Impact of Entrepreneurial Orientation, Entrepreneurial Management and Environmental Dynamism on Firm’s Financial Performance

Abstract

Entrepreneurial Orientation (EO) involves business mindset and behavior. The firm and industry context of entrepreneurship has always fascinated researchers for inquiry. The main aim of this study is to establish an association of factors such as EO characteristics (innovativeness and risk-taking), Entrepreneurial Management (EM), and Environmental Dynamism (ED) with firm’s financial performance. The objective also includes examining the moderating impact of EM and ED respectively on the link between EO characteristics and firm performance. This investigation covered small-to-medium enterprises (SMEs) in Pakistan from the cities of Islamabad and Lahore, and constituted a diverse sample of entrepreneurs from various sectors. Results reveal direct positive, individual relationships of innovativeness, risk-taking, and EM with firm’s financial performance. As far as moderating influence is concerned, EM and ED could not establish any significant interaction between EO characteristics and firm performance. Interestingly, from the contextual landscape of this study, risk-taking and EM have proved to be stronger, more consistent and stable predictors of performance compared with innovativeness. The EO dimension of innovativeness exhibits dual results of either strong or very weak predictor to performance, hence implying vulnerability. In fact, running full regression, the impact of innovativeness on performance gets diminished in the presence of risk-taking and EM. The investigation also reveals that when controlling for ED the analytical framework shows a slightly better degree of association between predictor and criterion variables. Under the context of this study it, therefore, concludes that SME managers should rely more on risk-taking dimension of EO compared with innovativeness especially in executing entrepreneurial management (EM) approaches.