E Ect of Entrepreneurial Orientation on Firm Performance and Failure
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Durham E-Theses Eect of Entrepreneurial Orientation on Firm Performance and Failure: A Longitudinal Analysis GALI, NAZHA,KAMEL How to cite: GALI, NAZHA,KAMEL (2018) Eect of Entrepreneurial Orientation on Firm Performance and Failure: A Longitudinal Analysis, Durham theses, Durham University. Available at Durham E-Theses Online: http://etheses.dur.ac.uk/12618/ Use policy The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in Durham E-Theses • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details. Academic Support Oce, Durham University, University Oce, Old Elvet, Durham DH1 3HP e-mail: [email protected] Tel: +44 0191 334 6107 http://etheses.dur.ac.uk 2 Effect of Entrepreneurial Orientation on Firm Performance and Failure: A Longitudinal Analysis Nazha Kamel Gali A Thesis Submitted in Fulfillment of the Requirements for the Degree of Doctor of Philosophy in Entrepreneurship at Durham University Business School Durham University Business School Durham University United Kingdom 2017 1 Effect of Entrepreneurial Orientation on Firm Performance and Failure: A Longitudinal Analysis Nazha Kamel Gali Abstract This thesis aimed to examine the longitudinal effects of entrepreneurial orientation (EO) and each of its dimensions, innovativeness, proactiveness, and risk taking, on firm performance, among surviving and failed firms, as well as on the risk of firm failure. By utilising the theoretical framework of organisational learning theory and prospect theory, this thesis advances knowledge on EO by challenging the dominating EO-as-Advantage perspective. This research adopted a quantitative methodology by objectively measuring EO at the firm-level and examining its effects along a longitudinal timeframe from the pre- crisis (fiscal year 2000) to the post-crisis period (fiscal year 2014). The thesis utilised secondary data from Compustat and CRSP databases to collect financial and market information on a sample of US large firms in the high-technology industry. The sample consisted of a total of 742 firms with 5,011 observations. Study 1 used fixed effect panel regression to examine the effect of EO and its dimensions on short-term and long-term measures of firm performance over time in the sample of surviving firms versus the sample of failed firms. Study 2 of this thesis examined the effect of EO and each of its dimensions on the risk of firm failure. The analysis of the data for Study 2 was done by the Cox proportional Hazard regression. EO was shown to have an inverse U-shaped effect on performance among surviving firms and a negative effect on performance among failed firms. It was revealed that innovativeness had a significant positive effect on long-term performance; whereas proactiveness and risk taking had a significant negative effect on long-term performance. It was also shown that EO as well as its dimensions increased risk of failure over time. Such results provide evidence for the EO-as-Experimentation perspective and align with our predictions on EO from organisational learning theory and prospect theory. 2 Table of Contents CHAPTER 1 .................................................................................................................................................... 18 INTRODUCTION ......................................................................................................................................... 18 1.1 BACKGROUND ....................................................................................................................... 19 1.2 LITERATURE GAPS ............................................................................................................................ 22 1.3 MOTIVATION FOR RESEARCH .................................................................................................... 24 1.4 AIMS, OBJECTIVES, AND RESEARCH QUESTIONS............................................................. 26 1.5 THEORETICAL FOUNDATION ...................................................................................................... 28 1.6 SYNOPSIS OF METHODOLOGY .................................................................................................... 33 1.7 STRUCTURE OF THE THESIS ........................................................................................................ 35 CHAPTER 2 .................................................................................................................................................... 38 LITERATURE REVIEW ............................................................................................................................ 38 2.1 INTRODUCTION TO THE CHAPTER .......................................................................................... 39 2.2 DEFINITIONS OF EO .......................................................................................................................... 39 2.3 DIMENSIONS OF EO AND THE GESTALT CONCEPTUALISATION VERSUS MULTI- DIMENSIONAL VIEW OF EO ................................................................................................................. 47 2.4 PROBLEMS WITH THE DEFINITIONS AND DIMENSIONS OF EO ................................. 52 2.5 A REVIEW OF THE BODY OF KNOWLEDGE ON EO ........................................................... 54 2.5.1 PHASES OF EO RESEARCH OVER TIME ................................................................................................. 56 2.5.2 CHALLENGES TO THE HEGEMONY OF THE ‘EO-AS-ADVANTAGE’ PERSPECTIVE ................ 75 2.5.3 IMPORTANCE OF EXAMINING PRE- TO POST-CRISIS PERIOD IN EO RESEARCH .................. 78 2.6 CONCLUSIONS AND KEY OBSERVATIONS............................................................................. 80 CHAPTER 3 .................................................................................................................................................... 83 THEORETICAL FRAMEWORK AND HYPOTHESES ................................................................... 83 3.1 INTRODUCTION TO THE CHAPTER .......................................................................................... 84 3.2 SUMMARY OF THE THEORETICAL RESEARCH QUESTIONS FOR STUDY 1 AND 2 ............................................................................................................................................................................ 85 3.2.1 RESEARCH QUESTIONS FOR STUDY 1 ..................................................................................................... 85 3.2.2 RESEARCH QUESTIONS FOR STUDY 2 ..................................................................................................... 86 3.3 SETTING THE CONTEXT OF EO AND FIRM PERFORMANCE/RISK OF FAILURE 86 3.3.1 THE EO CONSTRUCT..................................................................................................................................... 86 3.3.2 DEFINITION OF FIRM FAILURE .................................................................................................................. 87 3.4 ORGANISATIONAL LEARNING THEORY ................................................................................ 88 3.5 PROSPECT THEORY .......................................................................................................................... 94 3.6 EO-AS-ADVANTAGE VERSUS EO-AS-EXPERIMENTATION ............................................ 97 3.6.1 EO-AS-ADVANTAGE PERSPECTIVE ......................................................................................................... 97 3.6.2 EO-AS-EXPERIMENTATION PERSPECTIVE ........................................................................................... 99 3.7 THE SEPARATE EFFECTS OF THE EO DIMENSIONS ...................................................... 104 3.7.1 INNOVATIVENESS .......................................................................................................................................... 105 3.7.2 PROACTIVENESS ............................................................................................................................................ 109 3.7.3 RISK TAKING .................................................................................................................................................. 113 3.8 CHAPTER CONCLUSION ............................................................................................................... 117 3 CHAPTER 4 ................................................................................................................................................. 118 RESEARCH PHILOSOPHY AND DESIGN ...................................................................................... 118 4.1 INTRODUCTION TO THE CHAPTER ....................................................................................... 119 4.2 RESEARCH PHILOSOPHICAL POSITION .............................................................................. 119 4.2.1 INTRODUCTION: LOCATING ONTOLOGY AND EPISTEMOLOGY IN RESEARCH ENDEAVOURS ........................................................................................................................................................................................