In modern business environment, global competition continues to heighten and market demands rapidly evolve that companies strive to adroitly accommodate to these changing conditions for survival and success. As volatility in business environment created uncertainties and obsolescence in traditional business, innovation emerged as a significant driving force to sustain and improve competitive advantage for companies. However, despite both academic and practical focus on innovation and entrepreneurship, many companies face difficulties and often fail in motivating their employees to behave entrepreneurially. In discussing the root causes of these difficulties, I gained insights from literature review on challenges of corporate entrepreneurship
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When firms become large and complex, top management often designs several levels of hierarchy for functionality and delegate corporate entrepreneurship to employees at lower level. However, the reward is determined by the overall company performance and distributed to both the managers and “agents” (Jones and Butler, 1992). In short, mangers are not rewarded for behaving entrepreneurially, but for bearing and minimizing the risk for better performance. Thus, managers further develop risk aversion, only take up safe projects brought up by their agents and merely perform day-to-day functions without entrepreneurial initiatives. While these may seem stable for the company in the short-term, long-term development and profitability are questionable as managers continue to shirk their responsibilities in entrepreneurial activities (Jones and Butler, 1992). Moreover, the inherent nature of corporate entrepreneurship, which makes it difficult to measure or evaluate individual contribution, pushes most employees – even the delegates – to minimize their entrepreneurial efforts. Adding on to this free rider problem, increased bureaucratization in functional subunits, as they operate under a set of rules and standard procedures, significantly lowers entrepreneurial motivation. As a result, managers turn to “quota and budget watchers” (Thornberry, 2001), while lower employees play
When firms become large and complex, top management often designs several levels of hierarchy for functionality and delegate corporate entrepreneurship to employees at lower level. However, the reward is determined by the overall company performance and distributed to both the managers and “agents” (Jones and Butler, 1992). In short, mangers are not rewarded for behaving entrepreneurially, but for bearing and minimizing the risk for better performance. Thus, managers further develop risk aversion, only take up safe projects brought up by their agents and merely perform day-to-day functions without entrepreneurial initiatives. While these may seem stable for the company in the short-term, long-term development and profitability are questionable as managers continue to shirk their responsibilities in entrepreneurial activities (Jones and Butler, 1992). Moreover, the inherent nature of corporate entrepreneurship, which makes it difficult to measure or evaluate individual contribution, pushes most employees – even the delegates – to minimize their entrepreneurial efforts. Adding on to this free rider problem, increased bureaucratization in functional subunits, as they operate under a set of rules and standard procedures, significantly lowers entrepreneurial motivation. As a result, managers turn to “quota and budget watchers” (Thornberry, 2001), while lower employees play