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Volume 15, Number 4
April 2009

Intrapreneurship or entrepreneurship?

Simon Parker’s research shows that people who start new ventures within firms may not be the usual suspects

When John Warnock and Charles Geschke worked at Xerox’s Research Centre in Palo Alto, California, they got frustrated because new product ideas were being stalled. They decided to leave Xerox in the early 80s to start up their own business. Adobe, which was named after a creek that ran by their homes, now has sales of more than $3 billion per year.

Warnock and Geschke are classic entrepreneurs, but if Xerox had taken their ideas more seriously, they might have ended up as intrapreneurs instead. Intrapreneurship is the practice of starting a new venture within an existing organization, says Simon Parker, Ivey’s new Director, Driving Growth through Entrepreneurship & Innovation Cross-Enterprise Leadership Research Centre.

Intrapreneurship is an important way for firms to reinvent themselves and boost performance. A huge amount of knowledge creation takes place within firms. If they don’t take the best ideas and commercialize them, they run the risk of people leaving and doing it themselves.

In a recent study, Parker compared the factors associated with entrepreneurial and intrapreneurial activity. To conduct the study he used a dataset (PSED 2) from a survey of some 32,000 American adults, of whom five percent were involved in the early stages of a business start-up, either on their own or within a firm.

Parker found that general human capital – such as education, experience, and social networks – is more associated with entrepreneurship than with intrapreneurship. This came as no surprise. “Human capital is absolutely crucial to an independent start-up,” says Parker, “but it’s not as important where a start-up is internal. If an existing firm sees an opportunity but doesn’t have the human capital, it can find someone else who does.”

Intrapreneurial start-ups tend to focus more on Business-to-Business products, he found, whereas independent start-ups are more consumer sales oriented. “Existing firms have an advantage in commercializing Business-to-Business opportunities because they have more credibility and legitimacy with other firms,” he says. He also found that intrapreneurs are more likely than entrepreneurs to focus on products that are new and unique.

Age is a significant factor in the choice between entrepreneurship and intrapreneurship. Parker found that people who start their own companies tend to be in their 30s and 40s. Those either older or younger tend to be less willing to take the risk of going out on their own, or feel that they don’t have the opportunity. That makes them ideal candidates if a firm is looking for employees to take new ideas and run with them.

When Parker looked at gender and race he also came up with some interesting findings. One result that surprised him was that intrapreneurial activity was more likely to take place in a male-dominated workplace. Although women were less inclined than men to become involved in a start-up of any kind, once they do they were no more or no less likely to be intrapreneurs or entrepreneurs. African Americans were more likely than white Americans to be involved in start-ups, but no more or less likely to be intrapreneurs or entrepreneurs.

Although the research data gives certain clues about the factors that lead people to become entrepreneurs or intrapreneurs, such as age or education, there are many factors that still remain hidden. Parker refers to these factors as “unobservable,” but they still led him to a significant finding. “People who are less likely to get involved in start-ups for reasons that cannot be explained by the data are significantly more likely to get involved, if they do get involved, in intrapreneurship rather than entrepreneurship,” he says.

This suggests that the workplace can mould people’s willingness to get engaged in new ventures. “Entrepreneurship caters to people who have natural attributes that make start-ups attractive to them,” he says. “Intrapreneurs seem to be those people who would not normally get involved in a start-up but are somehow induced to do so by virtue of the company that they happen to be in.” Parker intends to explore this issue further in future research.

The key implication for managers is that employees who don’t look particularly entrepreneurial could turn out to be good choices to start and run a new intrapreneurial venture. “It’s very difficult to develop a profile of the ideal person to become an intrapreneur,” says Parker. “The data is telling us that this is something that people of all stripes get involved in. Virtually anyone can and does do it.”

Simon Parker is the MBA '80 Professor in Entrepreneurship
 

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