Corporate Entrepreneurship as a Strategic Approach - Literature review Example

CORPORATE ENTREPRENEURSHIP 2006 Corporate Entrepreneurship 1. Introduction In management meetings, it is rarely heard about particular discussions on innovation and how innovation could vitally influence company’s performances. While attending the day-to-day operations, managers often neglected the care of their own skills and mindset in the direction of innovation (Bean and Radford, 2002). Dean and Mary Tjosvold (1995) in their book, Psychology for Leaders: Using Motivation, Conflict, and Power to Manage More Effectively, say that “Top management sets policies; managers make decisions and solve problems; and employees do their assigned tasks”. The above statement implies that top managements are responsible to create a well working environment. Furthermore, it also means that a company needs spirit of corporate entrepreneurship in order to improve the company’s performance through innovation. Concerning the innovation, economic observers believed that there should be a harmonized effort to develop awareness and knowledge among managers of the importance of innovation. Furthermore, people consider that innovation becomes the linchpin of economic growth and becomes the engine that lies behind improvements in every aspect of modern life (Tushman & Anderson, 1996). According to Zahra (1991) corporate entrepreneurship deals with the process of creating new business in existing firms aims at improving organizational profitability and enhance a firm’s competitive position or the strategic renewal of existing business Concerning the entrepreneurship issue, this paper will elaborate and discuss the challenges of human resource management in a company trying to adopt the corporate entrepreneurship spirit in its six knowledge centres. Within the discussion we will address the relation between knowledge management and human resource management in attempt to support a company’s objective to be corporate entrepreneurship. mersagita 2. Knowledge Management, Human Resource Management, and Corporate Entrepreneurship As discussed above, entrepreneurship aims at finding and thus creating value creation for an organization. In this manner, we witness that a true entrepreneur is one that continuously creating value that help the company he owns to obtain distinctive and sustainable competitive advantage. In order to establish a sustainable competitive advantage, a company should be a learning organization in which it involves management of knowledge. According to Leadbeater (2000), a company involving knowledge management has several characteristics such as securing public legitimacy and entrepreneurial orientation. Furthermore, knowledge management is closely related to human resource management since knowledge workers in a knowledge management company have characteristics as following: Have high levels of education & specialist skills to identify and solve problems Understanding the importance for retaining productivity Have specialized knowledge Therefore, to maintain above characteristics, knowledge workers need continuously skills and knowledge improvement. Figure 1 best describes the relation between knowledge management and human resource management. Figure 1 Correlation between Knowledge Management, Human Resource Management, and Corporate Entrepreneurship Source: Knowledge management and Human Resource Management (PowerPoint Presentation), Nottingham Trent University The figure above tells us that in order to achieve quality leadership, future vision, sustainable strategy, appropriate policy (human resource policy and others), and business practices need appropriate human resource and knowledge management. This is due to corporation is a composition of various kind of people, each with different culture, skills, and capability, top name a few. The company also will grow only if the human resource in the company posses the spirit of continual learning. Therefore, a company should address the human resource issue in order to achieve its vision. And it only happened if the company encourages the organizational learning. Under such circumstances, the model above addresses the need to consider six factors concerning human resources: employee involvement, employee communication, employee resourcing, training and development, reward and recognition, and performance Management. 3. Corporate Entrepreneurship and Its Challenges 3.1 Challenges on Human Resource Management As a company grows from a scratch into a worldwide-operated company, they soon find that managing people become tough challenges since they should find appropriate method of bringing all elements of the company, the human resources, into one that the company envision. Therefore, in order to obtain a success in managing human resources in a company, the company should come with appropriate human resource strategy since knowledge workers in a company need updated information on continual basis. According to Watson (1998), human resource strategy is the general direction or objective that a company follows in order to help the company continues growing in the long term. Concerning the six components, the company should first find out what things contribute to the company’s goals in relation to human resource management. De Silva says that human resource management (HRM) has three basic goals, which contribute to achieving management objectives. 3.1.1 Finding the Right HR Policies The first is integration of HRM in two senses: integrating HRM into an organization's corporate strategy, and ensuring an HRM view in the decisions and actions of line managers. In this manner, a company should involve selecting the HRM options consistent with (and which promote) the particular corporate strategy. The option is determined by the type of employee behaviour expected (e.g. innovation) needed to further support the corporate strategy. For instance, the company should determine the HRM policies in relation to recruitment, appraisal, compensation, training, etc. differ according to whether the business strategy is one of innovation, quality enhancement or cost reduction. 3.1.2 Building Strong Culture A second challenge of HRM in AMS is securing commitment through building strong cultures. This involves promoting organizational goals by uniting employees through a shared set of values (quality, service, innovation, etc.) based on a convergence of employee and enterprise interests. 3.1.3 Flexibility and Adaptability A third goal of HRM is to achieve flexibility and adaptability to manage change and innovation in response to rapid changes consequent upon globalization. Relevant to HRM policies in this regard are training, re-organization of work and removal of narrow job classifications. In this manner, there are appropriate HRM policies to recruit, develop and retain quality staff, to formulate and implement agreed performance goals and measures, and to build a unified organizational culture. It means HRM emphasizes the concept of strategy and planning in order to eliminate the mediation role and adopts a generally unitary perspective instead of problem solving and mediation. Therefore, in HRM, employee cooperation exists in the form of programs of corporate culture, remuneration packaging, team building and management development for core employees. 3.2 Corporate Entrepreneurship and Innovation 3.2.1 Theories of Innovation: Three Aspects of Innovation Every aspect of the corporation influence innovation, from the smallest member of the company until the largest and most abstract factors. Each factor requires proper comprehension in order to produce a working environment where each condition harmonically leads toward the creation of new and productive ideas. The three factors of innovation are unlocking personal creativity, managing innovative managers, and environment for innovation. 3.2.2 Unlocking Personal Creativity The smallest building blocks of corporations are individuals working for the company. Prior to making organizational efforts to increase corporation’s innovation abilities, it is important to understand common knowledge on the aspects influencing personal creativity. Imagination bears creativity. Trainers believe that if employees are suppressed from imagining or wondering to find new perspectives, then managers might as well prohibits creativity. Collective brainstorming activities are a good example of encouraging creativity (Kyle, 2005) Practicality is the enemy of creativity. Often, due to the consideration of time and efforts to save it, practicality is the popular choice among managers. However, researchers believed that practicality would tie us to the here and now, the tried and true, while innovation requires active imagination, people who could see beyond the reality which is present. Fear of rejection kills creativity. Management who appreciate ideas tend to achieve more valuable inputs compare to those who do not. Managers must understand that fear of being rejected and being made ridicule is preventing employees from communicating their ideas. Routine activities weaken creative mindsets. Changing work routine, changing the decoration, or any other effort for creating a new working condition is important for nurturing innovation within a company (Stansburry, 2005) 3.2.3 Managing Innovative Managers Organizational efforts of nurturing innovation are lead by managers and team leaders. There are several managerial aspects that influence the process of promoting and nurturing innovation: Understanding of the process of innovation Managers should ask themselves these questions: How does innovation come about? Can it be structured? Can it be pursued periodically? Managers should learn about what real innovators do, how they do it and how it contributes to the performance of the team. Continuous learning. Great leaders do not stop learning. Managers who remain valuable contributors are usually those who sharpen their skills continuously. Curiosity, Openness and Leadership Managers should be genuinely interested in possibilities of innovation. Managers must be receptive and open to learn about everyone and anyone. Managers must also have passionate interest for progress and the development of new ideas. (Bean and Radford 2002) IV.1.3 Environment for Innovation Individuals and organizational level efforts should be combined with the proper understanding of what kind of environment that would support innovation. To determine and design a supportive environment, we must pay attention to these four dimensions of measurements: Generally perceived Level of Control A low level of control means that the company is rather flexible in making and implementing their decisions, while high level of control symbolized a bureaucratized type of an organization. The key is to find a good balance between control and flexibility to encourage innovation within bounds determined by organizational goals (Ginsberg, 2005). Operational Structure of an Organization Organizational structure and the structure of operational system within a corporation are seldom neutral. They usually encourage or discourage innovations. For example, structures that unaware for unhealthy competition inside the organization usually less supportive of cooperation and innovation. On the other hand strict structures might unintentionally discourage new ideas and experimentation (Bean & Radford, 2002). Access to and Quality of Corporate Strategy. Sound corporation strategies, communications to employees in clear and relevant manners are the foundations for individual contributions to those strategies. Often, we found corporations with employees who knows little of corporate strategy, but are being criticized for being slow to innovate (Bean & Radford, 2002). The Overall Level of Organizational Focus Efforts of innovating need proper directions. Organizational focus provides employees with the greatest stimulus to innovate because it orients attention to serve new customer needs or solve new customers’ problems, and thus creates value (Karlsberg and Adler, 2005). IV.2 Sources of Innovation After defining the three aspects that describe innovation efforts of different level of organizational component, we would display several activities that trigger the chain reaction of innovation. Some of the activities are: Opportunity Identification Company can design an active system to support innovation. Despite depending on researches to discover improvement possibilities, management must realize that most innovation opportunities are found by individuals who are closely tied to products and consumers (Hale, 1996). Management Support Innovation support could be in tangible and intangible forms. Tangible forms are financial, personnel, space and equipment while intangible forms are philosophical supports. In order to constantly supportive, managers must be committed to the principle that the company must change and innovate. Managers must also realized that in larger companies, management has less role than in small ones, thus required more actions of promotions and discussion with members of the corporations (Markgraf, 2000). V. Conclusion There is closed relationship between corporate entrepreneurship, knowledge management, and human resource management in a company trying to achieve and maintain its sustainable competitive advantage. In this paper, we pick the model from Knowledge management and Human Resource Management (PowerPoint Presentation), Nottingham Trent University that describe the relationship between corporate achievement or corporate entrepreneurship, knowledge management, and human resource management. The issue on corporate entrepreneurship is growing in recent days since corporations realize the importance of corporate entrepreneurship as a means to enhance the innovative abilities of their employees and to increase corporate success by encouraging the creation of new corporate ventures. However, the objective is not easy since it involve various aspects especially regarding human resource and knowledge management. The figure above tells us that in order to achieve quality leadership, future vision, sustainable strategy, appropriate policy (human resource policy and others), and business practices need appropriate human resource and knowledge management. This is due to corporation is a composition of various kind of people, each with different culture, skills, and capability, top name a few. The company also will grow only if the human resource in the company posses the spirit of continual learning. Furthermore, the model strengthens the idea that behind the success of any company is the quality of human resources. For this reason, the model suggests that a company should pay attention to six factors concerning human resource management: employee involvement, employee communication, employee resource, training and development, reward and recognition, and performance Management. . Works Cited Arthur A. Thompson Jr. 1998, Strategic Management: Concepts and Cases, University of Alabama Bean, Roger and Radford, Russel. 2002, ‘Managing Information Managers’, [Online] Available at: http://www.winstonbrill.com/bril001/html/article_index/articles/551-600/article552_body.html De Silva, Sriyan. 1998, ‘The Changing Focus of Industrial Relations and Human Resources Management’, [Online] Available at: http://www.ilo.org/public/english/dialogue/actemp/papers/1998/srsirhrm.htm Ferreira, Joao. 2002, Corporate Entrepreneurship: a Strategic and Structural Perspective. International Council of Small Business Hale, Guy A. 1996, ‘Managing for Innovation’, [Online] Available at: http://www.winstonbrill.com/bril001/html/article_index/articles/201-250/article242_body.html Karlsberg, Robert & Adler, Jane. ‘Seven Strategies of Sustained Innovation’, [Online] Available at: http://www.refresher.com/!rkjainnovation.html Knowledge management and Human Resource Management (PowerPoint Presentation), Nottingham Trent University Kyle, Bobbet. 2005, ‘Brainstorming Techniques form new Products’, [Online] Available at: http://www.innovationtools.com/Search/recommended_details.asp?a=192 Markgraf, Bert. 2000, ‘Managing Innovation’, [Online] Available at: http://www.suite101.com/article.cfm/346/48043 Minwoo, K. 2002, ‘Knowledge Management’, [Online] Available at: http://www.sveiby.com/articles/KnowledgeManagement.html Stansburry, Darren. 2005, ‘Unlocking your Creativity’, [Online] Available at: http://www.americanchronicle.com/articles/viewArticle.asp?articleID=1405 Tjosvold, Dean, and Mary M. Tjosvold. 1995, Psychology for Leaders: Using Motivation, Conflict, and Power to Manage More Effectively. John Wiley and Sons Inc Tushman Michael L. Anderson, Philip. 1996, Managing Strategic Innovation and Change, Oxford University Press, New York: Zahra, Shaker. 1991, ‘Predictors and financial outcomes of corporate entrepreneurship: An explorative study’, Journal of Business Venturing, vol. 6, pp. 259-285 Read More