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Measuring entrepreneurial orientation & business performance relationship
 

Measuring entrepreneurial orientation & business performance relationship

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    Measuring entrepreneurial orientation & business performance relationship Measuring entrepreneurial orientation & business performance relationship Document Transcript

    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 4, July-August (2013) 165 MEASURING ENTREPRENEURIAL ORIENTATION & BUSINESS PERFORMANCE RELATIONSHIP IN AN INDIAN SETTING SMITHA NAIR Contract Lecturer, School of Industrial Fisheries, CUSAT, Cochin-16. INTRODUCTION Entrepreneurial Orientation has evoked a lot of interest among the academic circles. Firms which display a high ability to innovate, involve in strategy, continuously assess their customers’ needs and wants, identify new opportunities, take calculated risks and persevere in making their vision a reality, display Entrepreneurial Orientation (EO) (Miller, 1983). ). EO has thus been variously defined as a strategy building process upon which a firm is able to base its entrepreneurial decisions (e.g., Lumpkin & Dess, 1996; Wiklund &Shepherd, 2003) and as the behavior of firms, whereby they strive to remain ahead of their competitors and better their own performance and achieve business success. Thus innovativeness, risk taking propensity and proactiveness are the hallmark of entrepreneurial firms. EO is considered essential to achieve business success, tide over potentially unfavourable situations, counter competition and achieve customer satisfaction. EO is conceptualized as a spectrum, on which firms which differ vastly with respect to their entrepreneurial behaviours, determined by their ability to innovate, take risks, and be on the lookout for opportunities, fall on opposite ends and can be labeled as either defenders/prospectors, conservative/entrepreneurial, followers/pioneers and reactive/proactive firms (Avlonitis and Salavou, 2007; Atuahene-Gima and Ko, 2001; Covin et al., 1999; Miles and Snow, 1978; Miller and Friesen, 1982; Mintzberg, 1973). Covin and Slevin’s (1986) three-dimensional definition of EO is adopted and it is treated as a multi-dimensional construct. Thus, this paper adopts the Covin & Slevin’s construct for studying the Indian seafood exporting firms’ EO setting. The entrepreneurial orientation and business performance (BP) relationship study is the objective of this paper. The EO-BP relationship has been studied widely and has reported to be significant and positive, and firms with a higher EO show a higher business performance (Zahra, 1991; Zahra and Covin, 1995;Wiklund, 1999, Rauch et al., 2004). Researchers have also studied the role of moderators in the EO-BP relationship and have reported the significance of firm specific factors and environmental factors (Cyert and March, 1963; Levinthal and March, 1981; Miller, 1987; Cooper et al., 1994). INTERNATIONAL JOURNAL OF MANAGEMENT (IJM) ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 4, Issue 4, July-August (2013), pp. 165-169 © IAEME: www.iaeme.com/ijm.asp Journal Impact Factor (2013): 6.9071 (Calculated by GISI) www.jifactor.com IJM © I A E M E
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 4, July-August (2013) 166 METHODS AND MEASUREMENT The data collection methods included collection of both primary and secondary data. Primary data was collected by survey method from the various seafood exporting firms in India, while secondary data was collected from the various government fisheries institutes and research bodies, trade associations like the Seafood Exporters Association, India (SEAI) and the internet. The research method employed the use of quantitative data analysis, which involved the testing of hypotheses, identifying causality and replicability, using survey method. The survey method was carried out using questionnaire as survey instrument. The sampling frame consists of a list of 356 processing (freezing) plants included in the Seafood Exporters’ Directory (2004), published by the Marine Products Export Development Authority. The questionnaire was designed to be an SPSS–friendly one and the questions were coded so that the responses obtained could be quantified to obtain tangible results. The instrument has a 6 item questionnaire based to find out the degree of proactiveness, risk taking and innovativeness and a 5 item business performance construct dealing with overall performance, ROI and sales compared to last year, compared to competitors and compared to expectations. HYPOTHESIS The EO-BP relationship is tested empirically by stating the hypothesis as follows: The greater the entrepreneurial orientation, the greater the market orientation. RESULTS AND DISCUSSION Motivating factors for initiating export operations The exporters listed different motivating factors for initiating export operations. On a scale of 1 – 5, the mean scores ranged from 2.25 to 4.51. Of them the most important factor was, predictably, profit incentive, with a mean score of 4.51 (S.D = 0.704). Following this, the other top motivating factors included location advantage (4.24), technical knowledge (4.09), future growth reasons (3.94) and high growth rate of business (3.88). The least motivating factor was competitive pressure from domestic market. The factor managerial urge, which reflects on the entrepreneurial orientation, had a mean value of 3.76. Table 5.2.16. Motivating factors for initiating export operations Motivating factors for initiating export N Mean Std. Deviation Profit Incentive 108 4.51 0.704 Tax Benefit 108 3.28 0.807 Managerial Urge 108 3.76 1.267 High growth rate 108 3.88 0.944 Receive unsolicited order 108 2.95 1.307 Company's future growth 108 3.94 0.930 Competitive pressure from domestic market 108 2.25 1.033 Inherited business 108 2.75 1.319 Less competition 108 2.65 1.130 Less investment required 108 2.28 1.022 Have technical know-how 108 4.09 0.881 Locational advantage 108 4.24 0.609 Source: Primary data
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 4, July-August (2013) 167 CORRELATION ANALYSIS The correlationship between entrepreneurial orientation and business performance is further examined by looking at the various components of business performance. Business is measured by both its economic and non-economic indicators. Non-economic indicators include the customer and employee consequences. Entrepreneurial orientation exhibits positive significant relationships to all the business performance components. The highest correlation is showed between entrepreneurial orientation and non-economic performance (r=0.654). Correlations Entrepreneurial Orientation Economic Business Performance Noneconomic Business Performance Entrepreneurial Orientation Pearson Correlation 1 .503** .654** Sig. (2-tailed) .000 .000 N 108 108 108 Economic Business Performance Pearson Correlation .503** 1 .732** Sig. (2-tailed) .000 .000 N 108 108 108 Noneconomic Business Performance Pearson Correlation .654** .732** 1 Sig. (2-tailed) .000 .000 N 108 108 108 **. Correlation is significant at the 0.01 level (2-tailed). RESULTS AND DISCUSSION It is seen that the EO-BP relationship is positive and the business and the greatest factor was the business performance relative to competitors, thus empirically proving that entrepreneurial orientation leads to an increase in business performance relative to its competitors. The results of the stepwise regression analysis of the EO-BP relationship are as given below. Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .519a .270 .263 .59608 2 .597b .357 .344 .56217 3 .617c .381 .363 .55412 a. Predictors: (Constant), Overall business performance of firm relative to major competitors last year b. Predictors: (Constant), Overall business performance of firm relative to major competitors last year, Equity of company to employees improved in past 3 years c. Predictors: (Constant), Overall business performance of firm relative to major competitors last year, Equity of company to employees improved in past 3 years, Return on investment of firm relative to all competitors last year
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 4, July-August (2013) 168 Thus to increase competitive capabilities, Indian seafood processing firms need to pay greater attention to their entrepreneurial orientation. By virtue of their risk taking behavior and their readiness to venture into new businesses, firms with a high EO tend to perform better than low EO firms. Hence it is recommended that Indian seafood processing firms need to be more entrepreneurial oriented, so as to deal with the inherent riskiness of the business. Being proactive and taking up new opportunities in order to convert them into strengths, will help the seafood firms to face the competition and utilize the opportunities coming up. The highly perishable nature of the seafood, the customer demand for safe food, the development of new players, in the seafood trade scenario, strict regulations and demand and supply fluctuations have all resulted in the seafood trading being a risky business (Allshouse et al.,2004). Presently, due to the disease affliction in the shrimp farms in Thailand, which is the major vannamei shrimp exporter to the US, the demand is being met by other countries including India. But India does not have enough capacity to fulfill the requirement by itself. If seafood firms take up farming on a large scale and absorb the potential risks, then they have the capacity to turn this opportunity to business success. CONCLUSIONS AND LIMITATIONS Thus it has been empirically proved that entrepreneurial orientation positively affects business performance of Indian seafood processing firms by increasing it. This is in line with empirical studies conducted world over and thus contributes to existing literature. It is therefore recommended that Indian seafood processing firms take up entrepreneurial activities in order to improve their business success and develop competitive advantages, which will help them excel in the global seafood trade. Some of the limitations of the study include lack of study of the potential moderators involved in the EO-BP relationship. Moreover several firms closed down during the period of the study, which may affect the findings of the study. Further studies need to be conducted to develop a better understanding of the EO-BP relationship. REFERENCES 1. Allshouse,J.,Buzby,J; Harvey,D; Zron,D (2004). Seafood safety and trade. Agriculture Information Bulletin Number 789-7, February, United States Department of Agriculture, pp.2. 2. Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29: 770-791. 3. Atuahene-Gima K, Ko A. An empirical investigation of the effect of market orientation and entrepreneurship orientation alignment on product innovation.Organ Sci 2001;12(1):54–74. 4. Covin JG, Slevin DP, Heeley MB. Pioneers and followers: competitive tactics, environment, and firm growth. J Bus Vent 1999;15:175–210. 5. Cooper, A.C., Gimeno-Gascon, F.J., Woo, C.Y., 1994. Initial human and financial capital as predictors of new venture performance. J. Bus. Venturing 9 (5), 371–395. 6. Cyert, R.M., March, J.G., 1963. A Behavioral Theory of the Firm. Englewood Cliffs, New Jersey. 7. Miles R, Snow C. Organizational strategy, structure and process. New York:McGraw Hill; 1978. 8. Miller D, Friesen PH. Innovation in conservative and entrepreneurial firms: two models of strategic momentum. Strat Manage J 1982;3:1–25. 9. Levinthal, D., March, J.G., 1981. A model of adaptive organizational search. J. Econ. Behav. Organ. 2, 307–333. 10. Mintzberg H. Strategy making in three modes. Calif Manage Rev 1973;16: 4–58.
    • International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 4, Issue 4, July-August (2013) 169 11. Covin, J. G. & Slevin, D. P. (1986). The development and testing of an organizational level entrepreneurship scale. In Ronstadt, R., Hornaday, J.A., Peterson, R. and Vesper, K. H. (Eds), Frontiers of entrepreneurship research, pp628-639.Wellesley, MA: Babson College. 12. Zahra, S. (1991). Predictors and financial outcomes of corporate entrepreneurship: An 13. explorative study. Journal of Business Venturing, 6:259-285. 14. Zahra, S. & Covin, J. (1995). Contextual influence on the corporate entrepreneurship – 15. performance relationship: A longitudinal analysis. Journal of Business Venturing, 10:43-58. 16. Wiklund, J. (1999). The sustainability of the entrepreneurial orientation-performance relationship. Entrepreneurship Theory and Practice, 24(1):37-48. Rauch et al., 2004). 17. R.Malarvizhi and Dr.Y.Lokeswara Choudary, “Entrepreneurial Barriers and Success Factors of Women in Utility Service Businesses”, International Journal of Management (IJM), Volume 4, Issue 2, 2013, pp. 310 - 320, ISSN Print: 0976-6502, ISSN Online: 0976-6510. 18. Prof. T A Venlatalachalam and Dr. G. Sivaramakrishnan, “Social Entrepreneurship in Indian Scenario”, International Journal of Management (IJM), Volume 2, Issue 1, 2011, pp. 58 - 60, ISSN Print: 0976-6502, ISSN Online: 0976-6510. 19. Smitha Nair, “Influence of Moderators on the Market Orientation-Business Performance Relationship”, International Journal of Management (IJM), Volume 4, Issue 2, 2013, pp. 78 - 84, ISSN Print: 0976-6502, ISSN Online: 0976-6510.