390 ENTREPRENEURSHIP
levels of management, and often all levels must approve the use of company resources
for the intrapreneurial venture. Rules, procedures, and processes slow down decision
making at the very time it should be expedited. A recent study shows that one way to
structure an intrapreneurial effort for success is through a “loosely coupled system.” The
internal venture requires independence and limited contact with the corporate host.^20
Sometimes the new venture threatens another of the company’s products, and the
incumbent product managers put up resistance. There are also opposing requests for
corporate resources, and resources devoted to the new venture are diverted from estab-
lished products and markets. Often people do not wish to change their orientations,
goals, and behaviors to do the things necessary to implement change. The paradox here
is that the very security the large corporation provides for risk taking discourages peo-
ple from taking any risks.
There are structural impediments as well. Internal capital markets do not include the
venture capitalists who are so important to the success of new ventures. These investors
have the technical expertise, contacts, and experience initiating new ventures that most
corporate executives lack. Without venture capitalists, the investment process becomes a
capital-budgeting exercise that may fail to capture all the subtleties of entrepreneurship.
Corporations will often manage resources for efficiency and return on investment rather
than for long-term advantages.^21
In the same vein, intrapreneurs do not own the ICV. The incentives and risks are,
therefore, different from those of independent entrepreneurship. Uniformly compen-
sating everyone involved—a bureaucratic procedure—removes an important motivating
force for the ICV. The result is that the corporation either abandons projects premature-
ly or escalates commitment to projects with little chance of success.^22
Some people doubt whether true entrepreneurship can exist inside a corporation.
23
Many companies that began as entrepreneurial ventures lose their fervor and excite-
ment as they become investment-grade corporations. It is difficult to offer the rewards
of intrapreneurship without incurring the resentment of other employees and man-
agers. Shifting the major reward mechanism from status and rank to contribution to
earnings is a challenge for corporations.^24 Some companies succeed for a while in moti-
vating their brightest people to start ICVs, but because most of the rewards accrue to
the corporation, these people are almost always destined to leave and start their own
businesses.
An insightful understanding of the problems faced by corporations trying to innovate
and venture has been postulated by Christensen (1997). His book The Innovator’s
Dilemmaexplains the problems of corporate venturing. The research is far-reaching,
from the evolution of the hard-disk industry through motorcycles and variety store
retailing.
Corporate innovation takes two forms. Sustaining innovationis the incremental
process and product innovation that helps existing products grow and maintain their
market position. Disruptive innovationis change that destroys current market posi-
tions and technological competence by changing the way customers behave and relate
to the product. Corporations’ core competences have made them successful. This is what
they do. And they have core rigidities—this is what they don’t do. The core rigidities pre-