Why Does Entrepreneurial Orientation Affect Company Performance?

Strategic Entrepreneurship Journal, Forthcoming

47 Pages Posted: 12 Jun 2019

See all articles by Tālis J. Putniņš

Tālis J. Putniņš

University of Technology Sydney (UTS); Stockholm School of Economics, Riga

Arnis Sauka

Stockholm School of Economics, Riga

Date Written: May 26, 2019

Abstract

To better understand why entrepreneurial orientation (EO) is positively associated with company performance, we propose and test a reconceptualization of how the components of EO (risk taking, innovativeness, proactiveness) combine in driving performance. Drawing on financial economics theory, our conceptualization highlights that all three components positively contribute to performance, but in different ways. Risk taking has a direct positive relationship with performance, which can be understood through the risk-return tradeoff that is central in financial economics theory. The relationship between risk taking and performance is conditional on the level of innovativeness and thus innovativeness contributes to performance through its effect on the type of risk taking. Proactiveness contributes to performance through its positive effect on the level of risk taking.

Keywords: entrepreneurial orientation, performance, conceptualization, risk taking, innovativeness, proactiveness

JEL Classification: L25, L26, M21

Suggested Citation

Putnins, Talis J. and Sauka, Arnis, Why Does Entrepreneurial Orientation Affect Company Performance? (May 26, 2019). Strategic Entrepreneurship Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3394367 or http://dx.doi.org/10.2139/ssrn.3394367

Talis J. Putnins (Contact Author)

University of Technology Sydney (UTS) ( email )

PO Box 123
Broadway
Sydney
Australia
+61 2 9514 3088 (Phone)

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia
+371 67015841 (Phone)

Arnis Sauka

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

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