Entrepreneurship in Medium-Size Companies: Exploring the Effects of Ownership and Governance Systems

TLDR

Corporate entrepreneurship is essential for innovation, renewal, and performance in competitive markets, yet it requires sustained support from top executives. In 231 medium‑size manufacturing firms, corporate entrepreneurship is strongest when executives and outside directors hold stock, the board chair and CEO are separate, and the board is medium‑sized, and it is positively linked to future performance, though the effects of outside director ratio and institutional ownership are mixed.

Abstract

Corporate entrepreneurship (CE), which embodies a company’s innovation and venturing activities, is necessary in today’s competitive markets. CE is important for organizational renewal, the creation of new business, and improved performance. CE, however, requires strong and continued support from the company’s top executives. Data from 231 medium-size manufacturing companies show that commitment to CE is high when: (1) executives own stock in their company; (2) the board chair and the chief executive officer are different individuals; (3) the board is medium in size; and, (4) outside directors own stock in the company. The relationships between the ratio of outside directors and CE, and institutional ownership and CE, are mixed. CE is also positively associated with future company performance.