Entrepreneurial orientation and higher level of innovation : a case study of SMEs in emerging country

Abstract

The importance of innovation has attracted the attention of policy-makers and academicians. As the impact, more studies have been conducted in order to boost innovation. Entrepreneurial orientation (EO) is one of the important resources for gaining a firm’s competitive advantage (Jeffrey Covin & Miles, 1999; Jeffrey Covin & Slevin, 1991; Lumpkin & Dess, 1996; Wiklund & Shepherd, 2005). Resource base view (RVB) sees the EO as the firm’s resource that is difficult to be imitated. The EO characteristics are scarce, valuable, and useful for achieving the firms’ goal. The EO is also recognized as the firm’s competitive advantage because of its idiosyncrasy that high level EO cannot be purchased in the market neither to be copied easily because firms should invest quite long time to cultivate the EO cultures (Lee, Lee, & Pennings, 2001). However, there are some controversy results of the EO impact on the firms’ performance. Lumpkin and Dess (1996), Zahra and Covin (1993), Tang, Tang, Marino, Zang and Li (2008), Madsen (2007), and Okpara (2009) discovered that there is a positive relationship between the EO and the firms’ performance. On the other hand, Walter, Auer and Ritter (2006) and Tang (2008) found surprising result that the EO exerted no significant impact upon the firms’ performance. Thus, it cannot be taken for granted that the EO growth has a clear positive impact in every setting of business. Study about EO is needed and has the potential to elicit surprising findings (Walter, et al., 2006). Reflection from those perspectives, in this study, we are interesting to see whether the EO could enhance the innovation performance into higher level of innovation such as radical innovation and higher novelty level of innovation for SMEs in developing country. This study is conducted on clustered SMEs in developing country and by this study; we aim to enrich the existing literature study by adding empirical study to give more insight on EO controversy result.