It has long been established that centralization negatively impacts entrepreneurial orientation (EO) of large organizations (Caruana, Ewing, and Ramaseshan 2002; Caruana, Morris, and Vella 1998; Miller 1983). Centralization may limit the exchange of entrepreneurial ideas and make it difficult for employees to gain support for their ventures (Zahra & Salvato, 2004). We propose however that acquisition strategy might mitigate this negative impact of centralization on EO. Formal checks, controls and rigid structures of centralized organizations may tend to inhibit entrepreneurial behavior within organizations (Sinetar, 1985; Morris, Avila and Allen, 1993). This however does not preclude acquiring entrepreneurial entities which would potentially be a source of growth (Burgelman 1984), relevant capabilities, inventions and innovations. As a rule, it is very costly to develop EO, especially for large centralized companies (Ginsberg & Hay, 1994). Thus, acquisitions may be the more attractive option as the alternatives are expensive or not even feasible (Salvato, Lassini & Wiklund, 2007). Such strategy would allow the large centralized firm to enjoy EO spillovers in terms of innovativeness (entering new markets), pro-activeness (being at the forefront of acquiring the most promising new ventures), risk-taking (e.g. risk of failing to capitalize on the M&As synergies).
Pastwa, Anna M.; Verwaal, Ernst; and Saly, Aart Willem
"CAN LARGE CENTRALIZED COMPANIES DEVELOP ENTREPRENEURIAL ORIENTATION THROUGH AN ACQUISITION STRATEGY? (INTERACTIVE PAPER),"
Frontiers of Entrepreneurship Research: Vol. 36
, Article 14.
Available at: https://digitalknowledge.babson.edu/fer/vol36/iss13/14