A Literature Review

Munich Personal RePEc ArchiveEntrepreneur, Entrepreneurship andIntrapreneurship. A Literature ReviewCadar, Otilia and Badulescu, DanielUniversity of Oradea, Romania1 April 2015Online at https://mpra.ub.uni-muenchen.de/82793/MPRA Paper No. 82793, posted 20 Nov 2017 18:33 UTC658ENTREPRENEUR, ENTREPRENEURSHIP AND INTRAPRENEURSHIP. ALITERATURE REVIEWOtilia Cadar, Daniel BadulescuDoctoral School in Economics, University of Oradea, Oradea, Romania[email protected][email protected]Abstract: Entrepreneurship is nowadays a buzz word, present both in political argumentsand discussions, in official debates and also in the economic literature. However, theentrepreneurship and the recognition of the entrepreneur’s role for the economic systemhave been revealed by different authors for two centuries. Despite of this fact, there arestill controversies regarding the meaning and significance of the entrepreneur andentrepreneurship. Since then, and especially in the latest decades, some new conceptshave been added to the already rich literature, e.g. intrapreneur and intrapreneurship. Thispaper is a modest attempt to review some old but also some recent approachesconcerning the named terms and concepts, and thud contributing to a better understandingand use of these concepts. After reminding some relevant approaches regarding the termsentrepreneur and entrepreneurship, the newly emerged terms have been in our attention.Indeed, while notions like „entrepreneur” and „entrepreneurship” are widely used andknown, the words „intrapreneur” and „intrapreneurship” are less commonly used and muchmore new but in rapidly spreading, due to the fact that the recent decades have beenlabeled by certain economists as „the entrepreneurship era”. The reason why the notion ofintrapreneurship is less known than that of entrepreneurship is very simple to explain: theformer one is pretty new, whereas the latter one has a history of over 200 years.Key words: entrepreneurship; intrapreneurship; innovation; corporation, capital.JEL classification: B30; L26.1. IntroductionWhat is the difference between entrepreneurship and intrapreneurship? What aresimilarities and the differences between the two concepts: entrepreneurship andintrapreneurship? In order for us to find the answer to this question, first we have to comeup with an answer to a different one: is it necessary that there be a new organization inorder to implement a new idea or can this one be implemented in an already existing one?Entrepreneurship is all about initiative, innovation, taking decisions, being responsibleenough so as to take risks regarding the economic activities undertaken by a certainperson that possesses a certain capital. Intrapreneurship is the means by which anorganization can be transformed in a more lucrative one, one in which visionary employeescan implement entrepreneurial ideas. It is for the benefit of any organization to sustain andencourage intrapreneurship, because thanks to intrapreneurship, companies can reinventthemselves, can improve their performances, develop and maintain themselves on themarket.Today, companies are extremely large, therefore the entrepreneurial spirit manifests itselfin already existing organizations and there is no need to initiate a new one. Those whomanifest their entrepreneurial capacities in an already existing company are like a breathof fresh air for that company. They are not entrepreneurs in the proper sense of the notion,but rather they are specialists with exceptional training, being able to use the knowledge659they have accumulated in order to innovate and transform innovation in a success. Thesepeople are called intrapreneurs.Intrapreneurship is proving good not only for the employer, but also for the employee,having the opportunity to stand out, to show off one’s qualities, to distinguish him/herself,to innovate. A creative, innovative person that is encouraged to use these personalqualities will feel motivated to remain in the company and therefore we will see less of this„phenomenon whereby valuable, open minded an innovative employees are being lost,disappointed by the organizations and bureaucratic processes present in the largecompanies” (Badulescu, 2013).2. The entrepreneur as main actor of the entrepreneurship and intrapreneurshipDespite a rich and diverse literature, capturing the essence of entrepreneurship and therole of entrepreneur for the economic system seems to be a difficult step for economists,who never cease to invoke it, but less to explain and even less to agree on it (Badulescuand Badulescu, 2012; Badulescu, 2013; Badulescu and Badulescu, 2014). As Hirshleifer(1976) has revealed, the main lines of thought define entrepreneurship in a general andquite superficial way, as a result of the confluence between business management andownership. It is considered as a production factor, related to risk assuming andcompensation, innovation, mitigation of uncertainties and generating profits. Baumol(1993) see the entrepreneur as “is at once one of the most intriguing and one of the mostelusive in the cast of characters that constitutes the subject of economic analysis”.Frank Knight (1942) considers that the entrepreneurs are the owners of the company(called “residual claimants”) and thus they are entitled to profit. For profit, the entrepreneurshall initiate useful changes or innovations, adapt to changes in economic environmentand assume for his company the consequences of uncertainty. The fact that entrepreneursare owners in the same time does not put equality between entrepreneurship and (small)business ownership. While small business owners see their company in a static view,maintaining the statu quo, they have a local coverage and limited growth prospects, theentrepreneurs see the business developing; they search opportunities and go beyond localconditions, in a continuous desire for expansion (De Clerq, Crijns and Ooghe 1997).On the other hand, Kirzner (1973) sees the entrepreneur as a “pure decider and arbitrator”and has no ownership. Kirzner claims that “… ownership and entrepreneurship should beseen as two completely separate functions, […] pure entrepreneurial decision is bydefinition reserved for decision makers not possessing anything” (Salerno 2007 andCostea, s.a.).Authors like Timmons and Spinelli (2003), Nieman (2001) consider entrepreneurship asthe business launch (exploiting an identified opportunity), followed by growth anddevelopment on a specific area. Small business owners are seen as business starters,who consolidate and develop their business up to a stage, where they lose theirwillingness, ability and entrepreneurial intuition.The entrepreneur’s role can be revealed by understanding the Schumpeterian approach ofproduction function (Iversen et al., 2008). Unlike the manager who combines theproduction factors in the production function, in order to achieve the highest technicalefficiency, the entrepreneur goes outward the production function through his or herinnovations. The entrepreneur moves the economic system out of equilibrium, throughcreating new products or production methods, and therefore others become outdated. Thisis the process of “creative destruction”, which Schumpeter views as the driving forcebehind economic development.In the same line, Schultz (1975) emphasizes that entrepreneurship is closely related todisequilibrium situations, entrepreneurship being the ability to deal with such situations. Indisequilibrium, the agents act sub-optimally and they could re-allocate their resources inorder to achieve a higher level of satisfaction. Entrepreneurship means the capacity and660ability (differing from one person to another, from one company to another) to coordinatethe re-allocation.The Schumpeterian entrepreneur applies information about inventions to create newcombinations; he is the most entitled to decide which new combinations are profitable. TheKnightian entrepreneur estimates a unique situation that will arise in the future and makesdecisions on how to exploit this situation in order to make profit. Both theories agree,however, that while entrepreneurs are decision makers, many decision makers are notentrepreneurs.Casson attempts to unify the definitions of Schumpeter and Knight by stating the idea thatthe entrepreneur is that person specialised in decision-making, possessing many skillsallowing them to make value judgements value for an intelligent use of scarce resources(Casson, 2003).The entrepreneur is often assumed to have a particular personality and specific traits. Thecore point of these approaches (Kaufmann and Dante, 1999) consists of a set ofcharacteristics describing the “entity” called entrepreneur, such as: fundamental change,innovative, flexible, willingness to undertake risks, always on alert, desire to succeed, andambition. Some perspectives on the specific characteristics of the entrepreneur areemphasized below:The entrepreneur is a person having abilities to solve crisis, a leader, motivated forundertaking risks. Marshall suggests that the qualities associated with a good entrepreneurare rare and limited, being “so great and so numerous that very few people can exhibitthem all in a very high degree” (Burnett, 2003). The entrepreneur is the guiding mind anddynamic spirit in the modern capitalism enterprise. Weber (2005) shows the significantcontrast between the new entrepreneur who sees earning as a call and wants to reform thestate of the art, and the traditional capitalist is satisfied with the existing statu quo.Sombart defines the entrepreneur as “quick in comprehension, true in judgement, clear inthought, with a sure eye for the needful… Above all, he must have a good memory.”(Sombart, quoted by Grundmann and Stehr, 2001). Sombart sees the difference betweenan entrepreneur and a trader in what he calls the “calling” for the entrepreneur,respectively, instrumental activity, lucrative for the trader. Sombart identifies the meaningof “calling” in other types of human behaviors, namely the explorer, the inventor, theconqueror and the organizer. Although it seems much more prosaic, for Sombart, traderfunction is more important in modern society and economy than heroic – entrepreneurship.”The entrepreneur began as a conquistador and ended as an official” (Loader, 2001).Entrepreneurs are leaders and key agents of creative destruction. Schumpeter pointed outthat the entrepreneur does not necessarily discover things, goods, but operates in aninnovative way with things which have already been invented. Combining the existinginventions, the entrepreneur and his creative destruction create new industries, while oldindustries are withdrawn, destroyed or disappear. The entrepreneurs change therelationship and production techniques, they lead the economy toward a better use ofcapital and knowledge, ultimately leading to improved macroeconomic growth andproductivity. Moreover, Schumpeter defines the entrepreneur as a creator of businesscycles, because their actions generate dislocations that often come in waves. Morerecently, for Baumol (2002), an entrepreneur may not manage or own a business, may beengaged or not in a productive activity, but the defining factor is the “innovative behaviour”.The entrepreneur is a person who makes investment under uncertainty and has anunusually low level of aversion to uncertainty. Frank Knight (1921) makes a cleardistinction between risk and uncertainty. For example, uncertainty refers to a unique event,difficult to predict as size, effects and time of occurrence (such as rapid and decisivechanges in consumer tastes), to which there are no “classical” protection, like insurance.According to Knight, the entrepreneur examines these unique events in the economy,applies his own judgments and actions, acting as an ad hoc insurance agent, and evenprotects other shareholders of the company against these effects.661The entrepreneur has an attitude and behavior based on receptivity to new information andpeople; he makes independent decisions, sees opportunities in rapidly changing anduncertain economic environment, he is persistent, available to assimilate technicalknowledge, has outstanding personality, leadership, management abilities (Johnson,2001). According to Sexton and Bowman-Upton (1991), entrepreneurship is a generalapproach to the management that begins with identifying opportunities and culminates withtheir exploitation.The entrepreneurs search opportunities and innovate to meet the society’s needs, withouttaking into account the apparent limitation of the currently available resources.Although comprehensive and meeting the analysts’ consensus, the behavioural theoriesare to be criticized at least on two respects. On one hand, it is difficult to test these skills,especially to demonstrate that they comprehensively define entrepreneurship, and on theother hand, these traits can exist at many people who are not necessarily entrepreneurs.As a conciliatory approach, we can say there is a general understanding that most of theabove traits accompany a continuous business activity in most entrepreneurial typesknown over time.3. Entrepreneurship versus intrapreneurshipThe simplest forms of the intrapreneurship concept appeared in the ‘70s, as a result ofcertain paradigm changes in the market, economy and companies’ culture. The origins ofintrapreneurship are to be found, no doubt, in entrepreneurship. The author whointroduced the notions of intrapreneurship and intrapreneur is Gifford Pinchot III in 1978.The notions stem from the phrase intra-corporate-entrepreneur (Pinchot, 2010), and itconcerned two aspects:1. Intrapreneurship is a set of good business practice that gives full credit to people withentrepreneurial personality to innovate quickly in large organizations, not only for thebenefit of the latter, but also that of the consumers/clients.2. Intrapreneurship encompasses individual actions or/and team actions that behave in anentrepreneurial manner, in order to serve the interest of very large companies and supplychains, with or without official help (Pinchot, 2010).In one of his works on intrapreneurship, Nielsen et al. (1985) states that, although Pinchotis the one who invented the notion of intrapreneurship, economists like Chandler,Williamson and Baumol changed the classical and neoclassical principles of the marketeconomy. They also believe that intrapreneurship is more apt for large corporations and itis best applied to dynamic environments (Hathway, 2009).Antoncic and Hisrich (2003) offered a series of key elements pertaining tointrapreneurship: new ventures and new businesses, product/service innovation, processinnovation, risk taking (losses, opportunity costs), pro-activeness. The two economists seethese elements as being independent, but at the same time interrelated, so as to refer tothe same construct.Macrae analyses intrapreneuship when western economies had difficulties. He considersthat organizations should compete within themselves and self regulating profit centersshould come up with the best solutions. Macrae says that this predates the notion ofintrapreneur, but he supports Pinchot’s ideas, warning about generally accepted theoriespromoted by business schools (Macrae, 1976; Macrae 1982).Pinchot and Pinchot suggest new terms related to intrapreneurship. One of them is”freeholder” which stands for employee or associate, but implies higher commitment.”Intra-property” pertains to the profit centre, assets and rights, and is not controlled by thecorporate centre. ”Intra money” refers to the wealth within the enterprise as a symbol ofindependence and freedom (Pinchot and Pinchot, 1997), (Hathway 2009).For Pinchot and Pellman, intrapreneuring is a set of definite principles, being the result ofPinchot’s work in big companies. In their view, powerful teams led by entrepreneurs maybe the beginning of successful organizations. The emphasis is on early prototyping,662tolerance of errors, internal and external networking and clever use of funds and sponsors(Pinchot and Pellman, 1999), (Hathway 2009).Today there are a series of approaches regarding intrapreneurship, the most importantbeing (Wanscoor, 1992):· The first approach values the individual, the hero, with emphasis on individualintrapreneurial action;· The second set of approaches has an emphasis on the intrapreneurial team,consisting of individuals who are willing to undertake risks and who promoteintrapreneurship together;· The third type of approaches focuses on the intrapreneurial organization, formedwithin the company where it used to function as a organizational subunit.The entrepreneur acts independently, activates in his own organization, whereas theintrapreneur is only partially independent, activating within the company as an employee.Being led in their activities by the entrepreneurial spirit, they have certain elements incommon, such as initiative, innovation and risk necessary for the creation of added value.These elements are implemented differently, resulting, therefore, in a series of differences.The next table offers information regarding the similarities and differences between theactivities undertaken by the entrepreneur and those of the intrapreneur.Table 1: Similarities and differences between entrepreneurship and intrapreneurship
Similarities
Differences
· Innovation:– both the entrepreneur and theintrapreneur are innovative persons;– innovation can represent a newproduct or service, a new technologicalprocess or an improved managementmethod;
· Type of activity:– the intrapreneur’s activity has arestoring character;– the entrepreneur’s activity has acreative character;
· Creation of value:– adding further value to the productsand services is the goal of the the two;– alteration must be truely new andmust come up with a differentproposal;
· Encountered obstacles:– for the intrapreneur, the company’sculture can be the main obstacle;– the entrepreneur has only oneobstacle, a very powerful one: themarket;
· Undertaking risk:– the intrapreneurial andentrepreneurial activities have a higherdegree of risk as compared to theusual ones;– the intrapreneur risks the company’smoney, focusing on new products;– the entrepreneur risks own moneyand time;
· Sources of funding:– the intrapreneur uses the company’sresources, that can be very large;– the entrepreneur must look forpersonal funding sources, at the risk oflosing his own assets/fortune;
Source: Sasu 2003 (in Badulescu, 2013)The experience acquired by working in a large company may prove useful for the openinga personal business. One has to decide which alternative is most suitable, as bothentrepreneurship and intrapreneurship have advantages as well as disadvantages.6634. Other forms of entrepreneurship/intrapreneurship.Exopreneurship is a form of entrepreneurship that is linked to intrapreneurship, butinnovation is facilitated by external entrepreneurs, referred to as exopreneurs. The forms ofexopreneurship have to do with the role and purpose of external agents, (entrepreneurs).Exopreneurship can turn into: franchising, subcontracting, strategic alliances and externalsearch for new financing sources (Chang, 2001).Franchising is not immediately associated with intrapreneurship, but the notion offrantrepreneur encompasses the activity and the personality of a franchisor whoreconfigures and innovates through franchising, developing the international market.Franchising is a different but important form of entrepreneurship (Sundbo et al., 2001). Theintrapreneur acts as a manager of change, whereas the frantrepreneur is seen as apartner. The intrapreneur focuses on adaptation, whereas the frantrepreneur focuses onstandardization. The intrapreneur has a wider purpose as regard to innovation, whereasthe frantreprenur’s purpose is a more limited one (Hathway, 2009).5. ConclusionsAn important part of this article underlines the relationship between entrepreneurship andintrapreneurship, as well as the similarities and differences between these two concepts. Inorder to be a successful entrepreneur it is necessary to possess a capital that allows youto bring something new on the market, for the companies who want to maintain themselveson the market, to resist competition, to enlarge and develop their business, innovation ismandatory. Both entrepreneurship and intrapreneurship offer this possibility, but in differentorganizational frameworks. Big companies interested in innovation are becoming more andmore preoccupied with the creation of a true entrepreneurship/intrapreneurship culture.They want to convince employees, investors and managers that trying to promote newideas is no loss of time, but on the contrary, it adds value to the company, that it is normalto make mistakes in the search for something new and that failure shall not be punished, ifthings do not go according to plan. Taking into consideration the high speed changes intoday’s business world, the big companies that are reluctant to inovation andintrapreneurship are likely to be left out of the race and therefore face drastic and rapidprofit cuts and have less chances of surviving.ReferencesAntoncic, B., Hisrich, R. D. 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