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Archives of Business Research – Vol. 9, No. 9

Publication Date: September 25, 2021

DOI:10.14738/abr.99.10680. Ekure, M., & Eleje, E. O. (2021). Relevance of Entrepreneurial Orientation and its Effect on the Performance of Smes in Asaba, Delta

State. Archives of Business Research, 9(9). 13-30.

Services for Science and Education – United Kingdom

Relevance of Entrepreneurial Orientation and its Effect on the

Performance of Smes in Asaba, Delta State

EKURE, Marcus

Department of Marketing, Nnamdi Azikiwe University

Awka, Anambra State

ELEJE, Edward Ogbonnia (Ph.D)

Department of Banking and Finance, Federal University

Wukari, Taraba State, Nigeria

ABSTRACT

The study investigated the relevance of entrepreneurial orientation on the

performance of Small and Medium scale Enterprises (SMEs) in Delta State. Other

specific objectives are to determine the relationship between proactiveness and

SMEs performance; to assess the connection between competitive aggressiveness

and SMEs performance; to ascertain the connection between risk-taking and SMEs

performance. A cross sectional research design was adopted for the study. A

structured questionnaire was developed to elicit data from respondents for the

study. This study specifically focused on relationship between proactiveness,

competitive aggressiveness, innovativeness and the relationship between risk- taking and SMEs performance. All the staff of selected SMEs were sampled. The

analytical technique used for hypotheses testing was the chi-square, using Stata

version 13. Findings revealed that, all variables used in this study had a significant

and positive relationship with performance of SMEs. Thus, the study concludes that

entrepreneurial orientation has a significant relationship with performance of

Small and Medium scale Enterprises (SMEs). This study therefore recommends

amongst others that more intensive entrepreneurial training and practice be done

by students in tertiary institutions as there seems to be no job waiting for graduates

among the teeming youths we have in Nigeria today.

Keywords: Entrepreneurial Orientation, Proactiveness, Competitive Aggressiveness,

Innovativeness

INTRODUCTION

The economic importance of small and medium-sized enterprises (SMEs) and

entrepreneurship has increased significantly in recent decades, and its contribution to the well- being of an economy cannot be overemphasized. Many studies, both in developed and the

developing countries have shown the major developmental role that SMEs play in an economy

(Karpak and Topcu, 2010; Abor and Quartey, 2010; Paul et al., 2007). SMEs do well in providing

employment to teeming job seekers, serve as avenues for innovation and provide revenue to

governments (the state) and the citizenry; hence it has been identified as acatalyst for economic

growth (Abor and Beikpe, 2005; Mensah, 2004).

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Archives of Business Research (ABR) Vol. 9, Issue 9, September-2021

Services for Science and Education – United Kingdom

Moreover, many scholars have recognized and demonstrated the crucial role played by SMEs

as an engine for economic growth, job creation, competitiveness in global markets and the

general health and welfare of economies both nationally and internationally. For instance,

about 85 per cent of new jobs in the U.S. are created by small businesses (Audretsch, 2002;

Lappalainen and Niskanen, 2009; Lappalainen and Niskanen 2012). As the entrepreneurial

activity and SMEs are seen to be increasingly indispensable to economic progress, it is

important to study how small firms and entrepreneurs can enhance their performance and

ensure their survival in the turbulent economic and business environment.

Coping with such harsh conditions may require firms to demonstrate special capabilities,

internal resources or behaviors such as innovativeness, flexibility or adaptability. In that sense

the strategic management and entrepreneurial orientation may offer useful concepts to utilize

possible remedies or enhancements for firm’s performance during economic crises. Hakala

(2011) pointed out that several distinct strategic orientations of businesses, such as market,

customer, learning, technology, and entrepreneurial orientations have gained considerable

attention as several studies have provided evidence that one of these orientations alone (Kohli

and Jaworski, 1990; Calantone et al., 2002; Wiklund and Shepherd, 2005) and the interaction

between the orientations or different combinations of the orientations may provide a source of

high performance or competitive advantage for firms (Hult et al., 2004).

Entrepreneurial orientation (EO) is a key ingredient for firms’ success. Perhaps that is why

Entrepreneurial orientation (EO) has received substantial conceptual and empirical attention,

representing one of the few areas in entrepreneurship research where a cumulative body of

knowledge is developing. Entrepreneurial orientation is usually defined as a multidimensional

construct, applied at the organizational level, which characterizes firm’s entrepreneurial

behaviour and includes one or several of these dimensions viz-a-viz risk-taking, innovativeness

and pro-activeness, access to capital, strategic orientation, creativity, risk orientation,

psychological traits, competitive aggressiveness, and autonomy to correlate etc. Also included

are environmental characteristics such as dynamism and hostility that are likely to impact on

the relationship between entrepreneurial orientation and firms’ performance. Being

entrepreneurial -oriented simply means being alert to the challenges that the business

environment poses, and to continually evolve strategies to surmount those challenges.

Entrepreneurial orientation can be thus regarded as a type of strategic orientation since it

captures how a firm intends to compete (Jebna andBaharudin 2015).

In a similar vein, a firm that is entrepreneurially oriented ventures into new or existing markets,

with innovations that are either based on new or existing products and services, but such that

is appreciative of the uncertainty and incurs risk in doing so. From a management perspective,

it would be important to know under which circumstances firms can expect risk-taking,

proactiveness, innovativeness, competitive aggressiveness, and autonomy to correlate. Where

EO has been found to increase success, this would mean that increases on any one component

would help firms to become more successful. Due to globalization, small and medium sized

enterprises (SMEs) face increasing pressure from competition from across the world. When

compounded with the changing sophistication of customers worldwide, it becomes apparent

that SMEs face increasing difficulty in maintaining and improving business performance, unless

they can actively manage these pressures.

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Ekure, M., & Eleje, E. O. (2021). Relevance of Entrepreneurial Orientation and its Effect on the Performance of Smes in Asaba, Delta State. Archives of

Business Research, 9(9). 13-30.

URL: http://dx.doi.org/10.14738/abr.99.10680

SMEs are encouraged to implement an entrepreneurial mindset to recognize the threats and

opportunities in the environment of the firm in order to make sure that the firm will continue

to exist in the future (Krueger 2000). In periods of economic and environmental turbulence, it

becomes even more apparent that firms face particularly high levels of market instability and

complex business uncertainty that obliges firms to act upon such change thus calling for

response (Grewal and Tansuhaj2001; Lin and Carley 2001). (Chattopadhyay et al. 2001).

Environmental turbulence can have a significant impact on the viability of a firm such that it is

critical for managers to understand and effectively manage these events, as well as for scholars

to determine what elements might explain the business performance difference between those

firms rising and falling in complex environmental conditions (Grewal and Tansuhaj2001). This

is particularly true for small and medium enterprises operating in rapidly changing and

competitive environments (e.g., Zahra and Covin1995; Chandler et al. 2000; Antoncic and

Hisrich2001) and ‘hostile’ environments (Covin and Slevin1989) too.

Delta State is predominantly a Small and Medium Enterprise State where over 50 % of Nigerian

GDP is produced by the Delta state SMEs sector. According to an industrial census conducted in

2003/2004 there were 121,426 industries having less than 10 employees with total

employments at 285,623 and 9961 industries with more than 10 employees having 747,823

employments in total. Among them, the number of industries with less than five employees

accounted for 84.3% of the total, contributing 7.5% to the total production value, 7.0% to Gross

Value Added (GVA), and 28.4% to the total employment of the manufacturing sector

STATEMENT OF THE PROBLEM

As global competition intensifies and domestic economic conditions worsen, SMEs need to

improve their performances (and chances of survival) with strong entrepreneurial orientation.

Entrepreneurial Orientation (EO) has been acknowledged as a determinant for firms’ growth

and profitability. Given the competitive nature of today’s business environment, firms need to

device means of survival. In business environments especially, where rapid changes, hostility,

uncertainty, and aggressive competition are present, a firm’s entrepreneurial posture plays an

important role as a performance enhancing factor. Everything about entrepreneurial

orientation is either aimed at attracting new customers or maintaining existing ones, ahead of

competitors. Globalization and the opening up of markets to global competition constitute a

huge challenge to local SMEs. By virtue of their sizes and persistently high operational costs

(which largely encapsulates other problems), many of these firms find it very challenging

competing against big local firms and the influx of cheap imported products from China and

other countries. Globalization intensifies competition and underscores the need for firms to be

entrepreneurially oriented. Financial interventions may amount to little, if the benefiting firms

are unable to effectively compete or are ill-equipped to do so. As global competition intensifies

and domestic economic conditions worsen, SMEs need to hone their performances (and

chances of survival) with strong entrepreneurial orientation.

The major reason behind choosing manufacturing sector SMEs is that the performance of SMEs

in manufacturing sector is declining. The exports of Sports products manufacturing, leather

product manufacturing, and surgical instruments manufacturing is continuously declining.

These three industries were amongst the top performing manufacturing SMEs in the country in

the last decade. In light of the fact that a number of SMEs in developing countries who once

engaged in exporting, no longer do so, this study intends to examine if there is any significant