FACTORS AFFECTING CORPORATE ENTREPRENEURSHIP INTENSITY IN RUSSIAN IT COMPANIES (Факторы влияющие на интенсивность внутрифирменного предпринимательства в российских ИТ компаниях)
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Introduction 5
Chapter 1. Corporate entrepreneurship: theoretical background and modern interpretation 7
1.1. Approaches to corporate entrepreneurship definition 7
1.2. Historical perspective of corporate entrepreneurship research 10
1.3. Benefits of corporate entrepreneurship 14
1.4. Internal and external factors influencing the intensity of corporate entrepreneurship 15
Chapter 2. Factors influencing corporate entrepreneurship intensity: results of empirical research 28
1.1. Case study design 28
1.5. Results of cross-case analysis 32
1.7. Findings from a case study 41
Conclusions 44
List of References 47
Appendix
Chapter 1. Corporate entrepreneurship: theoretical background and modern interpretation 7
1.1. Approaches to corporate entrepreneurship definition 7
1.2. Historical perspective of corporate entrepreneurship research 10
1.3. Benefits of corporate entrepreneurship 14
1.4. Internal and external factors influencing the intensity of corporate entrepreneurship 15
Chapter 2. Factors influencing corporate entrepreneurship intensity: results of empirical research 28
1.1. Case study design 28
1.5. Results of cross-case analysis 32
1.7. Findings from a case study 41
Conclusions 44
List of References 47
Appendix
The following master thesis investigation is devoted to internal and external factors affecting corporate entrepreneurship in Russian IT companies.
The IT industry by way of a research object was selected due to the fact that the IT industry is highly associated with innovations - ICT patents applications amount 40% of all patent applications and ICT R&D expenditures account up to 33% of overall business expenditures on Research and Development (OECD, 2015). In order to stay competitive in this industry company need to support a process of constant product development, possible only with innovations. There are two ways to stay innovative: merge innovations or develop innovation within a company. First way probably takes less effort, but second provides an internal source of innovations.
Corporate entrepreneurship importance for a company is hard to overemphasize: according to multiple scientific researches, it not only improves financial, market and innovation performance, but also enhances capabilities and helps in creating of learning organization. Companies with intensive corporate entrepreneurship tend to be more competitive in hostile markets, what has a special concern for companies currently operating on Russian market. The analysis of corporate entrepreneurship predictors has a significant importance for companies operating on highly innovative markets where lack of innovativeness, failure to diversify products portfolio and product updates’ delays leads to wane of a market share or to company bankruptcy. Ability to create an outstanding product is a main success driver on markets where customer’s preferences are formed by companies operating on this market. Moreover, constant development of new products and services is able to help a company to differentiate product portfolio and to avoid a company failure at a moment when product’s lifecycle is over.
The purpose of the study conducted is in building a working model of external and internal factors, influencing the intensity of corporate entrepreneurship and giving a description of how do elements of internal and external environment influence corporate entrepreneurship in Russian IT companies. Research question established is how external and internal factors affect corporate entrepreneurship. Answer on this question will give managers an understanding of which factors impact corporate entrepreneurship directly, which factors are just supportive and what direction company should work in order to establish intensive corporate entrepreneurship.
This paper consists of the investigation of approaches to corporate entrepreneurship definition, the theoretical research of corporate entrepreneurship theories with segregation on stages according to time and to the object of a research, identification of corporate entrepreneurship benefits and the observation of existing findings in corporate entrepreneurship antecedents. The study of theoretical sources is following with building 13-factors model, taking into consideration influence of external and internal environment. Farther as a result of research of connections between external and internal environment is suggested a model, taking into consideration key role of the industry influence on corporate entrepreneurship intensity.
The theoretical part is supported with the case study of five Russian IT companies consisting of interviews with companies’ founders and executives and the analysis of the results collected and adjustment of a theoretical model aligning it to the case study findings.
The last step of this research is comparison of results expected according to the theoretical model and results obtained from an empirical study, a discussion on matches and assumptions of reasons of mismatch, a managerial implication of the results obtained, a description of limitations and suggestions for further researches.
The IT industry by way of a research object was selected due to the fact that the IT industry is highly associated with innovations - ICT patents applications amount 40% of all patent applications and ICT R&D expenditures account up to 33% of overall business expenditures on Research and Development (OECD, 2015). In order to stay competitive in this industry company need to support a process of constant product development, possible only with innovations. There are two ways to stay innovative: merge innovations or develop innovation within a company. First way probably takes less effort, but second provides an internal source of innovations.
Corporate entrepreneurship importance for a company is hard to overemphasize: according to multiple scientific researches, it not only improves financial, market and innovation performance, but also enhances capabilities and helps in creating of learning organization. Companies with intensive corporate entrepreneurship tend to be more competitive in hostile markets, what has a special concern for companies currently operating on Russian market. The analysis of corporate entrepreneurship predictors has a significant importance for companies operating on highly innovative markets where lack of innovativeness, failure to diversify products portfolio and product updates’ delays leads to wane of a market share or to company bankruptcy. Ability to create an outstanding product is a main success driver on markets where customer’s preferences are formed by companies operating on this market. Moreover, constant development of new products and services is able to help a company to differentiate product portfolio and to avoid a company failure at a moment when product’s lifecycle is over.
The purpose of the study conducted is in building a working model of external and internal factors, influencing the intensity of corporate entrepreneurship and giving a description of how do elements of internal and external environment influence corporate entrepreneurship in Russian IT companies. Research question established is how external and internal factors affect corporate entrepreneurship. Answer on this question will give managers an understanding of which factors impact corporate entrepreneurship directly, which factors are just supportive and what direction company should work in order to establish intensive corporate entrepreneurship.
This paper consists of the investigation of approaches to corporate entrepreneurship definition, the theoretical research of corporate entrepreneurship theories with segregation on stages according to time and to the object of a research, identification of corporate entrepreneurship benefits and the observation of existing findings in corporate entrepreneurship antecedents. The study of theoretical sources is following with building 13-factors model, taking into consideration influence of external and internal environment. Farther as a result of research of connections between external and internal environment is suggested a model, taking into consideration key role of the industry influence on corporate entrepreneurship intensity.
The theoretical part is supported with the case study of five Russian IT companies consisting of interviews with companies’ founders and executives and the analysis of the results collected and adjustment of a theoretical model aligning it to the case study findings.
The last step of this research is comparison of results expected according to the theoretical model and results obtained from an empirical study, a discussion on matches and assumptions of reasons of mismatch, a managerial implication of the results obtained, a description of limitations and suggestions for further researches.
The purpose of the research conducted was in building a working model of external and internal factors, influencing the intensity of corporate entrepreneurship in Russian IT companies and giving a description of how do elements of internal and external environment influence corporate entrepreneurship intensity in Russian IT companies.
The research starts with a theoretical part, where were investigated more than 100 scientific researches (most of them is graded higher than 3 by ABS guide) devoted to corporate entrepreneurship, corporate venturing and intrapreneurship. Were described different ways to corporate entrepreneurship definitions, historical perspective of corporate entrepreneurship investigation from 1980 to 2016. Were provided researches evidence that companies with intensive corporate entrepreneurship demonstrate financial performance improvement, knowledge sharing enhancing and they are more competitive on a hostile market. Were evaluated five existing models of factors affecting corporate entrepreneurship and suggested two models: the first model describes relationships between external and internal environment and corporate entrepreneurship, and the second model catalogs set of internal and external factors affecting corporate entrepreneurship intensity, taking into account direction of this influence. It was suggested that centralization, complexity, level of formalization, decision making process, control system, leadership style, motivation to innovate, horizon of planning, flexibility of planning, scope of planning, dynamism, level of rivalry, heterogeneity of the market affects corporate entrepreneurship intensity.
Theoretical research was supported with a practical part consisting in case study of five Russian IT companies of different sizes, operating on diverse markets. For the case study were used multiple sources of evidence: open-end questions interviews with executives, participant-observation and analysis of web sites. After the data-collection process was conducted a cross¬case analysis and as a result of this from a theoretical model were excluded centralization, decision-making process, control system and leadership style.
The analysis provided is aimed to help executives of IT companies to understand how internal and external environment affects corporate entrepreneurship and which internal elements of an organization could support or diminish entrepreneurial intensity in conditions of Russian IT industry. According to the study conducted, corporate entrepreneurship improves financial and innovation performance, enhance knowledge sharing and makes companies more competitive in hostile market, which has high importance in current conditions of crisis in Russia.
From this study, managers could make a conclusion that high level of complexity in organization increases corporate entrepreneurship intensity and pay more attention on horizontal contacts among employees, create a PMO department or restructure a company in order to create a project organizational structure, making organization more flexible and sustainable.
On the contrary, high level of formalization diminishes corporate entrepreneurship intensity and takes extra time which could be critical in the industry where ability to be faster and more innovative than competitors is perceived as a survival rule. Consequently, decreasing the amount of formal elements within a company, usage of new types of communications: internal messengers, popular messengers will have a positive impact on company’s innovativeness.
Further, it could be concluded that non-monetary motivation works better in terms of corporate entrepreneurship, which could be a signal to change a motivation system if it does not fit this description. This research also supports the idea that nature of employees in Russian IT industry plays a significant role in establishing corporate entrepreneurship; this point together with a previous one gives understanding of HRM practices importance from a recruiting to a motivation policy. Proper recruiting of high-class specialists and turning them into loyal employees plays a significant role in future success of a business.
Onward, planning system has an impact on corporate entrepreneurship. Flexible system of planning, oriented on market and aimed on short or medium term periods is a reasonable choice for company operating on dynamic and hostile market. Renunciation from long-term planning could decrease company’s costs on planning adjustments, make company more flexible and enhance entrepreneurial intensity.
Moreover, the case study conducted evidences that high level of centralization, periodically autocratic leadership style and renouncement of shared decision making do not negatively relates to corporate entrepreneurship intensity and could be perceived as a normal phenomenon in Russian IT companies. On the contrary, these organizational features, especially cultivated by a company founder could support innovations. It could give managers an understanding of the fact that freedom of actions given to employees should have clear borders and most of decisions should be done by the narrow circle of executives. However, this does not mean that employees’ rights could be impinged and does not suggest a micromanagement as an appropriate way of company’s governance.
The study conducted met following limitations: difference of the positions held by interviewees and participant-observation of two companies of five. Difference of the interviewees’ positions could influence their awareness and point of view on diverse elements of organization. Two of five interviewees are founders of a company and we could see their equal awareness in answers to all questions, while representative from marketing definitely had less knowledge about organizational culture and motivation system and interviewee taking HRD position had difficulties answering questions concerning product launched and changed. Partly this limitation was overcame by using other sources of evidence; however, it could have some impact on the case study result. Second limitation is ability to use participant-observation as a source of evidence only for two company of the set. It gave us deeper knowledge of those companies, which could result unconscious preference to results obtained from this source. This limitation was minimizing by critical thinking and subjectivity reduction.
Further study could observe conclusion made using quantitative methods, in order to establish better understanding of how and which factors are correlated among themselves, to check with statistical methodology conclusion about crucial drivers of corporate entrepreneurship. It could be done by detailed investigation of linkages between factors, their intensity and reasons. Another direction for further researches could be quantitative investigation of connections between internal and external antecedents of corporate entrepreneurship, separating internal factors which are mostly influenced from outside and highlighting internal factor which are mostly formed from inside.
The research starts with a theoretical part, where were investigated more than 100 scientific researches (most of them is graded higher than 3 by ABS guide) devoted to corporate entrepreneurship, corporate venturing and intrapreneurship. Were described different ways to corporate entrepreneurship definitions, historical perspective of corporate entrepreneurship investigation from 1980 to 2016. Were provided researches evidence that companies with intensive corporate entrepreneurship demonstrate financial performance improvement, knowledge sharing enhancing and they are more competitive on a hostile market. Were evaluated five existing models of factors affecting corporate entrepreneurship and suggested two models: the first model describes relationships between external and internal environment and corporate entrepreneurship, and the second model catalogs set of internal and external factors affecting corporate entrepreneurship intensity, taking into account direction of this influence. It was suggested that centralization, complexity, level of formalization, decision making process, control system, leadership style, motivation to innovate, horizon of planning, flexibility of planning, scope of planning, dynamism, level of rivalry, heterogeneity of the market affects corporate entrepreneurship intensity.
Theoretical research was supported with a practical part consisting in case study of five Russian IT companies of different sizes, operating on diverse markets. For the case study were used multiple sources of evidence: open-end questions interviews with executives, participant-observation and analysis of web sites. After the data-collection process was conducted a cross¬case analysis and as a result of this from a theoretical model were excluded centralization, decision-making process, control system and leadership style.
The analysis provided is aimed to help executives of IT companies to understand how internal and external environment affects corporate entrepreneurship and which internal elements of an organization could support or diminish entrepreneurial intensity in conditions of Russian IT industry. According to the study conducted, corporate entrepreneurship improves financial and innovation performance, enhance knowledge sharing and makes companies more competitive in hostile market, which has high importance in current conditions of crisis in Russia.
From this study, managers could make a conclusion that high level of complexity in organization increases corporate entrepreneurship intensity and pay more attention on horizontal contacts among employees, create a PMO department or restructure a company in order to create a project organizational structure, making organization more flexible and sustainable.
On the contrary, high level of formalization diminishes corporate entrepreneurship intensity and takes extra time which could be critical in the industry where ability to be faster and more innovative than competitors is perceived as a survival rule. Consequently, decreasing the amount of formal elements within a company, usage of new types of communications: internal messengers, popular messengers will have a positive impact on company’s innovativeness.
Further, it could be concluded that non-monetary motivation works better in terms of corporate entrepreneurship, which could be a signal to change a motivation system if it does not fit this description. This research also supports the idea that nature of employees in Russian IT industry plays a significant role in establishing corporate entrepreneurship; this point together with a previous one gives understanding of HRM practices importance from a recruiting to a motivation policy. Proper recruiting of high-class specialists and turning them into loyal employees plays a significant role in future success of a business.
Onward, planning system has an impact on corporate entrepreneurship. Flexible system of planning, oriented on market and aimed on short or medium term periods is a reasonable choice for company operating on dynamic and hostile market. Renunciation from long-term planning could decrease company’s costs on planning adjustments, make company more flexible and enhance entrepreneurial intensity.
Moreover, the case study conducted evidences that high level of centralization, periodically autocratic leadership style and renouncement of shared decision making do not negatively relates to corporate entrepreneurship intensity and could be perceived as a normal phenomenon in Russian IT companies. On the contrary, these organizational features, especially cultivated by a company founder could support innovations. It could give managers an understanding of the fact that freedom of actions given to employees should have clear borders and most of decisions should be done by the narrow circle of executives. However, this does not mean that employees’ rights could be impinged and does not suggest a micromanagement as an appropriate way of company’s governance.
The study conducted met following limitations: difference of the positions held by interviewees and participant-observation of two companies of five. Difference of the interviewees’ positions could influence their awareness and point of view on diverse elements of organization. Two of five interviewees are founders of a company and we could see their equal awareness in answers to all questions, while representative from marketing definitely had less knowledge about organizational culture and motivation system and interviewee taking HRD position had difficulties answering questions concerning product launched and changed. Partly this limitation was overcame by using other sources of evidence; however, it could have some impact on the case study result. Second limitation is ability to use participant-observation as a source of evidence only for two company of the set. It gave us deeper knowledge of those companies, which could result unconscious preference to results obtained from this source. This limitation was minimizing by critical thinking and subjectivity reduction.
Further study could observe conclusion made using quantitative methods, in order to establish better understanding of how and which factors are correlated among themselves, to check with statistical methodology conclusion about crucial drivers of corporate entrepreneurship. It could be done by detailed investigation of linkages between factors, their intensity and reasons. Another direction for further researches could be quantitative investigation of connections between internal and external antecedents of corporate entrepreneurship, separating internal factors which are mostly influenced from outside and highlighting internal factor which are mostly formed from inside.