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Proactive Entrepreneurial Behaviour, Market
Orientation, and Innovation Outcomes: A Study of
Small- and Medium-sized Manufacturing Firms in the
UK
Journal Item
How to cite:
Liu, Gordon; Ko, Wai Wai Joyce; Ngugi, Isaac and Takeda, Sachiko (2017). Proactive Entrepreneurial Behaviour,
Market Orientation, and Innovation Outcomes: A Study of Small- and Medium-sized Manufacturing Firms in the UK.
European Journal of Marketing, 51(11/12) pp. 1980–2001.
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Version: Accepted Manuscript
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http://dx.doi.org/doi:10.1108/EJM-11-2016-0663
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Proactive Entrepreneurial Behaviour, Market Orientation, and Innovation Outcomes:
A Study of Small- and Medium-sized Manufacturing Firms in the UK
ABSTRACT
Purpose:
Drawing from resource-based theory, we study how and under what conditions small- and
medium-sized firms (SMEs) capitalise on their proactive entrepreneurial behaviour (PEB) to
achieve new product development (NPD) performance.
Methodology:
Our data were drawn from a cross-sectional questionnaire survey of 401 UK-based SMEs in
the manufacturing sector.
Findings:
We identify an upward curvilinear relationship between PEB and NPD performance. Taking
a step further, we propose and confirm that this curvilinear association arises from, in part,
SMEs’ innovation capability, which in turn translates into NPD performance. We also find
that this upward curvilinear relationship between PEB and innovation capability flips to a
downward curvilinear relationship when firms pursue a customer and competitor orientation.
Originality:
This paper looks beyond the linear relationship that exists among entrepreneurial behaviour,
market orientation and innovation outcomes.
Keywords: Proactive entrepreneurial behaviour; Innovation capability; New product
development; Customer orientation; Competitor orientation
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Introduction
The pursuit of innovation is an important tactic that firms employ to compete in an
increasingly dynamic and complex global marketplace (Baker and Sinkula, 2009; Hong et al.,
2013; Zhou et al., 2005). This is particularly true for small- and medium-sized firms (SMEs)
that lack of resource abundance to compete in mature product markets (Li and Atuahene-
Gima, 2001). Thus, researchers have devoted significant attention to identifying the drivers of
innovation outcomes (e.g. Laforet, 2009; O'Cass and Weerawardena, 2009). A stream of
literature focusses specifically on understanding the role of the entrepreneurial behaviour-
market orientation interface (E-MO interface) in facilitating innovation outcomes. At the firm
level, both entrepreneurial behaviour and market orientation reflect an organisation’s deeply-
rooted beliefs and values in relation to resource allocation to achieve strategic objectives.
Entrepreneurial behavior
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is manifested through an organisation’s strategic posture to pursue
business opportunities, while market orientation is demonstrated by an organisation’s
strategic behaviour of identifying and responding to market demands (Atuahene-Gima and
Ko, 2001; Rhee et al., 2010; Schindehutte et al., 2008). This research aims to extend this
literature stream by addressing three important gaps.
First, the extant literature highlights the positive relationship between entrepreneurial
behaviour and innovation outcomes (see Table 1). Despite recognising that different types of
entrepreneurial behaviour place emphasis on different strategic actions (Covin and Slevin,
1989; Lumpkin and Dess, 1996), most studies still focus on examining the impact of a
collection of entrepreneurial behaviours, (which together form a unidimensional
entrepreneurial strategic posture) on innovation outcomes. Few studies have taken a step
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It should be noted that a relationship exists between entrepreneurial orientation and entrepreneurial behaviour.
Entrepreneurial behaviour reflects different individual salient characteristics that are entrepreneurial in nature
(autonomy, risk-taking, etc.). An entrepreneurial orientation comprises various types of independent
entrepreneurial behaviour (Atuahene-Gima and Ko, 2001; Covin and Slevin, 1989; Mueller et al., 2012). The
most popular form of entrepreneurial orientation embraces three types of entrepreneurial behaviour –
proactiveness, innovativeness and risk-taking (Li et al., 2006; Renko et al., 2009).
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further to explore how a specific type of entrepreneurial behavior actually affects innovation
outcomes (See Table 1). Furthermore, recent work shows that the impact of entrepreneurial
behaviour on firms’ business performance may not be linear in nature (Kreiser et al., 2013).
Thus, the issue of whether entrepreneurial behaviour displays a nonlinear relationship with
innovation outcomes requires examination. Our study fills this important gap by investigating
the relationship between proactive entrepreneurial behaviour (PEB) – a specific type of
entrepreneurial behaviour – and new product development (NPD) performance – an ultimate
innovation outcome.
“Insert Table 1 about Here”
Second, prior studies suggest that firms’ entrepreneurial behaviour may not
automatically lead to innovation outcomes (e.g. Baker and Sinkula, 2009; Hong et al., 2013).
This raises the necessity of identifying and examining potential mediators that can direct the
curvilinear impact of entrepreneurial behaviour towards innovation outcomes. In this research,
we propose that innovation capability acts as a mediator in the PEB-NPD performance
relationship. We argue that the curvilinear impact of PEB is due to innovation capability,
which in turn contributes to NPD performance. This is the first study to offer and test the
indirect curvilinear relationship among PEB, innovation capability, and NPD performance.
Finally, previous studies suggest that market orientation plays a complementary role in
strengthening the impact of entrepreneurial behaviour on innovation outcomes (e.g.
Atuahene-Gima and Ko, 2001; Boso et al., 2012; Schindehutte et al., 2008). However, the
question of whether this positive moderation effect also occurs if the impact of
entrepreneurial behaviour is nonlinear in nature remains unexplored. To fill this gap, we
differentiate between customer orientation and competitor orientation that reflects firms’
market orientation, and examine their moderating influence on the relationship between PEB
and innovation capability.
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Theoretical Background and Hypotheses
Literature Review
Many studies have specifically examined the impacts of the E-MO interface on
innovation outcomes. We categorise their research foci into three general themes. The first
theme focuses on understanding the direct impacts of both entrepreneurial behaviour and
market orientation on innovation outcomes (e.g. Frishammar and Åke Hörte, 2007; González-
Benito et al., 2015; Tajeddini, 2010). The second research theme explores the intermediate
mechanisms whereby the E-MO interface affects innovation (e.g. Baker and Sinkula, 2009;
Li et al., 2006; Yu et al., 2016). For example, Hong et al. (2013) show that market orientation
affects NPD performance via new product development proficiency and product
meaningfulness, while entrepreneurial behaviour orientation affects NPD performance via
proficient intellectual property management and product novelty.
The third research theme shifts the focus to the interaction effects of entrepreneurial
behaviour and market orientation on innovation outcomes (e.g. Nasution et al., 2011;
Thoumrungroje and Racela, 2013; Verhees and Meulenberg, 2004). The findings regarding
whether or not the interaction between entrepreneurial behaviour and market orientation have
a desirable, positive effect on innovation outcomes are subject to controversy. For example,
Boso et al. (2012) suggest that entrepreneurial behaviour is more likely to be a driver of
innovation success when the market-oriented behaviour is strong. In contrast, Morgan et al.
(2015) find that entrepreneurial orientation has a positive impact on NPD performance, but
that occurs to a lesser degree when firms simultaneously implement market orientation. To
extend these three themes, we look beyond the linear relationship between E-MO interface
and innovation outcomes. Building on the resource-based theory, we develop a framework
(see Figure 1). We elaborate our discussions below.
