Proactive entrepreneurial behaviour, market orientation, and innovation outcomes: a study of small- and medium-sized manufacturing firms in the UK
Summary (3 min read)
Introduction
- This research aims to extend this literature stream by addressing three important gaps.
- Further to explore how a specific type of entrepreneurial behavior actually affects innovation outcomes (See Table 1).
- The authors propose that innovation capability acts as a mediator in the PEB-NPD performance relationship.
Literature Review
- Many studies have specifically examined the impacts of the E-MO interface on innovation outcomes.
- The authors categorise their research foci into three general themes.
- 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).
- 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).
- Building on the resource-based theory, the authors develop a framework .
Direct Effect of PEB on New Product Development Performance
- Resource-based theory posits that firms’ unique resources are the key drivers of superior performance (Barney et al., 2011).
- PEB refers to an array of strategic actions includes initiation of competitive actions, introduction of new products, and proactive operating techniques (Covin and Slevin, 1989; Nasution et al., 2011).
- The positive relationship between PEB and NPD performance may not be linear.
- They are more likely to introduce new products with highly innovative features, which in turn increase the likelihood of achieving strong NPD performance.
Mediating Role of Innovation Capability
- The authors propose that innovation capability serves as a mediator between PEB and NPD performance.
- Innovation capability describes firms’ capacity to perform innovative activities (Calantone et al., 2002; Ngo and O'Cass, 2012).
- In contrast, highly proactive SMEs are more likely to invest substantial resources in supporting innovation-related activities to enable them to introduce new products to the marketplace frequently and so are more likely to accumulate significant innovation-related experience.
- According to resource-based theory scholars, firms’ resources can be used to support the development of their capacity to perform value-creating tasks to improve performance (Amit and Schoemaker, 1993; Murray et al., 2011).
- Innovation capability mediates the relationship between PEB and NPD performance, whereas PEB has an upward curvilinear effect on innovation capability, and innovation capability has a positive linear effect on NPD performance within the SME context, also known as Hypothesis 2.
Contingent Role of Market Orientation
- Prior work on the resource-capability-performance framework also shows that a range of contingency factors may influence the relationship between resources and capability (Murray et al., 2011; Zhou et al., 2008).
- This is because pursuing customer orientation helps less proactive SMEs to gain more customer insights (Gonzalez-Benito et al., 2009; Schindehutte et al., 2008), which in turn reveals the importance of addressing customers’ needs through innovation (Song et al., 2000; Zhou et al., 2005).
- Such movements will enable proactive SMEs to accumulate significant experience about innovation, which in turn fosters the enhancement of innovation capability.
- Less proactive SMEs already engage in fewer innovation-related activities, because they do not consider actively seeking to redefine their market a high strategic priority (Lumpkin and Dess, 1996; Mueller et al., 2012).
- Competitor orientation also weakens the relationship between PEB and innovation capability when SMEs’ PEB is relatively strong.
Measurement and Data Collection
- The authors data were drawn from a cross-sectional questionnaire survey of UK-based SMEs in the manufacturing sector.
- First, it is very difficult for SME manufacturing firms to compete with large manufacturing firms in the mature marketplace due to their limited resources, so pursuing an innovation strategy is one way to overcome this challenge (Li and Atuahene-Gima, 2001; O'Cass and Weerawardena, 2009).
- Finally, based on the prior literature (Gatignon and Xuereb, 1997; Schultz et al., 2013; Spanjol et al., 2012), six control variables are included in the model: firm size (based on revenue), age, employee number, product type (within the manufacturing sector), competitive intensity, market turbulence, and technology turbulence in the model.
- Finally, the authors used three items to assess market turbulence and two items to assess technological turbulence from Schultz et al. (2013).
- The authors asked them to verify the relevance and completeness of their measurement by answering all of the survey items and provided feedbacks.
Validity and Reliability
- Because the authors measured all of the constructs based on self-reports, they follow the suggestion to use multiple statistical remedies to rule out potential common method bias (Podsakoff et al., 2003; Podsakoff et al., 2012).
- Finally, the authors calculated the variance inflation factors (VIFs) to assess the possibility of multicollinearity.
- Based on all of the above points, the authors argue that their research possesses both reliability and validity.
- In particular, there is an upward curvilinear relationship between PEB and innovation capability, and a linear positive relationship between innovation capability and NPD performance.
- Previous research indicates that the simultaneous inclusion of multiple interaction terms that share common variables may prevent the detection of moderating effects, due to the complex constellation of factors caused by such simultaneity (De Clercq et al., 2016).
Academic Contribution
- As a first contribution, the authors demonstrate an upward curvilinear relationship between PEB and NPD performance.
- More specifically, the positive effect of PEB on NPD performance is stronger when SMEs are more proactive and weaker when SMEs are less proactive.
- SMEs may not only suffer as a result of accumulating less new experience about innovation (due to their narrower product range), but also need to invest more resources in analysing and monitoring their competitors’ movements when pursuing high levels of competitor orientation.
- The findings of their research support Morgan et al. (2015)’s suggestions that market orientation can sometime reduce the positive effects of entrepreneurial behaviour on innovation outcomes.
- More specifically, the authors find that, when SMEs pursue PEB and customer (or competitor) orientation simultaneously, the upward curvilinear effect of PEB on innovation capability will flip to a downward effect.
Limitations and Future Research Opportunities
- First, their research design may restrict us from drawing any definite conclusions about the causation effect among the variables over time.
- Therefore, the generalisability of their findings remains limited to firms within a specific industry, company size, and country context.
- While the authors have gone through the necessary procedures to ensure the face validity, and statistical validity and reliability of their scales, however they may still not capture PEB sufficiently as the nature of (all types of) entrepreneurial behaviors is complex (Boso et al., 2012; Kreiser et al., 2013; Lumpkin and Dess, 1996).
- To begin with, the curvilinear relationship (PEB NPD performance and PEB innovation capability) suggests some research opportunities.
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Cites background from "Proactive entrepreneurial behaviour..."
...…SMEs that are related to their internationalization (Javalgi and Todd 2011); in England, which has an impact on the development of new products (Liu et al. 2017) and rural SMEs that show innovation (Blanchard 2017); in New Guinea in indigenous SMEs (Rante and Warokka 2013); in Pakistan (Iqbal…...
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References
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"Proactive entrepreneurial behaviour..." refers background in this paper
...…reflects a firm’s deeply-rooted beliefs and values that direct its focus towards creating a first-mover advantage to achieve superior performance (Kreiser et al., 2013; Simon et al., 2002; Song et al., 2000), that considers as an important resource of the firm (Lumpkin and Dess, 1996; Zhou et…...
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...…of positioning itself in anticipation of changes in the market by taking an active role to sharp the future state of its external environment (Kreiser et al., 2013; Lumpkin and Dess, 1996) the forward-looking stance to shape the business environment (Nasution et al., 2011; Rhee et al.,…...
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...Furthermore, recent work shows that the impact of entrepreneurial behaviour on firms’ business performance may not be linear in nature (Kreiser et al., 2013)....
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...…builds on prior research that emphasized the important contribution of innovation capability to an NPD program’s success (e.g. Ngo and O'Cass, 2012; Verhees and Meulenberg, 2004), and that PEB drives the engagement of innovation activities (e.g. Covin et al., 2000; Kreiser et al., 2013)....
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...…the necessary procedures to ensure the face validity, and statistical validity and reliability of our scales, however they may still not capture PEB sufficiently as the nature of (all types of) entrepreneurial behaviors is complex (Boso et al., 2012; Kreiser et al., 2013; Lumpkin and Dess, 1996)....
[...]
330 citations
"Proactive entrepreneurial behaviour..." refers background in this paper
...This consideration is based on the recent extension of resource-based theory, that posits that firms’ unique and valuable resources do not automatically lead to superior performance (Murray et al., 2011; Zhou et al., 2008)....
[...]
...Contingent Role of Market Orientation Prior work on the resource-capability-performance framework also shows that a range of contingency factors may influence the relationship between resources and capability (Murray et al., 2011; Zhou et al., 2008)....
[...]
...Prior work on the resource-capability-performance framework also shows that a range of contingency factors may influence the relationship between resources and capability (Murray et al., 2011; Zhou et al., 2008)....
[...]
303 citations
283 citations
"Proactive entrepreneurial behaviour..." refers background in this paper
...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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...…popular form of entrepreneurial orientation embraces three types of entrepreneurial behaviour – proactiveness, innovativeness and risk-taking (Li et al., 2006; Renko et al., 2009). further to explore how a specific type of entrepreneurial behavior actually affects innovation outcomes (See Table 1)....
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Frequently Asked Questions (2)
Q2. What are the future works in "Proactive entrepreneurial behaviour, market orientation, and innovation outcomes: a study of small- and medium-sized manufacturing firms in the uk" ?
Researchers in the future might employ a longitudinal research design in order to confirm this causality empirically or use data collected from multiple respondents in each firm to combat this limitation. Future studies on different industries, company sizes, or countries would help to generalize their findings and expand the boundary conditions. Future research should attempt to capture the domain of PEB construct with much richer and more detailed scales. Fourth, although the authors requested in their cover letter that the general manager ( or CEO ) of the firm should complete the questionnaire on behalf of his/her organisation, due to the anonymity and confidentiality of the responses, they can not eliminate the possibility that the respondent is not the general manager ( or CEO ) of the firm.