Academic journal article International Journal of Entrepreneurship

Assessing the Influence of Entrepreneurial Orientation on Small and Medium Enterprises' Performance

Academic journal article International Journal of Entrepreneurship

Assessing the Influence of Entrepreneurial Orientation on Small and Medium Enterprises' Performance

Article excerpt

INTRODUCTION

Entrepreneurial orientation is a company's ability to take on somewhat risky objectives in the context of decision-making styles, processes, practices and rules of innovation improvement, proactivity and propensity for risk-taking (Patel & D'Souza, 2009; Fauzul et al., 2010). The global business environment is often highly competitive and therefore, companies must be proactive and also be able to compete in foreign markets. Thus, researchers have argued about entrepreneurial orientation as a strategic means of enhancing SMEs' performance (Morgan et al., 2006; Bakar and Ahmad, 2010). Dixon (2012) proved that entrepreneurial orientation has a positive effect on operational efficiency of SMEs in South Africa. Also, a study conducted by Beck (2015) revealed that entrepreneur's orientations such as pro-activeness, innovativeness and risk-taking are pertinent to the performance of SMEs in Bangladesh. Despite these facts, the rate of SMEs' failure in Nigeria remains alarming and disturbing, especially bearing in mind the role of SMEs' in sustaining highly competitive economies (Abiodun and Ibidunni, 2014). The limited capacity of managers to be innovative, proactive and futuristic has been identified as some of the reasons for this declining performance of SMEs. Consequently, it has become pertinent to assess the role of entrepreneurial orientation of the performance of SMEs in a developing economy, such as Nigeria. Ibeh and Young (2001) and Fauzul, et al. (2010) suggested that entrepreneurial orientation in the business context is interpreted as the company's willingness to act proactively and seek international business opportunities with innovative products, services and processes, regardless of the risks they imply. Therefore, this research is focused on assessing the influence entrepreneurial orientation of Small and Medium Enterprises' (SMEs) performance in Nigeria.

LITERATURE REVIEW

Entrepreneurial Orientation (EO)

Entrepreneurial orientation is an organization's strategic orientation that refers to detailed entrepreneurial aspects of policymaking styles, approaches and practices; it sums up the features of an entrepreneurial firm (Dike, 2008). Fasua (2006) stated that an entrepreneurial firm is one that is involved in innovation, undertakes risky ventures and is first to come up with proactive steps, beating competitors to it. Based on this, several researchers have agreed that EO is a combination of the three dimensions: Innovative, proactive and risk-taking activities Therefore, EO involves a readiness to introduce new market offerings, involve risky undertaken; to try out new and uncertain products, services, and markets and be more proactive than competitors toward new marketplace opportunities (Oboh, 2004; Adeyemi and Aremu, 2011). The innovative aspect of EO is a firm's inclination towards engaging in and support new ideas, novelty, experimentation and creative process that are a departure from known practices and methods (Akinlabi, 2008). A high rate of innovation helps a firm to pursue new opportunities. Proactiveness refers to anticipating and acting on imminent change in terms of customers' wants and needs thus creating a firstmover advantage vis-a-vis competition (Chukwuemeka, 2006). Northouse (2009) stated that proactive firms have the desire to be pioneers, thereby taking advantage of emerging opportunities. EO also involves risk taking which is the willingness for a business owner to commit more resources to projects where the failure of such projects may be higher than the success (Miller and Friesen, 2010). In some instances, according to Lickona (2012) risk taking also implies committing resources to projects where the outcomes are unknown. This basically reflects that the company is disposed to disrupt the tried-and-true methods and venture into the unknown. Entrepreneurial orientation has progressed since it was proposed by Miller in 1983; it has developed from three concepts; innovativeness, risk taking and proactiveness to include autonomy (Peng, 2003). …

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