With limited resources and the need for constant innovation, entrepreneurship is perceived as an important factor for assuring economic growth and development at the venture and national levels. In this conceptual paper, we focus our analysis to corporate entrepreneurship as it contributes to the innovative processes within a venture. Though corporate entrepreneurship is a quite well explored phenomenon, few efforts have been made to elaborate on the antecedents and cohesion between dynamic capabilities and corporate entrepreneurship especially for high growth economies. This paper aims to explore the role of the dynamic capabilities as the antecedent of corporate entrepreneurship and the nature of the cohesion between them. The authors model the cohesion between dynamic capabilities and corporate entrepreneurship and argue that it generates business innovations that in turn generate aggregate demand and growth of the economy.

1. Modeling Dynamic Capabilities and
Corporate Entrepreneurship for innovation focused
growth economies
Ruta Aidis
Senior Fellow, George Mason University
Senior Researcher, Kaunas University of Technology
Asta Pundziene, Vice Rector of Research, KTU
Solveiga Buoziute-Rafanaviciene, Assoc. Professor, KTU
Monika Petraite, Dean, Social Science Faculty, KTU
Sigita Neverauskaite, PhD Candidate
Evelina Meiliene, Head, Development Project Center
Center for
Entrepreneurship and
Public Policy (CEPP)

2. Objectives
• Explore how entrepreneurship and dynamic
capabilities have been quantified
• Identify the essential components
• Introduce a model and framework
Goal: To create a quantitative measurement tool
for dynamic capabilities and corporate
entrepreneurship at the firm level
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3. Outline
1. Introduction
2. Quantifying Entrepreneurship for crosscountry comparison
3. Quantifying Dynamic Capabilities for crosscountry comparison
4. Assessment, Essential Components,
Framework and Model
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4. I. Introduction
• no clear conceptual model for the
interrelationships among dynamic capabilities,
corporate entrepreneurship, innovation and
economic growth.
• Some suggest that entrepreneurial activities are
antecedents of dynamic capabilities (Lei-Yu 2007)
• Others identify dynamic capabilities as a
moderating variable for developing innovations
(Zahra, Sapienza and Davidsson 2006)
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5. Our perspective
Dynamic capabilities (DC) = creating the conditions for
the implementation of innovative practices as well as
new knowledge and concept development through
learning
Entrepreneurship = impetus to apply new knowledge and
concepts through experimentation and
institutionalization of innovations
• Within firms, dynamic capabilities are the foundations
for corporate entrepreneurship
• Which creates a double loop for organizational
learning.
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6. Our working model
Antecedent
Input
Output
Consequent
Back loop
Consequent
Corporate
entrepreneurship
Tech and
innovation based
business
Economic
growth
Analytical
system;
organizational
settings for;
Learning &
knowledge
management
Opportunity search;
recognition;
exploitation.
Innovation level:
Innovations in
model; product;
services, investment
in R&D etc.
Growth in
GDP, jobs,
demand&
supply
Antecedent
Dynamic
capabilities
Learning loop
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7. 2) Quantifying entrepreneurship:
Suitable conditions
Institutions matter for entrepreneurship
development
(Baumol, North, and others)
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8. Quantifying Entrepreneurship:
individuals
• Global Entrepreneurship Monitor (GEM)
– Total Entrepreneurship Activity (TEA)
– Entrepreneurial attitudes, activity and aspirations
• Global Entrepreneurship and Development Index
(GEDI)
-
Institutional and Individual Variables combined
Penalty for Bottleneck methodology
Brings in data from the World Bank’s Ease of Doing business Index
World Economic Forum’s Global Competitiveness Index
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9. Quantifying Entrepreneurship within
firms: Corporate entrepreneurship
Entrepreneurial Employee Activity (EEA) – GEM
• 54 countries in 2011
• EEA characteristics
– Similar to TEA: skills, opportunity, fof, know entrepreneur
– Less exposed to financial risk
– Access to additional resources
• EEA not very widespread – 5% of employees
• Most prevalent in innovation driven economies
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10. EEA in selected countries
Country
Entrepreneurial Employee
Activity (EEA)
Total Entrepreneurship
Activity (TEA)
Lithuania
3.4
11.3
Poland
2.3
9.0
Slovakia
2.7
14.2
Latvia
2.2
11.9
Denmark
9.2
4.6
Sweden
13.5
5.8
Finland
8.0
6.3
US
5.3
12.3
Germany
3.5
5.6
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11. EEA explained
• Countries with high rates of EEA tend to
–
–
–
–
–
Highly educated employees
High level economic freedom
High level of social security
‘perceived employer support’
National cultural that supports job autonomy
• Supportive internal organizational culture
• EEA is most prevalent in the private sector (2/3)
but also takes place in the public sector (1/3)
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12. Conceptualizing DC:
Teece et al (1997, 2007)
Adapting, integrating and reconfiguring internal and
external organizational skills, resources and
functional competences to match the requirements of
the changing environment
Three stages of building DC:
• Sensing
• Seizing
• Transforming
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13. Conceptualizing DC
In terms of organizational learning (March 1991)
Exploring vs. Exploiting resources
Exploring: search, variation, risk-taking, experimentation,
play, flexibility, discovery and innovation
Exploitation: refinement, choice, productions, efficiency,
selection, implementation and execution
Are inter-related activities (Zollo & Winter 2002)
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14. Quantifying Dynamic Capabilities 1
• Deeds et al (1999) 94 biotech company IPOs – firm,
environment, quality of team
• Alvarez and Merino (2003) Savings and Loans institutions in
Spain – firm & environment
• Lei-Yu Wei (2007) 200 Taiwanese high-tech firms managing resources, ability to respond, cooperative teams
• MacInerney-May (2012) 265 business units from 179 large
companies in Germany – knowledge & capability
flexible/decentralized/formalization supports DC
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15. Quantifying Dynamic Capabilities 2
Alsos, Borch, Ljunggren and Madsen (2008)
Empirically test the validity of DC conceptualized as 4 types of activities:
Internal Exploration/ Exploitation
External Exploration/ Exploration
677 innovative firms in Norway
Renamed categories:
1. External observation and evaluation
2. External resource acquisition
3. Internal resource reconfiguration
4. Internal resource renewal
Dutch study (Leliveld & Smeitink, 2013)- 99 SMEs also found that age,
education and international focus effects firm performance
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16. Entrepreneurship, Innovation and
Dynamic Capabilities Model
“Transforming”
“Seizing”
“Sensing”
Institutional
Environment
Managerial
practices
Individual-level
responses
Macro-level
factors
Firm-level
factors
Entrepreneurial
action (EEA)
External
Incentives
Internal
Incentives
•Opportunity
Recognition
•Regulatory
Environment
•Resources
•Willingness to fail
• Decentralization
•R&D
Environment
•Strategic
Alliances
•Skill &
Capabilities
•Macro-Stability
•Capabilities
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•Developing &
innovative activity
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17. Measurement dimensions
Transforming : Institutional
Environment
• R&D expenditure
• Globalization
• Business Risk
• Regulatory environment
• Social Security
• National culture (Hofstede)
• National values (World Values
Survey)
• Economic Freedom
Seizing: Organizational Culture
• Decentralization
• Flexibility
• Formalization
• Exporting/Globalization
• Internal/External
Exploring/Exploitation
Sensing: Entrepreneurial
Employee characteristics
• Opportunity Recognition
• Skills
• Willingness to Fail
• Age
• Education
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18. Conclusions
• Dynamic Capabilities are measurable
• The overall institutional environment matters
and affects DC development which in turn
affects corporate entrepreneurship
• Entrepreneurs and Entrepreneurial employees
share many similar characteristics but may
also be affected by different incentives
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19. Further steps
• Identify firm sample
• Pilot dynamic capabilities measurements
• Model development/testing/refining
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