ABSTRACT
INTRODUCTION
CONCEPTUAL DEVELOPMENT
METHODS AND MEASURES
RESULTS
DISCUSSION
CONTACT
REFERENCES
TABLE 1
TABLE 2
TABLE 3
TABLE 4

Little formal research has compared individual characteristics of nascent entrepreneurs and nascent intrapreneurs. We propose that these two groups of founders differ in a number of characteristics thought to influence firm growth and performance. Using data from the Entrepreneurship Research Consortium, we find support for this premise. Specifically, nascent intrapreneurs appear to perceive less uncertainty, have greater risk-taking propensity, develop more formal business plans, and have more conservative growth expectations than their nascent entrepreneur counterparts. In addition, business plan formalization and risk-taking propensity appears related to growth expectations. This exploratory study should motivate more research on the entrepreneur and intrapreneur groups.

Scholars have invested considerable resources examining the individual characteristics of entrepreneurs in new and early stage ventures. Some of these individual characteristics include age, gender, prior work experience, and founder perception of environmental uncertainty. In addition, firm characteristics such as technology, innovation, and business plan formalization have also been found salient to new venture initiation processes. Such research, however, has not been extended into the realm of nascent intrapreneurs. Given that survey studies forecast a significant increase in intrapreneurial activities as we approach the new millennium (Rule and Irwin 1988), comparing a sample of nascent entrepreneurs and nascent intrapreneurs along a number of individual and firm characteristics is desirable.

Nascent entrepreneurs innovate and create independent ventures essentially for themselves, while nascent intrapreneurs execute this process on behalf of an existing organization. The result is similar in that both processes yield a new venture. However, it is desirable to learn if the characteristics and behaviors of the key actors (the entrepreneur and the intrapreneur) as well as their perceptions of environmental uncertainty and expectations of firm growth are similar in the nascent phase. This study provides a rare formal comparison of entrepreneurs to intrapreneurs—particularly in the nascent stage context. It also extends previous work on relating factors of nascent venture success to expectations of firm performance.

Many studies have examined factors affecting the performance of entrepreneurial ventures. Such factors include age, gender, prior work experience, business plan formalization, and perceived environmental uncertainty. Recently, such studies have penetrated the realm of nascent entrepreneurship—the early stage of new venture creation before substantive financial results are obtained. For example, Matthews and Human (2000) found that business plan formalization and perceptions of operational uncertainty helped predict nascent entrepreneurs’ expectations of future firm growth.

Research is less advanced in the intrapreneurial context. Most extant intrapreneurship research has focused on the organizational environment in which the intrapreneur operates. For example, Kanter’s (1989) work associated reporting structure, information flow, culture and climate, and reward systems with successful intrapreneurial ventures. Intrapreneurship research remains largely conceptual and focused on case-based observation (e.g., Norburn, Manning, and Birley 1986; Morse 1986; Duncan, Ginter, Rucks, and Jacobs 1988).

One way to reduce the research deficit is to leverage the more established knowledge base of entrepreneurs. For example, we can compare intrapreneurs to our more sophisticated knowledge of entrepreneurial characteristics and look for significant differences. Some comparative research has in fact been done. But, similar to intrapreneurship research in general, studies have focused on comparing strategy and structure variables of entrepreneurial and intrapreneurial ventures. For example, Shrader and Simon (1997) found that the two types of ventures emphasized different resources in developing competitive strategy. Carrier (1994) found that structural and system variables, such as performance and reward systems, favored success in entrepreneurial ventures over intrapreneurial ventures.

There is also a stream of research that compares the financial performance of intrapreneurial and entrepreneurial ventures (e.g., Biggadike 1979; Fast 1981), with a general theme that intrapreneurial ventures tend to under perform their entrepreneurial counterparts—although this is by no means conclusive (e.g., Shrader and Simon 1997). The theme of the relative underperformance of intrapreneurial ventures has recently emerged in the popular managerial literature by Christensen (1997) and others.

However, little of this comparative work has focused on the venture’s founder as the unit of analysis. How do characteristics of the entrepreneur and intrapreneur differ? Of course, a dearth of research may exist because scholars do not perceive a significant difference between the two groups to motivate formal studies. Hisrich and Peters (1998), for instance, listed characteristics of the intrapreneur that included: good grasp of the environment, visionary and flexible, creates management options, encourages teamwork, enables open discussion, builds a coalition of supporters, and persistence. It’s easy to argue that these characteristics are similar to those of the entrepreneur. Indeed, based on her review of the literature, Carrier (1996) concluded that most studies that have focused on individual or personal characteristics of the intrapreneurs (in comparison to the entrepreneur) have implied that there is no significant difference between them.

However, some commentators have proposed that entrepreneurs and intrapreneurs do indeed differ in some important ways. For instance, Luchsinger and Bagby (1997) suggested that, because intrapreneurs operate in the setting of an established organization, intrapreneurs have less control over their environment, assume less financial risk, and have access to more administrative and operational resources than does the entrepreneur. Moreover, intrapreneurs must be able to take a subordinate role, and seek sponsorship and resources despite almost certain internal resistance and criticism.

Based on prior research and empirical observation, we propose that nascent intrapreneurs (NI) should differ from nascent entrepreneurs (NE) along a number of dimensions. Over time, firms seek more control over their environments to reduce uncertainty and enhance survival (Pfeffer and Salancik 1978). Small firms are exposed to uncertainty on many fronts, including financial, human resource, and structural uncertainties (Ballentine, Cleveland, and Koeller 1993; Sharma 1999), and acquiring resources can be difficult (Starr and MacMillan 1990). Managers in established organizations are relatively insulated from such uncertainties, and have easier access to critical resources from their sponsor (Sharma 1999). Therefore,

Proposition 1a: NI should perceive less uncertainty than NE.

Stewart et al. (1997) found that propensity for risk-taking differentiates the entrepreneur from small business owner and corporate manager. Indeed, researchers have suggested that decision-making in established organizations tends to revert to the status quo, often to avoid risky outcomes (e.g., Staw 1981; Silver and Mitchell 1989). Since intrapreneurs usually have considerable experience in a corporate background, we posit that:

Propostion1b: NI should be more risk averse than NE.

Although research attempting to confirm the linkage between small business planning and performance has produced mixed results (e.g., Robinson and Pearce 1983; Orpen 1985; Bracker, Keats, and Pearson 1988), scholars tend to agree that small firms do not conduct as much formal planning as larger firms (e.g., Unni 1981; Robinson and Pearce 1984). Given their corporate background, intrapreneurs have likely been exposed to formal planning processes and have perhaps participated in planning prior to their corporate venture. Therefore,

Proposition 1c: NI should be prone to more formal business planning than NE.

In general, researchers have found that the performance of entrepreneurial growth firms tend to exceed the performance larger firms in similar industry contexts (Biggadike 1979; Fast 1981). Indeed, the recent underperformance of corporate ventures relative to smaller entrepreneurial firms has motivated research among a number of scholars to determine the causes of this phenomenon (see, for example, Christensen 1997). A problem, of course, with measuring growth in nascent firms, is that there are few actual results to measure. Some scholars of nascent enterprises have migrated toward using measures of expected growth (e.g. Krueger and Carsrud 1993; Matthews and Human 2000), under the presumptions that growth expectations might provide a useful predictor of actual performance (Chandler and Hanks 1993). Using growth expectations as a proxy for performance, we posit:

Proposition 1d: NI should have lower growth expectations than NE.

In addition to proposed differences between the NE and NI groups, we also develop a set of propositions relating NI behavior, perceived uncertainty, risk tolerance, and business planning formality to growth expectations. This work largely extends the work of Matthews and Human (2000), who studied the relationship of NE characteristics to expectations of growth. Theoretical support for substituting growth expectations for performance as the dependent variable can be evoked from the theory of planned behavior (Ajzen 1991), which posits that actions can be predicted from intentions.

We propose the following relationships:

Researchers have found that the performance of entrepreneurial ventures tends to exceed the performance of larger corporate operations in similar industry contexts (Biggadike 1979; Fast 1981). We should expect, therefore, that:

Proposition 2a: NI behavior should be related to lower growth expectations.

Scholars have suggested that the entrepreneur’s perception of the environment plays a key role in the firm’s chances for success (Bruno and Tyebjee 1982; Luo 1999). A recent study by Matthews and Human (2000) found support for the notion that higher levels of perceived uncertainty by nascent entrepreneurs led to lower expectations of financial growth. Therefore,

Proposition 2b: The more perceived uncertainty, the lower the growth expectations.

It is generally thought that risk takers expect greater rewards from higher risk situations. A founder’s tolerance for risk, therefore, should be associated with higher expectations of firm growth or performance:

Proposition 2c: The more risk is tolerated or sought, the higher the growth expectations.

Matthews and Human (2000) found that level of business planning formality was negatively associated with growth expectations of nascent entrepreneurs. The researchers reasoned that formal planning served to temper the founder’s growth expectations, since the planning process would temper the entrepreneur’s optimism of performance and encourage more realistic expectations. Therefore:

Proposition 2d: The greater the level of business planning formality, the lower the growth expectations.

Procedure and Sample

Data from the Entrepreneurship Research Consortium (ERC), a national study of nascent business founders, are used for this research. The ERC project gathered data from more than 600 randomly selected nascent business founders utilizing both telephone interview and mail surveys methods. The reader is referred to Reynolds (2000) for a detailed account of this database’s development and content.

Determination of NE and NI Samples

In the ERC database, nascent founder were assigned an NE status if they answered “yes” to the following question during the initial telephone screening interview: “Are you, alone or with others, now trying to start a new business?” Nascent founders were assigned NI status if they answered yes to the following screening question: “Are you, alone or with others, now starting a new business or new venture for your employer? An effort that is part of your job assignment?”

For those respondents that went on to complete the phone and mail portions of the survey, over 450 NE and about 70 NI were obtained. However, 46 respondents answered “yes” to both of the above screening questions, meaning that they were classified as both NE and NI. This is problematic for a study such as ours, since it is highly desirable to have “clean” samples of NE and NI for comparison purposes. Therefore, we excluded those respondents that answered “yes” to both screening questions. The sample for this study consisted of 440 NE (those that answered “yes” only to the NE screening question) and 27 NI (those that answered “yes” only to the NI screening question). Although the small NI sample size and the imbalance between NE and NI samples are concerns, it was decided to move forward with this exploratory study.

Dependent Variables

Expectations of Financial Growth. A single item in the phone interview asked, “We would like to ask about your expectations regarding the future of this new firm. First, what would you expect the total sales, revenues, or fees to be in the first full year of operation? And what about in the fifth year?” A simple percentage growth rate for the five-year period was calculated by subtracting year one from five and dividing by year one. A log transformation was performed on the growth rate in order to approximate a normal distribution to facilitate the regression analysis.

Expectations of Employee Growth—Full and Part Time. Four items from the phone interview asked the respondent to estimate the number of full and part-time employees, exclusive of the owner, expected in year one and year five. For example, we asked, “By the end of the first full year of operation, about how many full time employees, not counting owners, do you expect to be working for pay at this new business?” Expectations for full and part-time employees were summed for year one and year five and a simple percentage growth rate was calculated by subtracting year one from year five and dividing by year one.

Independent and Control Variables

Age. “What year were you born?” Age was calculated by subtracting the respondent’s birth year from 1999, the year of the survey.

Gender. Sex of the respondent was recorded by the phone interviewer as one for male and two for female.

Years of Full-Time Paid Work Experience. “How many total years of full time, paid work experience in any field have you had?”

Number of Employees. “How many people worked for this organization?”

Business Plan Formalization. “A business plan usually outlines the markets to be served, the products or services to be provided, the resources required—including money—and the expected growth and profits for a new business. Has a business plan been prepared?” A “yes” or “no” response was provided. If yes, the respondent was asked, “What is the current form—unwritten or in your head (1), informally written (2), formally prepared (3), or something else (0)?”

Perception of Environmental Uncertainty. An 11-item measure in the mail survey using a five point Likert response scale was used to assess the respondent’s perception of environmental uncertainty. This scale focused on state uncertainty (see Milliken 1987) referring to the inability of the nascent entrepreneur to understand or to predict the state of the environment due to a lack of information. The directions read, “Considering the economic and community context for the new firm, how certain are you that the new business will be able to accomplish each of the following?” The response scale was anchored by very high (5) to very low (1) including a category for “does not apply.” The items were reverse scored to be consistent with prior literature on uncertainty. A factor analysis performed by Matthews and Human (2000) found that the 11 items loaded on one of three factors which the researchers labeled as financial, competitive, and operational uncertainty.

Risk. Two items from the mail survey were used to capture the founder’s degree of risk tolerance. “Consider two types of new businesses. Assuming you are the sole owner, which situation would you prefer? (1) A business that would provide a good living, but with little risk of failure, and little likelihood of making you a millionaire, or (2) A business that was much more likely to make you a millionaire but had a much higher chance of going bankrupt. A second item asked, “I enjoy the challenge of situations that many consider ‘risky.’” The response scale was anchored by completely true (5) to completely untrue (1). In both cases, higher scores infer a greater degree of risk tolerance or risk seeking preference.

Descriptive statistics for the NE and NI groups appear in Table 1. The differences in gender, age, and experience levels are not statistically significant. A comparison of the NE and NI groups using measures of risk tolerance, perceived uncertainty, planning formality, and growth expectations appear in Table 1. Although the mean levels of only two measures were found to differ significantly (degree of business plan formalization and expected sales growth), the direction of the differences in nearly all cases were consistent with the differences proposed in P1a, P1b, P1c, and P1d, with the exception of P1b.

The correlations for the study variables appear in Table 2. Many of the correlations support our propositions concerning individual founder characteristics and growth expectations. Although measures of uncertainty were not significantly correlated to measures of growth expectations, most of the correlations were negative, which is consistent with P2b’s prediction that more uncertainty tempers growth expectations. The correlations between measures of risk tolerance and growth expectations provided some support for P2c, particularly for the relationship between preference for a risky startup and growth expectations. The significant negative relationship between business plan formalization and growth expectations supports P2d’s prediction that plan formalization tempers growth expectations.

Multiple regression with mean replacement for missing data was used to further test these relationships. Table 3 shows the regression results using expected financial growth as the dependent variables, while Table 4 shows results using expected employee growth as the dependent variable. The five regression models in both regressions depict the effects of sequentially entering groups of variables into the equation. Model 1 examines NE/NI effects; Model 2 adds the business plan formalization variable; Model 3 adds the three perceived uncertainty variables; Model 4 adds a group of demographic variables; Model 5 adds the two risk variables.

Table 3 indicates that both business plan formalization and preference for a venture-like start-up were both significantly related to expected financial growth. The significance and direction of the relationships both lend support to P2c and P2d. Although the NE/NI status variable was not significant, the regression coefficient was negative, which lends at least some support for P2a. The regression coefficients associated with the uncertainty variables provide little support for P2b, however. None of the coefficients were significant and only the coefficients associated with operational uncertainty were in the proposed negative direction. At the bottom of Table 3, note that only Model 5, the model in which the two risk variables were entered into the regression, was found to be significant (F = 2.20, p = .014).

The regression findings relative to expectations of employee growth (Table 4) were less significant. Only the risk variable related to preference for high growth venture was significant. Note, however, that the direction of relationships were consistent with the P2 set of propositions; unlike the previous model, all regression coefficients associated with the uncertainty variables were negative. Similar to the previous model, only Model 5 was found to explain a significant amount of the overall variance, albeit at a lower level of significance (F = 1.63, p = .087).

Our findings suggest that nascent intrapreneurs differ from nascent entrepreneurs and although only some of the differences were significant, in nearly all comparisons, the direction of the difference suggested that nascent intrapreneurs perceive less uncertainty, are more risk seeking, develop more formal business plans, and garner lower growth expectations than their nascent entrepreneur counterparts. The straightforward rationale for these differences can be tied to the intrapreneur’s corporate environment, which permits the intrapreneur to access more resources and structure while perhaps tempering appetite for risk and for unrealistic growth. A plausible rival hypothesis is that the individual intrapreneur has these more structured, conservative characteristics by nature, which caused the individual to select a corporate (rather than a small new start-up) environment in the first place. In reality, it is likely that both are true to some degree.

This study extends previous work that found both business plan formality and operational uncertainty as negatively related to growth expectations. (Matthews and Human, 2000) In the present study, we were able to verify the business plan formality relationship but not the uncertainty one. We introduced additional variables meant to capture the founder’s appetite for risk. Preference for ventures high in their risk/reward potential was found to be significantly related to growth expectations—this variable also contributed the most explained variance to overall models of growth expectations as well. Although the risk:reward axiom has been well articulated, we have rarely seen formal work that validates it in the context of the nascent founder.

There are limitations with this study that should be noted. The most visible one relates to the relatively small size of nascent intrapreneurs (n = 27), and to the large imbalance of nascent entrepreneurs to intrapreneurs (about 16 to 1). Both of these deficiencies make the statistical inferences of this study tenuous. The less visible but equally troublesome limitation of this study was obtaining “clean” samples of entrepreneurs and intrapreneurs themselves. In a comparison study of entrepreneurs and intrapreneurs, we want to make sure that we have samples that are as pure as possible to ensure that we are able to detect differences. Further research in this area should consider forced samples from the intrapreneurial population to ensure the proper stock. Although this study should be considered exploratory, it constitutes one of the few formal comparisons of entrepreneurs and intrapreneurs. We are hopeful that this initial work will generate further research that should inform and benefit both the stand-alone startup and the corporate venture.

CONTACT: Charles H. Matthews, College of Business Administration, University of Cincinnati, Cincinnati, OH 45221-0165; (T) 513-556-7123; (F) 513-556-4891; charles.matthews@uc.edu

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