Why Corporate America Needs Entrepreneurs

"The start-up firm, the home base of the entrepreneur, is the single most important unit of economic activity in our system," says Carl Schramm, the author of The Entrepreneurial Imperative.

"If our economy is to continue to expand and become even more productive - and if we're to compete globally while innovating at home, we'll need to see the emergence of a co-dependency between entrepreneurial start-ups and big Corporate America," adds Schramm, who is CEO of The Kauffman Foundation.

He envisions a healthy, symbiotic relationship between newly-formed companies and well-established industry leaders. Here's how the two can work together:

• Start-ups offer an aggressive approach, challenging the bigger corporations, and if the corporations cannot perform R & D within their walls to keep up, they can always buy out a start-up and breed its entrepreneurial successes.
• Start-ups can develop a new service, product, or technology, such as a useful software that, if not bought out by a singular company, can now offer its product to many companies, and in a sense, provide tools that benefit society.
• Start-ups boldly take risk, have initiative, and can do things faster than a conservative corporation choking on its bloated bureaucracy. When start-ups succeed, they challenge corporations to stimulate similar growth or quickly find themselves losing market share and becoming less relevant.

"There needs to be a continuous push from underneath, for corporations, that is, from recently created companies, changing the nature of the market with new innovations in goods or services," says Schramm. "Many of the fastest-growing firms come into existence because they have a knowledge advantage over their established competitors. They form their firms to exploit their knowledge or innovation. As a result, they change not only the market, but the competition."

"If large corporations are to survive, they clearly must become more entrepreneurial or merge with entrepreneurs," concludes Schramm. "The key is to make strategy part of every corporate conversation, big and small. Focusing on where every idea under discussion fits within the overall corporate objective is the prerequisite for making the corporation more entrepreneurial - this keeps the company focused on what it is trying to accomplish and allows it to respond faster to changes on the competitive landscape."

Entrepreneurial capitalism will require the seeding of more start-ups while simultaneously using the start-ups to engineer change and growth in bigger companies. But Schramm concludes the fate of the entrepreneurial ecosystem depends, in part, on the creation of the entrepreneurial manager, someone who, through training inside a company, learns the skills of both an effective manager and a successful entrepreneur. "The creation of this dual manager is essential for the American economy to move forward," says Schramm.