CLARIFYING THE ENTREPRENEURIAL ORIENTATION CONSTRUCT AND LINKING IT TO PERFORMANCE The Academy of Ma

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CLARIFYING THE ENTREPRENEURIAL ORIENTATION
CONSTRUCT AND LINKING IT TO PERFORMANCEThe
Academy of Management Review Jan 1996 21,1
Lumpkin, G t Dess, Gregory G
Institute of Business and Management, National
Chiao Tung University

• ??? 9437815

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Purpose of this paper

• In this article, the author discussed
• The relationship between EO and performance is
  context specific
• The dimensions of EO may vary independently of
  each other in a given context

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Question

• What is entrepreneurial orientation ?
• What are the factors of entrepreneurial
  orientation ?

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• This article makes a distinction between the
  concepts of entrepreneurship and entrepreneurial
  orientation.
• The strategy literature equated entrepreneurship
  with going into business, and the
  entrepreneurial orientation was to address the
  principal question of strategy content, that is,
  What business shall we enter?

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Proposition 1

• Autonomy, innovativeness, risk taking,
  proactiveness, and competitive aggressiveness are
  salient dimensions of an entrepreneurial
  orientation.

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Autonomy

• Autonomy refers to the independent action of an
  individual or a team in bringing forth an idea or
  a vision and carrying it through to completion .
• In general, it means the ability and will to be
  self-directed in the pursuit of opportunities.
• In an organizational context, it refers to action
  taken free of stifling organizational constraints.

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Innovativeness

• Innovativeness reflects a firms tendency to
  engage in and support new ideas, novelty,
  experimentation, and creative process that may
  result in new products, services, or
  technological process.

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Risk Taking

• Three types of strategic risk
• Venturing into the unknown
• Committing a relatively large portion of assets
• Borrowing heavily

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Proactiveness

• Websters dictionaryacting in anticipation of
  future problems, needs, or changes.
• Proactiveness was used to depict a firm that was
  the quickest to innovate and first to introduce
  new products or services.
• A firm can novel, forward thinking, and fast
  without always being first.
• The second to enter a new market was as
  pioneering as the first entrant and just as
  likely to achieve success via proactiveness.

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Competitive Aggressiveness

• It refers to a firms propensity to directly and
  intensely challenge its competitors to achieve
  entry or improve position to outperform industry
  rivals in the marketplace.
• It is characterized by responsiveness, which may
  take the form of head-to-head confrontation when
  a firm enters a market that another competitor
  has identified or reactive when a firm lowers
  prices in response to a competitive challenge.
• It reflects a willingness to be unconventional
  rather than rely on traditional methods of
  competing.

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Proposition 2

• The salient dimensions of an entrepreneurial
  orientation-autonomy, innovativeness, risk
  taking, proactiveness and competitive
  aggressiveness-may vary independently of each
  other in a given context.
• Although all five dimensions are central to
  understanding the entrepreneurial process, they
  may occur in different combinations, depending on
  the type of entrepreneurial opportunity a firm
  pursues.

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Conceptual framework of EO
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1.Moderating Effect model
Alternative Contingency Models
1.Organic organizations typically are
decentralized and informal and have an emphasis
on lateral interaction and an equal distribution
of knowledge throughout the organization
network. 2.Mechanistic organizations tend to be
highly centralized and formal, and they are
characterized by a high degree of vertical
interaction and specialized differentiation
between functions.
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Proposition 3

• The relationship between EO and firm performance
  will be moderated by the use of an organic
  structure.
• Firms with an entrepreneurial orientation that
  use an organic structure will have higher
  performance relative to those that do not use an
  organic structure.

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2.Mediating Effect model
Alternative Contingency Models
Integration of Activities reduce rancorous
conflict and isolation between organizational
units create mechanisms for exchange of
information and new ideas across organizational
boundaries ensure multiple perspectives are
taken into account in decisions, and provide
coherence and direction to the whole organization
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Proposition 4

• The relationship between EO and firm performance
  will be mediated by the use of integrating
  activities.
• Firms with an entrepreneurial orientation that
  use integrating activities will have higher
  performance compared to those that do not use
  integrating activities.

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3.Independent Effect Model
Alternative Contingency Models
Environmental Munificence maybe defined as the
profitability or growth rates of the industry in
which a firm competes.
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Proposition 5

• Both environmental munificence and EO will have
  an independent effect on organizational
  performance.

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4.Interaction Effects Model
Alternative Contingency Models

• Top Management Team Characteristics
• tolerance for ambiguity
• need for achievement

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Proposition 6

• Tolerance for ambiguity and EO will influence
  organizational performance through their
  interaction effect.
• Firms with an EO, in which managers have high
  tolerance for ambiguity, will have higher
  performance compared to firms with managers who
  have low tolerance for ambiguity.

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Proposition 7

• Need for achievement and EO will influence
  organizational performance through their
  interaction effect.
• Firms with an EO, in which managers have a high
  need for achievement, will have higher
  performance compared to firms in which managers
  have a low need for achievement.

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EO as multidimensionalHow relationships may
differ
1.Organic structure
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Proposition 8

• Organicness will moderate the relationship
  between innovativeness and performance.
• Among firms with high innovativeness, greater
  organicness will be associated with higher
  performance.

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• Because structural organicness suggests
  decentralization and low formalization,
  traditional methods of organizational control are
  relaxed.
• Such an organizational environment may promote
  the autonomy and creativity required for
  innovative behavior.

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Proposition 9

• Organicness will moderate the relationship
  between competitive aggressiveness and
  performance.
• Among firms with strong competitive
  aggressiveness, greater organicness will be
  associate with lower performance.

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• Although an organic structure may contribute to
  an atmosphere of creativity, it also may detract
  from a firms ability to an focus intensely
  enough to effectively compete with industry
  rivals.
• With such a structure, it may be more difficult
  to coordinate and integrate primary and support
  activities in a firms value chain.

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EO as multidimensionalHow relationships may
differ
2.Quick-Response
A firm following a strategy of Quick-Response may
outperform rivals through a variety of
competitive means, such as quickly adjusting to
market conditions or fast delivery of products
and services.
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Proposition 10

• A quick-response strategy will moderate the
  relationship between proactiveness and
  performance.
• Among firms that are highly proactive, a
  quick-response strategy will be associated with
  higher performance.

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• This strategy may help a firm become a first
  mover and provide a source of sustainable
  competitive advantage if imitation and
  substitution are difficult for competitors.

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Proposition 11

• A quick-response strategy will moderate the
  relationship between innovativeness and
  performance.
• Among firms that are highly innovative, a
  quick-response strategy will be associated the
  lower performance.

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• That is, a strategy that emphasizes speed of
  response without giving attention to the
  developmental activities and cross-functional
  coordination needed to effectively develop an
  innovative new product or service may cause
  performance to suffer.
• Further, a firm that responds too quickly to a
  new innovation may fail to integrate important
  feedback from the marketplace that would perhaps
  have helped it to respond with more effective
  innovative activities.