Abstract
Firms adopting an entrepreneurial orientation (EO) can be described as firms that take risks, are proactive in pursuing opportunities, compete aggressively with their industry rivals, launch products that change market boundaries and market behaviour, and grant employees autonomy to facilitate the generation of such radical innovation. Although an EO has been widely investigated in entrepreneurship research, only a few attempts have been undertaken to refine and broaden the BO construct since its development in the early 1980s. The two characteristics competitive aggressiveness and autonomy have only recently been added to an EO. This thesis argues that more components should be incorporated to achieve a more comprehensive EO construct: opportunity recognition, growth commitment and organisational learning.
The current thesis suggests that an EO, as it is currently acknowledged in the literature, is in need of further refinement. More specifically, a detailed examination of the construct reveals several inconsistencies such as equivocal EO definitions (actual entrepreneurial behaviours and practices vs. propensities to act entrepreneurially), ambiguous EO components and poorly operationalised scales. Furthermore, the psychometric properties of an EO have not been clearly specified (unidimensional vs. multidimensional, formative vs. reflexive). Due to these discrepancies, this thesis calls for a clearer and more comprehensive discussion of an EO along with a more valid BO scale.
One of the consequences of an EO as presented in this thesis is that of driving markets. A firm's ability to drive markets is considered a vital means with which to achieve firm success and long-term survival. Firms that drive markets engage in radical innovation, shape the needs of current and future customers, and change the market structure they are operating in. Unfortunately, however, firms often focus too closely on current customers and their needs, competitors and market conditions - that is, are market-driven. Instead of altering the composition of a market and/or the behaviours of market players, market-driven firms work within the confines of their markets, promoting incremental innovation rather than radical innovation.
Despite the importance of driving markets behaviours for firm success, there is little theoretical and empirical evidence to support how driving markets behaviours can be achieved. In order to address this gap, this thesis calls upon an EO as one possible antecedent of driving markets behaviours. Thus, following the development of an improved EO construct, this thesis then moves to establish a theoretical framework that describes an EO and its impact on driving markets /market-driven behaviours. To help establish an EO' s predictive validity, the framework is further enriched by adding a market orientation (MO), thereby comparing and contrasting both an EO and a MO in relation to driving markets and market-driven behaviours.
The data used for this research is based upon a study of 836 New Zealand firms. Confirmatory factor analysis is used to test for unidimensionality and to set up stable measurement models for all constructs in question. Structural equation modeling is then applied to examine an EO's psychometric properties and the relationship between an EO, a MO and driving markets /market-driven behaviours. The findings indicate that an EO is a multidimensional and formative construct, yet with only four contributing dimensions (R&D, proactiveness, autonomy, and growth commitment). It is further shown that an EO has a very strong direct impact on driving markets behaviours and also influences such behaviours considerably more than a MO. The same can be said about an EO's effect on market-driven behaviours.
A MO's direct impact on driving markets/market-driven behaviours is somewhat diminished by the suppressive negative effects of the responsiveness dimension of the MO construct, particularly on driving markets behaviours. Subsequent analysis shows that unlike an EO, a MO does not lead to driving markets behaviours, but rather to market-driven behaviours. In contrast, an EO is found to represent a more balanced approach, since it triggers both drivingmarkets and market-driven behaviours.