Abstract
Prior literatures have argued that the relationship between entrepreneurial orientation and firm performance may be not as straightforward as expected. With EO–performance contingency framework, this study investigates how product quality mediates the relationship between EO and firm performance. Using survey data from 153 new ventures, we find that EO dimensions have non-uniform and non-linear, rather than merely linear, relationships with product quality. Specifically, the results reveal that innovativeness and autonomy may lead to superior product quality, however, risk-taking would decrease, not increase, product quality. Proactiveness has U-shaped, not inverse U-shaped, effect on product quality and competitive aggressiveness has U-shaped, not positive linear, effect on product quality. Our results enrich the EO-performance contingency framework and highlight the significance of concerning independent and unique effects of individual EO dimension.
Keywords: entrepreneurial orientation; firm performance; product quality; new ventures
Highlights
Product quality partially mediates the relationship between entrepreneurial orientation and firm performance.
Innovativeness increases product quality.
Autonomy increases product quality.
Risk-taking reduces, not increases, product quality.
Proactiveness has U-shaped, not inverse U-shaped, effects on product quality.
Competitive aggressiveness has U-shaped, not positive linear, effects on product quality.
Risk-Taking (Cronbach’s alpha=0.92), Hughes and Morgan (2007), (1=strongly disagree; 7=very strongly agree) Risk-Taking 1: The term “risk taker” is considered a positive attribute for people in our business. Risk-Taking 2: People in our business are encouraged to take calculated risks with new ideas. Risk-Taking 3: Our business emphasizes both exploration and experimentation for opportunities. Innovativeness (Cronbach’s alpha=0.80), Hughes and Morgan (2007), (1=strongly disagree; 7=very strongly agree) Innovativeness 1: We actively introduce improvements and innovations in our business. Innovativeness 2: Our business is creative in its methods of operation. Innovativeness 3: Our business seeks out new ways to do things. Autonomy (Cronbach’s alpha=0.88), Hughes and Morgan (2007), (1=strongly disagree; 7=very strongly agree) Autonomy 1: Employees are permitted to act and think without interference. Autonomy 2: Employees perform jobs that allow them to make and instigate changes in the way they perform their work tasks. Autonomy 3: Employees are given freedom and independence to decide on their own how to go about doing their work. (Deleted) Autonomy 4: Employees are given freedom to communicate without interference. Autonomy 5: Employees are given authority and responsibility to act alone if they think it to be in the best interests of the business. (Deleted) Autonomy 6: Employees have access to all vital information. Proactiveness (Cronbach’s alpha=0.84), Hughes and Morgan (2007), (1=strongly disagree; 7=very strongly agree) Proactiveness 1: We always try to take the initiative in every situation (e. g., against competitors, in projects when working with others). Proactiveness 2: We excel at identifying opportunities. Proactiveness 3: We initiate actions to which other organizations respond. Competitive Aggressiveness (Cronbach’s alpha=0.72), Hughes and Morgan (2007), (1=strongly disagree; 7=very strongly agree) Competitive aggressiveness 1: Our business is intensely competitive. Competitive aggressiveness 2: In general, our business takes a bold or aggressive approach when competing. Competitive aggressiveness 3: We try to undo and out-maneuver the competition as best as we can. Performance (Cronbach’s alpha=0.96), McDougall et al. (1994) Performance 1 The return on investment (ROI) has exceeded what our investors expected (1=Much lower; 4=the same; 7=Much higher) Performance 2 Our company has met all of our predefined goals and objectives for this new venture (such as profitability, sales, etc.) (1=Much lower; 4=the same; 7=Much higher) Performance 3 How successful is your company from an overall profitability standpoint as stated in your business plan (1=Far less than our minimum acceptable criteria; 3=Barely met our minimum acceptable criteria; 7=Far exceeded our minimum acceptable criteria) Performance 4 Relative to competitors, out company’s sales growth is (1=Far less; 7=Far greater) Performance 5 Relative to competitors, our company’s market share gains are (1=Far less; 7=Far greater) Performance 6 Relative to competitors, our company’s net profits are (1=Far less; 7=Far greater) Product quality (Cronbach’s alpha=0.84), Song and Parry (1997), (1=strongly disagree; 7=strongly agree) Product quality 1: Compared to competitive products, our products offer unique features or attributes to the customer. Product quality 2: Our products are clearly superior to competing products in terms of meeting customers’ needs. Product quality 3: Our products have higher quality than competitive products – tighter specifications, stronger, lasted longer, or more reliable. Product quality 4: Our products assist the customer to do a job or do something he could not presently do with what was available. Market Growth (Cronbach’s alpha=0.90), Jaworski and Kohli (1993), (1=strongly disagree; 7=very strongly agree) Market Growth 1: There has been high growth in demand in this industry. Market Growth 2: This industry offered many attractive opportunities for future growth. Market Growth 3: Growth opportunities in this industry have been abundant. Technological Turbulence (Cronbach’s alpha=0.82), Jaworski and Kohli (1993),(1=strongly disagree; 7=very strongly agree) Technological 1: The technology in our industry is changing rapidly. Technological 2: It is very difficult to forecast where the technology in this industry will be in the next five years. Technological 3: A large number of new product ideas have been made possible through technological breakthrough in our industry. Industry 1 is a dummy variable (code as in computer entertainment industry, 1; otherwise=0); Industry 2 is a dummy variable (code as in consumer electronic industry, 1; otherwise =0); Industry 3 is a dummy variable (code as in household appliances industry, 1; otherwise=0); Ahuja, G., and C.M. Lampert. 2001. “Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions.” Strategic Management Journal 22 (6): 521–543.10.1002/smj.176Search in Google Scholar Arrow, K. J 1962. “Economic Welfare and the Allocation of Resources for Invention.”. In Nelson, R. R. (Ed.), The Rate and Direction of Inventive Activity: Economic and Social Factors. 609–626. 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Independent Variables
Dependent Variables
Mediating variables
Control Variables
Industry
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Published Online: 2017-9-5
© 2017 Walter de Gruyter GmbH, Berlin/Boston
