6.6 LEVEL OF EO AND ITS PERFORMANCE IMPLICATIONS
6.6.2 EO and business performance
In this section, correlations between EO dimensions and business performance based on Chi-square test (statistical significance) and Cramer’s V (effect size) are presented.
The performance variables considered include sales growth, gross profit, ROI and growth in number of employees.
6.7.2.1 The relationship between EO dimensions and sales growth
Significant and positive relationships were reported in respect of all dimensions of EO and sales growth of SSAEs though most if the relationships are weak. Only three items are strongly associated with sales growth. In particular, measures on autonomy-seeking showed strong and positive correlation with sales growth. For instance, encouraging individuals to think of ways of solving problems on their own was strongly and positively associated with sales growth (Chi-square=60.325, sig, p<0.05;
Cramer’s V=0.552). This means that SSAEs actively encouraged members to work independently and solve problems with minimal supervision. Self-dependence is favourable for positive business performance. Autonomy-seeking is confirmed in the literature to have a positive relationship with firm performance. Voss et al. (2005:1135) for instance perceive autonomy as a commitment to encouraging employees to be self-directed and independent in generating and implementing novel ideas. Callaghan and Venter (2011:31) argue that autonomy-seeking encourages independent and autonomous action in firms which in turn promotes performance. Others perceive autonomy as a catalyst for entrepreneurial activity and the freedom necessary to create new ventures (Lee & Peterson, 2000:401; Roskos, 2004:54).
Alexandrova (2004:141). Apart from promoting business performance, autonomy-seeking is also linked to other EO dimensions such as innovativeness as they collectively promote business performance as reported in the literature review in chapter 4 (Covin & Slevin, 1986; Zahra, 1991; Dess et al, 1997:691; Barringer &
Bluedorn, 1999; Knight 2000:13, Matsuno et al, 2002:18; Wiklund & Shepherd, 160
2005:75; Covin et al., 2006:57; Kaya & Agca, 2009:8; Lumpkin et., 2010:254;
Callaghan & Venter,2011:31)
Table 6.5 Significant tests for EO based on sales growth
Statement
Company’s sales growth over the past 1-5 years
Chi-square Cramer’s
employees to come up with new
ideas at the work place 38% 67% 73% 90% 87% 30.610,
sig 0.393
The company solves problems by
using creative methods 52% 67% 62% 85% 82% 14.642,
sig 0.272
The company encourages development of unique ways of
marketing products/services 38% 44% 62% 70% 87% 22.018,
sig 0.333
The company adopts new
technology when available 33% 70% 81% 92% 84% 38.019,
sig 0.438
The company introduced new products/services to the market in
the past 1- 5 years 33% 56% 65% 75% 80% 18.096,
sig 0.302
Proactiveness The company is often the first to
initiate actions to which other
competitors in the area respond 24% 33% 42% 52% 64% 12.945,
sig 0.256
Very often this company is the first in the area to introduce new
products/services to the market 43% 44% 50% 58% 76% 10.349,
sig 0.229
In this company, it is firmly believed that changes in the market creates a positive opportunity for doing business
33% 74% 89% 95% 91% 39.475,
sig # 0.506 Risk taking
The company often undertakes high risk projects with chances of very
high profits 33% 59% 62% 76% 91% 27.019,
sig 0.369
The company usually makes very bold but cautious decisions that
affect its future 24% 70% 73% 85% 91% 41.249,
sig 0.456
The possibility of financial loss is a
major concern in this company 52% 78% 77% 87% 87% 12.737,
sig # 0.271 In this company, there is a strong
liking for implementing plans only if
it is very certain that they will work 43% 56% 58% 47% 42% 2.463, ns 0.112 Autonomy seeking
This company encourages individuals to think of ways of
solving problems on their own 28% 41% 35% 87% 89% 60.325,
sig 0.552
In this company employees are not compelled to strictly adhere to laid down procedures in doing their tasks
29% 59% 54% 76% 82% 24.432,
sig 0.351
The company supports individuals or teams that work on their own
without close supervision 38% 56% 58% 95% 96% 56.348,
sig 0.5333
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6.7.2.2 The relationship between EO dimensions and gross profit growth
Correlations between EO dimensions and growth in gross profit in SSAEs are significantly positive for all items but most of the relationships are weak (see Table 6.6). Positive and strong growth relationships with sales growth were reported for only three items. The correlation between changes the market environment perceived as business opportunity and gross profit growth are strong and positive (Chi-square=46.287, sig, p<0.05; Cramer’s V=0.549. Encouraging individuals to solve problems on their own (Chi-square=69.614, sig, p<0.05; Cramer’s V=0.593) as well as supporting them to work independently (Fisher’s exact=60.833, sig, p<0.05;
Cramer’s V=0.561) are strongly and positively associated with gross profit growth.
Performance on proactiveness and autonomy-seeking elements are positive and strong in relation to gross profit growth. Based on proactiveness and autonomy-seeking dimensions, it could be concluded that EO positively influences gross profit growth. However, viewed from innovativeness and risk-taking dimensions, associations with gross profit growth, though positively significant, were generally moderate to weak. This finding is consistent with performance of SSAEs where the greatest proportion (42%) reported gross profit growth rate of 1%-5% for the previous five years (see Table 6.3).
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Table 6.6 Significant tests for EO based on growth in gross profit
Statement
Company’s gross profit over the past 1-5 years Chi-square Cramer’s V Decreasing The company tries to solve problems
concerning products/services by using
creative methods 52% 63% 68% 86% 80% 14.660,
sig 0.272 The company encourages
development of unique ways of
marketing products/services 35% 47% 64% 70% 90% 25.729,
sig 0.360 The company often adopts new
technology in making its
products/services 39% 67% 91% 90% 85% 29.794,
sig # 0.420 The company introduced new
products/services to the market in the
past 1- 5 years 35% 57% 68% 77% 75% 17.397,
sig 0.296 Proactiveness
The company is often the first to initiate actions (e.g., quality improvements) to which other competitors in the area respond
26% 40% 46% 49% 65% 9.948,
sig 0.224 Very often this company is the first in
the area to introduce new
products/services to the market 44% 50% 55% 60% 68% 4.513,
ns 0.151
In this company, it is firmly believed that changes in the market creates a
positive opportunity for doing business 30% 80% 91% 96% 88% 46.287,
sig # 0.549 Risk taking
The company often undertakes high risk projects with chances of very high
profits 35% 60% 59% 82% 83% 25.156,
sig 0.356 The company usually makes very bold
but cautious decisions that affect its
future 26% 70% 82% 87% 85% 39.738,
sig 0.448 The possibility of financial loss is a
major concern in this company 44% 93% 77% 89% 78% 23.733,
sig 0.375 In this company, there is a strong liking
for implementing plans only if it is very
certain that they will work 39% 57% 73% 37% 55% 11.575,
sig 0.242 Autonomy seeking
This company encourages individuals to think of ways of solving problems on
their own 22% 30% 55% 92% 83% 69.614,
sig 0.593 In this company employees are not
compelled to strictly adhere to laid
down procedures in doing their tasks 35% 47% 68% 81% 73% 24.099,
sig 0.349 The company supports individuals or
teams that work on their own without
close supervision 35% 57% 59% 96% 95% 60.833,
sig # 0.561
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7.6.2.3 The relationship between EO dimensions and growth in ROI Table 6.7 Significant tests for EO based on growth in ROI
Statement
Company’s return on investment (ROI) over the past 1-5 years Chi-square Cramer’s V Decreasing The company tries to solve problems
concerning products/services by using creative methods
62% 59% 77% 86% 77% 13.178,
sig 0.258 The company encourages
development of unique ways of marketing products/services
48% 42% 82% 69% 90% 24.534,
sig 0.352 The company often adopts new
technology in making its products/services
43% 68% 91% 91% 83% 25.531,
sig 0.383 The company introduced new
products/services to the market in the past 1- 5 years
33% 51% 68% 81% 77% 24.278,
sig 0.350 Proactiveness
The company is often the first to initiate actions (e.g., quality improvements) to which other competitors in the area respond
33% 37% 32% 55% 67% 11.985,
sig 0.246 Very often this company is the first in
the area to introduce new products/services to the market
57% 42% 59% 63% 63% 5.835,
ns 0.172
In this company, it is firmly believed that changes in the market creates a positive opportunity for doing business
48% 73% 86% 94% 93% 27.670,
sig # 0.404 Risk taking
The company often undertakes high risk projects with chances of very high profits
48% 51% 55% 86% 83% 27.139,
sig 0.370 The company usually makes very bold
but cautious decisions that affect its future
38% 56% 82% 89% 90% 37.481,
sig 0.435 The possibility of financial loss is a
major concern in this company
52% 76% 82% 89% 83% 14.070,
sig # 0.281 In this company, there is a strong liking
for implementing plans only if it is very certain that they will work
48% 56% 64% 39% 50% 5.837,
ns 0.172
Autonomy seeking This company encourages individuals
to think of ways of solving problems on their own
29% 29% 64% 93% 83% 70.766,
sig 0.598 In this company employees are not
compelled to strictly adhere to laid down procedures in doing their tasks
33% 46% 59% 82% 83% 31.715,
sig 0.400 The company supports individuals or
teams that work on their own without close supervision
52% 49% 73% 95% 97% 50.333,
sig # 0.506
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The association of growth in ROI with most EO dimensions were reported to be significant but weak (see Table 6.7).
Autonomy seeking elements again were most significantly correlated in magnitude with ROI. This also means that the desire to operate independently with minimum supervisory control is perceived in SSAEs as a very significant influencing factor which promotes growth in return on investments. This is consistent with the positive relationship between autonomy-seeking dimension of EO and firm performance cited earlier regarding relationships between EO and sales growth(see Section 6.7.2.1) and EO and gross profit growth (see Section 6.7.2.2)
6.7.2.4 The relationship between EO dimensions and growth in number of employees
Increase in the number of employees is influenced by EO practices. However, the associations are weak in most cases (see Table 6.8). Being generally small, SSAEs might fancy employing to many workers. In fact, they might perceive growth in numbers (employees) as increased cost to business (Bloise, 2002). This finding is also consistent with Hurst (20011) who found that most small businesses do not aim at growing big or undertake breakthrough innovations.
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Table 6.8 Significant tests for EO versus employee growth
The company encourages employees to come up with new ideas at the work
place 71% 83% 78% 3.155,
ns 0.126
The company tries to solve problems concerning products/services by using
creative methods 63% 81% 81% 7.393,
sig 0.193 The company encourages development of unique ways of marketing
products/services 52% 71% 76% 8.190,
sig 0.203 The company often adopts new technology in making its products/services 69% 87% 78% 7.311,
sig 0.192 The company introduced new products/services to the market in the past 1- 5
years 52% 75% 76% 10.658,
sig 0.232 Entrepreneurial Orientation (EO): proactiveness
The company is often the first to initiate actions (e.g., quality improvements) to
which other competitors in the area respond 31% 54% 62% 11.670,
sig 0.243 Very often this company is the first in the area to introduce new
products/services to the market 44% 63% 68% 7.541,
sig 0.195 In this company, it is firmly believed that changes in the market creates a
positive opportunity for doing business 73% 92% 81% 10.778,
sig 0.233 Entrepreneurial Orientation (EO): risk taking
The company often undertakes high risk projects with chances of very high
profits 55% 81% 70% 12.418,
sig 0.250 The company usually makes very bold but cautious decisions that affect its
future 63% 87% 70% 12.998,
sig 0.256 The possibility of financial loss is a major concern in this company 79% 86% 70% 4.404,
sig 0.149 In this company, there is a strong liking for implementing plans only if it is very
certain that they will work 60% 38% 54% 7.598,
sig 0.196 Entrepreneurial Orientation (EO): autonomy seeking
This company encourages individuals to think of ways of solving problems on
their own 48% 78% 76% 16.358,
sig 0.287 In this company employees are not compelled to strictly adhere to laid down
procedures in doing their tasks 42% 79% 78% 26.072,
sig 0.363 The company supports individuals or teams that work on their own without close
supervision 55% 88% 95% 31.705,
sig 0.400 sig = statistically significant result (p<0.05); ns = not significant
# means that Fisher’s exact test rather than the Chi-square test was performed
To sum up this section on EO and performance of SSAEs, The following can be said.
a) Positive relationships exist between EO and sales growth. With a few exceptions, the relationships were moderate to weak.
b) Positive relationships exist between EO and gross profit growth. Most correlations are significant and practically moderate to weak in effect.
c) Following the pattern of growth in sales and gross profit, EO dimensions showed positive and significant relationships with growth in ROI. Except on two items, the correlations ranged from moderate to weak.
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6.7 LEVEL OF MO AND ITS INFLUENCE ON PERFORMANCE
This section reports on level of MO as well as its relationships with the performance of SSAEs.