Risks of Corporate Entrepreneurship: Autonomy and Agency Issues

Risks of Corporate Entrepreneurship: Autonomy and Agency Issues

Although research on corporate entrepreneurship (CE) has attracted increasing attention, risks of CE are not well examined. In this paper, we examine direct and indirect agency risks associated with providing middle and operational managers with autonomy in the hopes of encouraging CE. The key ideas...

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Bibliographic Details
Published in:Organization science (Providence, R.I.) Vol. 23; no. 1; pp. 194 - 206
Main Author: Shimizu, Katsuhiko (Katsu)
Format: Journal Article
Language:English
Published: Linthicum INFORMS 01-01-2012
Institute for Operations Research and the Management Sciences
Subjects:
Agency
Agency theory
Analysis
Autonomy
Business management
Business risks
corporate entrepreneurship
Corporate strategies
Economic theory
Entrepreneurs
Entrepreneurship
Management
Manager behavior
Managers
Middle management
Middle managers
Opportunistic behavior
Organizational behavior
Organizational behaviour
Risk
Risk aversion
Roles
Small and medium sized enterprises
Stock options
Studies
Upper management
United States
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Summary:Although research on corporate entrepreneurship (CE) has attracted increasing attention, risks of CE are not well examined. In this paper, we examine direct and indirect agency risks associated with providing middle and operational managers with autonomy in the hopes of encouraging CE. The key ideas behind our discussion involve two dilemmas of CE. (1) To solve the risk-averseness problem of middle and operational managers and unleash their entrepreneurial ideas, top management needs to encourage autonomous behaviors, which can also exacerbate a different type of agency problem: opportunistic behaviors. (2) Although the generation of new ideas to explore new strategic directions and/or opportunities is important, the very newness of the ideas make them difficult to evaluate, and thus the selection process may be perceived as unfair by some managers. We propose that (a) stock options, (b) passive monitoring, and (c) perceived procedural justice would attenuate the negative side effects associated with CE, such as opportunistic behaviors and perceived unfairness. Although research in CE often stresses autonomy of middle and operational managers for new idea generation as important, examining the whole process in terms of idea generation, selection, and implementation with respect to potential risks will extend the CE literature.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:1047-7039
1526-5455
DOI:10.1287/orsc.1110.0645