Intrapreneurship and Corporate Venturing 385agers of a corporation the freedom to take initiative and try new ideas. It is entrepre-
neurship within an existing business. It goes by a number of different names, depend-
ing upon which academic is speaking or about which company. We will use the terms
corporate entrepreneurship, corporate venturing, and internal corporate ventures
(ICV)interchangeably with intrapreneurship.
The Need for Intrapreneurship
Why do existing businesses allow this internal entrepreneurship and encourage intrapre-
neurial efforts?^5 Christenson, in the Innovator’s Dilemma^6 persuasively argues that the
reason for intrapreneurship is the heavy pressure on top corporate managers to generate
continued growth. As a successful corporation fills in its niches and its products mature,
the growth of the company inevitably slows. Investors are not happy about slowing
growth, even in a profitable and stable company, because corporate market values
depend most heavily on the prospects for future earnings. But with saturated markets
and mature products room for growth is limited. So executives must decide to do some-
thing new—but what? That question will be addressed later.
While the growth motive may be dominant in today’s market environment, it is not
the only motive for corporate venturing. Intrapreneuring also is motivated by the gen-
eral recognition that the macroenvironment and the marketplace change much faster
than a corporate bureaucracy can. Intrapreneurship provides large corporations the op-
portunity to adapt to the increasingly dynamic, hostile, and heterogeneous environment
businesses face today.^7 Consider Johnson & Johnson. This company originally made its
mark with consumer products like baby oil, powder, and aspirin. These are now mature
products so J&J must look elsewhere for growth in order to continue to please Wall
Street, earn its typical 15 percent return on equity, and maintain its annual sales growth
of 8-10 percent.
To accomplish these goals J&J has done two things. First, it has tried to reinvent the
way it invents and innovates by creating some autonomous units and encouraging its
managers to brainstorm. For example, in 2006 the managers of a small J&J unit,
Ethicon Endo-Surgery, began to design a new and better surgical clip. A team of engi-
neers and scientists scoured the nation and the globe for every type of clip they could
find and brought them back to a large research and development office outside
Cincinnati. Free of corporate control and oversight, the team set out to design a new
clip.^8
But J&J did not stop there. It went on a corporate buying spree to grow its increas-
ingly important medical devices business. In 2006 it made a failed attempt to purchase
Guidant Corporation, the most important manufacturer of surgical stents. Wall Street
punished this failure by driving the stock price down. Top management responded by
using the corporation’s $16 billion war chest to make acquisitions, because internal ven-
turing cannot keep up the growth needed to placate “the Street.”^9
Corporate entrepreneurship also enables the corporation to diversify from its core
business through internal processes. Many companies are averse to trying new technolo-
gies and products that were “not invented here.” Diversification by acquisition (like
J&J) and merger is often risky, with the corporation overpaying for an acquisition
(known as Winner’s Curse) or merging with a partner that does not share its goals and