individual level entrepreneurial behaviour for the SME-context

A RELATIONAL VIEW ON INTRAPRENEURIAL BEHAVIOUR
–
A social cognitive framework of
employees’ individual level entrepreneurial behaviour for the SME-context
J.-MICHAEL GASDA
University of St. Gallen
Swiss Research Institute of Small Business and Entrepreneurship (KMU-HSG)
Dufourstrasse 40a
CH-9000 St. Gallen
Switzerland
Tel.: +41 71 224 71 41
Fax.: +41 71 224 71 01
Joerg-Michael.Gasda@unisg.ch
ABSTRACT
The paper discusses a social cognitive framework of how employee´s entrepreneurial
behaviour (EB) could be influenced in SMEs. The model suggests, individual-level EB
mainly to be influenced by processes of social exchange and social learning. That means
organizational level with individual level to be conceptually linked by relationships of
exchange and learning between the employee and the organization. The employee´s
perception of the quality of these relationships is suggested to directly influence individual
level EB: the personnel´s motivation for EB can be fostered via social exchange; the
personnel´s abilities for EB might be fostered via social learning. Because of the SMEmanagement´s
fundamental influence with regard to establishing high quality relationships
with their employees, fostering EB is regarded a top-down process. To test the propositions,
an experimental study design is proposed.
Keywords: Corporate Entrepreneurship, Entrepreneurial Behaviour, Intrapreneurship,
Organisational Behaviour Micro-Foundation, SME
The author would like to thank two anonymous reviewers for their very helpful and encouraging comments
on a short version of this paper.

GENERAL TOPIC
Sustaining competitive advantages requires personnel to support the organization’s
adaptiveness via entrepreneurial behaviour (EB). At the first glance, EB seems to be of
relevance mainly with regard to the top-management´s behaviour, but the literature on
“intrapreneurship” (e.g. Pinchot, 1985) and “corporate entrepreneurship” (e.g. Guth &
Ginsberg, 1990) put emphasis on the fact that an entrepreneurial organization requires also
personnel on middle- and lower hierarchies to behave entrepreneurially. Although the
concepts of intrapreneurship and corporate entrepreneurship were originally developed
against the background of fostering employee´s EB in large organizations, also small- and
mid-sized enterprises (SMEs) might profit from their personnel behaving (more)
entrepreneurially. But even though EB has been researched for quite a long time, examining
the drives behind employee´s EB still deserves attention. This paper extends the microfoundation
of employee´s EB in the context of SMEs: I want to look at fostering (and
measuring) employee’s EB by discussing a causal individual level framework of EB.
THEORETICAL FOUNDATION
This paper discusses a social cognitive framework for analyzing the emergence of
employee´s EB within existing SMEs. In comparison to large organizations, small and midsized
organizations are usually characterized by informal institutions, flat hierarchies, and
more personal relationships (e.g. Phohl, 1997). These characteristics in mind, I combine
social exchange (Blau, 1994) considerations with social learning theory (Bandura, 1989) in a
social cognitive two-factor model: The individual´s EB is proposed to result from the
interplay of (1) personnel´s motivation and (2) abilities to act entrepreneurially. The social
processes of exchange and learning between an employee and the organization might causally
influence the individual´s EB, since these processes influence the discovery and the
exploitation of entrepreneurial opportunities at the individual level. That means, the
conceptual linking between the organizational level behaviour with the individual level
behaviour is done by the relationships of social exchange and social learning.
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The proposed relational-view model allows delineating the roles of different
hierarchical levels regarding their impact on EB: In SMEs, fostering employee´s EB is a topdown
process, mostly depending on the top-management´s influence on the employeeorganization
relationship. This relational view might be of relevance since this view provides
additionally theoretical drives of IB; usually employee’s EB is assumed to be directly driven
by structural means (e.g. supportive context) or personnel´s characteristics (e.g. traits) rather
than by relational means.
RESEARCH GAPS AND CONTRIBUTION
This paper´s perspective on EB is primarily an individual level one, whereas most studies of
the past decades explore the phenomenon of EB at the level of organizations; regarding
Corporate Entrepreneurship (CE) definitions, Sharma & Chrisman’s (1999) definition
inventory only mentions two out of 26 definitions of CE to refer to the individual level. The
focus on firm level contributions still dominates the current literature (e.g. Rauch et al., 2009;
Lumpkin, et al., 2009; Ling et al., 2008)−although there are calls for researching the
individual´s level (e.g. de Jong et al., 2011). Our framework might add to the existing
literature mainly in three aspects:
First, it further clarifies the linkage between organizational behaviour and the
personnel´s entrepreneurial behavior (Kuratko et al., 2005) by applying the theories of social
exchange and social learning. Additionally, the framework assimilates aspects of social and
economic exchange and contributes to the question, how and why trustful relational exchange
and formal transactional exchange substitute and complement each other (e.g. Klein
Woolthuis, Hillebrand, & Nooteboom, 2005) and especially, why formal transactional
exchange (like e.g. pay-for-performance contracts) do create some instances of friction in the
attempt to foster IB.
Second, the model proposes IB to be a higher-order construct of two factors (motivation
and abilities). This conceptualization of IB allows to analyze some causal drives of IB from
the employees´ point of view in the SME-context and to predict employee´s EB probability
by using established scales/items living up to the SME-context. By that, the proposed model
might add to Hornsby, Kuratko, & Zahra´s (2002) five-factor-CEAI-scale with regard to
simplifying empirical testing.
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Third, the framework puts strong emphasize on role-model behaviour of the SME´s topmanagement
with regard to influencing personnel´s motivation and abilities to act
entrepreneurially. The interplay of different hierarchical levels regarding EB is covered by
the focus of the analysis: I state the emergence of employee´s EB to be fostered by top-down
processes. If the (top-) management is not considered a role model of EB and does not
establish trustful exchange relations with the employees, individual level EB is not to
flourish. This relational view might help to understand the influence of hierarchy-levels when
analysing the impact of the environment on individual level EB (see: Hornsby et al., 2009;
Kuratko et al., 2005).
The text in hand is structured as follows: The first chapter discusses a two-factor model
of EB and draws some propositions upon this relational-view. Afterwards, methodology to
test the suggested model is presented. A conclusion with some managerial implications and a
critical review is given in the last part of the paper.
A SOCIAL COGNITIVE FRAMEWORK OF
EMPLOYEES’ INDIVIDUAL LEVEL ENTREPRENEURIAL BEHAVIOUR
FOR THE SME-CONTEXT
A causal two-factor model of intrapreneurial behaviour
Regarding the individual level, the considerations of this paper focus on salaried employees,
not being shareholders of the organisation they work for. Referring on Pinchot´s seminal
works (e.g. 1985), I regard employees´ EB as intrapreneurial behaviour (IB), which is defined
as the identification and exploitation of opportunities by individual employees to benefit the
organization (de Jong et al., 2011). By sensing and exploiting opportunities, EB changes the
company’s business model or its competitive profile. EB in a broad comprehensive term is
the innovative use of resources to pursue opportunities (e.g. Mair, 2005), “entrepreneurial”
means identifying opportunities to create future goods or services and developing innovative
approaches to exploit these opportunities (Shane & Venkataraman, 2000; Smith & Di
Gregorio, 2002) on internal or external markets by selling them at prices greater than
production costs (e.g. Schumpeter, 1934). Especially in the context of CE, sometimes the
associations with EB have notions of grand entrepreneurship (meaningful innovations, e.g.
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inventing a new product-line or entering a totally new business area (e.g. Mair, 2005). This
paper adopts a less heroic view of EB by focussing on day-to-day entrepreneurship which
means, getting usually tasks done in an entrepreneurial−that is unusual and innovative−way.
From an organizational behaviour oriented point of view, this understanding of day-today
EB is close to the concept of “discretionary work effort” (DWE), characterizing the
tendency of personnel to innovate and engage spontaneously beyond prescribed roles in order
to promote the interests of the organisation (Katz, 1964), and by that fostering CE (e.g.
Morris et al., 2007) and, in the long run, performance (e.g. Kanfer, 1992). In general, there is
no agreement how to link individual behaviour with corporate behaviour (e.g. Ireland et al.,
2009) and this is also true for the research field of CE. Therefore, the guiding research
question of this paper is:
Why do some employees behave entrepreneurially and foster CE,
while others in the same context (e.g. same organization) do not?
Literature has tried to find answers to this question by having a look on (I) the individual´s
characteristics, or (II) the organisational climate or environment, but has (III) neglected
looking at relationships between employees and the organization as causal reasons for EB.
Regarding the individual´s characteristics (I)−contrary to predictions−individual cognitive
and emotional characteristics seem not affect EB directly (e.g. Sieger, 2011). Regarding the
organizational environment (II), Hornsby et al. (2002) established a measurement of an
organization´s five key-factors for fostering EB (Corporate Entrepreneurship Assessment
Instrument, CEAI). This model consists of the following five factors, capturing an
organization’s environment for CE or–more precisely: the perception of the environment: (1)
The appropriate use of rewards, (2) the support of the top management, (3) the availability of
resources, (4) the organisational structure, supporting communication and learning, and (5)
the organisation´s tolerance for failures and risk (“boundaries”). Now, each of these five
factors has been chosen for good reasons regarding the influence on EB (see e.g. Hornsby et
al., 2002), but the causal logic behind these factors fostering EB is very sophisticated and
seems to live up more to the context of large organizations.
(III) This paper wants to contribute to the research field of CE by broaching the issue of
a micro foundation of employees´ EB in SMEs: By adopting relationships between
employees and the organization as the unit of analysis, this paper wants to discuss an
additionally theoretical foundation for employees´ EB. The variance of employees´ EB within
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the same organization might be explained by the fact that individuals judge their relationship
with their organization differently.
Ultimately fostering EB has to distinguish from other topics of management (Kanter,
1985) since this topic of management is concerned with future innovative behaviour. The
action itself remains abstract until it is performed one fine day (e.g. as a specific innovation of
performance processes). In my opinion, a consequence of EB concerning abstract future
behaviour is that fostering EB should focus on general factors, influencing behaviour in
organisations. Such general (and to a certain degree interacting) factors are “willingness” and
“ability” to behave entrepreneurially (e.g. Vroom, 1964; for a critical review of interaction
relationship, see Terborg, 1977).
By definition, entrepreneurial behaviour is self-determined acting, based on certain
abilities or skills and (intrinsic) motivation (e.g. Kanfer & Ackerman, 1989). Therefore I state
individual level EB is causally influenced by the interplay of the factor of individual´s
motivation and the factor individual´s abilities to behave entrepreneurially. In short, fostering
personnel´s EB depends on influencing the individual’s motivation and abilities. Based on
this two-factor model, I discuss a framework how abilities and willingness could be
influenced.
A relational view on intrapreneurial behaviour
The following two-factor model represents a relational point of view (see also figure 1):
theories of social exchange and social learning are applied to explain the influence on
personnel´s motivation and abilities for EB: I state the entrepreneurial behaviour at the
organization-level to influence employees´ abilities to behave entrepreneurially via processes
of social learning in case of employees´ motivation for EB to be given because of an
established social exchange between the employee and the organization. Although
willingness to behave entrepreneurially may be influenced by the abilities to do so (and vice
versa), for analytical reasons, the aspects of motivation and abilities are dealt with
independently. This approach seems to be justified since one could imagine an employee to
sense opportunities but lacking the motivation to exploit them.
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Figure 1: Linking Organizational-level with Individual-level EB
Fostering individual level motivation for intrapreneurial behaviour
via social exchange
Regarding the individual’s motivation to act entrepreneurial, EB could be regarded as the
decision to co-operate in a social dilemma situation (e.g. a prisoner’s dilemma): Each
employee has to decide, whether or not to foster CE through his or her EB (“fundamental
social dilemma”, Lind, 2001). Individual level EB might profit the organization, but EB
causes individual costs (direct costs, e.g. work effort, risk-taking, and opportunity costs, Amit,
Muller, & Cockburn, 1995). From the employee´s point of view, it is rational not to perform
discretionary effort of EB, as long as these costs are not compensated by rewards. That is
why we have to ask what rewards could motivate cooperation. Actually this perspective is
compatible with Burgleman´s view (1983), regarding motivation for autonomous, cooperative
behaviour to be the basis for entrepreneurial action in organisations.
In general, exchange theory incorporates concepts seeking to explain how actors
interact with one another in order to exchange tangible or intangible resources. This exchange
is effected in the context of an individual cost-benefit perspective and based on self-interest
(Homans, 1958). 1 However, an exchange can span more than one single transaction;
resources are not exchanged concurrently but in terms of reciprocity (Gouldner, 1960): One
partner expects to get something back in return at some point in future―the exact level of
1
“Of all our many ‘approaches’ to social behavior, the one that sees it as an economy is the most neglected,
and yet it is the one we use every moment of our lives―except when we write sociology” Homans, 1958, p.
606.
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eciprocation as well as the time are not specified in advance (Blau, 1964). In such a case,
one would regard such an exchange relationship as a social exchange.
The exchange is considered “social”, because besides the exchange of economic
resources, social exchange also involves socio-emotional resources (Shore et al., 2006). That
means, there is a broader range of resources to be exchanged, enabling the relationship to
develop over time towards a widespread exchange. Such an informal exchange relationship
requires more trust than a pure economic exchange, being based on the reliance of formal
institutions to enforce the mutual pretensions presumptions associated with the exchange
(Blau, 1964; Clark & Mills, 1979; Rousseau & Parks, 1993).
In short, social exchanges are made in a more relational vein than a transactional vein;
actors see the value of leaving some obligations broad and open ended (e.g. Tsui et al., 1997).
Although interactions might be motivated by mutual expectations of behavioural outcomes
(economic-rational component of the exchange), finally the interaction is based on trust
(social component of the exchange). Since in the settings of social dilemmas it would be
rational for each actor not to come up with EB, I argue trust to be a pre-condition of
collective rational discretionary effort on individual level–like personnel’s EB. I use “trust”
in the terms of Mayer et al., 1995, as the acceptance of being vulnerable to the actions of
other actors. 2
Partly, I built on McAllister’s proposal (1995, 1997), distinguishing cognition-based
from affect-based trust: According to my understanding, trust will be placed if an actor
expects positive results from a certain interaction, and willingly bears a possible loss.
Ultimately, trusting means more than just calculating an expected utility (critically:
Williamson, 1993), since I assume actors not to be entirely rational but to make intentionally
rational decisions: Actors are aware of their unawareness (“intended rationality”, Jones,
1999; March & Simon, 1958). With imperfect foresight, decisions require the acceptance of
uncertainty, which means that decision makers need to have a certain amount of affect-based
uncertainty allowance as they might know the amount of the potential loss, but not the
probability of the loss.
Referring to EB as the decision to co-operate in a social dilemma, I argue the quality of
exchange between an employee and the organization to be crucial for the personnel´s
motivation to behave entrepreneurially. Thereby, we state trustful social exchange to be a
2
To say ‘A trusts B’ means that A expects B not to exploit an situation of vulnerability A has intently
created (e.g. James, 2002). Under the condition of a social dilemma, I assume, that B has selfish interests not to
react in the interest of A (‘cooperation’) but to maximise his or her own interest which by definition are not the
interests of B.
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pre-condition of individual-level EB and not a moderator, mediator (e.g. Robinson &
Morrison, 1995) or an outcome of EB. 3
Proposition 1a: The more the exchange relation between an employee and the
organisation can be considered as a social exchange, the higher is the employee´s
EB.
In case of fostering the employee´s EB via economic exchange (e.g. by pay-forperformance),
I assume the motivation for individual-level EB to be reduced (crowding-outeffect):
From a contractual point of view, transactional exchanges like pay-for-performance
provide incentives for re-negotiating compensation ex post and by that cause shirking (see
e.g. Hart & Moore, 2006). From a risk-aversion point of view, a pay-for-performance relation
could limit the employee´s motivation for EB when the performance-pay does not adequately
compensate the employee for bearing risk from the angle of the employee (Manso, 2011). In
case of risk-averse employees but risk-neutral organizations, fostering EB by formal
transactional exchange incentive schemes cannot be done efficiently. That is why I state
informal relational social exchange to be more efficient when it comes to foster employees´
motivation for EB.
Proposition 1b: The more the exchange relation between an employee and the
organisation can be considered as an economic exchange, the lower is the
employee´s EB.
Now, in SMEs the quality of relational exchange is mainly influenced by the topmanagement
directly, because of low levels of bureaucratic means to influence relationship
quality (e.g. corporate governance structures) and high levels of informal personal
interaction. Therefore, I state relationship quality to be influenced mainly via a top-down
process: The management has to initiate trustful social exchange between employees and
3
This understanding is compatible with that of Organ (1988), who seems to be one of the first authors to
document citizenship behaviour based upon a social exchange interpretation. However and in particular the
research dealing with organizational citizenship behaviour (OCB) has been conducted largely without a
theoretical framework (e.g. Konovsky & Pugh, 1994).
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organization (the last represented by the top-management) (e.g. Konovsky & Pugh, 1994;
Dirks & Ferrin, 2002).
Fostering individual level abilities for intrapreneurial behaviour
via social learning
The processes of social exchange can generate personnel´s motivation for EB by providing an
incentive for EB since in case of social exchange, employees believe individual-level EB to
pay-off for them in the long run. Besides this motivation, EB requires to recognize
opportunities for behaving entrepreneurially.
The processes of how and why opportunities are made or discovered are still unclear.
One dominate view is, opportunity recognition to be a cognitive process (Baron, 2006) and
pattern recognition to be a key component of opportunity recognition (Baron & Ensley,
2006). Kurt Levin and colleagues (1939) were the first authors describing “the situation” in
an organization to be a main driver of personnel´s behaviour (Ross & Nisbett, 1991, quoted
in: Bowen & Ostroff, 2004). The “situation” within an organization does not influence
personnel´s behaviour per se, but the fact that a certain situation is perceived against the
background of cognitive schemes or maps influences behaviour (Drazin et al., 1999, social
cognition, Bandura, 1991). Perceiving a situation allows the observer to learn. According to
Albert Bandura´s social learning theory (e.g. Bandura, 1976, 1979), learning does not require
making an experience on one´s own, since learning can also result from observing other
people`s behaviour in certain situations.
In psychological terms, a situation would be considered “strong”, when it (1) causes
similar expectations about appropriate response patterns by different observers, (2) provides
an incentive for performing well, and (3) instils the required skills for handling the situation
(Mischel, 1973). With regard to social learning, strong situations mean, that the more an
organisation sends signals about EB being important and a strategic goal of the organization,
that individual-level EB is expected and to be rewarded, the more likely employees are to
recognize opportunities for behaving entrepreneurially. Such signals can be sent by many
kinds of HRM practices, like a) selection of personnel, b) training, c) given appraisal, and d)
rewards, or e) the job design itself. Regarding SMEs, formal HRM practices are less likely to
10

e found and therefore informal practices are more likely to influence the perception of
situations as strong.
Especially the role model behaviour provided by the supervisors or the topmanagement
has a lot of influence on the perception of a situation: Role model behaviour can
create strong situations (Bowen & Ostroff, 2004), when the behaviour is (I) distinctive, (II)
consistent, and (III) consensus. The management´s behaviour can be distinctive, when
supervisors act visibly (e.g. by occasionally fulfilling operative tasks), when they are
legitimated by status and have high credibility, when they provide reasons for their
behaviour, and when their behaviour is of relevance for the entrepreneurial strategy of their
organisation. Besides these aspects of distinction, in order to create strong situations, the
management’s behaviour has to be consistent over time and has to be performed in consensus
with the organization’s members.
Especially in SMEs, the management is able to create strong situations: Because of flat
hierarchies, the management´s behaviour is more likely to be observed by the employees; in
many SMEs, the top management even is in charge of certain operative tasks (e.g. product
development, or customer care). Additionally, low levels of bureaucracy allow the topmanagement’s
behaviour to have an immediate impact and a high legitimacy–especial in the
case of owner-management. Taken together, in comparison to lager bureaucratic
organizations, the SME-manager can create a strong organizational climate more easily. A
strong organizational climate describes a high extent to which employees interpret a situation
similarly (Schneider et al., 2002).
With regard to social learning, a strong climate of EB might be helpful when it comes to
foster employees´ EB. I consider the entrepreneurial orientation (EO) of an organization the
employees perceive as a proxy for a strong organizational climate of EB. When employees
can judge the degree of the organization’s EO and when the degree of EO is considered to be
high, one can assume that such a strong situation will influence employee’s abilities for EB
by processes of social learning. In contrast to other ways of learning (e.g. learning from
feedback), resource allocation theory (Kanfer & Ackerman, 1989) might propose, that social
learning does not to lead to overwhelming information (e.g. Lam et al., 2011), since
information via role models is not actively given to employees, but passively absorbed. By
that, role-model learning is less likely to direct cognitive resources away from the personnel´s
tasks. Therefore I state:
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Proposition 2: The more an employee considers an organisation’s orientation as
entrepreneurial, the higher is the employee´s EB.
Drivers of EB in organisations:
Social-cognitive model for the SME-context
To summarize the argumentation given so fare: I proposed a framework model discussing
relationships in organizations to influence EB, taking into account the main characteristics of
SMEs: flat hierarchies, informal structures/institutions, and more directly personal
interactions. The proposed model (see also figure 2) can be considered a social cognitive one:
(I) Motivation to behave entrepreneurially is supposed to be influenced by the processes of
social exchange; (II) abilities to recognize and exploit opportunities a might be influenced by
processes of social learning. All together, the emergence of EB is driven by the interaction of
social processes as well as cognitive ones.
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Figure 2: Two-factor Model of Employee´s EB
Thereby, the proposed causal model of EB is based on the following simplification: The
emergence of EB is more likely to be directly influenced by social cognitive processes within
the organization (that means: social exchange and social learning between an employee and
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the organization) than by personnel´s characteristics (e.g. individual entrepreneurial
orientation). From an organizational-economics point of view, I argue individual behaviour to
be more influenced by individual perception of the employee-organization relationships than
by individual characteristics. Therefore:
Proposition 3a: Within the same organizational settings of high social
learning potential (represented by a high EO on organizational level),
personnel with an individually supposed higher entrepreneurial orientation
(e.g. former self-employed, freelance staff, or employees with an
entrepreneurial family background) do not show a higher individual EBlevel
in comparison with the other personnel.
Of course, the argumentation given above neglects the perception of relationships to be
probably influenced by individual characteristics. In order to get some more insights on this
aspect, I would like to test:
Proposition 3b: Within the same organizational settings of low social
learning potential (represented by a low EO on organizational level),
personnel with an individually supposed higher entrepreneurial orientation
(e.g. former self-employed, freelance staff, or employees with an
entrepreneurial family background) do not show a higher individual EBlevel
in comparison with the other personnel.
SUGGESTED METHODS
The data-collection has not been finished yet. That means the paper to remain on a conceptual
level right now. I intend to test the propositions mentioned above via structural equation
modelling and linear hierarchical regressions and hope to present first findings during the
paper presentation at the ICSB 2012.
Although EB is a popular topic in current research, no agreement is to be found
regarding the measurement of EB. Even though Pearce and colleagues (1997) suggested a
useful measurement-scale for EB, this measurement has not been broadly adopted in
literature. That is why in this paper, the conceptualization of EB is directed towards
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intrapreneurial behaviour, which is regarded to be a higher order construct of innovativeness,
proactiveness and risk taking. I measure EB directly via the proband´s task performance
(profit-rate) during the experimental study. Since social learning, social exchange and
entrepreneurship require a process-view (e.g. Shane et al., 2003), experimental studies are
preferred to static observations or surveys.
To collect data, I use an experimental study. Based on a computer-simulation, probands
are given a task to behave entrepreneurially: Each proband has to run a virtual coffee shop for
20 periods. After every period, the proband gets feedback on the shop´s performance (total
profit per period) and another one-dimensional information to adjust parameters (regarding
e.g. product, place, promotion, or price) in order to generate a higher profit during the next
period. Probands are selected to different settings at the beginning of the experiment. The
experimental design will differ with regard to social learning and social exchange: One part
of the probands will be coincidentally faced with an environment of high social learning and
another part with an environment of low (resp. negative) social learning. The environment of
high (low) social learning potential is characterized by a high (low) level of EO at
organizational level. Each single proband is faced with the environment via written
instructions/descriptions at the beginning of the experiment. A third group of probands plays
the simulation under a control setting without any social learning influence.
In addition, there will be three kinds of incentive schemes: One scheme represents a
social exchange (flat/fix wage over all periods and a long-term performance-based bonus),
the other a pure economic exchange (pay-for-performance after every period). Additionally, a
fix pay incentive scheme without any bonuses will be applied. Probands are selected to the
incentive scheme coincidentally at the beginning of the simulation game. The probands are
participants of several executive MBA programs. The dependent variable is the accumulated
profit of the shop after 20 periods. The profit will be a measurement for entrepreneurial
behaviour since risky entrepreneurial behaviour (e.g. experimentation regarding the
parameter-setting) is required to raise the shop´s profit. The probands are considered
“corporate entrepreneurs” during the simulation, who are paid for running the shop (the
virtual money can turn out to real gains after the game) but cannot lose money.
Additional Measures: All postulated relations are to be checked by means of established
scales. Regarding proposition 1a and 1b, I measure social exchange with a scale developed by
Shore and colleagues (2006), with regard to proposition 2, 3a, and 3b, entrepreneurial
orientation is to be measured by the scale of Wang (2008). To test the two-factor model´s fit
in total, the factors “motivation” and “abilities” are considered second order constructs; they
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are not measured directly, but can be judged in the sense of latent variables in a structural
equation model (SEM). Demographic characteristics of the test persons (gender, age),
personal aspects (e.g. individual EO) and cultural, as well as structural factors (work
experience in years, industry of current occupation) are controlled.
DISCUSSION
With the social cognitive framework this paper proposes a model of how employeeorganization
relationships could influence EB in SMEs. Regarding the causal mechanism to
link organizational level with individual level behaviour, I draw on social exchange and
social learning theory. Relating willingness to behave entrepreneurially with social exchange
allows looking at the perceived relational exchange between employee and organisation, the
last represented by the management. I assume the social exchange setting as appropriate for
analyzing EB–especially in the SME-context, where exchange relations are usually much
more influenced by informal structures and spontaneous behaviour, than by formal
institutions and bureaucratic structures.
Additionally, the social exchange consideration might be of relevance, since fostering
EB with attempts of economic exchange is likely to cause a motivational crowding-out effect
(e.g. Gasda & Fueglistaller, 2009). The proposed social cognitive framework explains
motivational crowding-out from a contractual perspective: In case of formal incentives are
used to foster EB (e.g. pay-for-performance for EB shown), the relational-exchange
perspective would suggest the employee (agent) as well as the employer (principal) have a
strong incentive to renegotiate compensation ex post and by that shirk, causing fractions in
the exchange. Under the assumption of a trustful social exchange, such a re-negotiation does
not emerge, since parties trust each other to profit from their behaviour in the long run. That
means, social exchange is guided by economic considerations, too; trust will only be given,
when the exchange seems to be economically reasonable for both exchange parties. By that, I
state economic and social exchange complement each other (see also managerial
implications): Material incentives are useful to motivate employees´ EB as long as the social
exchange is kept alive. This will be true in the case of e.g. combining long-time performancebased
bonuses with an efficient fix wage. The efficient fix wage takes into account to
compensate employee´s risk aversion in case of employee´s EB, while the long-time bonus
might rise effectiveness of employee’s EB.
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The proposed two-factor model might be a simplified model of EB the context of
SME−in addition to the five-factor model of Hornsby et al. (2002). The two-factor model
lives up to the working conditions of many SMEs. Measurement of the probability of
employee´s EB is simplified by using just two scales: (1) perceived entrepreneurial
orientation (which might be a proxy for employee´s abilities for EB, because o social
learning) and (2) social exchange quality (which is considered to be a measure for the
employee´s motivation to perform EB).
Mostly characterized by low hierarchies and informal institutions, SMEs offer special
managerial conditions for fostering EB: With this in mind, the proposed model stresses social
processes as the main drivers behind employee´s EB. The management has to be aware of its
role-model-function; the management has to initiate social exchange by offering the
employees trust in advance, for example by switching from pay-for-performance to flat
wages with long-time oriented bonuses. Trust is supposed to be a pre-condition of social
exchange. Regarding social learning, the management has to be aware that managerial action
could be considered role model behaviour of EB–may the behaviour be a good or a bad
example. On the whole, social exchange and social learning are processes which have to be
driven by the top-management. The relational view might explain, why providing useful
resources to the employees (e.g. top-management support) is not enough to foster EB (see
Hornsby et al., 2009), since employees have to be inspired how to make use of these
resources, too; entrepreneurial opportunities are to be discovered more easily by prepared
minds.
MANAGERIAL IMPLICATIONS
The social cognitive framework might also provide some managerial implications: First of all
as mentioned above, the framework implies employee´s EB to be influenced by certain topdown
processes–at least within the SME-context. Regarding social learning and social
exchange, the quality of the employee-organization relationship highly depends on the
behaviour of the top-management: Trust provides the basis for social exchange; entering a
trustful social-exchange relationship should be induced by the top-management´s initial
trusting behaviour. Additionally, regarding social learning, the management has to be aware
of being role-models for EB in order to induce employee´s EB. A culture of failureacceptance
has to be established−since failures and experimentation allow learning and
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probably generate entrepreneurial rents in the long run. Role model behavior is not restricted
to good examples. Also failures may provide good chances to learn, sometimes even more
sufficient ones.
Second, the framework allows to draw some implications when it comes to designing
incentive systems (e.g. financial incentives like pay-for-performance). For motivating EB, the
optimal incentive scheme should exhibit rewards (or at least substantial tolerance) for
learning (tolerance for failures) and rewards for long-term success in the sense of social
exchange (e.g. incidentally given bonuses/gifts in case of long term success). Moreover,
commitment to a long-term compensation plans, job security, and timely feedback on the
employee´s EB are essential to foster individual level EB. The more risk is induced by EB,
the more should the top-management establish financial protection for the company´s
corporate entrepreneurs (e.g. golden parachutes).
LIMITATIONS
The framework model discussed suffers from serious limitations. One limitation might be EB
to be presumed as useful in financial terms for an organisation per se. Consequently, the
motivation to behave entrepreneurially can result from the individual belief to profit from the
EB-induced positive outcome in the long run. Additionally, the analysis of the relational
exchange processes is limited to the exchange between the employee and the organisation,
resp. the top-management. By that, exchanges between employees and fellow workers in the
context of EB are beyond the scope of this analysis. Also the model proposed causal
relations, eventually causality is not allowed to be totally tested within the described setting,
since the experiment consists of simulation game and the social learning is induced via
written instructions. Additionally, doubts arise regarding cultural influences, since the social
exchange concept has mainly been applied and tested in western societies. Also, we have to
admit our study might suffer from self ratings and single source approach. And we have to
keep in mind, that the source of date, the employee, reports his or her perceptions of social
learning and social exchange. Although the perception of relationship is the heart of the
suggested relational model, I generally assume relationships to be judged objectively.
Adopting an organizational economics point of view, I neglect to have a closer look at factors
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influencing the way, personnel perceive relationships. Last not least, the simplified model is
restricted to analyzing individual level EB in the SME-context only.
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