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M. Ali Asghar
MB-12-34
Assessing the Relationship between
the Perceived Business Environment
and Firm’s
Entrepreneurial Orientation
ALARAPE, ADER...
Purpose of the Debate
To shed light on the relationship between the variables and entrepreneurial
orientation and suggest ...
Entrepreneurial Orientation
ENTREPRENEURSHIP

ENTREPRENEURIAL ORIENTATION

The capacity and willingness
to develop, organi...
Models of Entrepreneurial
Orientation
3 DIMENSION MODEL (COVIN & SLEVIN)
Innovation

Pro-activeness

Risk-taking

5 DIMENS...
Models of Entrepreneurial
Orientation
Innovation: The application of better solutions that meet new requirements,
inarticu...
Theoretical Framework
Entrepreneurial
Orientation Units

Performance

Business
Environment
Measuring Entrepreneurial
Orientation
Innovativeness

Entrepreneurial
Orientation Units

The firm manner and action
toward...
Omer Shahzad
MB-12-08
Dynamic Environment
Hypothesis 1: The more dynamic the perceived business environment the
higher the firm’s entrepreneuria...
Hostile Environment
Hypothesis 2: Environmental hostility is positively related with entrepreneurial
orientation
A “Hostil...
Environment Heterogeneity
Hypothesis 3: Environmental
entrepreneurial orientation

heterogeneity

is

positively

related
...
Environment Munificence
Hypothesis 4: Environmental
entrepreneurial orientation.

munificence

is

positively

related

to...
Data Collection
 The study was conducted to analyze the relationship between the
entrepreneurial orientation (EO) and per...
Research Method
 Multi-stage sampling technique was adopted in selecting the sample size.
 The first-stage involved the ...
Evaluation of Entrepreneurial
Orientation
 The entrepreneurial orientation was evaluated via the entrepreneurial
orientat...
Perceived Business Environment
 The
combination
of
internal
and
external
factors
that
influence a company's operating sit...
Data Analysis
 The Pearson correlation coefficient (r) was employed in examining the
relationship between the PBE variabl...
Results
Hypothesis 1: The more dynamic the perceived business environment the
higher the firm’s entrepreneurial orientatio...
Results
Hypothesis 2: Environmental hostility is positively related with entrepreneurial
orientation
Environmental hostili...
Results
Hypothesis 3: Environmental heterogeneity is positively related to
entrepreneurial orientation
The heterogeneity o...
Results
Hypothesis 4: Environmental munificence is positively related to
entrepreneurial orientation.
With respect to envi...
Conclusion
 This study makes contribution to the literature on entrepreneurship examining
the relationship between EO and...
Assessing the relationship between the perceived business environment
Assessing the relationship between the perceived business environment
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Transcript of "Assessing the relationship between the perceived business environment"

  1. 1. M. Ali Asghar MB-12-34
  2. 2. Assessing the Relationship between the Perceived Business Environment and Firm’s Entrepreneurial Orientation ALARAPE, ADEREMI AYINLA
  3. 3. Purpose of the Debate To shed light on the relationship between the variables and entrepreneurial orientation and suggest ways of improving the EO by creating conducive environment, thereby, enjoy the benefits improved performance associated with high entrepreneurial orientation.
  4. 4. Entrepreneurial Orientation ENTREPRENEURSHIP ENTREPRENEURIAL ORIENTATION The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. Innovation and risk taking are the essential part or the Entrepreneurship. Entrepreneurial Orientation or EO refers to the processes, actions, methods, practices and decision making styles within the Firm. So EO means the use of entrepreneurial ability in decision making.
  5. 5. Models of Entrepreneurial Orientation 3 DIMENSION MODEL (COVIN & SLEVIN) Innovation Pro-activeness Risk-taking 5 DIMENSION MODEL (LUMPKIN & DESS) Autonomy Innovativeness Competitive Aggressiveness. ProActiveness Risk-Taking
  6. 6. Models of Entrepreneurial Orientation Innovation: The application of better solutions that meet new requirements, inarticulate needs, or existing market needs Proactive: Acting in advance to deal with an expected difficulty. Risk: The potential of loss resulting from a given action, activity and/or inaction. Autonomy: It is the capacity of a rational individual to make an in-formed, unforced decision.
  7. 7. Theoretical Framework Entrepreneurial Orientation Units Performance Business Environment
  8. 8. Measuring Entrepreneurial Orientation Innovativeness Entrepreneurial Orientation Units The firm manner and action towards innovation (innovativeness) The firm risk-taking Risk taking Acting in advance to deal with an expected difficulty Pro-activeness
  9. 9. Omer Shahzad MB-12-08
  10. 10. Dynamic Environment Hypothesis 1: The more dynamic the perceived business environment the higher the firm’s entrepreneurial orientation and performance. A “Dynamic environment” is a rapidly changing work environment in an organization. Some of these changes include management issues like rapid decision-making, aggressive marketing, high-risk initiatives, among others. The firm may develop innovative strategies, be more proactive and risk taking and unconsciously develop its entrepreneurial orientation, thereby positively affecting the firm’s performance.
  11. 11. Hostile Environment Hypothesis 2: Environmental hostility is positively related with entrepreneurial orientation A “Hostile environment” creates threats to the firm, either through increased rivalry or decreased demand for the products. The firm therefore become more proactive to beat its competitors: risk-taking and innovative in revitalizing the demand of its products.
  12. 12. Environment Heterogeneity Hypothesis 3: Environmental entrepreneurial orientation heterogeneity is positively related to “Environmental heterogeneity” indicates that there are several different segments of the market with varied characteristics and needs that is served by the firm. In order to take advantage of the heterogeneity of the business environment, the firm needs to be proactive and risk-taking and innovative in order to take advantage of potential arbitrage and connect different markets.
  13. 13. Environment Munificence Hypothesis 4: Environmental entrepreneurial orientation. munificence is positively related to “Environmental munificence” means a great availability of resources in the environment and great opportunity in access and acquirement of resources needed. Munificence will significantly encourage innovativeness. Pro-activeness will become unimportant as the risk of failure is reduced.
  14. 14. Data Collection  The study was conducted to analyze the relationship between the entrepreneurial orientation (EO) and performance and the effect of the perceived business environment (PBE) on the EO.  Data was collected through questionnaires administered owners/managers of small and medium enterprises (SMEs). on
  15. 15. Research Method  Multi-stage sampling technique was adopted in selecting the sample size.  The first-stage involved the application of cluster sampling principle in selecting Lagos area of Southwestern Nigeria  In the second stage, the proportionate stratified sampling technique was adopted in selecting 279 firms from a sample frame of 1,047 SMEs  The questionnaires were distributed to the owners/mangers of SMEs through experienced field assistants over a period of four months.
  16. 16. Evaluation of Entrepreneurial Orientation  The entrepreneurial orientation was evaluated via the entrepreneurial orientation index (EOi). To calculate the entrepreneurial orientation index, an eighteen-item entrepreneurial measurement scale (6-items measures each of the dimensional variables of innovativeness, pro-activeness and risk taking).  The EO scale was constructed in “two-word” format on interval scale of “1 – 5”. As you move to the right of the scale the level of entrepreneurial orientation increases and as you move to the left, the level of entrepreneurial orientation decreases.
  17. 17. Perceived Business Environment  The combination of internal and external factors that influence a company's operating situation is said to be the perceived business environment. The business environment can include factors such as: dynamism, hostility, heterogeneity and munificence.  The questions drawn to get information on any of these variables were carefully selected. The higher the score the more dynamic, hostile, heterogeneity and munificence is the PBE and vice versa.
  18. 18. Data Analysis  The Pearson correlation coefficient (r) was employed in examining the relationship between the PBE variables (dynamism, hostility, heterogeneity and munificence) and EO. Simple linear regression and multiple linear regression that has the ability to estimate the direct linear effect of a single or group of independent variable on a dependent variable was employed to examine the effect of EO on growth performance of SMEs.  This statistical method is used to detect and explain the differences that each independent variable exercises on the dependent variable. The statistic software SPSS (Statistical Package for the Social Sciences Version 14) was used in analyzing the data for the study.
  19. 19. Results Hypothesis 1: The more dynamic the perceived business environment the higher the firm’s entrepreneurial orientation and performance. The environmental dynamism is positively related to pro-activeness and risktaking but negatively related to innovativeness. However, it is positively related to entrepreneurial orientation. Thus hypothesis 1 is upheld. This implies that as the PBE is dynamic, the pro-activeness and risk-taking of the firm increases.
  20. 20. Results Hypothesis 2: Environmental hostility is positively related with entrepreneurial orientation Environmental hostility has significant relationship only with pro-activeness but not with innovativeness and risk-taking. This implies that as the environment becomes hostile, the SMEs become proactive, risk-taking and innovativeness are thus not related to the hostility in the PBE. The hostility is positively related to entrepreneurial orientation because an average firm in hostile environment adopts series of innovative, proactive and risk-taking strategies and acts in order not to be washed away by the tide of “hostility”. Hypothesis 2 is therefore upheld. Therefore as the business environment become hostile, the SMEs are proactive and as it becomes Benign, they becomes non-proactive (i.e. passive).
  21. 21. Results Hypothesis 3: Environmental heterogeneity is positively related to entrepreneurial orientation The heterogeneity of the PBE has significant relationship with all the EO’s dimensional variables. It is positively related to pro-activeness and risk-taking; negatively related to innovativeness. However, there is no significant relationship between heterogeneity and entrepreneurial orientation. Thus, the PBE becomes more heterogeneous, the pro-activeness and risk-taking of the firm increases and as it becomes less heterogeneous the innovativeness of the firm increases, however, not related to the overall EO of the firm. Therefore hypothesis 3 is not accepted despite a significant relationship between the heterogeneity of the PBE and the dimensional variables of EO that determines the overall EO of the firm.
  22. 22. Results Hypothesis 4: Environmental munificence is positively related to entrepreneurial orientation. With respect to environmental munificence, there is a negative relationship with risk taking. The relationship is neither significant with innovativeness nor proactiveness. Therefore hypothesis 4 is not upheld since there is no significant relationship between environmental munificence and entrepreneurial orientation. However, the significant relationship between the environmental munificence and risk-taking implied that as the PBE becomes munificence the risk-taking proclivity reduces and as it becomes less munificence. This is because the scarcity in the environment put more challenges towards the firm, thus making them to be more daring and thus more risk-taking.
  23. 23. Conclusion  This study makes contribution to the literature on entrepreneurship examining the relationship between EO and the nature of the perceived business environment.  The environmental variable of dynamism and hostility are positively related to EO and its dimensional variables of pro-activeness and risk-taking. However, Dynamism has negative relation with innovativeness, while hostility has no significant relation with innovativeness.  Entrepreneurial orientation of a firm has positive effect on their performance, it becomes necessary to improve these environmental variables in order to improve the EO and thus take advantage of the positive relationship between the EO and firm performance to improve the performance of Nigerian SMEs.
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