Entrepreneurial orientation
G. T. Lumpkin and Gregory G. Dess
Entrepreneurial orientation (EO) is a term that addresses the mindset of firms engaged in the pursuit of new ventures and provides a useful framework for researching entrepreneurial ac tivity. Many scholars have used the term to describe a fairly consistent set of related activ ities or processes (e.g., Ginsberg, 1985; Knight, 1997). Such processes incorporate a wide variety of activities that include planning, analysis, de cision making, and many aspects of the organ ization’s culture, value system, and mission (Hart, 1992). Thus, an entrepreneurial orienta tion may be viewed as a firm level strategy making process that firms use to enact their organizational purpose, sustain their vision, and create competitive advantage(s). Research using the EO construct has focused primarily on firm level phenomena. There is no inherent reason why the EO construct should not be used to assess individual level entrepreneurial pro cesses, especially among small firms where firm behavior tends to be a reflection of a single founder. However, the research instruments most commonly used to measure EO are firm level scales and most prior research has focused at the organizational level of analysis (cf. Covin and Slevin, 1989).
Scholars have frequently investigated strategy making in terms of patterns of action or gestalts that are generalizable across many organizations (Rajagopalan, Rasheed, and Datta, 1993). EO represents a configuration of policies, practices, and processes that provide insights as to the basis of entrepreneurial decisions and actions. For example, Mintzberg (1973) suggested entrepren eurial, adaptive, and planning modes of strategy making, and later suggested a bargaining mode (Mintzberg, 1983). Miller and Friesen (1978) identified 11 strategy making process dimen sions that include, for example, integration, adaptiveness, expertise, innovation, and risk taking. Fredrickson (1986) suggested the dimen sions of comprehensiveness, risk taking, proac tiveness, rationality, and assertiveness.
The salient dimensions of EO have been de rived from a review and integration of the strat egy making process and entrepreneurship literature (e.g., Covin and Slevin, 1991; Kanter, 1983; Miller, 1983; Miller and Friesen, 1978; Venkataraman, 1989). An early definition of entrepreneurial orientation was provided by Miller, who stated an entrepreneurial firm is one that ‘‘engages in product market innovation, undertakes somewhat risky ventures and is first to come up with ‘proactive’ innovations, beating competitors to the punch’’ (1983: 770). Based on Miller’s conceptualization, three dimensions of EO have been identified and used consistently in the literature: innovativeness, risk taking, and proactiveness. Innovativeness is the predisposi tion to engage in creativity and experimentation through the introduction of new products/ser vices, as well as technological leadership via R&D in new processes. Risk taking involves taking bold actions by venturing into the un known, borrowing heavily, and/or committing significant resources to ventures in uncertain environments. Proactiveness is an opportunity seeking, forward looking perspective character ized by the introduction of new products and services ahead of the competition and acting in anticipation of future demand.
Lumpkin and Dess (1996) suggested that two additional dimensions were salient to entrepren eurial orientation. Drawing on Miller’s (1983) definition and prior research (e.g., Burgelman, 1983; Hart, 1992; MacMillan and Day, 1987; Venkataraman, 1989), they identified competi tive aggressiveness and autonomy as essential components of the entrepreneurial orientation construct. Entrepreneurial firms and start ups are keenly concerned with opportunities and threats in the external environment because these factors may support or limit their success. The proactiveness component of EO captures the entrepreneurial response to opportunity, but research instruments based on Miller’s (1983) definition omit measures of how entre preneurial firms respond to threats. Competitive aggressiveness was added to reflect this aspect of EO. Competitive aggressiveness is the intensity of a firm’s efforts to outperform rivals and is characterized by a strong offensive posture or aggressive responses to the actions of competi tors. Research by Burgelman (1983) and Hart (1992) suggests entrepreneurial behavior is often generative and creative, involving the autonomous actions of organizational actors. For this reason, autonomy is thought to be an 104 entrepreneurial orientation essential element of the EO construct. Auto nomy is the independent action undertaken by entrepreneurial leaders or teams directed at bringing about a new venture and seeing it to fruition.
Building on prior research, Lumpkin and Dess (1996) suggested a framework to investigate the relationship between the dimensions of EO and firm performance, as well as the effect of organ izational and environmental factors on the EO– performance relationship. Numerous studies have been conducted to investigate these factors, including the role of environment (e.g., Kreiser, Marino, and Weaver, 2002a; Zahra and Covin, 1995), organizational structure (e.g., Covin and Slevin, 1988; Miller, 1983), planning and control (e.g., Barringer and Bluedorn, 1999), individual differences (e.g., Becherer and Maurer, 1999), alliance usage (e.g., Dickson and Weaver, 1997), knowledge based resources (e.g., Wiklund and Shepherd, 2003), and entrepreneurial manage ment in international settings (e.g., Knight, 1997; Zahra and Garvis, 2000).
Many EO studies have focused on the entre preneurial orientation–performance relationship (e.g., Covin and Slevin, 1989) and on the sus tainability of the relationship between EO and performance (e.g., Wiklund, 1999). These stud ies have indicated that, in general, an entre preneurial orientation is associated with strong performance. However, the relationship be tween EO and performance is often contingent on other environmental and/or organizational factors. For example, Covin and Slevin (1989) found that performance was related to the fit between EO, structure, and environmental vari ables: firms with high levels of EO were most effective if they had organic structures and func tioned in hostile environments; firms in benign environments with mechanistic structures per formed better if they had low EO. Entrepreneur ial orientation may itself function as a moderator of performance relationships. For example, Wiklund and Shepherd (2003) found that the relationship between knowledge based re sources and performance was stronger among firms with higher levels of EO. Two studies that investigated the longitudinal nature of the EO–performance relationship reached similar conclusions: EO has a positive effect on firm financial performance and the strength of that relationship increases over time (Wiklund, 1999; Zahra and Covin, 1995).
There has been some debate in the literature as to whether or not the dimensions of EO are independent or covary under certain conditions. Some have argued the entrepreneurial orienta tion construct is best viewed as a unidimensional concept (e.g., Covin and Slevin, 1989); others have argued the dimensions of EO may occur in different combinations (e.g., Lumpkin and Dess, 2001). In a rigorous structural equation analysis, Stetz et al. (2000) studied 865 health care executives and found that the dimensions of EO tended to vary independently rather than covary, and that as a predictor of firm growth the EO construct was more robust than unidi mensional entrepreneurial constructs. A second study conducted by Kreiser, Marino, and Weaver (2002b) investigated the psychometric properties of EO data from six countries and reached a similar conclusion: the sub dimen sions of EO tend to vary independently of each other in many situations. Such findings suggest that unique combinations of EO provide more precise explanations of firm phenomena as well as greater insights into the EO–performance relationship.
The entrepreneurial orientation construct in cludes numerous promising and worthwhile re search questions that warrant future research. First, scholars could explore what factors may enhance (or inhibit) the strength of the relation ship between EO and firm performance. For example, under what conditions would other wise strong cultures cause core rigidities (Hamel and Prahalad, 1996) and, subsequently, erode innovation and discourage risk taking? How might a leader’s emotional intelligence (Goleman, 1998) improve an organization’s will ingness to take risks and engage in more pro active behaviors? And how do reward systems (e.g., behavioral based or outcome based) facili tate (or retard) such behaviors?
Second, researchers could also incorporate different perspectives on risk taking, given the increasing role of knowledge in the global econ omy. For example, firms that judiciously experi ment with new products and processes may be able to subsequently turn initial failures into new resource combinations (McGrath, 1999), enab ling them to create new ‘‘learning platforms’’ entrepreneurial orientation 105 (Grenadier and Weiss, 1997) for future value creating endeavors. Capturing such dynamics and their outcomes involves a closer look at dependent variables that go beyond traditional short term economic indicators.
Third, research endeavors should be directed at assessing and refining the EO construct itself. For example, Lyon, Lumpkin, and Dess (2000) have addressed the relative advantages and dis advantages associated with three alternate ap proaches: managerial perceptions, firm behaviors, and resource allocations. Ideally, when taken in combination, these approaches should enhance the reliability and validity of EO research.
Fourth, much can be learned by studying ‘‘best practices’’ of leading edge organizations. Studies that focused on the relationship between EO and best practices could help researchers to inductively derive theory that can later be tested to confirm or disconfirm extant knowledge. Thus, the viability of descriptive and normative EO theory would be advanced.
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