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The Complementary Effects of Market Orientation and Entrepreneurial Orientation on Profitability in Small Businesses

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  • William E. Baker
  • James M. Sinkula

Abstract

Market orientation (MO) and entrepreneurial orientation (EO) are correlated, but distinct constructs. MO reflects the degree to which firms' strategic market planning is driven by customer and competitor intelligence. Entrepreneurial orientation reflects the degree to which firms' growth objectives are driven by the identification and exploitation of untapped market opportunities. When modeled separately, research has reported direct effects of both constructs on firm profitability. When modeled simultaneously, however, the direct effect of EO has disappeared. This has led some scholars to postulate that EO is an antecedent of MO. The results of this study contradict this presumption and suggest that EO and MO complement one another, at least in small businesses, to boost profitability. The major difference between this and previous studies is the inclusion of innovation success, which captures an indirect effect of EO on profitability. At least in small firms, the results suggest that EO complements MO by instilling an opportunistic culture that impacts the quality and quantity of firms' innovations.

Suggested Citation

  • William E. Baker & James M. Sinkula, 2009. "The Complementary Effects of Market Orientation and Entrepreneurial Orientation on Profitability in Small Businesses," Journal of Small Business Management, Taylor & Francis Journals, vol. 47(4), pages 443-464, October.
    • Handle: RePEc:taf:ujbmxx:v:47:y:2009:i:4:p:443-464
    DOI: 10.1111/j.1540-627X.2009.00278.x
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    Citations

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    Cited by:

    1. Uma Shankar Yadav & Shweta Vyas & Kanchan & Indrajit Ghosal & Ajay Kumar yadav, 2024. "Impact of entrepreneurial leadership, Social media, digital technology, Entrepreneurial orientation and innovation on business performance in the handicraft sector: Talent management as mediating cons," Journal of Innovation and Entrepreneurship, Springer, vol. 13(1), pages 1-34, December.
    2. Xin, Yongrong & Khan, Rizwan Ullah & Dagar, Vishal & Qian, Fang, 2023. "Do international resources configure SMEs' sustainable performance in the digital era? Evidence from Pakistan," Resources Policy, Elsevier, vol. 80(C).
    3. Lixin Sheng & Jibao Gu & Jianlin Wu, 2023. "How does entrepreneurial orientation influence firm performance? The roles of corporate social responsibility and institutional environments," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(4), pages 2021-2036, July.
    4. Sinha, Kanhaiya K. & Steel, Piers & Saunders, Chad & Fariborzi, Hadi, 2023. "Balancing entrepreneurial and learning orientations: A meta-analytic approach to understanding performance variability," Journal of Business Venturing Insights, Elsevier, vol. 20(C).
    5. Michael Sheppard, 2023. "The behavioural gap between entrepreneurial SME’s and high growth: evidence from Canada," International Entrepreneurship and Management Journal, Springer, vol. 19(1), pages 427-449, March.
    6. Jiyeon Kim & Min Jae Park, 2022. "Influence of Entrepreneurship Manifestation Factor on Organisational Innovation: The Role of Corporate Entrepreneurship and Imperative Innovation Culture," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 31(3), pages 514-545, November.
    7. Muhammad Jawad Iqbal & Hafiz Muhammad Usman Khizar, 2022. "The Epistemology of Entrepreneurial Responsible Orientation (ERO): Theory, Conceptualization, and Future Research," SAGE Open, , vol. 12(2), pages 21582440221, April.
    8. Daneluz, Marina & Canever, Mario Duarte & Lima, Helenice González de & Bermudes, Rogerio Folha & Menezes, Gabrielito Rauter, 2022. "Linking entrepreneurial orientation and managerial capacity to performance in dairy farms," Revista de Economia e Sociologia Rural (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 60(3), January.
    9. Bouhalleb, Arafet & Tapinos, Efstathios, 2023. "The impact of scenario planning on entrepreneurial orientation," Technological Forecasting and Social Change, Elsevier, vol. 187(C).
    10. José Álvarez‐García & Esther Hormiga‐Pérez & Paul O. Sarango‐Lalangui & María de la Cruz del Río‐Rama, 2022. "Leaders' sustainability competences and small and medium‐sized enterprises outcomes: The role of social entrepreneurial orientation," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(5), pages 927-943, October.
    11. Viriya Taecharungroj & Dissatat Prasertsakul, 2023. "Placeful Business: Reimagining a Small Business Concept That Embraces and Enriches Places," Sustainability, MDPI, vol. 15(12), pages 1-19, June.
    12. Tomasz Mickiewicz & Arnis Sauka & Ute Stephan, 2010. "Entrepreneurship and Philanthropy after Socialism," TeliaSonera Institute Discussion papers 10, Baltic International Centre for Economic Policy Studies (BICEPS);Stockholm School of Economics in Riga (SSE Riga).
    13. Imen Ouragini & Lassaad Lakhal, 2024. "The Impact of Entrepreneurial Marketing on The Firm Performance," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 6003-6025, June.
    14. Nur Laily & Dewi Urip Wahyuni & Eka Yuliati, 2021. "Business Performance of Small and Medium Industries In Bojonegoro Indonesia," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(2), pages 470-475, February.

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