The strategic management of internal corporate venturing (ICV) presents a major challenge for many large established firms. The author’s conceptualization of ICV suggests that vicious circles and managerial dilemmas typically emerge in the development of new ventures. These problems are exacerbated by the indeterminateness of the strategic context for ICV in the corporation, and by perverse selective pressures exerted by its structural context. This article presents four major recommendations for improving the effectiveness of a firm’s ICV strategy.
1. See "DuPont: Seeking a Future in Biosciences," Business Week, 24 November 1980, pp. 86-98; "General Electric: The Financial Wizards Switch Back to Technology," Business Week, 16 March 1981, pp. 110-114.
2. See "Meet the New Lean, Mean IBM," Fortune, 13 June 1983, pp. 68-82.
3. "Allied after Bendix: R&D Is the Key," Business Week, 12 December 1983, pp. 76-86.
4. See R. Biggadike, "The Risky Business of Diversification," Harvard Business Review, May-June 1979, p. 111.
5. See N.D. Fast, "The Future of Industrial New Venture Departments," Industrial Marketing Management (1979): 264-273.
6. See E. von Hippel, "Successful and Failing Internal Corporate Ventures: An Empirical Analysis," Industrial Marketing Management (1977): 163-174. Some of the diversity found by von Hippel, however, may be due to a somewhat unclear distinction between new product development and new business development.
7. See J. R. Galbraith, "The Stages of Growth," Journal of Business Strategy 4 (1983) pp. 70-79.
8. See J. L. Bower, Managing the Resource Allocation Process (Boston: Graduate School of Business Administration, Harvard University, 1970).
9. See: R. A. Burgelman, "Managing Innovating Systems: A Study of the Process of Internal Corporate Venturing" (unpublished doctoral dissertation, Columbia University, 1980);
R. A. Burgelman, "A Process Model of Internal Corporate Venturing in the Diversified Major Firm," Administrative Science Quarterly, June 1983, pp. 223-244.
10. See: D. A. Schon, "Champions for Radical New Inventions," Harvard Business Review, March-April 1963, pp. 77-86;
E. B. Roberts, "Generating Effective Corporate Innovation," Technology Review, October-November 1977, pp. 27-33.
11. One of the key problems encountered by Exxon Enterprises was precisely the existence of these new product development problems in the entrepreneurial ventures (Qyx, Quip, and Vydec) it had acquired and was trying to integrate. See "What's Wrong at Exxon Enterprises," Business Week, 24 August 1981, p. 87.
12. The need for strategic forcing is consistent with findings suggesting that attaining large market share fast at the cost of early profitability is critical for venture survival. See Biggadike (May-June 1979).
13. See: Entrepreneurial activity used as insurance against environmental turbulence was first documented by R. A. Peterson and D. G. Berger, "Entrepreneurship in Organizations: Evidence from the Popular Music Industry," Administrative Science Quarterly 16 (1971): 97-106:
R. A. Burgelman, "Corporate Entrepreneurship and Strategic Management: Insights from a Process Study," Management Science 29(1983): 1649-1664.
14. The importance of the middle-level manager in ICV was already recognized by E. von Hippel (1977). The role of a "manager champion" or "executive champion" has also been discussed by: I. Kusiatin, "The Process and Capacity for Diversification through Internal Development" (unpublished doctoral dissertation, Harvard University, 1976);
M. A. Maidique, "Entrepreneurs, Champions, and Technological Innovation," Sloan Management Review, Winter 1980, pp. 59-76.
15. See Biggadike (May-June 1979).
16. See Fast (1979).
17. These frictions are discussed in more detail in R. A. Burgelman, "Managing the New Venture Division: Research Findings and Implications for Strategic Management," Strategic Management Journal, in press.
18. An overview of different forms of corporate venturing is provided in E. B. Roberts, "New Ventures for Corporate Growth," Harvard Business Review, July-August 1980, pp. 132-142.
A design framework is suggested in R. A. Burgelman, "Designs for Corporate Entrepreneurship in Established Firms," California Management Review, in press.
19. Some firms seem to have developed the position of corporate historian. See "Historians Discover the Pitfalls of Doing the Story of a Firm," Wall Street Journal, 27 December 1983.
Without underestimating the difficulties such a position is likely to hold, one can imagine the possibility of structuring it in such a way that the relevant data would be recorded. Another instance, possibly a board-appointed committee, could periodically interpret these data along the lines suggested.
20. Some companies have developed innovative types of arrangements to structure their relationships with internal entrepreneurs. Other companies have established procedures to help would-be entrepreneurs with their decision to stay with the company or to spin off. Control Data Corporation, for example, has established an "Employee Entrepreneurial Advisory Office."
The author gratefully acknowledges the support received from the Strategic Management Program of Stanford University's Graduate School of Business and the helpful comments made by Leonard R. Sayles, Steven C. Wheelwright, and an anonymous reviewer on an earlier version of this paper. Parts of the paper were presented at the Third Strategic Management Society Conference in Paris in October 1983.