Organizational environment for nonprofit entrepreneurship development.
Entrepreneurship (Evaluation)
Farid, Mamdouh
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Name: Academy of Entrepreneurship Journal Publisher: The DreamCatchers Group, LLC Audience: Academic Format: Magazine/Journal Subject: Business, general Copyright: COPYRIGHT 2005 The DreamCatchers Group, LLC ISSN: 1087-9595
Date: Jan, 2005 Source Volume: 11 Source Issue: 1
Geographic Scope: United States Geographic Code: 1USA United States

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The paper argues that entrepreneurship in an existing organization (intrapreneurship) is the outcome of the interlocking entrepreneurial activities of multiple participants, entrepreneurship is distributed throughout a structure, not mainly the strategic apex, and appropriate organizational settings are required to promote entrepreneurial behavior among organization members. The paper distinguishes among three types/roles of intrapreneurship in the nonprofit sector: social/human service, fund raising, and venture. A set of research questions is tested empirically to assess organizations' environment in fostering entrepreneurship. Survey result (219 nonprofit managers) shows that nonprofits are likely to develop organizational characteristic attributes of entrepreneurship and that certain organizational characteristics are associated with intrapreneurial behavior as measured by organization members' risk-propensity. Also, the result shows that aspects of organizational culture and management style (more controllable factors) seem to have more influence than the organizational structure and resource aspects (less controllable). Nonprofit managers are advised to establish organizational culture and context of receptive conditions for new ideas and the possibility of failure. This study fills a research gap of how nonprofit organizational characteristics foster entrepreneurship or retard it.


There is a strong argument that entrepreneurship and innovation are essential characteristics of successful nonprofits (e.g., Brinckerhoff, 2000; Hisrich et al, 2000; Kanter, 1999). Nonprofit entrepreneurship is emerging as an innovative approach for dealing with a dynamic and competitive environment. The magnitude of environmental adversity (shrinking resources, competition) and social and economic changes create pressure on these organizations to adopt a model of nonprofit entrepreneurship as "a proactive style of management through which leaders of nonprofit organizations seek to implement change through new organizational and programmatic initiative" (Young, 2001, p. 218).

While the traditional role of nonprofit entrepreneur is about start-up activity and new nonprofit creation, not all entrepreneurial roles fit this mold (Shane & Venkataraman, 2000). Many individuals are attracted to the nonprofit mission of an existing organization and its working environment and to the idea of helping in building or revitalizing a failing organization. Frumkin (2002) asserts that the low rate of nonprofits closure is explained by entrepreneurial activities of individuals who join existing nonprofits. Low rate of nonprofits failure by its turn may contribute to the widely observed expansion of the sector.

The concepts of social entrepreneurship and social enterprise have been rapidly emerging as an integrating theme for entrepreneurship models or roles in achieving social mission (Renz, 2001; Johnson, 2000; Leadbeater, 1997). Social entrepreneurial activities blur the traditional boundaries between nonprofit and for-profit sectors and emphasize hybrid models for social and economic activities (Young, 2002). Broadly defined, "social entrepreneurship" refers to activities encouraging more entrepreneurial approaches in the nonprofit sector in order to increase organizational innovation and effectiveness (Thalhuber, 1998). According to this view, social entrepreneurship is a means by which nonprofits enhance the entrepreneurial abilities of their employees.

Several authors have argued that entrepreneurship in an existing organization is the outcome of the interlocking entrepreneurial activities of multiple participants, and that hospitable organizational settings and environmental opportunities are required for entrepreneurial behavior (e.g., Shane & Venkataraman, 2000; Sykes & Block, 1989).

Thompson et al (2000) note that the process of nonprofit entrepreneurship often happen when entrepreneurial people are linked with the visionary idea, appropriate autonomous organizational setting, and opportunity to act. Current studies of entrepreneurship in an existing organization have focused on the interaction between individuals' characteristics and internal and external environments (e.g., Walley & Taylor, 2002; Busenitz et al, 2000).

This paper focuses on organizational characteristic attributes of intrapreneurship and how they influence nonprofit entrepreneurship. This study assumes that entrepreneurship is distributed throughout a structure, not mainly the strategic apex (the board and CEO/ED). The paper distinguishes between multiple roles/types of intrapreneurial participants and examines organizational characteristics (culture, structure, and management style) that seem to facilitate and develop nonprofit entrepreneurship. Specific research questions are outlined and tested empirically. Organizational setting will be assessed using a survey originally designed to assess an effective organizational intrapreneurial environment in the private sector.

Despite numerous discussions of nonprofit entrepreneurship, the writers are not aware of empirical research that examines organizational characteristics that seem to enhance and facilitate internal entrepreneurship. In their recent literature review of entrepreneurship in the nonprofit sector, Hisrich et al (2000) identify this research gap and have argued for the need to know how nonprofit organizational characteristics foster entrepreneurship or retard it (p.332). Exploration and research on this area seem to be needed at both of the theoretical and application levels.


Similar to all entrepreneurs, nonprofit entrepreneurs are energetic individuals, with a higher than average tolerance for risk, uncertainty and desire for autonomy, and a willingness to pursue their goals in spite of initial obstacles or lack of resources values (Waddock and Post, 1991; Doig and Hargrove, 1987).

As illustrated in the literature, the concept of intrapreneurship is almost synonymous with innovation initiated and implemented by employees (e.g., Ucbasaran et al, 2001; Zahara & Pearce, 1994). Intrapreneur has also been referred to as the "in-house entrepreneur" (Pinchot, 1985), the "idea manager" (Tropman, 1984), and the "corporate entrepreneur" (Carrier, 1996).

Nonprofit intrapreneurship may emerge spontaneously if the situation permits. Burgelman (1983) found that intrapreneurship consists of autonomous behavior by employees that emerge as a result of belief in mission, personal inclination, and internal opportunity (in terms of availability of untapped resources or organizational structure opportunity). On their study of intrepreneurship in nonprofits, Neilson et al (1985) and Quinn et al (1988) characterize this role as being involving promoting innovations in a rapidly than slowly evolving environment. "In these situations, it is often not the boss, but someone in an odd corner of the organization--a champion for some technology or strategic issue--who takes on the entrepreneurial role" (Quinn et al (1988, p.531). While these two last studies focus mainly on large nonprofits, this sort of entrepreneurial behavior is found to be observed as well in medium and small sized organizations (e.g., Carrier, 1996; Zahara & Pearce, 1994).

Also, Nielsen et al (1985) found that part of the intrapreneurial internal role is to resolve conflict between structural differentiation and integration in the organization. They cite for-profit, nonprofit and public organization cases that show this conflict can be solved by means of intrapreneurial activity. In this case, the intrapreneurial role is to resolve conflict between the need for integration of the total organization and the need for flexibility/innovation of different programs/units and to make sure that secondary activities satisfy or are integrated into the organization's mission and strategic needs. This can be an important function if the nonprofits have commercial activities. This integration function also imply that some intrapreneurial roles required the skills or the involvement necessary for the administration.

Ucbasaran et al (2001) have argued "... entrepreneurship is not necessarily a single-action event. Entrepreneurs, among themselves, may display differing characteristics and patterns of behaviour, which warrants research into different types of entrepreneurs" (p.61). Some of these intraprenuerial roles are briefly outlined below.


In comparison to the private sector, nonprofit entrepreneurs seem to be motivated more by a wider range of personal intrinsic needs and social desires. Thompson et al (2000) note that the motivations of the nonprofit entrepreneurs are not homogeneous and go beyond profit. Young (1985) studied 11 human service organizations with a focus on entrepreneurship. He found that motivations vary widely to include the fulfillment of strong social, religious beliefs or causes, the artistic-like urges to build and create, the seeking of status or inner satisfaction from professional achievement and accomplishment, the psychological need to test oneself and prove that one is capable of carrying off a major project or program, the pursuit of innate desires to help, teach, or serve the less fortunate members of society, the intellectual satisfaction from shaping and implementing new ideas, the achievement of personal recognition, power, or social status, the desire for autonomy and independence (to be one's own boss), the maternal-like satisfaction of parenting an enterprise and seeing it grow, and the material security and gain.

The literature shows that nonprofit entrepreneurs are found to assume a variety of types or roles for a wide range of personal and organizational reasons. This section attempts to distinguish between three nonprofit entrepreneurship roles or types. Differences in terms of personal characteristics and purpose for change/innovation are briefly emphasized in order to sharpen the distinction. The purpose of the following discussion is not to develop a typology but rather to build the argument that entrepreneurship is distributed throughout a structure and that nonprofits are entrepreneurial and innovative when they display attributes that facilitate entrepreneurial characteristics and behavior of the organization's members.

The Social/Human Service Role

Social entrepreneurs are creative thinkers, even more than other entrepreneurs. They create a new social concept or a new way of providing an existing human service. The social or human service entrepreneurial role involves coping effectively with environmental complexity and the dynamics of social changes and customers' needs (e.g., Heimovics et al, 1993) and it requires the ability to deal with a "complex social" problem by converting it into a specific social value "vision" (Waddock and Post, 1991).

The Fund Raising/Charity Role

While chief executives and trustees are usually involved in fund raising activities, the nonprofit organization is still in need of a fund raising or philanthropy entrepreneur (Reis & Clohesy, 2001). With a new idea or concept, the fund raising entrepreneur is able to raise public consciousness and marshal support. This is especially important in a time of social crisis or economic down turn, or when the range of options is smaller due to organizational structure and charitable purpose constraints.

As characterized in the literature, this role seems to require artistic and creative types of individuals who are motivated by human/social crisis situations (e.g., Reis & Clohesy, 2001). In their study of popular fund raising cases (e.g., Hands Across America and Partnership for Drug Free America), Waddock and Post (1991) also found that leading fund raisers act to perform boundary-spanning and coalition-building activities. Fundraisers look for new resources and networks and they provide knowledge of external conditions and valuable advisement services to the organization. If we accept the idea that, in comparison to other types, fund raiser entrepreneurs may not be required to have the skills or the involvement necessary for the administration, then it is safe to suggest that this is a role that fits volunteers very well.

The Commercial Venture Role

This role is similar to the venture strategy in terms of revenue-producing activities. Hofer and Sandberg (1987) characterize successful venture entrepreneurs as having a detailed knowledge of the key success factors in their businesses and the ability to identify potential venture opportunities. Nonprofits need this type of entrepreneur when it is necessary to raise revenue that can be used to finance their nonprofit operations. Federal and state funding for nonprofits decreased 23% in the 1980s (Salamon, 1989) and continued to decline in the 1990s (Mcleod, 1997). Hisrich et al (2000) consider commercial venture as an important category of entrepreneurial activity in the nonprofit sector.

Also, as explained in the literature, a venture entrepreneur is the person who has innovation and growth as main objectives (e.g., Carland et al, 1984). However, the venture expansion of a nonprofit organization should be gradual in order to avoid disruption of core operations, threats to their legal and tax status, or risks to their charitable and financial conditions (Dees, 1998). The commercial entrepreneurial problem includes how to locate and exploit new opportunities while simultaneously maintaining a firm core business/mission.

The next section deals with organizational characteristics that are found to be important to foster intrapreneurship. Research issues are also developed.


Entrepreneurial organizations are those which are willing to accept uncertainty and the possibility of failure for the purpose of gaining benefit from innovations (Firestenberg, 1986). Research has attempted to identify internal organizational factors that facilitate entrepreneurs' personal characteristics, such as risk-taking propensity, internal locus of control, and desire for autonomy and motivate them to engage in innovation and entrepreneurship. While the published research contains a wide variety of these factors, some consistent elements are found to include the elements of management practices, organizational resources and competencies, organizational culture, organizational structure, and organizational strategy (e.g., Busenitz et al, 2003). Subsumed under each of these elements are assortments of organizational policies and procedures that may be established by management. Given the breadth of the concepts of organizational cultural and structure, scholars have addressed them from different perspectives.

Some of the nonprofit organizational characteristics that are assumed to be a good potential environment to foster entrepreneurship include employees' participation (Durst & Newell, 2001), an adaptive and learning internal environment (Weeler, 2000), and a flat and flexible structure with a culture of trust and creativity (Leadbeater, 1997). In her study of human service organizations and their adaptation strategies for the current nonprofit environment, Alexander (2000) found that the hierarchical model of traditional command and control has limited applicability because nonprofits are usually smaller, leadership has a weaker authority, and the composition of employees is by large professionally licensed, highly mobile and peopled by volunteers. Management style is more participative and decentralized.

In addition, the growing interest in the process and practice of corporate entrepreneurship or intrapreneurship in the private sector has produced several frameworks in fostering entrepreneurship (e.g., Covin & Miles, 1999; Hornsby et al, 1993; Covin & Slevin, 1991). Covin and Slevin (1991) propose a conceptual model of a corporate entrepreneurship process that includes individual, organizational and environmental factors and their interactions. Kuratko et al (1990) present a multi-dimensional scale, to assess a hospitable working environment, that includes the factors of management support for innovation, flexible organizational structure, risk taking encouragement, and time availability to pursue ideas, and resource availability. This last framework is adopted in the current study.


Literature in the nonprofit sector has recognized the existence of entrepreneurship as part of life or intrinsic force in the nonprofit sector (e.g., Drayton, 2002; Frumkin, 2002; Hisrich et al, 2000). For example, Frumkin (2002) argues that nonprofits are vehicles to bring about change for entrepreneurs. Hisrich et al (2000) assert that social and human service organizations are publicly supported and explicitly designated with their own tax code for the purpose of bringing about change and innovation (p.323). Young (2001) cites the following developments in the nonprofit sector as evidence of entrepreneurial effort : (1) over the last two decades, the nonprofit segment of the American economy has grown rapidly in comparison to the government and business, which suggests the presence of considerable entrepreneurial effort, (2) the nonprofit segment shows a steady entry of new organizations and is populated largely by young organizations, which reflects nonprofit entrepreneurial behavior in addressing unsatisfied social, health, and other needs, forming their own organizations, mobilizing resources, and introducing new programs and services, and (3) missions of many nonprofits are framed in terms of introducing change, which exhibits the entrepreneurial character. That said, we suspect that nonprofit organizations in general would exhibit receptive entrepreneurial characteristics.

Furthermore, using risk-taking propensity of employees in the public sector as a dependent variable, Moon (1999) found that flat structure, low level of formalization, low level of centralization, and high level of organizational trust between members and leaders tend to promote a high level of risk-taking propensity and entrepreneurship of organization members. Hisrich et al (1996) found that risk-taking and persistence are two very important personal characteristics associated with innovation in the nonprofit sector.

Considering the reviewed literature, at least two propositions are possible:

1. With regard to the responsiveness of nonprofits to encourage employees' entrepreneurships, nonprofits, in part due to a range of flexible structure, procedures and policies and autonomy, are likely to develop organizational attributes of intrapreneurship.

2. Nonprofit organizations that are characterized by more organizational attributes of intrapreneurship are likely to promote more risk-taking behavior than nonprofits with fewer characteristics.

However, due to the exploratory nature of this study, analyses were structured around the following fundamental research questions rather than specific hypotheses:

1. What are relevant organizational characteristics that foster employees' intrapreneurship?

2. How do members of nonprofits respond to these characteristics?

3. To what extent do organizational characteristics explain the variance in the members' intrapreneurship behavior?

The paper will next explore these research questions. Results and implications will then be discussed.


To gather a sample, we looked in the National Directory of Nonprofit Organizations, published by the Taft Group, in the New York State. Hospitals, schools, and religious organizations were not included in the study. Each company selected was assigned a number starting with one. The first 457 companies with even numbers were selected.

The instrument used in this study is the intrapreneurial assessment instrument (IAI) developed by Kuratko et al (1990) to identify the dimensional structure of organizations in terms of its ability to support intrapreneurial activity. This instrument focuses on factors which are essential in developing a perceived entrepreneurial environment for managers and employees. We considered this survey since it is already been used in the private sector and it is comparatively applicable as will to smaller firms (e.g., Covin & Slevin, 1991). This is an important consideration since nonprofits on the average are smaller than for-profit organizations (Kushner & Poole, 1996)

The original IAI consists of 28 descriptive statements constructed around five factors: (1) management support (recognition and encouragement of innovation/innovators, etc.), (2) organizational structure (cross functional teams, unrestricted communication, flexible job description, etc.), (3) risk-taking encouragement and tolerance for failure (risk-takers are recognized and encouraged, mistakes are permitted, etc), (4) time availability (e.g., slack time to develop ideas and deal with long term problems), and (5) reward (for risk-takers) and resource availability (for new ideas/projects, etc). Respondents were asked to indicate how descriptive of their work areas or the organization they feel the items are on a five-point Likert scale (1 = Not at all descriptive, 5 = Very descriptive).

Companies selected were mailed three questionnaires each, with return envelops, to the executive director. Executive directors were asked to fill one of the questionnaires and to distribute the other two to top- and lower-level management. In their review of studies of entrepreneurial firms, Lyon et al (2000) find that management perceptions of firm-level variables such as strategy and structure are often used and that several studies often rely on the responses of a single key player to represent the views of the whole firm.

We received 247 responses out of total 1371 questionnaires for a response rate of 18.02 percent. Missing data reduced the usable sample size to 219. The components of managerial positions in the final sample include 72 (32.8%) president/CEO/ED, 65 (29.9%) V.P./director/top management, 43 (19.6%) associate director/middle level, and 39 (17.8%) program manager/counselor/first level. Average seniority with the current organization is 7 years. Range of organization size is between 5 to 3033 full time employees and the average is 96. Almost sixty percent (59.8%) described their organizations' mission as social and human service and forty percent (40.2%) as other types of services (art/culture/other services).

Fifty-nine percent (59.4%) of the sample reported they had previously worked for business firms before they moved to their current nonprofit organizations. Almost thirty-nine percent (38.7%) of these individuals had experienced a salary decrease as a result of joining nonprofits. Thirty percent (29.8%) had experienced a salary increase.

Table 1 shows other demographic characteristics. Table 1 also shows the sample responses to statements regarding how they get involved with the current organization.

In this study, we attempted to determine the impact of organizational setting on entrepreneurship in terms of individuals' risk-propensity behavior. As depicted in the literature, the propensity for risk taking is an essential element in the entrepreneurship process and it refers to a variety of financial, social and psychological risk associated with the pursuit of opportunities, change, new ideas or innovations (e.g., Tropman, 1989; Quinn, 1985).


One way to deal with the first question (What are relevant organizational characteristics that foster employees' intrapreneurship?) is to examine the factor structure of the IAI instrument and compare it with Kuratko et al's (1990) findings in the private sector using the same instrument. The results of the principle components factor analysis, based on a Varimax rotation, suggested the hypothesized five factors. The resulting factors, item abbreviations, factor loading, and alpha reliability are in Table 2. The analysis was done by using SPSSx. Similar procedures were followed in Kuratko et al's (1990) original study. Our resulting factors are risk-taking encoutagement (five items), management support for innovation (five items), flexible organizational structure (three items), time availability (three items), and reward and resource availability (two items).

Essentially, one management support item was integrated into the risk taking encouragement factor and one structure item was integrated into the management support factor. Total number of items was reduced from 28 to 18. The dimension of reward and resource availability does not include many of the items that are in the original survey. It includes only two items ("lack of funding" and "problems with the budget"). The rest of the items were reduced from the analysis.

Kuratko, et al's (1990) original study suggests a three-factor solution instead of the hypothesized five factors scale. Their three-factor solution includes management support (nine items), organizational structure (six items), and reward and resource availability (six items). According to their result, the time availability factor was integrated into rewards and resource availability while the risk-taking factor was integrated into the management support factor. Their number of items was reduced from 28 to 21. Our resulting five factors (Table 2) provide empirical evidence as to the existence of certain structural dimensions that are proposed to enhance entrepreneurship.

To analyze organizational characteristics' effects (How do members of nonprofits respond to these characteristics? To what extent do organizational characteristics explain the variance in the members' intrapreneurship?), a least squares regression analysis was conducted. There were six independent variables that include: (1) Risk Taking Encouragement, (2) Management Support, (3) Organizational Structure, (4) Time Availability, (5) Reward and Resource Availability, and (6) Employees' Participation. The first five measures were composite indices created from factor analysis listed in Table 2. Employees' participation measure was added since the original scale (Kuratko et al, 1990) does not include participation as a relevant aspect of organizational setting. Several studies have reported greater emphasis by nonprofits on providing opportunities for employees' participation (Durst and Newell 2001; Montes, 1997; Siciliano, 1997). Our survey asked respondents to indicate their agreement or disagreement, from Not at all descriptive (1) to Very descriptive (5), on the following statement "Employees participate in most decisions that directly impact them".

The dependent variable was a behavior statement regarding organization members' propensity for risk taking. Respondents were asked to indicate their agreement or disagreement, from Not at all descriptive (1) to Very descriptive (5), on the following statement "Most employees in this organization are not afraid to take risks". A similar statement was used by Moon (1999) as a dependent variable. Table 3 lists the independent and dependent variables and their mean, standard deviation, and correlation coefficients.

Table 4 displays the result of the regression model. The [R.sup.2] is .225 and the factors of risk-taking encouragement (p-value = 0.00), participation (p-value = 0.00), and management support (p-value = 0.098) are statistically significant. The three other factors of organizational structure, time availability, and availability of resources are not significant.

The results in tables 3 and 4 shows that nonprofits that are characterized by more organizational attributes of entrepreneurship are likely to promote more risk-taking behavior than nonprofits with fewer characteristics.


The results show that if nonprofits develop organizational characteristic attributes of intrapreneurship, these attributes are likely to promote entrepreneurial behavior. The result is, in fact, more positive than reported by Kuratko et al (1990). Our result shows more support for the dimensions of risk-taking and time availability. Table 3 shows the factors of participation, risk taking encouragement and management support for innovation as having above average values. There is no reason to doubt the sampling procedure that followed by the study. The response rate was not high (almost 18%), however the responding organizations were quite diverse in terms of mission, size, and locale.

The regression model (table 4) suggests that the model is modestly able to explain a little over 20 percent (adjusted [R.sup.2] = .203) of members' risk-propensity (the dependent variable). Tables 3 and 4 show that the factors of tolerance for mistakes or risk-taking encouragement, employees' participation, and management support for innovation can be significant predictors of employees' risk propensity by themselves and in combination with the other factors (McNabb, 2002). Overall, these three factors are more organizational culture than structure aspects.

Table 4 shows that organizational structure and time and resource availability are not significant. These factors are still important by themselves (table 3), but not in combination with the other factors (McNabb, 2002). Table 3 shows moderate-to-high correlations among all these variables.

Individual characteristics may lead entrepreneurial behavior if the internal conditions facilitate this behavior. Entrepreneurs' personal characteristics may also be enforced by the existence of an internal hospitable environment. Scholars argue that, similar to other entrepreneurs, nonprofit entrepreneurs are energetic individuals, with a higher than average internal locus of control, need for achievement, tolerance for risk, and desire for autonomy and a willingness to pursue their goals in spite of initial obstacles or lack of resources values (e.g., Diaz & Rodriguez, 2003; Waddock & Post, 1991). While they were not tested in the current research, personal characteristics such as tolerance for risk, achievement motivation, locus of control are found to be related to risk-taking behavior (e.g., Gatewood et al, 1995; McClelland, 1987). For example, participation and flexible job design are expected to empower employees and encourage their desire for autonomy and internal locus of control.

The next section will attempt to integrate the earlier discussion of intrapreneurial roles/types with the empirical part of the study.


The earlier part of the paper argues that nonprofit entrepreneurship is typically the result of the interlocking entrepreneurial activities of multiple participants and that the roles of entrepreneurs are to provide the required diversity. The paper differentiates between social/human service, commercial venture, and fund raising intrapreneurships. As argued by Moon (1999) and Hornsby et al (1993), dimensions of organizational characteristics are each significant in different ways to the entrepreneurs' characteristics (e.g., risk-taking, locus of control, autonomy) and behavior.

Some linkages or testable relationships between entrepreneurial types/roles, personal characteristics and context are proposed here to guide future research based on our framework. The following is few illustrations that partially use some of our empirical results.

For example, in a situation where a nonprofit needs to develop a new commercial venture (venture entrepreneurship) or where it is necessary to raise funds that can be used to finance their nonprofit operation (fund raising entrepreneurship) , high levels of management support (in terms of encouraging self-appointed innovators, innovators to bend rules and rigid procedures, and employees to generate new ideas without regard for crossing departmental or functional boundaries) and tolerance for mistakes (in terms of allowing calculated risk and that mistakes are defined as learning experiences) are suggested. Individuals with high tolerance for uncertainty and/or internal locus of control are expected to be involved in risk-taking and entrepreneurial activity.

Another illustration is that in a situation where a nonprofit deals with a "complex social" problem, it is recommended that low levels of job descriptions, high levels of slack times and high levels of employees' participation be provided to employees. These will enhance developing ideas and will give the social and human entrepreneur more room to plan to target innovation areas. Individuals with high desire for autonomy and tolerance for uncertainty are expected to be involved in risk-taking and entrepreneurial activity.


This paper attempts to identify nonprofit internal environment that facilitates and motivates employees to engage in entrepreneurship. The result of the empirical data shows that the elements of risk-taking encouragement, employees' participation, management support for innovation, structure, and time and resource availabilities are related to entrepreneurship as measured by employees' risk-taking propensity. This should be important to management since change and innovation are associated with risk propensity. Several researchers have asserted that individual differences in the willingness to bear risk influence the decision to exploit entrepreneurial opportunities (e.g., Shane & Venkataraman, 2000).

In our nonprofits sample, the organizational culture aspects seem to have more direct impact on entrepreneurship than the organizational structure and resource aspects. While management may not be able to change organizational structure or to control its resources, they may have more control over organizational culture and management style by establishing, by means of policies and procedures, of receptive conditions for new ideas and the possibility of failure. This should attract skilled and talented volunteers and staff. As Fisher (2004) noted, the maturing of baby-boom business people is a huge potential energy boost for nonprofit and the real question is weather nonprofits are ready for the influx of new talents. Table 2 shows the sample response to the question of how they get involved with current organization. Respondents selected the reason of the working environment (almost 67%) more than other reasons, including organization mission.

Given the diversity among entrepreneurs, perhaps future studies should try to investigate whether certain organizational contexts are more associated with or encouraging a specific type or role and to establish linkages between types and various contexts, on the one hand, and measures of organizational performance, on the other.

Some testable statements that include personal characteristics, organizational characteristics, intrapreneurial types/roles were previously offered to guide future research based on our framework. This study did not measure actual organizational performance. Entrepreneurship was measured perceptually in terms of risk propensity. While this should increase our prediction of the final outcome, it is recommended that future research may need to include both long-term measures (outcomes) in addition to short-term measures (internal perspective). Examples of outcomes include organizational growth (increased revenue and resources, expansion to new location, etc.) and social impact (increased the number of client served, expansion of services, enhance client satisfaction, etc.) (Kaplan, 2001; Alexander, 2000).

It is important to acknowledge certain limitations to this study. The study applies an instrument (IAI) that was based on one firm in the private sector to our sample of many and different types of nonprofits. While the study added the characteristic of employees' participation as another dimension obviously more research is needed to identify more nonprofit-relevant entrepreneurial contexts.


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Mamdouh Farid, Hofstra University
Table 1: Sample Characteristics/Profile (n=219)

  Demographic                                               Percent

Female                                                       53.3
Male                                                         46.7
College degree                                               40.2
Master degree                                                46.1
Full time                                                    92.7
How did you get involved with the current organization?   Percent (1)
  Because of the working environment                         66.7
  Because of perceived social need                           63.9
  Belief in the mission                                      35.6
  Because of financial compensation factors                  21.0
  To start an organization that centers on personal
  beliefs                                                     8.7
  Others (2)                                                 29.2

(1) Respondents answer more than one category

(2) Many reasons including commuting and convenient working hours.

Table 2: Rotated factor structure (n=219)

                                                         Factor Loading

Scale 1: Risk Taking Encouragement (scale alpha = 0.7261)
  1.Mistakes are rarely given second chances *               0.72
  2.Calculated risks are encouraged                          0.49
  3.Mistakes are defined as failure *                        0.72
  4.Mistakes are defined as learning experiences             0.64
  5.Ideas are not fully developed by original
    innovators *                                             0.54
Scale 2: Management Support (scale alpha = 0.7573)
  1.Self appointed innovators receive encouragement          0.55
  2.Senior managers encourage bending rules                  0.53
  3.Top managers are known for their experience with
    innovation                                               0.73
  4.Top management provide sponsorship for innovative
    projects                                                 0.79
  5.Members generate new ideas without regard for
    crossing functional boundaries                           0.55
Scale 3: Organizational Structure (scale alpha = 0.5988)
  1.Job descriptions are of strong concern *                 0.67
  2.Defining turf is important *                             0.75
  3.Slack time is given to develop ideas                     0.60
Scale 4: Time Availability (scale alpha = 0.6284)
  1.Jobs are too structured to think about wider
    problems *                                               0.69
  2.Always working with time constraints on job *            0.74
  3.Workers find time for long term problem solving          0.55
Scale 5: Reward and Resource Availability (scale alpha = 0.7041)
  1.Ideas often die because of lack of funding *             0.81
  2.Budgeting process leads to problems with continued
    funding for new project *                                0.77

* Score is reversed because item is stated in a negative terms

Table 3: Descriptive statistics and correlations of all the variables

Variables                       Mean        s.d.         1

1.Participation                 3.68        1.23
2.Risk Taking                   3.78         .81      .239 **
3.Management Support            3.46         .84      .320 **
4.Organizational Structure      3.03         .98      .264 **
5.Time Availability             3.13        1.04      .140 *
6.Resource Availability         2.52        1.21      .135 *
7.Risk Propensity               3.68        1.16      .342 **

Variables                        2           3           4

2.Risk Taking
3.Management Support          .494 **
4.Organizational Structure    .451 **     .419 **
5.Time Availability           .332 **     .251 **     .415 **
6.Resource Availability       .161 *      .234 **     .331 **
7.Risk Propensity             .375 **     .331 **     .262 **

Variables                        5           6

2.Risk Taking
3.Management Support
4.Organizational Structure
5.Time Availability
6.Resource Availability        .161 *
7.Risk Propensity              .148 *      .137 *

* p    .05:  ** p   .01

Table 4: Least Squares Regression Results for Risk-Propensity (n=219)

  Independent Variables         Coefficient         p-value

Constant                           0.917              .002
Participation                      0.222             .0003
Risk Taking                        0.362             .0008
Management Support                 0.169              .098
Organizational Structure           0.074               ns
Time Availability                 -0.072               ns
Resource Availability             -0.003               ns
[R.sup.2]                           .225
Adjusted [R.sup.2]                  .203
F (Total equation)                10.235             .0000
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