education and professionalization
Family
Values
Practices
Level of socialization
Source: Adapted from Hofstede et al. (1990).
Figure 3.1 Organizational, professional and national culture
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68 Strategic alliances, mergers and acquisitions
to change (Schein, 1990). The practices are maintained by the human
interaction (socialization7 and social control) in the organization (Schein,
1990; Lewis and Thornhill, 1994; Martins and Terblanche, 2003), and
are re ected in the (collective) behaviour of the employees, meaning the
right way of how things should be understood or done within a speci c
unit or organization. For this reason, the processes may have deep roots
in the organization’s history, even to the values of the very founders of
the organization. Derived from these  ndings, the following de nition of
corporate culture from Hofstede (1998) seems plausible: ‘The collective
programming of the mind [by human interaction] in the form of “best”
practices, which distinguishes the members of one organization from
another.’
THE OPTIMAL CULTURE FOR CE
According to many scholars, (radical) innovation is the result of a culture
that supports innovation (Johnson, 1996; Judge et al., 1997; Tesluk et
al., 1997; Shaughnessy, 1988; Martins and Terblanche, 2003). In that
sense, to promote CE it is more important to shape the organizational
culture than it is to implement innovation processes (Menzel et al., 2007).
Corporate culture is seen as a factor signi cantly contributing to the
creativity of an organization and therefore contributing to inventions
and innovation.
The concept of creativity can be seen as the generation of new and useful
and/or valuable ideas for products, services, processes and procedures by
individuals or groups in a speci c organizational context (Martins and
Terblanche, 2003). It is said that the potential of creativity resides in all
human beings and is part and parcel of the human condition (Bessant
and Tidd, 2007, 406; Ahmed, 1998; Jamrog et al., 2006; Davila et al.,
2007, 5). It follows that organizations, by their corporate culture, can
create encouragement for this natural inclination. So for organizations
to become innovative, it is required to have a corporate culture that con-
stantly guides employees to strive for creativity and innovation (Menzel
et al., 2007; Tushman and O’Reilly, 1997; Ahmed, 1998). Nevertheless, in
business, the idea should also be appropriate, useful and actionable. Thus
creativity in this chapter refers to business creativity as de ned by Amabile
(1998).
Discipline, on the other hand, here follows from the business setting
and not from the professional discipline, implying no direct link with
the professional culture (see van Luxemburg et al., 2002). To illustrate
the di erence, business and professional discipline can be compared
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Creating a supportive culture for corporate entrepreneurship 69
with Trompenaars and Hampden- Turner’s (1997, 8) idea of universal-
ism and particularism: one of their dimensions for cultural di erences.
Universalism, when compared to the professional discipline, implies
that good and right follows from the occupational education and train-
ing and always applies (Sirmon and Lane, 2004). On the other hand,
particularism implies that less attention is given to these abstract societal
codes (Trompenaars and Hampden- Turner, 1997, 8), and discipline then
follows from the (perceived) practices, implied from the corporate culture8
(Hofstede et al., 1990) and thus the business setting.
According to the literature, there are many practices needed for suc-
cessful radical innovation. In this chapter, our research the details of the
relationship between organizational culture and radical innovation were
elaborated on through a critical examination of these practices and relat-
ing them with the six dimensions of organizational culture. New business
ventures should strive to create the organizational culture as described
below, likely by engaging in SAs, in order to increase their chances of
success.
Dimension 1: Process versus Results Orientation
The  rst dimension of organizational culture focuses on the di erences
between an orientation on processes and an orientation on results. In a
results- oriented culture, the focus is on reaching a goal, whereby results go
before procedures. A process- oriented culture aims at the opposite and it
has a focus on the way of reaching the goals.
Unfamiliar situations
For radical innovation the core concepts are overturned, and the link-
ages between the core concepts and components are changed (Henderson
and Clark, 1990), while and the product will often be introduced in a new
market (Christensen and Overdorf, 2000). Both these factors lead to a
lot of uncertainty and ambiguity concerning the product and its proc-
esses.9 This lack of clarity has an important implication for managers: in
ambiguous environments it is seldom possible to ‘get it right the  rst time’.
Traditional planning and analysis are of limited value, since hard numbers
are di cult to come by, options are hard to compare, and past practices
o er little guidance for the future. A goal orientation is characterized by
employees who perceive themselves as being comfortable in unfamiliar
circumstances and able to deal with uncertainty and ambiguity. They are
willing to put in maximum e ort to cope with new challenges each day.
This makes this kind of orientation suitable for the development of radical
innovation.
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70 Strategic alliances, mergers and acquisitions
Results before procedures
Several authors state that an innovative supportive culture should focus
on goals (Carayannis and Chanaron, 2007, 161; Ahmed, 1998; Judge et al.,
1997; McLean, 2005). Indeed, there should be enough freedom and auton-
omy here for employees to determine the means by which to achieve the
set goals (Ahmed, 1998; Menzel et al., 2007), as this will enhance people’s
creativity (McLean, 2005; Carayannis and Chanaron, 2007, 161). Indeed,
in this way, people are able to suggest new and better ways of doing things
(Bessant and Tidd, 2007, 66). Judge et al. (1997) described this as chaos
within guidelines; top management prescribes a set of strategic goals, built
to allow personnel great freedom within the context of the goals.
Note that this does not mean that the employees should decide upon the
goals (Jamrog et al., 2006), as this will likely lead to less successful innova-
tion (Ahmed, 1998), because people may go o in their own independent
directions thereby showing little concern for organizational priorities
(Bessant and Tidd, 2007, 66). Another reason is that the lack of clarity
about goals will leave employees spending time and energy on trying to
determine which goals should receive focus (McLean, 2005).
Taking risks and experimentation are characteristics that are associ-
ated with creativity and innovation and characterize a goal orientation
(Carayannis and Chanaron, 2007, 161; Utterback, 1994, p. 230; Jamrog et
al., 2006; Davila et al., 2007, 6). For radical innovation, failures are inevi-
table and should be expected. Thus well- intentioned failure is an essential
element in the development of an organizational culture that promotes
creativity and innovation, (Martins and Terblanche, 2003; Garvin and
Levesque, 2006; Khazanchi et al., 2007). In that sense, the way in which
mistakes are handled in organizations will greatly determine whether
employees feel free to act creatively. For instance, at 3M the tendency is
not to ask why people failed, but what they have learned (Davila et al.,
2007, 196).
Nevertheless, it is important that a balance is reached in the degree to
which risk- taking is allowed (Martins and Terblanche, 2003). Too much
risk can lead to many failures as people will be confused, with ideas
oating around but few sanctioned (Bessant and Tidd, 2007, 66). In risk-
avoidant, process- oriented organizations, people often complain about
their boring, low- energy jobs and become frustrated by a long, tedious
process used to get ideas to action (Bessant and Tidd, 2007, 65). Either
way, employees will get frustrated that nothing gets done.
New challenges
People respond positively when faced with new challenges, on the con-
dition that they are provided with su cient scope to generate novel
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Creating a supportive culture for corporate entrepreneurship 71
solutions (Ahmed, 1998). High levels of challenge and involvement
imply that people are intrinsically motivated and committed to innovate
(Bessant and Tidd, 2007, p. 69). This also leads to the much- discussed
topic of rewards. According to Jamrog et al. (2006), there should be a
balance between intrinsic rewards and extrinsic rewards. Intrinsic rewards
are internal feelings of accomplishment, while extrinsic rewards typically
are monetary rewards.
Intrinsic rewards are the key driver of creativity (Amabile, 1998;
Ahmed, 1998; Montes et al., 2004), and indeed, too much focus on extrin-
sic rewards will destroy the employees’ intrinsic motivation, as the main
aim then becomes pursuing the rewards, thus redirecting attention away
from experimentation (Ahmed, 1998; Jamrog et al., 2006). In particular,
if rewards are not structured for innovation, but for the performance of
routine operations, employees are going to respond with caution and
uncertainty (Ahmed, 1998). Nevertheless, extrinsic rewards have to be
present at the base level to ensure that individuals are at least comfortable
with their salary (Ahmed, 1998; Jamrog et al., 2006).
Proposition
Concluding from the above, we argue that, since radical innovation brings
uncertainty and ambiguity, there is the need for goal orientation. Its char-
acteristics allow for risk- taking, a dynamic work environment, a results
orientation, and a stimulating reward systems; all these will allow employ-
ees to work towards their goals in a very creative manner. In that sense,
this dimension determines to some extent the amount of creativity in a
new business venture. Special attention should be paid to the amount of
risk- taking allowed and the proper use of rewards. Indeed, being too goal-
oriented will also impede radical innovation, resulting in creative solutions
which are not in line with the new business venture’s strategic direction.
For these reasons the  rst proposition is formulated as:
Proposition 1: a medium- strong goal orientation will stimulate the
development of radical innovation.10
Dimension 2: Employee versus Job Orientation
The second dimension concerns an employee orientation versus a job-
oriented organizational culture, whereby a job- orientated culture is only
interested in the work people perform, while an employee- oriented culture
takes into account the personal problems of the employees and feels
responsible for the welfare of its employees; even if that implies becoming
less productive.
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72 Strategic alliances, mergers and acquisitions
Concern for people
In line with Box 3.1, Davila et al. (2007) argue that when people are in
a positive mood, they tend to be more playful, engage in more divergent
thinking, and are more integrative and  exible in terms of seeing connec-
tions between di erent kinds of stimuli. This implies that an employee
orientation will result in the fostering and promotion of creativity in the
groups or teams within the CE unit.
Another way of supporting employees is by creating an innovation-
suitable work environment (McLean, 2005; Menzel, 2008). Although the
direct link between the design of the physical space and creativity remains
unproven, work environments have become integral parts of innovation
strategies (Haner, 2005). The physical environment of the workplace helps
to stimulate new ideas, and the availability of facilities (for example com-
puters and the Internet) are important resources for successful innovation
(Jamrog et al., 2006; Reigle, 2001; Martins and Terblanche, 2003; Menzel
et al., 2007). Interestingly, providing employees with the newest equip-
ment to get the job done is a clear example of job orientation, whereas
creating a comfortable work area can be seen as an employee orientation.
In line with this, Bessant and Tidd (2007, 59) state that there is the need
for a balance whereby subordinates feel supported and at the same time
empowered; see Box 3.2. Some organizations have started with implement-
ing family- friendly policies designed to recruit and retain valued workers
in tight labour markets (Akdere, 2006), which could help to attract and
keep suitable and talented people.
BOX 3.1 STARBRUCKS COFFEE COMPANY’S
HEALTH BENEFITS
An example of an innovative employee orientation is demon-
strated by the Starbucks Coffee Company, well known as a
company that encourages innovation by taking responsibility of the
welfare of its employees (for example health benefi ts). According
to the top management of Starbuck’s, this has led to more inno-
vation, because of the extremely low attrition level (Davila et al.,
2007, 145). This organization believes that there is a direct link
between the way the employees are treated and their innovative-
ness. To give an example, Starbucks was the fi rst organization
in the United States to give comprehensive health benefi ts and
stock options to every employee, including part- timers.
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Creating a supportive culture for corporate entrepreneurship 73
Employee health
The last characteristic of this dimension relates to the amount of stress
employees face in order to get the job done. Extreme workloads can be
seen as an obstacle to creativity and innovation as this will overload indi-
viduals, thereby spreading e ort too thinly (Ahmed, 1998; Carayannis and
Chanaron, 2007, 162). Bell and McNamara (1991, 21). Adds to this the
increased risk of burnouts, which can occur when employees work at a very
high pace for several years. On the other hand, too much slack time can also
be seen as an obstacle to innovation, as this will take away the challenge.
Proposition
We argue that  rms which are able to  nd the balance between an
employee and job orientation will be able to attract and keep key people
for the innovation process, because of the facilities o ered, modern equip-
ment and good working conditions. An extreme job orientation will cause
employees to leave or to be ine ective because of the strong work pressure
experienced, and an extreme employee orientation will lack the challenge
needed for radical innovation. In conclusion, the following proposition is
adopted:
Proposition 2: a balance between an employee and a job orientation
stimulates the development of radical innovation.11
Dimension 3: Parochial versus Professional Focus of Interest
This dimension shows the di erence between a parochial focus of interest
and a professional focus of interest. It is about the distinction between
BOX 3.2 INNOVATION LABORATORY XEROX
PARC
In practice, established organizations are implementing organi-
zational ‘innovation laboratories’ which are dedicated facilities
for encouraging creative behaviour and supporting innovative
projects (Haner, 2005). Xerox PARC pays careful attention to the
physical work environment of its employees (Burgelman et al.,
2004, 671). It illustrates the success of an innovation laboratory
for encouraging creativity and developing inventions by, among
other things, supporting the work environment.
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74 Strategic alliances, mergers and acquisitions
Corporate Cultures (CCs) where employees derive their identity largely
from their boss and/or organizational unit (parochial), and employ-
ees which identify themselves with their job or contents of their job
(professional).
Identi cation with job
Employees that de ne themselves by their technological speciality, rather
than by the organization they work for, see themselves as completely
separate from the company at large and often the company at large views
them as separate as well (P eging and Zetlin, 2006). This kind of spe-
cialization is found in professional CCs (Hofstede et al., 1990), and could
potentially inhibit innovation (Ahmed, 1998), as high domain- relevant
skills may narrow the search heuristics to learnt routines (depth), thereby
fundamentally neglecting new perspectives (width). On the other hand,
skills and knowledge in a particular  eld enhances the possibility of a new
and deeper understanding (Ahmed, 1998), which is important for techni-
cal, radical innovation. A good way to deal with the balance of depth and
width is by using cross- functional teams as described by Christensen and
Overdorf (2000). Indeed, it is widely agreed that di erent functional spe-
cialisms have to cooperate closely to achieve successful radical innovation;
especially when technical expertise must meet business and market knowl-
edge (Ulijn et al., 2001; Menzel et al., 2007). However, as Ulijn et al. (2001)
illustrate, see Table 3.1, di erent cooperating professional cultures might
lead to con ict situations. As we will argue later on, this is not necessarily
a bad thing.
Weggeman (2007, 230) also contributes to the distinction between a local
versus a professional focus of interest. Most important for our research is
that he argues that knowledge workers tend to prefer a professional focus
of interest. He also argues that extremes are rare in this dimension, with
likely values between 60 and 80 (on a scale of 0 to 100, 0 having an extreme
local focus of interest, 100 as the most professional focus of interest).
Low social control
If there is strong social control, as is the case with a local focus of inter-
est (parochial), it is not possible for the employees to go beyond what is
normally accepted and everybody will behave more or less in the same
way. Group similarities, the result of strong social control, do comfort
us because they seem to facilitate an easier work situation (Carayannis
and Chanaron, 2007, 217), but result in uncreative short- term thinking,
therefore inhibiting radical innovation. The opposite – professional focus
of interest – guarantees long- term creativity because the employees are not
forced to thinking ‘the same’.
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Creating a supportive culture for corporate entrepreneurship 75
Future orientation
In a parochial or local focus of interest, employees do not look far into the
future, but assume that the organization does so for them. For a profes-
sional focus, the opposite applies and employees do have a future orien-
tation concerning their job. Weggeman (2007, 213) therefore states that
employees with a high professional focus of interest can easily be tempted
to switch to another organization, if given better opportunities to use their
expertise. This future orientation of employees with a professional focus
of interest could thus possibly inhibit innovation, because key people may
leave the new business venture during the project.
Proposition
Identi cation with the profession requires a thorough technical knowledge
which, together with the possibility to deviate from the internal norm,
has been found necessary for the development of radical innovation.
However, a too strong future orientation might impede radical innovation
as key persons might leave the new business venture premature. We there-
fore argue that a medium professional focus of interest is most suitable for
the development of radical innovation:
Proposition 3: a medium- strong professional focus of interest stimulates
the development of radical innovation.12
Table 3.1 The mutual perception of engineers and marketers
What marketers think of engineers What engineers think of marketers
Have no sense of time, service or
competitive advantage.
No worry about or underestimate
costs.
Hide in the lab.
The client should adapt.
Standardization and technology
are sacrosanct.
Continue developing a product
without planning.
Want everything always Now, want
to deliver the product before it is
ready, are always in a hurry and
impatient or cannot decide what they
want.
Are aggressive, demanding and
unrealistic.
Promise more than they can
guarantee with the product
speci cations.
Have no sense of technology, no trust
in engineers, and are not interested in
their problems.
Focus on unrealistic pro t targets.
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76 Strategic alliances, mergers and acquisitions
Dimension 4: Open System versus Closed System
The fourth dimension makes the distinction between a culture with a
closed system and a culture with an open system. An important character-
istic of a closed system is that people do not  t easily into the organization,
which contradicts with an open system, where people will easily  t into the
organization.
Acceptance
If outsiders are coming into a community with new assumptions and they
nd the culture di cult to budge, it will decrease their innovative potential
because they will often give up in frustration or  nd themselves ejected
by the organization as being too foreign in orientation (Schein, 1983).13
Carayannis and Chanaron (2007, 161) described this as liveliness, and it
is about continuous organizational changes whereby deep- seated assump-
tions, goals and problem- solving approaches are questioned. It is argued
that doing so will increase the creativity and thus innovation. This thus
argues for an open system
If there is an open system culture in place, it will stimulate diversity,
because employees will accept newcomers more easily and almost every-
body will  t in the organization. Numerous authors found that hetero-
geneous workforces are rich seedbeds for ideas, creativity and innovation
due to the fact that di erent perspectives will generate a diversity of
creative solutions to a given problem (see Box 3.3 for an example) (Hauser,
1998; Anderson and Tushman, 1990; Bessant and Tidd, 2007, 66; Bassett,
2005; Leavy, 2005; McLean, 2005; Jamrog et al., 2006; Carayannis and
Chanaron, 2007, 161).
This is also because of the resulting constructive con ict which will lead
to improved information  ows (Anderson and Tushman, 1990; Martins
and Terblanche, 2003; McLean, 2005; Jamrog et al., 2006; Menzel et al.,
2007). Con ict can indeed have a positive e ect on performance, but only
when there is an open system set in place, as otherwise the consideration
of more options and alternative strategies (thus avoiding groupthink) will
degenerate into personal con icts (Bessant and Tidd, 2007, 62). Too few
con ict situations can result in potentially motivated individuals lacking
motivation in their task as meetings and deadlines are more about ‘tell’ and
not consensus (Bessant and Tidd, 2007, 62). On the other hand, too much
con ict can lead to individuals disliking each other and for this reason
holding back information, lying and exaggerating, resulting in absentee-
ism, poor quality, low morale and loss of competitiveness (Montes et al.,
2004, 63; Bessant and Tidd, 2007). Indeed, the con ict generated must be
well managed to make sure such con icts remain constructive (Jamrog et
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Creating a supportive culture for corporate entrepreneurship 77
al., 2006). It is important to prevent emotion con ict, as this is generally
energy- sapping and destructive, creating anxiety and hostility (Hauser,
1998; Bessant and Tidd, 2007, 62).
Non- secrecy
The last characteristic of this dimension is whether or not the organization
and its members are closed and secretive. This could be due to industrial
espionage and/or con dential customer information. Chesbrough (2003)
argues that indeed internal RandD and secrecy formed an e ective entry
barrier for competitors in many markets, but the model of ‘closed inno-
vation’ is not a standard any more because of the growing numbers of
knowledge workers and private venture capitalists. Therefore the concept
of open innovation is adopted by many  rms, which closely relates to an
open system, allowing  rms to commercialize external (as well as internal)
ideas by deploying outside (as well as in- house) pathways to the market.
Box 3.4 illustrates this with a short example of Xerox PARC.
Proposition
An open system will allow for the creation of a diverse workforce, thus
creating a diverse knowledge base with the possibility for constructive
con ict. This dimension is therefore likely to in uence the speed of the
BOX 3.3 IBM, BILL GATES, AND XEROX PARC
A model example of a company that refused to collaborate with
a team of people with a radical new innovative idea because of
a closed system is IBM. In the early 1980’s, Bill Gates and his
team showed their ideas about the future of software to IBM’s
board of directors (at that time it was a hardware company). One
of the reasons why the so- called, ‘Gates bunch’ was refused was
because they did not fi t into the closed IBM organization. This
corporate culture was very formal while the ‘Gates bunch’ looked
like a couple of hippies.
On the other hand, the highly innovative Xerox PARC can
be used as an example of how an open system could work for
innovative initiatives. The easy fi t within this special department
allows employees to act and appear in the way they think is suit-
able, attracting a diversity of knowledge workers. Because of this,
they have become notorious for long hear, beards, and working
shoeless and shirtless (Burgelman et al., 2004, 672).
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78 Strategic alliances, mergers and acquisitions
innovation process, as a heterogeneous workforce will be able to tackle
problems in enhanced ways, avoiding groupthink behaviour. The right
balance of con ict will result in people behaving in a more mature manner
with constructive debate. The open system approach is in line with the
ideas about open innovation, which leads to an increased innovative
potential. Therefore the following proposition is formulated:
Proposition 4: a strong open system stimulates the development of
radical innovation.14
Dimension 5: Loose versus Tight Work Discipline
The  fth dimension focuses on the amount of internal structuring in
an organization, and therefore the predictability of the employees.
One of these obstacles for developing radical innovation is to set the
right amount of internal structuring for the development of radical
innovation.
Internal structuring
Utterback (1994, 230) states that for radical innovation to occur, tra-
ditional organizational controls must loosen. Indeed, decentralization
is preached by many scholars of innovation (Martins and Terblanche,
2003; Burgelman et al., 2004; Jamrog et al., 2006; Bessant and Tidd, 2007;
Menzel et al., 2007). With little freedom, people are not able to work in a
creative way because of the strict guidelines and rigid roles. In that sense,
they have to carry out their work in prescribed ways and are likely to
spend a great deal of time and energy obtaining permission and support
(Bessant and Tidd, 2007, 66). To promote innovation, new business
BOX 3.4 OPEN INNOVATION
An example can be seen at Xerox PARC where researchers
developed numerous inventions which were not seen by Xerox
as promising technologies (for example the Graphical User
Interface), with their main focus on high- speed copiers and print-
ers. With an open innovation philosophy, they could have sold
this concept to interested third parties (for example Apple or
Microsoft), or they could have made a spin- off. In the same way,
new promising technologies can be acquired from other fi rms,
which fi t the buying company’s long- term strategy.
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Creating a supportive culture for corporate entrepreneurship 79
ventures should allow their employees to take time to think creatively and
to experiment (Martins and Terblanche, 2003; McLean, 2005).
On the other hand, Tushman and O’Reilly (1996, 26) found that, to
have an organizational culture that stimulates innovation, an organiza-
tion should simultaneously exert loose and tight control: ‘They are tight in
that the [organizational culture] is broadly shared and emphasizes norms
critical for innovation . . . The culture is loose in that the manner in which
these common values are expressed varies according to the type of inno-
vation required.’ This is also called  exibility control tension: successful
innovation requires companies, besides setting the stage for generating
new ideas ( exibility stimulates creativity), also to have the business disci-
pline and processes needed to take those new ideas to the market (Jamrog
et al., 2006; Khazanchi et al., 2007). Box 3.5 illustrates this.
Balanced resources
Being a cost- conscious organization has among other things to do with the
resource policy. Having too few resources may seriously hinder innovation
as this will force employees to spend their time searching for additional
BOX 3.5 THE DOT. COM CRASDH; GOOGLE AND
3M
A good example of problems that occur when there is a loose
structure only could be seen during the dot.com crash. Many
youthful and exuberant companies got into serious for putting
too much faith in creativity and too little value on traditional busi-
ness discipline and experience (Leavy, 2005). This can happen
because these employees simply do not know the right proce-
dures and do not possess the right skills (Bessant and Tidd,
2007, 66). For example, Netscape was too late in introducing
business discipline in its competition with Microsoft in the browser
market and lost a huge amount of market share subsequently.
Examples of fi rms fi nding a balance between freedom and
control are companies renowned for innovation, such as Google
and 3M, which tell employees to spend a certain percentage of
time on creative work on their own initiative without any guid-
ance (Davila et al., 2007, 143). To support this aspect, specifi c
seed funding is provided, and the individuals are encouraged to
share knowledge and become involved in each other’s projects
(Ahmed, 1998).
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80 Strategic alliances, mergers and acquisitions
resources or they become to lean. Both situations potentially inhibit inno-
vation (Bessant and Tidd, 2007, 61). Having too many resources could
also be an obstacle because employees with plenty of time and money to
get results will lose their direction, creativity and motivation (Amabile,
1998, 61; McLean, 2005; Jamrog et al., 2006; Bessant and Tidd, 2007). Box
3.6 provides a short example of how IBM handles this issue.
Lack of predictability
The operational mindset found at many large companies with a tight work
discipline results in managers focusing primarily on disciplined execution.
This results in a mere focus on operations, cost savings and short- term
nancial performance. In such settings, managers strive for tight control
and error- free performance by creating a predictable environment of
control, where the employees do as they are told. It does not need further
explanation that this does not encourage the creativity needed for the
development of radical innovation (Gupta et al., 2006).
Proposition
A balance between control (creating predictable behaviour) and freedom
(allowing creativity) is crucial for the development of radical innovation.
As described above, too much control is considered to be a major obstacle
for innovation, but too little control may also inhibit the development
of innovation. According to the literature, though, it is still necessary to
be on the ‘easy- going work discipline’ side as this has a positive e ect on
resource handling (not too much but certainly not too little) and the less-
predictable behaviour of the employees (which is more likely to result in
BOX 3.6 EMERGING BUSINESS
OPPURTUNITIES AT IBM
The system for the EBOs (Emerging Business Opportunities) of
IBM encourages experimentation and creativity, while providing
thoughtful oversight and strategic advice (Garvin and Levesque,
2006). It ensures that adequate resources are available, and
that managers do not have to spend excessive time searching
for funds. At the same time, the system does not ignore tangi-
ble, short- term results (internal structure). Businesses are not
allowed to languish, nor are they given unlimited time- frames.
EBO leaders are tasked with achieving concrete, measurable
milestones.
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Creating a supportive culture for corporate entrepreneurship 81
radical innovation). Derived from the above, the following proposition is
made:
Proposition 5: a medium- easy- going work discipline stimulates the
development of radical innovation.15
Dimension 6: Normative versus Pragmatic- Driven
The sixth dimension deals with the notion of customer orientation. The
scale of the dimension makes a distinction between an internally driven
culture in which the employees of the company are convinced of knowing
what is best for the customer (normative) and an externally driven culture
in which the satisfaction of the customers is most important, even if this is
not in the customers’ best interest (pragmatic).
Procedures or  exibility
Flexibility in this context means to what degree an organization is able to
react to customer demands which di er from the way it goes normally.
Procedures in this dimension are standardized ways or rules which have
to be followed to serve the customers and to prevent mistakes. So, in
other words, the higher the amount of procedures concerning customer
orientation an organization has, the less  exible it is to react to customer
demands. Deshpandé et al. (1993) found that cultures which are  exible
and responsive to the market outperform more consensual and internally
oriented cultures. Indeed, in an external environment the competitiveness
with other companies encourages continual changes in products, technol-
ogy and customer preferences, which stimulate innovation (Martins and
Terblanche, 2003; Menzel, 2008). Nevertheless, new business ventures
should still make use of a low to moderate amount of formal rules and reg-
ulations as all companies should have some guidelines to work within (for
example for health and safety reasons) (Martins and Terblanche, 2003).
Ethical business methods
Another aspect that shows the di erence between an internally driven
orientation and an externally driven one is how organizations deal with
ethics. Biotechnology is an example of an area in which many (radical)
innovations are developed. Organizations that develop these innovations
thus have a more pragmatic view about ethical methods than other organi-
zations. Nevertheless it is still the consumer who has to accept this kind
of innovation. In the beginning of the 1990s, the company Calgene devel-
oped the so- called ‘Flavr Savr Tomato’, which was superior to normal
tomatoes due to changes introduced to the genome of the normal tomato
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82 Strategic alliances, mergers and acquisitions
with biotechnological techniques. Although this tomato was healthier and
tasted better, the average consumer did not accept genetically engineered
food (yet). Nowadays, genetically engineered food is considered OK by a
large majority of the people (Moore, 1991), and reached the main market,
implying a huge market value. This example shows that for new inven-
tions, sometimes the borders of ethical issues should be sought, to develop
them further into successful innovations.
Customer focus
The ability to focus on customers (pragmatic attitude) is considered to be
a top- ranked factor for developing an innovative culture (Hauser, 1998;
Jamrog et al., 2006). Indeed, a market orientation is always required for
developing a successful new product, but for radical innovation, it should
not be seen as a substitute for a technology orientation (normative atti-
tude). Indeed, the innovation literature shows that a mere focus on the
current market does not guarantee innovative success as it will likely result
in the risks of incremental innovation only (Herstatt, 2002; Jamrog et al.,
2006). Therefore, traditional market research methods, with a focus on
current customers, used for the discovery of radical innovation in the form
of new market–technology combinations, possess only limited suitability
for new business ventures (Danneels, 2004).
Nevertheless, for radical innovation, this does not mean that customer
focus should be forgotten as a mere technology- push perspective poses
serious pitfalls as well, because it may address the needs of the atypical
user and a lock- in into one particular solution (Burgelman et al., 2004).
Chandy and Tellis (1998) found that  rms focusing on potential future
customers (latent needs) have a higher degree of achieving radical product
innovation compared to companies focusing on their established cus-
tomers (expressed needs). This implies that  rms should understand the
latent and unexpressed needs of their customers (Danneels, 2004). Indeed,
customers are not aware of future needs, and therefore organizations
should use specially quali ed, innovative knowledge carriers early on in
the process. Examples of these are lead users or external experts with rel-
evant knowledge from analogous markets (Jamrog et al., 2006; Herstatt,
2002). Understanding the deep shifts in consumer behaviour is notoriously
di cult, but once understood can bring great potential, namely radical
innovation (Henderson, 2006).
Proposition
To summarize: a new business venture should be  exible and should not
have too many procedures (concerning the customer orientation) as this
will impede radical innovation, although some rules have to be present.
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Creating a supportive culture for corporate entrepreneurship 83
Next, a pragmatic attitude concerning ethics could have a positive e ect
on the search for new (radical) inventions, as was illustrated above. The
last subsection discussed the di erent types of customer focus related to
radical innovation. It can be concluded that it is important for new busi-
ness ventures to have a strong focus on the latent needs of customers,
through for example lead users, thereby balancing the technology- push
and market- pull perspectives. In view of this, the following proposition is
adopted:
Proposition 6: a medium- strong pragmatic orientation stimulates the
development of radical innovation.16
Empirical Findings
The above- described propositions were subsequently tested at six di erent
new business ventures located at two large and successful Dutch multi-
nationals. All six new ventures were on or around the formerly speci ed
phase of the innovation process. To obtain these results, surveys17 were
distributed to 79 selected respondents, of which 60  lled out the whole
questionnaire. In addition, six interviews were conducted with the inno-
vation managers of the six new business ventures to con rm the  ndings
from the survey. Also, six more interviews were held with persons in
strategic positions (senior director new business development; director
innovation programme; director human resources innovation). Figure 3.2
discriminates between the average scores of the two companies, and the
estimated theoretical optimum.
Box 3.7 provides a summary of the proposed propositions (P1–P6) for
the reader’s convenience. We will continue with a short summary of the
main  ndings.
P1: as argued, the literature states that a goal orientation is crucially
important for developing radical innovation in the CE setting. Empirical
ndings indeed con rmed that a goal orientation, that is put in place well,
allows for risks to be taken and the necessary focus on results instead of
on procedures. It was found to be the most suitable way to create creative
ideas.
P2: an orientation on people is important as the employees make or
break the project. Nevertheless, too much focus on employees was found
to take away the challenge and e ectiveness needed for the development
of radical innovation. A balance is thus needed with, on the one hand,
attracting and keeping key employees, and on the other hand, enabling
and triggering people to deliver exceptional results.
P3: the need for in- depth knowledge argues in favour of a professional
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84 Strategic alliances, mergers and acquisitions
Position of the propositions between the two extremes
Position of the Company A
Position of the Company B
1 Process
2 Employee
3 Parochial
4 Open
5 Easy-going
6 Normative
Key
Extreme
Extreme
Strong
Strong
Medium
Medium
Moderate
Moderate
Balance
0 100
50
Goal
Job
Professional
Closed
Tight
Pragmatic
Source: Layout based on Ulijn et al. (2004).
Figure 3.2 Hofstede’s et al. (1990) six dimensions of organizational
culture with theoretical estimates and the two Dutch
multinationals
BOX 3.7 THE SIX ESTIMATED PROPOSITIONS
AS DERIVED FROM THE LITERATURE
P1. A medium strong goal orientation will stimulate the develop-
ment of radical innovation.
P2. A balance between an employee and a job orientation
stimulates the development of radical innovation.
P3. A medium strong professional focus of interest stimulates
the development of radical innovation.
P4. A strong open system stimulates the development of radical
innovation.
P5. A medium easy going work discipline stimulates the devel-
opment of radical innovation.
P6. A medium strong pragmatic orientation stimulates the
development of radical innovation.
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Creating a supportive culture for corporate entrepreneurship 85
focus of interest. Indeed, results illustrated that creative con ict, resulting
from lower levels of social control, allows employees to go beyond what
is normally accepted, likewise preventing behaviour which inhibits the
development of radical innovation.
P4: the literature review revealed that the implications of this speci c
dimension can be signi cant, as an open system allows for a diverse
workforce but also re ects the possibilities to utilize open innovation. The
empirical evidence con rmed these  ndings, but also illustrated that it is
very di cult to create an open system (both Company A and Company B
were struggling with the balance between intellectual property protection
and an open system).
P5: the allowance for creative behaviour in the innovation process was
found to be of key importance, and too much bureaucracy can seriously
impede this. Indeed, a balance between freedom and discipline was found
necessary for the development of radical innovation, although both the
literature and the empirical  ndings suggest that the focus should be on
a loose work discipline (hence the separation found between the mature
organization and its new business ventures).
P6: this dimension is of crucial importance for  rms that want to
respond to opportunities from the market in an e ective manner. At
Company B, empirical  ndings illustrated that quick decision- making in
this area was limited because of the many rules set in place, too early in the
innovation process. This subsequently limited their  exibility to e ectively
respond to market opportunities. Company A was found to be very strong
in this area, especially research into the latent needs.
To summarize: Figure 3.2 illustrates that the theoretical  ndings t
rather well with the empirical  ndings, as all scores were found on the
expected sides of the dimensions and close to the proposed optimum
estimates. This gives us further con dence that the proposed theoretical
values contain truth. From this we can conclude that the balancing act
between creativity and business discipline for CE organizational cultures
requires a culture that is results- oriented, externally focused (pragmatic),
is both job and employee oriented, loose in work discipline, has a profes-
sional focus of interest and is very open to the external environment.
Freedom is essential for creativity and thus the design of cutting- edge
products, services and technologies, while control is essential for keeping
the vision manageable, the strategy coherent and implementation on
target. Interviews at both companies showed that the di culty was not
only to  nd this balance, but also in dealing with the shift in this balance
during the innovation process (which inevitable occurs as the project
progresses). For example, in the beginning of the innovation process more
creativity is required while later, near the end, business discipline becomes
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86 Strategic alliances, mergers and acquisitions
more dominant for successful commercialization of radical innovations.18
This therefore asks for di erent CE organizational cultures during dif-
ferent phases of the innovation process. At one of the new business
ventures of Company B, the need for cultural shift was recognized and
accomplished by changing a large part of the team, thereby changing the
(perceived) practices and thus the organizational culture.
STRATEGIC ALLIANCES AND CORPORATE
ENTREPRENEURSHIP
Doing di erent things, which is the purpose of using CE, requires the use
of new knowledge and experience (Burgelman, 1983; Nooteboom, 2000).
Although one option may be to develop such knowledge in- house, col-
laboration with others is often considered to be a more e ective way to
acquire such valuable, novel knowledge. SAs are considered to be an e ec-
tive means for this purpose and CE activities may thus signi cantly bene t
from inter rm SAs (Teng, 2007). Sarkar et al. (2001) therefore argued
that the proactive formation of SAs re ects an important dimension of
entrepreneurial behaviour. They can be de ned as voluntary agreements
between independent  rms with the aim at improving the long- term per-
spective of product market combinations of at least one of the companies
involved (Gulati, 1998; Hagedoorn and Duysters, 2002). SAs are a  exible
organizational mode that allows  rms to bring complementary strengths
together in order to experiment with new technological and organizational
ideas (Mody, 1993), by developing access relationships into required stra-
tegic assets like value creation through new skills and leveraging comple-
mentary resources (Teng, 2007).
The traditional reason for forming alliances was to achieve transaction
costs advantages (Eisenhardt and Schoonhoven, 1996). Recent literature
has broadened this view and considers SAs to ful l three general goals in
the CE setting (Teng, 2007): (1) forming SAs for innovation, for instance
by joint research; here  rms are able to share R&D costs and risk besides
achieving economies of scale in research (Eisenhardt and Schoonhoven,
1996); (2) Corporate venturing, which involves creating or acquiring new
units in order to generate new business (Chesbrough, 2003); and (3) stra-
tegic renewal, which can be de ned as the  rm’s transformation in terms
of changing its scope of business or strategic approach (Zahra, 1996;
Teng, 2007); or in other words, activities to alter a  rm’s path- dependence
(Volberda et al., 2001).
Strategic renewal can be de ned as: ‘the creation of new wealth through
new combinations of resources’ (Guth and Ginsberg, 1990). The success of
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Creating a supportive culture for corporate entrepreneurship 87
strategic renewal thus depends on obtaining new resources and capabili-
ties which can be either tangible, like activities, but also intangible (Teng,
2007). As stated above,  rms can learn these needed resources and capabil-
ities from their partners, meaning that  rms can achieve strategic renewal
by utilizing SAs (Eisenhardt and Schoonhoven, 1996). Furthermore,
among intangible capabilities, learning (and thus perceiving) new prac-
tices can be considered. As was empirically shown by Hofstede et al.
(1990), organizational culture is mainly de ned by perceived practices.
Following from this reasoning, one could argue that it is possible to shape
an organizational culture by either changing the practices or changing the
way these practices are perceived. Note that by arguing in this way we
follow the adaptive perspective of strategic renewal, which suggests that
rms can and do change, thereby overcoming their rigidities by an adapta-
tion process of adopting new practices (Lewin and Volberda, 1999). This
is opposed to the selective perspective which suggests that the strategic
activities of  rms are limited to strengthening and exploiting their exist-
ing core competencies (Lewin and Volberda, 1999), which likely results in
incremental innovation only, and associated inevitable creative destruc-
tion (Schumpeter, 1942, 82). In sum, achieving the correct organizational
culture for CE practices can be considered as strategic renewal. Strategic
renewal in turn is a goal which can be achieved by utilizing SAs.
As is known from the literature and argued above, alliances can provide
concrete, as well as more abstract, critical resources and capabilities
(Eisenhardt and Schoonhoven, 1996). Although many advantages of
SAs have been mentioned in the literature, optimizing an organizational
culture has not been among them (at least not in a direct way), even
though implanting CE usually implies making fundamental changes
in the company’s culture (Zahra, 1996). Here, we see SAs in a new and
complementary way as we argue that carefully chosen SAs might also
be useful to establish or (further) optimize an innovative CE culture by
adopting practices from the alliance partner needed for the development
of radical innovation. Interesting to note here is that Ulijn et al. (2007)
found that certain national culture dimensions clearly in uenced coop-
erative attitudes towards strategic partnership and partnership diversity.
So, although there are most certainly possibilities to optimize the organi-
zational cultures of CE by utilizing SA, success is also dependent on the
national culture dimensions of the cooperating alliance partners.
Nevertheless, we argue that SAs can be helpful in creating the right CE
culture in two di erent ways. Firstly, when there is too much focus on cre-
ativity, one could consider establishing alliances with partners that bring
in su cient business discipline. For example,  rms should be selected with
strong organizational cultures (process orientation, normative and having
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88 Strategic alliances, mergers and acquisitions
a tighter work discipline), which facilitate internal behavioral consistency,
resulting in more reliable performance (Sørensen, 2002). Secondly, in
contrast, when there is a purported tendency to stress business discipline
at the expense of creativity, it may be useful to ally with  rms that are
especially strong on the creativity side. For this, one could think of an alli-
ance with a  rm which is more results- oriented, has a more open system,
and propagates a loose work discipline. In either way, SAs can form an
important means to overcome cultural weaknesses and initiate cultural
changes in such a way that a careful balance between creativity and disci-
pline is accomplished. As an example here we could mention the di erence
between the new business ventures of the two multinationals regarding the
sixth dimension, normative versus pragmatic driven (see Figure 3.2). A
knowledge alliance between these two  rms with the focus on optimizing
the organizational culture might enable the CE units of Company B to
become more  exible concerning its ability to react to customer demands,
by learning these practices from Company A. Besides, setting up this type
of learning alliance might well be easier than achieving technological SAs,
as there is no need for technology exclusivity, regarding ownership and
dissemination (Teng, 2007), but could bring the organizational culture
needed for the development of such technologies. In this way there will be
more potential alliance partners to select from.
CONCLUSIONS
This chapter has described how the ideal organizational culture for new
business ventures should look, by optimizing the six dimensions of organi-
zational culture as identi ed by Hofstede et al. (1990) for CE activities.
The six resulting theoretical estimates, or propositions, were subsequently
tested at six new business ventures located at two large Dutch multination-
als. Based on this investigation, we illustrated that the ideal innovative
organizational culture for CE is mainly characterized by a medium- strong
result orientation, a balanced job and employee oriented approach, a
medium professional focus of interest, a medium- loose work discipline,
strong open systems and a medium- strong pragmatic attitude. Here, we see
how an organizational culture that is conducive to CE activities di ers in
important ways from a corporate culture that is speci cally aimed at main-
taining stability and the  ne- tuning of established routines. Such a culture
will show almost opposite characteristics, such as a much stronger process
orientation, more parochial and relatively inward- looking (closed), with
rather tight control mechanisms, and stringent behavioural norms. These
profound cultural di erences between a parent company and a CE unit
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Creating a supportive culture for corporate entrepreneurship 89
illustrate convincingly the great value and importance of organizational
separation of CE activities. It is such separation that provides potential
room for CE units to develop their own entrepreneurial organizational
culture.
But whereas such separation may initiate the needed cultural devia-
tion, it does not guarantee that CE units would automatically arrive at
an organizational culture that is supportive for entrepreneurial activities.
To achieve that, SAs can be a useful way to build and  ne- tune such an
organizational culture. Here, SAs do not only provide access to critical
external knowledge but may also form an important change vehicle for
optimizing CE culture in such a way that creativity and discipline are
carefully blended. This implies that partner selection should explicitly
take the cultural dimensions into account, which sheds a di erent light
on cultural  t between partners. Traditionally partners are selected based
on the degree of cultural  t in terms of overlap, where too little overlap is
seen as negative (Douma, 1997). Here, we argue that in view of boosting
a CE- supportive organizational culture, partner selection should be based
on potential complementary cultural dimensions. Depending on the cul-
tural pro le of the speci c CE unit, partners should be selected that are
complementary either on the creativity side or on the disciplinary side.
The size of the empirical evidence presented in this investigation did not
allow the drawing of conclusions based on a large dataset. However, that
was also not the goal of this exploratory research, where the main aim was
to explore new ideas. The ideas presented in this chapter should there-
fore be tested on larger samples of new business ventures in longitudinal
research settings in order to investigate: (1) if the organizational culture
changes over time; (2) how organizational culture links to innovative
performance (are the propositions universally true?); (3) if it is possible to
deliberately change organizational culture by engaging in SA.
NOTES
1. This is consonant with the fact, in the history of technology, that initially innovations
are developed not in areas where they can achieve their full potential, but in areas where
they can be tolerated (Nooteboom, 2000).
2. An innovation is the successful introduction of an invention to the market whereas
an invention is a pure new scienti c discovery (which thus may have the potential to
become an innovation). Roberts (1988) de ned it as: ‘innovation equals invention plus
exploitation’.
3. Practices are de ned here as conventions, customs, habits, traditions, usages, and so on,
re ect symbols, heroes and rituals.
4. The six practice dimensions were labelled: process- oriented versus results- oriented;
employee- oriented versus job- oriented; parochial versus professional; open system
versus closed system; loose versus tight control; and normative versus pragmatic.
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90 Strategic alliances, mergers and acquisitions
5. The three value dimensions were labelled: need for security; work centrality; and need
for authority.
6. Symbols provide tangible evidence of the culture; they are manufactured by people to
facilitate activities, for example a company logo, which summarizes what a company
stands for. They can be words, gestures, pictures or objects that carry a particular
meaning. Rituals are standardized detailed sets of techniques and manage anxieties.
They are collective activities that are socially essential within the culture. Heroes are
persons who serve as a model. They can be dead or alive, real or imaginary, but all
heroes act as a role- model illustrating the best behaviour (Hofstede et al., 1990; Reigle,
2001).
7. The socialization of members is a matter of learning the practices, which consists of
symbols, heroes and rituals of a speci c unit or organization.
8. Note the distinction between corporate culture and organizational culture. While both
are comparable concepts, the former re ects the culture of the parent company while
the latter re ects the culture of the CE unit, or new venture. An example of an organi-
zational culture tuned for innovation is a culture building upon the principles of CE
(Thornberry, 2003). The possession of the right (interpretations of) practices, meaning
organizational culture, provides the venture with the necessary ingredients to innovate,
and to sustain innovation (Ahmed, 1998). However, remarkably few authors describe
the details of this relationship (McLean, 2005). Even if the details are described, they
are not structured in a way that would enable measurements of the optimal organiza-
tional culture for the successful development of radical innovation.
9. Note that there is a distinction between uncertainty and ambiguity. In uncertain envi-
ronments, alternatives and options are reasonably clear, and the likelihood of di erent
outcomes can be assessed probabilistically. In ambiguous environments, neither the full
range of alternatives nor the full range of outcomes is known in advance (Garvin and
Levesque, 2006), meaning that little is given or predetermined.
10. See Figure 3.2 for a graphical representation of the propositions and a rationale of the
intensi ers used.
11. See Figure 3.2 for a graphical representation of the propositions and a rationale of the
intensi ers used.
12. See Figure 3.2 for a graphical representation of the propositions and a rationale of the
intensi ers used.
13. (Schein, 1983) argues that this scenario is especially plausible when the distinctive parts
of the corporate culture are based on biases that are not economically justi able in the
short run.
14. See Figure 3.2 for a graphical representation of the propositions and a rationale of the
intensi ers used.
15. See Figure 3.2 for a graphical representation of the propositions and a rationale of the
intensi ers used.
16. See Figure 3.2 for a graphical representation of the propositions and a rationale of the
intensi ers used.
17. The questionnaire was distributed by the  rm ITIM, which has the exclusive right to
commercialize the survey originally developed by Hofstede et al. (1990). The authors
gratefully acknowledge all support provided by Bob Wais sz and his team, see http://
www.itimfocus.com.
18. Our focus in this chapter is on the phase when new business ventures start to develop a
business with the invention.
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