achieving strategic intent through corporate venturingeprints.glos.ac.uk/2168/1/301.full.pdfor...

This is a peerreviewed, final published version of the following document and is licensed under All Rights Reserved license:

Tunstall, Richard, Jordain, Clair, Pittaway, Luke and Thomas, Brychan C (2009) Achieving strategic intent through corporate venturing: The role of strategic relationships and market orientation. International Journal of Entrepreneurship and Innovation, 10 (4). pp. 301312. ISSN 14657503

Official URL: http://dx.doi.org/10.5367/000000009790012318DOI: http://dx.doi.org/10.5367/000000009790012318EPrint URI: http://eprints.glos.ac.uk/id/eprint/2168

Disclaimer

The University of Gloucestershire has obtained warranties from all depositors as to their title in the material deposited and as to their right to deposit such material.

The University of Gloucestershire makes no representation or warranties of commercial utility, title, or fitness for a particular purpose or any other warranty, express or implied in respect of any material deposited.

The University of Gloucestershire makes no representation that the use of the materials will not infringe any patent, copyright, trademark or other property or proprietary rights.

The University of Gloucestershire accepts no liability for any infringement of intellectual property rights in any material deposited but will remove such material from public view pending investigation in the event of an allegation of any such infringement.

PLEASE SCROLL DOWN FOR TEXT.

301ENTREPRENEURSHIP AND INNOVATION Vol 10, No 4, 2009, pp 301–312

Achieving strategic intent throughcorporate venturing

The role of strategic relationships and marketorientation

Richard Tunstall, Clair Jordain, Luke Pittaway and Brychan Thomas

Abstract: This principally conceptual paper explores how, in conjunctionwith its market orientation, a firm’s internal and external strategicrelationships may be used in implementing corporate venturing to achieveits strategic intent. Conceptually, the paper begins by exploring work onstrategic corporate venturing. Building on this analysis, a dichotomybetween internally sustained and externally partnered strategic relation-ships is discussed, as is the role of market orientation. From thisdiscussion, a conceptual framework is developed and applied to an exami-nation of three longitudinal case studies of multinational organizations. Inlight of these cases, the paper explores how strategic relationships may beused in corporate ventures to counter adverse market forces or to exploitmarket opportunities. The paper concludes by showing how organiza-tional strategic intent, realized through market orientation and strategicrelationships, may develop dynamically in response to external andinternal influences.

Keywords: corporate venturing; strategic intent; strategic relationships;market orientation; open innovation; intrapreneurship

Richard Tunstall is Senior Lecturer in Enterprise at the Welsh Enterprise Institute, University ofGlamorgan, Pontypridd, Mid Glamorgan CF37 1DL, UK. E-mail: [email protected]. ClairJordain is an Independent Enterprise Consultant, Fareham, Hampshire, UK. E-mail:[email protected]. Professor Luke Pittaway holds the William A. Freeman DistinguishedChair in Free Enterprise at the College of Business Administration, Georgia Southern University,Statesboro, GA 30460, USA. E-mail: [email protected]. At the time of writing, DrBrychan Thomas was a Research Associate at the Centre for Technology Management, Institute forManufacturing, University of Cambridge, UK.

Corporate venturing can increase an organization’sexposure to innovative ideas, giving them improvedaccess to new markets and increasing their financialreturns (Meyer and Heppard, 2000). In this sense,corporate venturing is viewed as a way of encouraginginnovative talent to stay within the company in order tocreate value, rather than leaving to create separateindependent businesses, which may become competitors

(Chesbrough, 2006). It has been argued that bothstrategy and the environment have an impact on corpo-rate venturing performance (Tsai et al, 1991), andwithin the context of this special edition, the paper seeksto understand and explore the role of strategic relation-ships and market orientation in attempting to achieve afirm’s strategic intent through corporate venturing. Byaddressing this question, the paper aims to answer the

302

Achieving strategic intent through corporate venturing

ENTREPRENEURSHIP AND INNOVATION Vol 10, No 4

call for further research on the challenges of usingcorporate venturing effectively for strategic purposes(Covin and Miles, 2007) and will develop a conceptualframework focused on this.

The paper starts by exploring the literature on corpo-rate venturing for strategic purposes. Research on theinternal and external strategic relationships that developthrough corporate venturing is explored. This isfollowed by a consideration of the market orientation offirms that engage in corporate venturing activity andwhether these can be described as either aggressive ordefensive. A conceptual framework is then developedillustrating the various options open to firms, in thecontext of strategic intent when they are developingcorporate venturing strategically. The paper exploresevidence in longitudinal case studies of three multina-tional organizations between 2000 and 2008 andanalyses the case study data in the context of theconceptual framework. Finally, key discussion pointsand conclusions are identified, including the usefulnessof the framework for analysing approaches to corporateventuring and the relevance of the conceptual frame-work for developing a dynamic perspective of corporateventuring.

Strategic corporate venturing in context

According to Zahra (2005), there is general agreementamongst scholars of the subject that corporate venturing(CV) is one of the key dimensions of corporate entrepre-neurship. Corporate entrepreneurship is often viewed asthe pursuit of entrepreneurship within existing firms,which also includes organizational innovation thatresults in new product development, as well as coveringstrategic renewal through the re-imagination of an entireorganization (Guth and Ginsberg, 1990). While tradi-tionally viewed as an internal process, researchers havemore recently identified that CV may be external orinternal in focus (Miles and Covin, 2002; Keil, 2004;Hill and Birkinshaw, 2008). In its internal context, CVhas been described as new business development withinan existing firm (Block and MacMillan, 1993) with thepotential for the creation of corporate start-up businessesdeveloped and potentially spun out of the corporateparent by internal employees (MacMillan et al, 1986),who are frequently referred to as ‘intrapreneurs’(Antoncic and Hisrich, 2003; Pinchot, 1985). In itsexternal context, CV has been described as the processof corporate investment in minority equity stakes insmaller unquoted companies for financial and strategicgain (McNally, 1995). Corporations undertakingexternal venturing have often been seen to use ‘corpo-rate venture capital’ (CVC) (Siegel et al, 1988; Sykes,1990; McNally, 1995; Dushnitksy and Lenox, 2006).

Research in this context is largely focused on thesources and uses of financial investment in externalfirms as a form of venture capital. In addition,Chesbrough (2006) and Miles and Covin (2002) identifythat investment relationships in external ventures maydevelop into spin-in opportunities where these areperceived as mutually beneficial for strategic reasons.

While interest amongst researchers in CV has devel-oped over 30 years, it has been acknowledged thatpractice amongst corporations in the USA in this area hasmirrored the history of the US venture capital industry,going through three specific ‘boom-and-bust’ cycles:1965–74, 1979–87 and 1994–2002 (Gompers, 2002;Allen and Hevert, 2007). During these cycles, numbersof corporations engaging in CV and total investment have‘spiked’ (Gompers, 2002) and subsequently reduced inintensity. It has also been noted that activity has signifi-cantly increased from one cycle to the next. As anexample, following the end of the flurry of activityduring investment in the most recent cycle (the Internetor ‘dot-com’ bubble), numbers of corporations takingpart in CV reached the highest recorded levels at theheight of the boom, but significantly decreased at the end(Birkinshaw et al, 2002). Despite cyclical investment, itis also noted that some corporations have continued toinvest in those CV programmes considered to be success-ful even in ‘bust’ periods, as these are seen as a keyelement of the organization’s approach to research anddevelopment (R&D) (Campbell et al, 2003).

Early research suggested that corporations’ initialinterest in CV was related to financial and strategicgoals, such as fostering innovation, generating strategicrenewal and obtaining windows on technology andmarkets (Sykes, 1990; Thornhill and Amit, 2000). Morerecent work argues that CV has increasingly beenutilized as one of a range of externally focused alterna-tives to innovation through internal corporate R&D.These new alternatives are thought to include jointventures and acquisitions of SMEs; university-basedcollaboration; the harnessing of underutilized internalR&D and ‘spillover’ technologies; and the commerciali-zation of intellectual property through external routes tomarket rather than through internal sources (Gompers,2002; Chesborough, 2006). In addition to a moreexternalized exit route for innovation projects, it hasbeen observed that some firms have begun to adoptalternative management approaches, such as usingventure capital techniques for both internal and externalventures (Miles and Covin, 2002; Campbell et al, 2003;Chesbrough, 2006).

Given the diversity of approaches being employed byorganizations in pursuing CV, it is useful to considerhow these may relate to a firm’s strategy. Covin andMiles (2007) have indicated that organizations may take


303ENTREPRENEURSHIP AND INNOVATION Vol 10, No 4

different approaches to the utilization of CV in relationto business strategy, and that CV may either be utilizedas part of a business strategy (strategic CV) or not (non-strategic CV). In addition, they argue that those firmsthat engage in CV for strategic reasons do so becausethey realize that innovation is the only way to meet theirlong-term goals. These goals are embedded in theirstrategic intent, which Hamel and Prahalad (1989)define as envisioning a desired leadership position andestablishing how the organization will chart its progress.

Ireland et al (2009) argue that firms that exhibit thestrategic intent of continuously and deliberatelyleveraging entrepreneurial opportunities for growth andadvantage-seeking purposes are pursuing a corporateentrepreneurship strategy (CES), and that CV may bepart of the strategic vision, entrepreneurial architecture,processes and behaviour that firms utilize. While CVmay have an important role in supporting a firm’s CES,however, Covin and Miles (2007) do not explicitly arguethat a firm’s business strategy has to be entrepreneurialin order to pursue strategic CV. Indeed, Tidd and Taurins(1999) indicate that there may be a range of motives forCV: these include market-based motives; growth anddiversification; combating cyclical demands of main-stream activities; and organizational learning.

The next part of the paper will explore how thesevarying forms of and purposes for strategic CV activitymay be realized in the strategic relationships formed byorganizations with their stakeholders and other organiza-tions.

Strategic relationships in corporateventuring

Although organizations that wish to encourage innova-tion could be content to create an environment in whichemployees freely experiment with ideas, the theories ofintrapreneurship can be utilized to a more far-reachingextent. Macrae (1976) suggested that something akin tofree market entrepreneurship within the corporateorganization would be the preferred route to effectiveinnovation within a firm. In effect, the principle was thatindividuals or groups, known as ‘intrapreneurial teams’,within the business became autonomous from theorganization and could become businesses in their ownright, thus forming looser relationships with the parentcompany and becoming a ‘business within a business’.Macrae (1976, 1982) and Pinchot (1978) took thisconcept one step further by suggesting that rather thanbeing officially generated by the organization, internalbusinesses could be initiated and run by employeeswithout instruction from the organization;intrapreneurial teams would become intrapreneurialorganizations.

Research on CV relationships has traditionally beenfocused internally within the firm and has consideredthe relationship between the organization and existingemployees engaged in creating new value (Amit et al,2000). This focus can be described as concentrating onthe ‘employee as entrepreneur’. There has also been amove towards the organization acting as a venturecapitalist bringing external entrepreneurs into theorganization, either as individuals or as whole teams(Morck and Yeung, 1999; Miles and Covin, 2002;Morris and Kuratko, 2002), effectively bringing in‘entrepreneurs as employees’. Furthermore, organiza-tions may venture entirely externally by funding anetwork of ventures that remain outside the company,but in which the organization takes a financial stake, in asimilar capacity to that of a traditional venture capitalist(McNally, 1997).

The idea of utilizing relationships external to thefirm, such as inter-firm relationships (Lorenzoni andLipparini, 1999), can be extended from a role inventure creation and sponsorship to support for theparent organization’s approach to managing the CVprocess. Miles and Covin (2002) highlighted the factthat some organizations, rather than having directinterventions, used external venture capital firms tosupport their internal or external venturing by assistingwith the identification of ideas and providing seedfunding. While engaging venture capitalists (VCs) inthis way may provide enhanced financial returns forcompanies and decrease risk, such an approach doesnot fully grasp the potential that organizations andventures can gain from bringing in external support forinternal ventures (Morris and Kuratko, 2002). Venturecapitalists and other outside corporate venture supportfirms can play a crucial role when supporting theventures of established organizations (Durman, 2001)as it can be difficult for intrapreneurs to find supportfor their ideas in the political context of an establishedcompany (Block and MacMillan, 1993; Pinchot andPellman, 1999). Venture capitalists, for example, havethe experience to identify viable ventures and can workin partnership with organizations by acting as a firstport of call, or mentor, for new ideas. Historicalexamples of movement towards these approaches couldinclude the work of Coller Capital and Lucent Tech-nologies/Bell Labs in creating a hybrid venturedivision.

The mixture of internal and external relationshipsgives the organization several options either to respondpassively to new ideas developed inside the organizationor actively to seek new ideas from external entrepre-neurs. Previous researchers have explained theserelationships by using a typology of venture creationapproaches and involvement (McNally, 1997): some

304



Figure 1. Spectrum of strategic relationships incorporate venturing.

have described them as a range of investment types (Hilland Birkinshaw, 2008); others as a range of focuses andinvestment intermediation sources (Miles and Covin,2002); and finally, others have seen them as part of arange of strategic approaches (Campbell et al, 2003).The full spectrum of strategic relationship opportunitiesis illustrated in Figure 1, and includes:

(1) passively responding to the generation of internalideas from employees; allowing subsequent internalfunding and ultimately ownership of the newventure by the organization (employees as entrepre-neurs) – internal strategic relationships;

(2) actively seeking new ideas from existing employees,with new ventures still owned, if only in part, andcontrolled by the parent organization, but withexternal strategic or financial involvement (employ-ees as entrepreneurs) – internal/external strategicrelationships;

(3) actively seeking new ideas from outside the organi-zation to spin into the organization with completeinternal financial control (entrepreneurs as employ-ees) – external/internal strategic relationships; and

(4) actively and strategically seeking outside entrepre-neurs and new ideas and funding them, but onlytaking a partial financial interest in the new ventures– external strategic relationships.

Having considered the range of forms of strategicrelationships that an organization may choose to engagein, one may now consider the reasons why these rela-tionships may develop as part of the firm’s overallstrategic intent, by considering the market orientationthat the organization may adopt.

Market orientation

The nature of the strategic relationships adopted by thefirm in pursuing corporate venturing as outlined in theprevious part of the paper, it is posited here, will beinfluenced somewhat by the firm’s market orientation inthe context of the strategic intent that guides it to engagein CV. Narver and Slater (1990) define market orienta-tion as encompassing the three tenets of customerorientation, competitive orientation and inter-functionalcoordination, while Morgan et al (2009) argue that itprovides firms with a competitive advantage. A numberof researchers, however, have suggested that marketorientation in isolation leads to the firm primarilyfocusing on existing markets and the expressed needs ofcustomers. This can leave the firm open to loss ofmarket share to entrepreneurial firms entering themarket with new technologies and offerings (Slater andNarver, 1995; Matsuno et al, 2002). Slater and Narver(1995) argue that one solution to this problem is tocombine market orientation with an entrepreneurialorientation in seeking and exploiting new products andmarkets. It has further been suggested that there is a linkbetween market orientation and corporate entrepreneur-ship in that these effectively provide a trade-off,particularly in dynamic environments, whereby firmsmay identify opportunities (Barrett and Weinstein, 1998;Matsuno et al, 2002; Simmons et al, 2009) or be subjectto environmental hostility (Zahra and Garvis, 2000).

Despite these attempts to link corporate entrepreneur-ship and market orientation, no consideration has beengiven to the relevance of market orientation to CV.Morgan et al (2009), however, argue that firms needcomplementary organizational capabilities in order todeploy a market orientation, and Attuahene-Gima andKo (2001) contend that realizing a market orientation intandem with an entrepreneurial orientation is a strategicand operational issue, which requires an attempt bysenior managers to engender the right environment –something that CV may provide (Simon et al, 1999).

Traditional competitive theory suggests that anorganization’s market position and corporate success arederived from the possession of competitive advantagethrough critical success factors (Kay, 1993), which Kaysuggests are architecture (that is, the organization’srelationships with customers and suppliers), innovation,brand and corporate reputation. Miles and Covin (2002)

2

3

4 EXTERNAL

Direction of financial investment

Direction of project ownership

1

INTERNAL



argue that a key desired strategic outcome from becom-ing an entrepreneurial organization is to gaincompetitive advantage. Some firms may consider CV tobe a way of maximizing the potential of core assets, andto this extent these organizations may seek to promotetheir critical success factors and to appropriate greatervalue from their core competencies through CV (Covinand Miles, 2007). Conversely, when considering thestrength of competition in the markets in which a firmoperates (Porter, 1980), firms may develop a CVstrategy in response to a perceived or actual increase incompetition in traditional markets.

In this paper, we propose that firms may adopt one oftwo forms of market orientation in competitive environ-ments. For some, CV may be a way of defending marketposition against perceived threats, such as environmentalhostility, and as a means of entering new markets as ahedge against significant loss of market share (Covinand Miles, 2007). These firms engage in ‘surface’entrepreneurship as they consider it an importantstrategic goal, which, while not a part of the organiza-tion’s shared values, should be promoted andencouraged for strategic reasons (Sathe, 1988), and inthis sense they have a defensive market orientation.

Conversely, some firms may spin out self-sufficientfirms, which are supported by the parent’s existingcritical success factors and at least initially do notappear to offer anything back in return. In this case, CVbecomes a vital part of the growth strategies of thesefirms; it becomes a fifth critical success factor and, ineffect, business strategy becomes driven by CV as the‘way we do business’ (Covin and Miles, 2007). In thiscase, the organization is engaging in ‘deep’ entrepre-neurship as it is seen as an important shared value(Sathe, 1988) and its approach may be part of a widercorporate entrepreneurship strategy (Ireland et al, 2009).When considering these firms and their approach tomarkets, the purpose of implementing strategic CV maynot be to defend existing markets, but rather to penetratediverse new markets as the main way of pursuingbusiness growth. In relation to Porter’s (1980) ‘fiveforces’ model of competition, market penetration maybe enacted through either investing in innovations inorder to create a substitute for products that are inexisting markets or by seeking to enter a new market.CV, for these firms, acts as a way of entering aggres-sively new and/or existing markets that are new to thefirm, and in so doing they create growth. We proposethat these firms can be described as having an aggres-sive market orientation. In the next section, the paperexplores how these market orientations, in conjunctionwith strategic relationships, may be utilized in attempt-ing to achieve a firm’s strategic intent when consideringapproaches to CV.

Options available in strategy formulationfor corporate venturing

When considering the options available to firms indeciding upon an entrepreneurial strategy, it is importantto take into account both the organization’s purpose orgoals – ‘the what and the why’ and the policies or plansfor achieving those goals (Andrews, 1971), ‘the how andwho’ of CV. The key issues we have identified inreviewing the literature are the aggressive or defensivemarket orientation of an organization (the what andwhy) and the role of internal and external strategicrelationships (the how and who) in utilizing strategic CVto achieve an organization’s strategic intent.

This can be expressed as a conceptual framework inthe form of a matrix (Figure 2) that shows the organiza-tion’s strategic intent in relation to its development ofstrategic relationships, either internally or externally,along with its market orientation, which may be eitheraggressive or defensive. By using these alternativestrategic intentions, the conceptual framework can beused to see in which quadrant a particular organization’sapproach lies. This shows the diversity of marketorientation and strategic relationships (indicated by eachquadrant of the matrix) and also the potential interactionbetween quadrants of the matrix. The next section of thepaper introduces the methodology and explores how theconceptualization can be used to understand the CVpractices of multinational organizations.

Methodology of the case study researchApproaches to research on CV have utilized a mixtureof quantitative and qualitative methods. Quantitativesurveys have tended to be developed through interviews,existing literature and responses from corporate CEOsand CV unit managers. Another quantitative approachhas been to undertake an analysis of financial invest-ments and returns using annual reports and venturecapital databases. Qualitative research has generallybeen conducted in the form of case studies of individualCV programmes and has used interviews with CVmanagers and CEOs as well as publicly availabledocuments. Qualitative research has allowed for morein-depth explorative study, and more recent studies havetended to adopt a multi-case approach.

In order to explore internal and external relationshipsin CV, a case study approach was used and the resultsfrom the research are reported in this paper. The ap-proach involved extensive examination of thephenomenon of CV in the organizations studied. Theapproach used is an example of a phenomenologicalmethodology (Tellis, 1997). In this approach to casestudy research, the context of the research is of para-mount importance. Data for the case studies were

306



Figure 2. The Corporate Venturing Strategic Intent Framework.

obtained from interviews with people in the organiza-tions investigated. The data from the interviews havebeen combined with secondary data from internal andexternal sources relating to the organizations engaged inthe research, so as to validate the opinions presented ininterview data. The case studies offer a methodologythrough observation, reconstruction and analysis thatprovides a thorough investigation to contribute to theresearch (Tellis, 1997). It is also argued by Aaker et al(1998) that case studies are often a logical method ofanalysis in a complex situation.

The use of the case study approach has allowed thefindings of this paper to be intrinsically linked. This haspermitted the results to be interpreted ideographically interms of the case particulars. Information has not been

interpreted nomothetically, thus ensuring that there areno law-like generalizations inferred. Since case studiesare exploratory in nature and are used in areas whereinsufficient knowledge exists (Hussey and Hussey,1997), they are appropriate to the case studies re-searched in this paper. According to Bryman (1989),case studies are important in terms of offering research-ers the opportunity to test theories. In terms of thispaper, the particular theories to be tested are the relativeimportance of internal and external strategic relation-ships in conjunction with market orientation indetermining strategic intent in CV.

In accordance with Yin (1994), the case studyapproach used for this work possesses the followingcharacteristics:



(1) The research was aimed at understanding andexploring the role of strategic relationships andmarket orientation in attempting to achieve a firm’sstrategic intent through CV.

(2) The research did not necessarily commence with aset of preconceived questions and ideas with regardto the organizations to be studied.

(3) The research used multiple methods to collect therelevant information from the case study sourcesand used the relevant literature on CV.

The main stages of the case study were followed inaccordance with the accepted approach of (a) selectingthe cases, (b) preliminary investigations, (c) informationgathering, (d) the analysis stage, and (e) the report stage.Also, the research followed the approach ofphenomenological studies in that a diagram was devel-oped as an aide-mémoire to explain the patternsemerging from the study (Hussey and Hussey, 1997).

The three cases chosen for this study were selectedfrom an original convenience sample of 12 multinationalfirms, due to the length of time that the businesses hadbeen involved with CV (at least 10 years), the locationof their head offices (the UK) and access to key inform-ants. Preliminary investigations regarding theorganizations were carried out through personal contactsmade in business and academic networks that weredeliberately selected in 2000 and through appraisal ofinformation in the business press. Data were subse-quently collected from 2000–2008 through a mixture offace-to-face and telephone interviews with at least twosenior managers at each organization, who were, or hadbeen, responsible for venture projects or the overallventure division, depending on the circumstances at thetime. Initial interviews took place in the period 2000–2002, with subsequent interviews in 2007–2008 andinformal contact throughout the eight-year period. Theseinterviews were supported by secondary sources such asnewspaper and business press articles, Website informa-tion and investor reports throughout the eight-yearperiod. In the following part of the paper, we explore thecase studies and discuss the conceptual issues high-lighted earlier, explaining how the data collected canenhance our understanding of strategic CV.

The case studies

Each of the three organizations included in this paper isdescribed in relation to its CV activities and thenconsidered in relation to its strategic relationships andmarket orientation in pursuing strategic CV.

Company A

The first business, based in the engineering industry,sells mainly to national public bodies and commercial

organizations in over 100 countries. It has an annualturnover of over £18 billion, with more than 100,000employees based in a number of countries, and claims toproduce over 100 inventions a year. The business set upa CV division to exploit potential sources of revenuefrom its innovations in alternative commercial markets.By 2003, the company was making between £1 millionand £2 million per annum from its R&D and intellectualproperty. It was able to utilize this income to subsidizeresearch for its core operations.

The organization’s venture unit attracted youngdynamic people who had felt stifled by the culture of theestablished company. These people, however, had to beaccepted into the community of the engineering organi-zation as a whole, which was fairly traditional –meaning that there was little acceptance of ‘mavericks’.The potential intrapreneurs in the venture division had tobe able to show that they balanced dynamism withacceptability. Intrapreneurs came from both inside andoutside the organization, even though the group itselfwas not laden with entrepreneurs and venture capitalists.The core team was formed from portfolio managersfrom within the wider organization and from its spin-outcompanies. People who created ventures with thecompany were the type of people who would notnormally take the risk of going outside the company tocreate their own ventures and had often been with thecompany for a number of years. The venture divisionrewarded its intrapreneurs by offering them a share ofthe value created, and the firm aimed to engender aculture that supported innovation by challenging staff toinnovate. Intrapreneurs were also forced to commit tothe venture, as they were not automatically granted theright to return to their previous positions if their ventureproject failed, and had to earn the benefits they normallyreceived in the parent company, the general idea being,according to the head of the ventures division, that hewanted them ‘…to kill to make it work’.

The venture division had a venture creation tool,which facilitated seeking the best teams for a ventureand also systematically trawling for good ideas. Thecompany sometimes received help from externalfinancial venture partners, who knew the commercialmarket that the organization was trying to move into,and who could give outside validation from theirexperience of that wider market. If a venture becamesuccessful, the parent organization would allow it to bereleased as a firm in its own right. The parent wouldoften retain an interest in the new venture as astakeholder, or would buy out the venture managers andincorporate them back into the wider organization as acommercial division.

By 2005, the head of the ventures division hadresigned to become CEO of another firm. While the

308



organization retained its interest in alternative commer-cial markets for its technology, the organization began toshift attention away from the development of ventures toa focus on financial gains from intellectual property, asthis was perceived as giving more reliable opportunitiesfor a shorter-term financial gain, against what the newventure division manager termed the ‘risks and longterm nature of [internal spin-out] investing’. Whileexisting venture projects continued to develop in thedivision, the focus for the new managers of the divisionswitched to identifying intellectual property and trans-ferring this to external independent businesses andventure capitalists in return for finance, as well asforging strategic alliances with small and large externalorganizations. These external organizations wouldprovide their own teams of venture managers, ratherthan developing existing employees, unless a strong casewas made against this approach.

Company B

Based within the fast-moving consumer goods (FMCG)industry, this business has an annual turnover of over£40 billion, employs over 170,000 people in 100countries and invests over £800 million in R&D. In2000, this organization did not have an official venturesdivision like Company A. By 2008, however, thecompany had experienced an explosion in CV, driven byits new strategic objectives. During the intervening eightyears, the organization had noticeably changed directionin terms of relationship development, moving from apurely internal focus to a joined-up internal and externalfocus as part of an emphasis on exploiting new channelsand moving closer to consumers. Some of these earlyventures developed a service side to a traditionallyproduct-focused company. Another goal in venturingwas to realize the potential of its core product brands toleverage new ventures and build the brands at the sametime.

The intrapreneurs who ran initial ventures weremainly managers from within established businesseswho had expressed an interest in the concept followingan internal campaign, championed by the CEO of theoverall organization. Managers were encouraged toventure in this way to show others that they could staywithin the company and be an entrepreneur, rather thanleaving to pursue their ideas. To launch a new venture,staff developed a business plan to show the feasibility oftheir ideas. Venture ideas could come from any part ofthe organization, but as one senior manager explained,‘…grassroots employees would need the support of amanager to write a feasibility plan’. The organizationhad a range of successes and failures in its initialventuring programme; some of their initial successeswere closed down or scaled back, while at least one

venture was successfully sold as a going concern. Ifintrapreneurs’ ventures failed, the company would try toredeploy staff, as they were still considered to be a partof the organization.

More recent developments (since 2005) have seen theorganization move towards capitalizing on existingbrands, infrastructure and technology to create valuethrough investing in new venture divisions, whereby theopportunity to submit business plans and take part inventure activities has been extended to external indi-viduals, as well as external small or medium-sized firms.Rather than passively waiting for ideas to be submitted,the organization also developed technology ‘scouts’ whoresearch relevant external businesses that are looking forventure funding and, according to one such scoutinterviewed, ‘to ensure the relationship I put in place isright for these companies’. The strategy the organizationhas taken has shifted over the past four years from oneof nurturing from within, with little or no involvementfrom outsiders (except for market research from custom-ers), to expanding its focus to external ideas andorganizations, while still maintaining opportunities fordeveloping internal spin-outs, which the head of theventuring division argued had turned his managementrole into ‘…much more one of negotiation than it is in anormal job’.

Company C

Company C is based in a diverse range of consumerservice industries, with seven key sectors. It is slightlysmaller that Companies A and B, with an annual turno-ver of over £10 billion, more than 50,000 employees andoperations in 29 countries. Unlike the examples ofdependent relationships between organization andventure at Companies A and B, all of the businesseswithin Company C are given an autonomous status.They have their own budgets and responsibility for theirown services provision, including marketing and humanresources. Each individual company is run by differentsenior management teams, and is frequently run inpartnership with experienced outside organizations,which could explain why this organization tends to besuccessful when entering diverse markets. Furthermore,the organization will divest itself of businesses that itsees as no longer relevant to the organization’s portfolio,and frequently sells its stake in businesses to allow it toinvest in new opportunities.

The organization does not have a head office as such,but what group decisions there are, are made by aholding company that has 40 members of staff, some ofwhom sit on the boards of the 200 individual companiesthat are part of the group. This holding company alsolooks after the legal and brand protection for the group,as well as supporting new ventures. The holding compa-



ny’s only other involvement occurs when ventures aredoing exceedingly well or badly and are either likely tobe sold or need assistance.

Ventures can originate internally, and at least one ofits recent ventures originated from an operationalemployee in another venture, who submitted a businessplan. There is no active encouragement for ideas fromemployees, though a senior manager in corporatedevelopment mentioned in an interview that ‘our culturemeans that staff feel comfortable approaching thecompany with ideas’. The organization receives around250 business proposals a day, mainly from peopleoutside the organization, with ideas for ventures. Nomatter where they originate, the organization alwayscarefully considers the resources at its disposal, andwhether the idea lies in a direction that supports theorganization’s strategic goals, and successful businesseshave been developed from proposals submitted by bothinternal operational staff and external individuals andorganizations. The organization also supports outsidefirms through two of its companies, which invest inmusic and technology businesses as an extension of theorganization’s other activities in these industries.

In the next section, each of these cases will beexplored according to the perceived market orientationand the type of strategic relationships they developed, inrelation to the conceptual framework that was illustratedin Figure 2, resulting in the mapping of the case studiesagainst the conceptual framework (Figure 3).

Relating case studies to market orientationand relationships

Despite their varied industries, there are some strikingsimilarities between these organizations. All of themmention that the main goal of venturing is to maximizethe value of their intellectual property, be this in theguise of inventions and concepts or in existing brands.Both Company A and Company B said that their initialventure programmes were perceived to have assisted inencouraging talented individuals to stay with or join theorganization. There was also evidence in the case studiesof the importance of a range of strategic relationshipswith outsiders to the organization. This could be fromdeveloping venture programmes, from individuals ororganizations proposing ‘spin-ins’ or investment oppor-tunities, or from organizations providing consultancy orfinancial investment. The main division of opinionappears to lie in the ways in which venturing is encour-aged, developed and managed. The differentorganizations have used a variety of strategic ap-proaches, with varying degrees of success. Some are stillstruggling with certain facets of a venturing programme.The following section of the paper will attempt to

illustrate how these similarities and differences may bemapped against the conceptual framework, in an attemptto understand them better.

Applying the corporate venturing strategicintent matrix

The case studies show varied market orientations anduse of strategic relationships and can be analysed asfollows:

Company A. Initially, this organization had a defensivemarket orientation, with mainly internal relationships.This took the form of encouraging existing staff toproduce commercial ideas and new ventures, but alsoinvolved keeping control of the eventual new ideas andventures produced. The company did, however, encour-age outside entrepreneurs to approach it with ideas thatit would support, occasionally utilizing the advice ofoutside venture capitalists, and subsequently developedroutes to market that relied heavily on external partner-ships through licensing. In all cases, the main focusremained on finding additional sources of revenue fromexisting research and development as a way of defend-ing the firm from potential shortfalls in traditionalsources of revenue. As illustrated in Figure 3, theorganization is seen to straddle both internal andexternal/defensive quadrants. Initially, strategic relation-ships pertinent to corporate ventures were mainlyinternal, but became increasingly external, whileconsistency was maintained in the focus on using adefensive market orientation.

Company B. This organization initially showed adefensive market orientation with an internal focus. Interms of the internal focus, venture creation centred onits main brands in an effort to safeguard against per-ceived threats from a competitive market. Itsrelationship strategy was ‘in-house’ and was designed toencourage existing employees to come up with newideas. Also, the new ventures were a part of the organi-zation rather than distinct spin-outs operating within aseparate structure. In terms of the later developedexternal focus through its new venture divisions, thisemphasis encouraged internal and external applicants topresent ideas, which, through incubator support, couldbe spun out by the organization. The aim was to explorenew market openings for the organization, to diversifyits portfolio and to raise revenue through spin-outs andshare options as venturing became an increasinglyimportant part of the businesses core strategy fordeveloping and commercializing new products. Thisappears to illustrate an approach to venturing that wasincreasingly aggressive in market orientation. The

310



Figure 3. Relating case studies to the Corporate Venturing Strategic Intent Framework.

Strategic intent Internal relationships External relationships

Aggressivemarketorientation

Company A (circa 2000–2003)

Company B (circa 2000–2003)

Company B (circa 2005–2008)

Company A (circa 2005–2008)

Company C (circa 2000–2008)

Defensivemarketorientation

organization was plotted within the defensive/internalquadrant at first, but subsequently within internal andexternal/aggressive quadrants (Figure 3).

Company C. This organization showed strong aggres-sive market orientation as venturing appeared to be thekey strategic approach to developing new markets. Therelationship focus allowed entrepreneurs from bothinside the organization and from outside to approach itwith new ideas, as well as facilitating an emphasis ondeveloping external strategic relationships with otherorganizations. The structure of this organization and therelationships it developed with these new venturesindicated an approach that allowed more autonomy fornew ventures than was observed in internal venturingconducted by the previous cases. As a consequence,Company C has been plotted in the internal and exter-nal/aggressive quadrants (Figure 3).

Discussion and implications

Most previous models of CV that have been developedto understand the forms that this activity may take havelargely focused on types of relationships (McNally,1997; Miles and Covin, 2002; Hill and Birkinshaw,2008) and the intended strategies and approaches thatthe organization has adopted (Campbell et al, 2003;Covin and Miles, 2007). The framework provided bythis paper builds on these models by including marketorientation, which can drive the strategic choicesadopted from the range of approaches available, andfurthermore by illustrating the possible interactionbetween market orientation and strategic relationships inCV with regard to a firm’s strategic intent.

As a result, this framework can be used to analyse CV

strategies and help develop understanding of practice inthe development of strategic relationships with regard toa firm’s market orientation. Further in-depth case studiescomparing activities, successes and failures in eachquadrant would further expand on this work. By furtheranalysis in this area, examples of best practice could beestablished and used to help managers formulatestrategies on corporate venturing and explore thestrategic directions and relationships necessary forsuccess.

Finally, while previous matrices and typologies havedetailed various approaches to CV, they have tended tosuggest that there might be ideal types that an organiza-tion could select. The application of this matrix inanalysing the three case studies discussed in this paper,however, highlights the dynamic nature of the practiceof strategic CV. In particular, the matrix allows thatenvironmental influences may affect the organization’smarket orientation and the extent to which the organiza-tion may choose, or is able to choose, to utilize internalor external strategic relationships. In developing adynamic perspective of CV, the paper allows an analystor researcher to observe when a firm chooses single ormultiple approaches to CV, and in conjunction withprevious work on the interaction between corporateentrepreneurship and the environment (Tsai et al, 1991;Zahra and Garvis, 2000) and work on corporate ventur-ing, market orientation and organizational learning(Slater and Narver, 1995; Tidd and Taurins, 1999), thiscould allow one to consider further how a firm’s ap-proach to CV can change and develop over time.

Further research into these areas could explore howchanges in the external environment, such as disruptivetechnological change or economic recession, may resultin a firm developing a defensive or aggressive market



orientation, leading to the changing behaviour of keyactors involved in developing internal and externalstrategic relationships in attempting to achieve theorganization’s strategic intent.

Conclusions

Through the use of the matrix to appraise marketorientation and strategic relationships, it may be possibleto consider whether firms with similar marketorientations adopt similar forms of strategic relation-ships. The use of internal and external strategicrelationships in tandem can be seen more clearly in thecase of organizations that have chosen an aggressivemarket orientation. Conversely, in the case of thoseorganizations that have chosen a defensive marketorientation, it appears that they may tend to focus ononly one type of strategic relationship. This monoga-mous use of one type of relationship seems to changeover time, especially as organizations take on a lessreactionary role in the formulation of new ideas andpossible venture creations. It is concluded that thoseorganizations that are aggressively market-orientatedmay be more likely to use both internal and externalstrategic relationships. If an organization’s aim is tocreate a ‘deep’ entrepreneurial organization, then the useof both types of strategic relationships would seemappropriate for managers to consider, using approachessuch as open innovation (Chesbrough, 2006). In the caseof adopting a defensive market orientation, it may bethat the use of a single-aspect relationship strategy islikely. More evidence will be needed to enable a conclu-sive concept to be made in relation to organizations thatfollow this strategy.

It also seems that time and the maturity of strategicCV in an organization play a part in the options thatshould be used to help succeed in achieving a firm’sstrategic intent. It may be helpful for managers toinclude this criterion in their strategic analysis to helpthem make the right decisions about the use of relation-ships that are required, depending on the marketorientation deemed most appropriate, given the circum-stances in which the organization finds itself. Forresearchers too, further exploration of the issues raisedin this paper may yield more insights into the complex-ity of responses that organizations may exhibit inpursuing corporate venturing.

Acknowledgments

The authors gratefully acknowledge the helpful com-ments and suggestions of the guest editors for theirguidance throughout the revision process.

ReferencesAaker, D., Kumar, V., and Day, G. (1998), Marketing Research, 6

ed, Wiley, London.Amit, R. H., Brigham, K., and Markam, G. D. (2000), ‘Entrepre-

neurial management as strategy’, in Meyer, G. D., andHeppard, K. A., eds, Entrepreneurship as Strategy – Compet-ing on the Entrepreneurial Edge, Sage, Thousand Oaks, CA.

Allen, S., and Hevert, K. (2007), ‘Venture capital investing byinformation technology companies: did it pay?’ Journal ofBusiness Venturing, Vol 22, pp 262–282.

Andrews, K. (1971), The Concept of Corporate Strategy, Irwin,Homewood, IL.

Antoncic, B., and Hisrich, R. D. (2003), ‘Clarifying theintrapreneurship concept’, Journal of Small Business andEnterprise Development, Vol 10, pp 7–24.

Attuahene-Gima, K., and Ko, A. (2001), ‘An empirical investiga-tion of the effect of market orientation and entrepreneurshiporientation alignment on product innovation’, OrganizationScience, Vol 12, No 1, pp 54–74.

Barrett, H., and Weinstein, A. (1998), ‘The effect of marketorientation and organizational flexibility on corporate entrepre-neurship’, Entrepreneurship Theory and Practice, Vol 23, No1, pp 57–70.

Birkinshaw, J., van Basten Batenburg, R., and Murray, G. (2002),‘Venturing to succeed’, Business Strategy Review, Vol 13, pp10–17.

Block, Z., and MacMillan, I. C. (1993), Corporate Venturing:Creating New Businesses Within the Firm, Harvard BusinessSchool Press, Boston, MA.

Bryman, A. (1989), Research Methods and OrganisationStudies, Unwin Hyman, London.

Campbell, A., Birkinshaw, J., Morrison, A., and van BastenBatenburg, R. (2003), ‘The future of corporate venturing’, MITSloan Management Review, Vol 45, pp 30–51.

Chesbrough, H. (2006), ‘Open innovation: a new paradigm forunderstanding industrial innovation’, in Chesbrough, H.,Vanhaverbeke, W., and West, J., eds, Open Innovation:Researching a New Paradigm, Oxford University Press,Oxford.

Covin, J., and Miles, M. (2007), ‘Strategic use of corporateventuring’, Entrepreneurship Theory and Practice, Vol 31, No2, pp 183–207.

Durman, P. (2001), ‘Consultants tempt big firms to experiment’,in the Business Section, The Sunday Times, 18 February, p13.

Dushnitsky, G., and Lenox, M. (2006), ‘When does corporateventure capital investment create firm value?’ Journal ofBusiness Venturing, Vol 21, pp 753–772.

Gompers, P. (2002), ‘Corporations and the financing of innova-tion: the corporate venturing experience’, Federal ReserveBank of Atlanta Economic Review, Vol 87, pp 1–17.

Guth, W., and Ginsberg, A. (1990), ‘Guest editor’s introduction:Corporate entrepreneurship’, Strategic Management Journal,Vol 11, pp 5–15.

Hamel, G., and Prahalad, C. K. (1989), ‘Strategic intent’, HarvardBusiness Review, Vol 67, No 3, pp 67–76.

Hill, S., and Birkinshaw, J. (2008), ‘Strategy-organizationconfigurations in corporate venture units: impact on perform-ance and survival’, Journal of Business Venturing, Vol 23, pp423–444.

Hussey, J., and Hussey, R. (1997), Business Research: APractical Guide to Undergraduate and Postgraduate Students,Macmillan, London.

Ireland, R. D., Covin, J. G., and Kuratko, D. F. (2009), ‘Conceptu-alizing corporate entrepreneurship strategy’, Entrepreneur-ship Theory and Practice, Vol 33, No 1, pp 19–46.

Kay, J. (1993), Foundations of Corporate Success, OxfordUniversity Press, Oxford.

Keil, T. (2004), ‘Building external corporate venturing capability:initial conditions, learning processes and knowledge manage-ment’, Journal of Management Studies, Vol 41, pp 799–825.

312



Lorenzoni, G., and Lipparini, A. (1999), ‘The leveraging ofinterfirm relationships as a distinctive organizational capabil-ity: a longitudinal study’, Strategic Management Journal, Vol20, pp 317–338.

MacMillan, I., Block, Z., and Narasimha, P. (1986), ‘Corporateventuring: alternatives, obstacles encountered and experienceeffects’, Journal of Business Venturing, Vol 9, pp 351–369.

Macrae, N. (1976), ‘The coming entrepreneurial revolution; asurvey’, The Economist, 25 December, pp 41–65.

Macrae, N. (1982), ‘Intrapreneurial now’, The Economist, 17April.

Matsuno, K., Mentzer, J. T., and Ozsomer, A. (2002), ‘The effectsof entrepreneurial proclivity and market orientation onbusiness performance’, Journal of Marketing, Vol 66, No 3, pp18–32.

McNally, K. (1997), Corporate Venture Capital: Bridging theEquity Gap in the Small Business Sector, Routledge, London.

Meyer, G. D., and Heppard, K. A. (2000), Entrepreneurship asStrategy – Competing on the Entrepreneurial Edge, Sage,Thousand Oaks, CA.

Miles, M., and Covin, J. (2002), ‘Exploring the practice ofcorporate venturing: some common forms and their organiza-tional implications’, Entrepreneurship Theory and Practice, Vol26, No 3, pp 21–40.

Morck, R., and Yeung, B. (1999), ‘When synergy creates realvalue’, Financial Times, 8 November, quoted in FT database.

Morgan, N. A., Vorhies, D. W., and Mason, C. H. (2009), ‘Marketorientation, marketing capabilities, and firm performance(research note)’, Strategic Management Journal, January.

Morris, M., and Kuratko, D. (2002), Corporate Entrepreneurship,Harcourt, Orlando, FL.

Narver, J. C., and Slater, S. F. (1990), ‘The effect of a marketorientation of business profitability’, Journal of Marketing,October, pp 20–35.

Pinchot, G. (1978), ‘Intra-corporate entrepreneurship’, TheEconomist, August.

Pinchot, G. (1985), Intrapreneuring, Harper & Row, London andNew York.

Pinchot, G., and Pellman, R. (1999), Intrapreneuring in Action,Berret-Koehler, San Francisco, CA.

Porter, M. E. (1980), Competitive Strategy, Free Press, NewYork.

Sathe, V. (1988), ‘From surface to deep entrepreneurship’,Human Resource Management, Vol 27, No 4, pp 389–411.

Siegel, R., Siegel, E., and MacMillan, I. (1988), ‘Corporateventure capitalists: autonomy, obstacles, performance’,Journal of Business Venturing, Vol 3, pp 233–247.

Simmons, G., Thomas, B. C., and Packham, G. (2009), ‘Opportu-nity and innovation: synergy within an entrepreneurialapproach to marketing’, International Journal of Entrepreneur-ship and Innovation, Vol 10, No 1, pp 63–72.

Simon, M., Houghton, S. M., and Gurney, J. (1999), ‘Succeedingat internal corporate venturing: roles needed to balanceautonomy and control’, Journal of Applied ManagementStudies, Vol 8, pp 145–159.

Slater, S. F., and Narver, J. C. (1995), ‘Market orientation and thelearning organization’, Journal of Marketing, Vol 59, No 3, pp63–74.

Sykes, H. (1990), ‘Corporate venture capital: strategies forsuccess’, Journal of Business Venturing, Vol 5, pp 37–47.

Tellis, W. (1997), ‘Introduction to case study research’, TheQualitative Report, Vol 3, No 2.

Thornhill, S., and Amit, R. (2000), ‘A dynamic perspective ofinternal fit in corporate venturing’, Journal of BusinessVenturing, Vol 16, pp 25–50.

Tidd, J., and Taurins, S. (1999), ‘Learn or leverage? Strategicdiversification and organizational learning through corporateventures’, Creativity and Innovation Management, Vol 8, No 2,pp 122–129.

Tsai, W., MacMillan, I., and Low, M. (1991), ‘Effects of strategyand environment on corporate venture success in industrialmarkets’, Journal of Business Venturing, Vol 6, pp 9–28.

Yin, R. K. (1994), Case Study Research – Design and Methods,2 ed, Sage, London.

Zahra, S. A., ed (2005), ‘Introduction’, in Corporate Entrepre-neurship and Growth, Edward Elgar, Cheltenham.

Zahra, S., and Garvis, D. (2000), ‘International corporateentrepreneurship and firm performance: the moderating effectof international environmental hostility’, Journal of BusinessVenturing, Vol 15, No 5–6, pp 469–492.

achieving strategic intent through corporate venturingeprints.glos.ac.uk/2168/1/301.full.pdfor...

Documents