Human activity has reached its height in the 21st century. Therefore, there is a need to develop and facilitate spheres of human activities. Business is a sphere of human activity, which requires constant development and dynamic change. Under conditions of overall globalization processes, business activities have to adopt constant changes in order to satisfy diverse needs of customers and producers. Thus, innovation in the business field is required. Entrepreneurship is an integral part of the modern business world. A need for innovation in this field is a sign of constant development of the business world and reflects a dynamic nature of all participants of the business world (Bessant & Tidd 2009).
This research paper discusses entrepreneurship and innovation. Intrapreneurship will also be considered, as it implies entrepreneurship activity of employees within a certain organization. This phenomenon has been often studied from theoretical and practical perspectives, but there is a need to study positive and negative effects of intrapreneurship.
Entrepreneurs vs. Intrapreneurs
An entrepreneur differs from an intrapreneur in the following way: the former is responsible for the risk taking for being an owner and an active participant of a certain business. The latter is hired by a certain organization and he is responsible for financial success of the unit of his operation. Mutual capabilities for entrepreneurs and intrapreneurs are conviction, zeal and insight (Bolton and Thompson 2003). An intrapreneur propagates and supports his ideas, thus, creating a gap between the organizational goals and his own goals. The best scenario for an intrapreneur is to gain support from the organization where he works. In other cases, he has to quit his job and set up his own business.
A well-known example of intrapreneurship is separation and propagation of the ideas developed by the developers of Adobe, John Warnock and Charles Geschke (Literature Review 1990). These engineers were hired by Xerox and their innovative ideas were not supported within the organization. Finally, they established their own business and currently annual turnover of Adobe rises up to $3 billion.
Innovation Introduced by Intrapreneurs
Innovations from the first perspective should be considered in the field of technology. Piatier (1984) claimed that “a misunderstanding of the concept of innovation, and suggested that restricting innovation to the field of technology was the equivalent of excluding half the problem by taking only a supply-oriented view” (cited by Carrier 1996). Therefore, it is more appropriate to consider innovation in a broader context as alternative commercial, organizational, structural or other ideas.
In the process of a conducted study, it was found out that intrapreneurs can develop their strategies under guidance of an owner-manager or “the owner-manager's overall strategic profile based on Miles and Snow's (1978) typology, or on the type of strategic behavior adopted by the innovators intrapreneurs with the help of the Burgelman and Sayles (1987) model” (Chang 2000).
The major benefits of intrapreneurship in any organization are obvious. Cooperation between the owner-manager and intrapreneurs should be directed on reaching mutual goals.
Moreover, it is often said that the small business is an “ideal potential incubator for intrapreneurs” (Cuhn 1993). The owner-manager is “the main catalyst in the emergence of intrapreneurship in the firm” (Cuhn 1993).
All the factors of intrapreneurship importance for future of the organization may be metaphorically explained in the following way: any organism should understand interaction of “the organism-in-its-environment”. Owner-managers are on the way to development of intrapreneurship encouragement. The owner-manager propagates successful development of the organization.
A challenge of innovation requires additional knowledge developed among intrapreneurs.
The intrapreneurs require additional knowledge, because they should be aware of the issues, such as risk taking, more. The intrapreneurs are not subjected to financial risk, but there is the accompanying risk which implies “the potential loss of personal credibility if one of their projects does not produce the desired results” (Bolton and Thompson 2003).
Economic Growth and Innovation
At first glance, it may seem that intrapreneurship is rather easy and uncomplicated process of business doing. Very often, one attempts to reveal characteristics of entrepreneurship in intrapreneurship: the former business doing implies innovation and creative thinking, and things are considered from an innovative perspective. Entrepreneurship is able to take a risk and accept failure. An intrapreneur is focused on the search for new opportunities that will result in profits increase. Innovation is a perfect way for organizations to increase their profits and develop creative thinking of their employees. Intrapreneurship is a way for innovation, reinvention and improvement (Carrier 1996). A creative potential of employees is the core rod of company’s innovative and successful development. Therefore, it is relevant to focus on creative potential of employees, because it is the core rod of company’s innovative and successful development (Pinchot 1985).
Currently, studies on entrepreneurship and intrapreneurship are focused on comparative-contrasting analysis of these activities. More educated employees with a richer experience were not involved in intrapreneurship though 5% of the interviewers (total number is 32,000) made an attempt to start up their own business (Carrier 1996). People launched their own companies when they were 30 or 40 years old. Younger people were afraid of a failure and, thus, companies may find this audience to make a perfect prospect for a company’s ideas development by means of adoption of innovative ideas of new employees (Chang 2000).
As it is concluded in the study by Chang (2000) “Entrepreneurship appeals to people who possess natural traits that find start ups arousing their interest. Intrapreneurs appear to be those who generally would not like to get entangled in startups but are tempted to do so for a number of reasons”. Thus, making good intrapreneurial choices is a benefit for the company to find new innovative ideas for their businesses. Thus, becoming intrapreneurs depends on internal motivations of employees within an organization in case their innovative ideas are not supported there and they need to start up their own business to reveal their creative potential.
As far as it can be seen, intrapreneurship is a stimulus for companies’ abilities to introduce innovations in order to reach flexibility, competitiveness and a better reaction to operate in the international market.
In the study conducted by Gartner (1985), entrepreneurship was presented as “the creation of new organizations” (cited by Carrier 1996). From this perspective, entrepreneurship does not exist once the venture is finally created. Nevertheless, a nature of intrapreneurship is often mixed up with entrepreneurship. Thus, intrapreneurship as a remedy for modern business world was suggested by Stevenson and Jarillo (1990). On the background of ‘cruel’ and competitive market, a lot of large organizations are striving for flexibility, ‘painless’ growth and innovation.
The most differential feature of intrapreneurship is the context in which business doing takes place. Innovation of entrepreneurs and intrapreneurs differs in the following way: “entrepreneurs innovate for themselves, while intrapreneurs innovate on behalf of an existing organization” (Chang 2000). Thus, entrepreneurs are looking for innovations for their own purposes, while intrapreneurs must be chosen by an organization and share their ideas with the organizations.
Some authors draw parallels between the different concepts of ‘corporate entrepreneurship’. Zahra (1991, p. 260) considers that ‘intrapreneurship’, ‘corporate venture and ‘internal corporate venture’ are the types of corporate entrepreneurship. The main objective of this activity is to create new business ideas within a certain organization. The main goal of corporate entrepreneurship is to enhance the company’s profitability and improve company’s competitive position in the business world (Pinchot 1985).
Main Obstacles for Innovation
In spite of the fact that positive effects of innovation are widely acknowledged, managers of some organizations may consider this problem vaguely. Employees with innovative ideas do not often present them to the managers of organization. Managers’ attitude to innovative ideas is not always positive. That’s why innovators prefer to keep silence and preserve their innovative ideas for them (Carrier 1996). Moreover, managers’ inflexibility prevents them from a proper consideration about innovative ideas. A group of inflexible intrapreneurs usually consists of older managers or managers with low risk-taking abilities. In such a way, the level of creativity is decreased in an organization. Employees who do not obtain support from managers have a few chances to reveal their potential.
On the other hand, managers are intimidated by the fact that workers may ‘go better’ than managers of the organization. Creative potential of intrapreneurs may outbalance creative potential of managers. Another obstacle for the development of intrapreneurship is a lack of desire among managers to give job authority to employees. Therefore, workers are prevented from setting task priorities. Moreover, a lack of encouragement of intrapreneurs, as it is often outlined in the organization, “According to suggestion-system rules, no reward is offered for an innovative employee's born risk or his/her performance as an entrepreneurial team member” (Kuhn 1993, p. 23). The best motivation for workers is to get rewards and acknowledgement for their ideas. This point has to be improved, because even a small reward may encourage a person to produce more creative ideas. Unfortunately, rewards are paid with great delays. Management is the way to realize their creative ideas. For development of creative ideas, intrapreneurs need extra time and convenient conditions for the ideas implementation. Here, it is important to mention sustainability that presents innovation and, thus, is incompatible with economic growth and development. In the atmosphere of sustainability there is no development. Special courses for development of innovative ideas and develop idea-making spirit, unfortunately this system did not exist for a long time. This kind of practices was neglected by employees themselves.
Basically, even if developed, innovative ideas were not totally accepted by managers of the organization. In the majority of cases managers did not approve innovative ideas suggested by intrapreneurs. There is a need to involve specialists able to distinguish innovative ideas. In case when innovative ideas are not approved by managers at once, intrapreneurs stop developing their new ideas (Lumsdaine and Binks 2007). There is a too complicated system of examining an innovative idea. Before the idea is approved by the company’s authority, there are too many steps to be made.
As a result of the conducted study on innovations in business, the issue of intrapreneurship as a means of innovation was discussed. Positive effects of innovation are released in case managers of the organization have tolerant attitude to innovative ideas suggested by the employees. Internal updating of the organization directed on establishment of special courses directed on development of intrapreneurial abilities among employees is a favorable condition for the development of intrapreneurship in the organization. Sustainability is not compatible with economic development. The most important role the intrapreneurship plays in the organization is a creation of innovative ideas and gaining benefits from creative potential of employees. Nevertheless, it is necessary to combine entrepreneurial and intrapreneurial skills of employees in order to obtain an effective integration of various abilities and professional skills. The main task of managers is to redirect innovative potential of ideas developed by intrapreneurs to the organizational needs. A protection of innovative ideas from rivalries is another crucial aspect of this study. Innovative ideas can appear suddenly, but they can also disappear very quickly, as well. A guarantee of a successful functioning of innovative ideas in an organization is overall support of intrapreneurs.