Opportunity Knocks

Entrepreneurship is usually associated with struggling start-ups, not sprawling multinational enterprises. But Ivey Professor Christopher Williams says that the multinational firm is an exciting context for studying entrepreneurship. “When a firm is spread out internationally across a diverse cultural and economic landscape, opportunities will inevitably pop up,” he says.

Williams recently joined Ivey from the Amsterdam Business School. Before pursuing an academic career, he spent two decades working on innovation projects in multinational enterprises. When he reviewed the literature on international entrepreneurship, he found that it didn’t reflect the richness and vitality of his own experience.

In the last few years he has published a range of papers on the topic, using a mix of quantitative and qualitative techniques. He believes, however, that research in the field has a long way to go. “All kinds of things have happened in the world over the last decade that make it necessary to reassess what we understand about entrepreneurship in international firms,” he says.

The common thread in Williams’s research is the importance of “entrepreneurial knowledge.” In his thinking, there are two types of knowledge in multinational firms: knowledge that relates to ongoing international production activities, and knowledge about international opportunities that have yet to be exploited. Managers often have difficulty recognizing and exploiting knowledge about international opportunities. A multinational firm cannot pursue every opportunity, so managers have to make the right decisions about which ones to pursue.

Williams finds that certain conditions need to exist for building entrepreneurial knowledge. For example, some multinational firms are simply too big. In one of his studies, Williams found that size and degree of internationalization can have a negative impact on entrepreneurial orientation. This doesn’t mean that large multinationals are not entrepreneurial. But when firms are widely dispersed, they often create more entrepreneurial knowledge than they can effectively coordinate. There are ways to compensate for size, he says. Hewlett Packard, for example, restructured and divided itself into smaller chunks.

In another study, Williams looked in-depth at 20 entrepreneurial initiatives in 20 multinational firms and triangulated this with input from managers in 118 subsidiaries around the world. He found that such initiatives had a better chance of progressing where a subsidiary had a strong learning orientation and shared values with corporate headquarters. “It’s important to be willing to learn from both the local environment and other subsidiaries,” he says. “This can be a very potent combination.”

Williams recently wrote a case study on Expatica, a small on-line multinational firm that offers free services to expatriate communities in Europe. The company generates its revenues through advertising. When Expatica found itself in serious financial trouble, it improved its learning orientation, and gave more authority and autonomy to its overseas partners. “The company turned itself around by focusing its learning on the sources of opportunities in overseas markets and working more closely with the people on the ground, rather than trying to do everything centrally in-house,” says Williams.

In another research project, Williams conducted a survey of Indian software engineers who were partnering with US and European multinational firms as part of those firms’ outsourcing strategies. He found that the software engineers who had gone onshore to work and socialize within the client firm – a practice he calls “embedding” - were better able to understand its business model and innovate on its behalf. “Managers and decision makers tend to deal with other managers,” says Williams. “If we want our partners abroad to innovate for us, we need to get to the knowledge workers, those who are actually cutting the code.”

The study of the Indian software engineers also reflected the importance of bridging cultural distances. Cultural tensions and misunderstandings can be a big hindrance to entrepreneurial behaviour in subsidiaries. Managers need to develop their cultural competencies to create a more entrepreneurial environment.

In another paper, Williams explored the concept of entrepreneurial communities: informal collections of people who work together and devote time to a focal initiative. Williams believes that the idea of community underpins much of the innovation and entrepreneurship taking place internationally. “Innovation in a multinational is often enhanced by encouraging entrepreneurial communities to develop across borders and across functions,” he says. “They are the incubators for new practices.”

Every multinational enterprise has what Williams describes as entrepreneurial “blind spots” - constraints or barriers to innovation. Managers need to be able to diagnose these blind spots and put in place organizational mechanisms to help overcome them. “It may be constraints of size, or culture, or learning,” he says. “But whatever it is, diagnosis is necessary.”

Leadership is essential to building entrepreneurial capabilities, says Williams. Good leaders create an environment where entrepreneurial knowledge is conspicuous and easily accessed. They can put in place mechanisms to filter entrepreneurial knowledge and use it to make good investment decisions. “I don’t think you’ll ever hit a perfect scenario. But ultimately I do see it as a leadership challenge.”

Reprint from Ivey Business Journal
[© Reprinted and used by permission of the Ivey Business School]