Being thesis submitted in the department of business administration and marketing, school of management

Source: Shah and Bhutta (2013) Model of Public Sector Corporate Entrepreneurship
Corporate Entrepreneurship: applications in Private and Public Sector Compared

Klein, Mahoney, McGahan and Pitelis (2009) see public entrepreneurship as a management phenomenon. They stress that entrepreneurial ideas are constructed and institutionalized through processes that are similar to the private sector entrepreneurship. They therefore concluded that research on private sector entrepreneurship should be helpful in understanding and applying entrepreneurship concepts in the public sector.

Based on this, they (Klein, Mahoney, McGahan & Pitelis, 2009) relate public and private entrepreneurship by identifying the expression of CE in the public sector in terms of the concepts derived from the private sector (innovatıveness, proactivity, risk-taking) as contained in the table below;
Table 2.2: Concepts of the Entrepreneurial Function in Private and the Public Sector

Concept of Entrepreneurship	Manifestation in Private Entrepreneurship	Application to Public Entrepreneurship	Issues and Problems	References
Proactivity Alertness to profit opportunities (Kirzner, 1973)	Management literature on opportunity recognition Austrian economics literature on market equilibration	Sensing shifts in public preferences Anticipating common problems Identifying out-of-date practices, agencies, and other institutions Avoiding undesirable outcomes in the public interest	Lack of market prices, difficulty in measuring profit, “soft budget constraints” Complex, hard-to-specify objectives Misalignment of interests between decision-makers and the general public; likelihood of rent-seeking Pursuit of valuable opportunities may be constrained by bureaucratic procedure Exchanges based on coercion, not consent Identifying and managing uncertain outcomes	Bellone & Goerl, 1992; Holcombe, 1992; Jacobson, 1992; Kirzner, 1997; McMullen & Shepherd, 2006; Schuler, Rehbein & Cramer, 2002; Shane & Venkatraman, 2000
Risk taking Judgmental decision-making under uncertainty (Knight, 1921)	Economics and finance literatures on investment and capital budgeting Management literature on judgment-based entrepreneurship	Investment of public resources to meet political objectives Evaluating the suitability of various policies for achieving particular outcomes Identifying gamesmanship nominally in pursuit of public interests but truly in private interests	Decision-makers do not put their own assets at risk Political actors may have very short time horizons Discernment of coalition-building from the pursuit of private interests	Foss & Klein, 2005; Foss, Klein, Kor & Mahoney, 2008; Kor, Mahoney & Michael, 2007; Langlois, 2007; McMullen & Shepherd, 2006; Mises, 1944, 1949; Penrose, 1959; Ostrom, 1965, 1990
Innovation (introduction of new goods, markets, production methods, organizational practices) (Schumpeter, 1934)	Economics and management literatures on product and process innovation	Introduction of new policy proposals, political positions, or paradigms Introduction of new procedures (e.g., the local ballot initiative) Changing administrative or electoral procedures Lobbying and other forms of rent-seeking	Decision-makers do not put their own assets at risk Political actors may have very short time horizons Bureaucratic organization is highly path dependent Identifying tradeoffs between short- and long-run interests	Bartlett & Dibben, 2002; Kirchheimer, 1989; Mack, Green & Vedlitz, 2008; Oliver & Holzinger, 2008; Schneider and Teske, 1992; Schneider, Teske & Mintrom, 1995; Schnellenbach, 2007; Wohlgemuth, 2000

Source: Klein,Mahoney,McGahan and Pitelis (2009)
In addition, they identified the framework for the study of the public entrepreneurship at four levels of analysis as shown below;
Table 2.3: A Framework for Analysing Public Entrepreneurship

Source: Klein, et al (2009)

	Level of Analysis	Examples, Issues, Problems
1.	Rules of the game	Creation or implementation of new laws, administrative procedures, informal norms. Establishes rules of the game, within which private agents “play” the game of resource allocation and value creation and appropriation.
2.	New public organizations	Establishment of new governmental or nonprofit agencies or enterprises. Involves judgmental decision-making about privately and publicly owned resources. Objectives and performance difficult to measure, and selection environment may be weak, “suffer” budget constraints
3.	Creative management of public resources	Organization and reorganization of states and state agencies. New forms of public-private interaction.
4.	Spillovers of private actions to the public domain	Pursuit of social and nonprofit objectives by private individuals and firms. Includes establishment of social norms and values.

Klein, Mahoney, McGahan and Pitelis (2009) express the view that public entrepreneurs may and do act like the private ones. According to them, though public and private entrepreneurship are typically being treated in isolation, they in fact co-evolve in many important ways. This is because the modern States contain and requires elements of private entrepreneurial behavior and that opportunities for public entrepreneurship research arise at each of the four levels identified by Klein, et al (2009) above. Thus, it may be inferred that, entrepreneurship not only exist outside of the formal organizations, but also within them in the form of corporate entrepreneurship, and that corporate entrepreneurship could be practiced in both public and private sectors alike. This suggests that HRMP is likely to produce the same effect in the public sector environment as it produces in the private sector if practiced correctly.

2.2.9. The Main Theoretical Base of the Study

All the six theories discussed above are relevant to the understanding and analysis of the relationship between corporate entrepreneurship and human resource management practices as shown above. However, while the trait theory, stewardship theory and agency theory provide background for understanding our theme, the human capital, resource based view and behavioural theories more directly assist us to understand the relationship between human resource management practices and corporate entrepreneurship.

First, most of the studies in the literature of corporate entrepreneurship and human resource management are in line with the main contention of the human capital theory that education of the human element can be a means of generating capabilities and broader options in making entrepreneurial decisions and behaviour. That is, human resource can produce profit through the development of entrepreneurial spirit and work behavior of workers. Education or human capital, can act as an impetus for developing and expressing behavior which leads to the creation of entrepreneurial ideas, improved technique, and new products (Adamolekun, 2013). Resource based view (RBV), on the other hand, is the most popularly applied by the CE/HRMP researchers. RBV incorporates and build on the assumptions of the human capital theory to provide a more logical framework which directly shows how HRMPs stimulate behavior which contribute to CE (Maes et al., 2010) and points most directly to the specific HRM practices by which this is done (Ireland, Covin & Kuratko, 2009).
A large portion of literatures reviewed (Zahra, Nielsen & Bogner, 1999; Vesper, 1990; Carland, Hoy, Boulton and Carland, 1982; Carland, Hoy, Carland, 1988; Brugat and Julion, 2001) show a pattern of shifting consensus to the conception of entrepreneurship as a form of behavior which is subject to HRM intervention, rather than traits which is inborn. By this, the behavioral theory becomes more relevant by providing a framework which enables us to examine corporate entrepreneurship as a behavior which is subject to the influence of HRMP.
Hence, while t he human capital theory addresses the potential of the subject matter (HR) as a basic tool for competitive performance, the RBV enables us to see how this subject matter can be a tool of corporate entrepreneurship. The behavioral theory, on the other hand, assists us to analyze and understand how corporate entrepreneurial behaviour can actually be produced with the aid of HRMP. Hence this study was based on the behavioural theory.
2.3. Empirical Frameworks
2.3.1. Human Resource Management and Corporate Entrepreneurship

The objective of human resource management practices (HRMP) is to influence employees’ behavior in order to impact business performance (Wright & Nishii, 2007). Research into the relationship between HRMP and business performance has supported this by leading to the conclusion that if appropriate HRMPs are implemented, they represent the most crucial resource of the firm (Barney & Wright,1998) and contribute significantly to value creation and the accomplishment of the firm’s objectives (Kaya, 2006). According to Fong, Ooi Tan, Lee, and Chong, (2011), while it is conceptually logical to expect human resource management practice to reinforce corporate entrepreneurship in view of this, the underlying mechanisms supporting the existence of the relationship between the two remains unclear. Hence, earlier thinking in this direction has been criticized for showing association between HRMP and firm performance, but leaving uncertainties about their concrete cause and effect relationship (Mulolli, Islami & Skenderi, 2015;Guest et.al., 1995).

First, as in response to this cause and effect gap, Aktan and Bulut (2008) study highlight how each of the specfic dimensions of corporate entrepreneurship, such as innovativeness, proactivity, risk taking behaviours which HRM practices develop, lead to positive firm performance as shown below:

Figure 2.14: Dimensions of Corporate Entrepreneurship and Financial Performance

Source: Aktan and Bulut (2008)
Further, Montoro-SanchezandSoriano (2011) investigation show the intersection and association between human resource management and corporate entrepreneurship, leading to good firm performance and conclude that human resources have an essential role in corporate entrepreneurship development in so far as they can encourage or hinder corporate entrepreneurial capabilities and work behaviour, leading to firm performance as indicated in figure 2.5. Castrogiovanni, Urbano and Loras (2011) studies also link corporate entrepreneurship and human resource management practices in SMEs’ in this manner. In this respect, Hayton (2005) identifies three main streams of studies which illustrate the intersection between HRM practices and CE as follows:


Table 2.4: Intersection between HRM and CE

Class of HR practices	Innovation	Venturing	Corporate Entrepreneurship
Individual HR practices	Balkin & Gomez-Mejia (1984-1987); Balkin & Bannister (1993); Balkin et al. (2000)	Steele & Balker (1986); Block & Ornati (1987); Skyes (1992)
HR systems or sets of HR practices	Soultaris (2002); Laursen (2002); Laursen & Foss (forthcoming)	Hill and Hlavacek (1972); Von Hippel (1977), Souder (1981)	Tworney and Harris (2000); Hornsby, Naffziger, Kuratko & Montagno (1993); Kuratko, Montagno & Hornsby (1990): Hornsby, Kuratko & Montagno (1999), Hayton (2004)
Organizational Culture	Chandler, Keller & Lyon (2000)	MacMillan (1987)	Morris, Davis & Allen (1994); Zahra, Hayton & Salvato (2004)

Source: Hayton (2005) Typology of HRM and Corporate Entrepreneurship Research
As in table 2.4, the subsequent cause and effect (HRM/CE) literatures fall into four strands of empirical research. These include those which examined the impact of factors that are only remotely related to HRMP, like organsation culture and management support, on CE (Mokaya, 2012; Zahra, Hayton & Salvato, 2004; Chandler, et al 2000;Morris, et al 1994); those which addressed the impact of core but stand-alone or individual HRMP, like training, on CE (Elradin, 2007; Balkin et al., (2000); those which addressed the impact of comprehensive set of HRMP on CE (Tursrney and Herris, 2000; Soultaris, 2002 ) and those which examined the impact of HRMP on the three key dimensions of CE (innovation, proactivity and risk-taking work behavior respectively). The empirical review will be discussed along these strands.

The first strand comprise of those of researchers like Kuratko (2005), Scheepers, Hough and Bloom (2008) and Hazlina (2010) which focus organizational environments that support corporate entrepreneurship, rather than the main human resource management practices. For example, Scheepers et al. (2008) identify internal organisational factors that are related to human resource management practices like management support and organisation boundary and show that they lead to corporate entrepreneurial capabilities like innovativeness, proactivity and risk taking behaviours as shown figure 2.15:

MS




Inn

Au




Proa

CE capability

Internal Factors

R




RT

OB


Figure.2.15: Theoretical Relationship between Internal Factors and the Corporate Entrepreneurship Capability

Source: M.J. Scheepers, J. Hough & J.Z Bloom (2008)

N.B: MS = Management Support

Au = Authority

R = Reward

OB = Organisation Boundary

CE = Corporate Entrepreneurship

Inn = Innovation

Proa = Proactivity

Rt = Risk-Taking
Variants of the studies linking HRM related practices and CE in this way include Alpeza (2011) study which focuses motivation system, organization culture and structure and communication system and Fong, Ng, Tan, and Seow (2013) which examine the role of factors like leadership, organization structure and culture on corporate entrepreneurship. The weakness of these studies, in relations to the objective of the current study is that many of the concepts addressed are only indirectly related to HRM practices and address them only in a general way. For example, while reward management, motivation, work discretion (which is related to job design) were directly related to HRMP, other like management support, time available, communication system, organisation culture are only the products or reflection of the quality of HRMP, rather than HRMP itsef. Zahra, Nielsen and Bogner (1999) and Malarvizhi and Rani (2012) however stress the need to understand the role of the specific HRM practice in developing entrepreneurship and entrepreneurial ventures as well as how these HRM practices and procedures can be used to navigate or indeed drive the changing landscape in small and entrepreneurial firms. Therefore, though these studies found positive relationship between CE and these HRM-related issues, they are inadequate for a conclusive assertion on the relationship between corporate entrepreneurship and human resources management practices.
Another class or strand of studies are those that directly link specific, but stand-alone or individual HRM practices with CE. These started with Edralin (2007). Edralin (2007) used a descriptive survey research design to examine the impact of training and development oninnovative workbehavior among workers in sixty Fillippine firms. He found a positive relationship between the two. Madu (2011), on the other hand examined the impact of compensation practices on intrapreneurship work behaviour. He gathered empirical data from 209 respondents in different organizations through a questionnaire survey. He also found a positive relationship between compensation practices and corporate entrepreneurial work behaviour. Unlike the earlier class of studies discussed, these studies more directly examine the relationship between CE and specific HRMPs.

The problem with these studies is that they limit their focus of study to one, stand-alone dimension of the HRM. However, each dimension of HRM requires complementary conditions regarding the others to be effective. For example, good training practices may be ineffective in producing entrepreneurial behaviour, if the reward system does not reinforce positive application of the skills obtained through training. It is also doubtful if compensations plan designed to encourage risk taking work behaviour would achieve its objective if performance appraisal or job design in the organization do not support it. Hence the multitude of assumptions that would be required to sustain the results of such stand-alone studies would tend to make the efforts unworthwhile. Sanjeev and Mathapati (2015) provide support for this reasoning by showing that desired employees’ behaviour is produced only when HRMP are internally consistent and reinforce each other to ensure that their sum constitutes a synergistic influence. In line with this Kahkha, Kahrazeh and Aramesh (2014) contend that achieving reliable results in studies of entrepreneurship requires a comprehensive approach to the factors shaping entrepreneurial work behaviour as was undertaken in this work. Based on this, Jimenez-Jimenez (2005) and Laursen and Foss (2003), stressed the need for organisations to develop a system of internally consistent HRMP, since it is only a system with mutually reinforcing practices that can be beneficial to innovative performance, rather than isolated HRMP .

Studies that address this gap by focussing the impact of a set of complemmentary HRM practices on CE started with Hayton (2005). In a meta analysis of empirical works linking CE and HRMP, Hayton (2005), shows that there is a positive relationship between specific HRMPs like job design, reward structure and training and corporate entrepreneurship. This work led to a model which directly link elements of HR (job design, training and performance evaluation) with corporate entrepreneurship as follow:


Social Capital Trust & Organisational Citizenship Behaviours

Cross Functional Team Based Structure

Job Design, High Discretion & Autonomy




Internal & External Exchange of Information & Resources

Perception of Organisational Support

Socialization & Team Oriented Training



Performance Evaluation and Incentive To Promote Risk Taking Behaviours

Risk Taking




Corporate Entrepreneurship Innovation & Venturing


Figure 2.16: Human Resource Management and Corporate Entrepreneurship

Source: Hayton (2005)
Other studies in this category are that of Soleimani and Shahnazari (2013) and Ozdemirci and Behram (2014) which examine the impact of a series or system of HRMP, rather than an aspect of it. Ozdemirci and Behram (2014) examined the role of HRMPs on corporate entrepreneurship in 124 Turkish firms operating in different industries. This study established that HRM practices partially mediated the relationship between intrapreneurship and corporate performance. Tang Wei, Snape and Chung (2015), examine how strategic human resource management (SHRM) facilitates corporate entrepreneurship (CE) among Chinese firms. Their data were collected through a survey of two hundred (200) manufacturing chinese firms. The result shows that there is a strong relationship between strategic human resource management and the level of corporate entrepreneurship in these firms. They also found that the relationship between SHRM and CE was partially mediated by a devolved management style. This relationship was however stronger for firms with more politically skillful HRM professionals. Brizek (2014) study, in the same way investigated a comprehensive and direct set of key elements of HRM practices creating entrepreneurial work environment or encouraging entrepreneurship in established organisations. He established that job design, recruitment and selection, training and development, compensation system and performance appraisal are human resource management practices creating entrepreneurial work environment as shown Figure 2.17: