Networks and corporateentrepreneurship

A comparative case study on family businessin Catalonia

Nuria Toledano, David Urbano and Marc BernadichBusiness Economics Department, Autonomous University of Barcelona,

Barcelona, Spain

Abstract

Purpose – The purpose of this paper is to analyse in-depth collaboration as a process that emergesfrom interactions among individuals in order to develop entrepreneurial actions within establishedfamily firms. The research is contextualized in the metal sector in Catalonia (Spain), using institutionaleconomics as a theoretical framework of reference.

Design/methodology/approach – Methodologically, the paper adopt an exploratory perspectiveand employs a qualitative approach. In particular, a multiple case-study is used to gain deep insightsinto a contemporary and complex issue within its real-life context, and two case studies arepurposefully selected in order to be able to conduct cross-case comparisons.

Findings – In the early formation phase of collective entrepreneurship, there are similaritiesreflecting the networks status of both cases. In contrast, there are some variations concerning thedevelopment of collective entrepreneurship within the businesses which affect the type of corporateentrepreneurship (CE) activities developed by the firms.

Research limitations/implications – By using a case study approach, it is hard to validate thetheories for any more general applicability.

Practical implications – Promoting trust in the organizational context, owner-managers mayassume the role of intrapreneurs as network or human interaction builders within businesses, in orderto promote CE through collective activities.

Originality/value – The paper shows that CE activities may be understood from a collective actionamong employees and owner-managers. The paper also demonstrates that the phenomenon can beplace into a broader theoretical context, taking into account the considerations included in institutionaleconomics.

Keywords Entrepreneurialism, Networking, Family firms

Paper type Case study

1. IntroductionIn the context of growing market globalization and high rates of changes in areas such astechnology and industry, firms need to innovate constantly to improve their flexibility,competitiveness and reactivity (Carrier, 1996; Huse et al., 2005; Littunen and Virtanen,2006). Many authors have highlighted that established firms must adopt entrepreneurialstrategies (Hitt et al., 2009; Ireland et al., 2009; Kuratko et al., 2005; McGrath andMacMillan, 2000; Sathe, 2003) as a path to revitalize existing organizations and make

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The authors acknowledge the financial support from the Projects SEC2006-06017 andSEJ2007-60995 (Spanish Ministry of Education and Science), and 2005SGR00858 (CatalanGovernment’s Department for Universities, Research and Information Society).

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Journal of Organizational ChangeManagementVol. 23 No. 4, 2010pp. 396-412q Emerald Group Publishing Limited0953-4814DOI 10.1108/09534811011055395

them more innovative. Consequently, entrepreneurship scholars have begun to payincreasing attention to entrepreneurial activities within established organizations,which have been conceptualized in literature as “corporate entrepreneurship” (CE) or“intrapreneurship” (Antoncic and Hisrich, 2004; Burgelman, 1983; Carrier, 1994, 1996;Covin and Miles, 1999, 2007; Covin and Slevin, 1991; Dess et al., 2003; Pinchot, 1985;Sharma and Chrisman, 1999; Zahra et al., 1999).

According to Guth and Ginsberg (1990, p. 5) the topic of CE encompasses thefollowing phenomena:

(1) the birth of new businesses within existing organizations, i.e. internal innovation orventuring; and (2) the transformation of organizations through renewal of the key ideas onwhich they are built, i.e. strategic renewal.

Concerning the most important issues that have been investigated in this field, ananalysis of recent works reveals two main approaches. On the one hand, a number ofstudies have examined the effect of CE on a company’s financial performance as wellas on the development and acquisition of important organizational capabilities andskills (Kuratko et al., 1990; Lim et al., 2008; Lumpkin and Dess, 1996; Soriano, 2005;Zahra, 1993, 1995; Zahra et al., 1999). On the other hand, several enquiries have soughtto uncover the antecedents of CE activities (Altinay, 2005; Burgelman, 1983; Covin andSlevin, 1989; Hornsby et al., 2002; Kathuria and Joshi, 2007; Kearney et al., 2008; Miller,1983; Zahra, 1991). Within the second approach, researchers have emphasized theimportance of a variety of sources such as the firm’s external environment, structureand organizational culture. In addition, current issues that call for action in CE researchinclude examining why some established firms develop incessantly entrepreneurialactivities rather than others. Among possible answers, a new discussion emerges aboutthe power of collaboration within firms (Miles et al., 2000, 2005; Miles and Snow, 1986;Ribeiro-Soriano and Urbano, 2009; Stewart, 1989; Weick and Roberts, 1993). Inparticular, within firms, collaboration among individuals and groups is usuallydirected toward objectives such as refining the business concept to meet changingcustomer needs and expectations and may take any form that has meaning andprescriptive value for the organization (Ireland et al., 2009; Jassawalla and Sashittal,1999). According to this view, CE arises from the collaboration efforts ofinnovation-minded players (Kemelgor, 2002), that is, from collaboration amongemployees and owners. Then, taking into account that entrepreneurial teams’ actionscontribute to nurturing and sustaining innovations within firms, CE can be understoodas a “collective phenomenon” ( Johannisson et al., 2002; Johannisson, 2003;Ribeiro-Soriano and Urbano, 2009). Nevertheless, so far we know little about thisphenomenon and the way in which the process of collaboration promotes CE activitiesand creates innovative products and services.

This study represents an initial attempt to consider collaboration as a process thatemerges from interactions among individuals in order to develop entrepreneurialactions within established firms. To facilitate understanding, an institutionalperspective (North, 1990, 2005) is adopted. The institutional approach stresses thefunction carried out by institutions in economic development and has turned out to beone of the most suitable frameworks for the analysis of institutional factors thatinfluence the development of entrepreneurial actions (Toledano and Urbano, 2008;Urbano, 2006; Veciana and Urbano, 2008). In this paper, institutional economics

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is especially applicable to learning from the role that human interactions or networks,as a particular kind of institution according to North’s (1990) perspective, can play indeveloping collaborative actions which, in turn, support CE activities. The studyemploys a case-study approach (Eisenhardt, 1989, 2007; Yin, 1984) to gain a deepunderstanding of this complex issue. Specifically, we conduct a multiple-case studywith two family businesses trading in the metal sector in Catalonia (Spain) whichacknowledges the introduction of innovations within the firms through the firstcomponent of Guth and Ginsberg’s (1990) definition of CE.

After this introduction, the paper is divided as follows. In Section 2 the conceptualframework is presented; in Section 3 the research methods are explained; in Section 4the most important characteristics of the context of the study are summarized; inSection 5 the empirical findings and a discussion of the cases are included; and finally,in Section 6 the conclusion and implications for future research are outlined.

2. Linking collaborative entrepreneurship, networks and institutionaleconomicsAccording to Miles et al. (2005, p. 1) collaboration is “a process whereby two or moreparties work closely with each other to achieve mutually beneficial outcomes”(Medina-Munoz and Medina-Munoz, 2004). While several types of collaboration arepossible to achieve diverse objectives, in this paper collaboration is considered to createCE activities. Therefore, collaborative entrepreneurship encompasses the relationshipsestablished among individuals in order to create new business within established firms,introduce significant innovations and enhance a company’s competitive position.Specifically, the collaboration among employees, owners and groups who shareinformation and efforts to develop CE has been conceptualized in the recent literature as“collective entrepreneurship” ( Johannisson, 2003; Ribeiro-Soriano and Urbano, 2009;Stewart, 1989).

Collective entrepreneurship has emerged as a new phenomenon within theentrepreneurship field (Hjorth and Johannisson, 2003; Johannisson, 2000a, b, 2003;Lounsbury, 1998; Ribeiro-Soriano and Urbano, 2009). While the concept ofentrepreneurship has been popularly linked to an entrepreneur who acts as a hero,collective entrepreneurship understands entrepreneurship as a plural phenomenon inwhich several individuals become enabled through the construction of social networks(Aldrich and Zimmer, 1986; Johannisson, 2000a, b, 2002, 2003) and shared cognitiveframes (Berger and Luckmann, 1967) to promote some type of innovation (Gupta andGovindarajan, 2000; Miles et al., 2000). Since collective interests do not always producecollective action (Heckathorn, 1996), it becomes necessary, however, to provide anappropriate atmosphere for the cooperation. According to Hargrave and van de Ven(2006, p. 874) “cooperation relationships emerge among the actors who can achievecomplementary benefits by integrating their functional specialization or institutionalrole”. In this context, the networks are considered as one of the main drivers ofcooperation and collective action among employees (Floyd and Wooldridge, 1999).

In general, the network perspective as applied to entrepreneurship proposes thatventures sediment, crystallise out of personal networks (Johannisson, 1992, 2000;Larsson and Starr, 1993; Taylor, 1999). Then, the entrepreneurial career is considered asa set of interlocking ventures that are embedded in the personal network of theentrepreneur ( Johannisson, 2002). The broad image of entrepreneurship, as independent

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entrepreneurship – creation of a new firm – or as CE – birth of new business orinnovative projects within existing organizations – can be perceived as the successiveenactment of venture opportunities continuously produced by the personal network.In other words, entrepreneurship may be associated with those ties in the overallpersonal network that the entrepreneur or intrapreneur establishes and maintains inorder to identify opportunities. Therefore, the concept of networks suggests collectionsof actors joined together by a certain type of relationship (Aldrich and Zimmer, 1986;Johannisson, 2002; 2000a, b). Concretely, the ideal type of network advocates a trulysymmetrical relationship between all the individuals involved to share usefulinformation/knowledge with other members, achieve mutual understanding, anddevelop a firm base for mutual trust that may eventually lead to collaboration toachieve actors’ individual as well as collective goals (Birley, 1985; Boojihawon, 2007;Granovetter, 1985; Johannisson, 2002, 2003; Sjostrand, 1992, 1986; Witt et al., 2008).

Within firms, the networks consist of all the relations between owners, managersand employees, as they are structured by patterns of coordination and control (Dubiniand Aldrich, 1991) which may influence the potential trust and outcomes ofembeddedness. In addition, research into institutionalism perspective states that theinstitutional framework structure incentives human relations and exchanges, whetherpolitical, social or economic (North, 1990). Consequently, the institutional perspectivemay be a useful approach for analyzing the human interaction and exchange incollective entrepreneurship, particularly in order to explain how employees and ownermanagers interact to develop collective actions which lead to CE activities.

An institutional approach to CE researchAs noted above, the institutional approach analyses the nature of institutions and theirconsequences for economic (or societal) performance. According to North (1990, p. 3),one of the main authors in this field, institutions are “a guide to human interaction”. Inthis sense, institutions reduce uncertainty by providing a structure to everyday life,representing the rules of the game in a society. Institutions may include any form ofconstraint that human beings devise to shape human interaction. Then, they may becreated, as are political rules, economic rules and contracts (formal institutions) or theymay evolve over time, as do codes of conduct, attitudes, values, norms of behaviourand conventions (informal institutions).

North’s position is that formal institutions are subordinate to informal ones in thesense that they are the deliberate means used to structure the interactions of a societyin line with the norms and cultural guidelines that make up its informal institutions.Therefore, informal institutions shape the collective sense making and individualunderstanding of social values and rules, which is in turn dependent on previousexperience and knowledge (Welter and Smallbone, 2008). North (1995) also drawsattention to the path-dependent behaviour of informal institutions, which are deeplyrooted in society, describing their embedded character as a result of their culturalcontent. In this sense, North (1990, p. 37) points out that “informal institutions comefrom socially transmitted information and are part of the heritage that we call culture”.Hence, while they evolve spontaneously and unintentionally over time, also act as arestriction for behavioural change.

While many of the scientific works on the institutional theory have focused on formalinstitutions (Chrisman et al., 1987; Lerner and Haber, 2001; North et al., 2001), in modern

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studies the popularity of informal institutions has increased, and their importance hasbeen remarkable (European Commission, 2003, 2004; Krueger et al., 2000; van Aukenet al., 2006). Moreover, in recent years, a renewed and broad scientific interest ininstitutions and the institutional approach has allowed the development of newapplications of this perspective, providing empirical understanding to different topicsrelated to entrepreneurship and SMEs (Toledano and Urbano, 2008; Veciana andUrbano, 2008; Stephen et al., 2009). In this context, informal institutions are viewed as theculturally accepted basis for legitimating entrepreneurship (Wade-Benzoni et al., 2002)through the determination of the collective and individual perception of entrepreneurialopportunities. As noted before, this paper is included within this research line, anddraws from institutional economics the concept of informal institutions for analysingcollective entrepreneurship and CE activities in family firms. In particular, adistinguishing feature of our approach is that CE activities in small family firms arefounded through human interactions or networks that facilitate collectiveentrepreneurship. Networks allow the sharing of information, ideas and efforts byemployees in order to generate innovations for the firm. Trust acts as the bonding agentthat allows networks to realize and achieve their full potential. Specifically, trust is easierand more likely to emerge in those situations where biological relations such as kinshipand family ties exist, in which the cooperation as well as collective actions have beenlearned through the socialization process (Aldrich and Cliff, 2003).

Therefore, based on these arguments, we expect that networks, as informalinstitutions from North’s (1990, 2005) perspective, create opportunities for small familyfirms to develop CE activities. Owing to the lack of previous enquiries in this field weadopt an inductive approach, using a case study methodology to obtain new insightsconcerning the phenomenon.

3. MethodologyThis paper adopted an exploratory perspective and employed a qualitative approach(Eisenhardt, 1989, 2007; Yin, 1984) for the purpose of understanding how networksaffect preconditions for collective entrepreneurship and, in turn, for developing CEactivities in small family Spanish firms. Case studies were used to gain deep insightsinto a contemporary and complex issue within its real-life context (Yin, 1984) and twocases were purposefully selected in order to be able to conduct cross-case comparisons(Eisenhardt, 1989, 2007). The selection principles were the following:

. the firms recruited shared a similar family firm governance structure – due to thefact that CE is critical to family firm survival, profitability and growth(Kellermanns and Eddleston, 2006; Rogoff and Heck, 2003; Salvato, 2004), as wellas a similar environmental context, given the importance of environmentalcontext for developing comparable cultures and human interactions (North, 1990);

. the companies aimed to operate in the metal sector, which during the last year(2008) has endured a deep economic crisis in Spain;

. the firms had introduced examples of different forms of CE activities thatinvolved the introduction of innovations during the last decade; and

. the firms had a clear willingness to change in order to face the more dynamic andhostile environment.

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According to these criteria, two family firms in the metallurgical Bages district of Manresa(Catalonia, Spain) were selected[1]. The processes of generation and development ofcollective entrepreneurship for implementing CE activities are analysed in this enquiry.

Research setting: metallurgical industry in the Bages (Manresa)The tradition of Manresa metal and its surroundings can be traced to around the year1323, when it is documented that under the invocation of Saints Matthew and Eloythere was a guild that grouped various trades related to the handling of metals:blacksmiths, locksmiths and knife-makers.

In the seventeenth and eighteenth centuries, claueters and dealers acquiredimportance; in 1717, Manresa was one of the few centres in which the manufacture ofweapons was allowed by the Board of Higher Government of Felipe V, and from 1721,Manresa dealers, while specialized, created jobs for teachers in other Catalan towns.

The birth of the metallurgical sector, understood in a modern sense, did not occur inthe Bages until the last century with the development of the textile industry. By theyear 1890 Manresa had some seventy companies in the metal industry. In the earlytwentieth century, the activity as a great company dedicated to smelter for themanufacture of railway carriages and wagons began. During the civil war (1936-1939),the metal sector gained importance, especially as regards the construction of shells andother war material, and after the conflict it continued to be closely related to the textileindustry until the crisis of the year 1962, in which some employers began to penetratemetal related activities, mainly in the automotive sector, but also in the manufacture ofgas meters, dump trucks, machinery and so forth. Substantial growth in the sectormade it the largest after textiles, so that in 1971 there were 495 companies involved inmetal, with 5,715 workers.

During the global crisis of 1973 that affected the Bages until 1977, the specializationof small and medium enterprises in certain products, including outsourcing, started tobe extended in the area.

Recently, the metallurgical Bages district ranks first in terms of number of workersand companies, and the value added of their production shows that metallurgicalcompanies have emerged strengthened from the crisis and improved their technologicalcapacity and productivity. Their entrepreneurial and competitive approach, withspecialized equipment, highly professional staff and an acceptable pace of adoption ofnew technologies, justifies the key role played by the sector today. The entrepreneurialculture, along with the creation of new infrastructure, has given metal a significant rolewithin the regional economy that is likely to intensify in the coming years, given thequantity and quality of the companies’ equipment and personal property.

Data collection and data analysisThe fieldwork was conducted over a period of three months during 2009, using severaldata collection methods. Empirical data were mainly gathered via in-depth interviewsfrom two family businesses. Specifically, the study is mainly based on stories (Steyaert,1997, 2007; Hjorth and Steyaert, 2004) of CE activities told by different actors of the firmsselected as well as people from the context in which the businesses develop theiractivities. The research access was made possible by a longstanding friendship betweenone of the researchers and some owner-managers interviewed. In addition, this authortook several months to create network contacts in the study region and to secure the

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participation of the individuals who knew the histories of the selected firms. Formal datacollection began with a semi-structured interview of owner-managers of the familyfirms, using open-ended questions to gather data on the CE activities. The stories told bythe key informants provided us a great amount of data about the role played by theinnovation within the firms in order to remain in the competitive arena. How to developand manage ongoing processes for facilitating a steady stream of such innovations aswell as how networks among employees and owner-managers promoted thedevelopment of innovations were also explained during the semi-structuredinterviews, which were tape-recorded and transcribed. Additionally, informalinterviews made us available significant information about the type of relations thatprevailed in the analyzed family firms.

In a second phase of the study, a combination of several telephone conversations,information exchange by e-mail, and participant observation took place in order tocomplete the information in relation to activities, resources, people, relationships andincidents regarding the role of collective entrepreneurship in the development of CE.Concretely, participant observation was used to gather direct evidence of the processesand activities involved in creating a CE activity, and were also helpful for developing asustaining personal contact with the field. Field notes were written before and afterperiods of participant observation. Secondary data, such as web sites of the familyfirms, were also employed.

Concerning data analysis, a research database was initially created with theresulting information from data collection. The presence of a case-study databaseincreased the reliability of the entire research (Yin, 1984). At the end of the databasecreation, we took the steps recommended by Yin (1984) and Eisenhardt (1989, 2007) toconduct both within-case analysis and cross-case analysis. Through the first, the maincharacteristics of the case-studies were summarized. Once the individual case studieswere complete, a cross-case analysis was applied with the aim of identifyingdifferences and similarities between the cases.

4. Research findings and discussionThe case studiesCase 1. The family firm was founded in 1945 as a subsidiary company of the textileindustry, and specializes in repairing boilers. This small Catalan firm was not stuck intime and moved towards the construction of heavy iron structures during the 1970s.A decade later, it changed to the production of thin sheet metal furniture, and isresponsible, among others, for the parking meters in Barcelona. Its production alsofocuses on the manufacture of metal components, stainless steel and aluminium for theelectronics, computing, automotive and safety sectors, among others. Currently, it has aplant of 20,000 m2 and 120 employees with a high level of training, attaining a turnoverof e18 million in 2007. Its customers are around the world, essentially in Milan, Florenceand Russia.

Case 2. The case study concerns three partners who developed a family firm inManresa (Barcelona, Spain). In 1987, the three members of the family decided to developtheir own business idea inspired by the tradition of the Manresa metal industry. Thebasic business idea was to offer to customers (other firms) a high-quality product for theautomobile industry. In particular, the firm is dedicated to the design, development andproduction of dies for steel wheels up to 18 inches in diameter, and it is also specialized in

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moulds and tooling for the automotive industry, focusing on the market of productionautomobiles and light trucks. Currently the number of employees is 36 without graduatedegree, and it is considered to be one of the leading steel wheel manufacturer in Europe.

Discussion: cross-case analysisNetwork development. Interestingly, in the early formation phase of collectiveentrepreneurship, there are similarities reflecting the network status – previouslystated as informal institutions according to North’s (1990) perspective – of both cases. Forboth of them, for instance, the point of departure was a strong relationship between a smallnumbers of actors instead of the properties of each individual actor. The exchange andcommunication were repeated, the voluntary cooperation became habitual, and theworkplace was considered a familiar context, like the home. These observations led us to aredefinition of the workplace as a context of networks – informal institutions – thatfacilitate the emergence of collective entrepreneurship, which becomes a key determinantof the socialization process, according to Berger and Luckmann (1967). In this sense, itis also possible recognize the work of Granovetter (1985) on the concept “embedded” andof Johannisson (1992) on “network”, where the way in which actors are embedded in socialsystems and develop collaborative relationships is taken into account.

Further, both cases were also quite similar in stressing as a basic condition forcooperation the existence of good personal relations based on personal trust. Certainly,one of the key observations concerning the ingredients that guided the collaborativeactions was the high degree of mutual sympathy, empathy and confidence thatcharacterized the relationships among actors. For instance, in Case 2, the existence of acollective identity around the new business which may be interpreted as a result ofspontaneous sociability within the family was noted from informal comment betweenfather (owner-manager) and son (employee). Similarly, relations based on mutualreciprocity were also common in Case 1, where the existence of family ties among thetwo owner-managers (first cousins) strengthened the feeling of work for a commonentrepreneurial objective. Therefore, the cases evidence shows that the entrepreneurs’positive attitudes toward the generation of good personal relationships within thebusinesses facilitated the building of trust among employees and owner-managersbefore the establishment of collective entrepreneurship (Stewart, 1989). Then, thesearguments suggest the following propositions:

P1. The greater effective and continuous communication among employees andowner-managers, the greater the likelihood that networks will emerge withinfamily firms.

P2. The greater openness and trust in networks among employees andowner-managers, the greater the likelihood that collaboration (co-operation)will emerge within family firms.

Collective entrepreneurship development and CE activities. As discussed by Guth andGinsberg (1990), some CE activities may be effectively described, distinguishing asuccessful introduction of a new product or innovation and a new corporate venturing.In Case 1 the CE activity is inherently related to the product innovation process, whilein Case 2 it has typically been referred to as corporate venturing. Table I is a synthesisof points made by respondents and our observations to contrast the two types of CEactivities.

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The differences in the results of CE activities also reflected some variations concerning thedevelopment of collective entrepreneurship within the businesses. For instance, in Case 1,collective entrepreneurship was the result of owner-managers initiatives in which highlyspecialized employees participated formally. One of the interviewees explained how thecollective entrepreneurship started in the following terms:

The new ideas are generated in the board by all business owner-managers (my father and mytwo brothers who are involved in the business management), and other family members whoare not involved in the management of business. But in particular I manage the new projects;my brother also works but he is focused on commercial tasks. Then we have regular meetingswith employees who develop the ideas.

This quotation suggested a formal link of dependence among skilled employees andowner-managers who work as a team in order to develop innovations in products andprocess. Then, our evidence suggests that in Case 1 the possibilities for collaborationand collective entrepreneurship emerge from economic rationalities underlying theprocess of collaboration. In this sense, collective entrepreneurship may be understoodas people who collaborate in order to follow opportunities for create new wealth(Stewart, 1989).

In contrast, in Case 2, a long common history before the establishment of the CEactivity, the friendship ties among employees, and the initiative of the owner-managerwere the main sources of the collective entrepreneurship. In particular, the collectiveentrepreneurship story was often mediated and covered by the rhetoric of “family”,“friendly support”, and “need for security”. Interviews with key informants alsoprovided information above the lack of formalization regarding the process of collectiveentrepreneurship as well as the lack of skilled employees who participated in the CEactivity. This suggests that in Case 2 the CE was more the result of an occasional

Case 1 Case 2

It is a company dedicated to outsourcing which isalways done by analysing the production processin order to reduce costs and become morecompetitive while maintaining a productionschedule based on the application of advancedtechnology that ensures a tight control of thequality of this process. Therefore, the firm createsinternal innovation, in improving its processesand looking for maximum efficiency, and alsoremains attentive to entry into new businesses. Asa result of the internal innovation two new lines ofbusiness were created:(a) a leading manufacturer of metal components.The strategy is based on offering comprehensivesolutions to the customers both in domestic andinternational, and develops a wide range ofsolutions for solar energy installations, designedto deliver efficiency and sustainability; and(b) a new industrial division of the firm whichmanufactures and packs kits mechanisms for theautomotive sector in the new division

The firm created a new metal company (spin-off),not related to the automotive sector but within thetradition of metal. The new spin-off producesmetal machined parts for the rail industry,aeronautics, among others. Since the beginning,the company was created legally independent ofthe Case 2 primarily to reduce financial risks andgain agility especially in relations with employees.It starts with four workers, and is managed bytwo owners. The technical requirements forreferring to the machines are chosen according tocriteria of experience and adaptability. Since thefounding of the company, as this is an auxiliaryenterprise, support business rather thanexpanding

Table I.Main characteristics ofthe CE strategies

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proposal than a meditated activity. There was also evidence that teams of employeestried very hard, guided by a passion to work together in a more secure activity instead ofmotivated by applying their specialized knowledge. As the owner-manager told us:

The truth is that we started so disorganized [. . .] I undertook the project with the fourworkers. My son joined later, because he was studying psychology [. . .] My knowledge(engineering) together with the experience and knowledge of employees was sufficient.

Therefore, the testimony of the owner-manager suggests a form of collectiveentrepreneurship based on personal ties and people’s willingness to collaborate in acommon project in order to improve their personal situations.

Nevertheless, in spite of the differences noted above, in both cases the participants’active cooperation in the CE process was evident and crucial. In particular, we foundevidence that the commitment of businesses’ members (employees, family andowner-managers) to companies and community along with the feeling of a generalizedreciprocity between owner-managers and employees was considered as the keyresource in the development of the entrepreneurial activity. In this sense, it is importantto emphasize the participants’ attitudes in CE toward the local development of thecommunity. Concretely, in Case 1, in answer to our question, “If, due to the currentcritical economic situation in which we are living in Spain you have to sack to youremployees and locate your business in other country, how easy or difficult would it befor you to make this decision?”, the owner-manager pointed out:

Very difficult [. . .] We will do all we can in order to stay in this place. We believe that it isimportant for our community.

On the other hand, it is interesting to note that financial resources were certainly alsoimportant, and, for example, in Case 2 the financial support from public organizationshelped to develop new products. However, the most important resources for CE werehuman resources as one of the key informants suggested to us:

The creation of new business, as a CE activity, can only be achieved with employees’resources through a collective entrepreneurship.

Therefore, we suggest the following propositions:

P3. The greater regular interactions within a family firm, in terms of networks,the greater the likelihood that collective entrepreneurship leads to internalinnovations as a form of CE activities.

P4. The greater sporadic interactions within a family firm, in terms of networks,the greater the likelihood that collective entrepreneurship leads to the creationof spin-off as a form of CE activities.

P5. The greater the perceived commitment with the community byowner-managers, the greater the likelihood that collective entrepreneurshipis promoted in order to develop CE activities.

5. ConclusionsIn this paper, we have focused on the phenomenon of collective entrepreneurship fromthe perspective of family businesses that carry out CE activities. As a conceptualframework we have developed an application of institutional economics using the

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concept of informal institutions from North’s (1990) perspective for analysing the humaninteractions or networks that are generated within firms and their influence on thestimulus of collective entrepreneurship. Only two cases in Catalonia (Spain) have beenstudied but the “theoretical sampling” based on a systematic search of the literaturemakes “analytical generalization” (Eisenhardt, 1989, 2007; Yin, 1984) possible.

Our evidence suggests that by creating arenas for promoting personal trust in theorganization’s context, networks or informal institutions from North’s (1990) perspectiveare generated within the businesses; their existence along with their particularcharacteristics determines, in part, the type of collective entrepreneurship, and, in turn, theCE activity. This has considerable implications for owner-managers, who in promotingtrust in the organizational context may assume the role of intrapreneurs as network orhuman interaction builders within businesses, in order to promote CE through collectiveactivities. As human interaction pathways increase, employees and owner-managerscommunicate more often. In turn, as more relationships and communication develop, truststrengthens, which generates greater opportunities to cooperate and develop CE. Then,networks or informal institutions may be understood as both an outcome of, and anantecedent to, successful collective action. From a theoretical point of view, the presentstudy also makes an important contribution to the knowledge of the factors that play a keyrole in the stimulus of CE. Particularly, while in the previous discussion of CE literature itwas clear that a variety of sources contribute to promoting entrepreneurial activities in thecontext of large corporations (e.g. the external environment, structure and organizationalculture), our case study, focused in small family firms, has highlighted the importance oftrust and networks in this process. This allows us to place the phenomenon into a broadertheoretical context, taking into account the considerations included in institutionaleconomics. Nevertheless, while this theoretical framework has been used in this paper, wehave not been exhaustive. Rather we have wished to generate some insights that link theemployee-organization relationships with the institutional approach by demonstratingevidence of its usefulness for analysing collective entrepreneurship as well as CEactivities. There are other limitations in this research. In particular, it should be note that,because our analysis is based on two case studies contextualized in the Catalonia, theconclusions that emerge from the study may not be appropriate in another context. Inaddition, descriptions of tie relationships between employees and owner-managers inorder to generate CE activities have relied, in a great part, on the recollections of theentrepreneurial informants. Nevertheless, this limitation was addressed by the fact thatsome of the networks were also described by other partners. In addition, these descriptionsrepresented their perception of the reality upon which they based the decisions for thefamily firms. Ideally, fruitful future research should analyze these issues with alongitudinal design. In addition, the present study might provide a starting point forexploring how other types of CE activities (e.g. strategic renovations) can be deliberatelypromoted in a family business context because of the existence of diverse kinds ofnetworks. Finally, institutional theory might also be useful as a theoretical framework tobetter understand the entrepreneurial responses of some firms to different institutions. Inthis sense, future empirical research may continue this line of investigation by usingdifferent samples to examine the theory’s practical utility to explain CE activities indifferent firms.

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Note

1. The real name of these firms were labeled – Cases 1 and 2 – in order to preserveconfidentiality.

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Further reading

Dess, G.G., Lumpkin, G.T. and McGee, J.E. (1999), “Linking corporate entrepreneurship tostrategy, structure, and process: suggested research directions”, Entrepreneurship Theory& Practice, Vol. 18 No. 9, pp. 677-95.

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Woodcock, M. and Francis, D. (1990), Unblocking Your Organisation, Gower, London.

Zahra, S.A. (1996), “Governance, ownership, and corporate entrepreneurship: the moderatingimpact of industry technological opportunities”, Academy of Management Journal, Vol. 39No. 6, pp. 1713-35.

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Zahra, S.A. and Covin, J.G. (1995), “Contextual influences on the corporate entrepreneurship –performance relationship: a longitudinal analysis”, Journal of Business Venturing, Vol. 10No. 1, pp. 43-58.

Zahra, S.A. and Pearce, J.A. (1994), “Corporate entrepreneurship in smaller firms: the role ofenvironment, strategy and organization”, Entrepreneurship, Innovation and Change, Vol. 3No. 1, pp. 31-44.

Corresponding authorDavid Urbano can be contacted at: david.urbano@uab.es

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