Academic journal article International Journal of Business and Society

The Relationship between Corporate Entrepreneurship and Firm Performance: Evidence from Malaysian Large Companies

Academic journal article International Journal of Business and Society

The Relationship between Corporate Entrepreneurship and Firm Performance: Evidence from Malaysian Large Companies

Article excerpt

1. INTRODUCTION

Studies on strategic management have shown that corporate entrepreneurship (CE) is the main source of superior firm performance (Antoncic & Hisrich, 2003; Jiang et al., 2014; Reijonen et al., 2015). Although there is no consensus among the researchers on the dimensions of CE, entrepreneurial orientation (EO) and corporate venturing (CV) are widely used as proxies of CE. Recently EO has been commonly accepted as an instrument for capturing a firm's inclination towards entrepreneurship which has been conceptualized as possessing three main characteristics which are; innovativeness, risktaking, and proactiveness (Covin & Wales, 2011; Liu & Lee, 2015). The CV is always associated with CE or labelled as "intrapreneuring" by Gifford Pinchot due to the fact that it is an entrepreneurial effort to create a new business within an existing firm (Dess & Lumpkin, 2005). The CE is a term used to explain the entrepreneurial efforts of an established and large organisation (Burns, 2005). Various authors have used various terms to describe entrepreneurial behaviour inside existing firms (Sharma & Chrisman, 1999). Among the terms used to describe entrepreneurial behaviour at the firm level are intrapreneuring (Pinchot, 1985), corporate entrepreneurship (CE) (Burgelman, 1983; Guth & Ginsberg, 1990; Covin & Miles, 1999; Morris et al., 2008; Sharma & Chrisman, 1999), corporate venturing (von Hippel, 1977; MacMillan et al., 1986; Vesper, 1990), innovative (Miller & Friesen, 1983), firm-level entrepreneurial posture (Covin, 1991; Covin & Slevin, 1986), firm's EO (Knight, 1997; Lumpkin & Dess, 1996), and organisational entrepreneurship (Handfield et al., 2009; Stevenson et al., 1985). However, CE is the term that is often used to describe entrepreneurial behaviour of large firms.

Despite a large body of literature that has empirically studied the effects of the CE on firm performance, limited empirical research exists on studies about the public-listed companies (PLCs) (Miller & Miller-Breton, 2011) and large firms. Nowadays, the performance of the PLCs has been a major concern as they are facing more challenging environments as compared to the challenges faced by PLCs in the past. This is proven as the survival rates of the listed firms are found to be declining (Fama & French, 2004). According to the Deputy Finance Minister of Malaysia Donald Lim Siang Chai in his speech, between 1st January 2003 and 15th July 2010, there were 143 public listed companies that have financial difficulties. From these number, 99 companies were delisted from the official list of Bursa Malaysia. These PLCs were facing financial distress as their loan amount was higher than the value of their assets and were thus, exposed to bankruptcy (The Sun Daily, 2010).

Majority of the researches on entrepreneurship in Malaysia are predominant by the small and medium sized firms. This is due to the fact that, SMEs accounted for 645,136 firms or 97.3% of the total firm establishment as at year 2010 (Department of Statistics, 2012). Thus, neglecting the importance of entrepreneurial activities among the large firms. Large and small firms face completely different challenges (Beaver, 2003) and thus, both have to adopt different business strategies to achieve high performance (Wagner & Hansen, 2005). For example, in generating innovation, large and small firms face different managerial and technical issues (Knight, 1989). Studies have found that the manufacturing and innovation strategies employed by the large and small firms also differ (Wagner & Hansen, 2005; Zahra & George, 2002). Accordingly, it is important to conduct separate studies on the effects of CE on firm performance according to the firm's size. This is because it is questionable whether the results of studies on small firms can be generalized to larger firms and vice versa, largely due to the fact that all core references with smalls firms as the samples use the perceptual performance data (Andersén, 2010). …

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