Journal of International Entrepreneurship

, Volume 13, Issue 1, pp 7–27

Relationship between entrepreneurial orientation and firm performance in large organizations over time

Article
  • 521 Downloads

Abstract

The purpose of this study is to understand the longitudinal relationship between entrepreneurial orientation and firm performance. The authors obtain objective performance measures from archival sources and construct 10-year panel data from large, publicly traded German firms using letters to shareholders to derive entrepreneurial orientation (EO) information. Unlike prior research, this study measures all variables every year for the sample period. Analyses indicate that EO has a strong initial effect on firm performance and that this effect gradually declines with time. Competitive intensity and demand volatility influence the effect of EO on performance in both the short term and the long term. Implications for research and practice are discussed.

Keywords

Entrepreneurial orientation Competitive intensity Demand volatility 

abstrakt

Der Zweck dieser Studie ist, die Längsschnittbeziehung zwischen unternehmerischer Ausrichtung (entrepreneurial orientation, kurz EO) und Unternehmensleistung zu verstehen. Die Autoren gewinnen objektive Leistungsmessung aus Archivquellen und erstellen anhand von Briefen an Aktienhabern Paneldaten von vergangen zehn Jahren aus großen, börsennotierten deutschen Unternehmen, um EO-Informationen zu gewinnen. Im Gegensatz zur bisherigen Forschung misst diese Studie alle Variablen jedes Jahr für die Probenzeit. Die Analysen indizieren, dass EO einen starken anfänglichen Einfluss auf die Unternehmensleistung hat und dass sich dieser Effekt allmählich abnimmt. Wettbewerbsintensität und Nachfrageschwankungen beeinflussen die Wirkung von EO auf die Leistung sowohl kurzfristig als auch langfristig. Konsequenzen dessen für Forschung und Praxis werden hier diskutiert.

References

  1. Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud 58(2):277–297CrossRefGoogle Scholar
  2. Arts W, Gelissen J (2002) Three worlds of welfare capitalism or more? A state-of-the-art report. J Euro Soc Pol 12(2):137–158CrossRefGoogle Scholar
  3. Barnett WP (1997) The dynamics of competitive intensity. Admin Sci Quart 128–160Google Scholar
  4. Barr P, Stimpert J, Huff A (1992) Cognitive change, strategic action, and organizational renewal. Strateg Manag J 13:15–36CrossRefGoogle Scholar
  5. Bhuian SN, Menguc B, Bell SJ (2005) Just entrepreneurial enough: the moderating effect of entrepreneurship on the relationship between market orientation and performance. J Bus Res 58:9–17CrossRefGoogle Scholar
  6. Bliese P (1998) Group size, ICC values, and group level correlations: a simulation. Organ Res Methods 1:355–373CrossRefGoogle Scholar
  7. Brislin RW (1970) Back-translation for cross-cultural research. J Cross-Cultur Psych 1(3):185–216CrossRefGoogle Scholar
  8. Combs JG, Crook TR, Shook CL (2005) The dimensionality of organizational performance and its implications for strategic management research. Res Methodol Strateg Manag 2:259–286CrossRefGoogle Scholar
  9. Covin JG, Lumpkin JT (2011) Entrepreneurial orientation theory and research: reflections on a needed construct. Entrep Theory Pract 35(5):855–872CrossRefGoogle Scholar
  10. Covin JG, Slevin D (1989) Strategic management of small firms in hostile and benign environments. Strateg Manag J 10(1):75–87CrossRefGoogle Scholar
  11. Covin JG, Slevin DP (1991) A conceptual model of entrepreneurship as firm behavior. Entrep Theory Pract 16(1):7–25Google Scholar
  12. Covin JG, Slevin DP, Schultz RL (1994) Implementing strategic missions: effective strategic, structural, and tactical choices. J Manag Stud 31(4):481–503CrossRefGoogle Scholar
  13. Covin JG, Green KM, Slevin DP (2006) Strategic process effects on the entrepreneurial orientation–sales growth rate relationship. Entrep Theory Pract 30(1):57–81CrossRefGoogle Scholar
  14. De Clercq D, Dimov D, Thongpapanl N (2010) The moderating impact of internal social exchange processes on the entrepreneurial orientation–performance relationship. J Bus Ventur 25(1):87–103CrossRefGoogle Scholar
  15. Deluga RJ (1997) Relationship among American presidential charismatic leadership, narcissism, and rated performance. Leadersh Quart 8(1):49–65CrossRefGoogle Scholar
  16. Deluga RJ (2001) American presidential Machiavellianism: implications for charismatic leadership and rated performance. Leadersh Quart 12(3):339–363CrossRefGoogle Scholar
  17. Dess GG, Beard DW (1984) Dimensions of organizational task environments. Admin Sci Quart 29(1):52–73CrossRefGoogle Scholar
  18. Dess GG, Lumpkin GT (2005) The role of entrepreneurial orientation in stimulating effective corporate entrepreneurship. Acad Manag Exec 19(1):147–156Google Scholar
  19. Dess GD, Pinkham BC, Yang H (2011) Entrepreneurial orientation: assessing the construct’s validity and addressing some of its implications for research in the areas of family business and organizational learning. Entrep Theory Pract 35(5):1077–1090CrossRefGoogle Scholar
  20. Devinney T, Kabanoff B (1999) Doing what they say or saying what they do? Australian organisations’ signals of performance and attitudes. Austr J Manag 24(1):59–75CrossRefGoogle Scholar
  21. Engelen A, Neumann C, Schwens C (2014) “Of course I can”: The effect of CEO overconfidence on entrepreneurially oriented firms. Entrep Theory Pract. doi: 10.1111/etap.12099
  22. Engelen A, Gupta V, Strenger L, Brettel M (2014) Entrepreneurial orientation, firm performance, and the moderating role of transformational leadership behaviors. J Management. doi: 10.1177/0149206312455244
  23. Fiol M (1995) Corporate communications: comparing executives’ private and public statements. Acad of Manag J 38(2):522–536CrossRefGoogle Scholar
  24. Frazier PA, Tix AP, Barron KE (2004) Testing moderator and mediator effects in counseling psychology research. J Couns Psych 51(1):115–134CrossRefGoogle Scholar
  25. George BA, Marino L (2011) Entrepreneurial orientation: conceptual formation, modeling, and operationalization. Entrep Theory Pract 35:989–1024CrossRefGoogle Scholar
  26. Gupta V, Dutta D (2010) Entrepreneurial orientation, organizational learning, and firm performance: a longitudional assessment. Babson College Entrepreneurship Research Conference, LausanneGoogle Scholar
  27. Gupta VK, Huang R, Yayla A (2011) Social capital, collective transformational leadership, and performance: a resource-based view of self-managed teams. J Manag Iss 23:31–45Google Scholar
  28. Gupta V, Dutta D, Chen X (2012) Impact of entrepreneurial orientation and market orientation on shareholder value: managing strategic contradictions through ambidexterity. Eastern Academy of Management Conference, PhiladelphiaGoogle Scholar
  29. Gupta VK, Dutta D, Chen X (2014) Entrepreneurial orientation capability and firm performance under conditions of organizational learning. J of Manage IssGoogle Scholar
  30. Hambrick DC (2007) Upper echelons theory: an update. Acad Manag Rev 32:334–343CrossRefGoogle Scholar
  31. Hawawini G, Subramanian V, Verdin P (2003) Is performance driven by industry-or firm-specific factors? A new look at the evidence. Strateg Manag J 24(1):1–16CrossRefGoogle Scholar
  32. Hitt M, Gimeno J, Hoskisson R (1998) Current and future research methods in strategic management. Organ Res Met 1(1):6–44CrossRefGoogle Scholar
  33. Hughes M, Morgan R (2007) Deconstructing the relationship between entrepreneurial orientation and business performance at the embryonic stage of firm growth. Ind Mark Manag 36:651–661CrossRefGoogle Scholar
  34. Jacobson R (1992) The “Austrian” school of strategy. Acad Manag Rev 17:782–807Google Scholar
  35. Javalgi RG, Todd PR (2011) Entrepreneurial commitment, management commitment and human capital: the internationalization of SMEs in India. J Bus Res 64:1004–1010CrossRefGoogle Scholar
  36. Jaworski BJ, Kohli AK (1993) Market orientation: antecedents and consequences. J Mark 57(3):53–70CrossRefGoogle Scholar
  37. Keh HT, Nguyen TT, Ng HP (2007) The effects of entrepreneurial orientation and marketing information on the performance of SMEs. J Bus Ventur 22(4):592–611CrossRefGoogle Scholar
  38. Kerin RA, Varadarajan PR, Peterson RA (1992) First-mover advantage: a synthesis, conceptual framework, and research propositions. J Mark 56:33–52CrossRefGoogle Scholar
  39. Khandwalla K (1977) The design of organizations. Harcourt Brace Jovanovich, NYGoogle Scholar
  40. Knight GA (1997) Cross-cultural reliability and validity of a scale to measure firm entrepreneurial orientation. J Bus Ventur 12(3):213–225CrossRefGoogle Scholar
  41. Larrick RP, Soll JB (2006) Intuitions about combining opinions: mis-appreciation of the averaging principle. Manag Sci 52(1):111–127CrossRefGoogle Scholar
  42. Li HL, Tang MJ (2010) Vertical integration and innovative performance: the effects of external knowledge sourcing modes. Technovation 30(7):401–410CrossRefGoogle Scholar
  43. Lumpkin G, Dess G (1996) Clarifiying the entrepreneurial orientation construct and linking it to performance. Acad Manag Rev 21(1):135–172Google Scholar
  44. Lumpkin G, Dess G (2001) Linking two dimensions of entrepreneurial orientation to firm performance: the moderating role of environment and industry life cycle. J Bus Ventur 16(5):429–441CrossRefGoogle Scholar
  45. Lyon DW, Lumpkin GT, Dess GG (2000) Enhancing entrepreneurial orientation research: operationalizing and measuring a key strategic decision making process. J Manag 26(5):1055–1085Google Scholar
  46. Makadok R (1998) Can first-mover and early-mover advantages be sustained in an industry with low barriers to entry/imitation? Strateg Manag J 19(7):683–696CrossRefGoogle Scholar
  47. McClelland P, Liang X, Barker V (2010) CEO commitment to the status quo: replication and extension using content analysis. J Manag 36(5):1251–1277Google Scholar
  48. Miller D (1983) The correlates of entrepreneurship in three types of firms. Manag Sci 29(7):770–791CrossRefGoogle Scholar
  49. Miller D (2011) Miller (1983) revisited: a reflection on EO research and some suggestions for the future. Entrep Theory Pract 35:873–894CrossRefGoogle Scholar
  50. Mintzberg H (1979) The structure of organizations: a synthesis of the research. Prentice-Hall, Englewood CliffsGoogle Scholar
  51. Morgan R, Strong C (2003) Business performance and dimensions of strategic performance. J Bus Res 56:163–176CrossRefGoogle Scholar
  52. Nadkarni S, Barr P (2008) Environmental context, managerial cognition, and strategic action: an integrated view. Strateg Manag J 29:1395–1427CrossRefGoogle Scholar
  53. Noble C, Sinha R, Kumar A (2002) Market orientation and alternative strategic orientations: a longitudinal assessment of performance implications. J Mark 66(4):25–39CrossRefGoogle Scholar
  54. Rauch A, Wiklund J, Lumpkin GT, Frese M (2009) Entrepreneurial orientation and business performance: an assessment of past research and suggestions for the future. Entrep Theory Pract 33(3):761–787CrossRefGoogle Scholar
  55. Robinson WT, Min S (2002) Is the first to market the first to fail? Empirical evidence for industrial goods businesses. J Mark Res 39:120–128CrossRefGoogle Scholar
  56. Robinson WT, Kalyanaram G, Urban GL (1994) First-mover advantages from pioneering new markets: a survey of empirical evidence. Rev Ind Organ 9(1):1–23CrossRefGoogle Scholar
  57. Short J, Broberg J, Cogliser C, Brigham K (2009) Construct validation using computer-aided text analysis (CATA): an illustration using entrepreneurial orientation. Organ Res Methods 13(2):320–347CrossRefGoogle Scholar
  58. Sørensen JB (2002) The strength of corporate culture and the reliability of firm performance. Admin Sci Quart 47(1):70–91CrossRefGoogle Scholar
  59. Stam W, Elfring T (2008) Entrepreneurial orientation and new venture performance: the moderating role of intra- and extra-industry social capital. Acad Manag J 51:97–111CrossRefGoogle Scholar
  60. Tang J, Tang Z, Marino LD, Zhang Y, Li Q (2008) Exploring an inverted U-shaped relationship between entrepreneurial orientation and performance in Chinese ventures. Entrep Theory Pract 32:219–239CrossRefGoogle Scholar
  61. Treacy M, Wiersema FD (1997) The discipline of market leaders: choose your customers, narrow your focus, dominate your market. Basic Books, New YorkGoogle Scholar
  62. Wales W, Gupta V, Moussa F (2013) Empirical research on entrepreneurial assessment: a comprehensive qualitative assessment. Int Small Bus J 31(4):357–383CrossRefGoogle Scholar
  63. Wiklund J, Shepherd D (2005) Entrepreneurial orientation and small business performance: a configurational approach. J Bus Ventur 20(1):71–91CrossRefGoogle Scholar
  64. Yadav MS, Prabhu JC, Chandy RK (2007) Managing the future: CEO attention and innovation outcomes. J Mark 71(4):84–101CrossRefGoogle Scholar
  65. Zahra SA (1996) Governance, ownership, and corporate entrepreneurship: the moderating impact of industry technological opportunities. Acad Manag J 39:1713–1735CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.School of ManagementBinghamton University, State University of New YorkVestalUSA
  2. 2.Lynchburg CollegeLynchburgUSA

Personalised recommendations