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COPYRIGHT 2006 SourceMedia, Inc.
Introduction
In our first article of this two-part paper, we argued that to develop and nurture simultaneously today's and tomorrow's competitive advantages, grounded in innovation, firms increasingly rely on "corporate entrepreneurship" (CE). As noted previously, CEis a process through which individuals in an established firm pursue entrepreneurial opportunities to innovate without regard to the level and nature of currently available resources. Leading edge companies see the effective use of CE as a source of competitive advantage and as a path to higher levels of financial and non-financial performance.
In our view, a CE strategy (CES) is an important path firms can take to make it possible for employees to engage in entrepreneurial behaviors, using knowledge as the foundation for continuous and successful innovations as they do so. More formally, a CES is a vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations by recognizing and exploiting entrepreneurial opportunities that are oriented to innovation. Creating a work environment where all employees are encouraged and are willing to "step up to the plate" to innovate on their jobs is a centerpiece of an effective CES. Developing an internal work environment capable of cultivating employees' interest in and commitment to creativity and the innovation that can result from it is the product of effective efforts by managers at all levels. Indeed it is extremely important to understand not only the "what and why" of CE but also the "how." This article is our second part of the two part paper where we introduce the tool needed for a company to examine its own internal environment in order to assess the "entrepreneurial health" of the firm.
Our purpose in this second part is to introduce the "Entrepreneurial Health Audit" as a tool to use to diagnose and address the extent to which an organization is capable of fostering sustainable entrepreneurial behavior as the path to improved performance.
Is your firm ready? Using the Entrepreneurial Heath Audit to find out
We have discussed the importance of CE as well as organizational dimensions (e.g., structure, controls, human resource management systems and culture) that are vital parts of forming and effectively using a CES in our part one article that appeared in the previous issue of the journal. But there is more to the story. Indeed, before a CES can be formed, top-level managers must understand several things about their firm with respect to its entrepreneurial status and capability. The "Entrepreneurial Health Audit", to which we now turn our attention, is a tool managers can use to gain this needed knowledge. As we will see, there are three steps to the audit (see Figure 1).
Step I: assessing your firm's entrepreneurial intensity
As we noted in our earlier article, entrepreneurial intensity is concerned with the degree and frequency of entrepreneurship occurring within a firm. This means that an organization's performance from the perspective of entrepreneurship at a point in time is shown by its entrepreneurial intensity score.
To assess a firm's degree of entrepreneurship, measures are needed of innovativeness, risk-taking, and proactiveness. Innovativeness refers to the seeking of creative, unusual or novel solutions to problems and needs. Commonly, these solutions take the form of new processes as well as new products (goods and/or services). Risk-taking involves the willingness to commit significant resources to opportunities having a reasonable chance of failure as well as success. However, these risks are carefully calculated, yielding a robust understanding of potential gains and potential losses that could be associated with decisions to engage in entrepreneurship. Proactiveness is concerned with anticipating and then acting in light of a recognized entrepreneurial opportunity. Proactiveness demands that firms tolerate failure and that employees be encouraged to persevere in their efforts to exploit opportunities that can be the source of innovation, competitive advantage, and first-mover benefits in marketplace battles.
In Figure 2, we present an instrument that yields a valid and reliable measurement of a firm's entrepreneurial intensity. The instrument measures an organization's innovativeness, orientation to risk-taking, and the degree to which it is proactive. The first 12 items measure a firm's degree of entrepreneurship and the remaining items measure the frequency of entrepreneurship. Weights of 0.7 and 0.3 are placed, respectively, on scores for degree and frequency. To obtain a score for an entire firm, the instrument is typically administered to a large number of managers representing different functional areas within the company. Annual measurements allow the firm to first benchmark itself, and then track progress over time...
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