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Journal ArticleDOI

The moderating impact of internal social exchange processes on the entrepreneurial orientation–performance relationship

01 Jan 2010-Journal of Business Venturing (Elsevier)-Vol. 25, Iss: 1, pp 87-103

Abstract: This paper applies a social exchange perspective to understand the internal contingencies of the relationship between entrepreneurial orientation (EO) and performance. It focuses on two aspects of social interactions among functional managers (procedural justice and trust), as well as on their organizational commitment, as potential enhancements to the firm's successful exploitation of entrepreneurial opportunities. A study of 232 Canadian-based firms finds several positive moderating effects: The EO–performance link is stronger for higher levels of procedural justice, trust, and organizational commitment. In addition, consistent with a systems approach to organizational contingencies, the EO–performance relationship is stronger when the organization's social context comes closer to an “ideal” configuration of procedural justice, trust, and organizational commitment that is most conducive to knowledge exchange within the organization. The study's implications and future research directions are discussed.

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Citation for published version:
De Clercq, D, Dimov, D & Thongpapanl, NT 2010, 'The moderating impact of internal social exchange processes
on the entrepreneurial orientation-performance relationship', Journal of Business Venturing, vol. 25, no. 1, pp.
87-103. https://doi.org/10.1016/j.jbusvent.2009.01.004
DOI:
10.1016/j.jbusvent.2009.01.004
Publication date:
2010
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Peer reviewed version
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NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Business
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been made to this work since it was submitted for publication. A definitive version was subsequently published in
Journal of Business Venturing, vol 25, issue 1, 2010, DOI 10.1016/j.jbusvent.2009.01.004
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THE MODERATING IMPACT OF INTERNAL SOCIAL EXCHANGE PROCESSES ON
THE ENTREPRENEURIAL ORIENTATION—PERFORMANCE RELATIONSHIP
Dirk De Clercq
Brock University
Faculty of Business
500 Glenridge Avenue
St. Catharines, Ontario L2S 3A1
Tel: +1 905 688 5550 x5187
Fax: +1 905 984 8068
ddeclercq@brocku.ca
Dimo Dimov
University of Connecticut
School of Business, Department of Management
2100 Hillside Road Unit 1041
Storrs, CT 06269-1041
Tel +1 860 486 3638
Fax +1 860 486 6415
dimo.dimov@business.uconn.edu
Narongsak (Tek) Thongpapanl
Brock University
Faculty of Business
500 Glenridge Avenue
St. Catharines, Ontario L2S 3A1
Tel: +1 905 688 5550 x5195
Fax: +1 905 378 5716
nthongpa@brocku.ca
Forthcoming in Journal of Business Venturing
January 13, 2009

THE MODERATING IMPACT OF INTERNAL SOCIAL EXCHANGE PROCESSES ON
THE ENTREPRENEURIAL ORIENTATION—PERFORMANCE RELATIONSHIP
Abstract
This paper applies a social exchange perspective to understand the internal contingencies of the
relationship between entrepreneurial orientation (EO) and performance. It focuses on two aspects
of social interactions among functional managers (procedural justice and trust), as well as on
their organizational commitment, as potential enhancements to the firm’s successful exploitation
of entrepreneurial opportunities. A study of 232 Canadian-based firms finds several positive
moderating effects: The EO–performance link is stronger for higher levels of procedural justice,
trust, and organizational commitment. In addition, consistent with a systems approach to
organizational contingencies, the EO–performance relationship is stronger when the
organization’s social context comes closer to an “ideal” configuration of procedural justice, trust,
and organizational commitment that is most conducive to knowledge exchange within the
organization. The study’s implications and future research directions are discussed.
Key words: entrepreneurial orientation, social exchange theory, procedural justice, trust,
organizational commitment
1. Executive Summary
This study examines the roles of social relationships between functional managers and
their commitment to the organization in shaping the entrepreneurial orientation (EO)–
performance relationship. In the context of prior studies that typically focus on the external
2

factors that affect the EO–performance relationship, as well as recent research that has begun to
explore its internal contingencies, limited attention centers on how the successful exploitation of
entrepreneurial opportunities might depend on social interactions within the firm. Because social
exchanges are instrumental for the firm’s ability to combine knowledge across different
functional areas, they can interfere in the successful enactment of the firm’s entrepreneurial
posture.
Drawing from prior work on social exchange relationships, we consider three
characteristics that collectively represent an organization’s internal social context and that affect
the extent and quality of internal knowledge exchange and thus the strength of the EO–
performance relationship: (1) procedural justice in cross-functional relationships, (2) trust
between functional managers, and (3) managers’ commitment to the organization and its goals.
Examining a sample of 232 Canadian-based firms representing a broad range of industries, we
find that the overall positive relationship between EO and performance becomes nuanced once
we account for social exchange processes. In particular, the relationship is positive only at high
levels of procedural justice, trust, and organizational commitment; it is further amplified to the
extent that the organization’s social context approaches an “ideal” configuration of procedural
justice, trust, and organizational commitment.
This study contributes to entrepreneurship literature by drawing attention to and
providing a theoretical elaboration of how the internal social context affects the EO–performance
relationship. Specifically, internal social exchanges influence the firm’s ability to combine
knowledge across functional boundaries, which in turn affect its ability to exploit new
opportunities successfully. By discussing how cross-functional procedural justice and trust
promote the quality of decision making when confronted with entrepreneurial opportunities, we
3

offer new insights into the role of formal and informal collaboration among functional
departments for the successful implementation of a firm’s EO. Furthermore, we highlight how
functional managers’ commitment to their organization can act as a catalyst to collaboration and
knowledge exchange. By internalizing the entrepreneurial goals of their organizations,
committed managers can enhance the cohesion and critical thinking that organizations require to
realize their entrepreneurial potential. We also contribute to literature on entrepreneurial
orientation by using a systems perspective to understand how internal social contingencies
collectively help translate a firm’s entrepreneurial posture into successful performance.
From a managerial point of view, this study suggests that when a firm seeks to adopt an
entrepreneurial orientation, top managers should focus not only on navigating the external
environment but also on ensuring that procedural justice and trust permeate the relationships
between functional departments. Ultimately, strong social relationships might make functional
managers less likely to identify themselves as marketers, salespeople, product designers, or
engineers and instead encourage them to perceive each other as “partners” with common
interests in identifying and exploiting entrepreneurial opportunities for the firm. Finally, by
fostering commitment and inspiration throughout the ranks of the organization, top managers can
create further impetus for cross-functional initiatives and collaboration that facilitate knowledge
exchange and ultimately help fulfill the firm’s entrepreneurial potential.
2. Introduction
In changing and increasingly competitive environments, firms must constantly seek out
entrepreneurial opportunities (D’Aveni, 1994) and translate them into improved performance
outputs (Hitt et al., 2001). To this end, a firm’s entrepreneurial orientation (EO)—that is, its
strategic posture to be innovative, proactive, and risk taking—takes on instrumental importance
4

Citations
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Per Davidsson1, Per Davidsson2Institutions (2)
01 Jan 2015
Abstract: The literature on “entrepreneurial opportunities” has grown rapidly since the publication of Shane and Venkataraman (2000). By directing attention to the earliest stages of development of new economic activities and organizations, this marks sound redirection of entrepreneurship research. However, our review shows that theoretical and empirical progress has been limited on important aspects of the role of “opportunities” and their interaction with actors, i.e., the “nexus”. We argue that this is rooted in inherent and inescapable problems with the “opportunity” construct itself, when applied in the context of a prospective, micro-level (i.e., individual[s], venture, or individual–venture dyad) view of entrepreneurial processes. We therefore suggest a fundamental re-conceptualization using the constructs External Enablers, New Venture Ideas, and Opportunity Confidence to capture the many important ideas commonly discussed under the “opportunity” label. This re-conceptualization makes important distinctions where prior conceptions have been blurred: between explananda and explanantia; between actor and the entity acted upon; between external conditions and subjective perceptions, and between the contents and the favorability of the entity acted upon. These distinctions facilitate theoretical precision and can guide empirical investigation towards more fruitful designs.

430 citations


Journal ArticleDOI
Per Davidsson1, Per Davidsson2Institutions (2)
Abstract: The literature on “entrepreneurial opportunities” has grown rapidly since the publication of Shane and Venkataraman (2000). By directing attention to the earliest stages of development of new economic activities and organizations, this marks sound redirection of entrepreneurship research. However, our review shows that theoretical and empirical progress has been limited on important aspects of the role of “opportunities” and their interaction with actors, i.e., the “nexus”. We argue that this is rooted in inherent and inescapable problems with the “opportunity” construct itself, when applied in the context of a prospective, micro-level (i.e., individual[s], venture, or individual–venture dyad) view of entrepreneurial processes. We therefore suggest a fundamental re-conceptualization using the constructs External Enablers, New Venture Ideas, and Opportunity Confidence to capture the many important ideas commonly discussed under the “opportunity” label. This re-conceptualization makes important distinctions where prior conceptions have been blurred: between explananda and explanantia; between actor and the entity acted upon; between external conditions and subjective perceptions, and between the contents and the favorability of the entity acted upon. These distinctions facilitate theoretical precision and can guide empirical investigation towards more fruitful designs.

380 citations


Journal ArticleDOI
Abstract: While 30 years of entrepreneurial orientation (EO) research has demonstrated that EO provides critical insights into questions of organizational-level strategy and performance, how EO manifests inside organizations has received little attention. Instead of assuming that EO is homogenous, we examine the questions of how and why EO might pervade organizations heterogeneously along three dimensions: vertically across hierarchy levels, horizontally across business units, and temporally as an organization develops. We then present three models for how EO can dynamically pervade organizations and discuss how examining the pervasiveness of EO can further our understanding of entrepreneurship as an organizational phenomenon.

287 citations


Journal ArticleDOI
Abstract: Extant research has shown that entrepreneurial orientation (EO) is positively associated with firm performance, but several contingencies affect the strength of this relationship. This article uses insights from the resource-based view and upper echelons perspective to introduce top management’s transformational leadership behaviors as moderators in the EO–performance relationship. The theoretically derived model is tested using survey data obtained from 790 small-and medium-sized firms in six countries. Findings indicate that, regardless of national setting, four transformational behaviors—articulating a vision, providing an appropriate model, having high performance expectations, and showing supportive leader behavior—positively affect the relationship between EO and firm performance. Further, the performance consequences of EO are greater when top management adheres to a configuration characterized by the highest possible levels of transformational behaviors. Implications and directions for future rese...

270 citations


Cites background or methods from "The moderating impact of internal s..."

  • ...We calculated the Euclidian distance of each firm from this “ideal” configuration (De Clercq et al., 2010)....

    [...]

  • ...While De Clercq et al. (2010) take a social exchange theory perspective on the EO– performance relationship and advance the notion that social processes among midtier managers at the same hierarchical level, taken individually and separately, can enhance or diminish the relationship between EO and…...

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  • ...While our study shows that firms need a top-down impetus from management to facilitate the EO–performance relationship, De Clercq et al. (2010) find that social exchange processes between midtier managers at the same hierarchical level drive the EO–performance relationship....

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  • ...Recently, De Clercq, Dimov, and Thongpapanl (2010) explored the contingent influence of social exchange processes between midlevel R&D and marketing managers on the EO–performance relationship....

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Journal ArticleDOI
Bradley A. George1, Louis Marino2Institutions (2)
Abstract: In this manuscript, we examine the evolution of the Entrepreneurial Orientation (EO) concept in an effort to identify areas of concern for the future development of knowledge around the construct and provide conceptual analyses to suggest how we might best move forward in the construct's development. We suggest that the continued accumulation of knowledge in the field is best facilitated by conceptualizing EO as a reflective model utilizing three dimensions that can be extended through the use of a classical classification scheme and that additional subcategories of EO should be developed within the EO conceptual family utilizing new measurement items.

267 citations


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  • ...Through a confirmatory factor analysis (CFA), we find factor loadings greater than .40, normalized residuals of less than 2.58, and modification indices of less than 3.84 (Anderson and Gerbing, 1988)....

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202032
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