Peranan gelagat keusahawanan dalaman sebagai pembolehubah pengantaraan di dalam syarikat-syarikat perkilangan multinasional yang terpilih.
Kajian ini meneliti peranan gelagat keusahawanan dalaman di kalangan pekerja yang bertindak sebagai pemboleh ubah penyambung antara faktor-faktor dalaman dan luaran dengan prestasi organisasi. Data diperoleh daripada 155 pekerja daripada enam syarikat perkilangan yang dipilih di Lembah Klang dan Pulau Pinang, Malaysia. Keputusan regresi menunjukkan bahawa persekitaran dalaman dan luaran mempunyai hubungan positif terhadap perilaku intrapreneurial, dan (b) gelagat keusahawanan dalaman mempunyai hubungan yang sederhana ke atas prestasi organisasi. Dengan demikian, persekitaran dalaman dan luaran positif dapat mempengaruhi perilaku keusahawanan dalaman dan seterusnya meningkatkan prestasi organisasi.
Thursday, April 8, 2010
The role of intrapreneurial behaviour as mediating variable
The role of intrapreneurial behaviour as mediating variable within the selected multinational corporation manufacturing firm.
This study examines a mediated process linking intrapreneurial behaviour and organizational performance. Data were obtained from 155 employees from six selected manufacturing firms in the Klang Valley and Penang, Malaysia. Regression results reveal that (a) internal and external environment have positively relationship on intrapreneurial behaviour, and (b) intrapreneurial behaviour fully mediates the interactive effects of internal and external environment on organizational performance. Thus, the internal and external environment positively affects intrapreneurship behaviour, which in turn leads to organizational performance.
Keywords: external environment; internal environment, firm performance; intrapreneurial behaviour
In today’s dynamic environment of global competition, rapid technological innovations, short product life cycles, and demanding product customization, manufacturing firms face a high level of uncertainty caused by ongoing change. Previous research has suggested development of intrapreneurship as a strategy to deal with the more dynamic and competitive market (Zahra, 2004; Antoncic, 2007). Many believe that intrapreneurship could enable a faster and more cost-efficient response to rapid market changes. Intrapreneurship has become an effective way for gaining competitive advantage in an uncertain manufacturing environment (Lumpkin& Dess, 2005; Pinchot, 2002; Zahra, 2004; Zahra & Garvis, 2000; Goosen, 2002). Meanwhile, intrapreneurship has been promoted as necessary to improve a firm’s competitiveness and performance. In practice, intrapreneurship includes a wide range of processes or activities characterized by a tendency to act autonomously, a propensity to innovate and take risks, and a predisposition to be aggressive toward competitors, as well as proactive with regard to marketplace opportunities, to aim at new venture creation (Lumpkin and Dess, 2005).
Fisher (1989) argues that employee behaviour should be treated as the mediator between organizational policy and organizational performance. Among diverse employee behaviours, a small but steady stream of research starts to explore employees’ intrapreneurial behaviours in the workplace (e.g., Kuratko, Montagno, & Hornsby, 1990). Intrapreneurial behaviour is behaviour that employees inside organizations demonstrate in pursuing opportunities with boldness and aggressiveness (Covin & Slevin, 1991), without regard for the resources they currently control (Stevenson & Jarillo, 1990), and searching for creative or new solutions (Antoncic & Hisrich, 2000) to problems and difficulties in their work. Briefly, intrapreneurial behaviour is characterized by innovativeness, proactiveness, and constructive risk taking that employees demonstrate in accomplishing their work. However, empirical research to investigate relationships between internal organisational factor external environment and firm performance performance largely ignores employee behaviours, in particular intrapreneurial behaviour. If internal and external environment is to contribute to organizational performance, it has to foster employees’ intrapreneurial behaviour. Similarly, Antoncic (2004) assert that internal organisational factor is an organizational culture and process that most effectively creates the necessary employee behaviours for creating superior value for buyers and, thus, continuous performance. The focus on the intermediate role of employees’ behaviours will contribute to the current literature concerning the internal and external environment–performance relationship.
Figure 1
Schematic Representation of Process Linking Internal Environment, External Environment, Intrapreneurial Behaviour to Firm Performance
To address theoretical limitations, this study examines (a) the main effect of internal and external environment on intrapreneurship behaviour; (b) the main effect of intrapreneurial behaviour on firm performance. Figure 1 presents a schematic representation of the variables examined in this study.
Theory and Hypotheses
The Internal Environment–Intrapreneurial Behaviour
The extant research has focused extensively on the type of internal antecedents that could impede intrapreneurship as well as the benefits of developing intrapreneurial behaviour within corporations (Morris & Kuratko, 2002). Accordingly, the second set of predictors of intrapreneurial behaviour includes the following key internal antecedents: Management support, work discretion, reward and reinforcement, organisational resources, organisational boundaries, barriers and bureaucracies.
The rewards and reinforcement system in a firm should be structured so that it encourages intrapreneurial behavior. According to Hornsby et al. (2002) the system has to increase the motivation of employees to act intrapreneurially. In order to encourage intrapreneurial behaviour, the reward system should consider “goals, feedback, emphasis on individual responsibility and results-based incentives” (Hornsby et al.2, 2002). According to Zahra (2004), rewards for intrapreneurial behaviour are not only financial. More challenges, responsibility and recognition (Hornsby et al., 2002) as well as more autonomy or budget (Christensen, 2005) are also of influence on the intrapreneurial behaviour of individuals.
The process of incubating and implementing ideas requires time. The company should make it possible for the employee to make time free for these activities and to work on long term problem solving besides his short term goals (Hornsby et al., 2002). Employees should feel that they really have time available for these actions (Kuratko et al., 2005). Originally, based on their previous literature study, Kuratko and Hornsby also pointed to the importance of other resources but time which encourage intrapreneurial behaviour (Kuratko et al., 2005). Easy accessibility to resources, such as funds, makes it easier to experiment and take risks (Hornsby et al., 2002).
In order to enable and encourage intrapreneurial behaviour, the management should adopt a policy that facilitates and promotes such activities in the firm (Hornsby et al., 2002). The management policy should result in employees believing that innovation and intrapreneurial behaviour take a permanent part of their role in the organization (Hornsby et al., 2002). The management should create an intrapreneurial culture in the firm, in which employees have the facilities and backup of the management to innovate and show intrapreneurial behaviour. Examples of the forms that management support can take are “quick adoption of employee ideas, recognition of people who bring ideas forwards, support for small experimental projects, and seed money to get projects off the ground” (Hornsby et al., 2002).
Intrapreneurial behaviour is influenced by the extent to which employees are allowed to make decisions themselves regarding how to perform their work (Hornsby et al., 2002). Employees should feel a certain amount of autonomy when working on their job because when they are only expected to follow prescribed work methods, there is no space or need for them to come with their own ideas and improvements. An important part of the autonomy/work discretion factor is the ability of employees to take risks. In the original factor classification (see table 2.1 above) risk taking is even put aside as a separate factor. Both employees and management should accept taking risks by the shop floor and tolerate possible failures (Kuratko et al., 2005). Employees should be allowed to experiment and learn from their mistakes and failures.
Organizational boundaries, real and imaginary, should be eliminated, so that employees can look at the organization in a broad perspective. They should be able to look also at problems which do not only involve their own job (Hornsby et al., 2002). The organizational structure should be supportive for intrapreneurial behaviour (Hornsby et al., 2002). Among other things, it has to facilitate knowledge and resources sharing across the firm (Christensen, 2005). Also in this context it is important that the employee is not only restricted to following standard working procedures (Hornsby et al., 2002).
Hornsby et al. (2002) synthesized these internal antecedents to five factors. These authors concur that while the literature illustrates a wide variety of intrapreneurial behaviour factors, there are a few elements that are consistent throughout the texts in this field, namely management support for innovation, work discretion and autonomy, rewards, resource and time availability and flexible organizational boundaries. This discussion forms the basis of the first hypothesis.
Hypothesis 1: Internal environment is positively related to intrapreneurship behaviour.
The External Environment–Intrapreneurial Behaviour
Various researchers have identified intrapreneurial behaviour as an employees-level response to environmental conditions (Antoncic, 2003; Zahra, 2004). A further distinction can be drawn between environmental conditions that are favourable, or munificent, and those that are unfavourable, or hostile.
Environmental munificence can be seen as a multidimensional concept that includes dynamism, technological opportunities, industry growth and the demand for new products (Zahra, 2004). Dynamism refers to perceived instability and continuing changes in the firm's markets. Increased dynamism can be viewed as being conducive to the pursuit of intrapreneurship because it tends to create opportunities in a firm's markets (Zahra, 2004). Organizations often respond to challenging conditions found in dynamic or high-tech environments by adopting an intrapreneurial posture Heinonen, 2005). Changes in industry competitive structure and the underlying technologies are also thought to influence intrapreneurial behaviour among employees (Harrington, 2001). Two other munificent environmental characteristics are perceived industry growth and increased demand for new products.
Thompson and Strickland (2006) suggested that the perceived decline of an industry would push companies into increased renewal activities. Growth markets, on the other hand, offer opportunities that lead to increased intrapreneurial activities. Accordingly, high market growth has been postulated as being related to corporate start-up success (Goosen, 2002). Demand for new products also presents an important market-pull (Zahra, 2004) that encourages intrapreneurship. Therefore, it is expected that dynamism, technological changes, industry growth and the demand for new products will be positively related to intrapreneurial behaviour.
Environmental hostility has been found to be related to the intrapreneurial behaviour of successful small firms (Covin, Green, & Slevin (2006). Hostility tends to create threats for the organization, and these threats stimulate the pursuit of intrapreneurial behaviours (Zahra, 2004). Two hostile environmental conditions that appear to affect intrapreneurship are unfavourable change and competitive rivalry. Unfavourable change refers to the extent to which ongoing developments in various components of the environment are perceived as unfavourable to a company's goals and mission, whereas competitive rivalry refers to the intensity of competitive threats (Zahra, 2004). The above research forms the basis of the second hypothesis.
Hypothesis 1: External environment is positively related to intrapreneurship behaviour.
The Mediating Role of Intrapreneurial Behaviour
We contend that intrapreneurial behaviour may mediate the relationship between internal and external environment and organizational performance. Firms adopting a intrapreneurial culture will tend to foster intrapreneurship behaviour. Intrapreneurial behaviour involves the proactive pursuit of creative or new solutions to challenges confronting them (Antoncic & Hisrich, 2000). Intrapreneurs are not satisfied with the status quo, work to better satisfy customers’ needs, and promote organizational performance. Employees who fail to display intrapreneurial behaviour are likely to be slower to react to external threats and more likely to miss emerging opportunities (Antoncic & Hisrich, 2000). Empirical research supports a positive relationship between intrapreneurial behaviour and firm performance (Antoncic & Hisrich, 2007). Thus, the above argument suggests that a internal and external environment contributes to intrapreneurial behaviour, which in turn contributes to firm performance. This study, therefore, propose the following hypotheses:
Hypothesis 3: Intrapreneurial behaviour mediates the interactive effects of internal and external environment on firm performance.
Type of Study
This study was an explanatory study of intrapreneurial behaviour in selected manufacturing firm in Malaysia. A cross-sectional survey was used to determine how the independent variables influence the intrapreneurial behaviour within manufacturing sectors in Malaysia. A survey design allows for the collection of a large volume of data from a sizeable population in a highly economical way. Mail surveys in particular can be used to collect data from a substantial number of geographically dispersed respondents. These surveys were conducted after identifying the key informant in each firm.
The Population and Sample
Six manufacturing firm from Klang Valley and Penang were selected to be included in the sample to serve as a ‘known group’ sample. It was mutually agreed that no mention of individual or organization names would be mentioned in the research to ensure confidentiality of the organizations involved. Therefore the organizations shall be referred to as Company A, Company B, Company C, Company D, Company E, and Company F in all further discussions. A brief description of each company is discussed below, including the response rates yielded from each company.
The survey was administered to respondents consisted managers and non-managers position in a selected corporation. This corporation was selected for this study because it is comprised of six physically separate companies located in different states. The six companies were different in a number of ways, such as the number of years in operation in Malaysia, and size employees provided. Company A from Germany and has been operating for more than 5 years, Company B from Taiwan and has been operating for more than 5 years. Company C from Japan and has been operating for 2-5 years. Company D from Great Britain and also has been operating for 2-5 years. Company E from United States and has been operating for 2-5 years. Company F from Italy and has been operating more than 5 years. The six companies were manufacturing-based companies of different types of product such as electronic, car, car components and car accessories.
The total number of people employed by the six companies is 1101. Each employee was invited to voluntarily participate in the study by filling out a 20 minute survey. Employee confidentiality was maintained in that no personally identifiable information was collected and any groups of 10 or fewer respondents, when stratified based on demographic data, were incorporated into the next closest strata. A total of 155 employees, or 14.1% of the population, responded to the survey. The population and sample data are shown in Table 4.1.
Table 1: Population and Sample Sizes by Company
MNC Company State Population Sample Response rate
Company A (Germany) Penang 180 33 18.3%
Company B (Taiwan) Penang 131 22 16.8
Company C (Japan) Klang Valley 117 33 28.2%
Company D (United Kingdom) Klang Valley 133 14 10.5%
Company E (United States) Penang 220 29 13.2%
Company F (Italy) Klang Valley 320 24 7.5%
Total 1101 155 14.1%
The Measurement Instrument
The measurement instrument was developed to assess the internal and external environment that influence the intrapreneurial behaviour among employee within manufacturing sectors in Klang Valley and Penang, Malaysia. In order to ensure the validity and reliability of the measurement instrument, it was essential to define the key variables accurately and clearly. All items were developed by questions formulated by the researcher (based on the literature) to ensure that each variable in the measurement instrument was represented the particular variables.
Based on the pilot feedback, several items were reworded to ensure clarity. Response options of all the measures in the survey, unless otherwise indicated, ranged from 1 (strongly disagree) to 5 (strongly agree).
Confirmatory Factor Analysis (CFA)
The first step involved the establishment of measurement models using confirmatory factor analysis (CFA). The assessment of CFA model fit was based on multiple criteria that reflected statistical, theoretical, and practical considerations, as suggested by Byrne (2001). The 2 measure is the most generally reported measure of model fit. However, it should also be highlighted that the 2 statistic should not be considered in isolation because it is sensitive to both sample size and the degrees of freedom in the model and can lead to the rejection of too many models (Raykov, 1998). Byrne (2001) suggests that other goodness-of-fit statistics should also be taken into account when determining the model fit, which "take a more pragmatic approach in the evaluation process" (p. 81) including Chi square/degree of freedom ( /df), Goodness-of-fit (GFI), Tucker Lewis Index (TLI), Comparative Fit Index (CFI) and Root Mean-Square Error of Approximation (RMSEA). Having said that, Steiger (1990) argues that the RMSEA has recently been recognised as one of the most informative criteria in covariance structure modeling, and it takes into account the error of approximation in the population Similarly, Byrne (2001) suggests that RMSEA is one of the most informative indices of model fit because it takes into account the error of approximation in the population, has a less stringent requirement on 2 , and is less sensitive to the number of sample and parameters in the model. In view of Byrne's (2001) pragmatic approach in determining model fit, a set of goodness of fit indices were observed including , /df, GFI, TLI, CFI, and RMSEA to assess the model fit in this study. The recommended fit indices are summarised in Table 2 below.
Table 2
Goodness of Fit Criteria to Determine Model Fit
Goodness of fit criteria Type Acceptable Recommended values Interpretation
Chi-square Model fit p > .05 Non-significance means the model fits the observed covariances and correlations.
Chi-square/df (CMIN/DF) Absolute Model Parsimony Less than 3.0 Less than 2.0 Values 0 indicates poor model fit. Values ranging from 2.0 to 3.0 signify mediocre fit
Goodness-of-fit (GFI) Absolute Fit 0 (no fit) 1 (perfect fit) Greater than 9.0 Value 0 indicates poor model fit and value more than 0.90 indicates good model fit.
Comparative Fit Index (CFI) Incremental Fit 0 (no fit) to 1 (perfect fit) Greater than 0.90 Value 0 indicates poor model fit and value more than 0.90 indicates good model fit.
Tucker-Lewis (TLI) Incremental Fit 0 (no fit) to 1 (perfect fit) Greater than 0.90 Value 0 indicates poor model fit and value more than 0.90 indicates good model fit.
Root Mean-Square Error of Approximation (RMSEA) Absolute Fit 0 to 1 Less than 0.08 Values less than .05 indicate good model fit. Values ranging from .05 to .08 indicate acceptable fit. Values above .08 to .10 indicate mediocre fit. Values more than .10 indicate poor fit.
Sources: Byrne (2001), Hair et al. (2006), and Kline (2005).
Intrapreneurial behaviour. An 28 item scale was used to measure employees’ intrapreneurial behaviour. Employees were asked to comment on their own intraprenrial behaviours with regard to (a) their innovativeness, such as their accountability for implementing innovations and using mistakes as a source of learning, (b) their proactiveness, such as taking action before approval and acting as owners, and (c) their constructive risk taking, such as accepting mavericks. The fit indexes fell within an acceptable range ( =.229, df = 2; p=.892; /df=.114; GFI=.999; CFI=1.000; TLI=1.054; RMSEA = 0.00). The scale’s alpha reliability is 0.78.
Internal Environment. An 30 item scale was used to measure internal environment. Employees were asked to comment on the internal organizational characteristics with regard to (a) reward, (b) management support (c) resource and time availability, (d) autonomy, and (e) organizational boundaries. The fit indexes fell within an acceptable range ( =3.548, df = 2; p=.060; /df=3.548; GFI=.991; CFI=.998; TLI=.981; RMSEA = 0.10). The scale’s alpha reliability is 0.78.
External Environment. An 23 item scale was used to measure external environment. Employees were asked to comment on the external environment of their organization with regard to (a) dynamism, (b) technologies changes, (c) demand for new product, (d) unfavourable change and (e) competitive rivalry. The fit indexes fell within an acceptable range ( =.357, df = 2; p=.550; /df=.357; GFI=.999; CFI=1.000; TLI=1.004; RMSEA = 0.00). The scale’s alpha reliability is 0.78.
Firm performance. Self-reported indicators were used to measure firm performance. Self-reported subjective performance measures were used because of the difficulty in obtaining objective measures, correlations between subjective and objective measures, and use of subjective measures in prior similar studies (Matsuno et al., 2002). Employees were asked to compare their firm with other firms. Two subscales of nine items each were used to assess firm performance perception on a 5-point scale (1 = strongly disagree and 5 = strongly agree). The fit indexes for the one-factor model fell within an acceptable range ( =2.177, df = 2; p=.337; /df=1.089; GFI=.994; CFI=.999; TLI=.995; RMSEA = 0.024). The scale’s alpha reliability is 0.87.
Data Analysis
Confirmatory factor analysis (CFA) was conducted using AMOS 16 to examine the distinctiveness of our study variables. These variables are internal environments, external environment, intrapreneurship behaviour, and firm performance. The fit of the hypothesized four-factor model was compared to a series of nested alternative models. As shown in Figure Table 2, the hypothesized (baseline) four-factor model showed good fit indices (χ2 = 0.020; RMSEA = 0.00; CFI = 1.000; TLI = 1.059) and yielded a significantly better fit to the data relative to model. The CFA results indicate support for the hypothesized four-factor model and the construct distinctiveness of the variables. To test the hypotheses of the study, regression analyses were conducted following procedures recommended for testing mediated moderation models (Baron & Kenny, 1986; Muller, Judd, & Yzerbyt, 2005).
Figure 2
SEM for Internal Environment, External Environment, Intrapreneurial Behaviour to Firm Performance
Results
In Figure 2 (constructed in AMOS 16.0 with standardized values) it is shown that the external environment construct has a higher influence (0.52) on the intrapreneurial behaviour than the internal organizational factors constructs (0.38). These findings find that intrapreneurial behaviour construct has a high influence (0.42) on the firm performance than the external environment (-0.37). The internal and external environment have indirect effect on firm performance with the construct of intrapreneurial behaviour as the mediating variable. This finding also suggests that that the intrapreneurial behaviour is a construct that could be managed and improved by focusing on the internal antecedents of management support, rewards for intrapreneurial behaviour and allowing employees to have work discretion and to function autonomously.
Table 3 provides a summary of the standardized and standardized parameter estimates and t-values for the various paths in the SEM of the model shown in Figure 2 obtained in the AMOS 16.0 program.
Table 3
A summary of the dimensions and model estimates of the structural equation model for the influence of the internal antecedents and external on intrapreneurial behaviour
Estimate S.E. C.R. P
Intrapreneurial behaviour - Internal antecedents 1.402 .229 6.121 ***
Intrapreneurial behaviour - External antecedents .558 .067 8.388 ***
Firm Performance - External antecedents -.305 .072 -4.240 ***
Firm Performance - Intrapreneurial behaviour .324 .068 4.804 ***
The multiple fit indices of the SEM for intrapreneurial behaviour influenced by the internal antecedents and munificence, compared with recommended guidelines, are shown in Table 6.15. Because some of the fit indices evaluate different aspects of fit, it is important to evaluate fit based on multiple fit statistics, so that judgments will not be an artefact of analytical choice (Grimm & Yarhold, 2000).
Examining the multiple fit indices in Figure 2, the modified SEM model showed good fit. The overall model achieved a value of 1.00 for the Joreskog GFI, which meets the threshold of 0.90. The values for CFI, and TLI were 1.000, and 1.059 respectively. These values exceed the recommended threshold of 0.90. Finally, the RMSEA value of the overall model was 0.00, which is below the recommended threshold value of being below 0.05 to 0.10 (Hair et al., 2006). To summarise, all the fit indices indicated exceed the recommended guidelines for good fit and, therefore, it could be concluded that the model reflects good measurement and statistical fit.
In summary, a structural equation model was defined to assess the relationships between the internal antecedents and external antecedents, with the intrapreneurial behaviour and firm performance. The model showed significant parameter estimates and acceptable fit indices, compared with recommended guidelines. The implication of the SEM model is that the intrapreneurial behaviour can be managed through management of the internal antecedents (management support, rewards, time availability organizational boundaries and autonomy).
Discussion
This study examines the mediated process of the relationship between intrapreneurial behaviour and organizational performance. The study yields several empirical findings. First, the results suggest that intrapreneurial behaviour is positively related to firm performance. Second, the results support our contention that internal and external environment is positively related to intrapreneurship behaviour.
One of the important finding in this study is the relationship between intrapreneurial behaviour and firm performance. The intrapreneurial behaviour has strong relationship with firm performance in terms of growth and profitability. This finding is mirrors other studies shows that intrapreneurial behaviour have positive effects on firm performance and success in terms of growth, and profitability. Although empirical research with large samples on intrapreneurial behaviour is still limited, empirical results so far support this statement (Antoncic, 2007). In one of the largest and most recent studies done so far— among 477 Slovenian firms— Antoncic and Hisrich (2004) show empirically that intrapreneurial behaviour has positive influence on profitability and growth of firms. The relationship between intrapreneurial behaviour and these three factors is strong and significant. In a different study which adds firms from the United States, Antoncic (2007) shows that intrapreneurial behaviour is positively related to firm growth and partly to profitability.
The overall outcomes of intrapreneurial behaviour were of interest to the study in the manufacturing sector. Does intrapreneurial behaviour actually achieve positive and significant outcomes for manufacturing organization? The results of this study suggest they do; the outcome measure for organization impact was found to be significant and highly positive. Regardless of the size of the organization, intrapreneurial behaviour are viewed by various manager and non-manager in the organization as having important and positive outcomes for the firm performance.
The study extends research on the relationship between intrapreneurial activities and organizational performance through examining the mediated process in this relationship. This study reveals that intrapreneurship behaviour fully mediates the interactive effect of internal and external environment on firm performance. The result of the work provides new insight into the mechanisms through which internal and external environment affects firm performance.
Limitations of the study and suggestions for future research
Although the present study aimed to make a significant contribution to the body of knowledge on intrapreneurial behaviour and the influence of antecedents to intrapreneurial behaviour, certain areas still need to be explored or expanded. Based on the outcome of this research, the following limitations are stated and opportunities for future research on intrapreneurial behaviour are outlined:
Using only six firms was a limitation of this study, since it is possible that the use of more respondents from more than two states in Malaysia could have provided a different picture of the intrapreneurial behaviour. Resource limitations only allowed for data collection from one respondent per company. This study is nevertheless a step towards providing insight into the intrapreneurial behaviour of established firms in Malaysia and the influence of intrapreneurial activities, internal and external antecedents. Future research should triangulate the views of one respondent with secondary sources, or use multiple respondents on different levels of management and different departments per company.
Future research should refine the model of the antecedents' influence on intrapreneurial behaviour. The antecedents only explain 41% of the variation of the data in intrapreneurial behaviour. Future research should enhance the predictive power of the model by measuring other internal factors, such as the influence of the individual in the intrapreneurial behaviour process; the type of intrapreneurial behaviour practiced by a company; organisational culture; the value system of an organisation; and its control systems - all of which may well influence intrapreneurial behaviour.
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This study examines a mediated process linking intrapreneurial behaviour and organizational performance. Data were obtained from 155 employees from six selected manufacturing firms in the Klang Valley and Penang, Malaysia. Regression results reveal that (a) internal and external environment have positively relationship on intrapreneurial behaviour, and (b) intrapreneurial behaviour fully mediates the interactive effects of internal and external environment on organizational performance. Thus, the internal and external environment positively affects intrapreneurship behaviour, which in turn leads to organizational performance.
Keywords: external environment; internal environment, firm performance; intrapreneurial behaviour
In today’s dynamic environment of global competition, rapid technological innovations, short product life cycles, and demanding product customization, manufacturing firms face a high level of uncertainty caused by ongoing change. Previous research has suggested development of intrapreneurship as a strategy to deal with the more dynamic and competitive market (Zahra, 2004; Antoncic, 2007). Many believe that intrapreneurship could enable a faster and more cost-efficient response to rapid market changes. Intrapreneurship has become an effective way for gaining competitive advantage in an uncertain manufacturing environment (Lumpkin& Dess, 2005; Pinchot, 2002; Zahra, 2004; Zahra & Garvis, 2000; Goosen, 2002). Meanwhile, intrapreneurship has been promoted as necessary to improve a firm’s competitiveness and performance. In practice, intrapreneurship includes a wide range of processes or activities characterized by a tendency to act autonomously, a propensity to innovate and take risks, and a predisposition to be aggressive toward competitors, as well as proactive with regard to marketplace opportunities, to aim at new venture creation (Lumpkin and Dess, 2005).
Fisher (1989) argues that employee behaviour should be treated as the mediator between organizational policy and organizational performance. Among diverse employee behaviours, a small but steady stream of research starts to explore employees’ intrapreneurial behaviours in the workplace (e.g., Kuratko, Montagno, & Hornsby, 1990). Intrapreneurial behaviour is behaviour that employees inside organizations demonstrate in pursuing opportunities with boldness and aggressiveness (Covin & Slevin, 1991), without regard for the resources they currently control (Stevenson & Jarillo, 1990), and searching for creative or new solutions (Antoncic & Hisrich, 2000) to problems and difficulties in their work. Briefly, intrapreneurial behaviour is characterized by innovativeness, proactiveness, and constructive risk taking that employees demonstrate in accomplishing their work. However, empirical research to investigate relationships between internal organisational factor external environment and firm performance performance largely ignores employee behaviours, in particular intrapreneurial behaviour. If internal and external environment is to contribute to organizational performance, it has to foster employees’ intrapreneurial behaviour. Similarly, Antoncic (2004) assert that internal organisational factor is an organizational culture and process that most effectively creates the necessary employee behaviours for creating superior value for buyers and, thus, continuous performance. The focus on the intermediate role of employees’ behaviours will contribute to the current literature concerning the internal and external environment–performance relationship.
Figure 1
Schematic Representation of Process Linking Internal Environment, External Environment, Intrapreneurial Behaviour to Firm Performance
To address theoretical limitations, this study examines (a) the main effect of internal and external environment on intrapreneurship behaviour; (b) the main effect of intrapreneurial behaviour on firm performance. Figure 1 presents a schematic representation of the variables examined in this study.
Theory and Hypotheses
The Internal Environment–Intrapreneurial Behaviour
The extant research has focused extensively on the type of internal antecedents that could impede intrapreneurship as well as the benefits of developing intrapreneurial behaviour within corporations (Morris & Kuratko, 2002). Accordingly, the second set of predictors of intrapreneurial behaviour includes the following key internal antecedents: Management support, work discretion, reward and reinforcement, organisational resources, organisational boundaries, barriers and bureaucracies.
The rewards and reinforcement system in a firm should be structured so that it encourages intrapreneurial behavior. According to Hornsby et al. (2002) the system has to increase the motivation of employees to act intrapreneurially. In order to encourage intrapreneurial behaviour, the reward system should consider “goals, feedback, emphasis on individual responsibility and results-based incentives” (Hornsby et al.2, 2002). According to Zahra (2004), rewards for intrapreneurial behaviour are not only financial. More challenges, responsibility and recognition (Hornsby et al., 2002) as well as more autonomy or budget (Christensen, 2005) are also of influence on the intrapreneurial behaviour of individuals.
The process of incubating and implementing ideas requires time. The company should make it possible for the employee to make time free for these activities and to work on long term problem solving besides his short term goals (Hornsby et al., 2002). Employees should feel that they really have time available for these actions (Kuratko et al., 2005). Originally, based on their previous literature study, Kuratko and Hornsby also pointed to the importance of other resources but time which encourage intrapreneurial behaviour (Kuratko et al., 2005). Easy accessibility to resources, such as funds, makes it easier to experiment and take risks (Hornsby et al., 2002).
In order to enable and encourage intrapreneurial behaviour, the management should adopt a policy that facilitates and promotes such activities in the firm (Hornsby et al., 2002). The management policy should result in employees believing that innovation and intrapreneurial behaviour take a permanent part of their role in the organization (Hornsby et al., 2002). The management should create an intrapreneurial culture in the firm, in which employees have the facilities and backup of the management to innovate and show intrapreneurial behaviour. Examples of the forms that management support can take are “quick adoption of employee ideas, recognition of people who bring ideas forwards, support for small experimental projects, and seed money to get projects off the ground” (Hornsby et al., 2002).
Intrapreneurial behaviour is influenced by the extent to which employees are allowed to make decisions themselves regarding how to perform their work (Hornsby et al., 2002). Employees should feel a certain amount of autonomy when working on their job because when they are only expected to follow prescribed work methods, there is no space or need for them to come with their own ideas and improvements. An important part of the autonomy/work discretion factor is the ability of employees to take risks. In the original factor classification (see table 2.1 above) risk taking is even put aside as a separate factor. Both employees and management should accept taking risks by the shop floor and tolerate possible failures (Kuratko et al., 2005). Employees should be allowed to experiment and learn from their mistakes and failures.
Organizational boundaries, real and imaginary, should be eliminated, so that employees can look at the organization in a broad perspective. They should be able to look also at problems which do not only involve their own job (Hornsby et al., 2002). The organizational structure should be supportive for intrapreneurial behaviour (Hornsby et al., 2002). Among other things, it has to facilitate knowledge and resources sharing across the firm (Christensen, 2005). Also in this context it is important that the employee is not only restricted to following standard working procedures (Hornsby et al., 2002).
Hornsby et al. (2002) synthesized these internal antecedents to five factors. These authors concur that while the literature illustrates a wide variety of intrapreneurial behaviour factors, there are a few elements that are consistent throughout the texts in this field, namely management support for innovation, work discretion and autonomy, rewards, resource and time availability and flexible organizational boundaries. This discussion forms the basis of the first hypothesis.
Hypothesis 1: Internal environment is positively related to intrapreneurship behaviour.
The External Environment–Intrapreneurial Behaviour
Various researchers have identified intrapreneurial behaviour as an employees-level response to environmental conditions (Antoncic, 2003; Zahra, 2004). A further distinction can be drawn between environmental conditions that are favourable, or munificent, and those that are unfavourable, or hostile.
Environmental munificence can be seen as a multidimensional concept that includes dynamism, technological opportunities, industry growth and the demand for new products (Zahra, 2004). Dynamism refers to perceived instability and continuing changes in the firm's markets. Increased dynamism can be viewed as being conducive to the pursuit of intrapreneurship because it tends to create opportunities in a firm's markets (Zahra, 2004). Organizations often respond to challenging conditions found in dynamic or high-tech environments by adopting an intrapreneurial posture Heinonen, 2005). Changes in industry competitive structure and the underlying technologies are also thought to influence intrapreneurial behaviour among employees (Harrington, 2001). Two other munificent environmental characteristics are perceived industry growth and increased demand for new products.
Thompson and Strickland (2006) suggested that the perceived decline of an industry would push companies into increased renewal activities. Growth markets, on the other hand, offer opportunities that lead to increased intrapreneurial activities. Accordingly, high market growth has been postulated as being related to corporate start-up success (Goosen, 2002). Demand for new products also presents an important market-pull (Zahra, 2004) that encourages intrapreneurship. Therefore, it is expected that dynamism, technological changes, industry growth and the demand for new products will be positively related to intrapreneurial behaviour.
Environmental hostility has been found to be related to the intrapreneurial behaviour of successful small firms (Covin, Green, & Slevin (2006). Hostility tends to create threats for the organization, and these threats stimulate the pursuit of intrapreneurial behaviours (Zahra, 2004). Two hostile environmental conditions that appear to affect intrapreneurship are unfavourable change and competitive rivalry. Unfavourable change refers to the extent to which ongoing developments in various components of the environment are perceived as unfavourable to a company's goals and mission, whereas competitive rivalry refers to the intensity of competitive threats (Zahra, 2004). The above research forms the basis of the second hypothesis.
Hypothesis 1: External environment is positively related to intrapreneurship behaviour.
The Mediating Role of Intrapreneurial Behaviour
We contend that intrapreneurial behaviour may mediate the relationship between internal and external environment and organizational performance. Firms adopting a intrapreneurial culture will tend to foster intrapreneurship behaviour. Intrapreneurial behaviour involves the proactive pursuit of creative or new solutions to challenges confronting them (Antoncic & Hisrich, 2000). Intrapreneurs are not satisfied with the status quo, work to better satisfy customers’ needs, and promote organizational performance. Employees who fail to display intrapreneurial behaviour are likely to be slower to react to external threats and more likely to miss emerging opportunities (Antoncic & Hisrich, 2000). Empirical research supports a positive relationship between intrapreneurial behaviour and firm performance (Antoncic & Hisrich, 2007). Thus, the above argument suggests that a internal and external environment contributes to intrapreneurial behaviour, which in turn contributes to firm performance. This study, therefore, propose the following hypotheses:
Hypothesis 3: Intrapreneurial behaviour mediates the interactive effects of internal and external environment on firm performance.
Type of Study
This study was an explanatory study of intrapreneurial behaviour in selected manufacturing firm in Malaysia. A cross-sectional survey was used to determine how the independent variables influence the intrapreneurial behaviour within manufacturing sectors in Malaysia. A survey design allows for the collection of a large volume of data from a sizeable population in a highly economical way. Mail surveys in particular can be used to collect data from a substantial number of geographically dispersed respondents. These surveys were conducted after identifying the key informant in each firm.
The Population and Sample
Six manufacturing firm from Klang Valley and Penang were selected to be included in the sample to serve as a ‘known group’ sample. It was mutually agreed that no mention of individual or organization names would be mentioned in the research to ensure confidentiality of the organizations involved. Therefore the organizations shall be referred to as Company A, Company B, Company C, Company D, Company E, and Company F in all further discussions. A brief description of each company is discussed below, including the response rates yielded from each company.
The survey was administered to respondents consisted managers and non-managers position in a selected corporation. This corporation was selected for this study because it is comprised of six physically separate companies located in different states. The six companies were different in a number of ways, such as the number of years in operation in Malaysia, and size employees provided. Company A from Germany and has been operating for more than 5 years, Company B from Taiwan and has been operating for more than 5 years. Company C from Japan and has been operating for 2-5 years. Company D from Great Britain and also has been operating for 2-5 years. Company E from United States and has been operating for 2-5 years. Company F from Italy and has been operating more than 5 years. The six companies were manufacturing-based companies of different types of product such as electronic, car, car components and car accessories.
The total number of people employed by the six companies is 1101. Each employee was invited to voluntarily participate in the study by filling out a 20 minute survey. Employee confidentiality was maintained in that no personally identifiable information was collected and any groups of 10 or fewer respondents, when stratified based on demographic data, were incorporated into the next closest strata. A total of 155 employees, or 14.1% of the population, responded to the survey. The population and sample data are shown in Table 4.1.
Table 1: Population and Sample Sizes by Company
MNC Company State Population Sample Response rate
Company A (Germany) Penang 180 33 18.3%
Company B (Taiwan) Penang 131 22 16.8
Company C (Japan) Klang Valley 117 33 28.2%
Company D (United Kingdom) Klang Valley 133 14 10.5%
Company E (United States) Penang 220 29 13.2%
Company F (Italy) Klang Valley 320 24 7.5%
Total 1101 155 14.1%
The Measurement Instrument
The measurement instrument was developed to assess the internal and external environment that influence the intrapreneurial behaviour among employee within manufacturing sectors in Klang Valley and Penang, Malaysia. In order to ensure the validity and reliability of the measurement instrument, it was essential to define the key variables accurately and clearly. All items were developed by questions formulated by the researcher (based on the literature) to ensure that each variable in the measurement instrument was represented the particular variables.
Based on the pilot feedback, several items were reworded to ensure clarity. Response options of all the measures in the survey, unless otherwise indicated, ranged from 1 (strongly disagree) to 5 (strongly agree).
Confirmatory Factor Analysis (CFA)
The first step involved the establishment of measurement models using confirmatory factor analysis (CFA). The assessment of CFA model fit was based on multiple criteria that reflected statistical, theoretical, and practical considerations, as suggested by Byrne (2001). The 2 measure is the most generally reported measure of model fit. However, it should also be highlighted that the 2 statistic should not be considered in isolation because it is sensitive to both sample size and the degrees of freedom in the model and can lead to the rejection of too many models (Raykov, 1998). Byrne (2001) suggests that other goodness-of-fit statistics should also be taken into account when determining the model fit, which "take a more pragmatic approach in the evaluation process" (p. 81) including Chi square/degree of freedom ( /df), Goodness-of-fit (GFI), Tucker Lewis Index (TLI), Comparative Fit Index (CFI) and Root Mean-Square Error of Approximation (RMSEA). Having said that, Steiger (1990) argues that the RMSEA has recently been recognised as one of the most informative criteria in covariance structure modeling, and it takes into account the error of approximation in the population Similarly, Byrne (2001) suggests that RMSEA is one of the most informative indices of model fit because it takes into account the error of approximation in the population, has a less stringent requirement on 2 , and is less sensitive to the number of sample and parameters in the model. In view of Byrne's (2001) pragmatic approach in determining model fit, a set of goodness of fit indices were observed including , /df, GFI, TLI, CFI, and RMSEA to assess the model fit in this study. The recommended fit indices are summarised in Table 2 below.
Table 2
Goodness of Fit Criteria to Determine Model Fit
Goodness of fit criteria Type Acceptable Recommended values Interpretation
Chi-square Model fit p > .05 Non-significance means the model fits the observed covariances and correlations.
Chi-square/df (CMIN/DF) Absolute Model Parsimony Less than 3.0 Less than 2.0 Values 0 indicates poor model fit. Values ranging from 2.0 to 3.0 signify mediocre fit
Goodness-of-fit (GFI) Absolute Fit 0 (no fit) 1 (perfect fit) Greater than 9.0 Value 0 indicates poor model fit and value more than 0.90 indicates good model fit.
Comparative Fit Index (CFI) Incremental Fit 0 (no fit) to 1 (perfect fit) Greater than 0.90 Value 0 indicates poor model fit and value more than 0.90 indicates good model fit.
Tucker-Lewis (TLI) Incremental Fit 0 (no fit) to 1 (perfect fit) Greater than 0.90 Value 0 indicates poor model fit and value more than 0.90 indicates good model fit.
Root Mean-Square Error of Approximation (RMSEA) Absolute Fit 0 to 1 Less than 0.08 Values less than .05 indicate good model fit. Values ranging from .05 to .08 indicate acceptable fit. Values above .08 to .10 indicate mediocre fit. Values more than .10 indicate poor fit.
Sources: Byrne (2001), Hair et al. (2006), and Kline (2005).
Intrapreneurial behaviour. An 28 item scale was used to measure employees’ intrapreneurial behaviour. Employees were asked to comment on their own intraprenrial behaviours with regard to (a) their innovativeness, such as their accountability for implementing innovations and using mistakes as a source of learning, (b) their proactiveness, such as taking action before approval and acting as owners, and (c) their constructive risk taking, such as accepting mavericks. The fit indexes fell within an acceptable range ( =.229, df = 2; p=.892; /df=.114; GFI=.999; CFI=1.000; TLI=1.054; RMSEA = 0.00). The scale’s alpha reliability is 0.78.
Internal Environment. An 30 item scale was used to measure internal environment. Employees were asked to comment on the internal organizational characteristics with regard to (a) reward, (b) management support (c) resource and time availability, (d) autonomy, and (e) organizational boundaries. The fit indexes fell within an acceptable range ( =3.548, df = 2; p=.060; /df=3.548; GFI=.991; CFI=.998; TLI=.981; RMSEA = 0.10). The scale’s alpha reliability is 0.78.
External Environment. An 23 item scale was used to measure external environment. Employees were asked to comment on the external environment of their organization with regard to (a) dynamism, (b) technologies changes, (c) demand for new product, (d) unfavourable change and (e) competitive rivalry. The fit indexes fell within an acceptable range ( =.357, df = 2; p=.550; /df=.357; GFI=.999; CFI=1.000; TLI=1.004; RMSEA = 0.00). The scale’s alpha reliability is 0.78.
Firm performance. Self-reported indicators were used to measure firm performance. Self-reported subjective performance measures were used because of the difficulty in obtaining objective measures, correlations between subjective and objective measures, and use of subjective measures in prior similar studies (Matsuno et al., 2002). Employees were asked to compare their firm with other firms. Two subscales of nine items each were used to assess firm performance perception on a 5-point scale (1 = strongly disagree and 5 = strongly agree). The fit indexes for the one-factor model fell within an acceptable range ( =2.177, df = 2; p=.337; /df=1.089; GFI=.994; CFI=.999; TLI=.995; RMSEA = 0.024). The scale’s alpha reliability is 0.87.
Data Analysis
Confirmatory factor analysis (CFA) was conducted using AMOS 16 to examine the distinctiveness of our study variables. These variables are internal environments, external environment, intrapreneurship behaviour, and firm performance. The fit of the hypothesized four-factor model was compared to a series of nested alternative models. As shown in Figure Table 2, the hypothesized (baseline) four-factor model showed good fit indices (χ2 = 0.020; RMSEA = 0.00; CFI = 1.000; TLI = 1.059) and yielded a significantly better fit to the data relative to model. The CFA results indicate support for the hypothesized four-factor model and the construct distinctiveness of the variables. To test the hypotheses of the study, regression analyses were conducted following procedures recommended for testing mediated moderation models (Baron & Kenny, 1986; Muller, Judd, & Yzerbyt, 2005).
Figure 2
SEM for Internal Environment, External Environment, Intrapreneurial Behaviour to Firm Performance
Results
In Figure 2 (constructed in AMOS 16.0 with standardized values) it is shown that the external environment construct has a higher influence (0.52) on the intrapreneurial behaviour than the internal organizational factors constructs (0.38). These findings find that intrapreneurial behaviour construct has a high influence (0.42) on the firm performance than the external environment (-0.37). The internal and external environment have indirect effect on firm performance with the construct of intrapreneurial behaviour as the mediating variable. This finding also suggests that that the intrapreneurial behaviour is a construct that could be managed and improved by focusing on the internal antecedents of management support, rewards for intrapreneurial behaviour and allowing employees to have work discretion and to function autonomously.
Table 3 provides a summary of the standardized and standardized parameter estimates and t-values for the various paths in the SEM of the model shown in Figure 2 obtained in the AMOS 16.0 program.
Table 3
A summary of the dimensions and model estimates of the structural equation model for the influence of the internal antecedents and external on intrapreneurial behaviour
Estimate S.E. C.R. P
Intrapreneurial behaviour - Internal antecedents 1.402 .229 6.121 ***
Intrapreneurial behaviour - External antecedents .558 .067 8.388 ***
Firm Performance - External antecedents -.305 .072 -4.240 ***
Firm Performance - Intrapreneurial behaviour .324 .068 4.804 ***
The multiple fit indices of the SEM for intrapreneurial behaviour influenced by the internal antecedents and munificence, compared with recommended guidelines, are shown in Table 6.15. Because some of the fit indices evaluate different aspects of fit, it is important to evaluate fit based on multiple fit statistics, so that judgments will not be an artefact of analytical choice (Grimm & Yarhold, 2000).
Examining the multiple fit indices in Figure 2, the modified SEM model showed good fit. The overall model achieved a value of 1.00 for the Joreskog GFI, which meets the threshold of 0.90. The values for CFI, and TLI were 1.000, and 1.059 respectively. These values exceed the recommended threshold of 0.90. Finally, the RMSEA value of the overall model was 0.00, which is below the recommended threshold value of being below 0.05 to 0.10 (Hair et al., 2006). To summarise, all the fit indices indicated exceed the recommended guidelines for good fit and, therefore, it could be concluded that the model reflects good measurement and statistical fit.
In summary, a structural equation model was defined to assess the relationships between the internal antecedents and external antecedents, with the intrapreneurial behaviour and firm performance. The model showed significant parameter estimates and acceptable fit indices, compared with recommended guidelines. The implication of the SEM model is that the intrapreneurial behaviour can be managed through management of the internal antecedents (management support, rewards, time availability organizational boundaries and autonomy).
Discussion
This study examines the mediated process of the relationship between intrapreneurial behaviour and organizational performance. The study yields several empirical findings. First, the results suggest that intrapreneurial behaviour is positively related to firm performance. Second, the results support our contention that internal and external environment is positively related to intrapreneurship behaviour.
One of the important finding in this study is the relationship between intrapreneurial behaviour and firm performance. The intrapreneurial behaviour has strong relationship with firm performance in terms of growth and profitability. This finding is mirrors other studies shows that intrapreneurial behaviour have positive effects on firm performance and success in terms of growth, and profitability. Although empirical research with large samples on intrapreneurial behaviour is still limited, empirical results so far support this statement (Antoncic, 2007). In one of the largest and most recent studies done so far— among 477 Slovenian firms— Antoncic and Hisrich (2004) show empirically that intrapreneurial behaviour has positive influence on profitability and growth of firms. The relationship between intrapreneurial behaviour and these three factors is strong and significant. In a different study which adds firms from the United States, Antoncic (2007) shows that intrapreneurial behaviour is positively related to firm growth and partly to profitability.
The overall outcomes of intrapreneurial behaviour were of interest to the study in the manufacturing sector. Does intrapreneurial behaviour actually achieve positive and significant outcomes for manufacturing organization? The results of this study suggest they do; the outcome measure for organization impact was found to be significant and highly positive. Regardless of the size of the organization, intrapreneurial behaviour are viewed by various manager and non-manager in the organization as having important and positive outcomes for the firm performance.
The study extends research on the relationship between intrapreneurial activities and organizational performance through examining the mediated process in this relationship. This study reveals that intrapreneurship behaviour fully mediates the interactive effect of internal and external environment on firm performance. The result of the work provides new insight into the mechanisms through which internal and external environment affects firm performance.
Limitations of the study and suggestions for future research
Although the present study aimed to make a significant contribution to the body of knowledge on intrapreneurial behaviour and the influence of antecedents to intrapreneurial behaviour, certain areas still need to be explored or expanded. Based on the outcome of this research, the following limitations are stated and opportunities for future research on intrapreneurial behaviour are outlined:
Using only six firms was a limitation of this study, since it is possible that the use of more respondents from more than two states in Malaysia could have provided a different picture of the intrapreneurial behaviour. Resource limitations only allowed for data collection from one respondent per company. This study is nevertheless a step towards providing insight into the intrapreneurial behaviour of established firms in Malaysia and the influence of intrapreneurial activities, internal and external antecedents. Future research should triangulate the views of one respondent with secondary sources, or use multiple respondents on different levels of management and different departments per company.
Future research should refine the model of the antecedents' influence on intrapreneurial behaviour. The antecedents only explain 41% of the variation of the data in intrapreneurial behaviour. Future research should enhance the predictive power of the model by measuring other internal factors, such as the influence of the individual in the intrapreneurial behaviour process; the type of intrapreneurial behaviour practiced by a company; organisational culture; the value system of an organisation; and its control systems - all of which may well influence intrapreneurial behaviour.
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