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Entrepreneurial orientation and firm performance: the mediating role of functional performances

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  • Jafar Rezaei
  • Roland Ortt

Abstract

Purpose - Earlier studies have generally shown a positive relationship between entrepreneurial orientation (EO) and the overall performance of the firm. The purpose of this paper is to understand in more detail how EO influences firm performance. It adds to the literature by distinguishing performances of different functions in a firm and by exploring how the dimensions of EO influence these functional performances and, in turn, overall firm performance. Design/methodology/approach - This study examined the relationship between three dimensions of EO (innovativeness, proactiveness, risk-taking), three types of functional performances of firms (R&D performance, production performance, marketing and sales performance) and the overall performance of firms. The data are collected from 279 high-tech small-to-medium-sized enterprises (SMEs) using a postal survey. The proposed hypotheses are tested using structural equation modeling (SEM). Findings - The results indicate that the dimensions of (EO) are related in different ways to the performance of functions in a firm. A positive relationship is observed between innovativeness and R&D performance and between proactiveness and marketing and sales performance. A negative relationship exists between risk-taking and production performance. The results also show a sequential positive relationship from R&D via production and marketing and sales to overall performance of firms. Therefore, it is concluded that the R&D, production and marketing and sales functions reinforce each other in a logic order and are complementary in their effect on overall firm performance. Practical implications - The results imply that the three functions, R&D, production and marketing and sales, in a firm play different roles, both in the firm’s EO and in their contribution to overall performance. Managers can use the findings to monitor and influence the performance of different functions in a firm to increase overall firm performance. Originality/value - The first contribution of this study is that it unravels (i) which dimensions of EO have an effect on the performance of separate functions in a firm, indicating that functions contribute in different ways to entrepreneurial orientation of the firm. A second contribution is assessing how the performance of these functions influence the firm’s overall performance. This paper fills a gap in the literature by exploring internal firm variables mediating the relationship between EO and overall firm performance and contributes to the discussion on the contradictory results regarding the relationship between risk-taking and firm performance.

Suggested Citation

  • Jafar Rezaei & Roland Ortt, 2018. "Entrepreneurial orientation and firm performance: the mediating role of functional performances," Management Research Review, Emerald Group Publishing Limited, vol. 41(7), pages 878-900, May.
    • Handle: RePEc:eme:mrrpps:mrr-03-2017-0092
    DOI: 10.1108/MRR-03-2017-0092
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    Citations

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    Cited by:

    1. Muhammad Yaseen & Waseem Sajjad & Supawan Visetnoi & Siti Amanah & Shahab E. Saqib, 2024. "Entrepreneurial Orientation and SMEs Efficiency With Government Financial and Non-Financial Incentives as Moderators," SAGE Open, , vol. 14(3), pages 21582440241, September.
    2. Chakraborty, Imon & Nandhini, K. & Ilavarasan, P. Vigneswara & Edirippulige, Sisira, 2024. "Factors of front-end innovation in fem-tech startups: An empirical study," Technology in Society, Elsevier, vol. 76(C).
    3. Gonçalo Rodrigues Brás & Miguel Torres Preto, 2021. "The consequences of intrapreneurship in exporting firms: a structural-model approach," CeBER Working Papers 2021-06, Centre for Business and Economics Research (CeBER), University of Coimbra.

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