Entrepreneurial Orientation and the Performance of Religious Congregations as Predicted by Rational Choice Theory
Pearce, John A., II, Fritz, David A., Davis, Peter S., Entrepreneurship: Theory and Practice
Empirical and anecdotal evidence suggests that businesses that act with an entrepreneurial orientation enjoy superior performance. Our research investigates whether nonprofit, religious congregations can benefit from similar initiatives. We based our hypotheses on the Rational Choice Theory of Religion, which was developed by social scientists to bring economic analysis to the understanding of the effects of competition among nonprofit organizations. Using a sample of 250 religious congregations in five different geographical markets, an entrepreneurial orientation is found to be positively associated with organizational performance. A hypothesized interaction effect between environmental munificence and entrepreneurial orientation is assessed.
The concept of entrepreneurial orientation (EO) has emerged as an approach for injecting entrepreneurial behavior into ongoing firms. An EO is conceptualized as a set of distinct but related behaviors that have the qualities of innovativeness, proactiveness, competitive aggressiveness, risk taking, and autonomy. These behaviors are associated with entrepreneurship in that they contribute to the development and implementation of new resource combinations to improve competitiveness and facilitate entry into new markets. EO is linked positively to performance in service and manufacturing industries. However, EO has been neglected as a research topic in nonprofit sectors.
The specific nonprofit organizations studied in this research are religious congregations. Despite the importance of religious institutions in the United States and worldwide economy, there has been a pronounced lack of direct application of strategic theory to religious congregations (Miller, 2002). We explore the proposition that many of the same benefits that firms in the manufacturing sector and the for-profit service sector receive from implementing an EO also accrue to religious congregations that adopt an entrepreneurial approach to management.
Attempting to assess the value of EO in a nonprofit context presents a special theoretical hurdle. EO has been conceptually developed and empirically tested to explain performance differences among profit-oriented businesses. While nonprofit organizations share many similarities, many factors are distinctly different, including primary performance indicators, manager/nonmanager relationships, and critically, the consequences of competition among different groups. Since EO is expressly advocated to improve organizational competitiveness, is EO advantageous in a nonprofit, religious context?
To address this issue, our research employs the Rational Choice Theory of Religion (RCT) (Finke & Stark, 1988; Finke, Guest, & Stark, 1996; Iannaccone, 1995b), augmented by the neoclassical rational choice perspective (Spickard, 1998) to more fully understand the consequences of EO for nonprofit religious organizations. The RCT views religion as a social phenomenon that is best understood through economic analysis of a competitive environment in which people make rational choices.
An organization's external environment has long been linked to its performance. Aldrich (1979) identified six salient dimensions of the environment, which Dess and Beard (1984) distilled into three primary dimensions, labeled complexity, dynamism, and munificence. Environmental munificence, which refers to the relative abundance of the resources that support the organization, has since proven to be the most significant of the factors (Castrogiovanni, 1991). The level of munificence reflects demographic, economic, social, political, and technological developments.
Firm munificence emerges as the most consequential factor in EO, when munificence is defined as the carrying capacity of the environment to sustain growth (Castrogiovanni, 1991). Although research has established a positive relationship between munificence and performance in for-profit firms (Covin & Slevin, 1989; Dess, Lumpkin, & Covin, 1997; Hansen & Wernerfelt, 1989), little is known about the relationship in nonprofits, or in religious congregations specifically. …