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Advances in Social Sciences Research Journal – Vol.7, No.12
Publication Date: December 25, 2020
DOI:10.14738/assrj.712.9289.
Abdulsamad, A., Ali, N. A., Mahomed, A. S. B., Hashim, H., Jandab, A., Al-Sharif, A. (2020). The Importance of Entrepreneurial
Orientation's Dimensions in Influencing the Organizational Performance of Food and Beverage SMEs. Advances in Social Sciences
Research Journal, 7(12) 81-99.
The Importance of Entrepreneurial Orientation's Dimensions in
Influencing the Organizational Performance of Food and Beverage
SMEs
Akram Abdulsamad
Ph.D. Candidate; School of Business and Economics,
UPM, Malaysia. Lecturer; Faculty of Economics
Political of science, University of Aden, Yemen.
Noor Azman Ali
Ph. D, School of Business and Economics,
UPM, Malaysia.
Anuar Shah Bali Mahomed
Ph. D, School of Business and Economics,
UPM, Malaysia.
Haslinda Hashim
Ph. D, School of Business and Economics,
UPM, Malaysia.
Abdulwahab Jandab
Ph.D. Faculty of Administration Sciences,
Albaydha University, Yemen
Abdulrahman M. Al-Sharif
Ph.D. CandidateSchool of Business and Economics,
UPM, Malaysia
ABSTRACT
The study is attempted to examine and analyze the important influence
of entrepreneurial orientation components - risk-taking,
innovativeness, and proactiveness- on the organizational performance
of Yemeni Small and Medium Enterprises within the food and beverage
industry. The model of study is tested on 459 owners/Managers of SMEs
by employing the analysis of Partial Least squares structural equation
modeling (PLS-SEM), as well as Importance-Performance Map Analysis
(IPMA). After utilizing the cross-sectional approach, the results
illustrated that the innovativeness and risk-taking have a significant
and positive impact on organizational performance, but their effect was
less than proactiveness. Moreover, the analysis of importance- performance pointed out that proactiveness more important than
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Advances in Social Sciences Research Journal (ASSRJ) Vol.7, Issue 12, December-2020
innovativeness and risk-taking in determining organizational
performance. The model of study expounded 34% of the whole variance
in SME's performance. Moreover, it provided the implications of
practical and theoretical.
Keywords: Strategic Orientation, Entrepreneurial Orientation,
Entrepreneurial Orientation Dimensions, Organizational Performance, SMEs
in Yemen, Resource-Based of View.
INTRODUCTION
The Small and Medium Enterprise (SMEs) have the capacity to provide more growth and
development opportunities to the world economy better than the large-scale industry [1]. More so,
SMEs create more employment openings rapidly than the bigger organizations. In addition to the
supplier role, they are playing for bigger companies [2, 3]. The importance attached to SMEs could
be drawn from Thailand’s novel and proactive SME sector which was the backbone of survival for
the country during the period of Asian economic crunch.
Although the importance of SMEs was emphasized, it is not sufficient If its performance is not
satisfactory, because the performance of the SMEs that actually contributes to economic
development [4]. In view of this argument, there cannot be a good contribution from SMEs unless
they perform satisfactorily. Therefore, SME's performance is a subject that deserves adequate
attention.
Some countries have a low-performance level of SMEs which may be a result of an increasingly
complex and changing business environment [5]. Moreover, [6] observed that in developing
countries, SMEs ignored the understanding of major capabilities for example entrepreneurial
orientation (EO) used to exploit the superior performance and increase their competitive
advantage.
The EO has a potential benefit, as it requires taking a risk to develop new products, services, and
markets, willingness to innovate, and proactively explore new opportunities and compete
successfully with competitors [7, 8]. Moreover, it represents a firm’s attitude toward
entrepreneurism, indicating how likely they are to make strategic decisions on new ventures [9].
The explanation of the association between both the EO-performance is routinely based on the RBV.
From that perspective, the EO comprises oftentimes an intangible resource, and these resources an
inimitable, valuable, rare, and un-substitutable [10, 11]. Thus, the diversity of the allocation for the
EO resource leads to distinction in the company performance [9, 12, 13].
Past studies that have been carried out based on the RBV theory, have shown that EO is one of the
valuable resources witch enhances the companies’ performance and innovativeness [9, 12, 13].
Furthermore, it has been argued by other researchers that EO enhances successful competition of
firms, while the unique capabilities are maintained to help them take advantage of opportunities,
and as well reduce the risk [14].
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URL: http://dx.doi.org/10.14738/assrj.712.9289 83
Abdulsamad, A., Ali, N. A., Mahomed, A. S. B., Hashim, H., Jandab, A., Al-Sharif, A. (2020). The Importance of Entrepreneurial Orientation's Dimensions in
Influencing the Organizational Performance of Food and Beverage SMEs. Advances in Social Sciences Research Journal, 7(12) 81-99.
Even though many researchers have focused on studying the correlation between organizational
performance (OP) and EO, findings of such studies are mixed and inconclusive forward to this day
[e.g., 15, 16]. Due to restrictions on the EO concept operationalization, different study plans, and
diversity the context of the investigation across different researches, these variations in results
should be predicted to some extent. These indecisive evidences have led some researchers to
request further study into EO 's impact on company performance [17, 18].
While the universality of entrepreneurial structures is studied [e.g., 8, 19], we understand the
concept of an EO as based on three main dimensions: risk-taking, proactivity and innovation. [20-
22] highlighted the importance of analyzing each of the three dimensions (risk-taking, proactivity
and innovation) that are considered such an independent actors, thereafter determining the impact
of each aspect of the OP. Due to the importance of these dimensions that inform the concept the
diversity of cultural and institutional contexts is significant.
Although SMEs generally are important contributors to the economy, the manufacturing sector is
regarded as a pillar of growth in modern economies [23-25]. However, this study focuses on the
performance of food and beverage SMEs, where it forms 48% of the entire manufacturing sector.
Also, the performance of these firms is not good where its contribution to GDP is very low [25, 26].
In the context of SMEs within Yemeni, a few researchers have conducted studies on SMEs'
performance [25, 27-29] and they have provided well knowledge about the entire Yemeni SMEs'
performance. However, only one study, as far as the researcher knows, has focused on Yemeni SMEs'
performance in the food and beverage sector [29]. Moreover, [29] they have focused on IT-based
innovation and new product development performance in Yemen. Although they provided a useful
insight, it is not enough to address the problem of the performance of food and beverage SMEs at
the complex developing economy, such as Yemen.
In light of the earlier discussions, this paper purposes to address this research gap via examining
the influence of EO components on OP in the Yemen context as well as specific industrial food and
beverages. Consequently, the study question is stated as following: Does the importance of each
dimension of EO vary in influence in organizational performance?
THEORETICAL FRAMEWORK
In the past few decades, it has been observed that the popularity of the RBV (resource-based view)
is continuously increasing such as a popular view in the areas of marketing, management of
strategic, organizational theory, moreover other fields [30, 31].
It has been observed that past studies have employed the use of RBV theory in studies related to
Small and Medium Enterprise (SMEs) [32, 33]. [34] have noted that the suitability of RBV in SMEs
is due to the fact that: (a) it is time-efficient, relatively simple, and does not force the management
and members of a firm to pay more attention to particular variables that have a high influence on
the long-term to firms’ competitive advantage; and (b) it RBV deployment does not require the skills
of specialists for strategic analysis or complex information systems. In addition to that, RBV offers
a framework that organizations can use in strategizing according to eminent resources to acquire
competitiveness, as well as enhanced performance [33].
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According to RBV, the company owns a unique set of resources, and the resources can be
categorized as tangible, intangible and capabilities postulate that a firm has a unique compilation of
resources, which can be largely [35, 36]. As proposed by RBV, the success of a firm largely depends
on intangible resources, which have been labeled as primary determinants of success in firms [29,
35]. This is because more extensive activities can be supported by such resources in comparison
with tangible resources. Additionally, scholars have acknowledged the strategic importance of
intangible resources because they are regarded as scarce, difficult to duplicate and enable a firm to
gain a sustainable competitive advantage [37]. More so, it has been observed that tangible resources
are not possessed by SMEs. Thus, this study considers organizational resources as capabilities and
intangible resources. In the current study, organizational resources refer to capabilities and
resources that are peculiar to firms, and they include entrepreneurial orientation (EO).
RBV is used in this study because of its relevance to the study. In the sense. it provides, and an
explanation for competitive advantage is achieved by firms by fully using their large reservoir of
capabilities and resources; the competitive advantage, in turn, enhances their performance. Past
studies that have been carried out based on the RBV theory, have shown that EO is one of the
valuable resources that enhances the firm’s performance and innovativeness [9, 12, 13].
Furthermore, it has been argued by other researchers that EO enhances successful competition of
firms, while the unique capabilities are maintained to help them take advantage of opportunities,
and as well reduce the risk [14].
ENTREPRENEURIAL ORIENTATION
A considerable portion of the researches was devoted to entrepreneurial orientation (EO). There is
a consensus about the benefits offered by EO, however, the concept is also defined by many schools
[38]. In this respect, [17] defined EO as the organization's collection of practices that reflected its
method by means of processes and decision-making criteria. Similarly, [39] defined it as the
structure that reflects the abilities of the entrepreneurial of the firms. In addition, many researchers
tried to determine some of the attributes of an organization in their attempt to contribute to EO
development. [40] illustrated some features, including the variation of the organization from its
competition, the rate of growth, and the level firm's knowledge [40]. In addition, EO is defined as an
organizational strategic direction to gain an understanding of the specific business aspects of
practices, methodology, and decision-making [41].
There was an argumentation in entrepreneurship literature on the dimensionality of the EO
construct [38]. In a study conducted by [42], three components of EO - are risk-taking (RT),
proactiveness (PR), and innovativeness (INN)- were presented through a three-dimensional model,
where it will be discussed in details in the next parts. On the other hand, [17] further provided two
components which are competitive aggressiveness and autonomy. The authors explained that
autonomy helps an organization to pursue and aggressively capture entrepreneurial ideas and
agendas which in turn result in the development of the entrepreneurial behavior of the firm [17].
However, the model proposed by [17] was criticized by [43] who noted that the model is not
empirically valid. This is supported by [19] whose study findings were different from the
psychometric properties of these two models. In their study, they found that the three-dimensional
model proposed by [42] is better in terms of validity. Based on the previous discussion, Based on
the previous discussion, this study has selected not to involve the other two dimensions that have