Predictors and financial outcomes of corporate entrepreneurship: An exploratory study

Abstract

Today, there is considerable scholarly and managerial interest in corporate entrepreneurship; that is, those activities that enhance a company's ability to innovate, take risk, and seize opportunities in its markets. Corporate entrepreneurship centers on creating new business by penetrating new markets, pursuing new business, or both. Despite the growing recognition and use of corporate entrepreneurship, little empirical research has been done on its antecedents and potential association with company financial performance. To fill this gap in the literature, this study proposes a model that identifies potential environmental, strategic, and organizational factors that may spur or stifle corporate entrepreneurship. The model also highlights the potential associations between corporate entrepreneurship and corporate financial performance. Building on the existing literature, the study advances five hypotheses that operationalize the model. The hypotheses are tested using data from 119 of the Fortune 500 industrial firms, covering the period 1986 to 1989. This exploratory study's results indicate that: (1) environmental dynamism, hostility, and heterogeneity (multiplicity and complexity of environmental components) intensify corporate entrepreneurship; (2) growth-oriented strategies are associated with increased corporate entrepreneurship, whereas a strategy of stability is not conducive to corporate entrepreneurship; (3) the scanning, formal communication, and integration components of formal organizational structure are positively related to corporate entrepreneurship—increased differentiation and extensive controls stifle corporate entrepreneurship; (4) clearly defined organizational values, whether relating to competitors or employees, are positively associated with corporate entrepreneurship; and (5) corporate entrepreneurship activities are associated with company financial performance and reduced systematic risk.