Corporate Entrepreneurship: Innovation in Global, Corporate Environments

Abstract

Innovation is critical to the growth of organizations as well as to the generation of ideas and opportunities for individuals, communities, and nations. Its outputs have the potential to benefit our lives personally and expand economic vitality globally. Many might connect innovation mostly closely with startup organizations. This chapter, however, investigates innovation in large, global, corporations, the biggest drivers of innovation. It does so through the lens of corporate entrepreneurship, a practice that encourages innovators to function as entrepreneurs within the confines of these companies. This chapter investigates the study and practice of corporate entrepreneurship through the authors’ research, including reviews of the literature and primary research. It investigates the history of corporate entrepreneurship, difficulties faced by innovators in these large organizations, and the three levels of innovation they create. It further introduces readers to the authors’ corporate entrepreneurship model. It discusses the various aspects of the model and examines the use and perceived value of each aspect. Finally, the authors offer recommendations on accelerating innovation in these environments and provide suggestions for future research. The objectives of this chapter are to provide readers with an overview of corporate entrepreneurship, its challenges, and methods utilized to mitigate those challenges.

1. Introduction

Innovation is the development of new products, services, ideas, discoveries, business models, and inventions that can have numerous outcomes and benefits. It helps companies grow their businesses with existing or new customers. It can provide a step forward in new scientific breakthroughs, and it can create jobs and develop the economic vitality of communities, regions, countries, and the world. Therefore, it has the possibility of creating value for many stakeholders. There are many ways an organization can innovate to create value. This chapter reviews those methods in the context of large, global, industrial companies in comparison with their smaller, start-up counterparts. While this chapter defines innovation as the activity that leads to the value-creating outputs mentioned above, many others use the term research and development (R&D) interchangeably. The authors of this chapter will explain that R&D is just one of three methods of innovation development. However, because R&D is widely accepted as a synonym for innovation, it also has well-established measurements, and for that reason, we introduce our topic of innovation there.

R&D has expanded rapidly, especially within the 21st century. According to some estimates, global R&D increased over 200% in the first two decades of the century [1], and the amount spent on R&D around the world totals over US$2 trillion [1, 2]. It is generally considered that there are three types of organizations involved in R&D: private businesses, government agencies, and institutions of higher education or colleges and universities. In countries represented by the Organization for Economic Cooperation and Development (OECD), which is an intergovernmental organization representing 28 highly developed economies, private industry provides the most funding for R&D. Organizations in this category represented about US$900 billion in investment in 2019 in just those 28 countries, which was 64% of all funding for research and development [1]. In this chapter, we focus on these larger organizations because they tend to be self-funded, meaning they are not generally seeking funding through external sources such as venture capital (VC) or government-funded grants. Large companies also represent the largest spenders among private organizations. One researcher has indicated that large companies, those with more than 500 employees, conduct over five times more research than small organizations, and they are also more productive than start-up companies [3]. While these large organizations are key players in innovation, their participation, and especially their own ecosystems, represents a puzzle of sorts. While they have large budgets and many resources, they have challenges not faced by their upstart rivals. These challenges can suppress innovation in these organizations despite their budget and resource advantages. In this chapter, the authors discuss the challenges faced by large corporate organizations, and we also review various tools and models utilized in large organizations in an attempt to deal with these challenges. Finally, we pose recommendations for these organizations meant to accelerate their innovation processes.

The objective of this chapter is to provide readers with an overview of innovation in large, corporate organizations through the lens of corporate entrepreneurship. It does so by contrasting innovation efforts in these organizations against those of startup companies. Readers will understand the added challenges of innovation in existent organizations and the methods used to encourage innovators in these organizations to function as entrepreneurs.

2. Corporate entrepreneurship

2.1 Overview

Entrepreneurship is a well-known concept, but corporate entrepreneurship is less so. In this section, the authors first define corporate entrepreneurship (CE) in the context of entrepreneurship. We then briefly discuss the increased study and utilization of CE as a way of determining its growth, and then we provide other terms that have been used to describe this innovation activity. We conclude this section by introducing a model of corporate entrepreneurship in three categories with various techniques included in each of those three, which we also define and discuss.

2.2 Definition of corporate entrepreneurship

To understand corporate entrepreneurship, it is important first to establish clarity around the meaning of entrepreneurship. While entrepreneurship is a widely used term, The Center for American Entrepreneurship identifies it as follows:

‘The process by which individuals or a group of individuals (entrepreneurs) exploit a commercial opportunity, either by bringing a new product or process to the market, or by substantially improving an existing good, service, or method of production. This process is generally organized through a new organization (a start-up company), but may also occur in an established small business that undergoes a significant change in product or strategy…’ [4].

Corporate entrepreneurship is similar to what we find in this definition because CE also attempts to exploit market opportunities. We indicated earlier that these opportunities are innovations or, in other words, the development of new products, services, ideas, discoveries, business models, and inventions. It can also include the improvement of already-existing products, services ideas, discoveries, business models or inventions. The goals for these activities are to satisfy unmet needs of customers and potential customers and to develop revenue and/or market growth for the organization as well as to create value for customers and potential customers. CE differs in that it does not typically create a new organization, although it can. It also is not reserved for the domains of small businesses. In fact, identifying the top corporate funders in the innovation process would provide a list of familiar names, including the following: Amazon, Alphabet (the parent company of Google), Huawei, Microsoft, and Apple [5]. In 2020, the biggest spender among them, Amazon, spent US$42 billion, which was over 50% more than what the number two on the list, Alphabet, spent [5]. These are large companies that happen to be the biggest global spenders in innovation. Therefore, we think of corporate entrepreneurship as the process that leads to development or improvement of products, services, ideas, discoveries, and business models within an already existent business in order to uncover areas of revenue or market growth. Similarly, Schroeder, a Forbes contributor, defined CE as, ‘senior management supporting employees to think and behave like entrepreneurs within the confines of an existing organizational structure’ ([6], para. 2).

2.3 Increased study and utilization of corporate entrepreneurship

The first identified work acknowledging the role of a corporate entrepreneur was dated 1937 [7]. Use of the term, and the discipline itself, did not gain much traction in the subsequent decades. However, CE gained increased focus as an area of scholarly research in the 1980s, when it emerged as its own defined area of innovation [7]. As a research topic, the area of corporate entrepreneurism started a sharp upward trajectory shortly after the turn of the twenty-first century. Figure 1 depicts the number of scholarly journal articles or books that mentioned the term ‘corporate entrepreneurship’ somewhere in the document. This data was gathered using successive Google Scholar searches for journals or books published over five-year increments between 1946 and 2020.

Figure 1.

Number of journal articles or books that use the term “corporate entrepreneurship” from 1946 to 2020.

Despite the focus in this section on the term ‘corporate entrepreneurship,’ others have used similar terms to describe the innovation process in established organizations. Scholars and researchers have also developed terms such as ‘intrapreneurship’ [8], ‘intrapreneuring’ [9], and others have combined terminology, as in ‘strategic entrepreneurship’ [10]. With these terms their commonality is the process of nurturing and developing innovation within an already existent business to satisfy unmet needs, create value, expand revenue and profit, and develop competitive advantage.

2.4 Corporate entrepreneurship model

There are many corporate entrepreneurship models widely available. In this chapter, we introduce a model developed by the authors [11] which they advanced from the writings of others [12, 13]. Previous scholars had identified three areas of CE, which were as follows: research and development, corporate venturing, and strategic renewal. The model presented in Figure 2 expands upon these by aligning various corporate venturing activities with their associated areas.

Figure 2.

Corporate entrepreneurship model.

In Figure 2, readers will notice the three categories of CE. Each one has various activities associated with it. Corporate venturing is unique in this model because it defines two distinct types. Here, we identify ‘inside-out’ methods, meaning originating from inside the corporation and ‘outside-in,’ which is the opposite. We discuss these activities and the effectiveness of them in a subsequent section of this chapter.

2.5 Levels of innovation

In the sections above, we described that innovation occurs in various types of organizations such as, private businesses, government agencies and institutions of higher education, and we also identified that it happens at different levels of intensity between these organizations. In this section, we will illustrate that there are different stages of innovation and that these stages happen at different rates within varying corporate organizations.

First, we will identify the different levels of innovation or corporate entrepreneurship. For this, we utilize the Innovation Ambition Matrix which identified three levels of innovation: core, adjacent, and transformational [14]. There are similar models that identify these three levels as the three horizons of growth, which are: H1 or core innovation, H2 or incremental innovation, and H3 or future business, which is characterized by disruption or creating a defense to a disruptive threat from competitors [15].

2.5.1 Core innovations

Core innovations are the development of new products, services, ideas, discoveries, business models, and inventions that are closest to an organization’s current business. These developments are closely aligned with the company’s existing products and current customers. These are intended to improve the value delivered to current customers. They could include added features that customers see as improving their experience with the product or service. They might also include changes in the company’s processes that improve customer experience with the organization. As an example, we can look at the credit card industry. The basic premise of the product is the same today as it was when the modern credit card was developed in 1950 [16]. These allowed consumers to make purchases without using cash. While the basic premise remains the same, the technology embedded in the cards has improved. Initially, merchants had to make physical copies of a customer’s card. One decade later, magnetic strips were added to the back of the cards. This allowed the cards to store information about the consumer, and that data could be relayed and stored at a point of sale. This freed merchants from making physical copies. However, there were issues with security and theft of data. For added protection, chips, or what amounted to mini microprocessors, were added to credit cards in the 1980s. These are known as EMV chips for Europay, Mastercard and Visa, the companies that utilize the technology. With this innovation, the chip provided a unique code for each transaction, and it also involved the use of a personal identification number unique to the card holder. Moving forward, the chips have allowed customers to tap and even use their mobile phones to complete a transaction.

2.5.2 Adjacent innovations

Adjacent innovations are those that are one step away from the organization’s current business. The authors of this chapter identify those as ‘new to the company’ areas of innovation [11]. Netflix’s more recent delivery models represent adjacent innovation. Initially, when the company was founded in 1997, it delivered content on video discs, which it sent to subscribers via the postal service. Subscribers would only rent the title they wanted, and then they would send it back to the company in the mail [17]. In 2007, Netflix launched a streaming service, which at the time, it called, ‘Watch Now,’ [17]. That forever changed the company’s delivery model and the way many consumers watch video content to this day.

2.5.3 Transformational innovations

Transformational innovations are those that develop breakthroughs in products, services, or business models that are designed for markets that do not currently exist. These are revolutionary developments that create completely different markets for the developing companies. Amazon, which we identified earlier as the world’s largest investor in innovation, is often used as an example of a company that has developed more than one transformational innovation. Amazon started business in July 1995 as an online book retailer. A year and a half later, its revenues were more than US$15 million [18]. The online sales model was followed by the development of ebooks, which Amazon launched in 2007 through its Kindle reader. At the time of its launch, a Kindle sold for US$9.99 [19]. One can consider Amazon’s sale of books online as a transformational innovation because it developed a new type of service that offered convenience and a wide-ranging selection to consumers. Of course, Amazon expanded upon its initial success by later selling music CDs online, and then by offering a wide-ranging assortment of goods.

What perhaps is even more of a classic transformational innovation from Amazon is Amazon Web Services (AWS), the company’s web services infrastructure. Amazon was the first to market such a service [20]. The idea was spawned during a strategic planning session in 2003. Because of the company’s necessity to develop and manage cost-effective and scalable data centers to service its own ecommerce growth, it developed assets and strengths in this realm. Initially, Amazon management did not even realize that it had something unique with data storage that it could commercialize. That developed into AWS, which remained the market leader through the end of 2022, with 32% market share [21]. The development of AWS was a transformational innovation because Amazon management did not realize that data storage was one of its core competencies or that it could scale and sell that service to others. In addition, it developed an entirely new industry which offered flexible, scalable, and more cost-effective data storage.

Another transformational innovation that was not initially commercialized by a large, global organization was ChatGPT. It was developed by OpenAI, a U.S. firm based in California and launched in November 2022. ChatGPT is an artificial intelligence (AI) chatbot that uses natural language processing (NLP) and large language models (LLM). It does more than a chatbot because it can write text based on questions that users ask of it. That means, one can generate emails, memos and even essays and research papers using the solution. The researchers who developed ChatGPT indicated that its release was only meant to gather data from users [22]. Instead, it became the fastest growing app in history, reaching 100 million users in just 2 months [23]. In that time, ChatGPT went through several iterations and releases and was being integrated into other platforms. It also stepped-up rivals’ efforts to launch their own versions.

2.5.4 Inside and outside the core innovations

As we identified three areas of innovation, core, adjacent and transformational, we note too that the terms ‘core’ and ‘outside the core’ have been popularized. In our model ‘outside the core’ consists of both adjacent and transformational innovation, as indicated in Figure 3.

Figure 3.

The three levels of innovation identified as core and outside the core (adjacent and transformational).

2.6 Transformational and disruptive innovation

As we described, transformational innovation develops breakthroughs in products, services, or business models that are designed for markets that do not currently exist. In this section, we address the difference between transformational and disruptive innovation. Many corporate entrepreneurs, R&D staff and researchers discuss and use the term ‘disruptive innovation’. However, we want to define this term as it was originally identified by Clayton Christensen. Christensen was a business guru who is best known as a key figure at the Boston Consulting Group (BCG) and a professor at Harvard Business School. He indicated that large, established firms have difficulty in developing disruptive innovation because of the following unique elements of this type of innovation. First, disruptive products are simpler and cheaper. They generally promise lower margins not greater profits. Second, disruptive technologies typically are first commercialized in emerging or insignificant markets. Third, a leading firm’s most profitable customers generally do not want, and initially cannot use, products based on disruptive technologies. By and large, disruptive technology is initially embraced by the least profitable customers in a market ([24], p. xix).

According to Christensen’s definition, the solution developed through disruptive innovation is not meant for an organization’s current customers, but, instead, it creates new markets. For those reasons, we can see that disruptive innovation fits in our model as part of ‘outside the core,’ and specifically as transformational innovation. What is unique, however, about disruptive innovation is that it arises from the low or less expensive end of the market, where large, established companies are uninterested in the innovation. It just does not represent enough profit margin for them.

From this definition of disruptive innovation, and integrating it with the model of the three levels of innovation as depicted in Figure 3, readers should understand that all disruptive innovations would fall into transformational innovation, but not all transformational innovation is disruptive. Using our examples of transformational innovation described above, perhaps the example that best fits as a disruptive innovation is that of Amazon’s AWS. Here, innovators did not initially understand that they had something they could commercialize or sell to external organizations. They developed a market for something that did not exist. Similarly, OpenAI unknowingly created a new market with ChatGPT. It initially launched the service at no cost to users. A subsequent fee-based model was released using a US$20 monthly subscription. That is at the bottom end of the market, where large corporate organizations would find it difficult to realize substantial profit margins. For these reasons, ChatGPT also stands as a good example of a transformational innovation that is also disruptive.

3. Innovation funding sources

In the broad sense of innovation, which is bigger than corporate entrepreneurship because it involves start-ups and non-corporate organizations, there are three recognized funding sources which are the following: businesses, governments, and higher education organizations. In OECD countries, R&D funding is dominated by business organizations. In 2017, they represented 64% of all research and development funding with government funding coming in a distant second at 24% [1]. It is interesting to note that in the period from 1992 to 2017, funding from companies had more than doubled and funding from colleges and universities had tripled, obviously from a smaller base. Funding from governments, however, had not kept pace, only increasing by 50% over the same period [1].

Investigating funding sources in corporate organizations is somewhat complex. Not all corporate organizations are equal when considering innovation and their spending on it. Globally in 2020, the industry sector that spent the most on research and development was categorized as ‘software and internet’. It represented 19.5% of all R&D funding [25]. This was followed by health industries (16.8%); however, this likely also reflected spend on research due to COVID-19. The chemicals industry was third (13.1%) [25].

Large, global, corporate organizations are usually involved in more than one level of innovation, if not all three. Scholars believe that, in general, these organizations are involved at various intensities among the three levels of innovation. Consensus has followed that industrial companies focus 70% of their resources on core innovation, 20% on adjacent innovation, and 10% on transformational [14, 26]. However, this is an over generalization, and researchers have found that organizations in different industries place resources in different levels of innovation, with consumer goods companies focusing most heavily on core innovations and midstage technology firms focusing more on ‘outside the core’ innovations [14]. Research conducted by the authors of this chapter also discovered that global, industrial companies were more aligned with the general expectations stated above in a mix of 70% core, 20% adjacent, and 10% transformational innovation. However, interviews with other companies, including one identifying itself as a ‘transformational healthcare company,’ indicated that only 20% of its resources were dedicated to core innovation, with 60% at adjacent and 20% at transformational.

Analyzing data from corporate innovation investment is not only compounded by different rates in various industries but also by the size and age of the organization. Researchers at Stanford University analyzed over 4000 U.S. companies with a combined market capitalization of over US$21 trillion. They determined that 42% of these companies were backed by venture capital. Their investment in innovation represented over a quarter of all research and development spending in the three sources we previously identified: private industry, government, and higher education. The data also depicted that the VC-backed organizations were much smaller than their counterparts. While they represented 42% of innovation investment, they represented only 20% of market capitalization [27].

4. Challenges of innovating in large, corporate environments

While large corporate organizations have larger budgets and more resources than their smaller counterparts, the size of the R&D budget has not been closely correlated to breakaway growth [26]. That is because large organizations, and large global organizations even more so, have several challenges inherent in their businesses that make innovation more cumbersome. We can summarize them in six categories as follows, all of which we briefly discuss in the following section: culture, leadership, resources, structure, reward philosophy, and governance.

4.1 Culture

There are several ways to envision culture as it relates to innovation. First, from a high-level overview, innovation and discovery are approached differently in different cultures around the world. Researchers have indicated that this is because of the impact of national cultures on factors that influence innovation and corporate entrepreneurship. Culture in this sense is a shared system of meaning, or as identified by Hofstede, et al., culture is, ‘the collective programming of the mind that distinguishes the member of one group or category of people from others’ ([28], p. 6). In Hofstede’s previous works, he identified six dimensions of culture that he used to determine the differences between national cultures. Other researchers subsequently indicated the ones they believe are most significant in predicting levels of innovation and entrepreneurism. Four of the six stand out in that regard, and they are as follows: power distance, uncertainty avoidance, individualism vs. collectivism, and masculinity vs. femininity [29]. While defining these and identifying their roles in the development of a culture of innovation is outside the scope of this chapter, it is important to note that these dimensions can indicate important factors that are predictors of an innovation mindset. Most notably, they could have a bearing on an individual’s or an organization’s level of risk acceptance or risk adversity. It could also influence how individuals see themselves in the context of others, whether those are individuals, organizations, or structures.

Regarding national cultures, corporate entrepreneurs working in large, global organizations also need to consider the impact that national culture might have on innovation in the organization’s home-country. Research conducted by the authors of this chapter defined that in large, global, industrial companies, responsibility for core innovations reside more with the local business units, and corporate departments take on more responsibility when organizations are innovating at either adjacent, or especially, at transformational levels of innovation.

Beyond national cultures, organizations have their own culture. Just as with national cultures, they are a shared system of meaning, but here, they are confined to one company or one business unit within a larger organization. These are long-established ways of working, entrenched hierarchies, and perspectives of the organization and of those outside it. Some organizations have a more entrepreneurial culture than others. As Ireland et al. accurately described, ‘[An] entrepreneurial culture is one in which new ideas and creativity are expected, risk taking is encouraged, failure is tolerated, learning is promoted, product, process and administrative innovations are championed and continuous change is viewed as conveyor of opportunities’ ([30], p. 970).

Organizations that have an entrepreneurial culture tend to be driven to action, and particularly quick action, either to exploit an opportunity or meet a competitive threat. They are more risk tolerant. That not only means they are more comfortable in ambiguous situations with uncertain outcomes, but they are also more flexible with their budgets and funding. They can deploy those quickly where needed and retract them from other projects if situations change. Cultures of large, industrial, global organizations tend to be the opposite. They are more risk adverse because most of these companies are public. They must satisfy the needs of their stockholders and the financial markets. This leads them to focus on short-term gains, usually on a quarter-by-quarter basis, where they can recognize quick victories and continue their quarterly growth momentum. If they would instead focus on long-term, more transformational innovation, then their return on investment would not be realized as quickly. Their growth would also be less predictable. Similarly, most large, global corporations focus on their current customers. These are the ones that will help them deliver that predictable growth. So, they ask their customers want they want, and they strive to deliver that value to them. The innovation that arises from this approach is what Christensen called ‘sustaining technologies,’ as opposed to those that are disruptive. He also underscored this point of chasing short-term gains when he wrote, ‘Sustaining projects addressing the needs of the firms’ most powerful customers almost always preempted resources from disruptive technologies with small markets and poorly defined customer needs’ ([24], p. 43). In addition, those individuals running established global firms are rewarded based on short-term revenue gains and profit targets not long-term vision; therefore, they align resources and strategies accordingly.

Large, global, industrial organizations typically have a culture that is deeply involved in processes and administration. These develop out of a sense of maintaining control over many business units, layers of management and geographically far-flung operations. This leads to levels upon levels of decision making and established processes which make flexibility very cumbersome.

4.2 Leadership

Leadership is undoubtedly closely connected to culture. Leaders help establish or perpetuate culture. However, while culture refers to an organization, leadership applies to individuals or a group of individuals. These leaders are responsible for setting the tone for, and even suggesting specific models and methods of, innovation and corporate entrepreneurship. Leaders who are known as entrepreneurial exude passion for innovation, which motivates their staff toward an entrepreneurial spirit. Those who are less entrepreneurial are more entrenched in the process and administration of programs and policies. In fact, they might owe their jobs and careers to those very processes. Research conducted by the authors of this chapter uncovered that in many large, corporate organizations, leadership brings with it a set of practices and tools with which those leaders feel most comfortable using. They roll out procedures, train staff, and establish these tools within the organization, but then frequently, they leave the organization or transfer to another business unit, position, or location. At that time, a subsequent innovation leader replaces that individual and brings his or her own set of processes tools and procedures. This was also evident in research conducted by Wellspring, of which it said, ‘Many large companies experience a fits-and-starts pattern of innovation investment. A similar tendency is to shuffle the innovation leadership. Usually this happens when a company loses patience with the current innovation team or its structure, often before they’ve had enough runway to demonstrate potential.’ ([26], p. 15). In a Wellspring study, researchers discovered that only 6% of corporate executives felt that this lack of leadership coordination was impeding innovation; however, one third of subordinates felt that it was an innovation impediment.

4.3 Resources

One important duty for which top leaders in an organization are responsible is aligning resources. Here, we may think mostly about financial resources and budgeting, but it also includes capital equipment and human resources. Most large companies have organizational and strategic business unit strategies, and those strategies should steer the direction of resources. However, in these large organizations, the competition for resources can be intense. Perhaps a few projects will be funded, and many others may not. Research findings indicate that even in large corporate organizations with large R&D budgets, most people involved in innovation indicated the lack of funding as one of the biggest obstacles to their success [26].

While startups usually focus on a small number of products or services, large, established firms usually need to manage many product portfolios that can be global in scope. These could all have mid-level managers in charge of various products overlayed by country or region managers responsible for revenue, growth, and profit in their geographic areas. This then translates into an innovation pipeline where these managers seek iterative changes in their products to meet their unique customers’ needs. That leads to a long list of corporate-wide innovation requests, which are all in competition with one another for funding.

The authors of this chapter discovered in their research that large, global organizations generally allow control of R&D for incremental innovation to local business units and country or regional groups. This makes sense when a company wants to focus on developing core innovation that will develop incremental improvements for current customers. As organizations move their focus of innovation into the area that is ‘outside the core’, which includes adjacent and transformational innovation, corporate-level innovation teams become more involved. That is most notably so in transformational innovation.

Another substantial input to resources is talent acquisition and retention, or the management of human resources. Many scholars believe that to be a talented innovator, a person requires a specific set of qualities, traits, and training. This might be especially true for organizations looking to attract those individuals who can help them develop transformational innovation. They believe it takes, what Phillips said was, ‘Identifying and recruiting energetic, creative people who will take the time to conduct research, investigate options and explore emerging opportunities, and who aren’t afraid of working in ambiguous context or outside of the company’s core competencies’ ([31], p. 8).

While prevailing thought might not consider an entrepreneur as a good fit for innovation teams in large companies, research indicates the story is more complex. In recent decades, those interested in innovation have become less likely to start their own companies. More of these individuals have joined the ranks of large organizations, growing to about 58% by 2019 compared to 50% at the beginning of the 21st century [32]. Interestingly, this research discovered that when innovators move into large, corporate organizations from start-up companies, they are less productive, producing between 6% and 11% fewer patents [32]. While cause and effect was not directly established, it could be reasoned that it was the administrative processes, procedures, and complexities of large organizations that led to a reduced level of productivity.

4.4 Structure

Much has been researched and written about the optimum structure for productive innovation and for the various stages of it, core, adjacent, and transformational. Research has also confirmed that large, corporate organizations are nearly always involved in multiple innovation activities simultaneously. Depending on the level of innovation and who holds the budget, there could be a mix and matrix of different models and structures. In opposition to this, most scholars believe that a flat organization, meaning one with fewer layers of reporting, managing, and directing, is best. This is probably why start-ups and entrepreneurial organizations are credited with being faster and more effective in innovation productivity. These are smaller and flatter organizations. Most scholars also believe that a coordinated innovation effort or the management of an innovation portfolio is essential. ‘Innovation budgets are apportioned to an expanding array of innovation teams or groups that don’t have strong motivations to collaborate. Indeed, 42% of companies reported that they regularly fund innovation projects on a tactical case-by-case basis’ ([26], p.8). These researchers also discovered that what they identified as ‘high-growth companies’ prioritized the structure of innovation and mandated a central R&D department that was responsible for managing the innovation portfolio across business units, stages of development, and levels of innovation. The individuals in these centralized departments also act as innovation influencers. They are the ones that carry the message about the importance of innovation throughout the company. They also research, develop, iterate upon, and train employees on various methods and models of innovation.

4.5 Reward philosophy

Reward philosophy refers to the mechanisms, policies, and procedures used to incentivize innovators. This is a key differentiating element between startups and entrepreneurial firms and their larger colleagues. Entrepreneurs are familiar with being compensated according to their own performance and that of their teams. They are more comfortable with compensation being aligned to the proportion of their own contribution.

Those in established, large corporate organizations are more familiar with compensation based on job grades and levels. Large organizations have a dizzying array of pay grades and levels. Most also have merit-based incentives; however, the formulas and algorithms developed to mete out bonuses makes it difficult for most staff members to understand how their contributions either impacted the bonus structure or how their performance was assessed by it.

The reward philosophy adopted by most large, corporate organizations also reinforces short-term goals and objectives over long-term ones as well as core innovation over those that are ‘outside the core’. These are what Christen called ‘sustaining technologies,’ and they do just that. They sustain the organization based on its current customers and the needs of those customers. As indicated earlier, these established organizations are required to meet the quarterly expectations of investors and financial analysts. This plays into their risk aversion with long-term and sustaining growth opportunities. They want to rely on the best possible outcome, which generally means generating innovations for their current customers or the core level of innovation. Likewise, managers and staff are incentivized based on the company’s annual performance, another short-term measurement. This perpetuates the intense focus on those core innovations that satisfy current customers. Christensen realized this and cautioned against it over 25 years ago when saying, ‘In established firms, expected rewards, in their turn, drive the allocation of resources toward sustaining innovations and away from disruptive ones. This pattern of resource allocation accounts for established firms’ consistent leadership in the former and their dismal performance in the latter’ ([24], p. 32).

4.6 Governance

When thinking about innovation, governance refers to all the processes, oversight and activities of innovation discovery and development. This includes those involved in the processes, both internal to an organization and external, as well as the tools and models used. It also includes the things that are produced by this activity, whether those are products, services, ideas, discoveries, business models, or inventions. Governance is closely tied to structure, but while structure is how innovation is organized, governance is how it is carried out. In smaller, flatter organizations and start-ups, this governance is clear. Entrepreneurs are close to the inputs and outputs of innovation. They know those who are involved in the process, and they are laser focused on completing a limited number of objectives, whether that is providing proof of concept or launching a product or service. In a large, corporate organization, governance becomes more process and procedure driven, which makes it more complex. In addition, within organizations that lack a coordinating innovation department, there could be many approaches and layers of governance.

A widely recognized part of governance is measurement. No doubt, measurement is important because we cannot improve upon things if we have difficulty measuring them. However, fixation on the measurement instead of the value created by an innovation can be misplaced. Companies tend to use metrics such as return on investment (ROI) or breakeven analysis to determine the potential success of various opportunities. They also measure how innovation projects are progressing against their objectives, with many applying techniques like stage-gate processes. These are project management tools that divide an innovation project into planning phases with their own respective goals, timelines, and owners. When utilized over many projects, stage-gate processes become an ad hoc innovation portfolio management tool. That is to say that organizations allow the stage-gate process to drive their management of the various innovation projects in development. Stage-gate tools can be effective, when managed appropriately; however, they can also be a passive approach to innovation portfolio management. Scholars also indicate this process is probably best attributed to core or adjacent innovations but not transformational ones [14]. In fact, it is difficult to measure something that does not yet exist, and yet, this is where Christensen says disruptive technologies comes from. Revert to our example of Amazon Web Services. Developers were not aware how many potential customers would be interested in a cloud-based service or how interested they would be. The same was true of ChatGBT. OpenAI publicized ChatGBT to obtain data or get a measurement. Both of those examples ended in overwhelming success, but Christenson notes that there is value in failure too. Quick failure is particularly valuable, if it leads to learning and iterative improvement or a change in focus. However, to make those changes, a more active portfolio management approach should be used.

5. Methods and tools used by corporate entrepreneurs

When considering the methods and tools used by corporate entrepreneurs, we refer to our corporate entrepreneurship model, as depicted in Figure 2. This outlines the most-widely utilized processes and techniques. As previously stated, we organized them in three categories, research and development, corporate venturing, and strategic renewal. Below, we investigate each of these.

5.1 Research and development

Research and development is fairly well understood without much explanation, plus we have discussed it throughout this chapter. However, to be as complete as possible, we offer the definition of R&D as the internal process that discovers and builds new products, services, business models and inventions. The U.S. National Science Foundation defines it as ‘creative and systematic work undertaken in order to increase the stock of knowledge—including knowledge of humankind, culture and society—and to devise new applications of available knowledge’ ([33], p. 2).

The next category in the corporate entrepreneurship model outlines methods used in corporate venturing. Here, we define them as being either ‘inside-out,’ indicating that it was initiated by the innovating firm, which then sought arrangements with external organizations, or ‘outside-in,’ meaning innovation is sourced from external organizations and pulled into the innovation process. Before we outline some of these methods, we first need to establish a definition of corporate venturing. For that, we turn to a definition used by Zahra who wrote that it is when, ‘The firm will enter new businesses by expanding operations in existing or new markets’ ([34], p. 1715). In the following section, we briefly identify methods of corporate venturing and then discuss the use and perceived success of these methods.

5.2 Corporate venturing: inside-out

Investigating inside-out methods of corporate venturing, we first identify business accelerators. That is a process which provides various levels of support and could include funding and mentoring to start-up companies. Here, the large organization provides support to smaller, external start-ups, with the hope that they would innovate independently. If successful, the sponsoring company could absorb the smaller one, either the entire company or parts of its innovation outcomes.

Corporate spinoffs are well known. Those involve the sponsoring company developing a smaller organization that becomes somewhat independent of it, even though the sponsoring company may maintain some level of investment. Divestiture is similar, but in this case, the sponsoring company sells off its interest in the company it spins out. Table 1 provides a case-study example of a corporate spinoff that used expertise from a research university.

Context: Developing a new service inside a large, corporate environment	When Thomas Edison founded MSA Safety Inc. after a tragic mine explosion more than a century ago, he likely never envisioned the technology Safety.io would develop to save lives in the global chemical process and mining industries.
Challenge: Develop “Outside the core” solution	Explore areas of “outside the core” innovation portfolio to identify transformational growth opportunities.
Insight: Transformational innovation with new service for current customers	With data gathered from each of its wearable gas detectors, the innovation pushes information to a cloud service and relays important notifications such as safety alerts and predictive analytics in real-time to users around the world.
Innovation solution: Inside-out corporate venturing	Partnering with Carnegie Mellon University’s Corporate Startup Lab (CSL), Mine Safety Inc. developed Safety io, a corporate spin-out, to develop the innovation.
Results: Cutting time for innovation	Company officials admitted that within the corporate structure, it could have taken years for this service to become reality; however, with the tools and framework provided by the university, the partnership was able to bring this service to market within months.

Table 1.

Case study of inside-out corporate venturing using university expertise to create a corporate spinoff.

Idea incubators are departments within an organization that develop ideas for new products, services, and companies, and they then manage a pipeline of those ideas.

With IP outlicensing, it is important to know that IP stands for intellectual property. That means the developer of that product or idea has legal rights to it. Licensing is a legal agreement that allows someone who does not hold the rights to the intellectual property to use it for product or service development and/or commercialization, for a fee to the license holder. In this case, the corporate sponsor holds the rights to the IP and licenses it to an external organization.

A joint venture is a business combination. In this situation, two independent organizations come together and develop a third, independent organization. The two organizations can have varying levels of investment in the organization according to their agreement; however, the joint venture is recognized as a third, independent organization.

Open innovation and crowd sourcing have become popular in recent years. Usually, we think of them from an outside-in perspective. However, here, in both methods, it is the innovators and corporate entrepreneurs who are developing the ideas or models that are then further developed outside the organization and then returned to it, if successful.

5.3 Corporate venturing: outside-in

The second area of corporate venturing acknowledged in the model is outside-in. Here, there are seemingly more methods; however, some of them are similar to those used in the inside-out model, except that they come from outside the organization and are pulled into it.

Of those that were not mentioned in the inside-out section, or that are in need further explanation, we begin with corporate venture capital (CVC). We have discussed venture capital in this chapter, and usually that is investment that is managed by an investment group that takes a measure of control of an organization they fund. In the CE model under corporate venture capital, a large organization would fund a start-up, and while that sounds like something that should be inside-out, it fits into outside-in. That is because after the organization provides funding, it expects to adopt the innovations discovered through the CVC, and then it commercializes them. At times, the funding organization absorbs the entire start-up organization that it helped fund through CVC.

Earlier we mentioned a business combination called a joint venture. That was in the inside-out section of corporate venturing. In this section of corporate venturing, we mention two other types of business combinations, and those are mergers and acquisitions. They are usually mentioned together and can be referenced as M&A (mergers and acquisitions). A merger is a business combination that primarily involves equals. They come together to form a third company, but unlike a joint venture, it is only that merged organization that survives. The other two organizations are absorbed into it. An acquisition is the outright purchase of another company. Many times, especially with independent start-ups, large corporate organizations will purchase them for their innovations, although there are other reasons to pursue an acquisition.

Another type of outside-in CV we mention is open innovation. There are different types of open innovation, but what they have in common is that they are all structured to pull innovation out of a typical R&D group and remove it from a formulaic process and into a more open environment. Similarly, crowd sourcing, which is also identified as outside-in corporate venturing, engages participation from individuals outside an organization, primarily for ideation or development of ideas for new products or services.

The next method is an R&D consortia, and that refers to efforts to pull in corporate entities, independent research groups, government entities or agencies or colleges and universities to collaborate to develop new innovations.

Finally, reverse innovation pitches engage smaller organizations and startups to add to innovation development in a larger organization. Here, the large organization develops a pitch, or several, to get the interest of some smaller organizations to work on the innovation issue, which is funded by the large organization.

5.4 Strategic renewal

The final category of our CE model is strategic renewal. Here again, we refer to earlier research conducted by Zahra for a definition. In it, he says strategic renewal, ‘refers to revitalizing the company’s operations by changing the scope of its business, its competitive approach or both’ ([34], p. 1715). Under strategic renewal, we identify two specific types. One is a new business model, and the other is process reengineering. Business models refer to the way an organization creates and delivers value to its customers. It includes the types of products or services it will provide, the costs associated with developing those and the intended target markets for them. It also outlines how customers will access the product or service, whether that is in a retail outlet, directly from the company, or another method. Perhaps most importantly, a business model outlines how the company will make money.

Process Reengineering is a procedure that requires a company to completely revamp how it is conducting business by focusing on processes in the organization and redesigning them for better efficiency and better value.

6. Use and effectiveness of corporate venturing methods

In our research on various methods of corporate venturing as outlined in our CE model, we discovered that some of the most widely used methods are not perceived to be the most effective in advancing innovation. As depicted in Figure 4, the corporate entrepreneurs who we surveyed as part of our research indicated which types of inside-out methods their organizations used. They then rated each of them on a 1–10 effectiveness scale, with 1 being the least effect and 10 being the most.

Figure 4.

Corporate venturing inside-out methods: degree of use and perceived effectiveness.

In this data, readers can see that corporate entrepreneurs believe that some of the most widely used methods of inside-out corporate venturing are also perceived to be effective in advancing innovation. This is the case for mergers and acquisitions, university contracts and joint ventures. However, one can also see that some of the methods perceived to be most effective are seldom used. This is especially the case for idea incubators, whether they are internal or external. They were the most highly rated in effectiveness, at 8.5 and 9.0 respectively; however, they were only used by 57% and 14% of respondents. This disconnect between popularity of some methods of corporate venturing and their effectiveness is even more starkly revealed in the analysis conducted on the outside-in methods, as depicted in Figure 5.

Figure 5.

Corporate venturing outside-in methods: degree of use and perceived effectiveness.

The data in Figure 5 indicate that the most widely used outside-in method, joint ventures, is seen as fairly ineffective, with a rating of 5.0 on a 1–10 scale. On the opposite end of the spectrum, two of the methods perceived as being the most effective are utilized the least. This is the case for open innovation and crowd sourcing and business accelerators. What this data on corporate venturing says to the researchers is that large, global, corporate companies are familiar and comfortable with a few tools that they have used on more than one occasion. However, experience shows that these methods have not always been effective, at least from the perspectives of the corporate entrepreneurs we surveyed. The methods they do not use might be perceived as effective given the experience respondents had with the other methods; however, they also might not know enough about the lesser-used methods. These methods are newer ones and might be attractive for that reason alone.

7. Recommendations for corporate entrepreneurship in large, global, industrial organizations

In this chapter, the authors discussed the desire for large, global, industrial organizations to capture the innovation spirit of entrepreneurs. We have identified this as corporate entrepreneurship, but we have also described the challenges in these organizations that hinder corporate entrepreneurship. We have outlined the different levels of innovation and explained that these large organizations tend to allow local business units to focus on research and development for core innovation, but they attempt to control innovation that is ‘outside the core’ at a corporate-level function. We also described some tools that corporate entrepreneurs could utilize to accelerate innovation. Our research indicated that some of these tools are widely used and are perceived as effective, but others are commonly utilized and are not seen as effective. Even more surprising, some are perceived as potentially effective, but they are not utilized much at all. In this section, we briefly discuss recommendations to accelerate innovation in these large, global corporations.

Researchers and scholars have analyzed and discussed recommendations for innovation acceleration for years, and our own research, through literature review and primary study, has focused on a few key recommendations. Perhaps the first thing that organizations need to develop is a strategy for innovation. Nagji and Tuff described this as the organization understanding its innovation ambition [14]. Companies need to ask themselves if they want to persist in developing iterative innovations for current customers or develop adjacent innovations or solutions that are new to the company. They could also decide to develop new innovations for new markets, which is transformational innovation. Whatever their decision, they should know that different types of innovation are managed differently. Core innovations are best left to local business units, mostly through their internal research and development. At the opposite end of the spectrum, transformational innovation is best managed by a separate organization. Scholars have argued that to develop transformational innovation the individuals responsible need to be placed in an independent organization untethered to the corporate processes and administration of the parent firm, and especially, they need to have their own budget. That way, budgets that were allocated to their efforts are not absorbed into the larger organization or transitioned to other projects.

Our research is also quite clear that organizations need to speak the same language when it comes to innovation. We discovered that there is a great deal of confusion within organizations about the innovation that their organizations are pursuing and who is responsible for it. A common language and guiding set of processes is imperative. That is why other authors have argued for a centralized innovation group. These departments, as we discussed above, may not be entirely responsible for innovation, but they can train and mentor others within the organization and coordinate innovation efforts.

Combining these, the need for an innovation strategy and organizing for innovation, we also recommend the management of an innovation pipeline as a portfolio. These large companies tend to be quite good at product portfolio management; however, they do not seem to manage their innovations as a portfolio of potential opportunities. As Nagji and Tuff indicated, ‘Pipeline management should focus on the iterative development of a few promising ideas, not the ruthless filtering of many’ ([14], p. 7). Pipeline management also requires that an internal group, hopefully a centralized innovation team, follows innovation projects through the pipeline to monitor their progress against goals. For this, the team needs to create a set of meaningful metrics that applies to all projects. These metrics should be easy to understand for corporate managers to assess project progression.

Finally, we recommend that while organizations need to coordinate innovation efforts internally, as our corporate entrepreneurship model suggests, they should also develop relationships with innovation teams externally. These relationships should be strategic, few in number, and fit into the parent organization’s ways of working, culture, and processes.

8. Conclusion

This chapter introduced the topic of corporate entrepreneurship, which the authors defined as the attempt by large, corporate organizations to encourage innovators to function as entrepreneurs within the confines of these companies. It described the increased popularity of CE among scholars. It also investigated similar terms that represent the same activity, which is innovation in large, global, corporate organizations. The authors then introduced readers to the three levels of innovation, sometimes known as the three horizons of innovation, which are as follows: core, adjacent, and transformational. We identified core innovation as being identified by that terminology only; however, we explained that our model combines adjacent and transformational innovation in an area we identified as ‘outside the core’. We discussed how transformational innovation is not always disruptive, but that disruptive innovation is always transformational. We reviewed funding sources of corporate entrepreneurship and innovation. We then progressed through a discussion about the various ways that innovation in large, global, corporate organizations is different and more challenging than it is in their smaller and startup counterparts. We provided an overview of the various methods that we identified as part of our corporate entrepreneurship model, and we discussed the utilization of those techniques as well as their perceived effectiveness. Finally, we provided recommendations for these organizations to accelerate innovation. While the authors provided an overview of the methods of both corporate venturing and strategic renewal, and also provided some indications of their use and perceived effectiveness, we would recommend future research focus on these methods. It would be advantageous to both the body of literature and to practitioners to have a broader understanding of the utilization of each method, and even more so, the actual effectiveness of them, We asked our research participants about their perceived effectiveness, which can certainly be expanded upon in future research to obtain a larger sample. However, it would be more impactful to determine their success based upon business-related metrics such as, revenue, profit or market share expansion or on economic impact measurements, such as jobs created or contributions to the local, regional, national and global economies.

Acknowledgments

The authors would like to acknowledge and thank the staff and membership of the Innovation Research Interchange with whom we conducted our research. We would also like to acknowledge Dave Mawhinney and Sean Ammirati at the Swartz Center for Entrepreneurship and the Corporate Startup Lab and Carnegie Mellon University.

Conflicts of interest

The authors have no conflicts of interest to declare.

Notes/thanks/other declarations

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