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Entrepreneurial Orientation: Can Academic Literature Guide Founders?

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In an ideal world, the academic knowledge about entrepreneurship shall serve to entrepreneurs and managers. It shall enrich the management practice. In reality, the research findings are difficult to apply in entrepreneurial practice.

Suppose we take an example of the term “entrepreneurial orientation”. In the academic world, it refers to the extent to which a firm is entrepreneurial. This concept looks well-suited for the discussion of the applicability of academic research findings to entrepreneurial practice. Starting from the 80s, it has been investigated in more than 200 research studies. But the question is how well it can be applied in real practice. For me the concept sounds like a meaningless abstraction, though I can be totally wrong. Let’s test it and see its value.

Entrepreneurial Orientation

The concept of entrepreneurial orientation (EO) consists of risk-taking, proactiveness and innovativeness and competitive aggressiveness and autonomy. In itself it’s a combination of these key components.

#1 Risk-Taking

Historically risk-taking has been a key characteristic associated with entrepreneurship. Originally, it is a case when an individual takes a risk, leaves a permanent job or simply starts working on him- or herself. Although it can also be applied to innovative companies, which disrupt their activities with risky decisions that require large resources allocation and have uncertain outcomes.

#2 Proactiveness

Proactiveness defines the entrepreneurial ability to take actions and build future opportunities in terms of products or technologies as well as markets and consumer demand. It stands for not reacting on challenges but building the future.

#3 Innovativeness

Intrinsically, innovativeness is interlinked with entrepreneurship. As Peter Drucker, consultant and management guru, said:

“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.”

In the context of EO, innovativeness is typically related to the company technological or product leadership.

#4 Competitive Aggressiveness

Competitive aggressiveness means that the company doesn’t shy away from direct competition with other companies but rather aggressively pursues conquering the target market.

#5 Autonomy

Autonomy means the ability to complete the task, project, operation without being held back by bureaucratic constraints or strict organizational hierarchy.

Most scholars explored the EO as a construct of all or some of these components, its impact on company performance and tried to define the straightforward correlation between them. Some found out that each component has a value and may increase the company success. Some of them contradicted that only all together they give an effect on company performance. In the end both approaches can be implemented easily in company practice by the use of different measurements and metrics to evaluate and improve the company activities.

However, in practice the EO construct has different drivers and different manifestations in different types of companies. Here the company size, the industry specificities and internal culture matters. Their impact makes clear that the relationship between EO and company performance is not straightforward. It really depends. Ideally, entrepreneurs need to know under which circumstances the EO might have a positive impact on company performance, when it occurs or among which type of company this is likely to occur. In practice, they don’t find a solution in the academic findings.

That reveals a common problem of academia and business gap. Lots of research studies in the area of entrepreneurship and business administration are descriptive of precedent cases. Moreover, they are pretty generalized. Yeah, entrepreneurs who get their hands dirty will “surely” appreciate some generalized theory and non-concrete guidance for them to cope with everyday startup problems. I’m sure that the academic literature can bring some insights but I’m still doubtful that it can help practically.

 

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