Publication: SAM Advanced Management Journal
Publication Date: 22-JUN-06
Delivery: Immediate Online Access
Author: Chow, Irene Hau-siu
Article Excerpt
Analyzing relationships in China can be tricky because it is a transitional economy and has a mixture of state-owned and non-state-owned firms. Nevertheless, the broad-based study here (over 3,500 firms) sheds light on factors influencing entrepreneurial orientation and how entrepreneurial characteristics may affect profitability. All but one of the hypotheses were supported by the study. As would be expected, an entrepreneurial orientation does affect performance; a more highly educated workforce enhances entrepreneurial behavior and performance; non-state-owned firms are more entrepreneurial than state-owned, and this orientation is more apt to affect performance; but the business environment does not weaken the relationship between entrepreneurial orientation and performance.
Introduction
The contribution of entrepreneurship to national growth has been documented in the literature (Carree and Thurik, 2003; Reynolds, et al., 1999). The Global Entrepreneurship Monitor (GEM) provides empirical data investigating the impact of entrepreneurial firms on the level of economic growth in 37 countries (Reynolds et al., 1999). One of the important measures in the GEM study is the total entrepreneurial activity (TEA) score, which is measured by the proportion of working-age adults in the population who are either involved in the process of starting a business or are active as owner-managers of enterprises less than 42 months old. According to GEM, the total entrepreneurial activity (TEA) score is much higher in emergent economies. These transitional economies seek to loosen restrictions on the private sector, resulting in an initial wave of entrepreneurship.
Entrepreneurs seek to identify new opportunities, respond to environmental changes, and take appropriate actions to achieve performance. Most often, entrepreneurship is interpreted as business ownership or self-employment. Carree et al. (2002) posit that business ownership is not synonymous with entrepreneurship, but the trend of business ownership level is a fair reflection of the development in entrepreneurship level. Adopting the definition of Covin and Miles (1999), entrepreneurs are individuals who champion product ideas within a corporate context, whereas firm-level entrepreneurship is defined as entrepreneurial philosophy that permeates an entire organization's outlook and operations. In other words, corporate entrepreneurship refers to the firm's actions per se. Finn-level entrepreneurial behaviors include product or process innovation, the risk-taking propensity of the firm's key decision-makers, and evidence of proactiveness (Miller, 1983). This level of analysis is also known as entrepreneurial posture (Covin and Slevin, 1991) and entrepreneurial orientation (Lumpkin and Dess, 1996). Entrepreneurial orientation refers to the processes, practices, and decision-making activities that lead to new entry (Lumpkin and Dess, 1996). Essentially, it refers to a firm's strategic orientation, capturing the specific entrepreneurial aspect of decision-making styles, methods, and practices.
Given the growing importance of entrepreneurial firms in transitional economies like China, in particular, a more in-depth analysis will provide a better understanding of their entrepreneurial activities. China's entrepreneurs were able to make a comeback after the chaos of Mao's rule because of recognition and encouragement by Deng Xiaping. Private entrepreneurship flourished starting in the 1980s. Entrepreneurial spirit sprang up and contributed to the subsequent high economic growth (Malik, 1997). Entrepreneurs have stimulated economic performance by introducing innovations, creating change, and stimulating competition. They seek opportunity to create both private wealth and social benefit by adopting new production techniques, reallocating resources to new opportunities, diversifying output, and penetrating new markets (Venkataraman, 1997). Entrepreneurship and new firm formation are the driving forces in stimulating economic growth and employment. The private sector took up growth and employment and at the same time, reducing some of the burden of mass layoffs from state-owned enterprises (Peng, 2001).
The new generation of entrepreneurs is more dynamic and innovative. They are important components of economic systems and contribute to their adaptability, dynamism, and ability to create wealth and prosperity (Peng, 2001). Facing competition from the private (non-state) sector, state-enterprises are encouraged to set up profit-seeking and risk-taking businesses. To survive, state-run enterprises are beginning to operate on a profit-oriented basis, like individually owned firms. With China joining the World Trade Organization (WTO), it is necessary to reform state-owned firms to more autonomous and dynamic in responding to market competition. On the other hand, entrepreneurial firms are expected to expand rapidly.
Despite the growing importance of entrepreneurial activities in China's economy, large-scale investigations on this topic are scarce. It would be interesting to find out the changes in institutional environment and their impact on entrepreneurial activities. Most existing research on entrepreneurship in China uses case-oriented or small-sample qualitative studies (Ahlstrom and Bruton, 2002). The present study fills the gap by examining the relationship between entrepreneurial orientation and firm performance from a national survey of organizations in a variety of industries from 31 regions throughout China. China was chosen as an appropriate research setting for its high economic growth and increasingly important entrepreneurial activities. Existing literature consistently shows a positive influence of entrepreneurial activities on firm performance. However, the environment may influence the entrepreneurial orientation-performance relationship. Therefore, this study investigates the possible moderating effect of environmental variables on such relationship. The results of this study will contribute to a better understanding of research in entrepreneurship in a transitional economy.
The following section is a review of relevant studies on entrepreneurial orientation and factors that affect the relationship between entrepreneurial orientation and firm performance. The institutional environment and its impact on entrepreneurial activities will also be elaborated, followed by results from the data analysis. The paper concludes with a discussion on the implications of the findings for theory, research, and practices.
Theory and Hypotheses
* Relevant studies on entrepreneurial orientation and firm performance
The...
NOTE: All illustrations and photos have been removed from this article.
More articles from
SAM Advanced Management Journal
ADA's reasonable accommodation: myth or reality., 22-SEP-07
Corporate social responsibility: an exploratory study in the United Arab Emirates., 22-SEP-07
Improving organizations by coaching individual development using the resource-based business strategy., 22-SEP-07
Looking for additional articles?
Click here to search our database of over 3 million articles.
Looking for more in-depth information on this industry?
Click here to search our complete database of Industry & Market reports by text, subject, publication name or publication date.
About Goliath
Whether you're looking for sales prospects, competitive information, company analysis or best practices in managing your organization, Goliath can help you meet your business needs.
Our extensive business information databases empower business professionals with both the breadth and depth of credible, authoritative information they need to support their business goals. Whether it be strategic planning, sales prospecting, company research or defining management best practices - Goliath is your leading source for accurate information. |
