Revisiting the impact of entrepreneurial orientation on SMEs’ organizational performance
-
DOIhttp://dx.doi.org/10.21511/ppm.22(2).2024.03
-
Article InfoVolume 22 2024, Issue #2, pp. 29-39
- 423 Views
-
155 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study investigates the impact of five dimensions of entrepreneurial orientation (risk-taking, proactiveness, innovativeness, aggressiveness, and autonomy), an independent variable, on SMEs’ organizational performance in Bangladesh. The study surveyed 237 SMEs’ owners (out of 300, with a response rate of 79%) in Gazipur district, Bangladesh. Cronbach’s alpha (α) value of 0.70 was used to examine the reliability of the constructs in this study. Drawing from earlier research, a five-point Likert scale questionnaire was constructed to assess the links between entrepreneurial orientation and SMEs’ organizational performance. The dependent variable in this study was SMEs’ organizational performance, which was based on business growth, change in number of employees, profitability, and sales growth. The hypotheses were tested using SPSS with a 95% confidence interval. The results suggest that all five dimensions of entrepreneurial orientation positively affect the organizational performance of SMEs in Bangladesh. It is evident that proactiveness (β-value = 0.330) has the greatest effect on SMEs’ organizational performance, and competitive aggressiveness has the least effect (β-value = 0.230). The independent variables explain a significant proportion of the variability observed in SMEs’ organizational performance (R2 = 57.4%). The research outcomes offer valuable implications for entrepreneurs, policymakers, and academics.
Acknowledgment
The authors acknowledge the Accounting Research Institute (ARI)-HICoE.
- Keywords
-
JEL Classification (Paper profile tab)D23, L25, L26
-
References42
-
Tables6
-
Figures1
-
- Figure 1. Research framework
-
- Table 1. Reliability and validity analysis
- Table 2. Demographic information
- Table 3. Correlation matrix
- Table 4. Model summary of regression analysis
- Table 5. Regression coefficients
- Table 6. Summary of hypotheses testing
-
- Akhter, A., Karim, M. M., Jannat, S., & Islam, K. M. A. (2022). Determining factors of intention to adopt internet banking services: A study on commercial bank users in Bangladesh. Banks and Bank Systems, 17(1), 125-136.
- Altinay, L., & Wang, C. L. (2011). The influence of an entrepreneur’s socio-cultural characteristics on the entrepreneurial orientation of small firms. Journal of Small Business and Enterprise Development, 18(4), 673-694.
- Antoncic, J. A., Antoncic, B., Gantar, M., Hisrich, R. D., Marks, L. J., Bachkirov, A. A., Li, Zh., Polzin, P., Borges, J. L., Coelho, A., & Kakkonen, M. L. (2018). Risk-taking propensity and entrepreneurship: The role of power distance. Journal of Enterprising Culture, 26(01), 1-26.
- Arshad, A. S., Rasli, A., Arshad, A. A., & Zain, Z. M. (2014). The impact of entrepreneurial orientation on business performance: A study of technology-based SMEs in Malaysia. Procedia-Social and Behavioral Sciences, 130, 46-53.
- Avlonitis, G. J., & Salavou, H. E. (2007). Entrepreneurial orientation of SMEs, product innovativeness, and performance. Journal of Business Research, 60(5), 566-575.
- Chen, Y., Wang, Y., Nevo, S., Benitez-Amado, J., & Kou, G. (2015). IT capabilities and product innovation performance: The roles of corporate entrepreneurship and competitive intensity. Information & Management, 52(6), 643-657.
- Covin, J. G., & Covin, T. J. (1990). Competitive aggressiveness, environmental context, and small firm performance. Entrepreneurship Theory and Practice, 14(4), 35-50.
- Covin, J. G., & Wales, W. J. (2012). The measurement of entrepreneurial orientation. Entrepreneurship Theory and Practice, 36(4), 677-702.
- Damanpour, F., Szabat, K. A., & Evan, W. M. (1989). The relationship between types of innovation and organizational performance. Journal of Management Studies, 26(6), 587-602.
- Danso, A., Adomako, S., Damoah, J. O., & Uddin, M. (2016). Risk-taking propensity, managerial network ties and firm performance in an emerging economy. The Journal of Entrepreneurship, 25(2), 155-183.
- Fan, M., Qalati, S. A., Khan, M. A. S., Shah, S. M. M., Ramzan, M., & Khan, R. S. (2021). Effects of entrepreneurial orientation on social media adoption and SME performance: The moderating role of innovation capabilities. Plos One, 16(4), e0247320.
- Frank, H., Kessler, A., & Fink, M. (2010). Entrepreneurial orientation and business performance – A replication study. Schmalenbach Business Review, 62, 175-198.
- Frese, M., Brantjes, A., & Hoorn, R. (2002). Psychological success factors of small scale businesses in Namibia: The roles of strategy process, entrepreneurial orientation and the environment. Journal of Developmental Entrepreneurship, 7(3), 259-282.
- García-Lopera, F., Santos-Jaén, J. M., Palacios-Manzano, M., & Ruiz-Palomo, D. (2022). Exploring the effect of professionalization, risk-taking, and technological innovation on business performance. Plos One, 17(2), e0263694.
- Hoe, S. L. (2008). Issues and procedures in adopting structural equation modelling technique. Journal of Quantitative Methods, 3(1), 76-83.
- Hossain, M. U., & Asheq, A. A. (2019). The role of entrepreneurial orientation to SME performance in Bangladesh. International Journal of Entrepreneurship, 23(1), 1-6.
- Huang, Y., Li, P., Wang, J., & Li, K. (2022). Innovativeness and entrepreneurial performance of female entrepreneurs. Journal of Innovation & Knowledge, 7(4), 100257.
- 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(5), 651-661.
- Jalali, A., Abhari, S., & Jaafar, M. (2022). Indirect effect of extra-industry network and innovativeness on performance through proactiveness. Journal of Facilities Management.
- Keh, H. T., Nguyen, T. T. M., & Ng, H. P. (2007). The effects of entrepreneurial orientation and marketing information on the performance of SMEs. Journal of Business Venturing, 22(4), 592-611.
- Kirby, D. A. (2004). Entrepreneurship education: Can business schools meet the challenge? Education + Training, 46(8/9), 510-519.
- Kiyabo, K., & Isaga, N. (2020). Entrepreneurial orientation, competitive advantage, and SMEs’ performance: Application of firm growth and personal wealth measures. Journal of Innovation and Entrepreneurship, 9.
- Kosa, A., Mohammad, I., & Ajibie, D. (2018). Entrepreneurial orientation and venture performance in Ethiopia: The moderating role of business sector and enterprise location. Journal of Global Entrepreneurship Research, 8.
- Kraus, S., Rigtering, J. C., Hughes, M., & Hosman, V. (2012). Entrepreneurial orientation and the business performance of SMEs: A quantitative study from the Netherlands. Review of Managerial Science, 6, 161-182.
- Kreiser, P. M., & Davis, J. (2010). Entrepreneurial orientation and firm performance: The unique impact of innovativeness, proactiveness, and risk-taking. Journal of Small Business & Entrepreneurship, 23(1), 39-51.
- Li, Y. H., Huang, J. W., & Tsai, M. T. (2009). Entrepreneurial orientation and firm performance: The role of knowledge creation process. Industrial Marketing Management, 38(4), 440-449.
- Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135-172.
- Lumpkin, G. T., Cogliser, C. C., & Schneider, D. R. (2009). Understanding and measuring autonomy: An entrepreneurial orientation perspective. Entrepreneurship Theory and Practice, 33(1), 47-69.
- Luo, S., & Lin, H. C. (2022). How do TMT shared cognitions shape firm performance? The roles of collective efficacy, trust, and competitive aggressiveness. Asia Pacific Journal of Management, 39, 295-318.
- Lüthje, C., & Franke, N. (2003). The making of an entrepreneur: Testing a model of entrepreneurial intent among engineering students at MIT. R&D Management, 33(2), 135-147.
- Macko, A., & Tyszka, T. (2009). Entrepreneurship and risk taking. Applied Psychology, 58(3), 469-487.
- Matsuno, K., Mentzer, J. T., & Özsomer, A. (2002). The effects of entrepreneurial proclivity and market orientation on business performance. Journal of Marketing, 66(3), 18-32.
- Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29(7), 770-791.
- 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.
- Roux, I. L., & Bengesi, K. M. K (2014). Dimensions of entrepreneurial orientation and small and medium enterprise performance in emerging economies. Development Southern Africa, 31(4), 606-624.
- Runyan, R. C., Huddleston, P., & Swinney, J. (2006). Entrepreneurial orientation and social capital as small firm strategies: A study of gender differences from a resource-based view. The International Entrepreneurship and Management Journal, 2(4), 455-477.
- Uddin, R., Bose, T. K., & Yousuf, S. (2014). Entrepreneurial orientation (EO) and performance of business in Khulna City, Bangladesh. Journal of Small Business & Entrepreneurship, 27(4), 343-352.
- Wales, W. J., Gupta, V. K., & Mousa, F. T. (2013). Empirical research on entrepreneurial orientation: An assessment and suggestions for future research. International Small Business Journal, 31(4), 357-383.
- Wales, W. J., Shirokova, G., Sokolova, L., & Stein, C. (2016). Entrepreneurial orientation in the emerging Russian regulatory context: The criticality of interpersonal relationships. European Journal of International Management, 10(3), 359-382.
- Wang, Y. (2016). What are the biggest obstacles to the growth of SMEs in developing countries? Empirical evidence from an enterprise survey. Borsa Istanbul Review, 16(3), 167-176.
- Wiklund, J., & Shepherd, D. (2005). Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20(1), 71-91.
- Zahra, S. A., & Covin, J. G. (1995). Contextual influences on the corporate entrepreneurship-performance relationship: A longitudinal analysis. Journal of Business Venturing, 10(1), 43-58.