Employee entrepreneurship and the creation of new ventures

Employee entrepreneurship and the creation of new ventures

With ESSEC Knowledge Editor-in-chief

We tend to associate entrepreneurship with striking out on your own to create a new venture, but this isn’t always the case. Employee entrepreneurship refers to new ventures created within their parent organization, often to benefit said organization with innovative ideas. Ha Hoang (ESSEC Business School) and Markus Perkmann (Imperial College London) examined physicians in the UK National Health Service (NHS), looking at their relationship to their organization and how they transition to entrepreneurship while remaining part of the NHS. 

Employee entrepreneurship ventures can be a boon to their employers, as a source of innovation (1), wealth (2), and increased organizational learning (3, 4). We know that employee entrepreneurship is good for business - what we know less about is the journey from employee to entrepreneur. 

Examining employee entrepreneurship 

To learn more about employee entrepreneurship, the researchers studied physicians in the UK’s National Health Service (NHS) who participated in the Clinical Entrepreneurship Programme. The goal of this program was to support health professionals in pursuing their entrepreneurial dreams, with the hope of developing solutions that would benefit the NHS, but it supported the would-be entrepreneurs whether or not their project was directly linked to the NHS. 

The researchers observed the aspiring entrepreneurs over the course of the program and interviewed participants, the clinician leading the program, and mentors. Using this data and  survey data, the researchers explored key points of the venture founding process: motivation and steps taken, their relationship with the organization, and their personal goals and outlook. 

They noticed that most of the ideas aimed to solve medical or health issues: a free teleconsultation service, easier access to clinical trials, better public health education for children, and more. The employee’s orientation to their organization- how they felt about it - colored their efforts, with their orientation displaying two different facets. The first is their intentions: some participants reported an intent to innovate and create solutions to problems they’d noticed on the job, thereby improving the organization. These people wanted to take action to improve the NHS, and to identify opportunities that would allow them to do so. The second set of people displayed a close attachment to the organization, with it being a core component of their identity. These people identified with the values of the NHS and so wanted their project to improve its functioning.

Many of the aspiring entrepreneurs were driven to improve the NHS, fueled by their close affiliation with it. But it wasn’t all smooth sailing: sometimes their efforts were curtailed by their responsibilities and a lack of resources and they needed to look outside the organization to achieve their goals.

Sometimes, these budding entrepreneurs felt that their efforts were hindered by their position, feeling a mismatch between their job and their innovation goals. When people felt this mismatch, they tended to also feel dissatisfied with certain aspects of the NHS, for instance perceiving a lack of support for innovation. For example, one person noted: “...people are just putting out fires, there’s no time for improvement, there’s no time for really restructuring”. In response, many participants devoted themselves to activities outside their job description - but sometimes got pushback from colleagues who felt this was inappropriate. 

If the NHS entrepreneurs had to break free of their prescribed role, they often also had to look outside the NHS for resources and mobilize their individual network both inside and outside the organization. Along with going beyond the boundaries of their official position, this represented a move toward founding a venture outside the organization. 

This didn’t mean they wanted to cut ties entirely with the NHS - quite the opposite. Typically, the budding entrepreneurs also maintained their membership in the organization. They tended to see the NHS as a source of inspiration and knowledge, and a way to gain valuable insight for their project. They were also motivated by the advantages of being affiliated with such an established organization, advantages they could capitalize on for the good of their venture, like reputation and respect. Even aside from these benefits, people were also keen to maintain professional continuity, recognizing the risks of halting their activities and becoming a full-time entrepreneur. Though working full-time presented challenges to their entrepreneurial dreams, they tended to still pursue it in their spare time rather than fully leaving the NHS. 

This also had the advantage of letting people reflect on their job and in some cases, mold their role and their career trajectory to align with their new goals of simultaneously pursuing an entrepreneurial career alongside their career in the NHS. 

Staying close to the parent 

This desire to remain affiliated with the NHS shaped their projects, with many designed to be interconnected with the organization. This played out in a few different ways. Some innovators saw their project being deployed within the NHS, with the NHS as a customer: for example, a new system for managing medical imaging reports. Another was to create solutions for the NHS patients, like a device that would facilitate home care. A third feature was for the NHS to serve as advisors, board members, or supporters, who would counsel and endorse the venture. Finally, some envisioned the NHS as a source of referrals for the venture. Though the interdependence played out in different ways, it was common for individuals to link their project to the NHS.

What does this mean for hybrid entrepreneurship?

Hybrid entrepreneurs are those that simultaneously create a new venture and maintain their previous employment. Much of the literature has assumed that entrepreneurs remain employed for financial reasons, but this research shows that identity is also a key driver. This means that people also develop complementary ventures that could address the needs of their organization. This has valuable implications for employers seeking to encourage entrepreneurial behavior. It shows that it is possible to pursue entrepreneurship alongside employment in the parent organization. To capitalize on this, employers could develop policies to support and promote interdependent ventures that will address challenges like conflicts of interest, intellectual property, and venture governance, as well as providing resources. Together, these findings suggest that employee entrepreneurship provides a valuable pathway to more innovative organizations, and that employees are willing to align their career and venture goals to continue their organizational membership while they pursue their entrepreneurial dreams.

Further reading

Hoang, H., & Perkmann, M., “Staying close to the parent: Employee entrepreneurship and the creation of interdependent ventures”, 36th EGOS Colloquium 2020, Virtual, 1 July 2020. 

References

  1. Agarwal R., Shah S. K. (2014). Knowledge sources of entrepreneurship: Firm formation by academic, user and employee innovators. Research Policy 43(7), 1109-1133.

  2. Klepper S. (2007). Disagreements, spinoffs, and the evolution of Detroit as the capital of the US automobile industry. Management Science, 53(4), 616-631.

  3. Agarwal R., Audretsch D., Sarkar M. (2010). Knowledge spillovers and strategic entrepreneurship. Strategic Entrepreneurship Journal, 4(4), 271-283.

  4. Parhankangas A., Arenius P. (2003). From a corporate venture to an independent company: a base for a taxonomy for corporate spin-off firms. Research Policy, 32(3), 463-481.

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