Peter Drucker, one of the foremost management consultants of the 20th century, is credited with saying that “innovation is the specific instrument of entrepreneurship, the act that endows resources with a new capacity to create wealth.” This has been taken very seriously in current times, where globalization and rapidly developing technologies have made innovation necessary to compete. The main approach facilitating innovation has been to develop an entrepreneurial culture and orientation towards entrepreneurship. There are four reasons why, and these have been building over successive decades of research. Initially, managing innovation was a means cope with change; then it was to gain a competitive advantage; following that it was to access the opportunity of innovation; and finally it was to create a better world for all.
Drucker put it this way: “Entrepreneurship is the managerial process for creating and managing innovation. If such a culture does not exist management must create it. Without it, systematic innovation will not take place” (Drucker 2014, xii). With so many organizations focusing on innovation, innovations themselves have become more disruptive and competitive, and this serves society as a whole by adding value (Drucker 2014). The entrepreneurial orientation is an attitude towards change that seeks opportunity, and this can often result in innovative approaches that exploit new contexts (Ibid). This attitude is one of possibilities but also one of taking responsibility for one”s own capacity and learning (Ibid.).The management of innovation has been a growing area of research, beginning with identification of the importance of innovation and entrepreneurship, followed by the measurement of impacts and facilitation and more recently clarifying and defining what constitutes innovation and the leadership styles which are supportive.
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In a study conducted over fifty years ago, it was recognized that emerging industries such as electronics often had to adapt quickly to changing conditions, and that a more organic response rather than a precise and hierarchical one contributed to positive outcomes. Burns (1961) examined change and the response of organizations in an early study on managing innovation. Since Burns did his study, there had been rapidly growing new technologies and most organizations find themselves seeking the best response. Entrepreneurial orientation had not yet been identified, however it could be assumed to be one of the more organic responses which contributed to innovation and positive outcomes.
Miller and Friesen (1982) proposed two understandings of innovation. The conservative understanding was that innovation was a reluctant response to the changing markets and realities, and in that model they predicted that innovation results when there are ways of recognizing and coping with environmental, information and structural challenges. Another understanding of innovation was more entrepreneurial, assuming continuous and aggressive pursuit of innovation. The researchers predicted that in such a situation there was a need to recognize when innovation and entrepreneurship were not the appropriate responses (Miller & Friesen 1982). To some extent this paradigm accurately describes the different between lean and agile technology startups today and the traditional, more bureaucratic corporate model. The former involves and entrepreneurial orientation, while the latter is quite the opposite. Today, the corporate model based on bureaucratic decision making is considered outdated by many.
Pinchot (1985) highlighted the concept of “intrapreneuring,” or entrepreneurship within an organization that leads to innovation and commercial vitality. Those within large corporations who have an entrepreneurial spirit can use this within the organization to increase innovation; however intrapreneurship requires a culture within the organization that supports such ways of thinking. The intrapreneurial process, like that for the entrepreneur, requires selling the idea to decision makers within the organization, development of business plans and creating space within the organizations for the developing idea.
Garcia-Morales and colleagues (2006) explored how innovation and organizational learning were related, and based in “personal mastery, transformational leadership, shared vision, proactivity and environment influence improvements in performance”. This concept was tested empirically using over 400 corporations in Spain with the finding that innovation and organizational learning led to higher levels of entrepreneurship and competitive market advantages. The researchers noted that management styles are a major factor in setting the culture and environment, and encourages more transformational styles of leadership in order to facilitate innovation and organizational learning (Garcia-Morales et. al 2006). Gumusluoglu and Ilsev (2009) explored further the idea that transformational leadership contributes to entrepreneurship, creativity and innovation. They tested a model supporting this theory in small Turkish software development organizations. They found that transformational leadership had impacts on individuals, giving rise to new ways of thinking and creativity, and this was also reflected at the organizational level in terms of increased competitiveness (Gumusluoglu & Ilsev 2009).
Another approach to entrepreneurship and innovation in organizations was proposed by Damanpour and Wischnevsky in 2006). In essence, they claim that the adoption of an innovation is not in fact organizational innovation; adoption of the innovation of another does not require entrepreneurship. Their framework divides organizations into those that create innovations and those that adopt innovations. In so doing, the entrepreneurship that generates innovation is separated from those who profit by copying successful models. The researchers proposed that this distinction clarifies inconsistent findings in research with regard to innovation and outcomes (Ibid.).
Research and practice continue to further understanding of the management of innovation and the contribution of an entrepreneurship orientation from within an organization. Coping with change, competitive advantage, accessing opportunity and creating a better world for all have each been the focus driving the recognition and support for entrepreneurship and innovation, and there is no shortage of change to exploit.
- Burns, T. E., & Stalker, G. M. (1961). The management of innovation. University of Illinois at Urbana-Champaign’s Academy for Entrepreneurial Leadership, Historical Research Reference in Entrepreneurship.
- Damanpour, F., & Wischnevsky, J. D. (2006). Research on innovation in organizations: Distinguishing innovation-generating from innovation-adopting organizations. Journal of engineering and technology management, 23(4), 269-291.
- Drucker, P. (2014). Innovation and entrepreneurship. Routledge.
- Garcia-Morales, V. J., Llorens-Montes, F. J., & Verd?-Jover, A. J. (2006). Antecedents and consequences of organizational innovation and organizational learning in entrepreneurship. Industrial Management & Data Systems, 106(1), 21-42.
- Gumusluoglu, L., & Ilsev, A. (2009). Transformational leadership, creativity, and organizational innovation. Journal of business research, 62(4), 461-473.
