Abstract
Previous studies have generally established a positive relationship between aggregated measures of entrepreneurial orientation (EO) and firm performance. However, there are theoretical reasons suggesting that three dimensions of EO (innovativeness, proactiveness, and risk-taking) may possess differential relationships with performance in smaller firms. This study utilizes a sample consisting of 1,668 small-to-medium sized enterprises (SMEs) in nine countries across 13 different industries to provide a finer-grained analysis of the EO-performance relationship. Specifically, we theorize and test a non-monotonic influence of innovativeness, proactiveness, and risk-taking on SME performance. Innovativeness and proactiveness displayed predominantly positive U-shaped relationships with SME performance. Risk-taking, however, displayed a predominantly negative U-shaped relationship with SME performance. Further, individualism was found to positively moderate the relationships between innovativeness-performance and proactiveness-performance. Taken together, these results suggest that differential relationships exist between three dimensions of EO and SME performance, with important theoretical implications for future EO research.
Similar content being viewed by others
Notes
We recognize that EO has been conceptualized with additional dimensions (Lumpkin and Dess 1996). However, the earlier conceptualization using three underlying dimensions (innovativeness, proactiveness, and risk-taking) has been the most widely utilized framework of the EO construct in both the entrepreneurship and strategic management literature (Rauch et al. 2009). Thus, we focused our study on these three dimensions.
We also conducted a latent methods factor test and a one-factor test on the perceptual data employed in this study. The results of these tests are available from the authors upon request. Taken together, these various tests suggest that common method bias did not pose a significant threat to this research.
References
Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park: Sage.
Alvarez, S. A. (2007). Entrepreneurial rents and the theory of the firm. Journal of Business Venturing, 22(3), 427–442.
Alvarez, S. A., & Barney, J. B. (2005). How do entrepreneurs organize firms under conditions of uncertainty? Journal of Management, 31(5), 776–793.
Andersen, T. J., Denrell, J., & Bettis, R. A. (2007). Strategic responsiveness and Bowman’s risk-return paradox. Strategic Management Journal, 28, 407–429.
Atuahene-Gima, K., & Ko, A. (2001). An empirical investigation of the effect of market orientation and entrepreneurship orientation alignment on product innovation. Organization Science, 12(1), 54–74.
Baum, J. R., Olian, J. D., Erez, M., Schnell, E. R., Smith, K. G., Sims, H. P., et al. (1993). Nationality and work role interactions: A cultural contrast of Israeli and U.S. entrepreneurs’ versus managers’ needs. Journal of Business Venturing, 8(6), 499–512.
Begley, T. M., & Boyd, D. P. (1987). Psychological characteristics associated with performance in entrepreneurial firms and smaller businesses. Journal of Business Venturing, 2, 79–93.
Bowman, E. H. (1980). A risk/return paradox for strategic management. Sloan Management Review, 21(3), 17.
Branzei, O., & Vertinsky, I. (2006). Strategic pathways to product innovation capabilities in SMEs. Journal of Business Venturing, 21(1), 75–105.
Brislin, R. W. (1980). Translation and content analysis of oral and written materials. In H. C. Triandis & J. W. Berry (Eds.), Handbook of cross-cultural psychology. Boston: AllynBacon.
Bruton, G. D., Ahlstrom, D., & Li, H. (2010). Institutional theory and entrepreneurship: Where are we now and where do we need to move in the future? Entrepreneurship Theory and Practice, 3(34), 421–440.
Cho, H.-J., & Pucik, V. (2005). Relationship between innovativeness, quality, growth, profitability, and market value. Strategic Management Journal, 26, 555–575.
Covin, J. G., Green, K. M., & Slevin, D. P. (2006). Strategic process effects on the entrepreneurial orientation-sales growth rate relationships. Entrepreneurship Theory and Practice, 30(1), 57–81.
Covin, J. G., & Miles, M. P. (1999). Corporate entrepreneurship and the pursuit of competitive advantage. Entrepreneurship Theory and Practice, 23(3), 47–63.
Covin, J. G., & Slevin, D. P. (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10, 75–87.
Covin, J. G., & Slevin, D. P. (1991). A conceptual model of entrepreneurship as firm behavior. Entrepreneurship Theory and Practice, 16(1), 7–25.
Covin, J. G., Slevin, D. P., & Heeley, M. B. (2000). Pioneers and followers: Competitive tactics, environment, and firm growth. Journal of Business Venturing, 15(2), 175–210.
Covin, J., & Wales, W. (2012). The measurement of entrepreneurial orientation. Entrepreneurship Theory and Practice, 36(4), 677–702.
Damaraju, N. L., Barney, J., & Dess, G. (2010). Stigma and entrepreneurial risk taking. Paper presented at the Summer Conference, Imperial College London Business School, June, 2010.
Davidsson, P., & Wiklund, J. (2000). Conceptual and empirical challenges in the study of firm growth. In D. Sexton & H. Landstrom (Eds.), The Blackwell handbook of entrepreneurship. Oxford: Blackwell.
De Clercq, D., Sapienza, H. J., & Crijns, H. (2005). The internationalization of small and medium-sized firms. Small Business Economics, 24(4), 409–419.
Dess, G. G., Ireland, R. D., Zahra, S. A., Floyd, S. W., Janney, J. J., & Lane, P. J. (2003). Emerging issues in corporate entrepreneurship. Journal of Management, 29(3), 351–378.
Earley, P. C., & Gibson, C. B. (1998). Taking stock in our progress on individualism–collectivism: 100 years of solidarity and community. Journal of Management, 24(3), 265–304.
Eisenhardt, K. (1989). Making fast strategic decisions in high-velocity environments. Academy of Management Journal, 27, 299–343.
Folta, T. B. (2007). Uncertainty rules the day. Strategic Entrepreneurship Journal, 1(1–2), 97–99.
Freel, M. S. (2005). Perceived environmental uncertainty and innovation in small firms. Small Business Economics, 25(1), 49–64.
Gupta, A. K., & Govindarajan, V. (1984). Business unit strategy, managerial characteristics, and business unit effectiveness at strategy implementation. Academy of Management Journal, 27(1), 25–43.
Hayton, J. C., George, G., & Zahra, S. A. (2002). National culture and entrepreneurship: A review of behavioral research. Entrepreneurship Theory and Practice, 26(4), 33–52.
Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. Newbury Park: Sage.
Hofstede, G. (2001). Culture’s consequences (2nd ed.). Thousand Oaks: Sage.
Hofstede, G., Noorderhaven, N. G., Thurik, A. R., Uhlaner, L. M., Wennekers, A. R. M., & Wildeman, R. E. (2004). Culture’s role in entrepreneurship: Self-employment out of dissatisfaction. In J. Ulijn & T. Brown (Eds.), Innovation, entrepreneurship and culture: The interaction between technology, progress and economic growth (pp. 162–203). Cheltenham: Edward Elgar.
Hornsby, J. S., Kuratko, D. F., Shepherd, D. A., & Bott, J. P. (2009). Managers’ corporate entrepreneurial actions: Examining perception and position. Journal of Business Venturing, 24(3), 236–247.
Hughes, M., & Morgan, R. E. (2007). Deconstructing the relationship between entrepreneurial orientation and business performance at the embryonic stage of firm growth. Industrial Marketing Management, 36, 651–661.
Ireland, R. D., Covin, J. G., & Kuratko, D. F. (2009). Conceptualizing corporate entrepreneurship strategy. Entrepreneurship Theory and Practice, 33(1), 19–46.
Ireland, R. D., & Hitt, M. A. (1999). Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership. Academy of Management Executive, 13(1), 43–57.
Khandwalla, P. N. (1977). Some top management styles, their context and performance. Organization & Administrative Sciences, 7(4), 21–51.
Knight, F. H. (1921). Risk, uncertainty, and profit. New York: Kelly and Millman, Inc.
Kreiser, P. M., Marino, L., Dickson, P., & Weaver, K. M. (2010). Cultural influences on entrepreneurial orientation: The impact of national culture on risk taking and proactiveness in SMEs. Entrepreneurship Theory and Practice, 34(5), 959–983.
Kreiser, P. M., Marino, L., & Weaver, K. M. (2002). Assessing the psychometric properties of the entrepreneurial orientation scale: A multi-country analysis. Entrepreneurship Theory and Practice, 26(4), 71–94.
Kuratko, D. F. (2009). The entrepreneurial imperative of the 21st century. Business Horizons, 52(5), 421–428.
Lee, S. H., Peng, M. W., & Barney, J. B. (2007). Bankruptcy law and entrepreneurship development: A real options perspective. Academy of Management Review, 32(1), 257–272.
Li, H., & Atuahene-Gima, K. (2001). Product innovation strategy and the performance of new technology ventures in China. Academy of Management Journal, 44(6), 1123–1134.
Li, Y., Zhao, Y., Tan, J., & Liu, Y. (2008). Moderating effects of entrepreneurial orientation on market orientation-performance linkage: Evidence from Chinese small firms. Journal of Small Business Management, 46(1), 113–133.
Lieberman, M., & Montgomery, D. (1988). First-mover advantages. Strategic Management Journal, 9, 41–58.
Lind, J., & Mehlum, H. (2010). With or without U? The appropriate test for a U-Shaped relationship. Oxford Bulletin of Economics and Statistics, 72(1), 109–118.
Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Journal, 21(1), 135–172.
Lumpkin, G. T., & Dess, G. G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. Journal of Business Venturing, 16, 429–451.
Makino, S., Isobe, T., & Chan, C. M. (2004). Does country matter? Strategic Management Journal, 25, 1027–1043.
Marino, L., Strandholm, K., Steensma, H., & Weaver, K. (2002). The moderating effect of national culture on the relationship between entrepreneurial orientation and strategic alliance portfolio extensiveness. Entrepreneurship: Theory & Practice, 26(4), 145–160.
McGrath, R. G. (2001). Exploratory learning, innovative capacity, and managerial oversight. Academy of Management Journal, 44(1), 118–131.
McMillan, I. C. (1983). Preemptive strategies. Journal of Business Strategy, 4(4), 16–26.
Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29(7), 770–791.
Miller, D. (2011). Miller (1983) revisited: A reflection on EO research and some suggestions for the future. Entrepreneurship Theory and Practice, 35(5), 873–894.
Miller, D., & Friesen, P. H. (1982). Innovation in conservative and entrepreneurial firms: Two models of strategic momentum. Strategic Management Journal, 3, 1–25.
Miller, K. D., & Leiblein, M. J. (1996). Corporate risk-return relations: Returns variability versus downside risk. Academy of Management Journal, 39(1), 91–122.
Mitchell, R. K., Smith, J. R., Morse, E. A., Seawright, K. W., Peredo, A. M., & McKenzie, B. (2002). Are entrepreneurial cognitions universal? Assessing entrepreneurial cognitions across cultures. Entrepreneurship Theory and Practice, 26(4), 9–32.
Mitchell, R. K., Smith, J. R., Seawright, K. W., & Morse, E. A. (2000). Cross-cultural cognitions and the venture creation decision. Academy of Management Journal, 43(8), 974–993.
Morris, M. H., Avila, R. A., & Allen, J. (1993). Individualism and the modern corporation: Implications for innovation and entrepreneurship. Journal of Management, 19(3), 595–612.
Morris, M. H., Davis, D. L., & Allen, J. W. (1994). Fostering corporate entrepreneurship: Cross-cultural comparisons of the importance of individualism versus collectivism. Journal of International Business Studies, 25(1), 65–89.
Morris, M. H., Kuratko, D. F., & Covin, J. G. (2011). Corporate Entrepreneurship & Innovation (3rd ed.). Mason: South-Western/Cengage Publishers.
Morris, M. H., Kuratko, D. F., & Schindehutte, M. (2000). Triggering events, corporate entrepreneurship and the marketing function. Journal of Marketing Theory and Practice, 8(2), 18–30.
Mueller, S. L., & Thomas, A. S. (2001). Culture and entrepreneurial potential: A nine country study of locus of control and innovativeness. Journal of Business Venturing, 16, 51–75.
Murphy, G. B., Trailer, J. W., & Hill, R. C. (1996). Measuring performance in entrepreneurship research. Journal of Business Research, 36(1), 15–24.
Neter, J., Wasserman, W., & Kutner, M. H. (1990). Applied linear statistical models. Homewood: Irwin.
Pakes, A. (1985). On patents, R&D, and the stock market rate of return. Journal of Political Economy, 93(2), 390–409.
Palmer, T. B., & Wiseman, R. M. (1999). Decoupling risk taking from income stream uncertainty: A holistic model of risk. Strategic Management Journal, 20(11), 1037–1062.
Pinillos, M. J., & Reyes, L. (2011). Relationship between individualist-collectivist culture and entrepreneurial activity: Evidence from Global Entrepreneurship Monitor data. Small Business Economics, 37(1), 23–37.
Qian, G., & Li, L. (2003). Profitability of small- and medium-sized enterprises in high-tech industries: The case of the biotechnology industry. Strategic Management Journal, 24(9), 881–887.
Rauch, A., Wiklund, J., Lumpkin, G. T., & Frese, M. (2009). Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory and Practice, 33(3), 761–787.
Roberts, P. W. (1999). Product innovation, product-market competition and persistent profitability in the U.S. pharmaceutical industry. Strategic Management Journal, 20(7), 655–670.
Robinson, K. C., & McDougall, P. P. (2001). Entry barriers and new venture performance: A comparison of universal and contingency approaches. Strategic Management Journal, 22, 659–685.
Rosenbusch, N., Brinkmann, J., & Bausch, A. (2011). Is innovation always beneficial? A meta-analysis of the relationship between innovation and performance in SMEs. Journal of Business Venturing, 26, 441–457.
Sasabuchi, S. (1980). A test of a multivariate normal mean with composite hypotheses determined by linear inequalities. Biometrika, 67, 429–439.
Schultz, R., Slevin, D.P. & Covin, J.G. (1995). The strategic management profile: An executive questionnaire. Unpublished questionnaire, University of Pittsburgh, Pittsburgh.
Shepherd, D. A., Covin, J. G., & Kuratko, D. F. (2009). Project failure from corporate entrepreneurship: Managing the grief process. Journal of Business Venturing, 24(6), 588–600.
Short, J. C., Broberg, J. C., Cogliser, C. C., & Brigham, K. H. (2010). Construct validation using computer-aided text analysis. Organizational Research Methods, 13(2), 320–347.
Short, J. C., McKelvie, A., Ketchen, D., & Chandler, G. N. (2009). Firm and industry effects on firm performance: A generalization and extension for new ventures. Strategic Entrepreneurship Journal, 3, 47–65.
Smith, K., & Cao, Q. (2007). An entrepreneurial perspective on the firm-environment relationship. Strategic Entrepreneurship Journal, 1, 329–344.
Stam, W., & Elfring, T. (2008). Entrepreneurial orientation and new venture performance: The moderating role of intra- and extraindustry social capital. Academy of Management Journal, 51(1), 97–111.
Steensma, H. K., Marino, L., Weaver, K. M., & Dickson, P. H. (2000). The influence of national culture on the formation of technology alliances by entrepreneurial firms. Academy of Management Journal, 43(5), 951–973.
Stopford, J. M., & Baden-Fuller, C. W. F. (1990). Creating corporate entrepreneurship. Strategic Management Journal, 15(7), 521–537.
Su, Z., Xie, E., & Li, Y. (2011). Entrepreneurial orientation and firm performance in new ventures and established firms. Journal of Small Business Management, 49(4), 558–577.
Tang, Z., & Tang, J. (2012). Entrepreneurial orientation and SME performance in China’s changing environment: The moderating effects of strategies. Asia Pacific Journal of Management, 29, 409–431.
Tang, J., Tang, Z., Marino, L. D., Zhang, Y., & Li, Q. (2008). Exploring an inverted U-shape relationship between entrepreneurial orientation and performance in Chinese ventures. Entrepreneurship Theory and Practice, 32(1), 219–239.
Taylor, M. Z., & Wilson, S. (2012). Does culture still matter?: The effects of individualism on national innovation rates. Journal of Business Venturing, 27(2), 234–247.
Terziovski, M. (2010). Innovation practice and its performance implications in small and medium enterprises (SMEs) in the manufacturing sector: A resource-based view. Strategic Management Journal, 31(8), 892–902.
Thurik, A. R., & Wennekers, S. (2004). Entrepreneurship, small business and economic growth. Journal of Small Business and Enterprise Development, 11(1), 140–149.
Tiessen, J. H. (1997). Individualism, collectivism, and entrepreneurship: A framework for international comparative research. Journal of Business Venturing, 12(5), 367–384.
Triandis, H. C., & Suh, E. M. (2002). Cultural influences on personality. Annual Review of Psychology, 53(1), 133–160.
Tsui, A. S., Nifadkar, S. S., & Ou, A. Y. (2007). Cross-national, cross-cultural organizational behavior research: Advances, gaps, and recommendations. Journal of Management, 33(3), 426–478.
Venkatraman, N. (1989). Strategic orientation of business enterprises: The construct dimensionality, and measurement. Management Science, 35(8), 942–962.
Wales, W. J., Patel, P. C., Parida, V. & Kreiser, P. M. (In Press). Non-linear effects of entrepreneurial orientation on small firm performance: The moderating role of resource orchestration capabilities. Strategic Entrepreneurship Journal.
Wiersma, E. (2007). Conditions that shape the learning curve: Factors that increase the ability and opportunity to learn. Management Science, 53(12), 1903–1915.
Wiklund, J., Patzelt, H., & Shepherd, D. A. (2009). Building an integrative model of small business growth. Small Business Economics, 32(4), 351–374.
Wiklund, J., & Shepherd, D. A. (2005). Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20(1), 71–91.
Wiklund, J., & Shepherd, D. (2011). Where to from here? EO as experimentation, failure, and distribution of outcomes. Entrepreneurship Theory and Practice, 35(5), 925–946.
Wright, P., Kroll, M., Pray, B., & Lado, A. (1995). Strategic orientations, competitive advantage, and business performance. Journal of Business Research, 33, 143–151.
Zahra, S. A. (1996). Technology strategy and financial performance: Examining the moderating role of the firm’s competitive environment. Journal of Business Venturing, 11(3), 189–219.
Zahra, S. A., & Bogner, W. C. (2000). Technology strategy and software new ventures’ performance: Exploring the moderating effect of the competitive environment. Journal of Business Venturing, 15(2), 135–173.
Zahra, S. A., Hayton, J. C., & Salvato, C. (2004). Entrepreneurship in family vs. non-family firms: A resource-based analysis of the effect of organizational culture. Entrepreneurship Theory and Practice, 28(4), 363–381.
Zahra, S. A., Nielsen, A. P., & Bogner, W. C. (1999). Corporate entrepreneurship, knowledge, and competence development. Entrepreneurship Theory and Practice, 23(3), 169–189.
Author information
Authors and Affiliations
Corresponding author
Additional information
A previous version of this manuscript was awarded the Wesley J. Howe Award for Excellence on the Topic of Corporate Entrepreneurship at the Babson Entrepreneurship Research Conference. A condensed version of the paper was published in Frontiers of Entrepreneurship Research (FER).
Electronic supplementary material
Below is the link to the electronic supplementary material.
Rights and permissions
About this article
Cite this article
Kreiser, P.M., Marino, L.D., Kuratko, D.F. et al. Disaggregating entrepreneurial orientation: the non-linear impact of innovativeness, proactiveness and risk-taking on SME performance. Small Bus Econ 40, 273–291 (2013). https://doi.org/10.1007/s11187-012-9460-x
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11187-012-9460-x
Keywords
- Entrepreneurial orientation
- Innovativeness
- Proactiveness
- Risk-taking
- Individualism
- Small-and-medium sized enterprises (SMEs)