Intrapreneurship: Productive and Non-Productive

Is Intrapreneurship Always Beneficial?

Business-related academic fields broadly refer to entrepreneurial activities within established firms as “corporate entrepreneurship,” but there is no universally accepted definition (Kuratko et al., 2015; Sharma & Chrisman, 1999). Birkinshaw (2003) disentangles (at least) four strands of literature with different assumptions and objectives: corporate venturing, intrapreneurship, bringing the market inside, and entrepreneurial transformation. Scholars within the intrapreneurship tradition focus on employees and how firm structure and culture affect their entrepreneurial activities. The literature also discusses how employees can abide by or shape firm rules and how managers can affect employees’ intrapreneurial intentions. Here, intrapreneurship is commonly seen as a prerequisite for firms to change and survive in the long run. The growing attention is accompanied by attempts to measure intrapreneurship. Since 2011, the Global Entrepreneurship Monitor (GEM) measures country level intrapreneurship, defining intrapreneurs as individuals who continuously develop new business activities for their primary employer. The definition is representative in treating intrapreneurship as a productive endeavor in the sense that it increases the joint surplus, and should be encouraged.

We challenge the outlook that intrapreneurship is always beneficial. Admittedly, some evidence indicates that intrapreneurship helps managers to revitalize firms, to innovate, and to enhance their overall business performance (Antoncic & Hisrich, 2001; Kuratko et al., 1990). However, firms do not necessarily perceive intrapreneurship in a positive light. Analysis of 2,000 medium-sized tech-businesses suggests that intrapreneurs often end up in an adversarial role: “Intrapreneurs are very important to the company but they are seen as enemies because they question long-standing paradigms” (Baltes, 2016). But is a company always unwarranted in seeing the intrapreneur as an enemy? Not necessarily.

The Schumpeterian–Baumolian View of Entrepreneurship

Schumpeter’s conception of the entrepreneur as the person responsible for innovation—defined as the creation and commercialization of new combinations of (old and new) knowledge—is an obvious starting point for thinking about intrapreneurship: Pinchot (1985), who coined the term, explicitly described intrapreneurs as “[t]hose who take hands-on responsibility for creating innovation of any kind, within a business.” And while there are other important conceptions of what entrepreneurs do (Foss & Klein, 2012; Hébert & Link, 2006), such as being alert to opportunities (Kirzner, 1973), and exercising judgment under uncertainty (Knight, 1921), the Schumpeterian perspective has high empirical relevance; Baumol (2010) estimates that more than nine tenths of the rise in GDP per capita since 1870 can be attributed to innovation.

Schumpeterian researchers consequently see the entrepreneurial innovator as the primus motor for economic growth (Henrekson & Stenkula, 2016). That said, wide-tent definitions of entrepreneurship successfully incorporate several aspects simultaneously; for example, Leyden and Link (2015) conceive of entrepreneurship as the (Schumpeterian) process of acquiring knowledge to produce innovations while dealing with (Knightian) uncertainty (for other wide-tent definitions, see Henrekson & Stenkula, 2016; Wennekers & Thurik, 1999). Whereas our conception of intrapreneurship is Schumpeterian at its core, we also take Knightian uncertainty into account, to add further realism to the model we shall eventually propose.

To Schumpeter (1934), innovations could take various forms in addition to mere technological improvements. He enumerated five such forms: the introduction of a new good, the introduction of a new method of production, the opening of a new market, the conquest of a new source of supply, and the carrying out of the new organization of any industry (1934, p. 66; cf. OECD, 2010). Arguably, most of the innovative acts that Schumpeter lists could be carried out by intrapreneurs as well as by independent entrepreneurs (cf. Pinchot, 1985). That said, Baumol (1990) extends Schumpeter’s list by hypothesizing that entrepreneurs use their talents to maximize their own utility rather than social welfare.

Thus, Baumol “undermines a fundamental assumption of most theories of entrepreneurship, namely, that entrepreneurship is always beneficial” (McCaffrey, 2018, p. 6). Instead, the social reward structure for economic behavior affects the allocation of entrepreneurial talent (cf. Murphy et al., 1991). In practice, this means that a society’s institutions—the formal and informal rules of the game (North, 1990)—influence the nature of entrepreneurial activities, and whether they are productive (corresponding to a bigger social pie), unproductive (the size of the pie remains unchanged), or destructive (the pie shrinks). In neoclassical production terms, the distinction corresponds to an outward (productive) shift, a non-shift (unproductive), or an inward (destructive) shift in the production possibility frontier (Coyne & Leeson, 2004). Although all types of entrepreneurial activity occur in all societies (e.g., Acemoglu, 1995; Coyne & Leeson, 2004; Desai & Acs, 2007; Smallbone & Welter, 2001; Sobel, 2008), their relative allocation appears to be an important determinant for each society’s level of welfare and growth rate.

Different contexts carry different welfare implications for different people (Davidson & Ekelund, 1994; Desai & Acs, 2007), and Baumol (1993) himself acknowledges that his categorization is not always straightforward. ¹ Still, the distinction has proven an intuitive and appealing way of classifying activities that require entrepreneurial talent (e.g., Minniti, 2008). Notably, it offers an important benchmark for judging the outcome of the entrepreneurial process, which, we argue, can also be extended to judge the outcome of the intrapreneurial process. That said, as “many studies imply that there is little difference between unproductive and destructive entrepreneurship” (McCaffrey, 2018, p. 187), some researchers group the unproductive and destructive categories together, usually under the label “non-productive” (cf. Coyne et al., 2010; Douhan & Henrekson, 2010; Sobel, 2008), an approach we shall follow.

“To derive more substantive results from an analysis of the allocation of entrepreneurial resources,” Baumol (1990, p. 897) expands Schumpeter’s list with “such items as innovations in rent-seeking procedures, for example, discovery of a previously unused legal gambit that is effective in diverting rents to those who are first in exploiting it.” His subsequent historical account illustrates how flawed rules of the game can result in entrepreneurs leading “a parasitical existence that is actually damaging to the economy” (p. 894), ² before highlighting rent seeking as the type of unproductive entrepreneurship that seems most relevant today. In an empirical study finding support for Baumol’s central argument, Sobel (2008) makes a distinction between “investing entrepreneurial energies into productive market activities versus unproductive political and legal activities (e.g., lobbying and lawsuits).” According to Foss and Klein (2012, p. 197), “(r)ent-seeking, influence activities, and even fraudulent or criminal behavior, both inside and outside organizations, can be modeled as ‘entrepreneurial’ … but with questionable social benefit.” The list can be expanded to include other (creative and non-routine) activities that are likely to result in a net reduction of social income and wealth.

Baumol’s argument has been influential among economists interested in entrepreneurship (e.g., Boettke & Coyne, 2003; Boettke & Leeson, 2009; Elert & Henrekson, 2017; Sobel, 2008), and also been integrated into core concepts of entrepreneurship theory, for example, by Eckhardt and Shane (2003) who identify the choice between productive and unproductive entrepreneurship as a major source of entrepreneurial opportunity. Surveying Baumol’s impact, McCaffrey (2018) states that “entrepreneurship research now regards Baumol’s theory as correct, and even foundational” (cf. Davidsson, 2016), before outlining two relevant strands of criticism. According to the institutional critique, the relationship between institutions and entrepreneurs is bidirectional, in that entrepreneurs can affect institutional change (cf. Douhan & Henrekson, 2010; Elert & Henrekson, 2017). The second criticism, associated with, for example, Foss and Klein (2012), argues that key Baumolian insights “can be retained without using the Schumpeterian, innovation-based framework on which it has so far been based” (McCaffrey, 2018, p. 15). In this view, the chief problem with Baumol’s theory is that it takes no account of uncertainty or judgment. We draw on both critiques when extending Baumol’s theory to intrapreneurship.

Extending Baumol’s Framework to Intrapreneurship

Even though researchers have embraced Baumol’s (1990) fundamental insight, among the few who draw the corresponding implications for intrapreneurship are Foss et al. (2007), who explore the idea that intrapreneurship can destroy value (see also Foss & Klein, 2012). Drawing on Knight (1921), they argue that firms exist as manifestations of entrepreneurial judgment under uncertainty. Entrepreneur-owners can delegate this judgment, effectively making employees proxy-entrepreneurs in a nested hierarchy of judgment. However, “[d]elegated rights can be used in both beneficial and harmful ways, presenting managers with a tradeoff between encouraging beneficial entrepreneurship and facilitating harmful entrepreneurship inside the firm” (Foss et al., 2007, p. 1893). Managing the tradeoff between productive and destructive proxy-entrepreneurship becomes a critical management task, for which ownership plays a key role, since it “conveys the right to define key elements of this organizational structure” (Foss & Klein, 2012, p. 220, cf. Foss & Klein, 2015).

While this article is indebted to Foss et al.’s (2007) Knightian take on intrapreneurship, we believe there is added value to approaching intrapreneurship from a Schumpeterian–Baumolian perspective, both for emphasizing innovation (in line with Pinchot’s [1985] conception of intrapreneurship), and for putting institutions front and center. Appropriately extended, a Baumolian framework reveals how the rules of the game at different levels of social analysis shape the productive character of intrapreneurship in heretofore unanticipated ways, and how intrapreneurship shapes those rules in turn. Yet, we acknowledge that like all entrepreneurs, intrapreneurs operate under Knightian uncertainty and make judgments about the future state of the world (Foss & Klein, 2012; cf. McCaffrey, 2018). Hence, intrapreneurship is an innovative process that takes place under uncertainty (cf. Leyden & Link, 2015). This approach reveals that intrapreneurship is at least as multifaceted a phenomenon as entrepreneurship.

Applied to intrapreneurship, Baumolian logic implies that core intrapreneurial talents are used to maximize individual utility rather than firm profits or social welfare. The rules intrapreneurs face help determine whether their activities will be productive, unproductive, or destructive, but these rules appear on two social levels: the firm level and the societal level. For example, whereas social security and labor-market regulation appears to affect the allocation of entrepreneurial talents between intrapreneurship and entrepreneurship (Elert et al., 2019; Liebregts & Stam, 2019), the intrapreneur faces firm-level rules that may cover everything from explicit intrapreneurship policy, to intra-company trust and other workplace norms (Antoncic & Hisrich, 2001). The recognition that entrepreneurs face different levels of institutions, with different effects and persistence is not new (Bylund & McCaffrey, 2017; Elert & Henrekson, 2016), but that this is so also for the intrapreneur has yet to be appreciated. For example, Foss and coauthors only discuss the organizational context within the firm as relevant for intrapreneurship (Foss & Klein, 2012; Foss et al., 2007).

As we shall argue, the two sets of rules are sufficiently distinct to be separated analytically, and taking both into account has substantial ramifications for the outcome of the intrapreneurial process, since the institutional dynamics between different levels can result in situations when an intrapreneurial action undertaken by an employee can be harmful to the firm but beneficial for society at large, and vice versa. The chief implication is that assessments of whether intrapreneurship is productive or non-productive look different depending on whether one applies a firm perspective or a societal perspective, and both are needed. In practice, this means that the analysis encompasses three levels, including that of the individual (intrapreneurial) decision maker. To understand the overall incentive structure faced by the intrapreneur, we will provide a clearer view of the institutional interplay in the next section.

The Model

A consequence of the interplay between the intrapreneur and the two rule levels is that while an intrapreneur may engage in innovative activities that are beneficial for society and for the employer, such a harmonious outcome cannot be taken for granted. Figure 1 describes the situation for an intrapreneurial employee facing the rules of the firm and of society, classifying intrapreneurial outcomes depending on whether they are beneficial or harmful for society and/or for the firm, taking into account the fact that a particular outcome can come about in several ways (e.g., a positive outcome may occur either because an individual follows a beneficial rule or disregards a harmful rule). The figure aims to structure the discussion and does not claim perfect and mutually exclusive categorization; on the contrary, the intrapreneur can engage in several of these responses, either simultaneously or sequentially. However, intrapreneurial action aimed at innovation is always surrounded in uncertainty (McCaffrey, 2018), suggesting that intrapreneurship can become non-productive in two ways: first, as Baumol (1990) recognizes, when an intrapreneur anticipates that the rewards to non-productive activities will be relatively greater and chooses to pursue them; second, welfare outcomes are always uncertain in advance, a fact that may be particularly true when low-quality rules (at the firm level or the societal level) interfere with intrapreneurs’ decision-making and distort their judgments (cf. McCaffrey, 2015).

OPEN IN VIEWER

Figure 1

Fully and mainly productive and non-productive intrapreneurship.

Moreover, the model implies that the entrepreneurially gifted individual has, at least temporarily, made the (conscious or unconscious) choice to become an intrapreneur, rather than an independent entrepreneur who starts a firm. ⁴ This choice is shaped by societal rules, such as employment legislation and the social security system that often impose a heavy opportunity cost on an individual leaving safe employment to start a firm (Elert et al., 2019). These and other barriers to new firm entry may make the choice to pursue intrapreneurship a second-best route (Lucas & Fuller, 2017), but the option to become an entrepreneur will always be available to the intrapreneur and cast its shadow over model outcomes (perhaps especially so for scenario B).

Scenario A is straightforward: the intrapreneurial activity is beneficial for the firm and society. Such fully productive intrapreneurship is analogous to productive entrepreneurship, as it commonly takes the form of a novel combination of knowledge that is commercialized in the form of a new product or service that the firm recognizes that it can sell for a profit, resulting in increased consumer surplus or societal well-being. However, this innovative process is always subject to uncertainty and therefore requires judgmental decision-making, as suggested by the development of Post-it Notes at 3M: It was far from evident that Arthur Fry’s experimentation with a new kind of glue would amount to anything useful, and the development took several years and faced substantial opposition within the firm. Still, Fry persisted. That he could do so was largely a result of 3M’s policy permitting their employees to devote 15% of their time to realize their own ideas (Pongracic, 2009).

This forcefully illustrates that rule quality (at the firm level or the societal level) will affect intrapreneurs’ decision-making processes, helping or distorting their judgments (McCaffrey, 2018). As such, fully productive intrapreneurial ventures often come about in conducive corporate environments with clear and well-established procedures and norms that support employee initiatives and reward productive intrapreneurial activity. Such an environment is likely easier to achieve when society’s rules are supportive, that is, when the two rule levels are complementary and conducive to productive activity. Yet, it is possible to conceive of situations when this is not the case, for example, when a multinational firm locates in an underdeveloped country with poor institutional quality. An intrapreneur may then be forced to break society’s rules in order to follow the firm’s rules, but the result may still be beneficial for the firm and for society.

Scenario B is a case of mainly productive intrapreneurship, in the sense that the intrapreneur’s innovation is beneficial from a societal point of view but harmful for the firm. This may occur when the intrapreneur attempts to commercialize a novel combination of knowledge into a product or service that undercuts the firm’s business model, consumes resources which are dearly needed elsewhere, or is considered a waste by firm management. The uncertainty of the intrapreneurial process means that such adverse effects are rarely foreseen in advance, but more likely when the two rule levels conflict, with one set being unconducive to intrapreneurship: For example, firm-specific factors such as organizational inertia, cultural resistance, and a lack of incentives may make established firms resistant to socially productive internally generated innovations (Ford & Probert, 2011). Formal firm rules may also (unintentionally) discourage innovations, for example, by requiring employees to devote a considerable amount of their time to following detailed protocols and filling out reports (Erixon & Weigel, 2016, p. 68ff). Disregarding firm rules and norms may then be necessary to generate a socially productive outcome. ⁵

Scenario B can also occur when societal and firm rules align, for example, if the firm has made an over-commitment to current customers (Ford & Probert, 2011). In such instances, innovations rarely go beyond the prototype stage. Arthur Fry’s development of Post-it Notes at 3M almost suffered this fate, but the initial skepticism eventually gave way to the decision to produce and sell what would become one of the firm’s most successful innovations (Pongracic, 2009), turning it into an example of fully productive intrapreneurship. A less successful case occurred when Nokia rejected an employee’s touch-screen smartphone prototype without a hard keyboard 3 years before the launch of the first iPhone (Erixon & Weigel, 2016, p. 128). Nokia’s specialization became a chief impediment to the innovation since its application charted a different future than the one in which the firm had invested. Similar developments occurred at Kodak (analog vs. digital cameras) and Facit (mechanical vs. digital calculators; Sandström, 2010). That said, uncertainty means that failure is a potential outcome of all intrapreneurial processes, and firms and employees may learn from abandoned projects to develop successful innovations in the future. A firm culture with some tolerance of failures likely helps spur fully rather than mainly productive intrapreneurship (Tian & Wang, 2014).

Scenario B is intimately related to the aforementioned choice between intrapreneurship and entrepreneurship, since it often causes the employee to leave and start a new firm. Inc.500’s 1989 list of the 500 fastest-growing private companies in the United States saw 71% of 100 founders report that they were developing an idea first encountered in previous employment (Bhidé, 2000). Conflict and disagreement between R&D workers and their managers lie at the root of many spinoffs and spinouts (Klepper & Thompson, 2010; Klepper, 2009), and firms appear to make extensive use of ideas that employees first developed at a prior employment (Singh & Agrawal, 2011). In fact, a spinoff can be seen as an intrapreneur’s attempt to bypass a lower set of rules that are deemed too constraining, since he or she will only have to deal with society’s rules when becoming an entrepreneur (cf. Bylund & McCaffrey, 2017). ⁶ The ensuing competition likely harms the former employer but may be outweighed by the fact that a socially desirable idea ends up being exploited, while forcing the former employer to reinvest profits in innovations to keep its market position.

Scenario C describes mainly non-productive intrapreneurship, meaning that an intrapreneurial activity is beneficial for the firm but harmful to society. This situation becomes more likely when firm rules and norms prescribe different actions than society’s rules. Notably, many large firms employ lobbyists skilled at navigating the regulatory process, acquiring transfers, and engaging in unproductive activities, which, if they contain a sufficiently novel or creative element, can reasonably be labeled intrapreneurship. In the extreme, this category extends to white-collar crimes and activities that can, at a minimum, be deemed to harm society.

The creation of Collateralized Debt Obligations (CDOs) or credit default swaps to help firms avoid capital requirements by technically removing risk from the balance sheet may be one such example, as such financial instruments constitute novel combinations of knowledge. However, given the inherent uncertainty of the intrapreneurial process, it is less apparent that the instruments’ creators intended them to be non-productive for society. Another example is environmental misbehaviors, which “often eclipse the scope and reach of the criminal law” (Sollund, 2012, p. 3) and become possible because companies arm themselves with employees with intimate knowledge of a weak environmental regulatory regime, which they use to circumvent or even break laws regulating, for example, pollution and toxic waste disposal (Nurse, 2015). However, the firm and its intrapreneurs may see such seemingly non-productive intrapreneurial activity as necessary inputs for productive activities (Lucas & Fuller, 2017).

Finally, in scenario D, we are dealing with fully non-productive intrapreneurship, which is harmful to the firm and to society. Just like Baumol’s non-productive entrepreneurs often rent-seek against society, employees in this category often use their intrapreneurial talents to maximize a firm division budget even though resources are better needed elsewhere, or engage in other zero- or negative-sum games. In a British survey, most firm managers state that to succeed, they have to play politics at least part of the time, and 83% concur that “politics is played at all organizational levels” (Buchanan, 2008). Again, however, uncertainty shrouds all such activities, notably uncertainty of the institutional kind (Bylund & McCaffrey, 2017), suggesting that such non-productive intrapreneurial behavior may occur because firm rules and norms are conflicting or too complex, unintentionally encouraging unproductive behavior.

The fully non-productive outcome can also result from an abject breaking of rules that are conducive to productive behavior. In a survey, 75% of managers were willing to destroy economic value to keep firm numbers predictably up (Graham et al., 2005). Outright embezzlement and fraud against the parent company are also examples of fully non-productive intrapreneurship if they are sufficiently novel and creative. A poignant example involves a manager who was reimbursed for over $1.2 million in false expenses through a complex web of deception, involving fake companies, fake invoices, and fake expense reports (Bilski, 2018). Enron is another case in point: while the company’s intrapreneurial culture led Fortune to dub it as “America’s most innovative company” 1996–2001, it was revealed to foster massive creative accounting fraud, eventually resulting in company bankruptcy. The example shows how failure of control and governance can result in non-productive intrapreneurship (Birkinshaw, 2003).

To summarize, scenario A is the least conflict-ridden, because an intrapreneur’s actions benefit the employer and society. Scenario D—when an intrapreneur’s actions harm the employer and society—is its obverse image. Here, the incentives of society and the firm may once more align, in the sense that it is in the interest of both to put an end to the intrapreneur’s non-productive behavior. Scenarios B and C are more complicated, and more interesting from a researcher’s point of view. In Foss et al.’s (2007) parlance, scenarios A and C may both be considered examples of when an entrepreneur successfully derives judgment to proxy-entrepreneurs, to the benefit of the firm. Still, the two scenarios’ welfare implications for society are very different. Likewise, scenarios B and D both entail unsuccessfully derived entrepreneurial judgment, but their differing societal implications should be acknowledged.

Under scenario B, the intrapreneur’s actions harm the firm but are beneficial for society. The problem is that the firm has every incentive to stifle intrapreneurship which it perceives as a threat or a waste, even though furthering it would be productive for society—unless the firm is wrong. The uncertainty of the intrapreneurial process may cause managers or owners to erroneously dismiss an innovation that would in actuality benefit the firm. Exploring an innovation may also reduce the company’s surplus in the short run but be necessary in order for the company to flourish and survive in the long run. The development of Post-it Notes at 3M is a case in point. When such intrapreneurial innovations are discouraged, we are dealing with what may be labeled a Type 2 error from society’s perspective—a failure to identify and promote a socially valuable innovation (Johansson, 2010). A common “solution” to the problem is that the intrapreneur quits, to create a new firm or find an employer more susceptible to the idea. If the intrapreneur is convinced that the innovation entails value for society and can be sold for a profit, the impetus for doing this should be large (unless such “treacherous” behavior is hindered, for example, by means of non-disclosure clauses, see Starr et al., 2015).

Conversely, scenario C is desirable to the firm but detrimental to society, conforming to a Type 1 error from a societal perspective: it is not just a failure to eliminate failing projects, but the encouragement of projects that harm society. Nonetheless, a profit-driven firm may endorse the intrapreneur’s behavior or even cover it up if it is illegal. Such situations make loyalty a double-edged sword. If allegiance to the firm leads an intrapreneur to engage in morally repellent or illegal practices, society loses out. In such a situation, disloyalty to the employer is to be preferred, or rather loyalty to society that may make someone engage in whistle-blowing.

Intrapreneurship and Institutional Change

The relationship between institutions and entrepreneurship appears bidirectional (cf. Elert & Henrekson, 2017), and intrapreneurship may be a similar force for endogenous change within and beyond firms, in several ways (cf. Mahoney & Thelen, 2010). First, an intrapreneur may “creatively circumvent constraints, for example by finding ways to hide their behavior, or inventing behaviors that are not formally prohibited” (Foss & Klein, 2012, p. 200), effectively changing the impact of rules indirectly (Elert & Henrekson, 2016). Moreover, when scenario B results in a spin-off, this may be considered an institutional action: The intrapreneur elects to sidestep constraining (firm-level) rules and will, in the new role as entrepreneur, “only” be constrained by society’s rules (Bylund & McCaffrey, 2017). The creation of a new firm also spawns a new set of firm rules that apply to a new generation of would-be intrapreneurs.

Furthermore, fully productive intrapreneurial innovation will likely encourage a firm to try to repeat the success, for example, by decentralization or coming up with “a compelling narrative that promotes the entrepreneurial self-image among the employees” (Pongracic, 2009, p. 106; cf. Sautet, 2000). As mentioned, 3M early on recognized the potentials of intrapreneurship, trying to harness it by allowing employees to spend 15% of their work time on their own projects. And while 3M’s management initially resisted some intrapreneurial innovations, the firm has had a habit of embracing them once their usefulness become more apparent. 3M has even used these intrapreneurs’ uphill battles as instructive examples: “By treasuring such stories, 3M encourages others to try to innovate despite opposition” (Pinchot, 1985, p. 47). Such structures of shared meaning are likely conducive to fully productive intrapreneurship (Ebeling, 1999).

The mere potential of a new intrapreneurial innovation can be enough to induce changes to a firm’s corporate culture. For example, a manager who could not sell GM headquarters on the idea of the Pontiac Fiero decided to “force” decentralization, renting a space ten miles away to get away from the bureaucracy. The success of this process spurred GM to try to replicate it (Pongracic, 2009, p. 107). Other firms follow similar strategies, pursuing governance structures that empower employees through less managerial intervention (Foss, 2001; Sautet, 2000). Decision-making decentralization may be the clearest manifestation of efforts to create a “thoroughly entrepreneurial firm, one where most or even all employees are encouraged to act in creative and innovative ways” (Pongracic, 2009, p. 1; cf. Foss & Klein, 2012, pp. 213–214). Thus, many firms allow small teams to autonomously work in “skunkwork projects” or internal incubators outside the formal bureaucracy, to circumvent standard management constraints and encourage innovation (e.g., Fosfuri & Rønde, 2009). Firms like Facebook, Dreamworks, and Google have also altered their organizational structure to promote productive intrapreneurship, once the benefits of such activities become apparent (Knippen, 2017; Trenchard, 2016).

Fully non-productive intrapreneurship may also spur rule and governance changes, though likely in the direction of increased monitoring and limiting employee autonomy (Pongracic, 2009, p. 102). While such centralizing changes may limit non-productive entrepreneurship, they are also likely to limit productive intrapreneurship. This hints at an important trade-off: While decentralization risks yielding poorer incentives and efficiency compared to hierarchy, its benefits are greater flexibility and innovativeness (the creation of new knowledge), which, in times of rapid market change, may be too costly to ignore (Langlois, 1995; Pongracic, 2009). This suggests that in highly innovative, competitive markets, enabling fully productive intrapreneurship may be a crucial governance issue for both a firm’s growth and its survival.