MIT Sloan Management Review

Management of Technology and Innovation

 

Managing the Internal Corporate Venturing Process

By Robert A. Burgelman

January 15, 1984

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 indeterminate-ness 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. Ed.

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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... To read the complete article, login or sign-up using the form below.

 
 

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