Department of Business Economics International Doctorate in Entrepreneurship and Management DOCTORAL DISSERTATION (Degree of Doctor of philosophy Ph d.)ENTREPRENEURIAL AND INNOVATIVE BEHAVIOR IN SPANISH SMES:
Submitted to the Department of Business Economics in partial fulfillment of the requirements for the degree of Doctor of philosophy Ph d. by the Universitat Autònoma de Barcelona.
I 9 INTRODUCTION OF THE DISSERTATION 9 1. Entrepreneurship as Entrepreneurial Behavior 9 2. Problem Statement 11 2. 1. Entrepreneurial and Innovative Behavior in SMES and their Contribution
view of the firm 20 2. Contingency Theory 22 2. 1. Contingency relationships between corporate entrepreneurship and performance 23 2. 2. The role of environmental hostility 25
Table 1. Dissertation approach 17 Table 2. Key variables exploring the CE-performance relationship in a contingent approach 24 Table 3. Environment main definitions 27
I will always remember their classes of Public Enterprise and Doctoral Seminar, respectively. In addition, I would like to thank all administrative staff of the Universitat Autònoma de Barcelona, in particular the professionals of the Business Economics department.
Finalmente, discutimos as possíveis implicações desses resultados e propomos futuras linhas de investigação. 8 9 CHAPTER I INTRODUCTION OF THE DISSERTATION 1. Entrepreneurship as Entrepreneurial
Behavior This dissertation is the result of a research effort that focuses on subjects related to a major driver of economic growth:
entrepreneurship. It is acknowledged widely that entrepreneurship is one of the most important forces that shape the changes in the economic landscape (Reynolds et al.
2005), moreover, entrepreneurship contributes to economic performance by introducing innovation, enhancing rivalry and creating competition (Wong et al.,
2005). ) Hence, the important contribution of entrepreneurship to national growth has been documented by several authors in the literature (Levenburg and Schwartz, 2008;
Tang et al. 2008; Uhlaner and Thurik, 2007; Urban, 2008. But what is entrepreneurship? There is no single definition of entrepreneurship.
According to Chow (2006), most often entrepreneurship is interpreted as business ownership or self employment, but that is not an accurate definition.
Furthermore, entrepreneurship often appears under different denominations, which explains why it is defined in different ways (Cuervo et al.,
2007). ) However, there seems to be a consensus that the essence of entrepreneurship is the willingness to pursue opportunity.
Thus, entrepreneurship is a process by which individuals-either on their own or inside organizations-pursue opportunities (Stevenson and Jarillo, 1990 p. 23).
Opportunity is defined as a future situation according to desires and goals of individuals or organizations. In turn, entrepreneurial opportunities differ from the larger set of all opportunities for profit,
particularly opportunities to enhance the efficiency of existing goods, services, raw materials, and organizing methods (Shane and Venkataraman,
2000 p. 220) 10 Entrepreneurship can be seen as entrepreneurial function, which involves more than the creation of a new business.
Entrepreneurship implies the pursuit of opportunity, evaluation, and exploitation of opportunities and the set of individuals who discover,
evaluate, and exploit them (Shane and Venkataraman, 2000 p. 218). In brief, in a firmlevel perspective these opportunities are not specifically related to business creation but rather through new products, services and process, new strategic behaviors and new market opportunities.
Thus, entrepreneurial opportunities come in a variety of forms: opportunities in a product markets (Venkataraman, 1997), opportunities in factor markets,
as in the case of the discovery of new things innovation (Schumpeter, 1934). But, what about our research?
Where is located it? As noted above, we can identify that two streams of research have denominated the entrepreneurship literature.
The first has focused largely on the individual entrepreneur as the unit of analysis, especially on identifying the traits
which distinguished successful entrepreneurs from less successful ones (Gartner, 1989). In contrast, the second stream of research tends to view entrepreneurial activities as a firm-level phenomenon (Covin and Slevin, 1991), labeled Corporate Entrepreneurship CE (Zahra and Covin, 1995.
An individual's psychological profile does not make a person an entrepreneur. Rather, we know entrepreneurs through their actions or behavior (Covin and Slevin, 1991 p. 8). Therefore,
as stressed by Yeoh and Jeong (1995), the fact that organizational level is a better predictor of entrepreneurial effectiveness suggests that organizations can
and should be viewed as entrepreneurial entities. Our research is inserted in a CE context, precisely. The entrepreneurial behavior of small and medium-sized enterprises (SMES) and its influence on the performance of them is the main topic in this dissertation.
By entrepreneurial behavior we must understand the behavior that combines innovation in product or process 11 (innovativeness
the risk-taking propensity by the CEO, and evidence of proactiveness (Miller and Friesen, 1982;
Miller, 1983; Covin and Slevin, 1989). 2. Problem Statement 2. 1. Entrepreneurial and Innovative Behavior in SMES and their Contribution to Performance The study of organizational strategy is a recurrent theme examined by academics,
In this vein, a central concept emerges in the domain of corporate entrepreneurship, which receives a substantial amount of theoretical and empirical attention, Entrepreneurial Orientation (EO).
Drawing on prior strategy-making process and entrepreneurship research, measurement scales of EO have been developed and widely used,
and entrepreneurship studies (p. 1078). Although the theoretical foundation of the relationship between EO and performance has rarely been explicated (Wiklund and Shepherd, 2011),
as well as conceptual, arguments suggest that EO is 12 not equally suitable in all environments (e g.,
That is, in an uncertain environment where an atmosphere of high risk predominates, fewer opportunities, and with tremendous competitiveness, an entrepreneurial behavior is recommended specially.
Over the last few years, the business environment, in Spain and elsewhere, has grown increasingly hostile
and it can certainly be argued that the external environment may have a strong impact on SME viability and growth.
Moreover, the importance of proper alignment of the strategy with the environment means that both entrepreneurial and conservative companies must develop characteristics that enable them to cope with their environments (Yamada and Eshima, 2009;
Yeoh and Jeong, 1995). 2. 2. The importance and relevance of entrepreneurial SMES for contemporary societies As already stressed, there are many evidences that entrepreneurship is of great value for economic growth, productivity, innovation
entrepreneurship has gained additional attention in the current economic crisis, as it is widely viewed as a key aspect of economic dynamism.
considering the important and irreplaceable role of these companies 13 within the economy of a country, sometimes facing particular difficulties.
Precisely, over the last three years the SMES environment, in Spain and elsewhere, has grown increasingly turbulent
and it can certainly be argued that probably few SMES operate in a benign environment. Nonetheless, is especially important to highlight that SMES are closely related to the creation of new products and process techniques.
and technological change creates greater uncertainty in the world economy, entrepreneurship is believed to offer ways to help to meet new economic, social and environmental challenges.
In this sense, successful entrepreneurship both in SMES and in large firms depends heavily on innovation and R&d.
According to OECD report Science, Technology and Industry Scoreboard (2009), R&d intensity has increased in all OECD countries with the gradual shift to a knowledge-based economy.
Knowledge creation and diffusion are broader than R&d since a large and growing share of innovations is not necessarily 1 SMES-According to the European union recommendation,
firms seize entrepreneurial opportunities. Entrepreneurial opportunities are likely to be larger when firms develop innovations that are new to the market or new to the world.
Regarding to innovativeness, it is acknowledged that of the three dimensions that integrate the EO construct,
Innovative firms, through the creation and introduction of new products and technologies, develop a market niche with new products/services,
differentiate themselves and/or substitute incumbents with better quality, cheaper price or other means that customers value (Richard et al.,
and capitalize on emerging market opportunities (Wiklund, 1999). Unsurprisingly, it has received special attention, and remains as a topic with substantial conceptual and empirical attention (e g.,
In circumstance of uncertainty and constantly competition both locally and internationally it seems essential to identify the strategic posture which may reflect firms'strengths and that probably influence their performance (Ramíres-Alesón and Espitia-Escuer, 2001.
it was decided to operationalize the external environment according to its level of hostility, both international and domestic, consistent with the specifications of Yeoh and Jeong (1995).
This environment-framing method has regularly been used in the past, with researchers making the distinction between hostile and benign environments (e g.,
, Covin and Slevin, 1989; Miller and Friesen, 1983; Robertson and Chetty, 2000). 16 empirical evidence on the relationship between network usage, EO and SME growth.
Will firms be more profitable in accordance with the fit between EO and the environment?
when there is a fit between EO and the external environment. There is a positive effect of network usage on EO development.
human resource management, economics and finance, marketing, international business and corporate entrepreneurship. In the field of entrepreneurship, Alvarez and Busenitz (2001) present RBV through the entrepreneurial process of cognition, discovery, understanding market opportunities,
and coordinated knowledge. Namely, they examined the role of entrepreneurial resources within RBV, suggesting how these resources might be unique to entrepreneurship.
Entrepreneurial opportunities exist primarily because different agents have different beliefs about the relative value of resources
when they are converted from inputs into outputs (Schumpeter, 1934; Shane and Venkataraman, 2000. The approach adopted by Alvarez
The importance of the nature of cognitive factors for human capital, recognizing that not all managers possess the requisite combination
or level of skills to generate profits. In summary, entrepreneurial opportunities emerge when certain individuals have insights into the value of resources that others do not (Barney et al.,
2001 p. 628). 1. 1. SME and the knowledge-based view of the firm As stated by Grant's (1991) resource categories,
Moreover, in dynamic (sometimes hostile) environments in which many SMES operate, it can be used to identify entrepreneurial opportunities,
to develop creative or novel internal solutions or external offerings. The analysis of organizational knowledge offers insight into the linkage between organizational capability and competitive advantage.
which conforms to the changing environment through the identification of variables that produce the greatest impact, where the structure and function (Mintzberg,
1984) depend on the adaptation and interaction with the environment. Namely, this approach is based upon the idea that organizations must adapt their structures,
but rather as results from the interplay of attributes such as strategy, structure, management style, etc, within a given environment,
2005). 2. 1. Contingency relationships between corporate entrepreneurship and performance It is not difficult to find the relationship between CE and contingent perspective models.
Entrepreneurship scholars have developed numerous typologies to describe alternate perspective of entrepreneurship. These classification systems typically depict differences in entrepreneurship as the result of various combinations of individuals,
organizational or environmental factors that influence how and why entrepreneurship occurs as it does (Lumpkin and Dess, 1996 p. 135).
Moreover, there is a consensus that the discovery and exploitation of entrepreneurial opportunities results from prior knowledge about markets and customers combined with the prior information on external problems (Shane and Venkataraman, 2000;
Venkataraman, 1997. At the firm-level, numerous entrepreneurship researchers have emphasized the importance of viewing the entrepreneurial behavior-performance relationship in a contingency framework (Covin and Slevin, 1991;
Lumpkin and Dess, 2001; Wiklund and Shepherd, 2005. Factors such as environmental variables (Khandwalla, 1977; Miller and Friesen, 1983) or the structural and managerial characteristics (Mintzberg, 1984) of an existing firm, influence how an entrepreneurial orientation will be configured to achieve high performance.
As stated by Lumpkin and Dess (1996), the entrepreneurship literature, in referring to the causes of entrepreneurship,
often mentions factors such as managerial styles, social or motivational factors, and 24 environmental factors. These may be important corollaries to an entrepreneurial orientation that help explain a firm's performance.
For instance, in their model of entrepreneurship as firm behavior, Covin and Slevin (1991) discussed the relationship of strategy, structure
and environment to the EO dimensions of innovativeness, proactiveness and risk-taking propensity. Especially the environment has long been considered one of the critical contingencies in organizations theory and strategic management.
Consequently, it is highlighted always as a critical contingency or contextual factor in the EO-performance relationship.
Table 2 shows some examples of contingent variables used in seminal studies concerning environmental and organizational factors to explain the relationship between firm-level entrepreneurship and performance.
2006) Environment dynamism, environment hostility Strategic decision-making, strategic formation mode, strategic learning from failure, firm size,
dimensions of EO) Wiklund and Shepherd (2005) Environmental dynamism Strategic posture (EO), financial resource, size, age Yeoh and Jeong (1995) External environment (benign
1967) has been the starting-point for the recognition of the importance of external forces in unpredictable environments (See Table 3). Currently,
or, even, other environment dimensions such as dynamism, often called uncertainty (Miller and Friesen, 1983), level of industry stagnation,
Environmental hostility represents the degree of threat to the firm posed by the multifacetedness, vigor and intensity of the competition.
According to Miller and Friesen (1983), hostile environments, like dynamic ones, intensify challenges to the firm,
but rather results from the fit of these dimensions within a specific environment characterized by some degree of hostility and uncertainty.
Thus, the classification that would be used frequently in the literature stresses two different scenarios, hostile and benign environments.
Hostile environments are described by Khandwalla (1976/77; 1977) as stressful, very risky, with few opportunities. In this sense, Covin and Slevin (1989) added that a hostile environment is characterized by intense competition,
overwhelming business climate and relative lack of opportunity for exploitation. Conversely, a non-hostile or benign environment is one that has none of the characteristics above,
but, instead, provides investment opportunities and has a favorable climate for business (Covin and Slevin, 1989;
Khandwalla, 1977). 27 Table 3. Environment main definitions Study Label Characteristics Lawrence and Lorsh (1967) Uncertainty Which is characterized by the rate of changes and innovation in the industry,
as well as the uncertainty and unpredictability of the actions of competitors and customers Chandler (1962); Khandwalla (1972) Environmental heterogeneity Which encompasses variations among the firm's market that require diversity in production and marketing orientations Khandwalla (1976/77;
1977) Environmental hostility Like dynamic ones, intensify challenges to the firm, and often complicate these challenges.
In contrast to dynamism, however, hostility makes for scarce resources, slimmer profit margin, and in general, less maneuverability.
Miller and Friesen (1982; 1983) dynamic and hostile environment When competitors'product change rapidly or when customer needs fluctuate Source:
Self-elaborated 3. Absorptive Capability and Organizational Learning Theory Absorptive capability and organizational learning have been used in diverse and significant organizational phenomena.
March, 1991), organizational economics (Rogers, 2004), international business (Eriksson et al. 1997; Lane et al. 2001; Zahra et al.
It is acknowledged that competition is based increasingly knowledge, as firms strive to learn and to develop capabilities faster than does the competition (Prahalad and Hamel, 1990;
Teece et al. 1997). ) Based on Cohen and Levinthal's (1990) definition, absorptive capacity is the ability to recognize external information,
In the international entrepreneurship context, the firm's effort to learn from its foreign presence, international learning effort (Sapienza et al.
a brief of main studies Study Theoretical approach Treatment/modeling Outcome/effects Cohen and Levinthal (1990) ACAP Model of firm investment in R&d predicting how absorptive capacity
economic growth A model to examine the importance of technological catch up in explaining productivity growth. ACAP is a factor in explaining growth;
and highlights networks as vital when it comes to gaining access to opportunities, collecting the resources needed to build a new firm
and networking is recognized increasingly as a major theme in entrepreneurship (Jack et al.,2010). ) The boom in network research is part of a general shift, beginning in the second half of the 20th century, away from individualist, essentialist and atomistic explanations toward more relational, contextual and systemic understandings (Borgatti and Foster, 2003
Social network research in organizational contexts highlights topics such as social capital, embeddedness, organizational networks, board interlocks, joint ventures and inter-firm alliances (see Borgatti and Foster, 2003;
The trend towards network represents a major opportunity for the corporate entrepreneurship movement (Ripollés and Blesa, 2006.
Table 5 shows ten key reasons (arranged chronologically) why it is important to consider the social network from the corporate entrepreneurship perspective.
including leadership, knowledge utilization, innovation, profit maximization, entrepreneurship, and so on. Borgatti and Foster (2003 p. 1005) 5 An important source of new ideas and lucrative opportunities may be the networks,
in which the entrepreneur is actively participating. Elfring and Hulsink (2003 p. 412) 6 A key benefit of networks for the entrepreneurial process is the access they provide to information and advice.
Drawing on prior strategy-making processes and entrepreneurship research, measurement scales of EO have been developed and widely used,
and pursuing new business opportunities. Proactive firms act on future needs actively seeking new opportunities and furthermore they are often pioneer firms that first to enter the new markets (Nazdrol et al.,
2009). ) Risk-taking reflects a firm's willingness to commit more resources to projects in which the expected returns are uncertain.
and represents one of the areas of entrepreneurship research, where a cumulative body of knowledge is developing (Basso et al.,
, Entrepreneurship: Theory and Practice, Strategic Management Journal, Academy of Management Journal, Journal of Management Studies, etc.
Miller (1983) The paper Strategy making and environment: the third link, proposes three hypotheses related to the relationship between strategy-making and environment.
In this paper the author proposes his definition of what will become the foundation of the EO approach,
Covin and Slevin Covin and Slevin (1989) In the study Strategic management of small firms in hostile and benign environments, the authors discuss the concepts of entrepreneurial and conservative strategic postures based on
the three variables of the firm-level entrepreneurship phenomenon (Miller and Friesen, 1982; Miller, 1983) and the partial reuse of a questionnaire developed by Khandwalla (1977.
extensively used in entrepreneurship and strategy. Covin (1991), Covin and Slevin (1991), Covin et al. 2006) In subsequent articles, Covin and Slevin use the term EO with reference to one of the two strategic postures that a firm may adopt in a given environment (highlighted in the research of 1989.
Their seminal article, A conceptual model of entrepreneurship as firm behaviour (1991), recaps the previous elements and introduces a detailed description of entrepreneurial posture.
Entrepreneurial behavior is one of the implementation channels of strategic behavior at the firm level.
to establish a clear distinction between the concept of EO and entrepreneurship, comparably with the distinction established between content
and aggressive competition (thus far considered as a single dimension). Assessment of past research: a review Rauch, Wiklund, Lumpkin,
2009) 39 6. Innovativeness Innovativeness relates to the firm's capacity to engage in innovation, that is, the introduction of new products or services, processes,
For instance, for Schumpeter (1934), organizational innovativeness is highlighted as an important factor for aggregate economic growth and performance over time.
or services that shifted resources away from existing firms and caused new firms to grow.
) In summary, innovativeness is the predisposition to engage in creativity through the introduction of new products or services as well as technological leadership via R&d in new processes (Rauch et al.
Equally, in GEM survey the questions concerning innovativeness indicate the degrees of effort by the firm in an attempt for potential customers to consider their products
or services new and unfamiliar and the technologies or procedures required by these products or services becoming generally available recently,
as well as strategic innovation and market relationship. In summary, innovativeness in both set of measures is the predisposition to engage in creativity through the introduction of new products or services as well as technological leadership via R&d in new processes. 42 43 CHAPTER III
ESSAY ONE ENTREPRENEURIAL ORIENTATION ENVIRONMENTAL HOSTILITY AND SME PROFITABILITY: A CONTINGENCY APPROACH Abstract This essay investigates the effect of the entrepreneurial orientation (EO) on SME profitability.
and the external environment. 1. Introduction It is well-known that there is a large body of literature regarding aspects of firm performance,
In this sense, EO has emerged as a major construct within the strategic management and entrepreneurship literature over the years (Basso et al.
as well as conceptual, arguments suggest that EO is not equally suitable in all environments (Covin and Slevin, 1989;
Namely, the magnitude of the relationship between EO and firm performance is contingent upon the external environment as well as upon internal organizational processes (Tang et al.
Equally important, the EO-environment fit may play an essential role in the firm's ability to improve its profitability.
Entrepreneurs seek to identify new opportunities, respond to environmental changes, and take appropriate actions to achieve success. At the firm level,
entrepreneurship is defined as entrepreneurial philosophy that permeates an entire organization's outlook and operations, and it refers to the firm's actions per se (Chow, 2006).
representing a widely exploited intangible asset in corporate entrepreneurship. Entrepreneurial values enhance the creation of new businesses within the existing businesses
and processes, responding to changes that occur in its environment, assuming a proactive strategic posture, and so on.
In turn, EO suggests a proclivity towards the creation of new products or services, proactiveness and risk-taking propensity (Miller, 1983;
) In other words, innovativeness is the predisposition to engage in creativity through the introduction of new products or services as well as technological leadership via R&d in new processes (Rauch et al.
It is a forward-looking perspective characterized by the introduction of new products and services ahead of the competition and acting in anticipation of future demand.
By considering that proactiveness involves the capacity of a firm to anticipate changes in its environments,
and exploit entrepreneurial opportunities (Lumpkin and Dess, 1996). Essentially, it refers to a firm's strategy orientation,
differentiate themselves and/or substitute incumbents with other 48 means that customers value (Wiklund and Shepherd,
thus achieving profitable opportunities. Risk-taking involves taking bold actions by venturing into the unknown (Rauch et al.
2009), it reflects the tendency to assume relatively high levels of riskseeking profitable opportunities in the face of uncertainty and the achievement of longterm profitability.
2. 2. The moderating role of environmental hostility a contingency approach It is acknowledged that the discovery and exploitation of entrepreneurial opportunities results from prior knowledge about markets and customers (Venkataraman, 1997.
Moreover, new information about technology, combined with the prior information on market needs and external problems, leads to the discovery of entrepreneurial opportunities (Shane and Venkataraman, 2000.
Thus, the external environment is highlighted always as a critical contingency or contextual factor in the EO-performance relationship.
Several authors stressed the importance of the fit between organization and environment. The importance of proper alignment of the strategy with the environment means that both entrepreneurial and conservative companies must develop characteristics that enable them to cope with their environments (Yeoh and Jeong, 1995.
In this vein, Yamada and Eshima (2009) argued that the external environment may have a strong impact on small firms'viability and growth. 50 This stream of research draws on Khandwallas's contingency perspective (1972),
who pointed out that the performance of a company should not be measured only in terms of organizational attribute (structure, management style, etc.),
but rather by results from the fit of these dimensions within a specific environment characterized by some degree of hostility and uncertainty.
Thus, the classification that would be used in the literature stresses two different scenarios, hostile and benign environments.
hostile environments are described by Khandwalla (1976/77; 1977) as stressful, very risky, with few opportunities. In the same way, Covin and Slevin (1989) added that the hostile environment is characterized by intense competition,
overwhelming business climate and relative lack of opportunity for exploitation. Conversely, the non-hostile or benign environment is one that has none of the characteristics above,
but rather provides investment opportunities and has a favorable climate for business (Covin and Slevin, 1989;
Khandwalla, 1977. In fact, the classical study of contingent or contextual analysis of the EO-performance relationship is the research by Covin and Slevin (1989),
who pointed out that the entrepreneurial strategy changes according to the external environment being hostile or benign.
Entrepreneurial firms benefit especially in hostile environments (Covin and Slevin 1989. It is expected because the success of these firms is generated by their competitive efforts that seek to gain
or maintain competitive advantage. In this way, Robertson and Chetty (2000) say that environments characterized by high levels of uncertainty are used to encourage greater levels of innovation and risk-taking,
which would imply the adoption of an entrepreneurial posture. On the other hand, in benign environments the relationship between EO and performance may be less significant.
Entrepreneurial behavior involves more risk than does a conservative behavior. Covin and Slevin (1989) argued that in a benign environment it is not necessary to take 51 decisions that create uncertainty
or consuming effort or resources to maintain a firm's viability. To summarize the proposal is based upon the idea that there is a contingent relationship between EO, environment and profitability.
Thus, the core focus of H2 is illustrated in Figure 1. So, the aforementioned theoretical arguments provide reasonable justification for advancing the following hypotheses:
H2. Business profitability will be greater or lower under the fit between EO and environmental hostility.
Entrepreneurial SMES (high EO), operating in a hostile environment, will have better profitability than will entrepreneurial SMES operating in benign environments;
Conservative SMES (low EO), operating in a benign environment, will have better profitability than will conservative SMES in hostile environments.
Moreover, these companies play an important and irreplaceable role in the economy of a country by generating employment and contributing to the GDP.
which leads to the independent variables entrepreneurial orientation and hostile environment. The questionnaire is presented using a 7-point Likert scale,
The higher the index (minimum 1 and maximum 7), the more hostile the 57 environment in which the company operates is.
which is required especially for new investments. In this study, we assume a model proposed in previous studies (e g.,
such as increasing or decreasing stocks, increasing or decreasing accounts with suppliers or clients and decisions on investments in fixed assets.
FCF measurement(-)EBITDA Financial expenses Changes in trade receivables Stock changes Changes in creditors Investment in fixed assets=Free cash flow Model by Prior (2003) Control variables
The environment was classified as benign or hostile, depending on the degree of hostility perceived. The EO index is located between one and seven, with the highest score indicating more entrepreneurial behavior.
The same approach was used to classify the level of hostility of the environment. Thus, the environment is considered to be hostile
when the index is greater than or equal to four, and is considered benign when the index is less than four.
a third part of the SMES considered their environment as benign, especially companies in the food and beverage industry.
Conversely, two-thirds of the SMES saw their environment as hostile. For example, in 60 the pharmaceutical manufacturing industry, all companies considered their environment as stressful and very risky.
Table 11 summarizes the main statistics (i e.,, mean scores and SDS) and the correlation matrix of key variables considered in the study.
we omitted category dco he (coded 1 for conservative firms doing business in a hostile environment,
and not surprisingly, these conservative SMES operating in hostile environments presented the worst performance among all firms in the sample. 2 where:
doing business in a hostile environment, and 0 in other cases; dco be dummy variable coded 1 for firms with a conservative orientation doing business in a benign environment,
and 0 in other cases; deo be dummy variable coded 1 for firms with a entrepreneurial orientation doing business in a benign environment,
and 0 in other cases. By using this model we can consider the full sample in the regression analysis,
H2a SMES with EO, operating in a hostile environment, will have better profitability than SMES with EO in benign environments Confirmed.
Further, entrepreneurial SMES doing business in a hostile environment present higher performance in all ratios than do entrepreneurial SMES doing business in a benign environment (e g.,
The H2b predicted SMES with a low EO, operating in a benign environment, will have better profitability than will SMES with a low EO in hostile environments Confirmed.
Conservative SMES have higher financial performance in a benign environment than in a hostile one (CO BE>CO HE.
For example, conservative firms operating in a benign environment present a ROA of 0. 252 (p<.05) and a FCF index of 0. 324 (p<.01),
higher than do conservative firms in a hostile environment. 63 Table 12. Results of regression analyses ROA ROS FCF Step 1 Step 2 Step 3 Step 1 Step 2 Step 3 Step 1
and Conclusions This essay addresses the impact of EO on SME profitability and key effects of external environment in a contingency model.
pay dividends to their shareholders or expand its business. Otherwise, a negative FCF means that the company will sell part of its investment or increase its debt.
Our findings confirm the existence of a positive and significant relationship between EO and FCF
Overall, our findings provide more evidence about the existing relationship between strategic attributes and performance with certain contingencies from the firm's operating environment.
In general, evidence from this study underscores the importance of a firm's operational environment, as stressed in other studies but, nonetheless,
A central message from the evidence provided is that entrepreneurial SMES have the ability to operate in both hostile and benign external environments (overall results highlighted that entrepreneurial SMES are more profitable in general than conservative ones are.
Nevertheless, we have argued that conservative SMES operating in a benign environment presented results as equally well as entrepreneurial SMES in the same operating environment.
which operate in hostile environments. In conclusion, our findings emphasize that the strategic orientation of the firm should not be considered in isolation,
in an uncertain environment where an atmosphere of high risk predominates, few opportunities, and with tremendous competitiveness, an entrepreneurial posture of the firm is recommended specially.
This result could be explained by the characteristics required by the hostile environment (i e.,, companies with an entrepreneurial profile,
which often are the first to introduce new products, 66 services or administrative techniques, and typically assume a very competitive posture).
) Approximately three decades ago, both entrepreneurial orientation (EO) and organizational networks emerged as an important area of inquiry within entrepreneurship.
If, on one hand, EO can be a way for the firm to exploit opportunities and improve its growth, on the other hand,
and the recognition of the network as a knowledge-based resource with the ability to influence the environment.
However, the issue of the study is focused always on how network resources impact creation or growth in a new venture context.
) EO still makes a contribution to the strategy and entrepreneurship field; one example is the recent number of publications involving this topic (e g.,
) Furthermore, in any studies the limitations or suggestions represent opportunities to advance in the research.
So, in this scenario an important research topic within the field of entrepreneurship emerged, and the role of networks in the entrepreneurial process has 71 been studied widely in recent decades (Jack, 2010;
and make the first move by introducing new products and services. Furthermore networks are vital
discovery of opportunities, securing resources and gaining legitimacy (Elfring and Hulsink, 2003). Likewise, networks act as a buffer against shocks
To foster EO, the entrepreneurs need to access different resources to identify new entrepreneurial opportunities,
as well as, the resources and competences needed to exploit these opportunities economically ahead of competitors, thus facilitating innovative and proactive performance,
and exploit entrepreneurial opportunities (Lumpkin and Dess, 1996). Empirically, Miller and Friesen (1982), then Miller (1983) have used five items related to risk-taking
) In other words, innovativeness is the predisposition to engage in creativity through the introduction of new products or services as well as technological leadership via R&d in new processes (Rauch et al.
It is a forward-looking perspective characterized by the introduction of new products and services ahead of the competition and acting in anticipation of future demand.
If proactiveness involves the capacity of a firm to anticipate changes in its environments and generate competitive advantage from these postures,
and exploit new opportunities, on the other hand, the long-term or lagged effects of EO on firm performance are still unclear.
or lagged effects that might exist between sets of antecedents, entrepreneurship and performance. In an attempt to improve the knowledge regarding the long-term effect of corporate entrepreneurship,
Zahra and Covin (1995) collected data from three different samples over a seven-year period to assess the longitudinal impact of EO on growth revenue.
direct and indirect causal effects A number of scholars have asserted that several elements of networks can create advantages in a firm's environment (Gulati et al.
For instance, entrepreneurs who use their customers and suppliers as sources of support in the gestation period are more likely to grow faster (Capelleras and Greene, 2008).
) Sometimes, close ties with customers can cause performance disadvantages, as pointed out by Burt (1992),
however, Birley's study did not find any significant relationship between growing and non-growing firms in a sample of new ventures.
In the same way, Ostgaard and Birley (1996) tried to associate new venture growth and networking characteristics of the entrepreneur,
but they found a complete lack of any significant relationship between the size of network and sales or profit growth.
Nonetheless, when the absolute values of sales and profits were measured, they found some support for this relationship.
and their findings point out the value of networks for discovering opportunities and gaining legitimacy. More importantly, these entrepreneurial processes, in turn, have an impact on a firm's performance.
If networks are considered to be important for all types of companies particularly due to the fact that the economic environment is becoming increasingly competitive (Madsen, 2007),
and the third and fourth items collect information about the use of networks to influence the environment and the use of employees'networks as an information source, respectively.
probably influenced by the peculiar environment of the economic crisis in which our research is inserted. It would be explained by a stochastic factor, namely,
that Spanish economy was affected more by the economic crisis from 2008 on, and it would be reflected in the growth rates presented by SMES.
is a large stochastic factor such as wars, terrorism, economic crisis and so on. Returning to our research questions and aims stated in Section 1,
the use of networks to influence the environment and employees'networks as an information source.
when considering small and medium enterprises separately. A multigroup analysis has enabled us to illustrate that networks play a stronger role in EO development in medium-sized companies than in small ones
influence the environment, improve the proclivity of higher levels of EO and thus achieve high levels of growth.
as well as entrepreneurial spirit in companies'environments, can be valuable to society as a whole because they represent more than just entrepreneurship topics
and have a direct influence on potentially successful firms. Particularly in the Spanish context, they make it easier for public-support agencies to identify SMES with resources and potential growth.
and a successful innovative posture could be a key to access the export market in a global economy.
Unsurprisingly, it is one of the most popular topics in business management and international entrepreneurship (IE) literatures (e g.,
and IE 94 that one of the keys to generate a competitive advantage in a global economy is through innovativeness (Flor and Oltra, 2005;
) In the European business context, characterized by small domestic markets associated with the situational uncertainty and the current economic crisis,
large economies are facing difficulties due to recessions in their domestic markets. Thus, one of the avenues for small firms to gain market share
joint venturing or foreign direct investment, among others. In this study, we concentrate our analysis only on export activities (i e.,
and capitalize on emerging market opportunities (Wiklund, 1999). Innovative firms, through the creation and introduction of new products and technologies, develop a market niche with new products/services,
differentiate themselves and/or substitute incumbents with better quality, cheaper prices or other means that customers value (Richard et al.,
2009; Wiklund and Shepherd, 2005. Innovation could be recognized as a key success factor in an increasingly competitive, global economy (Akman and Yilmaz, 2008.
In this way, there is a large volume of empirical literature testing the effect of innovative activity on international business (e g.,
2009) highlighted the importance and the significant impact of innovation activities, competition and new products development on the internationalization,
Export propensity affects positively the firm's innovativeness. 3. Research design 3. 1. Database The sample used in this essay was taken from the Spanish Global Entrepreneurship Monitor (GEM) by considering the adult population survey for the years 2007
64.15 13.79 22.06 Innovativeness innovate in products or services new to all or some not new 398 579 40.74 59.26 580 869 40.03 59.97 technology available less than 5 years
who capture the importance of entrepreneurial export orientation considering as a relatively high foreign market rate, more than 50%of customers in other countries.
) In other words, innovativeness is the predisposition to engage in creativity through the introduction of new products or services as well as technological leadership via R&d in new processes.
The questions concerning innovativeness indicate the degrees of effort by the firm in an attempt for potential customers to consider their products
or services new and unfamiliar and the technologies or procedures required by these products or services becoming generally available recently.
Another factor that may help explain firm innovativeness, especially in a strategic vision, is precisely the uniqueness of products or service,
and services that are either totally new or radically different from existing products (Sharma and Blomstermo,
Regarding the uniqueness of products or services, we used a dichotomous variable. It assumes a value of one (1)
or some in an attempt for potential customers to consider their products or services new and unfamiliar;
or none of your potential customers consider this product or service new and unfamiliar? Technology available Were technologies
or services as well as technological innovation affects the proportion of foreign sales (export intensity). The second research objective is to investigate
which have a proportion of their revenue derived from foreign sales) are more innovative in products or services,
the correlation between innovation in products or services and technological innovation was expected, but the correlation value is not higher. 107 4. 2. Export intensity In order to test Hypotheses 7a and 7b,
Considering the role of the product/service innovation, our findings show that firms which apply their efforts to convince customers to recognize the company's output as new and unfamiliar raise the probability of exporting and even increase the export intensity.
or services is present if the firm has no (or has few) competitors offering the same product or service to their potential customers.
The results are in accordance with those expected, that is, a small firm without competitors offering the same product
Particular emphasis has been placed on innovation in product or service, process innovation, uniqueness of products or services and foreign sales.
and services that are either totally new or different from existing products. Thus, we can state that the uniqueness of products
and services is another basis for internationalization. Moreover, our empirical results provide support for the direction of a number of recent arguments.
because the fewer or no other businesses offering the same product or service to customers,
CONTRIBUTIONS AND IMPLICATIONS OF THE DISSERTATION The present doctoral dissertation advances our understanding about some relationships in the field of entrepreneurship.
adjust their strategy to the environment and use their networks to develop entrepreneurial orientation and grow. 120 Secondly,
we focused our attention on two critical aspects in entrepreneurship: entrepreneurial, and innovative behavior. Moreover, we noted that our research is inserted in a corporate entrepreneurship context.
The entrepreneurial orientation, as well as the innovativeness of small and medium-sized firms and their influence on the performance of them, is the main topic in this dissertation.
which highlights the importance of the proper alignment of the EO with the environment. Thus, in the first empirical essay, our findings recommend that it is essential to identify the strategic posture which may reflect firm strengths to achieve competitive advantage and
Entrepreneurial SMES (high EO), operating in a hostile environment, will have better profitability than will entrepreneurial SMES operating in benign environments;
Conservative SMES (low EO), operating in a benign environment, will have better profitability than will conservative SMES in hostile environments. 2 H3.
and integrating different elements of entrepreneurship, strategic management and business performance, this dissertation has important implications for the literature, management and public policy,
Implication for the literature This doctoral dissertation contributes to the literature on entrepreneurship and strategy management by investigating the impact of a firm's resources and capabilities such as EO, social networks and innovativeness on its performance.
, product innovation, technology innovation, investments in R&d, etc), our findings give a more complete reflection of the number of innovations adopted in a given time-period.
this dissertation points out that entrepreneurial SMES seem to have more capability to operate in both a hostile and benign environment without compromising their outcomes.
It highlights the necessity of firms to develop superior EO, especially in hostile environments, because it is where a greater degree of creativity,
influence the environment, and improve the proclivity of higher levels of EO and growth. That is, business managers should 125 recognize the importance of an embedded network of strong ties to secure crucial resources,
because they represent more than just entrepreneurship topics and have direct influence on potentially successful firms.
despite large investments made by governmental agencies in export promotions since the 1990s, the growth of productivity has been one of the lowest among the EU countries (Cassiman and Golovko, 2011).
-By recommending the entrepreneurial posture as an important tool, particularly in hostile environments; -by recommending the continued and consistent use of networks to secure crucial resources;
-by recommending innovative practices such as product and service innovation, investment in new technologies and continuous improvement;
and services radically different from existing ones, betting, thus, for the innovatory uniqueness; -by recommending the use of the international experience through export activities to implement innovative projects.
In general, the present results are encouraging to entrepreneurship scholars. Thus, another observation to future research is that examining the EO-performance relationship in different countries with additional moderating variables,
For example, specific EO dimensions (such as competitive aggressiveness) may be less valid in certain cultural contexts that frown upon high competitiveness. 129 We have seen also that SMES have different FCF levels according to their entrepreneurial posture and operating environment.
we also suggest that an interesting extension of this study would be a cross-time analysis based on strategic investments made by entrepreneurial companies,
connecting the literature on entrepreneurship and the concept of agency problem by Jensen (1986). Future research will hopefully test this EO-EH-performance relationship using novel methodologies,
Despite the exhaustive literature on EO, this construct represents a fruitful topic of entrepreneurship research,
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Entrepreneurship Theory and Practice, 35,293-317.156 157 APPENDIX Appendix 1. Confirmatory factor analysis EO Model fit EO construct Recommended level CFA level CFI
Appendix 2. EO scale measurement No. of items Type of measure Innovativeness Strong emphasis on marketing products and services that have recently been developed through R&d. 3 Likert 1-7 New lines
of products or services. Likert 1-7 Changes in product or service lines. Likert 1-7 Proactiveness Typically initiates actions to
which competitors then respond. 3 Likert 1-7 Often is the first to introduce new products, services, administrative techniques, operating technologies, etc.
aggressive posture in order to maximize the probability of exploiting potential opportunities. Likert 1-7. 863.932.873.866.876.750.846.857.881.943***951***969***158 Appendix 3. EH scale measurement No. of items Type of measure Environmental hostility How would you characterize the external environment (both domestic
and international) within which your firm operates? 3 Very safe/risky Likert 1-7 There is an abundance/very few marketing opportunities
and investment Likert 1-7 An environment that my firm can control and manipulate/dominating environment which my firm's initiatives count for very little against tremendous competitive.
Likert 1-7 Appendix 4. Firm network scale measurement No. of items Type of measure Network resources Use of manager's own networks. 4 Likert
1-7 Use of networks as a knowledge resource. Likert 1-7 Use of networks to influence the environment.
Likert 1-7 Use of employees'networks as an information source. Likert 1-7
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