The
role of entrepreneurial orientation for entrepreneurial firm start-up and/or
growth.

 

Introduction

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In this assignment I will be critically
analyzing the role of entrepreneurial orientation for an entrepreneurial firm
start up/or growth. EO is a strategy that has been broadly construed and has
acquired many different interpretations by scholars and academics.  This strategy has been used by organizations
to increase organizational performance, competitive advantage and also
organizational excellence. It can be perceived that if implemented in the early
stages of strategic management, it can aid the success of a business startup or
growth of an existing organization (Wales, 2012).
EO has been categorized into 2 sections, one of which is a set of behaviors
that is used within the strategic management strategy, or another is a set of
processes, practices and decisions that enable startups and existing
organization a lead to a new entry within the market (Wales, 2012).
The variables in which EO contains is the driving force behind entrepreneurial
organizations and these variables have been the main focus on many literature
reviews evaluating the impact or role EO has on firm starts-ups or the growth
of an organization. I will also be analyzing how EO affects the performance of
a start-up firm or existing organization with literature from scholars and
academics. The review will be divided into sections containing a methodology,
literature review, conclusion and suggestions for further research to depict a
true representation of the topic. 

Methodology

The method of research adopted is a review
of past researchers and views provided by academics. I have attained journal articles
within the last 5 years. I solely focused on recent studies to ensure that the
information disclosed within the literature review is relevant and up to
date.  To get to the bottom of the topic,
I used their ideas and critically analyzed what they have stated about the role
of entrepreneurial orientation within organizations. The journal articles used
were listed on the ABS journal list and found most of them on google scholar,
as well as Ebsco hosted journal articles through the Brunel library.

Keywords: Entrepreneurship, Entrepreneurial Orientation, Organizational
Performance, Organizational Excellence, Competitive Advantage, Start-ups,
Risk-taking, Decision making, Competitive aggressiveness, Autonomy, First
Mover, New Product Development (NPD), Brand Image

Literature Review

Dimensions
of EO

The dimensionality of EO has been long
debated over the years in literature reviews, however 2 concepts that have been
widely accepted and citied in multiple literature reviews is that of Danny
Miller’s previous work on firm strategy making (Wales W. J., 2016). This was then extended by Covin and
Slevin (1989) which embraced the three dimensional view of EO. This is a
combination of risk-taking, innovation and pro-activeness. Lumpkin and Dess
(1996) then extended this concept to justify that it actually has five
dimensions, which includes the 3 aspects of Miller/Covin and Slevin (1989), but
also has an additional 2 aspects of autonomy and competitive aggressiveness (Wales W. J.,
2016).
They believe that these processes, practices and decision making should be seen
as individual variables when implementing the EO strategy to firm start-ups.
Each of these concepts have been predominately accepted in recent theorizing
and can continue to co-exist with each other as they both offer a unique view
point. (Wales W. J., 2016)

Miller/Covin and Slevin’s 3 dimensions and how it relates to
start-up and existing organizations

Risk
taking

In order for any startup or a firm to take
off, an element of risk taking is a necessity as without it you would not be
able to remain competitive in a market and gain a lead entering a new market.
According to Vij and Singh (2012) they believe that businesses should consider
related risks that favor change and innovation to gain competitive advantage
for their firm (Bedi, 2012).  They also believe that “firms with a
propensity to engage in relatively high levels of risk-taking, innovative and
proactive behaviors have EO, while those engaging in relatively low levels of
these behaviors have conservative orientation” (Bedi, 2012, p. 19) meaning that
organizations that do not engage with this concept is less likely to succeed.
For an established company that part takes in risk taking, this attribute is
usually prevalent in the fluctuation of share prices (Bedi, 2012).

Innovation

Innovation is measured by how the
entrepreneur innovates their business, by creating new ideas, the ability to
formulate new ways to approach the market which are different from the existing
ones, as well as the eagerness to implement new strategies within their
business (Bedi, 2012). Vij and Singh
(2012) also believe that “Innovativeness reflects a firm’s tendency to engage
in and support new ideas, novelty, experimentation and creative processes that
may result in new products, services, or technological processes and which may
take the organization to a new paradigm of success” (Bedi, 2012, p. 19) This also implies
that entrepreneurs that use method will continuously find extraordinary
solutions to problems and tasks that they are faced with. It can be argued
that, an innovative organization has a strategic advantage that could be linked
to the firm’s performance (Bedi, 2012).
This increases the chance that the organization would capitalize from having
the first mover advantage to stay ahead of the competition and emerging market
opportunities that will aid financial results (Bedi, 2012).

Pro-activeness

Pro-activeness within an a firm start up or
an established organization is the notion of entrepreneurs constantly seeking
and looking for an opportunity to introduce new products or ideas ahead of any
existing competitors in the hope of creating a change or trend within the
market or environment (Bedi, 2012).
Vij and Singh justify pro-activeness is manifested by “(1) aggressive behavior
directed at rival firms; and (2) the organizational pursuit of favorable
business opportunities” (Bedi, 2012, p. 20). This could be
interpreted as the ability to handle any situation that an organization may be
faced with, and deal with this in a way that will maintain the brand image and
push for competitive advantage. Again, with pro-activeness, this is also
associated with the first mover advantage as a company that is willing to align
its interests with forward-thinking perspectives, it will always be reflected
within the actions taken to grow the organization (Bedi, 2012).

 

 

 

 

Lumpkin and Dess’s five dimension concept

Autonomy

Autonomy can be perceived as “the
independent action of an individual or a team in bringing forth an idea or a
vision and carrying it through to completion” (Bedi, 2012, p. 22) This could be
interpreted as the will to act alone and be self-motivated to find
opportunities that would be beneficial to a start-up or an established
organization. As rightly stated by Vij and Singh “Autonomy in firms may vary
with the size of organization, management style, or ownership” (Bedi,
2012, p. 22).
Within start-ups, autonomy can be possessed at any level due to smaller teams
and the ability to have more control and influence over the decisions made.
However, at a larger corporation, the flexibility to exercise autonomy is
constrained to the sector the individual is confined to.

 

Competitive
aggressiveness

One interpretation of competitive
aggressiveness has been defined as “Competitive aggressiveness refers to a
firm’s propensity to directly and intensely challenge its competitors to
achieve entry or improve position, that is, to outperform industry rivals in
the marketplace” (Bedi, 2012, p. 21) This is beneficial to all startups and
established organizations that aim to maintain a secure position within the
market, therefore they have to be flexible and adapt to change to ensure the
success of their organization. It could also be used to measure how an
organization deals with threats and how they intend on responding to
competitors to gain an advantage within the market.

There are many opinions on whether the
dimensions of EO are better practiced integrated or segregated. Miller/Covin
and Slevin (1989) believe that these dimensions should be unidimensional and
should be carried out as a set of organizational behaviors (Wales J. G., 2012). Whereas, Lumpkin and Dess (1996)
believe that these are a set of independent variables that could be carried out
in different combinations, therefore making it a multidimensional construct (Bedi, 2012). Each of these sub
dimensions have a different outcome that is based on the entrepreneurial
performance of the organization, and each of them could be used as an advantage
for start-ups or for remaining competitive, innovative and adaptable for
established organizations.

 

The role EO has on organizational performance

EO has been described as a set of
characteristics that could be followed by organizations to increase firm
performance. One of those characteristics is innovation, and this has been
closely related to entrepreneurship as there have been extensive research
completed on the relationship between the two (Peris-Ortiz, 2014). According to Sahut
and Peris-Ortis they believe that large or smaller organizations have their own
set of advantages and disadvantages in the matter of innovation. However, they
believe that “small businesses provide the most conducive environment for
entrepreneurship and innovation that are not necessarily sustained by the
know-how and resources characteristic of large-scale production, but require
commitment and close cooperation between company members” (Peris-Ortiz, 2014, p. 663). This can be
interpreted as innovation is likely to be more successful in smaller companies
because the employees and higher level management are closely related and can
contribute more idea’s and be a part of the decision making process. 

Another characteristic critically acclaimed
by scholarly research is the act of decision making. According to scholars
research the works of Mintzberg (1993) and Khandwalla (1976/1977) established
entrepreneurial orientation as a ‘managerial disposition rooted in decision
making’ (Wales, 2012, p. 679) which has been
widely adopted by many scholars (Wales, 2012).  The decisions made within the organization
based on using the entrepreneurial orientation strategy aids the
entrepreneurial culture allowing them to remain competitive within the market.

According to research completed by Vij and
Singh (2012) EO strategies can be measured “by looking at top management’s
entrepreneurial style, as evidenced by the firms’ strategic decisions and
operating management philosophy” meaning that EO can be defined by the
entrepreneurial decisions made to solidify their position within the market.

According to Wang and Altinay (2012) EO can
be linked to organizational effectiveness and improve the process of
entrepreneurial activity that is beneficial to the growth of a firm or a
start-up. They suggest that the firm level behavioral characteristics is useful
for identifying the potential growth of an organization (Altinay, 2012). Vij and Singh (2012) also agree that
“Scholars have theorized that the incidence of firm-level entrepreneurial
behaviors, i.e., the propensity to engage in relatively high levels of
risk-taking, innovative and proactive behaviors is positively associated with
organizational profitability and growth” meaning that these personality
attributes, if adapted by a start-up or established organization would be able
to maintain their level of relevance within the market. After extensive
research, various scholars and academics have proven for it to seem quite
difficult to measure the link between EO performance relationships, therefore,
“A combination of subjective and objective measures of performance should be
used for accurate measurement of performance.” (Bedi, 2012,
p. 22)

There has been many studies that debate the
relationship between EO and firm performance, however, the majority as shown in
recent research believe “that businesses that adopt a strong EO perform better
than firms that do not adopt an EO” this could be because entrepreneurial
culture within a start-up, or an existing organization shapes the core values
of an organization to remain competitive, and allows the organization to keep
changing and adapting to future market trends. 

 

Disadvantages of EO in start-ups or existing
organizations 

As a firm start-up or an established
organization, there are inevitably going to be disadvantages to some of the
strategies that has been implemented to execute your business plan or idea. I
will be discussing the disadvantages of some of the characteristics of EO has
on an organization and the outcome.

Resources

It has been argued that “EO is a
resource-intensive philosophy: risk taking endeavors at the firm may suffer
along with the ability to successfully innovate and develop new markets when
resources are distributed among alternative activities inside the firm” (Todd Morgan, 2014, p. 734) meaning that
organizations that emphasize on all aspects of a company, may struggle with
innovative developments due to not having enough capital to invest on
innovation.

 

 

Risk
taking

In current research taking
entrepreneurial risks could be defined as “to make large and uncertain resource
commitments that may be costly in terms of failure” (Todd Morgan, 2014, p. 736) As suggested by
Morgan (2014) EO heavily relies on resources to carry out the decisions based
on this strategy, so if an investment is misplaced in a certain area of the
business or not a lot of capital has been invest