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Aldag (2005) forms the basis of firm’s outstanding performance and growth as they
are the product of effective strategic management. Hence, managers should focus on
building sustainable competitive advantage by implementing unique value and
creative strategies based on the combination of internal organizational resources and
capabilities stimulated by corporate entrepreneurship (CE). While acknowledging the
resource based view (RBV) concept of Barney (1991) that a firm is a collection of
unique resources and capabilities that provide basis for its strategy and returns; the
idea that the firm must strategize to innovate and build competitive advantage is no
longer new. What is worrisome is how the managers will achieve such intent, bearing
the nature of the volatile environment they operate. These therefore call for the
nurturing of effective corporate entrepreneurship within the firm processes to
stimulate employees innovative, proactive and risk taking behaviours geared towards
ensuring proper opportunity identification and exploitation that may result to strategic
renewal. Sharma and Chrisman (1999) viewed corporate entrepreneurship (CE) as the
process by which an individual or a group of individuals in association with an
existing organisation, creates a new organisation or adds to the renewal or innovation
of an existing organisation. Similar view by Burgelman (1983) observed that CE
allows the revitalisation and improvement of corporate performance, and it allows for
the transformation of organisation through a process of strategic renewal, based on the
acquisition of new capabilities (Guth and Ginsberg 1990). This suggests that strategy
must be dynamic, innovative and proactive to accommodate anticipated change that
characterizes a turbulent environment.
The persistent increase in environmental turbulence necessitates the role of
dynamic capabilities (DC). Johnson, Scholes and Whittington (2008) viewed dynamic
capabilities as an organisation’s ability to renew and recreate its strategic capabilities
to meet the needs of the changing environment. Supporting this view, Pavlou (2004)
observed that dynamic capabilities are firm’s ability to reconfigure resources and
renew functional competence that addresses the changing environment. This suggests
that the development of DC is inevitable for firm’s sustenance given a volatile
environment. The renewal and reconfiguration of firm’s resources do not occur by
chance, but are predicated on the innovative, proactive and risk taking behaviour of
firms that constitute corporate entrepreneurship (CE). McDougall and Oviatt (2000)
viewed CE as the combination of innovative, proactive and risk taking behaviour
intended to create value in organisations. Related view by Johnson (1998) perceived
CE as opportunity seeking with determination. Studies by Schaltegger and Wagner
(2010) posit CE as the catalyst that brings together people, money and ideas to
establish value creating networks. Wiklund (1999) also noted that CE linked invention
with market success. The trend in these views confirm the fact that today’s firm must
not only strategize on existing resources and capabilities, but must also strive to
develop dynamic capabilities that can accommodate change, innovate and facilitate
the development of new organization capabilities, through corporate entrepreneurship.
The study therefore posits that innovative, proactive and risk taking attitudes of
employees that constitutes CE, stimulates the development of DC (learning,
reconfiguration, coordination and integration) that is purposefully geared towards
sustaining firms’ competitive position in the turbulent environment.
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2. LITERATURE REVIEW
2.1. Entrepreneurial behaviour
Entrepreneurial behaviour is any newly fashioned set of actions through which
companies seek to exploit entrepreneurial opportunities rivals have not noticed or
exploited. Entrepreneurial opportunities are external environmental conditions
suggesting the viability of introducing and selling new products, services, raw
materials and organizing methods at prices exceeded their production costs (Casson,
1982; Shane and Venkataraman, 2000). In complex environments, entrepreneurial
opportunities often surface unexpectedly; because these opportunities are short-lived
and subject to capture or appropriation by rivals, a firm must move quickly to pursue a
desired opportunity once it has been identified (Eisenhardt and Sull, 2001). Three key
dimensions – innovativeness (the seeking of creative solutions to problems or needs),
risk-taking (the willingness to commit significant levels of resources to pursue
entrepreneurial opportunities with a reasonable chance of failure), and proactiveness
(doing what is necessary to bring pursuit of an entrepreneurial opportunity to
completion) – underlie entrepreneurial behaviour (Covin and Slevin, 1991; Lumpkin
and Dess, 1996; Morris and Kuratko, 2002). Entrepreneurial behaviour is the conduit
through which entrepreneurship is practiced in companies of all types. Increasingly,
organizations are committing to the position that entrepreneurial behaviour is essential
if they are to first survive and then achieve competitive success in a world that is
being driven by accelerating change (Barringer and Bluedorn, 1999; Ireland et al.,
2001; Lyon, Lumpkin and Dess, 2000). In essence, entrepreneurship is concerned
with discovering and exploiting value creating entrepreneurial opportunities (Shane
and Venkataraman, 2000). The behavioural component “...includes the set of
activities required to move a concept or idea through the key stages in the
entrepreneurial process to implementation” (Morris and Kuratko, 2002).
Entrepreneurship’s willingness component “refers to the willingness of an individual
or organization to embrace new opportunities and take responsibility for effecting
creative change” (Morris and Kuratko, 2002). Lumpkin and Dess (1996) call this
attitude or willingness entrepreneurial orientation. Entrepreneurial behaviour,
displayed within the context of an existing organization, is linked to corporate
entrepreneurship and is differentiated from its relationship with independent
entrepreneurship (Sharma and Chrisman, 1999. In the instance of corporate
entrepreneurship, the process of entrepreneurial actions encompasses a set of
organization-wide activities rather than any single one (Vozikis et al., 1999).
2.2. Dynamic Capability - a routine within processes
The concept of dynamic capabilities was introduced by Teece and Pisano, (1994).
Zollo and winter, (2002) found that dynamic capabilities result from complicated
organizational and strategic routines through which the managers reconfigure and
renew a firm’s resource base to generate economically value-creating strategies. This
implies that dynamic capabilities can be perceived as the routines that guide and
facilitate the development of firm’s (organizational) capabilities. Eisenhardt and
Martin (2000) extended the definition to include the ability of firms to initiate change.
Dynamic capabilities are not simply processes, but embedded in processes; processes
are often explicit or codifiable structuring and combination of resources and can be
transferred more easily within firm or across firms. More recently, Helfat et al. (2007)
defined dynamic capabilities as “the capacity of an organization to purposefully
create, extend or modify its resource base. Winter (2003) observed that dynamic
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capabilities enable firm to react to changing market conditions by developing and
renewing its organizational capabilities thereby achieving and sustaining a
competitive advantage. This suggests that the development of dynamic capabilities is
inevitable for firm’s sustenance given a volatile environment. The renewal and
reconfiguration of firm’s resources do not occur by chance, but are predicated on the
innovative, proactive and risk taking behaviour of firms that constitute corporate
entrepreneurship (CE). The study seeks to examine relationship between corporate
entrepreneurship and dynamic capabilities in selected registered Pharmaceutical firms
in Nigeria.
This was premised on the belief that an understanding of the nature and
influences of CE on DC by managers and policy makers, will aid in shaping their
strategic choices and as such offer a road map for the sustenance of the firm
competitive position. Hence the identification and understanding of the influences of
CE on DC would give managers and organizations the instrument to rationally
improve their chances of success and durably sustain their competitive advantage.
Dynamic capabilities (DC) emerged as a component of resource based view in an
attempt at explaining the competitive advantage in a rapidly changing environment.
They are referred to as the capacity of an organisation to purposefully create, extend
or modify its resource base (Helfat et al, .2007). Similar view by Winter (2003)
opined that dynamic capabilities are capabilities that operate to extend, modify or
create ordinary capabilities, they are essential capacities for coping with market needs
(Teece et al., 1997). Related view by Zollo and Winter (2002) described dynamic
capability as the learned and stable pattern of collective activity through which the
organisation systematically generates and modifies its routines in pursuit of improved
effectiveness. The word capacity referred to the firm’s ability to perform a task in a
satisfactory manner to achieve congruence with the changing environment. However
the corporate entrepreneurship (CE) should premise the alteration or modification of a
firm resource base. The perception is based on the innovative, proactive and risk
taking qualities of corporate entrepreneurship exhibited in the identification and
exploitation of opportunities that necessitated resource modification or alteration.
Thus CE could trigger successful DC in firms since the aim is to identify and exploit
opportunities for new growth platforms through entrepreneurship leading to resource
modification if need be. Moreover the present day characteristics of the turbulent
business environment which reflect innovative product development, shorter
technology life cycle and speed of market entry are anchored on entrepreneurial
prowess of firms. Thus the influence of CE on the DC purposefully deployed by firm
gives the firm a sense of direction towards the identification and exploitation of
opportunities which may be the game changer for the firm in the industry.
Corporate Entrepreneurship (CE) is the process by which individuals or groups
inside organisations pursue opportunities without regard to the resources they
currently control (Stevenson, Roberts, and Grousbeck, 1999). CE encompasses three
types of phenomena (Sharma and Chrisman, 1999) these are innovativeness, pro-
activeness and risk seeking. This process leads to the birth of new businesses and to
the transformation of companies through a renewal of their key ideas (Guth and
Ginsberg, 1990). These by implication suggest entrepreneurial behaviour are reflected
in the innovative and risk taking attitude of employees in the firms.
The motive for corporate entrepreneurship lies in the urge to identify sources of
existing and emerging opportunities (Ramachandran, 2003) leading to strategic
renewal that may result to significant changes in an organisation’s business or
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corporate level strategy for successful exploitation and growth. These changes alter
pre-existing relationships within the organisation or between the organisation and its
external environment and in most cases involve some sort of innovation.
It is therefore pertinent to examine the relationship between CE and DC since the
sustenance of firm’s competitive advantage in a turbulent environment requires CE
and DC that seeks the renewal, reconfiguration and development of organisation
capabilities having been complemented by corporate entrepreneurship. This is
premised on the fact that CE allows the revitalisation and improvement of corporate
performance (kanter, 1984; Pinchot 1985; Rule and Irwin,1988) and it is the process
by which individual or group of individual identify and exploit opportunities through
the innovative, proactive and risk taking skills that constitute entrepreneurship
(Sapienza et al, 2004 ). Similar view by Chung and Gibbons (1997) affirmed CE as a
process that transforms individual ideas in to collective actions. Acknowledging this
view, Phan et al, (2009) concurred that CE embodies renewal activities that enhances
corporations’ ability to compete and take risk which may and may not involve the
addition of new businesses to corporation. While noting that major aim of renewing
and reconfiguring (DC) existing resources and capabilities is to achieve congruence
with opportunities both within and outside the business environment, CE seeks to
identify and exploit opportunities using the innovative, proactive and risk taking skills
of individual or group of people as such CE actions should precede DC actions and
strategy to give guidance and minimize risk in an uncertain environment
Hence to generate an economically value-creating strategy, opportunity
identification and recognition must precede resource reconfiguration and renewal in
the course of exploiting such opportunities to achieve strategic fit between the
organisation’s resources and opportunity identified. This will help reduce the risk of
failure and enhance the innovativeness of firms.
The following hypotheses were formulated for the study:
Corporate entrepreneurship has no significant effect on the dynamic
capabilities developed by the Nigeria Pharmaceutical firms.
Employee’s innovative prowess has no relationship with the reconfiguration
of the firm’s resources.
Employee’s innovative prowess does not relate with the coordination of the
firm’s resources.
Employee’s innovative prowess has no relationship with the integration of
the firm’s resources
Employee’s innovative prowess does not relate with the learning culture of
the pharmaceutical firms.
Pro-activeness of employee’s has no significant relationship with the
learning culture of firms.
Pro-activeness of employee’s has no significant relationship with the
reconfiguration of the firms resources.
Pro-activeness of employee’s has no significant relationship with the
coordinating prowess of the firms resources.
Pro-activeness of employee’s has no significant relationship with the
integrating skills of the pharmaceutical firms;
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Employee’s risk taking culture has no significant relationship with the
reconfiguration of the firms resources.
Employee’s risk taking culture has no significant relationship with the co-
ordination of the firms resources.
Employee’s risk taking culture has no significant relationship with the
integration of the firms resources.
Employee’s risk taking culture has no significant relationship with the
learning prowess of the pharmaceutical firms.
3. METHODOLOGY
Confirmatory factor analysis (CFA) test was performed with Corporate
Entrepreneurship (CE) as a higher order latent construct, consisting of the three first
order indicators (Innovativeness, Pro-activeness Risk-taking). The first order loadings
ranged from 0.64 to 0.88 with t-values greater than 1.96 and significant at p < 0.001.
The second order loadings ranged from 0.70 to 0.84 at a t-value >1.96 and significant
at p< 0.001. The outcome affirmed the higher order construct explicitly represent the
causal constructs that impact the first order factors. The measurement model fit index
accounted for chi-square ( ) of 80.7771; df 41, p= 0.000, ; GFI = 0.932;
CFI= 0.902. The result indicates an adequate fit.
Beyond the examination of the loadings for each indicator, composite reliability of
every construct in the model was also assessed. The reliability scores for the first
order construct ranged from 0.74 to 0.84, providing a direct assessment of the
construct reliabilities. The overall composite reliability score for the second order
construct corporate entrepreneurship is 0.94 all exceeding the 0.70 rule of thumb,
indicating a good overall reliability of the model. Confirmatory factor analysis (CFA)
test was also performed on dynamic capability (DC) as a higher order latent
construct, consisting of the four first order indicators (Learning, Integration,
Coordination, Reconfiguration). The first order loadings ranged from 0.58 to 0.86
with t-values >1.96 and significant at p < 0.001. The second order loadings ranged
from 0.64 to 0.81 at a t-value >1.96 and significant at p< 0.001. The outcome
affirmed the higher order construct explicitly represent the causal constructs that
impact the first order factors.
The measurement model fit index accounted for chi-square = 92.751; df =48;
/df = 1.9323; p= 0.000; CFI =0.962; GFI= 0.971. The result indicates an adequate
fit. The result showed that each item loaded significantly on its respective first order
factor and subsequently the higher order construct without cross-loading to any other
first order factor of the same construct. Following the examination of the loadings for
each indicator in the DC construct and first order loading construct, composite
reliability of every construct in the model was also assessed. The reliability scores for
the first order construct ranged from 0.78 to 0.85, providing a direct assessment of the
construct reliabilities. The overall composite reliability score for the second order
construct dynamic capability is 0.92, all exceeding the 0.70 rule of thumb, indicating
a good overall reliability of the model.
4. ANALYSIS OF THE STRUCTURAL PATH
Following the examination and validation of the measurement model in a CFA
analysis, the structural relationship to examine the overall relative model fit and the
structural parameter estimate with one headed arrow on a path diagram was estimated.
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The fit of the structural model was assessed using the absolute fit, parsimony fit and
incremental fit indices. The fit resulted to a measures of chi-square ( ) of 88, df =37,
p=0.000, , CFI = 0.914, GFI = 0.943. The chi square statistics is significant
and other relevant indices indicate a good overall fit (Tippins and Sohi, 2003).
The hypotheses specified for the study were tested.
Hypothesis Parameter
H1: CE DC 0.68
H2: INV RC 0.57
H3 INV CD 0.53
H4: INV LE 0.59
H5 : INV INT 0.63
H6: PR LE 0.50
H7: PR RC 0.55
H8: PR CD 0.54
H9: PR INT 0.56
H1O: RK RC 0.61
H11: RK CD 0.31
H12: RK INT 0.42
H13: RK LE 0.12
The loading of CE to DC was significant (0.68, t=7.416, p=0.001). The results
pinpoint the significant effect of corporate entrepreneurship on dynamic capability
developed by the pharmaceutical firms. This affirmed employee’s pro-activeness and
innovativeness in terms of their willingness to adapt quickly to new ways of doing
things and seeking unusual solutions to challenges that necessitated the need to
reconfigure existing resources, integrate new resources and coordinate them in to
productive capacity ahead of competitors to capture the market opportunities,
especially when such opportunities has propensity for high risk with high returns.
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This by implication suggests corporate entrepreneurship influences the dynamic
capabilities in the pharmaceutical firms.
The result also examines the influence of employee’s innovative prowess on the
reconfiguration of resources embarked upon by the pharmaceutical firms as expressed
in hypothesis 2. The innovative prowess of employee’s was noted to have a
significant influence on the reconfiguration of the firm’s resources. This was evidence
from the positive correlation of 0.57 exhibited by the innovative prowess of the
employees on reconfiguration of the firm’s resources. The outcome of the result was
based on the zeal by top managers that saw them placed strong emphasis on research
and development and technological leadership. This initiated and boosted the
innovative culture displayed by employees to think and behave in novel ways, leading
to seeking changes to the existing configuration in a timely and appropriate manner to
achieve operational competence to match the changing environment. This innovative
actions enables the firms to effectively and efficiently maximises the emerging
opportunities ahead of competitors.
The influence of the employees’ innovativeness on the co-ordinating skills of the
firms was also noted to have a correlation of 0.53. This suggest that employees
readiness to adapt to new ways of doing things while being encouraged by
management who assigned task to commensurate with the relevant knowledge and
skills of the employees promotes effective co-ordination resources and capabilities.
The result is the effective management of dependencies among task, resources and
work which ensures output in one unit is available and useful to other units when
needed.
Innovativeness of employees was also observed to have significant impact at
promoting learning culture in the firms. The correlation of 0.59 attested to this.
Attempt at trying to achieve new ways of doing things seeking unusual solutions
endeared the employees to seek access to expert and knowledgeable co-workers for
proper brainstorming and quality decision making. The senior knowledgeable mentors
were equally motivated by the willingness of the employees to think and behave in
original ways as such learning was seen by all as a key commodity to guarantee
organisational survival since the motive is to enhance a culture of knowledge sharing
leading to the sustainability of the firms’ competitive position.
The innovative attitude of employees was also noted to have a strong positive
correlation of 0.63 with the integration skills of the firms. This was evidenced from
the fact that employees willingness to have seeking new ways of doing things led to a
shared awareness among employees and a thorough understanding of their group task.
Their collective decision to be innovative stimulated actions that are interrelated and
geared towards managing rapidly changing conditions. Individuals are then
forthcoming in contributing their input to the group.
Employee’s pro-activeness was equally found to have 0.50 positive correlations
with the pharmaceutical firms learning culture. This affirmed the fact that top
managers tendencies to be ahead of competitors in introducing novel ideas initiated
and catalyst the learning culture that was identified as a key commodity to guarantee
organisation survival. Their pro-activeness was perceived in their desire to promptly
access expert, knowledgeable co-workers and senior knowledgeable mentors in their
firms. Their pro-activeness was confirmed in the management ability to promptly
equip their firms with facilities and a culture that enhances knowledge sharing. Hence
pro-activeness was found to have stimulated a virile leaning culture in the
pharmaceutical firms.
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Pro–activeness of employees was also noted to have a 0.55 relationship with the
reconfiguration of the pharmaceutical firms’ resources. This was based on the fact
that initiated actions by the employees are promptly implemented especially when it
requires the reconfiguration of resources to come up with new productive assets. The
top management desire to be ahead of others at introducing novel ideas promptly led
to an efficient and effective resource reconfiguration to address and capture shifting
market opportunities. The zeal to be the first at introducing new product, services,
administrative techniques and technology stimulated the reconfiguration of resources
in timely, appropriate and efficient manner whenever the need arises. This actions
most times have been the game changer required to sustain the firms’ competitive
positions.
Also observed was the relationship between the employee’s pro-activeness and
the co-ordination of the firm’s resources and capabilities. A relationship of 0.54 was
exhibited. This was perceived to be the result of the firms’ capabilities that ensures
dependencies among task, work and resources fit together very well. While ensuring
that pharmaceutical firms are the first at introducing new product, services and
administrative skills, assigned task are done to commensurate relevant knowledge and
skills of employees. These affirmed the fact that employees are posted to units based
on their core areas of competence and this practice brings out the best pro-activeness
in the employees.
The relationship between the employees’ pro-activeness and the integrating skills
of the firms was observed to have a correlation of 0.56. This was based on the
perception that top managers actions initiated ahead of competitors were supported by
employees with shared awareness and understanding of the motive. The employee’s
group task allows for synchronisation of their works with the works of others to
manage rapidly changing conditions.
The risk taking by employees in the pharmaceutical firms was found to have
significant (0.61) positive relationship on the reconfiguration of the firms resources
and capabilities. This was evidence from the fact that decision making on the need to
reconfigure existing resources to capture the emerging opportunities is not only
capital intensive but also strategic because of the competitive position of the firms
which must be sustained. The pharmaceutical firm’s response to exploring risky and
unknown alternatives leading to the renewal of existing resources and capabilities
attested to the determination of the firms to maximise its profit and sustain its
competitive position through huge investment in the reconfiguration of firm’s
resources. The act of reconfiguring existing resources and capabilities is risky and
requires caution bearing in mind that failure may spell doom for firms.
Risk taking by employees was also observed to have a weak correlation (0.31)
with the coordination of the firm’s resources and capabilities. This conceivably was
because the organisation willingness to commit resources to risky project is taken
with great caution by effective management of dependencies among task, resources
and works, as such the level of risk is minimize through proper monitoring of the
implementation process. Also noted is the fact that assigned task are matched to the
relevant knowledge and skills of the employees and this has minimise the risk of
failure because expertise and employees core areas of competence are given priority
and this has placed the duties of the firms in safe and capable hands.
Also observed is the weak relationship (0.42) between the risk-taking by
employees and the integration of works and contributions of individuals or group to
the organisation. This is based on the assumption that despite the firm’s strong
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propensity for high risk project and the shared awareness and understanding displayed
by group in the firms. Group task and actions are screened and implemented with
caution at every stage. The firm’s commitment of resources to identified opportunities
by an individual or group is also done carefully following a thorough screening and
evaluation because of the rapidly changing business environment and shorter product
lifecycle.
The risk-taking by employees to learn and acquire knowledge is small. This is the
result of 0.12 relationship exhibited. This by implication means that employees in the
firms do not attached meaningful risk to learning and seeking knowledge to advance
the firms competitive position. They were also encouraged by the firm’s facilities and
a culture that enhances knowledge sharing and this gives no room to any fear or risk
to learn especially when access to expert, knowledgeable co-workers and senior
knowledgeable mentor is guaranteed. This confirmed the fact that employee’s ability
to learn is at low risk, making learning a key commodity for organisation survival.
Figure 1 Measurement Theory Model (CFA) For Corporate Entrepreneurship
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Figure 2 Measurement Theory Model (CFA) Dynamic capability
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5. CONCLUSION
Following the findings and discussion, the following under listed conclusion were
derived:
Corporate entrepreneurship has significant effect on the dynamic capabilities
developed by the pharmaceutical firms.
The innovative prowess of employees significantly encouraged the reconfiguration of
the firm’s resources thereby maximizing the emerging opportunities ahead of
competitors.
Employees’ innovativeness boosted the coordinating skills of the pharmaceutical
firms.
Employees’ innovativeness positively stimulated the learning culture in the
pharmaceutical firms.
The innovative attitudes of employees acted as catalyst that enables individual
employees to have a shared awareness among their groups.
The pro-activeness of employees encourages easy access to learn from expert,
knowledgeable coworkers, and senior knowledgeable mentors.
Employee’s pro-activeness ensures and secures the timely, efficient and effective
reconfiguration of the firms’ resources and capabilities to match the changing
environment.
The pro-activeness of employees helps identify the employee’s skills and core area of
competence that task to be assigned on expertise for easy discharge of duties.
5.2. Recommendation
Based on the findings and conclusion of the study the following recommendations
were made:
Contemporary managers should pay attention to corporate entrepreneurship effect on
the dynamic capabilities of firms based on its significance on the sustainability of
firm’s competitive positions in a turbulent environment.
Organization should promote innovative culture in their employees to safe guard the
reconfiguration of the firm’s resources for easy maximization of emerging
opportunities ahead of competitors.
Stimulating Employee’s innovativeness is imperative by top management based on its
positive influence on firms coordinating skills, learning culture and shared awareness
among groups and individuals.
The cordial relationship between senior knowledgeable mentor and the other
employees should be sustained through consistent improvement in the learning
environment. This will promote brainstorming among employees, gives them a sense
of belonging, build learning culture that ginger innovativeness and pro-activeness
among employees.
The firms should further improve on the machinery put in place to screen activities
and ideas relating to new opportunity identification and exploration since there might
be reasons to reconfigure the firm’s resources in the process. Decision such as these
comes with high risk and huge commitment of resources and requires caution.
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