The Correlates of Entrepreneurship in Three Types of Firms

Abstract

Various factors have been identified as determinants of entrepreneurial behavior in firms, including leader personality, organizational structure, and strategy-making. The author argues that the manner and extent that entrepreneurship is influenced by these factors depends on the nature of the organization. Incorporating the type of firm in analysis may help to explain contradictory findings among prior studies. A tripartite typology of the firm is proposed. (1) Simple firms are small, and their power is centralized at the top. (2) Planning firms are bigger; their goal is smooth and efficient operation through formal controls and plans. (3) Organic firms seek to be adaptive to their environments and emphasize expertise-based power and open communication. It is hypothesized that in Simple firms, characteristics of the leader determine entrepreneurship; in Planning firms, explicit and well-integrated product-market strategies determine entrepreneurial activities; and in Organic firms, environment and structure determine whether entrepreneurial behavior is undertaken. The predictiveness of the typology was validated by data from interviews with 52 firms in Montreal, Canada, representing a range of industries and firm sizes. Analysis also largely supported the hypotheses concerning firm behavior. Concludes that any program to stimulate entrepreneurship must take into account the type of firm targeted. (TNM)

Keywords: Organizational structure, Firm characteristics, Entrepreneurial environment, Firm control, Leadership, Strategic planning, Locus of control