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IBC P6 The role of entrepreneurship and innovation in existing companies

Part of the IBC course:

I would like to take one last opportunity to base one of my last posts during our IBC course on yet another unconventional strategy that I think would be rewarding for the reader. I decided to write this post opposing the post of another IBC student based on the course literature and my comments/ his comments to that particular theory regarding Innovation. The theory is presented in our course book “Entrepreneurship: Successfully Launching New Ventures” by Barringer and Ireland (2008). The authors along with my colleague’s support, claim that small firms are twice as entrepreneurial per employee than big firms > 500. My feedback to this is that I see common sense in this statement based on several logical reasons, but also challenge in actually fully supporting this claim. Big firms have the experience of being small firms before they became big, steady and sometimes unfortunately, still. However my point would be to challenge this theory in saying that big firms and their employees are innovative on a bigger scale than small firms, especially, when circumstances require innovation and when there is organizational support for creativity.

Here follows my reaction to this theory:
Mihai: “Hi JS. You state that small firms are more entrepreneurial than big firms, corporations. On some level I could understand your point that small firms are still in the development process, therefore more entrepreneurial. Your argument might be that not all organizations are undergoing changes constantly as caused by the changing environment, especially big corporations who can afford so. But don’t you think that big corporations are several steps forward from the smaller firms in terms of development, including their entrepreneurial capacity and experience? They are capable of creating a R&D cohesive units supported by massive resources in order to develop new entrepreneurial processes, products or services e.g. Apple!”
JS: “Thanks Mihai. I agree with you that big companies are several steps forward in many ways. But this also explains why they are less entrepreneurial. On their way to become big, they lose entrepreneurial spirit, the founder is not in charge any more, rules and guides are set, formal structures are developed etc. So indeed many big companies have great R&D departments but check again the work of Barringer and Ireland. They found, referring back to the National Federation of Independent Businesses, that small firms (less than 500 employees) are twice as innovative per employee as larger firms. Also read the other findings I cited in my blog once more. So what I tried to say is that small firms are closer to the entrepreneurial process than most big firms are. There is still a lot of “freedom” to experiment and simply make thinks happen. Maybe that explains their success in their innovation.”
Mihai: “Hi again. So if understand right we have already agreed that there are big companies who promote creativity and entrepreneurial spirit such as Google, your suggestion, or Apple or Timberland who have been known to be creative during their life-time span, from small firm creations to large organizations that they nowadays.
In my opinion, large firms inspire small competitors through their “successful recipe”, their strategic decisions and creative products/ services. And here I am giving example of large firms who have been known to promote creativity and entrepreneurial spirit, such as Timberland, the american boot producer. The Harvard Business Review presents Timberland’s innovative spirit since its foundation and when time requires to be innovative such as the Greenpeace movement that claimed Timberland used leather from rainforest affected areas in Brasil. They responded to this challenge in an innovative way, and resolved the situation accordingly (HVB, 2010) being a large organization itself.
I would argue that the small firm’s entrepreneurial spirit and development depend on and are greatly influenced by large organizations and their “way” of doing things, therein including creativity programs, cross-functional work team departments (e.g. R&D), and education (creativity library) that inspire small firms under their development (and entrepreneurial if you want) journey. Firestein (1996) argues, and I quote him because I take his quote as a conclusive argument for this discussion, “creativity is a strategic business weapon. The organizations that will survive and thrive in the twenty first century will not be the ones with the deepest pockets, but the ones that can unleash and apply the creativity of their workplace” (Alvaro Rolon, 2004)
References:
Barringer B.R., Ireland,R.D. (2008). Entrepreneurship: Successfully Launching New Ventures.
Alvaro Rolon (2004): “Creativity and Innovation in top large organizations”
Harvard Business Review (September, 2010) Jeff Swartz: “How I did it: Standing up to 65000 angry activists” http://bit.ly/9lzHgt
Innovation within Timberland article: http://bit.ly/8YaUby
Part of the blog’s information was retrieved from: http://entrepreneurial-mind.blogspot.com/2010/09/importance-of-entrepreneurship-and.html#comments

One comment on “IBC P6 The role of entrepreneurship and innovation in existing companies

  1. Thanks Mihai for your elaboration. First I would like to react one of your statements:

    I have read the literature and am aware of the authors' claims about creativity in small firms vs large firms, but I usually tend to question results when they can be questionable, and this situation here applies.

    The literature on which I based my opinion was an empirical study, which means the results are proven and therefore are a fact, until someone will prove the contradictory. This means if you would like to contradict you will have to do a research. Doing so you will be able to make well supported conclusions.

    To continue I think you have developed two potential hypotheses. I will try to write these down, as close to your suggestion as possible. Also, I think that it would be very interesting to test these hypothesis. It could be a great subject for your final thesis to find out if your suggestions are right. As, at this moment, you do not have any hard evidence that will support your hypothesises. Also you could try to find any other peer reviewed study, in the Scopus database, which could be similar to your suggestions. If not, I would encourage you using these hypotheses as a final thesis.

    H1: Big firms and their employees are innovative on a bigger scale than small firms.

    H2: The entrepreneurial spirit and the development of small firms depends on and is positively influenced by large organizations and their operating procedures.

    You will have to define what a big / small company is. Also I am not sure what you mean by a bigger scale? Do you mean that the innovation is more important or that is has greater influence? Maybe you could specify on that part.
    Finally I think your suggestions and the ones I made could perfectly live together as they cover different aspects and your research could lead to a great additional theory.
    Let me hear how you think about the suggestions I made!

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