Many large established firms currently seem to be trying hard to improve their capacity for managing internal entrepreneurship and new ventures. Companies like Du Pont and General Electric have appointed CEOs with a deep understanding of the innovation process.1 IBM has generated much interest with its concept of "independent business units."2 To head its new ventures division, Allied Corporation has attracted the person who ran 3M's new ventures group for many years.3 These are only some of the better publicized cases.
Most managers in large established firms will probably agree that internal corporate venturing (ICV) is an important avenue for corporate growth and diversification. However, they will also probably observe that it is a hazardous one, and will be ready to give examples of new ventures (and managerial careers) gone for naught.
Systematic research suggests that such apprehension is not unfounded. In a large sample study of firms attempting to diversify through internal development, Ralph Big-gadike found that it takes on the average about eight years for a venture to reach profitability, and about ten to twelve years before its ROI equals that of mainstream business activities.4 He concludes his study with the caveat that new business development is "not an activity for the impatient or for the fainthearted." Norman Fast did a study of firms that had created a separate new venture division to facilitate internally developed ventures.5 He found that the position of such new venture divisions was precarious. Many of these were short-lived, and most others suffered rather dramatic changes as a result of often erratic changes in the corporate strategy and/or in their political position. An overview of earlier studies on new ventures is provided by Eric von Hippel, who observed a great diversity of new venture practices.6 He also identified some key factors associated with the success and failure of new ventures, but did not document how the ICV process takes shape.
The purpose of this article is to shed additional light on some of the more deep-rooted problems inherent in the ICV process and to suggest recommendations for making a firm's ICV strategy more effective. This article presents a new model capable of capturing the intricacies of managerial activities involved in the ICV process.