Entrepreneurial orientation and its impact on firm growth amongst SMEs in South Africa
-
DOIhttp://dx.doi.org/10.21511/ppm.15(3).2017.14
-
Article InfoVolume 15 2017, Issue #3, pp. 166-178
- Cited by
- 1680 Views
-
572 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
Entrepreneurial orientation (EO) has been widely touted as a fundamental ingredient for enhancing firm growth. Consequently, this aimed at examining the impact of EO and its dimensional variables (innovativeness, risk-taking, and proactiveness) on SME growth (employment, sales, and asset growth). Using information from 285 SMEs, the results obtained indicated that while EO had a significant positive association with SME growth (employment and sales growth), most SMEs show a moderate level of EO. Also, following the EO dimensions, the findings established the emergence of proactive innovation (a combination of proactiveness and innovativeness) which showed a significant positive association on sales growth. Risk-taking was the only factor that showed a significant influence on employment and asset growth. This study also showed that controlling for the effect of firm age on growth significantly reduced the error of predicting sales growth by 2.3%. This study culminates with recommendations on enhancing EO amongst SMEs in South Africa.
- Keywords
-
JEL Classification (Paper profile tab)M13, L25, D12
-
References47
-
Tables5
-
Figures1
-
- Figure 1. Structural Equation Model (SEM) Path Diagram between Firm Growth and EO index
-
- Table 1. Descriptive statistics for EO dimension items and EO Index
- Table 2. Correlation matrix for EO dimension construct and EO Index
- Table 3. Regression Analysis of EO dimension constructs and Firm growth
- Table 4. Goodness of fit for SEM model
- Table 5. SEM associations between Firm growth and EO index
-
- Alarape, A. A. (2013). Entrepreneurial orientation and the growth performance of small and medium enterprises in Southwestern Nigeria. Journal of Small Business &Entrepreneurship, 26, 553-577.
- Anderson, B., & Eshima, Y. (2013). The influence of firm age and intangible resources on the relationship between entrepreneurial orientation and firm growth among Japanese SMEs. Journal of Business Venturing, 28, 413-429.
- Basile, A. (2012). Entrepreneurial orientation in SMEs: risk-taking to enter international markets. Far East Journal of Psychol. Business, 7(2), 1-21.
- Callaghan, C., & Venter, R. (2011). An investigation of the entrepreneurial orientation, context and entrepreneurial performance of inner-city Johannesburg street traders. Southern African Business Review, 15(1), 28-48.
- Calvo, J. L. (2006). Testing Gibrat’s Law for Small, Young and Innovating Firms. Small & Business Economics, 26, 117-123.
- Covin, J. G., & Slevin, D. P. (1989). Strategic management of small firms in hostile and benign envi¬ronments. Strategic Management Journal, 10, 75-87.
- Covin, J. G., Green, K. M., & Slevin, D. P. (2006). Strategic process effects on the entrepreneurial Orientation-sales growth rate relationship. Entrepreneurship Theory and Practice, 30, 57-81.
- Coad, A., Segarra, A., & Teruel, M. (2013). Like milk or wine: Does firm performance improve with age? Structural Change and Economic Dynamics, 24, 173-189.
- Davis, S. J., Haltiwanger, J., Jarmin, S. R., & Miranda, J. (2007). Volatility and Dispersion in Business Growth Rates: Publicly Traded vs. Privately Held Firms. NBER Macroeconomics Annual 2006, 21.
- Dobbs, M., & Hamilton, R. T. (2007). Small Business Growth: Recent Evidence and New Directions. International Journal of Entrepreneurial Behaviour & Research, 13(5), 296-322.
- Eline, O. (2013). The effect of risk taking propensity on employee-growth-ambition. (Master Thesis). University of Amsterdam.
- Fatoki, O. O., & Garwe, D. (2010). Obstacle to growth of new SMEs in South Africa: A principal component analysis approach. African Journal of Business Management, 4(5), 729-738.
- Fatoki, O. O. (2012). The Impact of Entrepreneurial Orientation on Access to Debt Finance and Performance of Small and Medium Enterprises in South Africa. Journal of Social Science, 32(2), 121-131.
- Fatoki, O. O. (2014). The Entrepreneurial Orientation of Micro Enterprises in the Retail Sector in South Africa. Journal of Sociology and Social Anthropology, 5(2), 125-129.
- Gurbuz, G., & Aykol, S. (2009). Entrepreneurial management, entrepreneurial orientation and Turkish small firm growth. Management Research News, 32(4), 321-336.
- Haltiwanger, J. C., Jarmin, R. S., & Miranda, J. (2013). Who creates jobs? Small VS. Large VS.Young. Review of Economics and Statistics, 95(2), 347-361.
- Hughes, M., & Morgan, R. E. (2007). Deconstructing the relationship between entrepreneur¬ial orientation and business performance at the embryonic stage of firm growth. Industrial Marketing Management, 36, 651-661.
- Jalali, A., Jaafar, M., Talebi, K., & Halim, A. S. (2014). The Moderating Role of Bridging Ties between Risk-Taking, Proactiveness and Performance: The Evidence from Iranian SMEs. International Journal of Business and Management, 9(5), 74-87.
- Kose, J, Lubomir, L., & Yeung, B. (2004). Corporate Governance and Managerial Risk Taking: Theory and Evidence.
- Le Roux, I., & Bengesi, M. K. (2014). Dimensions of entrepreneurial orientation and small and medium enterprise performance in emerging economies. Development Southern Africa, 31(4), 606-624.
- Levie, J., & Autio, E. (2013). Growth and growth intentions: a meta-analysis of existing evidence. Enterprise Research Centre.
- Ljungquist, U., & Ghannad, N. (2008). At the edge of entrepreneurial orientation: identifying impediments of SME growth. Frontiers of Entrepreneurship Research, 28(13).
- Lumpkin, G. T & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of management review, 135-172.
- Lumpkin, G. T., & Dess, G. G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. Journal of Business Venturing, 16(5), 429-451.
- Masona, C. M., Floreania, J., Miania, S., Beltramea, F., & Cappellettoa, R. (2015). Understanding the impact of entrepreneurial orientation on SMEs’ Performance. The role of the financing structure. Procedia Economics and Finance, 23, 1649-1661.
- McGrath, R. G. (2013). The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business. Boston, MA: Harvard Business School Publishing.
- Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29, 770-791.
- Mirela, B. (2008). Innovation: The characteristic tool of entrepreneurs.
- Moreno, A. M., & Casillas, J. C. (2008). Entrepreneurial orientation and growth of SMEs: A causal model. Entrepreneurship Theory and Practice, 32(3), 507-528.
- Neneh, B. N. (2011). The Impact of Entrepreneurial Characteristics and Business Practices on the Long Term Survival of Small and Medium Enterprises (SMEs) (Master’s thesis) submitted at the University of the Free State, Bloemfontein, South Africa.
- Neneh, B. N., Van Zyl, J. H., & Van Noordwyk, A. (2016). Gender Differences in Entrepreneurial Orientation and Performance: Evidence from South Africa. Conference paper submitted at the Southern African Institute for Management Scientists (SAIMS), 4-7 September 2016, Pretoria, South Africa.
- Neneh, B. N., & Smit, A.V.A. (2013). Will promoting more typical SME start-ups increase job creation in South Africa? African Journal of Business management, 7(31), 3043-3051.
- Neneh, B. N., & Van Zyl, J. H. (2014). Growth intention and its impact on business growth amongst SMEs in South Africa. Mediterranean Journal of Social Sciences, 5(20), 172-183.
- Neneh, B. N. (2016). Examining the Moderating effect of Environmental Hostility on the Entrepreneurial Orientation – Performance Relationship. Journal of Economics and Behavioral Studies, 8(6), 6-18.
- Ogunsiji, P.A.S., & Kayode, W. L. (2010). Entrepreneurial Orientation as a Panacea for the Ebbing Productivity in Nigerian Small and Medium Enterprises: A Theoretical Perspective. International Business Research, 3(4), 192-199.
- Quaye, M. D., & Acheampong, G. (2013). Are SME Owner-Managers Entrepreneurs? Evidence from Ghana. European Journal of Business and Management, 5(23), 37-47.
- Rauch, A., Wiklund, J., Lumpkin, G. T., & Frese, M. (2009). Entrepreneurial orientation and business performance: an assessment and past research and suggestions for the future. Entrepreneurship Theory and Practice, 33, 761-787.
- Runyan, R. C., Cornelia, D., & Swinney, J. L. (2008). Entrepreneurial Orientation versus Small Business Orientation: What are their Relationships to Firm Performance? Journal of Small Business Management, 46(4), 567-588.
- Shafaeddin, M. (2014). Competitiveness and Development: Myth and Realities. New York, NY: Anthem Press.
- Soininen, J., Martikainen, M., Puumalainen, K., & Kylaheiko, K. (2012). Entrepreneurial Orientation: growth and Profitability of Finnish Small and Medium-Sized Enterprises. International Journal of Production Economics, 140, 614-621.
- Tang, Z., Kreiser, P. M., Marino, L., Dickson, P., & Weaver, K.M. (2009). A Hierarchical Perspective of the Dimensions of Entrepreneurial Orientation. International Entrepreneurship and Management Journal, 5(2), 181-201.
- Trading Economics. (2017). South Africa Unemployment Rate.
- Welsch, H., Price, P. D., & Stoica, M. (2013). Innovation, Performance and Growth Intentions in SMEs. International Journal of Economics and Management Engineering (IJEME), 3(5), 176-181.
- Yoo, S. J. (2001). Entrepreneurial orientation, environment scanning intensity, and firm performance in technology-based SMEs. Frontiers of Entrepreneurship Research.
- Yoon, H. (2012). The Performance Effects of Entrepreneurial Orientation: Evidence from South Korean Start-ups. International Journal of Arts and Commerce, 1(4), 248-254.
- Zampetakis, L. A, Vekinia, M., & Moustakis, A. V. (2010). Entrepreneurial orientation, access to financial resources and product performance in the Greek commercial TV industry. The Service Industry Journal, 31(6), 897-910.
- Zhou, H., & de Wit, G. (2009). Determinants and dimensions of firm growth. Scientific analysis of Entrepreneurship and SMEs, 1-34.