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

• ??? 9737529

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Problem

• "What is entrepreneurship?"
• What is entrepreneurial orientation ?
• What is the relationship between entrepreneurial
  orientation and performance?

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the author argued

• 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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ABSTRACT

• purpose1?clarifying the nature of EO construct
  
• 2? investigating the
  relationship between EO and firm
• performance .
• Steps 1?explore and refine the dimensions of
  EO
• 2?discuss the usefulness of
  viewing a firms EO as a
• multidimensional
  construct.
• 3?drawing on examples from the
  EO-related
• contingencies literature.
• Method1?moderating effects model
• 2?mediating effects model
• 3?independent effects model
• 4?interaction effects model

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Entrepreneurship v.s entrepreneurial orientation

• ENTREPRENEURSHIP------------------- NEW ENTRY
• ENTREPRENEURIAL PROCESS-----------P136
• ENTREPRENEURIAL ORIENTATION-----FIVE DIMENSIONS
• The strategy literature equated entrepreneurship
  with going into business, and the was to
  address the principal question of strategy
  content, that is, What business shall we enter?
• entrepreneurial orientation is a process.

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Proposition 1
competitive aggressiveness
innovativeness
Autonomy
EO
proactiveness
risk taking
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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.
• A forward-looking perspective
• 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.
• Distinction between competitive aggressiveness

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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.
• firm responsiveness directed toward achieving
  competitive advantage
• It reflects a willingness to be unconventional
  rather than rely on traditional methods of
  competing.

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Proposition 2

• The 5 salient dimensions of an EO
• may vary independently of each other in a
  given context.
• they may occur in different combinations,
  depending on the type of entrepreneurial
  opportunity a firm pursues.

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Conceptual framework of EO
Environmental factors Dynamism Munificence
complexity Industry characteristics
EO Autonomy Innovativeness Risk
Taking Proactiveness Competitive aggressiveness
Performance Sales growth Market
share Profitability Overall performance Stakeholde
r satisfaction
Organizational Factors Size Structure Strategy Str
ategy-making process Firm resources Culture Top
management team characteristics
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1.Moderating Effect model
Alternative Contingency Models

• Organic organizations
• decentralized and informal
• lateral interaction
• equal distribution of
• knowledge.

• Mechanistic organizations
• highly centralized and formal
• a high degree of vertical
• interaction
• 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
Entrepreneurial Orientation
Performance
Integration of Activities

• 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
• 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(proposition2 vary independently)
1.Example 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(proposition2 vary independently)
Example2 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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• 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.
• responds too quickly to a new innovation may fail
  to integrate important feedback from the
  marketplace tive innovative activities.

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Implication for research and practice

• Future research should
• 1?investigate how entrepreneurial process
  influence in the different settings
• 2?empirically test unique configurations of the
  dimensions of EO
• 3?support that the dimensions of EO fall into two
  categories is successful because of an emphasis
  on competitive aggressiveness
• 4?investigate whether some dimensions of EO are
  always present
• 5?investigate risk taking and autonomy are need
  for all types of new entry, but that
  innovativeness, proactiveness, and competitive
  aggressiveness. .

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CONCLUSION

• Goal1?clarify the multidimensional nature of EO
• construct
• 2?suggest alternate contingency
  models that
• will provide additional
  insight into the EO-
• performance relationship.
• Efforts
• directed at understanding the dimensionality
  of the EO construct and the role of contingency
  and configurational approaches in explaning its
  relationship.
• Contribution
• to further theroetical development in the
  field of EO.