Employee engagement

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An investigation on the contribution of non-managerial employees to corporate entrepreneurship and how this can be managed

Master thesis, MscBA, specialization Small Business and Entrepreneurship University of Groningen, Faculty of Economics and Business

July, 2013

Menno Bouwman Churchillstraat 9 6904 NE Zevenaar Studentnumber: 2164205 m.bouwman.6@student.rug.nl

First Supervisor Dr. O.A. Belousova

Second Supervisor Prof. Dr. A. J. Groen

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1 Acknowledgments: First I would like to thank Drs. R. Lohuis, as principal of GasCo, for his support during the internship and the interesting conversations we had. Moreover, I would like to thank Dr. O.A.

Belousova for her constructive feedback on my thesis. Furthermore, I am grateful towards all the participants of the questionnaire and to all the interviewees. Finally, I thank Prof. Dr. A. J. Groen for his support as a second supervisor.

Abstract: What are the antecedents of engagement in innovative behaviors by employees? How can management stimulate involvement of employees in CE processes and therewith increase innovation within an organization? The research is conducted within GasCo, a semi-public corporation that is operating in the eastern part of the Netherlands and that is active in the energy and cable sector. Data is collected in the period from May to July 2013 by conducting an online questionnaire among all 230 employees and 14 in-depth interviews.

Results show that employee engagement is an intervening variable between antecedents of CE and entrepreneurial behavior of employees. Management support, work discretion, rewards/reinforcement, time availability and organizational boundaries are interrelated characteristics that management can influence to increase entrepreneurial behavior by employee engagement. Findings suggest that if managers are able to manage employee engagement, they can increase involvement in CE of employees and therefore create an organization that is more entrepreneurial. In doing so, this study has led to a more complete insight in the process of CE and entrepreneurial behavior of employees within an existing organization.

Keywords: corporate entrepreneurship, Entrepreneurial Orientation, Market Orientation, management support, work discretion, rewards/reinforcement, time availability organizational boundaries, engagement, extra-role voice behavior, innovative behavior

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Introduction

Many fast-growing young corporations and large established organizations attribute much of their success to an Entrepreneurial Orientation (EO); as life-cycles become shorter and the rate of process and technology change faster, corporate entrepreneurship (CE) is needed to attain a higher degree of innovation within the organization (Lumpkin & Dess, 2005; Carter& Jones, 2006; Ireland et al., 2009).

Authors like Hornsby et al. (2002), Covin & Miles (1999), Lumpkin & Dess (1996), and Hornsby &

Goldsby (2009) have emphasized the importance of CE as a growth strategy and effective means for achieving competitive advantage. So organizations should embrace CE as a way of doing business throughout the whole organization (Hornsby & Goldsby, 2009).

A certain level of ambidexterity seems to be important for innovative organizations. Ambidexterity is the ability of an organization to have an internal environment for doing daily business effectively, but also being able to cope with environmental changes (Gibson & Birkinshaw, 2004). Such an environment, where employees simultaneous perform operating and entrepreneurial activities, can be created when management creates an environment that stimulates entrepreneurial behavior of employees. According to Gibson & Birkinshaw (2004) there are two distinct types of ambidexterity: structural or contextual.

Within structural ambidexterity theory entrepreneurship and management are considered as different and incompatible concepts that should be performed by different business units (Gibson & Birkinshaw, 2004).

For example, there is a R&D department that is responsible for the development of new goods and the production department is responsible for the production of the goods. Contextual ambidexterity, on the other hand, is an organization‟s capacity to simultaneously achieve alignment and adaptability within a single business unit (BU), by building a BU context that encourages individual employees to make their own judgments as to how to manage the conflicting demands for alignment and adaptability (Gibson &

Birkinshaw, 2004). The same authors emphasize that there is a growing recognition of the importance in achieving the desired balance between opposing demands and that the creation of such a context can enhance success of an organization. Thus, the challenge for management is to establish an organizational context that may encourage entrepreneurial behavior of all employees (Birkinshaw, 1997). According to Hornsby et al. (2002), earlier research has identified five consistent organizational characteristics which can be managed to create an internal environment that can foster entrepreneurial behavior of middle managers: management support, work discretion, rewards/reinforcement, time availability, and organizational boundaries.

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5 Besides these five organizational characteristics management can stimulate entrepreneurial behavior of employees by the use of an Entrepreneurial or Market Orientation (EO or MO). An EO can enhance entrepreneurial behavior of employees, because it encourages employees to be innovative, pro-active and to take risk (Covin & Slevin, 1989; Lumpkin & Dess, 2005). A MO can as well stimulate entrepreneurial behavior of employees, because it encourages employees to follow the market and to develop and introduce new products (Narver & Slater, 1990; Zhang & Duan, 2010; Baker & Sinkula, 2005). When employees perceive that they are encouraged to introduce new products and to undertake innovative projects they may behave more entrepreneurial.

The outcome of personal reactions to the perceived environment is related to employee engagement. Why is employee engagement so important for the contribution of employees to the entrepreneurial process?

The assumption is that employees with a high level of engagement will be more involved in speaking out and challenging the status quo with making suggestions for change and recommending modifications to standard procedures even when others disagree, what is called in literature extra-role voice behavior (LePine & Van Dyne, 1998).

To date most research in the field of CE has been focused on the factors that promote entrepreneurial action of managers and researchers generally applied this to all employees and have relatively ignored the different groups that exist within an organization or have implicitly assumed homogeneity within organizations (Hornsby et al. 2009). However, research of Floyd & Lane (2000) indicates that perceptions of employees varied across different hierarchical levels, because they differ in roles. Thus more research is needed on the perception of non-managerial employees on factors that can stimulate CE. In this research the role of work engagement, as an intervening and mediating variable, between factors that can stimulate engagement of non-managerial employees on one hand, and extra-role voice behavior of the same employees on the other is explored. Non-managerial employees consist out of all employees that are not executing a management function, after this referred to as employee. A high score on extra-role voice behavior may subsequently lead to more innovative behavior.

The main focus of the study is deepening the knowledge about the contribution of employees to CE and how this can be managed; this leads to the following problem statement:

-What are the antecedents of engagement in innovative behaviors by employees?

The thesis proceeds as follow: first different conceptualizations of entrepreneurship will be discussed, followed by the existing literature about factors that can stimulate corporate entrepreneurship. After this

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6 the methods and analysis will be described in the methodological part and in the final section the conclusions, discussions and limitations of the research will be discussed.

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Theoretical background

Earlier research showed that internal and external factors can have an influence on the success of CE in organizations; however some firms create an environment that is more entrepreneurial than others (Hornsby et al., 2009). An important question to answer is: Why are individuals in some organizations, but not in others, engaged in the entrepreneurial process? Is this caused by the environmental context, the internal organizational context or just the person? The internal organizational context has the ability to influence individual behavior of employees in entrepreneurial processes (Hornsby et al., 1999; Hornsby et al., 2002; Kuratko et al., 2005a). According to Hornsby et al. (2002) and Marvel et al. (2007) it is the challenge for an organization to create an internal context that stimulates CE of employees. Therefore this research is focused on strategies and the internal environment that can stimulate entrepreneurship.

In the next section the different conceptualizations of entrepreneurship within a large organization have been reviewed, and it is illustrated how they are contradictory. Clearly, there is considerable overlap between the different definitions and conceptualizations; however each covers a different area and it is important that the distinction between the concepts is clear to all readers. A number of scholars (Jennings

& Lumpkin, 1989; Zahra, 1991, e.g.) have expressed concerns about a lack of universally acceptable definitions and although the choice of definitions in behavioral sciences generally remains subject to debate, a clearly stated set of definitions is necessary for scientific understanding, explanation, and prediction (Sharma & Chrisman, 1999:11).

Entrepreneurship within an organization

Multiple terms are used for the entrepreneurial efforts within an existing organization such as corporate entrepreneurship, corporate venturing, organizational renewal, strategic renewal and corporate entrepreneurship strategy. Guth & Ginsberg (1990) and Sharma & Chrisman (1999) mentioned that CE can be the creation of a new organization or instigate (corporate) renewal within an existing organization.

Burgelman (1983:1349) used another definition of CE when he stated that “CE refers to the process whereby the firms engage in diversification through internal development. Such diversification requires new resource combinations to extend the firm‟s activities in areas unrelated, or marginally related to its current domain of competence and corresponding opportunity set”. Other authors like Floyd & Lane (2000:155) used the term strategic renewal to describe entrepreneurship within an organization and used a more restricted scope than Burgelman (1983). They defined strategic renewal, as an “evolutionary process associated with promoting, accommodating, and utilizing new knowledge and innovative behavior in order to bring change in organization's core competencies and/or a change in its product market domain”. Renewal activities take place within an existing organization and are not treated as new

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8 businesses by the organization. Other authors like Hornsby et al. (1993) used the term corporate venturing, which refers to corporate entrepreneurial efforts that lead to the creation of new business within the corporate organization. These BUs may follow from or lead to innovations that exploit new markets, or new product offerings, or both (Sharma & Chrisman, 1999). Both strategic renewal and corporate venturing suggest changes in either the strategy or structure of an existing organization, however they do not necessary involve innovation. The principle difference between strategic renewal and corporate venturing is that corporate venturing involves the creation of new BUs whereas strategic renewal leads to the reconfiguration of existing businesses within a corporate setting (Sharma &

Chrisman, 1999).

The concepts of strategic renewal and corporate venturing are both part of most of the CE definitions.

Jones & Butler (1992:735) defined CE as “the process by which firms notice opportunities and act to creatively organize transactions between factors of production so as to create customer surplus value”.

According to Guth & Ginsberg (1990) CE encompasses two phenomena namely: the birth of new businesses within existing organizations (corporate venturing) and transformation of organizations through the renewal of key assumptions on which they were built (corporate renewal). This definition is a subset of the definition of Sharma & Chrisman (1999:18) who stated that CE is: “a process whereby an individual or a group of individuals, in association with an existing organization, creates a new organization or instigates renewal or innovation within that organization”. In this research the definition of CE of Sharma & Chrisman (1999) is used to describe the entrepreneurial processes within the organization, because it includes acts of organizational creation, renewal, and innovation that occur within an organization.

Entrepreneurial behavior of individuals or a group of individuals can occur when employees perceive an organizational context that stimulates CE (Hornsby et al., 2002). This perception can lead to a high level of work engagement, which in turn may result in the entrepreneurial behavior of the employees. So engagement may be regarded as an intervening variable between antecedents of entrepreneurship on one hand, and entrepreneurial behavior of employees on the other. Thus, before starting with the development of the hypotheses theory about employee engagement will be discussed.

Employee engagement

As mentioned before, it is important to do research on factors that can stimulate employee engagement.

Engaged employees feel energetic, like their work activities and they find themselves able to deal well with the demands of their jobs (Schaufeli et al., 2006). “One says that employees are emotionally and cognitively engaged when they know what is expected of them, have what they need to do their work, have

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9 opportunities to feel an impact and fulfillment in their work, perceive that they are part of something significant with coworkers whom they trust, and have chances to improve and develop” (Harter et al., 2002:269). Research of Harter et al. (2002) showed that engaged employees increase the effort they put into their job and that this leads to higher performances of these employees and organizational success.

According to Hakanen et al. (2008:78) “Work engagement leads to personal initiative which, in turn, has a positive impact on work-unit innovativeness”. Engaged employees work harder and are more likely to go the 'extra mile' for the organization (Harter et al. 2002; Hakanen 2008).

For organizations it is important to enhance employee engagement and to understand how it can be managed, however managing employee engagement is difficult because it depends on the perception of the organizational environment of employees. Top-level management can create an organizational environment that stimulates employee engagement and if employees perceive strategic orientations and an internal environment that stimulates engagement on a sufficient level entrepreneurial behavior may occur.

It is, for example, assumable that an employee is spending (free) time thinking on new ideas; however that he or she is not speaking out and challenging the status quo by making suggestions for change, because the employee does not perceive management support. The consequence may be that an employee is not engaged in their work and that he or she will not invest the extra effort that is necessary to put the idea forward. The consequence might be that the organization misses an opportunity to create a successful innovation.

In sum, earlier research showed that employee engagement is important for organizational success and that research on the antecedents of employee engagement is needed. Now we will continue with the development of the hypotheses by discussing the possible antecedents that can lead to employee engagement, starting with EO.

Entrepreneurial Orientation & employee engagement

An EO strategy can be used by top-level management to create an organizational context that stimulates engagement of employees. “EO is a strategic construct whose conceptual domain includes certain ﬁrm- level outcomes and management-related preferences, beliefs, and behaviors as expressed among a ﬁrm‟s top-level managers” (Covin et al., 2006:57). Miller (1983) was one of the first researchers who emphasize the importance of innovativeness, pro-activeness and risk taking attitude for entrepreneurship.

Covin & Slevin (1989) have further deepened the concept and operationalized these three dimensions.

Later, Lumpkin & Dess (1996) added two dimensions, namely competitive aggressiveness und autonomy, to the framework, however only a few studies have expressly examined Lumpkin & Dess' (1996) five- dimension framework of EO (Hughes & Morgan, 2007). The tendency is to study only the three

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10 dimensions mentioned by Miller (1983), in this study the mainstream is followed and therefore only the dimensions mentioned by Miller (1983) are used.

Innovativeness

Innovativeness refers to the development and launch of new products and services, in exploration of new markets, and in process innovations (Lumpkin & Dess, 1996; Covin & Slevin, 1989). If top-level management speaks out and shows a strong preference for innovation projects employees will probably be encouraged to put innovative ideas forward and to undertake innovative projects (Covin et al., 2006).

Top management can show their willingness for innovation to invest money and other resources to get new projects off the ground (Covin & Slevin, 1989). Employees probably will experience more challenge in their work and may see opportunities to learn and grow during this process. All of these aspects can enhance employee engagement (Harter et al., 2002). So, it is expected that when employees are encouraged to put innovative ideas forward and to undertake innovative projects they will become more engaged in their work. This leads to the following hypothesis:

Hypothesis 1a: Perceived by employees innovativeness of the top management will be positively related to engagement of employees

Pro-activeness

Pro-activeness, as a second dimension of EO, refers to an attitude of top-level management to actively seek to anticipate opportunities, thereby creating a first-mover advantage compared to competitors (Covin

& Slevin, 1989; Lumpkin & Dess, 1996; Hughes & Morgan 2007). With an innovative and/or proactive approach a company can gain a sustainable competitive advantage (Lumpkin & Dess, 2005). When employees experience that there is a willingness among management to carry out ideas they proposed and when they receive recognition for pro-activeness, this probably will increase the feeling that their opinion counts. According to Harter et al. (2002) this feeling may enhance employee engagement. This leads to the following hypothesis:

Hypothesis 1b: Perceived by employees pro-activeness of the top management will be positively related to engagement of employees

Risk taking

The third dimension of EO: Risk taking is associated with a willingness to commit high amounts of resources to projects with high risks where the cost of failure might be high, but where a company can earn high profits with the success of the project (Covin & Slevin, 1989; Lumpkin & Dess, 1996; Wiklund,

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11 2005). When top-level management speaks out and shows a strong preference for high-risk projects with changes of high returns instead of a preference for low risk projects this will probably encourage employees to propose innovative ideas. If employees are encouraged to put forward and undertake innovative ideas, this gives them the opportunity to learn grow and to develop themselves. It is the expectation that these perceptions will increase their engagement (Harter et al., 2002). It is expected that a risk taking propensity will have a positive influence on the engagement of employees. This leads to the following hypothesis:

Hypothesis 1c: Perceived by employees risk taking of the top management will be positively related to engagement of employees

EO construct

One of the unresolved theoretical matters involving EO is the essential nature of the construct. Covin &

Lumpkin (2011) stated that EO exists as a dispositional or behavior construct and that it cannot be both.

Covin & Slevin (1991:8) used a behavioral construct of EO when they stated that: “A behavioral model of entrepreneurship is suggested because behaviors rather than attributes are what give meaning to the entrepreneurial process. An individual's psychological profile does not make a person an entrepreneur.

Rather, we know entrepreneurs through their actions. Similarly, non-behavioral organizational-level attributes, like organizational structure or culture, do not make a firm entrepreneurial. An organization's actions make it entrepreneurial. In short, behavior is the central and essential element in the entrepreneurial process”. Voss et al. (2005:1134), on the other hand, stated that: “An EO is a firm-level predisposition to engage in behaviors that lead to change in the organization or marketplace”. They used a dispositional conceptualization just as Lumpkin & Dess (1996:136) when they stated that: “an EO refers to the processes, practices, and decision-making activities that lead to entrepreneurship it involves the intentions and actions of key players functioning in a dynamic generative process aimed at new- venture creation”.

The debate about how EO should be conceptualized is still going in the EO literature, and there is considerable overlap between both definitions. However, most of the scholarly community sees EO as a dispositional construct (Covin & Slevin, 2011). This mainstream view is followed and the dispositional conceptualization of Voss et al. (2005) is used for this research.

Market Orientation & employee engagement

Besides EO, MO is the second strategy top-level management can use to create an organization context that stimulates entrepreneurial behavior of employees. “Firms with strong market orientations prioritize

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12 learning about (1) customers (e.g., likes and dislikes, satisfaction, perceptions); (2) factors that influence customers (e.g., competition, the economy, sociocultural trends); and (3) factors that affect the ability of the firm to influence and satisfy customers (e.g., technology, regulation)” (Baker & Sinkula, 2005:483).

A high level of MO will probably enhance the adaptiveness of an organization to the environment and increase the opportunity to create more customer value, both are important for the success of an organization: “Having a better price with better product available and better customer service means nothing if the market does not exist, is too small, or is unwilling to change; just because something is better it does not mean that it is needed” (Kuratko et al., 2011:32-33). It is assumed that organizations with a high MO have more knowledge about their customers and the market than organizations with a low MO. If organizations have knowledge about the needs and wishes of their (potential) customers and the market potential of a product, they can develop a product that is needed and that satisfies wishes of (potential) customers. Therefore a high MO will increase the chance on success of a new product or service.

MO construct

There are two leading conceptualizations of MO construct. First, Kohli and Jaworski (1990:6) define MO, from a behavioral perspective, as “an organization wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization wide responsiveness to it”. Narver & Slater (1990:21), on the other hand had taken a cultural perspective and, defined MO as “the organization culture that most effectively and efficiently creates the necessary behaviors for the creation of superior value for buyers and, thus, continuous superior performance for the business”. There is considerable overlap between both conceptualizations.

Central to both perspectives is customer focus, however both from another perspective. The importance of the cultural perspective has been emphasized by Narver & Slater (1998: 235) when they stated that: "If a market orientation were simply a set of activities completely disassociated from the underlying belief system of an organization, then whatever an organization's culture, a market orientation could easily be implanted by the organization at any time. But such is not what one observes." In this research the cultural perspective is followed and the definition of Narver & Slater (1990) is used, because this definition is more focused on the creation of an entrepreneurial organizational environment.

According to Narver & Slater (1990) MO consists out of three behavioral dimensions, namely: customer, competitor, and interfunctional coordination. The definitions of the dimensions were adopted out of Narver & Slater (1990: 21-22): “Customer orientation is the sufficient understanding of one's target buyers to be able to create superior value for them continuously. A customer orientation requires that a

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13 seller understands a buyer's entire value chain, not only as it is today but also as it will evolve over time subject to internal and market dynamics. Competitor orientation means that a seller understands the short-term strengths and weaknesses and long-term capabilities and strategies of both the key current and the key potential competitors. The third of the three behavioral components is interfunctional coordination, which is coordinated utilization of company resources in creating superior value for target customers”. A high level of MO ensures that the organization is continuously learning about customers‟

needs and it is trying to create more value for customers (Narver & Slater, 1990; Kohli & Jaworski, 1990). This strategy can enhance the perception of employees that they are doing important and useful work, and that their opinion counts. When employees have the feeling that they do useful work, because they are trying to create more value for customers they may become more engaged in their work (Harter et al., 2002). This leads to the following hypothesis:

Hypothesis 2: Perceived by employees market orientation of an organization will be positively related to engagement of employees.

Organizational characteristics & employee engagement

Besides EO and MO, there are internal organizational characteristics that can be influenced by top-level management to create an organizational context that supports involvement of employees in CE. Hornsby et al. (2002) described five organizational factors that can be managed to create an internal environment that fosters CE throughout the whole organization and to create entrepreneurial behavior among middle- managers, namely: management support, work discretion, rewards/reinforcement, time availability, and organizational boundaries. These CEAI-factors may give important indications for an appropriate structure of innovation processes.

Management support

Management support is the willingness of top-level managers to facilitate and promote entrepreneurial behavior, including the championing of innovative ideas, to give recognition to people who come up with new ideas and providing the resources people require to take entrepreneurial actions (Hornsby et al., 1993; Ireland et al., 2009). As top-level managers act upon, facilitate and promote entrepreneurial behavior, it will likely affect the organization‟s internal environment, encouraging the formation of cultural norms favoring entrepreneurship (Hornsby et al., 2002). Managers' positive attitude toward CE may lead to an internal climate conducive to entrepreneurial behavior (Marvel et al., 2007). When employees receive appreciation for participating in CE of management this may increase work engagement (Harter et al., 2002). This leads to the following hypothesis:

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14 Hypothesis 3a: Perceived by employees management support will be positively related to employee engagement

Work discretion

The second factor: Work discretion/autonomy refers to freedom for employees to make decisions and delegation of authority and responsibility to non-managerial employees (Hornsby et al., 1993; Ireland et al., 2009). A high level of independency and responsibility will motivate employees to behave entrepreneurial (Hornsby et al., 2002). According to Marvel et al. (2007) empowerment results in greater work satisfaction. When employees have more autonomy in their work it is expected that they have the feeling that their opinion seems to count and that they do useful work for the organization, which may enhance employee engagement (Harter et al., 2002). This leads to the following hypothesis:

Hypothesis 3b: Perceived by employees work autonomy will be positively related to employee engagement

Rewards/reinforcements

Rewards/reinforcements, as a third factor, can have direct and immediate effects on the occurrence of entrepreneurial behavior. In particular, whether or not the reward system encourages risk taking and innovation has been shown to have a strong effect on individuals‟ tendencies and motivation to behave in entrepreneurial manners (Hornsby et al., 2002). Entrepreneurs see rewards as a precondition for entrepreneurial behavior; without an appropriate reward system, which encourages risk taking and innovation, employees will not put in the effort needed for innovation (Marvel et al., 2007). There is even a change that entrepreneurs will leave the organization out of dissatisfaction about the reward system (Hornsby et al., 1993; Marvel et al., 2007; Ireland et al., 2009). “Money talks” (Marvel et al., 2007) and when an employee receives a reward/reinforcement for the extra efforts he or she probably has the feeling that the organization appreciates his or her efforts, because he or she received recognition for doing good work (Harter et al., 2002). It is expected that this recognition will reinforce engagement of employees.

This leads to the following hypothesis:

Hypothesis 3c: Perceived by employees rewards/ reinforcement will be positively related to employee engagement

Time availability

The fourth factor: Time availability refers to the fact that organizations must evaluate workload to ensure that individuals and groups of individuals have the time needed to pursue innovations and that their jobs

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15 are structured in ways that support efforts to achieve short- and long-term organizational goals (Hornsby et al., 2002). It is important that entrepreneurs perceive the availability of time for innovative activities (Hornsby et al., 1993; Marvel et al., 2007). This ability can increase work engagement, because an employee has the opportunity to do what he or she does best (Harter et al., 2002). Employees are expected to invest “slack” time on those tasks, most salient given their roles and responsibilities (Hornsby et al., 2009) and when they are engaged in their work they may take initiative which is not obligatory to them (Harter et al., 2002). Therefore, when employees perceive time as a resource to generate entrepreneurial activities this will probably stimulate entrepreneurial behavior. It is expected that employees will become more engaged in their work when they perceive time for innovative and work relative activities, because this give employees the possibility to do what they can do best and to make use of and to develop their capabilities and capacities. This leads to the following hypothesis:

Hypothesis 3d: Perceived by employees time availability will be positively related to employee engagement

Organizational boundaries

Organizational boundaries, as fifth factor, refers to boundaries, real and imagined, that prevent people from looking at problems outside their own jobs (Hornsby et al. 1993: 32). It seems to be important for organizations to encouraging all employees to look at the organization from a broader perspective and to ensure that employees are not only focused on their own specific task or department. If employees have a broader job description, there is a higher chance that they will innovate because they can link several processes together (Hornsby et al., 2002). Employees who are more used to cross boundaries between departments within an organization are more used to have an open view to the whole organization and external environment (Floyd & Lane, 2000). Environmental scanning and extra-organizational activities of employees can give inspiration for new innovative ideas (Damanpour, 1991). If employees have a broader perspective on the organization they might have more of a feeling that his or her fellow employees are committed to doing quality work and that they have the ability to learn and grow within the organization. When an employee has these feelings he or she might become more engaged in his or her work (Harter et al, 2002). This leads to the following hypothesis:

Hypothesis 3e: Perceived by employees organizational boundaries will be positively related to employee engagement

If employees are engaged in their work, they may take initiative which is not obligatory to them and are more likely to go the 'extra mile' for the organization (Harter et al., 2002). Van Dyne & LePine (1998)

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16 defined this as extra-role voice behavior, and this behavior of employees is assumed to be needed for successful CE within an organization. Employee engagement may affect extra-role voice behavior and therefore the relation between both constructs will be discussed next.

Employee engagement & extra-role voice behavior

Extra-role voice behavior is important for CE, because entrepreneurship starts with recognition and generation of new ideas, opportunities or solutions that challenge past practices and standard operating procedures. However, if individuals generate ideas and solutions for problems but are unwilling to speak up and share them with others, the entrepreneurial process stops (LePine & Van Dyne, 1998).

Organizations can create a certain environment to stimulate CE, however when employees do not react on it with their behavior, it is useless. Covin & Slevin (1991:8) already emphasized the importance of behavior when they stated that: “Behavior is the central and essential element in the entrepreneurial process”. A distinction can be made between primary and secondary role behavior of employees; primary role behavior contents daily activities and other specified behavior. Secondary role behaviors also support the organization's objectives, however these behaviors are not explicitly defined (Floyd & Lane, 2000).

Van Dyne & LePine (1998) did empirical research on helping, in-role, and extra-role voice behavior.

Helping (affiliative-promotive) and voice (challenging-promotive) are both promotive behaviors.

“Helping emphasizes small acts of consideration and is cooperative behavior that is noncontroversial.

Voice, on the other hand, is promotive behavior that emphasizes expression of constructive challenge intended to improve rather than merely criticize” (Van Dyne & LePine, 1998:109). Extra-role voice behavior is not stated in the job description and therefore it is not obligatory to employees. When employees have the perception that the organizational strategies and internal environment support and stimulate CE they may become engaged in their work and subsequently behave entrepreneurial when they take initiative which is not obligatory to them (Van Dyne & LePine, 1998). Extra-role voice behavior is important for CE, because employees then start to put forward and discus new ideas, problems and other developments that influence work. This behavior of employees will probably lead to more innovative behavior of employees. If employee engagement is low they probably will be less committed to their work and extra-role voice behavior will probably not take place, so work engagement can be a mediating variable between factors that stimulate entrepreneurial behavior on one hand and extra-role voice behavior of employees on the other. This leads to the following hypothesis:

Hypothesis 4: Engagement of employees will be positively related to extra-role voice behavior of the same employees

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Extra-role voice behavior & innovative behavior

Extra-role voice behavior may lead to a higher amount of innovative ideas proposed by employees, which give an indication of innovative behavior of employees (Kuratko et al. 2005a). Innovative behaviors of employees have influences on the innovation ratio of the organization. Earlier research showed that this ratio is important for survival and success of the organization, so organizations should create an organizational environment that may stimulate innovative behavior of employees. The expectation is that a high level of extra-role voice behavior of an employee will lead to more innovative behavior of the same employee. For example, when a particular co-worker speaks up in this group with ideas for new projects or changes in procedures, it is expected that the same employee suggested more ideas within the last 6 months than an employee who have a low level of extra-role voice behavior. This leads to the following hypothesis:

Hypothesis 5: Employees with a higher level of extra-role voice behavior will have a higher level of innovative behavior

Conceptual model

The theory discussed above provides the conceptual model driving the current study (see fig.1). It suggests that orientations and organizational characteristics can influence engagement of employees, which in its turn affects extra-role voice behavior. Furthermore it is assumed that extra-role voice behavior is subsequently related with innovative behavior.

Fig. 1: a model to illustrate the conceptual process of CE within an organization.

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Methodology Data collection

The aim of the methodology part is to explain how the hypotheses introduced in the previous chapter have been tested. The research is conducted within GasCo. GasCo is a semi-public corporation that is operating in the eastern part of the Netherlands and is active in the energy and cable sector. With its 230 employees, and a yearly turnover of 60.5 million, GasCo can be seen as a large organization (European Union, 2003), but as a relatively small player in the grid operator market. The grid operator market in the Netherlands is divided in different geographic areas and people are not able to switch between grid operators and therefore all grid operators do have a monopolistic market position. The grid operator department is the largest and most important BU of GasCo and additionally GasCo has some smaller BUs that are active in markets that are related to infrastructure and energy sector. Data is collected in the period from May to July 2013 by conducting an onlinequestionnaire and 14 in-depth interviews.

Questionnaire

To ensure representativeness of the sample and to prevent respondent bias the online questionnaire was sent to all of the 230 employees with an accompanying letter to explain the purpose of the research.

Before the online questionnaire was sent, a BU manager sent a notice per e-email in advance to express the importance of the research for GasCo. After these e-mails employees further received two reminders in the subsequent weeks. Employees had the opportunity to start the online questionnaire on a preferred time within a timeframe of three weeks. This meant respondents had the possibility to start the questionnaire, pause and finish later. Results showed that questionnaires were filled in on different times and different days, so situation bias is highly unlikely. Out of the 230 employees who received the questionnaire 63 filled in and returned the questionnaire, resulting in an effective response ratio of 27.4%.

Out of the respondents 12 of them are female and 51 are male and the average age of the participants was 42 years. 22 of them work for BU A, eight for BU B, nine of them work for BU C, nine for BU D and 15 of the respondents work as supporting staff. “Response bias is always a concern when respondents volunteer for a study” (Monsen & Boss, 2009:83). To prevent response bias the general characteristics (in terms of age and gender) of this research were compared with data of personnel that was provided by GasCo and it is found that there were no large differences in characteristics between the respondents and the non-respondents, so it is assumed that there is no response bias.

To increase the validity of the findings from the experiment and to test the remaining part of the conceptual model triangulation was applied. In social science triangulation can be defined as: “the mixing

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19 of data or methods so that diverse viewpoints or standpoints cast light upon a topic” (Olsen, 2004: 3). The idea is that one can be more confident with a result if different methods lead to the same result. According to Olsen (2004) triangulation, besides increasing the validity of the claims made, also helps in deepening and widening the understanding of the results. Therefore, besides of questionnaires, in-depth interviews were conducted.

In-depth interviews

In-depth interviews were conducted among the director, all the nine managers of GasCo and with five randomly selected employees of different business-units and supporting departments. For the amount of five employees was chosen after a discussion with the principal. All interviews were used to deepen and widen knowledge about CE within GasCo and for understanding of the results of the questionnaire. The interviews with the non-managerial employees took place after they filled in the questionnaire, so that the researcher was able to ask an employee why he or she has given certain scores in the questionnaire. The managers have not completed the questionnaire and therefore these interviews were just scheduled by the management secretary within a timeframe of three weeks. All the interviews were conducted at different moments within a timeframe of three weeks to prevent circumstances bias. A list with functions of people who have been interviewed can be found in appendix B and the results of the interviews have been checked and approved by the interviewees to increase the controllability of the research. However, the transcriptions of the interviews are not included in this thesis, due to the confidentiality of the interviews.

In sum, the conclusions of this research are mainly based on the results of the online questionnaire and the interviews are mainly used to support these results and to deepen knowledge about the entrepreneurial processes. One of the advantages of using a quantitative instrument (online questionnaire) is that it makes the research easily replicable for other researchers and that it eliminates researcher bias (Cooper &

Schindler, 2006) .So other researchers can relatively easy imitate the research by conducting the same questionnaire among other organizations to control whether they get the same results. Next the measures that have been used in the process will be introduced and finally the techniques which are used to analyze the data will be presented.

Measures

In this section the measures of the variables are presented. In addition, demographic measures that were used as control variables are presented as well. The questions of the scales are originally in English and were for this research translated in Dutch. The questions were translated by the native Dutch researcher and checked by a native English speaker who has lived in the Netherlands for more than 40 years. The

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20 consultation of a native English speaker prevents respondent‟s bias which could have occurred due to poorly translated and constructed questions. The original and validated scales of the constructs were used to prevent researcher bias. A disadvantage of the use of the original scales is that most of the scales were developed to be conducted among managers and not for non-managerial employees. However, after a consultation with the supervisor, it was expected that employees would be able to answer the questions.

Organizational characteristics: The Corporate Entrepreneurship Assessment Instrument-CEAI (Kuratko et al., 1993; Hornsby et al., 2002) was used to measure the organizational factors that can be managed to create an internal environment that can foster corporate entrepreneurial activity within an organization.

Top-level management support for CE was measured by 19 items (e.g., senior managers encourage innovators to bend rules and rigid procedures in order to keep promising ideas on track), work discretion was measured by 10 items (e.g., I have the freedom to decide what I do on my job), rewards/reinforcement was measured by 6 items (e.g., my supervisor will increase my job responsibilities if I am performing well in my job), time availability was measured by 6 items (e.g., during the past three months, my work load was too heavy to spend time on developing new ideas), and organizational boundaries was measured by 7 items (e.g., In the past three months, I have always followed standard operating procedures or practices to do my major tasks). For each of these ﬁve scales, the participants responded to 7-point Likert-scales with responses ranging from 1= strongly disagree to 7= strongly agree.

Entrepreneurial Orientation- A nine-item scale developed by Covin & Slevin (1989) was used to measure EO. These items were based on the three dimensions initiated by Miller (1983), namely: innovativeness pro-activeness and risk-taking. Respondents were asked to indicate on seven-point Likert-scales the extent to which each item of the measure characterizes the strategic posture of their firms (e.g., In general, the top managers of my firm have: 1= A strong tendency for low-risk projects, versus 7= A strong tendency for high-risk projects).

There is a dispute about the level of depth in which EO should be measured. Authors like Miller (1983) and Covin & Slevin (1989) have treated EO as a unidimensional view, i.e. all dimensions are empirically related and are treated as one factor. Lumpkin & Dess (1996), on the other hand, stated that it has benefits to use a multidimensional construct on EO, because the dimensions may vary independently of each other depending on the environmental construct. In other words, risk-taking, innovativeness, and pro-activeness are treated as distinct but related factors. According to Monsen & Boss (2009) recent researchers have provided both theoretical and empirical justification for a multidimensional view of EO. The latest development will be followed and a multidimensional view on EO is used, also because a multidimensional view provides more detailed information.

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21 Market Orientation- In MO research two different scales were mostly used to measure MO, namely the MKTOR scale of Narver & Slater (1990) and the MARKOR scale of Kohli et al. (1993). The MKTOR scale was the first operational measure of MO and therefore used in this research. Just as with EO there is also a discussion in the field of MO about the depth you should measure MO, unidimensional or multidimensional? The scale of Narver & Slater (1990) is originally assumed to be a unidimensional construct and this construct is commonly used in the literature (Ward et al., 2006). Therefore in this research MO is assumed to be a unidimensional construct. The respondents were asked to indicate on seven-point Likert-scales the MO of their firm, where 1 = strongly disagree to 7 = strongly agree (e.g., our business strategies are driven by our beliefs about how we can create greater value for customers).

Engagement- Two scales can be used to measure engagement of employees, namely Gallup Workplace Audit (GWA) developed by Harter et al. (2002) and the Utrecht Work Engagement Scale (UWES) of Schaufeli et al. (2002). For this research the GWA of Harter et al. (2002) is used, because this scale fits better with the focus of the research. This scale assesses the degree of work engagement of employees (e.g., at work, my opinions seem to count); participants responded on a seven-point Likert-scale, where 1

= strongly disagree to 7 = strongly agree. According to Harter et al. (2002) the 12 antecedent items to measure engagement of employees should be treated as a unidimensional construct.

Extra-role behavior- The six-item scale of Van Duyne & LePine (1998) is used to measure extra-role behavior of employees. The respondents were asked to indicate on seven-point Likert-type scales the extra-role behavior of themselves, where 1 = strongly disagree to 7 = strongly agree (e.g., speaks up and encourages others in this group to get involved in issues that affect the group).

Innovative behavior- To measure innovation behavior respondents were asked to identify (1) the number of new ideas suggested within the last six months. According to Hornsby et al. (1999) & Kuratko et al.

(2005b) this represents an indication of innovative behavior. Where Hornsby et al. (1999) used six questions to measure innovative behavior of employees, the researcher of this research has chosen to measure innovative behavior by only one of these six questions. Answers on most of the questions use by Hornsby et al. (1999) do not necessarily represent innovative behavior of the employee that contributes to the innovativeness of the organization. For example, Hornsby et al. (1999) asked respondents how many of the ideas they have proposed were implemented and how many ideas they implemented without official organizational approval. Respondents also were asked to indicate the number of times they bypassed normal channels to pursue an innovative idea. Answers on these questions also depend on the willingness of management to innovate and the willingness to implement innovation that is proposed by employees. If management support many innovative ideas the amount of ideas implemented without

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22 approval will be low, however this says nothing about the innovative behavior of an employee. One other question Hornsby et al. (1999) asked to measure innovative behavior was focused on the time someone spend on thinking about work related problems. However, it is the action of proposing innovative new ideas that can increase the organization‟s innovativeness, not the time someone spends on thinking about new ideas. If someone spends a lot of time on thinking on innovative ideas, without proposing these ideas it will not increase the innovativeness of the organization. Hornsby et al. (1999) also measure innovative behavior by the number of times someone talked outside their department about innovative ideas;

however someone might talk with ten different people about the same idea. So the amount of times someone talked about innovative ideas does not necessarily give a good indication of the contribution someone has to the innovativeness of an organization. So five of the six questions that Hornsby et al.

(1999) used to measure innovative behavior of employees, do not exactly measure the contribution an individual has to the innovativeness of the organization. Therefore in this research innovative behavior of employees is only measured by the number of ideas they have suggested within the last six months.

Demographic Measures- The control variables used are: gender and age of the respondents. Respondents were asked to identify (1) their age. Gender is coded as followed (1) man (2) woman.

Market environment- Another control variable used is: the market environment of the BU. Employees working for a BU that is active in a monopolistic market environment are coded as “0”, employees that are working for a BU that is active in a competitive market environment are coded as “1”. Employees working for supporting departments have been excluded for this control variable, because they execute tasks for BUs that are active in both market environments within GasCo.

Before it was allowed to put together the questions into one variable the internal consistency and reliability of the instrument need to be controlled for.

Reliability

The measures that have been presented above have been tested on internal consistency by calculating the Cronbach‟s alpha. The Cronbach‟s alpha is an appropriate instrument to check the internal consistency and instrument reliability of the measures used (Keller, 2012). Internal consistency means that the questions used for one variable measure the same underlying construct (Huizingh, 2007). According to Malhorta (2007) the minimum Cronbach‟s alpha score needed for internal consistency is 0.7, so if Chronbach‟s alpha is >0.7 the constructs were regarded internally consistent and reliable, otherwise the constructs should be excluded. In table one underneath the alpha scores on the different constructs can be found.

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Table 1: Chronbach’s alpha score α Entrepreneurial Orientation

- Risk taking 0.76

- Pro-activeness 0.66

- Innovativeness 0.72

Market Orientation 0.87

Internal characteristics

- Management support 0.87

- Work discretion 0.92

- Reward/reinforcement 0.74 - Time availability 0.78 - Organizational boundaries 0.66

Employee engagement 0.79

Extra-role voice behavior 0.89

Table one shows that the alpha scores on pro-activeness and organizational boundaries are not high enough according to Malhorta (2007). However, Covin & Slevin (1989), and Hornsby et al. (2002) used a cut-off score of .6 when they developed the scales and since then many researchers used the scales and considered them as reliable, so both are considered as reliable. By time availability the fourth question was deleted to obtain an acceptable alpha score. The second question of work discretion and the first and fifth questions of time availability are recoded, because these questions were asked reversed. After these adjustments all constructs had an alpha score higher than 0.7, so it is assumed that the questions in these cases measured the same construct.

Normally most researchers also conduct an exploratory factor analysis to uncover the underlying structure of a relatively large set of variables. However, this is not necessary because in this research only valid and tested scales are used so it is assumed that the questions measure the same construct.

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Analysis &Results

The aim of this section is to present the results of the data analyses carried out. SPSS statistics 17 is used to analyze the quantitative data obtained during the research. First, means and standard deviations of the variables are presented in table two to get a good insight in the obtained data.

Table 2: means and standard deviations of the variables *

mean s.d. N

Entrepreneurial Orientation

- Risk taking 3.04 1.11 63

- Pro-activeness 3.66 1.22 63

- Innovativeness 3.58 1.33 63

Market Orientation 3.79 0.90 63

- Management support 3.86 0.85 63

- Work discretion 5.07 1.20 63

- Rewards/reinforcement 4.45 1.07 63

- Time availability 3.85 1.13 63

- Organisational boundaries 4.10 0.92 63

Engagement 4.94 0.86 63

Extra-role voice behavior 5.32 1.09 63

Innovative behavior 3.62 2.88 63

*N= sample size, s.d. = standard deviation, all variables are measured on ordinal scales with ranges from 1 to 7 (except for innovative behavior that was measured on a ratio scale)

From the table above it can be seen that the average scores on the constructs of EO are low and have a relatively high standard deviation. Work discretion has the highest average score of the internal characteristics that can stimulate entrepreneurial behavior among employees, followed by rewards/reinforcement. Innovative behavior is measured on a ratio scale and therefore has a higher standard deviation than the other variables in this table. However, data of innovative behavior is normally distributed.

Hypotheses Tests

In this section the hypotheses that are proposed in the theoretical part will be tested. First, let‟s summarize the hypotheses in table three underneath to get a clear overview of the hypotheses.

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Table 3: hypotheses analyzed with regression analyses

H1 a Perceived by employees innovativeness of the top management will be positively related to engagement of employees

b Perceived by employees pro-activeness of the top management will be positively related to engagement of employees

c Perceived by employees risk taking of the top management will be positively related to engagement of employees

H2 Perceived by employees market orientation of an organization will be positively related to engagement of employees

H3 a Perceived by employees management support will be positively related to employee engagement

b Perceived by employees work autonomy will be positively related to employee engagement c Perceived by employees rewards/ reinforcement will be positively related to employee

engagement

d Perceived by employees time availability will be positively related to employee engagement e Perceived by employees organizational boundaries will be positively related to employee

engagement

H4 Engagement of employees will be positively related to extra-role voice behavior of the same employees

H5 employees with a higher level of extra-role voice behavior will have a higher level of innovative behavior

Now the hypotheses are fresh in mind the first hypotheses will be tested. To analyze the relations between the different variables and to test the hypotheses (multiple) linear regression models have been used.

However, before the linear regression models could be conducted, it had to be checked if the following assumptions were met: 1) data has to be ratio or interval, 2) data has to describe the relationship between a dependent and an independent variable 3) data has to be normally distributed, , 4) data has to be independent (Keller, 2012; Huizingh, 2007). First, the data obtained with the Likert-scales is ordinal and not ratio or interval. Nevertheless, it is generally accepted that data from Likert-scales is treated as being interval (Cooper & Schindler, 2006). Secondly, the data has to describe the relationship between a dependent and an independent variable. In the theoretical part this is explained and therefore this assumption is met.

The third assumption that needs to be met is normal distribution of the data. The Shapiro-Wilk test is an appropriate test to determine if the data is normal distributed (Yap & Sim, 2011). If the test is significant

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26 (p<0.05) the distribution does significantly differ from a normal distribution. Results of the Shapiro-Wilk test (p < 0.05) in table four underneath show that scores were normally distributed for the scales of innovative behavior, risk taking, market orientation, and management support, reward reinforcement time availability, and work engagement but not for work discretion, extra-role voice and innovative behavior.

Table 4: Shapiro-Wilk test *

statistic sig.

Entrepreneurial orientation

- Risk taking 0.970 0.120

- Innovativeness 0.972 0.159

- Pro-activeness 0.970 0.122

Market orientation 0.972 0.155

- Management support 0.969 0.111 - Work discretion 0.903 0.000 - Reward/reinforcement 0.972 0.163 - Time availability 0.988 0.796 - Organizational boundaries 0.965 0.068

Employee engagement 0.979 0.375

Extra-role voice behavior 0.842 0.000

Innovative behavior 0.849 0.000

*Test is significant at (p<0,05)

So according to the Shapiro-Wilk test only a part of the data is non-normal distributed. However, according to the central limit theorem the data are assumed to be normally distributed when the sample size is at least 30 (Keller, 2012). This theory says that the distribution of any sample mean has an approximate normal distribution and that the approximation becomes almost normal as the sample size gets larger (Keller, 2012). The sample size is large enough (63) to assume that the data are normally distributed. This is further enhanced by visual inspection of the graphs according to the Normal Q-Q Plot theory. This theory said that when data is normally distributed, the circular dots that represent data points will be positioned approximately along the diagonal line in the Normal Q-Q Plot graphs (Keller, 2012).

All the q-plots diagrams are checked and all variables seem to be normally distributed. Thus, despite the Shapiro-Wilk test that showed some non-normal distribution it is assumed that the data used in this research were normal distributed.

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27 Finally, the independence of the data was assumed because the employees that participate conduct the questionnaire independently of each other. All the assumptions were met, so linear regression models are appropriate to measure correlation between the variables.

Influence of EO and MO on engagement of employees

A multiple regression model was conducted to predict employee engagement from the constructs of EO (innovativeness, pro-activeness and risk taking) and MO. EO and MO were taken together in a multiple regression model because the strategic orientations operate in concert with one another to explain variation in employee engagement.

A multiple linear regression can examine the multiple factors that contribute to employee engagement and control for the influence of control variables. The control variables age and gender of the respondent are included in this model, to determine if these control variables influence employee engagement. The results of the regression model underneath (F (6, 56) = 1.205, P>0.05, R² = .114, and the P-value of .317) shows us that this multiple regression model is not significant. The results reported in table five underneath confirm that none of the possible antecedents of employee engagement have significant influence on employee engagement.

Table 5: multiple regression analysis (1) of the constructs of EO and MO on engagement of employees

Variable B SE coef ϐ t sig.

Intercept 5.022 .824 6.093 .000

Age of the respondent -.014 .011 -.171 -1.306 .197

Gender of the repsondent .285 .287 .132 .992 .326

Entrepreneurial Orientation

- Innovativeness -.214 .110 -.334 -1.954 .061

- Pro-activeness -.053 .091 -.075 -.577 .566

- Risk taking .245 .128 .317 1.911 .061

Market Orientation .103 .142 .109 .726 .471

note: **P<.05; B=unstandardized regression coefficient; SE= standard error of the coefficient; ϐ= standardized coefficient

Another multiple regression model was conducted to test if there were differences in employee engagement between employees of BUs that are active in a monopolistic market and employees that work for BUs that are active in a competitive environment. In this analysis employees working for supporting departments were excluded, because they execute tasks for BUs that are active in a monopolistic market environment and for BUs that are active in a competitive market environment. Results in the table six

Employee engagement

Table of Contents

Introduction

Theoretical background

Entrepreneurship within an organization

Employee engagement

Entrepreneurial Orientation & employee engagement

Market Orientation & employee engagement

Organizational characteristics & employee engagement

Employee engagement & extra-role voice behavior

Extra-role voice behavior & innovative behavior

Conceptual model

Methodology Data collection

Measures

Analysis &Results

Hypotheses Tests