Executive Interviews: Interview with Philip Anderson on Corporate Entrepreneurship
April 2007 - By Dr. Nagendra V Chowdary

Philip Anderson
INSEAD Alumni Fund Professor of Entrepreneurship at INSEAD, in Singapore.
He is also director of the 3i Venture lab.

• From your extensive research on entrepreneurship, are there specific patterns that you have noticed as regards the nation specific, industry specific, economic developmentstage specific, etc.? For instance, Americans are supposed to be having higher entrepreneurial quotient; some industries have seen more entrepreneurial ventures than other industries.
  The two biggest national factors are culture and regulation. In the US it is prestigious to be an entrepreneur; in many other countries it has been less so. For example, in India working for the government or for a large firm such as Hindustan Lever has been for many years a prestigious thing to do. Only recently have we seen graduates of top places like IITs or IIMs choose the entrepreneurial path. Some very successful MNC Managing Directors, such as Srini Rajam of Ittiam (formerly MD of Texas Instruments India) are also choosing this path and acting as role models. With respect to regulation, bankruptcy is not so damaging and has less stigma in the US than in most places. In many European countries, for example, your life is ruined if you ever become bankrupt, so people are understandably very risk averse about starting new enterprises. With respect to industry, the three key factors are barriers to entry (particularly the amount of capital needed to launch a business); cycle time to first sale (for example, very long if you are selling to government or regulated customers); and the availability of a pool of talented people to be VP of marketing, VP of business development, CFO, CTO, and so on.

• What are your research insights from entrepreneurial culture in family businesses across the generations? For instance, in Nordstrom, Estee Lauder, Walgreens etc? Are there any specific trends?
  Few family businesses survive two generations. Founders usually have very strong personalities, which makes it difficult for children to follow in their footsteps. When that happens, it is usually because the parents give their children great freedom to do what they like. For example, Shyam Bhartias father started a textile business in Calcutta, but encouraged his son to start Jubilant Organosys. Mr. Bhartias son in turn has started a hypermarket chain with the encouragement of his father and of his mother, who is the editorial director of the Hindustan Times.

• Corporate entrepreneurship, the best at the moment, is a high sounding word for the most. Or is it that its just a new found jargon on the block? What's corporate entrepreneurship all about? What are its unique features?
  It can mean different things; to some it just means that employees behave as if they owned their departments. At INSEAD, we study firms that start new organizations inside existing companies. Sometimes an innovation fits an existing business well. Other times, a company does something so new from its perspective that it is a better idea to start a new organization inside the enterprise, one that is configured from the start to suit the new line of business. That is the essence of corporate entrepreneurship. The more innovative a company is, the more relevant corporate entrepreneurship is. When corporations try to start new lines of business, they fail more often for organizational reasons than for technical or market issues. This is why thinking through how to organize a business unit around an innovation is so vital.

• Building a new venture within the walls of an established corporation is a decidedly unnatural act. So perhaps it is unsurprising that any corporation presented with lower hanging fruit that is, growth opportunities that are less difficult to capture would naturally seek to avoid the risk and complexity of entrepreneurship. If stock markets demanding growth and profitability expectations can be met any other way, why bother? Why should a corporation risk a significant portion of its earnings on a risky new venture? When would a corporation risk a new venture, especially when the going is good?
  Because it wants to do something valuable that does not fit one of its existing subunits. For example, when Apple wanted to start a music distribution company (iTunes), it made strategic sense but there was no Interview 4 organization within Apple that had the right culture, people, incentives, etc. In such cases it is necessary to set up a new venture. Its far less risky to do that than to ask a business that was not set up to be a music distribution business to take on a line of business that doesnt fit it well.

• What are the different forms (schools) of corporate entrepreneurship? What is the appropriateness of each of those forms?
  Basically there are three. First, some firms acquire smaller, entrepreneurial ventures and grow them. Second, some firms have a formal corporate venturing unit that deliberately sets up new ventures for growth. Thermo Electron in the US is perhaps the most famous example. Third, some firms only set up a company within a company infrequently, when they launch a sufficiently new line of business. The first is appropriate when the parent culture fits the acquisition well or when the logic of an acquisition is to consolidate a consolidated sector. The second is appropriate for highly innovative firms with employees who value freedom and are willing to take risks. The third is appropriate for the majority of companies, who do not often create new lines of business that dont fit the existing organization chart.

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