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MEASURING ENTREPRENEURIAL ORIENTATION _ BUSINESS PERFORMANCE RELATIONSHIP

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					International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
  INTERNATIONAL JOURNAL OF MANAGEMENT (IJM)
Volume 4, Issue 4, July-August (2013)

ISSN 0976-6502 (Print)
ISSN 0976-6510 (Online)                                                           IJM
Volume 4, Issue 4, July-August (2013), pp. 165-169
© IAEME: www.iaeme.com/ijm.asp                                              ©IAEME
Journal Impact Factor (2013): 6.9071 (Calculated by GISI)
www.jifactor.com




       MEASURING ENTREPRENEURIAL ORIENTATION & BUSINESS
         PERFORMANCE RELATIONSHIP IN AN INDIAN SETTING

                                          SMITHA NAIR
               Contract Lecturer, School of Industrial Fisheries, CUSAT, Cochin-16.



INTRODUCTION

        Entrepreneurial Orientation has evoked a lot of interest among the academic circles. Firms
which display a high ability to innovate, involve in strategy, continuously assess their customers’
needs and wants, identify new opportunities, take calculated risks and persevere in making their
vision a reality, display Entrepreneurial Orientation (EO) (Miller, 1983). ). EO has thus been
variously defined as a strategy building process upon which a firm is able to base its entrepreneurial
decisions (e.g., Lumpkin & Dess, 1996; Wiklund &Shepherd, 2003) and as the behavior of firms,
whereby they strive to remain ahead of their competitors and better their own performance and
achieve business success. Thus innovativeness, risk taking propensity and proactiveness are the
hallmark of entrepreneurial firms. EO is considered essential to achieve business success, tide over
potentially unfavourable situations, counter competition and achieve customer satisfaction. EO is
conceptualized as a spectrum, on which firms which differ vastly with respect to their entrepreneurial
behaviours, determined by their ability to innovate, take risks, and be on the lookout for
opportunities, fall on opposite ends and can be labeled as either defenders/prospectors,
conservative/entrepreneurial, followers/pioneers and reactive/proactive firms (Avlonitis and Salavou,
2007; Atuahene-Gima and Ko, 2001; Covin et al., 1999; Miles and Snow, 1978; Miller and Friesen,
1982; Mintzberg, 1973). Covin and Slevin’s (1986) three-dimensional definition of EO is adopted
and it is treated as a multi-dimensional construct. Thus, this paper adopts the Covin & Slevin’s
construct for studying the Indian seafood exporting firms’ EO setting. The entrepreneurial
orientation and business performance (BP) relationship study is the objective of this paper.
        The EO-BP relationship has been studied widely and has reported to be significant and
positive, and firms with a higher EO show a higher business performance (Zahra, 1991; Zahra and
Covin, 1995;Wiklund, 1999, Rauch et al., 2004). Researchers have also studied the role of
moderators in the EO-BP relationship and have reported the significance of firm specific factors and
environmental factors (Cyert and March, 1963; Levinthal and March, 1981; Miller, 1987; Cooper et
al., 1994).



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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 4, July-August (2013)

METHODS AND MEASUREMENT

        The data collection methods included collection of both primary and secondary data. Primary
data was collected by survey method from the various seafood exporting firms in India, while
secondary data was collected from the various government fisheries institutes and research bodies,
trade associations like the Seafood Exporters Association, India (SEAI) and the internet.
        The research method employed the use of quantitative data analysis, which involved the
testing of hypotheses, identifying causality and replicability, using survey method. The survey
method was carried out using questionnaire as survey instrument. The sampling frame consists of a
list of 356 processing (freezing) plants included in the Seafood Exporters’ Directory (2004),
published by the Marine Products Export Development Authority. The questionnaire was designed to
be an SPSS–friendly one and the questions were coded so that the responses obtained could be
quantified to obtain tangible results. The instrument has a 6 item questionnaire based to find out the
degree of proactiveness, risk taking and innovativeness and a 5 item business performance construct
dealing with overall performance, ROI and sales compared to last year, compared to competitors and
compared to expectations.

HYPOTHESIS

The EO-BP relationship is tested empirically by stating the hypothesis as follows:
The greater the entrepreneurial orientation, the greater the market orientation.

RESULTS AND DISCUSSION

Motivating factors for initiating export operations
        The exporters listed different motivating factors for initiating export operations. On a scale of
1 – 5, the mean scores ranged from 2.25 to 4.51. Of them the most important factor was, predictably,
profit incentive, with a mean score of 4.51 (S.D = 0.704). Following this, the other top motivating
factors included location advantage (4.24), technical knowledge (4.09), future growth reasons (3.94)
and high growth rate of business (3.88). The least motivating factor was competitive pressure from
domestic market. The factor managerial urge, which reflects on the entrepreneurial orientation, had a
mean value of 3.76.

                 Table 5.2.16. Motivating factors for initiating export operations
            Motivating factors for initiating export          N      Mean    Std. Deviation
            Profit Incentive                                  108    4.51         0.704
            Tax Benefit                                       108    3.28         0.807
            Managerial Urge                                   108    3.76         1.267
            High growth rate                                  108    3.88         0.944
            Receive unsolicited order                         108    2.95         1.307
            Company's future growth                           108    3.94         0.930
            Competitive pressure from domestic market         108    2.25         1.033
            Inherited business                                108    2.75         1.319
            Less competition                                  108    2.65         1.130
            Less investment required                          108    2.28         1.022
            Have technical know-how                           108    4.09         0.881
            Locational advantage                              108    4.24         0.609
           Source: Primary data

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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 4, July-August (2013)

CORRELATION ANALYSIS

        The correlationship between entrepreneurial orientation and business performance is further
examined by looking at the various components of business performance. Business is measured by
both its economic and non-economic indicators. Non-economic indicators include the customer and
employee consequences. Entrepreneurial orientation exhibits positive significant relationships to all
the business performance components. The highest correlation is showed between entrepreneurial
orientation and non-economic performance (r=0.654).

 Correlations
                                               Entrepreneurial        Economic Business       Noneconomic Business
                                                Orientation              Performance              Performance
 Entrepreneurial       Pearson                         1                    .503**                   .654**
 Orientation           Correlation
                       Sig. (2-tailed)                                       .000                     .000
                       N                              108                    108                      108
                                                           **
 Economic Business Pearson                         .503                        1                     .732**
 Performance       Correlation
                       Sig. (2-tailed)                .000                                            .000
                       N                              108                    108                      108
 Noneconomic           Pearson                     .654**                   .732**                     1
 Business              Correlation
 Performance           Sig. (2-tailed)                .000                   .000
                       N                              108                    108                      108
 **. Correlation is significant at the 0.01 level (2-tailed).

RESULTS AND DISCUSSION

        It is seen that the EO-BP relationship is positive and the business and the greatest factor was
the business performance relative to competitors, thus empirically proving that entrepreneurial
orientation leads to an increase in business performance relative to its competitors. The results of the
stepwise regression analysis of the EO-BP relationship are as given below.

Model Summary
 Model        R        R Square          Adjusted R Square            Std. Error of the Estimate
                   a
   1        .519           .270                .263                            .59608
   2        .597b          .357                .344                            .56217
                   c
   3        .617           .381                .363                            .55412
a. Predictors: (Constant), Overall business performance of firm relative to                   major competitors last
year
b. Predictors: (Constant), Overall business performance of firm relative to                   major competitors last
year, Equity of company to employees improved in past 3 years
c. Predictors: (Constant), Overall business performance of firm relative to                   major competitors last
year, Equity of company to employees improved in past 3 years, Return                         on investment of firm
relative to all competitors last year


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International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 4, Issue 4, July-August (2013)

        Thus to increase competitive capabilities, Indian seafood processing firms need to pay greater
attention to their entrepreneurial orientation. By virtue of their risk taking behavior and their
readiness to venture into new businesses, firms with a high EO tend to perform better than low EO
firms. Hence it is recommended that Indian seafood processing firms need to be more
entrepreneurial oriented, so as to deal with the inherent riskiness of the business. Being proactive and
taking up new opportunities in order to convert them into strengths, will help the seafood firms to
face the competition and utilize the opportunities coming up. The highly perishable nature of the
seafood, the customer demand for safe food, the development of new players, in the seafood trade
scenario, strict regulations and demand and supply fluctuations have all resulted in the seafood
trading being a risky business (Allshouse et al.,2004). Presently, due to the disease affliction in the
shrimp farms in Thailand, which is the major vannamei shrimp exporter to the US, the demand is
being met by other countries including India. But India does not have enough capacity to fulfill the
requirement by itself. If seafood firms take up farming on a large scale and absorb the potential risks,
then they have the capacity to turn this opportunity to business success.

CONCLUSIONS AND LIMITATIONS

       Thus it has been empirically proved that entrepreneurial orientation positively affects
business performance of Indian seafood processing firms by increasing it. This is in line with
empirical studies conducted world over and thus contributes to existing literature. It is therefore
recommended that Indian seafood processing firms take up entrepreneurial activities in order to
improve their business success and develop competitive advantages, which will help them excel in
the global seafood trade.
Some of the limitations of the study include lack of study of the potential moderators involved in the
EO-BP relationship. Moreover several firms closed down during the period of the study, which may
affect the findings of the study. Further studies need to be conducted to develop a better
understanding of the EO-BP relationship.

REFERENCES

 1.  Allshouse,J.,Buzby,J; Harvey,D; Zron,D (2004). Seafood safety and trade. Agriculture
     Information Bulletin Number 789-7, February, United States Department of Agriculture, pp.2.
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     Science, 29: 770-791.
 3. Atuahene-Gima K, Ko A. An empirical investigation of the effect of market orientation and
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 6. Cyert, R.M., March, J.G., 1963. A Behavioral Theory of the Firm. Englewood Cliffs, New
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Volume 4, Issue 4, July-August (2013)

 11. Covin, J. G. & Slevin, D. P. (1986). The development and testing of an organizational level
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     pp. 78 - 84, ISSN Print: 0976-6502, ISSN Online: 0976-6510.




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