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

2.1.2.7.2. Entrepreneurship in the Public Sector Environment

The dichotomy between the public and private sectors in terms of employee productivity, corporate performance, and the likes has occupied the interest of several authors (Maduabum, 2014; Fajana, 2006). The question has been asked as to whether the private enterprise concept of an entrepreneur is an appropriate model for public administration. A common sentiment in this regard is “government has no business with business”. It was believed that the value and characteristics of public entrepreneurship such as personal vision of future, autonomy, risk taking and secrecy are at odd with the values of democratic politics and administration such as accountability, citizenship participation, open policy-making process and stewardship behaviour. It has long been held that while private sector innovates, government duty is to impose rules. In line with this, Schneider, Teske and Mintrom (1995) emphasize that there remained differences between public and private sector institutions. Some of these differences, according to them, include the following:

Table 2.1: Differences between Private and Public Sector Environment

S/N	Private Sector	Public Sector
1	The emphasis is on profit,	The emphasis is on providing a service at minimal cost.
2	The private sector is guided mainly by internal policy, which is flexible and relatively easy to change;	The public sector is guided by law and regulation, which is external to the organization, inflexible and difficult to change.
3	The private sector is customer-driven,	The emphasis is on complying with the regulations.
4	The private sector is not strongly committed to job security.	The public sector employees are usually well protected. Thus it is not easy to get rid of the “dead-wood” in the civil service.
5.	In the private sector, competition creates pressure for efficiency and effectiveness.	Competition does not exist in the public sector, because most public services operate in a monopolistic environment.
6	The objectives of operations in the private sector are generally clear, and the administrators have clear implementation guidelines or direction.	Many public policies are politically motivated; thus the objectives may not be clear, and the administrators have no clear implementation guidelines or direction.
7	There is more recognition for accomplishments in the private sector and usually less punishment if a mistake is made.	Public servants are seldom rewarded or recognized for doing a good job, but often punished for making mistakes. This discourages public servants from taking chances.
8	Investment is voluntary; therefore, there is an acceptance of risk by the investor.	In the public sector, capital is raised through compulsory fees and involuntary taxation, and thus “investors” do not anticipate or tolerate risk of the funds they have entrusted.

Source: Compiled from Schneider, Teske and Mintrom, (1995)

However, Allison (1982) considers that despite these, management principles in public and private sectors are fundamentally alike in many important respects. Also, Eggers, Kraus, Hughes and Laraway (2013, 8) stressed that, though innovation is often viewed as the province of the private sector, the modern day economic climate presents an unprecedented need and opportunity for government to innovate in the face of crucial challenges.

In line with this, Terry et al. (1992) is of the view that intrapreneurship should not be regarded as attributes reserved for a few exclusive individuals or the “context” of start ups. In this regards, he contended that government institutions need, can and should prioritize the cultivation and development of entrepreneurial work behavior to improve their effectiveness. Along this line of thought, Zerbinate and Souitaris (2005) show that entrepreneurial concept applies in the public sector and indeed identified five (5) possible types of entrepreneurial actors in the public sector. These include career driven public sector workers, the politically ambitious public officer, spin-off creator, business entrepreneur in politics as well as professional politician. The assumption is that each of these agents can play their roles entrepreneurially if they are motivated and empowered to do so by appropriate HRMP interventions. According to Vikalpa (2006), they are at present being prevented from expressing intrapreneurship in the service by hindrances such as unclear norms on linking innovations with career growth, inadequacy of rewards and recognition, ambivalent support from the immediate supervisor, informal team formation, procedural delays, poor documentation and maintenance of records, lack of facility for pilot testing, lack of recognition for contributions by support functions, inadequate systems for promotion and management of ideas, lack of recognition for innovations in non-core areas, low emphasis on dissemination and commercialization of innovation, lack of patenting initiatives, poor handling of change management, uneasy access to foreign technologies, absence of failure analysis systems. However, referring to the activities of intrapreneurs in government, Shah (2013) contended that:

Government bureaucracy can throw all sorts of barriers in the way of people who are trying to drive constructive change, but some people, when they run into a barrier inside their own organization, can’t help but try to figure out to climb over it, creep under it, squeeze around it, or knock it out of the way. We call those people intrapreneurs (p. 5).

These intrapreneurs, according to him, use strategies which include sourcing and application of ideas from outside the organization to meet an unmet need; finding new ways around old pattern of doing things; building vibrant, energetic, passionate teams to pursue their objectives; leveraging their networks, building new connections, or making sales pitches for their new ideas. They also often keep quiet about the changes they implement until they can demonstrate the potential of their new ideas. These approximate the key elements of proactivity and innovation which characterize intrapreneurial work behaviours in the private sector. Osborne and Gaebler (1992) note that the public sectors, driven by politicians and bureaucrats who are under increasing pressure to perform in modern times, are already introducing elements of market forces into their hitherto monopolistic government enterprises. To ensure the success of such endeavors, they suggest that government should steer and not row. That is, the obligation of government is not to provide services directly, but to ensure that they are provided. Government strategies and policies should be towards empowering the communities to solve their-own problems; rather than monopolies, competitions, driven by mission rather than rules; be result-oriented by finding outcomes rather than inputs, meet the needs of the customer, not the bureaucracy; concentrate on earning money rather than spending it; investing in preventing problem rather than resolving crises; decentralizing authority and solving problems by influencing marketing forces instead than more creating public programs.


2. 2. Theoretical Framework

Six theories and the respective models of HRM and CE are considered important for a proper understanding and analysis of human resource management practice-corporate entrepreneurship (HRMP/CE) issues under investigation. They shall be discussed as follows:

2.2.1. Human Capital Theory

Psachoropoulos and Woodhall (1997) propose that human capital theory is based on the assumption that formal education is instrumental and indeed required to enhance the quality of the human resource and productive capacity of any population. In these works, they argue that a more educated population is a more productive population. This support Robert and King (1991) human capital model, showing that the creation and development of human capital through education was responsible for differences in labour productivity, levels of technology and hence the expression of entrepreneurship observed in the countries of the world. From this perspective, human capital theory provides a framework for examining the impact of acquired variables such as experience, learning and education and capabilities on career outcomes and supports the assumption that education can serve as a key determinant of the quality of decision choices and consequent economic benefits (Dickson, George & Mark, 2008). In relation to work setting, human capital theorists demonstrate that education increases the productivity and efficiency of workers by increasing the level of the stock of productive and compensable human capabilities which result from innate abilities and investment in the development of human beings.

The supply of formal education is therefore considered as a productive investment in human capital, which the proponents of this theory see as being more worthwhile than that of physical capital and a justification for allocation of a large percentage of public expenditure on education in both developing and developed countries (Fagerlind and Saha, 1997). Babalola (2003) contended that the justification of investment in human capital is foundamentally based on three arguments in this theory which is of relevance to entrepreneurship. First, appropriate parts of the knowledge accumulated by previous generations should be given to the new generation. Second, the new generation of people (or workforce) should be educated on how existing knowledge should be used to develop new products, to introduce new production processes, methods and social services; and thirdly, the new generation should be motivated to develop entirely new ideas, processes and products through creative and innovative methods. By this the entrepreneurial potential of the new generation of the labor force is developed and activated for expression in and out of corporate settings. It is in this sense that entrepreneurship may be seen as an expression of the quality of human resources or labor activated through education and training. This challenges the orthodox assumption that an entrepreneur is a separate factor of production, apart from labour and provides support for Akintunde’s (2013) worker/entrepreneur continuum conception of labor in industry:


Entrepreneurial Worker

Traditional Worker


Figure 2.4.: Worker/Entrepreneur Continuum

Source: Akintunde (2013)
This is in line with our earlier conceptual argument that human resources comprise employees, Management, employers as wel as entrepreneurs, rather than employees only. From this line of thought, the difference between the traditional worker and the entrepreneurial worker is the human resource function of training and education and not inherent traits. The potential for entrepreneurship is inherent in every worker but the expression varies according to the level and effect of formal and informal education and training or experiences as in the theory X and theory Y assumptions.
The basic assumption of the discussions on this topic so far is that education is a means of enhancing managerial capabilities for generating broader options for making entrepreneurial selection decision easier (Dickson et al, 2008). It is in this respect that Adejimola and Olufunmilayo (2009) posit that education should be programmed and implemented with a view to produce and enhance the supply of entrepreneurial capabilities and activities of the workforce. By this, education can act as an impetus for creating new ideas, improved techniques, new technologies and new product (Adamolekun, 2013) and entrepreneurship training becomes responsible for creative destruction (Schumpeter, 1934) for increased firm performance in terms of productivity and profitability. This suggests that human resource management practices (HRMP) can produce profit through the development of entrepreneurial spirit, capabilities and work behavior for organization performance in terms of expansion, employment and hence poverty reduction as demonstrated in Macchitella (2008) model below:



Figure 2.5.: HRMP and Entrepreneurial Capabilities

Source: Macchitella (2008)
This has been supported in Van-Den-Berg (2001) which establishes a correlation between the level of education and training function of HRM and new product development in knowledge-based economics which invested massively in education and technology.
2.2.2. Resource Based View (RBV)

According to Kudono (2012), resource based view is concerned with the relationship between the internal resources, strategy and firm performance. The RBV postulates that organizations are heterogeneous in terms of the resources they control. The resources include all the capabilities, attributes and knowledge an organization possesses which enables it to develop and execute strategies that enhance its performance. Barney (1991) proposes that the internal organizational resources that are valuable, inimitable, rare and without a strategically equivalent substitute are sources of sustainable advantage. As a result, the more valuable, rare, imperfectly imitable and non-substitute these resources are, compared to those of other competitors’ firms, the more reliable the competitive advantage built on these resource will be (Ireland, Dess, Zahra, Floyd, Janney and Lane, 2003). This perspective, according to Maes and Roodhooft (2010), suggest that firm-specific assets and capabilities are key determinants of the differences in firm performances and wealth creation outcomes and that competitive advantage of a firm lies upstream of product markets and relies upon resources. Many entrepreneuship writers use resource-based view to identify and explain persistent positive performance differences among firms (Ireland, Dess, Zahra, Floyd, Janney & Lane, 2003).

Applying the above to the human resource, Torrington, Hall and Taylor (2005) claim that HR can provide competitive entrepreneurial advantage for a business as long as they are unique and cannot be copied or substituted for by competing organizations. Wright, McMahan and Mc Williams (1994) also illustrate how HR meets these four criteria. First, value is created when individual’s competences matches the job requirements of the firm, which thus enabling them to make valuable contributions which cannot be easily substituted for another. The criterion of rarity is related to this value because it is assumed that the most important competence for employees is cognitive ability due to future needs for adaptability and flexibility. The talent pool is limited and many employers are currently experiencing difficulties in finding the talent that they require (Sobande, 2013). Also, the quality of inimitable applies to HR as competitors will find it difficult to identify the exact source of competitive entrepreneurial advantage from within the firms’ HR pool. They will be unable to copy the unique historical conditions, unique behavior of the HR and culture. This is the reasons why organization can employ a group of people from the same source and skill set but their behavioral quality and their respective performance outcomes will be different.
In furtherance of this, many research works on SHRM, based on this theory, were designed to establish the unique role and entrepreneurial contribution of the human resources (Wright, et al., 2001; Way & Johnson, 2005). Wright, McMahan and McWilliams (1994) and Lado and Wilson (1994) have all concluded that Strategic HRM can produce sustainable competitive advantage and an enhanced organizational effectiveness. From this perspective, RBV focuses on the advancement of sustained competitive entrepreneurial advantage through the development of human capital rather than just aligning human resources to current strategic goals. Torrington, Hall and Taylor (2005) posit that the RBV has stimulated attempts to create a Resource Based Model of SHRM. This model was based on the concept that organization is a unique collection of experiences, skills, attributes, knowledge and characteristics which give the organization its unique competitive edge.
This establishes the linkages between the human capital theory and the resource based view and centralizes the human resource of the organization as well as how they are being managed in stimulating entrepreneurial processes. Thus, when the RBV is applied to intrapreneurship development or corporate entrepreneurship, the questions to ask are ‘‘How can resources (Human capital) contribute to company performance through corporate entrepreneurship?” and “What managerial process, strategies or practices (HRM) will optimize her competitive advantages?” (Ireland, Dess, Zahra, Floyd, Janney & Lane, 2003; Moses, 2010).
The resource in focus, in this study is the HR (human capital assest) and their management. Mpris and Jones (1993) stress that human resource management is the most vital of all managerial processes that can most positively affect the pursuit of corporate entrepreneurial outcomes . According to Balkin and Gomez-Mejia (1987), though, heterogeneous resources are conditions of entrepreneurship, the process by which these resources (including HRM) are discovered, converted from inputs into heterogeneous outputs and exploited have been given little attention in the literature. Infact the START (2003) survey indicates that more than fourty five percent (45%) of the entrepreneurs considers HRM as one of the top three management activities that required to be focused to ensure the survival and prosperity of newly formed venture. This buttresses the assertion of Katie et al, (2000) that the level of the effectiveness of the management of the human resources can determine the success or failure of firms in generally and the entrepreneurial ones in particular. It may therefore be concluded, as indicated in Maes et al., (2010) and Shah (2013) that the nature of human resource pools as well as the human resource management practices is more likely to influence corporate entrepreneurial activities than the environment itself.
2.2.3. Agency Theory

Agency theory is based on the notion that social and political life can be understood as a series of “contract” in which one party, the principal, enters into an exchange relationship with another, the agents ( J. Bendickson , J. Muldoon , E. Liguori , P. E Davis , 2016) as well as the economic doctrine that human behaviour is mainly motivated by self-interest, utility-maximization and opportunism (Jensen & Meckling, 1976). Agency theory therefore prescribes that organization should align the interest of agents with those of the organization or principal through control and incentives system. In this respect, agency theory is generally discussed in relation to the relationship between top manager or executives and the shareholders as a result of the separation of ownership and control (Olaopa, 2004). Breton-Miller and Miller (2009) and Corbetta and Salvatto (2004) have however extended the principles to employment relationship between business owners and organizations’ employees. As a result, Messersmith (2010) stress that agency theory provides alternative strategy of either seeking to monitor and control the behavior of employees and incur agency cost on one hand or, on the other hand, establish a system of incentives that harmonises individual utility-seeking behaviors with the objectives of the organization and thereby reducing the agency cost. The first would tend to produce bureaucratic employees, while the second would tend to produce entrepreneurial employees (entreployees). Here, the human resource management practices become a tool for producing such employees.

2.2.4. Stewardship Theory

This theory derives from the psychology and sociology literatures as a form of management principles besides those that are based on agency theory (Davis, Schoorman & Donaldson 1997). It challenges the assumption that all human behaviours are as a result of self-interest. According to Zahra (2007), this theory suggests that utility may be maximized by financial as well as non-financial compensations. For example, Wasserman (2006) indicates that firm founders may be willing to accept lower levels of financial rewards from their firms because they are satisfying other non-pecuniary needs through the social prestige of firm formation and ownership. Appelbaum, Bailey, Berg, and Kalleberg (2000) also report cases of employees working for an entrepreneurial firm who are being rewarded in the forms that are non-strictly financial benefits.

Applebaum, Bailey, Berg and Kalleberg (2000) report that some employees regard the opportunity to work on innovative products or services, to participate in building a young organization or to work in a less formally established organization culture associated with new ventures as providing some utility for them. Consequently, stewardship theory implies an open form of management that helps to build trust, cooperation and collaboration between the business owner or his managerial representatives and the firm’s employees for the purpose of establishing an entrepreneurial culture in the organization (Davis, Schoolman & Donaldson, 1997). It is in this sense that stewardship theory is considered as a managerial philosophy which provides a motive which stimulates the employees to activate entrepreneurial skills and attitude and work entrepreneurially like the founding entrepreneurs. This occurs when it increases the level of human and social capital in the form of entrepreneurial qualities within the firm and leads to a form of management which has the ability to positively influence the level of entrepreneurial expression and firm performance.
2.2.5 Trait Theory of Entrepreneurship

Much of earlier research in the field of entrepreneurship focused on the person of the entrepreneur because, according to Schumpeter (1983), “the entrepreneur causes entrepreneurship”. It was reasoned from these studies that a person starts a venture because he/she has certain inner qualities which made him/her to do so and therefore different from other members of the population. Thus these researchers attempt to identify “Who is an entrepreneur?” or the trait that differentiate entrepreneurs from non-entrepreneurs and hence rooted in the trait theory tradition. Based on this tradition, researchers such as Moyer (2016) and McCleland (1961) propose that entrepreneurship is a function of certain human characteristics which everyone does not possess. According to him, these characteristics are often related to processes that traditionally cannot be controlled, or lose their uniqueness and efficiency, effectiveness when controlled.

In partial agreement with the above, Christensen (2005) is of the view that entrepreneurship is not entirely controllable. According to Garbur (1989), in the trait approach, the entrepreneur is assumed to be a particular type of personality in a fixed state. It may be inferred from this that, since an entrepreneur is a personality type or a state of being that does not go away, then once an entrepreneur; always an entrepreneur, irrespective of the influence of environmental interventions such as the HRMP. From this perspective, the role of HRMP is only to find, employ and emplace the entrepreneurial personality. The great-man and the psychological characteristics schools of thoughts are the sub-schools of the trait approach. Traits such as risk taking, locus of control, personal value system, need-for-achievement, age; (culminating in the big-five taxonomic continuum conception of personality) were among those regarded as distinguishing entrepreneurs from non-entrepreneurs or contributing to entrepreneurial success (Leutner, Ahmetoglu, Akhtar & Chamorro-Premuzic, 2014). Jaana (2001), reports that nearly all empirical investigations that he reviewed assumed that entrepreneurship is a discontinuous function. McClelland (1961) sees entrepreneurs as a group in contrast to other groups; manager or employee as a group, as against entrepreneur as a group. This assumes that one is either an entrepreneur or is not, suggesting a dichotomous condition and leaves little room for efforts to develop or multiply entrepreneurial behavior through HRMP. Scholars in this school of thought “typically refer to entrepreneurial capacities as product of nature or a constant”. Their counterpart practitioners tend to focus more on passion, talents, destiny, than on scientific processes in entrepreneurship development policies and programmes.
The trait approach failed to achieve the objective of producing a unifying definition of the subject matter. It does not ascribe any serious role for Human Resource management in shapping corporate entrepreneurial behaviour. Instead, it yielded conflicting definitions and foci such as: self-employment, starting a business, ownership and authority as in Welseh and Yang, (1993); Need for achievement as in Komives and Coooper (1972); locus of control as in Brockhaus, (1980) are but a few examples. Many (and often vague) definitions of the entrepreneur have emerged from this approach. Few studies even employ the same definition for different constructs.

The lack of basic agreement as to “who an entrepreneur is” has led to the selection of samples of “entrepreneurs” that is hardly homogenous in many studies (such as in Welseh & Yang, 1993). This lack of homogeneity occurs, not only among the various samples, but also within the samples. The result is that the number of traits and characteristics or “psychological profile” of the entrepreneur from these studies now appears to suggest an entrepreneur as someone that is larger than life and full of contradictions. This theory however provides a background for understanding other theories such as behavioral theory which builds on a more rigorous scientific analysis to expand the role of HRMP in entrepreneurship development.