JITE v37n2 - The Impact of Intrapreneurial Programs on Fortune 500 Manufacturing Firms
The Impact of Intrapreneurial Programs on Fortune 500 Manufacturing Firms
Melissa H. Marcus
Dennis G. Tesolowski
Clinton H. Isbell
Early research on intrapreneurship focused on the appropriate utilization of rewards ( Kanter, 1983 ; Sathe, 1985 ; Souder, 1981 ), management support ( Macmillan, 1986 ; Souder, 1981 ), resource availability ( Kanter, 1983 ; Souder, 1981 ), organizational structure ( Burgelman, 1984 ; Sathe, 1985 ; Souder, 1981 ), and risk taking ( Burgelman, 1984 ; Kanter, 1983 ; Macmillan, 1986 ; Sathe, 1985 ). To further the limited research, Balkin and Logan ( 1988 ), Brazeal and Weaver ( 1990 ), and Chisoholm ( 1987 ) conducted descriptive and statistical studies in varying settings. Those statistical studies included information related to personal intrapreneurial characteristics. Based on the limited findings of existing research, the relationship of intrapreneurial programs to the corporate environment and the impact of such programs on corporate performance is an area ripe for more specific investigation.
Most of the research on intrapreneurial variables tends to be descriptive research, modeling, and empirical research dealing primarily with focused firm characteristics as they relate to certain companies. The majority of empirical research on the subject has been limited in scope and includes, primarily, Knight ( 1985 ), Kuratko and Montagno ( 1989 ), and Kuratko, Montagno and Hornsby ( 1990 ). Advocates of intrapreneurship have proposed credible reasons for use of the intrapreneurship concept. Dynamic changes in the corporate environment provide additional considerations, in particular, the special focus given to the development and management of future innovations ( Bird, 1996 ; Ellis, 1985 ; Sarbough-Thompson, 1998 ). Yet, as research and development dollars are viewed as more productive, the changing corporate environment similarly requires a greater innovation base in order to remain competitive.
Problem Statement and Theoretical Framework
Quantitative research in the field of intrapreneurship has been somewhat limited ( Miller, 1983 ). In the dynamic conditions of both the corporate environment and the United States economy, the contributions provided by the intrapreneur are especially relevant ( Backman, 1983 ). Employee contributions have become increasingly important in the overall corporate organization because of the need to improve efficiency, effectiveness, and various financial indicators. Within the ever-changing workplace, employee contributions may take many forms ( Baumol, 1968 ; Cooper, 1985 ; Gupta, 1995 ; Jones & Butler, 1992 ). Intrapreneurship is a concept that can be utilized when an organization is attempting to incorporate employee contributions that might lead to financial gain, while simultaneously attempting to establish reward systems that positively affect motivation and morale ( Cole, 1959 ; Collins, 1981 ; Gunn, 1998 ; Howell & Higgins, 1990 ; Kintzer, 1996 ; Knight, 1985 ). The purpose of this study was to investigate whether corporations that reported the presence of intrapreneurial programs within their existing organizational structures experienced significant differences in performance, based on established financial indicators, from nonintrapreneurial corporations.
In this study, we investigated the impact of programs for the development and/or improvement of products and/or processes (otherwise termed intrapreneurial programs) on overall corporate performance. The investigation focused on corporate intrapreneurial programs in Fortune 500 firms within the 10 categories of manufacturing industries in the United States. We used a self-reporting questionnaire technique to determine the presence of intrapreneurial programs within the firms. Prior to distribution of the final research questionnaire, a panel of experts critiqued the research instrument and we conducted a pilot study. Additional analyses were performed to determine the impact on company performance as measured sales, profit, and return to investors.
Our investigation focused on corporations in the 10 separate categories of industries listed in the "Manufacturing Division" of the Standard Industrial Classification Manual ( 1987, 1992 ). Through analysis of corporate financial data and corporate responses to the questionnaire reproduced in Figure 1 , we sought to answer three specific research questions: (a) Are sales significantly impacted when intrapreneurial programs are incorporated into the organization? (b) Are profits significantly impacted when intrapreneurial programs are incorporated into the organization? and (c) Is the return to investors significantly impacted when intrapreneurial programs are incorporated into the organization?
Another purpose of the study was to identify possible influences on an organization member's perceptions of the success of an intraprenuerial program. Accordingly, as subsidiary research questions, we asked whether an organization member's perception of success of an intrapreneurial program was correlated to: (a) the length of time the program had been present within the organization, (b) the size of the organization, (c) the functional area of product/idea development/improvement within the organizational structure, and 4) the organization's industrial classification.
Figure 1 Organizational Intrapreneurship Program Research Survey
Intrapreneutrial Programs Q#:______________________ Ind#:_____________________ Directions: Please circle the appropriate response to the following questions as they refer to product and/or process development and improvement within your organization. If you respond positively to either question #1 or #2, please also indicate the length of time such a program has existed within your organization.
1. Does an informal intrapreneurial program exist within your organization? Yes No N/A Less than 3 years 3-5 years 6-10 years More than 10 years 2. Does a formal intrapreneurial program exist within your organization? Yes No N/A Less than 3 years 3-5 years 6-10 years More than 10 years 3. Does your organization have formal policies that foster intra-preneurship? Yes No N/A 4. Does your organization have formal procedures that foster intra-preneurship? Yes No N/A 5. What is the informal intrapreneurship program within your organization called? ______________________________________________________________ 6. What is the formal intrapreneurship program within your organization called? ______________________________________________________________ 7. In which functional area of your organization do the majority of intrapreneurial product/process development ideas originate? Please choose only one response.
___ Engineering ___ Materials Management ___ Public Relations ___ Finance/Accounting ___ Personnel ___ Quality Control ___ Marketing ___ Production ___ Research & Development ___ Other (Specify) ____________________________________ 8. Please rank order the following factors, providing a priority to their importance, with regard to product and/or process development (intrapreneurial) programs within your organization. (1=highest priority; 8=lowest priority)
RANK FACTOR RANK FACTOR ___ Technology Considerations ___ Financial Analysis ___ Patent Potential ___ Product Design ___ Personnel ___ Resource Availability ___ Development Costs ___ Competitive Market Analysis 9. Please indicate (circle) the degree to which your organizational intrapreneurial program has impacted each of the following factors and whether the program positively or negatively impacted your organization:
a. Total Sales No Impact Slight
Positive Negative b. Profit No Impact Slight
Positive Negative c. Total return
No Impact Slight
Positive Negative Organizational Structure 10. Within the last 2 years , approximately how many products and/or product improvements developed through the intrapreneurial program have led to:
a. development of a prototype? 0 1-5 6-10 11-20 21-30 31-40 More than 40 b. test market stage? 0 1-5 6-10 11-20 21-30 31-40 More than 40 c. commercialization of the product? 0 1-5 6-10 11-20 21-30 31-40 More than 40 d. contributions to overall corporate sales? 0 1-5 6-10 11-20 21-30 31-40 More than 40 11. Within the 3 years prior to the intrapreneurial program, approximately how many products and/or product improvements led to:
a. development of a prototype? 0 1-5 6-10 11-20 21-30 31-40 More than 40 b. test market stage? 0 1-5 6-10 11-20 21-30 31-40 More than 40 c. commercialization of the product? 0 1-5 6-10 11-20 21-30 31-40 More than 40 d. contributions to overall corporate sales? 0 1-5 6-10 11-20 21-30 31-40 More than 40 The following statements (12-17) relate to the intrapreneurial program (formal or informal) that exists within your organization. Please indicate (circle) the degree to which you agree/disagree with each statement.
12. The corporate philosophy is one in which innovation is emphasized. Strongly Agree Somewhat Agree Agree No Opinion Disagree Somewhat Disagree Strongly Disagree N/A 13. Goals are in place to encourage intrapreneurship. Strongly Agree Somewhat Agree Agree No Opinion Disagree Somewhat Disagree Strongly Disagree N/A 14. The organization intrapreneurial program has procedures for obtaining funding for project development. Strongly Agree Somewhat Agree Agree No Opinion Disagree Somewhat Disagree Strongly Disagree N/A 15. Corporate incentives have been established to encourage participation in the intrapreneurial program. Strongly Agree Somewhat Agree Agree No Opinion Disagree Somewhat Disagree Strongly Disagree N/A 16. The organization has specific criteria for the development of intrapreneurial ideas. Strongly Agree Somewhat Agree Agree No Opinion Disagree Somewhat Disagree Strongly Disagree N/A 17. The intrapreneurial program is available to employees throughout the organization. Strongly Agree Somewhat Agree Agree No Opinion Disagree Somewhat Disagree Strongly Disagree N/A
18. Please indicate (circle) the approximate number of organizational employees for each of the following categories:
Domestically only Less than 2,500 2,500-5,000 5,001-10,000 10,001-25,000 Greater than 25,000 Domestically and internationally Less than 2,500 2,500-5,000 5,001-10,000 10,001-25,000 Greater than 25,000 Policies and Procedures 19. Which policies within your organization, if any, relate to the concept of intrapreneurship? ______________________________________________________________________________________ 20. Which procedures within your organization, if any, relate to the concept of intrapreneurship? ______________________________________________________________________________________ (If such policies and procedures exist, we would appreciate your assistance in obtaining a copy, provided such a request is consistent with company policy.)
NOTE: Please attach separate any comments you may wish to include.
Thank You For Your Assistance!!!!
The sampling method used in the study included a randomized design and incorporated a stratified sampling technique. After completion of the initial industry determination, random selection of companies from within the Fortune 500 was made. The research analysis included t -tests, descriptive statistics, and a correlational technique.
Independent variables relevant to this study included: (a) the presence of intrapreneurial programs within the organization, (b) the perception of success with regard to organizational structure, (c) the primary functional areas incorporating intrapreneurial ideas, and (d) number of product and/or process developments/improvements. The dependent variable in this investigation was defined as the impact of the independent variable (presence of an intrapreneurial program) on overall organizational performance. The overall performance was measured by impact on total sales, profit, and return to investors.
The term total sales was defined as the aggregate dollar volume of sales mix resulting from all products, services, or both, of a given organization. All companies in the sample derived more than 50% of their sales from manufacturing or mining. Sales included operating revenues but did not necessarily include dividends, interest, and/or royalties. Profit was defined as revenue remaining after-taxes, after extraordinary credits or charges if any appeared on the income statement, and after cumulative effects of accounting changes. Return to investors was regarded as the relationship of profit to invested capital and was calculated as capital turnover multiplied by net income as a percentage of sales. Return to investors is affected by changes in sales, amount of invested capital, and changes in costs. It includes both price appreciation and dividend yield to the investor in company stock.
Because the financial indicators were measured in different units (return to investors as a percentage, and total sales and profit as an aggregate dollar value), the independent variables were compared to each financial indicator separately.
The sample for this study was obtained by random selection of manufacturing firms from the population of Fortune 500 organizations. Limitation of the sample to manufacturing firms was based on a review of the literature, which indicated that most intrapreneurial programs were in large manufacturing firms as compared to firms in other types of industries. Approximately 22 two-digit codes exist within the Standard Industrial Classification representing major groups within the Standard Industrial Classification Manual ( 1972, 1987 ) for which 10 industry classifications were selected for this study.
Within each industry classification, 20-22 firms were randomly selected for statistical and descriptive analyses. A composite listing of the names and addresses of potential respondents (chief executive officers) was compiled from the Compact Disclosure Database and cross-referenced with the Fortune 500 listing to ensure an accurate population. In order to allow for tracking of the survey, a master list was developed. Five hundred firms comprised the total population for the study, with 217 companies selected for sampling purposes. Procedures consistent with those of the initial distribution were used in a follow-up mailing and resulted in a return of 100 questionnaires (46.1%). Table 1 shows the 10 categories of manufacturing industries that were selected from the Standard Industrial Classification Manual.
Table 1 Master List Coding for Industry by Standard Industrial Classification Code
Code Number Industry Classification
1 Food and Kindred Products 2 Chemicals 3 Computer & Office Equipment 4 Electronics & Electrical Equipment 5 Forest & Paper Products 6 Industrial & Farm Equipment 7 Transportation Equipment 8 Petroleum Refining 9 Publishing & Printing 10 Scientific, Photographic, & Control Equipment
Data Analysis Procedures
Each questionnaire was identified with a packet number and industry number for follow-up purposes only. Database fields were designed to compute the percentage scores, frequency scores, or both, from raw scores. These were statistically analyzed using the Statistical Analysis System. Questions within the research questionnaire were analyzed using descriptive, inferential, and correlational techniques. In order to test the null hypotheses, t-tests were conducted to analyze differences between each financial indicator and the specified independent variable. The correlational technique allowed for the development of a matrix for specific factors within an organization that were previously identified as the most important in the development of an intrapreneurial program. In order to accomplish this objective, respondents were requested to rank order the listing of items provided. Frequency and mean distributions were utilized to address the subsidiary questions proposed in this research.
Survey instruments were sent to the 217 participants comprising the research sample. One-hundred participants (46.1%) responded. T -tests, means, frequency distributions, and a correlational technique were incorporated in the analysis.
Each questionnaire ( Figure 1 ) was coded by industry and sequential packet number to allow for follow-up. Of the 100 participants, 75% returned the questionnaire on the initial mailing and the remaining 25% on the follow-up mailing. The dependent variables were designated by program type: I (informal program), F (formal program), and C (combined program). The results of the investigation are shown in Table 2.
Sales. The test for overall effect of informal intrapreneurial programs resulted in a t -value of -1.15. For the null hypothesis, the variance is equal with an F (32,56)=8.72, p =0.2540. Similarly, the t -values (-0.18) and (-0.92), respectively, for formal intrapreneurial programs, F (46,45)=1.24, p =0.8570), and combined programs, F (29,69)=4.34, p = .3627), indicated that results were not significant at the .05 level. These results, which were based on the collected responses and financial data, demonstrated that total sales were not significantly impacted.
Profit. At the .05 level of significance, the effect of informal intrapreneurial programs resulted in a t -value of -1.83, F (32,56)= 4.10, p =0.0733. Analysis of both the formal, t -value=-0.40, F (46,45)=3.15, p =0.6866, and the combined programs, t -value=-1.30, F (29,69)=3.64, p =0.2004, yielded similar data. Profit was not significantly impacted by the presence of an intrapreneurial program.
Return to investors. For overall effect of informal intrapreneurial programs, the analysis resulted in a t -value of 1.06, F (56,32)=2.01, p =0.2909. Similar results were found for the t -values (-0.18) for formal intrapreneurial programs, F (45,46)=2.09, p =0.8515, and combined programs (0.12) with a similar conclusion, F (69,29)=2.26, p =0.9005. The resulting t-values were not significant at the .05 level. Respondents were also asked to rank order a specified group of factors ( Table 3 ) previously identified within Fortune 500 companies as the major areas of concern in product/process development and/or revision.
Table 2 Program Type vs. No Existing Program for Relative Variables
Dependent Variables Informal Program Exists
Formal Program Exists
Combined Program Exists
No Program Exists
Sales-I 6910.58 12567.78 -1.15 0.2540 Profit-I 133.33 571.24 -1.83 0.0733 Return to Investors-I 20.38 13.48 1.06 0.2909 Sales-F 8136.65 8790.36 -0.18 0.8570 Profit-F 238.67 310.91 -0.40 0.6866 Return to Investors-F 17.39 18.63 -0.18 0.8515 Sales-C 8305.37 13871.86 -0.92 0.3627 Profit-C 198.60 527.90 -1.30 0.2004 Return to Investors-C 18.04 17.30 0.12 0.9000
Table 3 Pearson Correlatn Coefficient Matrix Indicating Factor Rank Considerationsk
Sub-scale 1 2 3 4 5 6 7 8
Technology -- -0.07
Patent Potential -- -- 0.004
Personnel -- -- -- 0.50
Development Cost -- -- -- -- 0.19
Financial Analysis -- -- -- -- -- -0.36
Product Design -- -- -- -- -- -- -0.11
Resource Availability -- -- -- -- -- -- -- 0.01
-- -- -- -- -- -- -- --
--- Note: Significant correlations in bold.
a = .05
Significant among correlations were the relationships between financial analysis and technology ( r = -0.31), resource availability and technology ( r = -0.28), patent potential and product design ( r = -0.33), personnel considerations and development costs ( r =0.50), competitive market analysis and development costs ( r = -0.61), and product design and financial analysis ( r = -0.36). Correlations between other variables proved inconclusive. These significant correlations are also supported by the data presented in Table 4, which shows that technology, product design, and competitive market analysis were identified as most important through the rank order process.
In summary, the study investigated whether incorporation of intrapreneurial programs into the organizational structure would have an impact on organizational performance, as measured by total sales, profit, and return to investors. None of the null hypotheses were rejected in this study.
Table 4 Ranking of Means for Intrapreneurial
Program Development Factors**
Variable Mean N Order
Technology 2.78 70 1 Patent Potential 6.22 72 7 Personnel 6.33 66 8 Development Costs 4.65 66 6 Financial Analysis 4.02 70 4 Product Design 3.59 69 2.5* Resource Availability 4.24 69 5 Competitive Market Analysis 3.59 71 2.5*
* indicates tie
**Question: Please rank order the following factors, providing
a priority to their importance with regard to product and/or
process development (intrapreneurial) programs within your
organization. (1=highest priority, 8=lowest priority). See
Organizational Intrapreneurship Program Research Survey
( Figure 1 ).
Commercialization of a product and contribution to corporate sales were most often indicated with the electronics industry, followed by the computer industry. Ranking means for development factors ( Table 4 ) further indicated that technology, product design, and competitive market analysis were most important (mean ranking order 1, 2.5, 2.5). Conversely, development costs, patent potential, and personnel factors were of lowest priority (with a mean ranking of 6, 7, 8, respectively). Respondents were asked to subjectively indicate the degree to which the intrapreneurial program within their organization had impacted each of the financial factors and whether that impact was positive or negative. Analysis by frequency distribution showed that with regard to sales 32.8% of the respondents indicated "moderate impact," and 35.8% indicated "significant impact." Similarly, with regard to profit 37.3% indicated "moderate impact," while 26.9% indicated "significant impact." Results for return to investors were also similar, with 43.3% indicating "moderate impact" and 32.8% indicating "significant impact." All respondents indicated that the impact of intrapreneurial programs was positive. Thirty percent indicated that organizational policies and procedures were in place to foster intrapreneurial development. In order to determine the successful impact on sales, profit, and return to investors, each of these financial indicators was investigated, regardless of whether the organization had a formal program, an informal program, or a combined program. With regard to industry classification, the electronics and computer industries reported the most dominant intrapreneurial programs.
This study also included four subsidiary questions. Subsidiary question 1 was whether the organization's perception of success of the intrapreneurial program was correlated to the length of time the program has been present within the organization. For informal product development or improvement programs that had been in existence for more than 10 years, 55.56% of the respondents indicated prototype development, 60.00% indicated products at the test market stage, 59.18% indicated commercialization of products, and 58.33% indicated corporate sales. With regard to the existence of formal intrapreneurial programs, a cross tabulation of the variables indicated that programs which had been in existence for three to five years provided the largest number of successes in all categories (prototype, test market stage, commercialization of product, and contribution to corporate sales).
Subsidiary question #2 addressed whether the organization's perception of success of the intrapreneurial program was correlated to company size. Most (41.25%) of the prototype successes occurred within the category of 10,000-25,000 employees. The test market stage was also most successful in the category of 10,000-25,000 employees, with 21.45%. Commercialization and contribution to corporate sales were most successful in the category of "Greater than 25,000 employees," with 29.37%. Subsidiary question #3 focused on whether a successful intrapreneurial program was correlated to the functional area of product/idea development/improvement. Respondents were asked to indicate which functional area provided the most product development/improvement for their organization. The most predominant area was research and development (44.26%). This category was followed by engineering, at 32.79%. Frequencies indicated that programs having "1-5" prototypes within the last two years were most predominant, in the engineering area, and that programs having "11-20" prototypes were most predominant in the research and development area. Research and development was the dominant functional area for the category of "More than 40" developments.
At the test market stage level, the research and development functional area was dominant with 1-5 product developments (18.08%), closely followed by engineering (16.39%). Within the last two years, the engineering area was dominant in the number of commercialized products (20.00%) and contribution to overall corporate sales (18.75%), and the research and development area followed closely with commercialized products at 16.92% and contribution to overall corporate sales at 15.63%.
The final subsidiary question investigated whether the organization's perception of intrapreneurial program success was correlated to the industry classification. The computer, electronics, and scientific equipment categories were dominant for prototype development and test market stage.
The topic of intrapreneurship has far-reaching implications for manufacturing and educational organizations. Since the concept of intrapreneurship is relatively new in most organizational climates, the development and follow-up of this investigation and similar research is important. The identification of: (a) intrapreneurial programs, (b) organizational structure, and (c) policies and procedures provides a point of reference from which financial indicators may be closely aligned with the future need to create efficiencies within organizations.
By investigating the impact of intrapreneurial programs on the financial aspects of the organization, researchers and managers alike can improve their understanding of the effect of these programs on the entire organization. For professionals working with training and development, HRD, and industrial technology programs, this research provides additional insight into the emerging component of intrapreneurship, which can be integrated into new or existing curricula. The focus on competition brings to the forefront the need to develop new ideas and more efficient methods for dealing with current processes. Providing a basis for such instruction could enhance the foundation for developing managers, specialists in training and development or HRD, and industrial technologists. For example, Clemson University's Department of Management offers an entrepreneurship course entitled, "New Venture Creation", and more recently Greenville Technical College has developed and is currently implementing a 40-hour certificate program in entrepreneurship through the Continuing Education Program ( Bell, 1999 ).
As intrapreneurship programs continue to become more common in manufacturing environments, future research may provide an objective basis for determining the extent to which such programs are feasible and have the potential to be incorporated into organizational structures. The financial measures of this study provide not only a basis for measuring the impact of intrapreneurship programs on profit, sales, and return to investors, but they also indicate the need for specialists in training and development, HRD, or both, and industrial technologists to assist in integration of intrapreneurship concepts throughout educational and industrial organizations.
Marcus is Director of Employee Development, Relations, and AssistancePrograms in the Office of Human Resources at Clemson University (South Carolina).
Tesolowski is a Professor in the Department of Technology and Human Resource Development at Clemson University (South Carolina).
Isbell is a Professor in the Department of Technology and Human Resource Development at Clemson University (South Carolina).
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