The role of senior management in opportunity formation: Direct involvement or reactive selection?

Research Summary: Much research suggests that entrepreneurial opportunities in established firms result from bottom‐up initiative in a diverse workforce, senior management's main role in the entrepreneurial process is to select among opportunities generated in the bottom‐up process, and it should refrain from directly getting involved in this process. We develop an alternative and more active view of the role of senior management in the opportunity formation process in which senior management intervenes in the entrepreneurial process to resolve coordination and collaboration problems across initiatives and decide on resource allocation. We proffer rival hypotheses concerning the effect of such senior management involvement in the entrepreneurial process. Specifically, we hypothesize that the positive relations between bottom‐up initiative/employee diversity and opportunity formation are positively (negatively) moderated by such direct involvement by senior management. We examine these ideas using two matched data sources: a double‐respondent survey of CEOs and HR managers and employer–employee register data. We find support for the view that senior management involvement positively moderates the relations between bottom‐up processes/diversity and opportunity formation. Managerial Summary: What are the processes through which entrepreneurial opportunities emerge in established companies? Research has pointed to diversity and bottom‐up initiative, but our understanding is limited with respect to what senior managers should do to optimally promote entrepreneurship in such companies. In one view, senior management should keep a distance and limit their involvement to picking the best opportunities out of those they are presented with in the bottom‐up process. In contrast, we argue that given bottom‐up initiative in the context of a diverse workforce, senior management should play a more direct role in the entrepreneurial process. The reason is that senior‐management involvement at early stages of the opportunity formation process is required to handle the management challenges arising from diversity and bottom‐up initiative. Overall, our study suggests that firms that wish to seize the potential benefits (in terms of entrepreneurial opportunities) of having a more diverse workforce and more bottom‐up initiative need senior managers that directly engage in the entrepreneurial process.