In Search of Corporate Renewal: How to Benefit from Corporate Venturing?

Despite the rapid change in today's business environment there are relatively few studies about corporate renewal. This study aims for its part at filling that research gap by studying the concepts of strategy, corporate renewal, innovation and corporate venturing. Its purpose is to enhance our understanding of how established companies operating in dynamic and global environment can benefit from their corporate venturing activities. The theoretical part approaches the research problem in corporate and venture levels. Firstly, it focuses on mapping the determinants of strategy and suggests using industry, location, resources, knowledge, structure and culture, market, technology and business model to assess the environment and using these determinants to optimize speed and magnitude of change.Secondly, it concludes that the choice of innovation strategy is dependent on the type and dimensions of innovation and suggests assessing market, technology, business model as well as novelty and complexity related to each of them for choosing an optimal context for developing innovations further. Thirdly, it directsattention on processes through which corporate renewal takes place. On corporate level these processes are identified as strategy formulation, strategy formation and strategy implementation. On the venture level the renewal processes are identified as learning, leveraging and nesting. The theoretical contribution of this study, the framework of strategic corporate venturing, joins corporate and venture level management issues together and concludes that strategy processes and linking processes are the mechanism through which continuous corporate renewaltakes place. The framework of strategic corporate venturing proposed by this study is a new way to illustrate the role of corporate venturing as a purposefullybuilt, different view of a company's business environment. The empirical part extended the framework by enhancing our understanding of the link between corporate renewal and corporate venturing in its real life environment in three Finnish companies: Metso, Nokia and TeliaSonera. Characterizing companies' environmentwith the determinants of strategy identified in this study provided a structured way to analyze their competitive position and renewal challenges that they arefacing. More importantly the case studies confirmed that a link between corporate renewal and corporate venturing exists and found out that the link is not as straight forward as indicated by the theory. Furthermore, the case studies enhanced the framework by indicating a sequence according to which the processes work. Firstly, the induced strategy processes strategy formulation and strategy implementation set the scene for corporate venturing context and management processes and leave strategy formation for the venture. Only after that can strategies formed by ventures come back to the corporate level - and if found viable in the corporate level be formalized through formulation and implementation. With the help of the framework of strategic corporate venturing the link between corporaterenewal and corporate venturing can be found and managed. The suggested response to the continuous need for change is continuous renewal i.e. institutionalizing corporate renewal in the strategy processes of the company. As far as benefiting from venturing is concerned the answer lies in deliberately managing venturing in a context different to the mainstream businesses and establishing efficientlinking processes to exploit the renewal potential of individual ventures.

Organizational ambidexterity and corporate entrepreneurship : the differential effects on venturing, innovation and renewal processes

Most corporate entrepreneurship studies have focused on either innovation, venturing or strategic renewal making comparison between the antecedents of all three aspects of corporate entrepreneurship difficult. Moreover, studies on corporate entrepreneurship hardly address organizational antecedents, while simultaneously managing and organizing CE and mainstream activities has been seen as a major challenge for incumbent firms. Our findings show that organizational ambidexterity has strong and differential effects on venturing, innovation and renewal. We find, for example, that innovation is affected by horizontal integration, while strategic renewal is significantly influenced by integration on top management team level.

Is the sum more than the corporate entrepreneurship parts? the different effects of social capital on innovation, venturing, and renewal processes

Principal Topic Although corporate entrepreneurship is of vital importance for long-term firm survival and growth (Zahra and Covin, 1995), researchers still struggle with understanding how to manage corporate entrepreneurship activities. Corporate entrepreneurship consists of three parts: innovation, venturing, and renewal processes (Guth and Ginsberg, 1990). Innovation refers to the development of new products, venturing to the creation of new businesses, and renewal to redefining existing businesses (Sharma, and Chrisman, 1999; Verbeke et al., 2007). Although there are many studies focusing on one of these aspects (cf. Burgelman, 1985; Huff et al., 1992), it is very difficult to compare the outcomes of these studies due to differences in contexts, measures, and methodologies. This is a significant lack in our understanding of CE, as firms engage in all three aspects of CE, making it important to compare managerial and organizational antecedents of innovation, venturing and renewal processes. Because factors that may enhance venturing activities may simultaneously inhibit renewal activities. The limited studies that did empirically compare the individual dimensions (cf. Zahra, 1996; Zahra et al., 2000; Yiu and Lau, 2008; Yiu et al., 2007) generally failed to provide a systematic explanation for potential different effects of organizational antecedents on innovation, venturing, and renewal. With this study we aim to investigate the different effects of structural separation and social capital on corporate entrepreneurship activities. The access to existing and the development of new knowledge has been deemed of critical importance in CE-activities (Floyd and Wooldridge, 1999; Covin and Miles, 2007; Katila and Ahuja, 2002). Developing new knowledge can be facilitated by structurally separating corporate entrepreneurial units from mainstream units (cf. Burgelman, 1983; Hill and Rothaermel, 2003; O'Reilly and Tushman, 2004). Existing knowledge and resources are available through networks of social relationships, defined as social capital (Nahapiet and Ghoshal, 1998; Yiu and Lau, 2008). Although social capital has primarily been studied at the organizational level, it might be equally important at top management level (Belliveau et al., 1996). However, little is known about the joint effects of structural separation and integrative mechanisms to provide access to social capital on corporate entrepreneurship. Could these integrative mechanisms for example connect the separated units to facilitate both knowledge creation and sharing? Do these effects differ for innovation, venturing, and renewal processes? Are the effects different for organizational versus top management team integration mechanisms? Corporate entrepreneurship activities have for example been suggested to take place at different levels. Whereas innovation is suggested to be a more bottom-up process, strategic renewal is a more top-down process (Floyd and Lane, 2000; Volberda et al., 2001). Corporate venturing is also a more bottom-up process, but due to the greater required resource commitments relative to innovation, it ventures need to be approved by top management (Burgelman, 1983). As such we will explore the following key research question in this paper: How do social capital and structural separation on organizational and TMT level differentially influence innovation, venturing, and renewal processes? Methodology/Key Propositions We investigated our hypotheses on a final sample of 240 companies in a variety of industries in the Netherlands. All our measures were validated in previous studies. We targeted a second respondent in each firm to reduce problems with single-rater data (James et al., 1984). We separated the measurement of the independent and the dependent variables in two surveys to create a one-year time lag and reduce potential common method bias (Podsakoff et al., 2003). Results and Implications Consistent with our hypotheses, our results show that configurations of structural separation and integrative mechanisms have different effects on the three aspects of corporate entrepreneurship. Innovation was affected by organizational level mechanisms, renewal by integrative mechanisms on top management team level and venturing by mechanisms on both levels. Surprisingly, our results indicated that integrative mechanisms on top management team level had negative effects on corporate entrepreneurship activities. We believe this paper makes two significant contributions. First, we provide more insight in what the effects of ambidextrous organizational forms (i.e. combinations of differentiation and integration mechanisms) are on venturing, innovation and renewal processes. Our findings show that more valuable insights can be gained by comparing the individual parts of corporate entrepreneurship instead of focusing on the whole. Second, we deliver insights in how management can create a facilitative organizational context for these corporate entrepreneurship activities.

Management renewal? Consequences of the new conception of the “best interests of the corporation” in North American and French Corporate Law

Corporate law integrates a stakeholder conception through the comprehensive meaning of the best interests of the corporation. In this paper, I address criticisms about classical definition of the firm’s purpose. Even if American law is more discreet and uncertain, it is possible to defend a broad conception of the best interests of the corporation. The interests of Canadian and French firms include their partners. While the notion of intérêt social is debatable in France, Canada has recently modified its point of view regarding the purpose of the firm. Indeed, the decision of the Supreme Court of Canada Magasins à rayons Peoples Inc. (Syndic de) v. Wise in 2004 changed the concept of corporate law. With respect to fiduciary duties, the Supreme Court set aside the traditional interpretation of the “best interests of the corporation” which gave primacy to shareholders’ interests. The Court held that the expression “best interests of the corporation” refers to the maximization of the corporation’s value. This innovative vision of the best interest of the corporation introduces stakeholder theory and corporate social responsibility (CSR) into corporate law and provides a new field for the firm’s management to frame their responsibilities. This paper concludes with an extended discussion of the implications of stakeholder and CSR influence for the future of corporate law, economy and financial researches.

Structural differentiation and corporate venturing : the moderating role of formal and informal integration mechanisms

Research has suggested that corporate venturing is crucial to strategic renewal and firm performance, yet scholars still debate the appropriate organizational configurations to facilitate the creation of new businesses in existing organizations. Our study investigates the effectiveness of combining structural differentiation with formal and informal organizational as well as top management team integration mechanisms in establishing an appropriate context for venturing activities. Our findings suggest that structural differentiation has a positive effect on corporate venturing. In addition, our study indicates that a shared vision has a positive effect on venturing in a structurally differentiated context. Socially integrated senior teams and cross-functional interfaces, however, are ineffective integration mechanisms for establishing linkages across differentiated units and for successfully pursuing corporate venturing.

The differential effects of organizational antecedents on dimensions of corporate entrepreneurship

This study seeks to further delineate how organizational antecedents differentially influence the three components of corporate entrepreneurship: innovation, venturing or strategic renewal. We argue that structural differentiation may help organizations to maintain multiple and often conflicting demands of entrepreneurial and mainstream activities. Taking a social capital perspective, our study further examines two contingencies in the form of informal integration mechanisms (i.e. connectedness and TMT social integration). Our findings show structural differentiation has a positive effect on all three components of corporate entrepreneurship, yet the effect is moderated by integration mechanisms. Interunit connectedness has a positive moderation effect regarding innovation and venturing, and TMT social integration has a negative moderation effect regarding strategic renewal. This reveals that innovation is influenced by informal integration mechanisms on the organizational level, strategic renewal on top management team level, while venturing is influenced by integration mechanisms on both levels.

A micro perspective analysis of capability renewal through knowledge integration within product innovation projects

The aim of this paper is examine how firms renew their organisational capabilities based on micro organisational processes. Organisational capability development literature points to firms’ failure in capability renewal process. To overcome this inefficiency, it is proposed to integrate dynamic capability and ambidexterity perspectives by studying knowledge integration within product innovation. In this relation, applying micro perspective in studying technology diffusion within Iranian Auto industry revealed micro co-evolutionary relationships between knowledge integration within product innovation and capability development. Furthermore, based on near decomposability principals, the analysis suggested relationships among modularity of product architecture, modularity of organisational modularity and modularity of industry architecture in downstream and upstream value chain. Based on these micro-macro co evolutionary effects, capability development process underlying successful corporate entrepreneurship may be verified.

A capability-based view of organisational renewal : Combining opportunity- and advantage-seeking growth in large, established European and North American wood-industry companies

The purpose of this study was to extend understanding of how large firms pursuing sustained and profitable growth manage organisational renewal. A multiple-case study was conducted in 27 North American and European wood-industry companies, of which 11 were chosen for closer study. The study combined the organisational-capabilities approach to strategic management with corporate-entrepreneurship thinking. It charted the further development of an identification and classification system for capabilities comprising three dimensions: (i) the dynamism between firm-specific and industry-significant capabilities, (ii) hierarchies of capabilities and capability portfolios, and (iii) their internal structure. Capability building was analysed in the context of the organisational design, the technological systems and the type of resource-bundling process (creating new vs. entrenching existing capabilities). The thesis describes the current capability portfolios and the organisational changes in the case companies. It also clarifies the mechanisms through which companies can influence the balance between knowledge search and the efficiency of knowledge transfer and integration in their daily business activities, and consequently the diversity of their capability portfolio and the breadth and novelty of their product/service range. The largest wood-industry companies of today must develop a seemingly dual strategic focus: they have to combine leading-edge, innovative solutions with cost-efficient, large-scale production. The use of modern technology in production was no longer a primary source of competitiveness in the case companies, but rather belonged to the portfolio of basic capabilities. Knowledge and information management had become an industry imperative, on a par with cost effectiveness. Yet, during the period of this research, the case companies were better in supporting growth in volume of the existing activity than growth through new economic activities. Customer-driven, incremental innovation was preferred over firm-driven innovation through experimentation. The three main constraints on organisational renewal were the lack of slack resources, the aim for lean, centralised designs, and the inward-bound communication climate.

Corporate Venture Capital: How established firms use external resources to create new competencies

This Doctoral Dissertation is triggered by an emergent trend: firms are increasingly referring to investments in corporate venture capital (CVC) as means to create new competencies and foster the search for competitive advantage through the use of external resources. CVC is generally defined as the practice by non-financial firms of placing equity investments in entrepreneurial companies. Thus, CVC can be interpreted (i) as a key component of corporate entrepreneurship - acts of organizational creation, renewal, or innovation that occur within or outside an existing organization– and (ii) as a particular form of venture capital (VC) investment where the investor is not a traditional and financial institution, but an established corporation. My Dissertation, thus, simultaneously refers to two streams of research: corporate strategy and venture capital. In particular, I directed my attention to three topics of particular relevance for better understanding the role of CVC. In the first study, I moved from the consideration that competitive environments with rapid technological changes increasingly force established corporations to access knowledge from external sources. Firms, thus, extensively engage in external business development activities through different forms of collaboration with partners. While the underlying process common to these mechanisms is one of knowledge access, they are substantially different. The aim of the first study is to figure out how corporations choose among CVC, alliance, joint venture and acquisition. I addressed this issue adopting a multi-theoretical framework where the resource-based view and real options theory are integrated. While the first study mainly looked into the use of external resources for corporate growth, in the second work, I combined an internal and an external perspective to figure out the relationship between CVC investments (exploiting external resources) and a more traditional strategy to create competitive advantage, that is, corporate diversification (based on internal resources). Adopting an explorative lens, I investigated how these different modes to renew corporate current capabilities interact to each other. More precisely, is CVC complementary or substitute to corporate diversification? Finally, the third study focused on the more general field of VC to investigate (i) how VC firms evaluate the patent portfolios of their potential investee companies and (ii) whether the ability to evaluate technology and intellectual property varies depending on the type of investors, in particular for what concern the distinction between specialized versus generalist VCs and independent versus corporate VCs. This topic is motivated by two observations. First, it is not clear yet which determinants of patent value are primarily considered by VCs in their investment decisions. Second, VCs are not all alike in terms of technological experiences and these differences need to be taken into account.

The Life Cycle of Corporate Venture Capital

This paper establishes the life-cycle dynamics of Corporate Venture Capital (CVC) to explore the information acquisition role of CVC investment in the process of corporate innovation. I exploit an identification strategy that allows me to isolate exogenous shocks to a firm's ability to innovate. Using this strategy, I first find that the CVC life cycle typically begins following a period of deteriorated corporate innovation and increasingly valuable external information, lending support to the hypothesis that firms conduct CVC investment to acquire information and innovation knowledge from startups. Building on this analysis, I show that CVCs acquire information by investing in companies with similar technological focus but have a different knowledge base. Following CVC investment, parent firms internalize the newly acquired knowledge into internal R&D and external acquisition decisions. Human capital renewal, such as hiring inventors who can integrate new innovation knowledge, is integral in this step. The CVC life cycle lasts about four years, terminating as innovation in the parent firm rebounds. These findings shed new light on discussions about firm boundaries, managing innovation, and corporate information choices.