Entrepreneurial orientation and performance: the interaction effect of customer capital
| Published date | 24 January 2014 |
| Date | 24 January 2014 |
| DOI | https://doi.org/10.1108/WJEMSD-05-2013-0030 |
| Pages | 48-68 |
| Author | Alireza Jalali,Mastura Jaafar,Thurasamy Ramayah |
| Subject Matter | Strategy,Business ethics,Sustainability |
Entrepreneurial orientation and
performance: the interaction
effect of customer capital
Alireza Jalali
Quantitative Survey Department, University Sains Malaysia, Penang, Malaysia
Mastura Jaafar
Project Management Department, University Sains Malaysia,
Penang, Malaysia, and
Thurasamy Ramayah
School of Management, University Sains Malaysia, Penang, Malaysia
Abstract
Purpose – The purpose of this study is to advance research on entrepreneurial orientation (EO),
resource-based view (RBV), customer (relational) capital, and small and medium enterprises (SMEs) by
examining how the interaction effect of customer capital shapes the relationship between EO and firm
performance.
Design/methodology/approach – This researchis considered as a correlationalrather than a casual
study with 150 questionnaire returned frommanufacturing SMEs. This cross-sectional study tested all
hypothesesthat are related to theresearch questions anduse statistical softwareSPSS 17 to analyze data.
Findings – The study found that a high customer capital strengthens the link between two
dimensions of EO (innovativeness and risk taking) and weakens the link between another dimension
of EO (proactiveness) and firm performance.
Research limitations/implications – First, future studies would benefit from an enhanced
development in the measurement of EO dimensions, which relies on richer and more refined
conceptualizations. Second, a single informant who was asked to evaluate EO may potentially increase
the degree of subjectivity and bias in the responses. Obtaining more than one respondent for the
survey from each organization is always highly desirable.
Practical implications – The results of the current study cover the limitation of the previous study
by independently examining the moderating effect of customer capital as an intangible resource in the
relationship between innovativeness and risk taking on firm performance. The paper expands this line
of work by adding the idea that the intangible resources of a firm are more likely to contribute to
sustaining superior firm performance when they are used with other factors simultaneously.
Social implications – Environmental factors, such as government financial aid and protection of
organizations outside the industry, may affect the relationship between SMEs and the agents.
Establishing extra ties between Iranian firms and agents may be expensive for Iranian manufacturing
firms, and they may not be able to create these ties without government support.
Originality/value – A research gap exists in understanding how customer capital operates and
endows benefits to firms that are beyond their start-up phase and are embarking on international
activities. The current study tries to overcome a number of limitations of the previous framework by
combining RBV and customer capital.Particularly, “the RBV’s lack ofspecificity haveraised questions
as to its status as a legitimate theory, and make it difficult to design and test empirically.”
Keywords Performance, Entrepreneurship, Customer capital, Entrepreneurial orientation,
Performance, Small and medium enterprises, Resource-based view, Iran
Paper type Research paper
Introduction
Small and medium enterprises (SMEs) are the engines of global economic growth
(Acs and Peterson, 1997). Kusar et al. (2004) argued that if SMEs can fulfill customer
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/2042-5961.htm
Received 17 May 2013
Revised 17 May 2013
Accepted 8 July 2013
World Journal of Entrepreneurship,
Management and Sustainable
Development
Vol. 10 No. 1, 2014
pp. 48-68
rEmeraldGroup PublishingLimited
2042-5961
DOI 10.1108/W JEMSD-05-2013-00 30
48
WJEMSD
10,1
demands according to the features and quality of the products, they can successfully
enter the universal market. The SMEs sector is the backbone of developed economies
throughout the world. In developed countries, such as those in the European Union
(EU) with approximately 300 million inhabitants, SMEs represent 99 percent of all
businesses, which implies an average of 52 enterprises per 1,000 inhabitants. In the
Mediterranean countries of the EU, SMEs represent up to 80 percent of all businesses
and employs 66 percent of the entire labor force (European Commission, 2010). SMEs in
these countries create more jobs than the larger enterprises.
The SMEs in Iran are categorized as micro enterprises with one to nine employees,
small enterprises with ten to 49 employees, or medium enterprises with 50-99
employees (Center, 1999). The SMEs are considered the backbone of the Iranian
economy. The importance of the SMEs in Iran can be characterized by the fact that
these SMEs are currently estimated to represent 75 percent of all Iranian business
enterprises and employ 63 percent of the work force in the private sector. The Iranian
public policy is very much focussed on SMEs because of the role that these firms
play in promoting flexibility and innovation, in creating jobs, as well as in absorbing
employees despite the huge size of the sector compared with large enterprises
(Talebi and Tajeddin, 2011). Statistics shows that despite the SMEs making up a large
portion of Iranian business enterprises, the share of the value added of these firms are
much lower than those of the large enterprises (10 percent from total value added)
(Kamalian et al., 2013). The non-personal abilities of owners, such as entrepreneurial
abilities as well as the inaccessibility to information, including marketing data,
technical information, and information about suppliers, buyers, and competitors, are
some of the barriers that prevent fostering of a strong entrepreneurial orientation
(EO) among SMEs in Iran (United Nation Industrial Development Organization and
UNDP, 2003).
Madsen (2007) observed that the degree of the relationship between firm strategic
orientation and firm performance has incre ased in recent years. According to
Coulthard (2007) and Lyon et al. (2000), current studies demonstrate a general
agreement among scholars that EO does influence fir m performance. Further more,
a few studies have merely investigated the particular relationship between EO an d
firm growth (Covin et al., 2006; Moreno and Casillas, 2008). Adopting a wise EO is
considered insufficient for wealth creation of an organization (Covin and Slevin, 1988;
Lumpkin and Dess, 1996). For example, Macmillan (1983) proposed that bui lding
contacts and networks is the basic element in determining the success of
any firm. A superior judgment of situations under which an EO is reinforced
may thus need a contingency persp ective that emphasizes the significance of fit
among a firm’s strategic position and other compounds of interest (Lumpkin and
Dess, 1996).
Although previous research has identified the access and use of networks as
essential to the success of small professional service firms (Ram and Carter, 2003; Shaw
et al., 2008; Silversides, 2001), Peng and Luo (2000) argued that not all ties provide an
equal affect. Thus, further research on the different dimensions of EO and firm
performance is necessary (Kreiser et al., 2002; Rauch and Frese, 2000). A research gap
exists in understanding how customer capital operates and endows benefits to fir ms
that are beyond their start-up phase and are embarking on international activities
(Anderson et al., 2010; Ellis, 2010). The current study tries to overcome a number of
limitations of the previous framework (Reed et al., 2006) by combining resource-based
view (RBV) and customer capital. Particularly, “the RBV’s lack of specificity have
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Entrepreneurial
orientation and
performance
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