The impact of entrepreneurial orientation on firm performance: Exploring the moderating influence of trust and organizational commitment in the Indian IT/ITE sector

Harshavardhan Reddy Nallabathula; Ashok Doraiswamy

doi:10.31893/multiscience.2024206

Keywords:

Entrepreneurship Orientation

Firm Performance

Trust

Organisational Commitment

Micro

Small and Medium Enterprises

Abstract

The purpose of the research study is to test how entrepreneurship orientation influences Indian MSME’s performance and to delineate the moderation effect of trust in leadership and employee commitment on the relationship between entrepreneurial orientation and firm performance. Based on the social exchange theory, the study tested how firm performance is affected by Entrepreneurship Orientation such that relationships can be exchanged by trust and commitment. Applying descriptive research design, data were collected from randomly selected IT and ITE consulting firms located in Bangalore (A metro Tier I city in the country which presents close to 80 percent of Indian IT and ITE companies’ establishment (timesofindia, 2020)). The hypothesized model was tested using SEM analysis. This study aims to: (1) examine the relationship between entrepreneurial orientation and firm performance within the context of Indian Micro, Small, and Medium Enterprises (MSMEs), with a specific focus on consulting organizations; (2) assess the moderating influence of trust among members on the relationship between entrepreneurial orientation and firm performance; and (3) investigate the interaction effect of managerial commitment on the relationship between entrepreneurial orientation and firm performance, thereby enhancing our understanding of the dynamics at play within MSMEs, particularly in the consulting sector. The capability of being innovative which measures entrepreneurial orientation impact firm performance and being proactive in the business over entrepreneurial orientation positively impacts firm performance while risk-taking attitude and firm performance relationship are not significant. This result is in support of the previous research report that showed only the innovativeness and proactiveness variable. Further, it is noticed from the hierarchical regression analysis that proactiveness and firm performance are moderated by the level of trust that the employee has in his/her functional manager, and proactiveness and firm performance are also moderated by the employee’s level organizational commitment.
References
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10. Floyd, S. W., & Wooldridge, B. (1997). Middle management’s strategic influence and organizational performance. Journal of Management studies, 34(3), 465-485.
11. Floyd, S.W., Lane, P.J., (2000). Strategizing throughout the organization: managing role conflict in strategic renewal. Academy of Management Review 25(1), 154–177.
12. Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.
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19. Kreiser, P. M., Marino, L. D., & Weaver, K. M. (2002). Assessing the psychometric properties of the entrepreneurial orientation scale: A multi-country analysis. Entrepreneurship theory and practice, 26(4), 71-93.
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21. Li, H., & Atuahene-Gima, K. (2001). Product innovation strategy and the performance of new technology ventures in China. Academy of Management Journal, 44(6), 1123–1134.
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28. Okangi, F. P. (2019). The impacts of entrepreneurial orientation on the profitability growth of construction firms in Tanzania. Journal of Global Entrepreneurship Research, 9(1), 1–23.
29. Rempel, J. K., & Holmes, J. G. Zanna (1986). How do I trust thee. Psychology Today, February, 28-34.
30. Soomro, B. A., & Shah, N. (2019). Determining the impact of entrepreneurial orientation and organizational culture on job satisfaction, organizational commitment, and employee’s performance. South Asian Journal of Business Studies.
31. Tammi, T., Reijonen, H., & Saastamoinen, J. (2017). Are entrepreneurial and market orientations of small and medium-sized enterprises associated with targeting different tiers of public procurement?. Environment and Planning C: Politics and Space, 35(3), 457-475.
32. Tsai, W., & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy of management Journal, 41(4), 464-476.
33. Vasconcelos, V. N. D. S. A., Silveira, A., & Bizarrias, F. S. (2016). The relations between entrepreneurial orientation, organizational learning and organizational performance of small enterprises. International Journal of Professional Business Review, 1(2), 1-14.
34. Wales, W. J., Covin, J. G., & Monsen, E. (2020). Entrepreneurial orientation: The necessity of a multilevel conceptualization. Strategic Entrepreneurship Journal, 14(4), 639-660.
35. Yli-Renko, H., Autio, E., Sapienza, H.J., (2001). Social capital, knowledge acquisition and knowledge exploitation in young technology-based firms. Strategic Management Journal 22 (June–July), 587–614.
36. Zaheer, A., McEvily, B., Perrone, V., (1998). Does trust matter? Exploring the effects of interorganizational and interpersonal trust on performance. Organization Science 9 (2), 141–159.

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

How to cite

Nallabathula, H. R., & Doraiswamy, A. (2023). The impact of entrepreneurial orientation on firm performance: Exploring the moderating influence of trust and organizational commitment in the Indian IT/ITE sector. Multidisciplinary Science Journal, 6(10), 2024206. https://doi.org/10.31893/multiscience.2024206

[1] Allen, N. J., & Meyer, J. P. (1990). The measurement and antecedents of affective, continuance and normative commitment to the organization. Journal of Occupational Psychology, 63(1), 1–18.

[2] Antoncic, B., & Zorn, O. (2004). The mediating role of corporate entrepreneurship in the organizational support-performance relationship: An empirical examination. Managing global transitions, 2(1), 5.

[3] Ardelean, B. O. (2021). Role of Technological Knowledge and Entrepreneurial Orientation on Entrepreneurial Success: A Mediating Role of Psychological Capital. Frontiers in Psychology, 12, 814733.

[4] Chong, W. Y., Hong, P. H. K., & Teck, T. S. (2022). Small and Medium-Sized Businesses in Malaysia Can Look Forward to the Future of Co-Creation, a Literature Review. International Journal of Professional Business Review, 7(6), e0583-e0583.

[5] De Clercq, D., Dimov, D., & Thongpapanl, N. (Tek). (2010). The moderating impact of internal social exchange processes on the entrepreneurial orientation-performance relationship. Journal of Business Venturing, 25(1), 87–103.

[6] De Clercq, D., Sapienza, H.J., (2006). Effects of relational capital and commitment on venture capitalists' perception of portfolio company performance. Journal of Business Venturing, 21 (3), 326–347.

[7] Elshaer, I. A., & Sobaih, A. E. E. (2022). I think I can, I think I can: Effects of entrepreneurship orientation on entrepreneurship intention of Saudi agriculture and food sciences graduates. Agriculture, 12(9), 1454.

[8] Emerson, R. (1981). Social exchange. Social psychology: Sociological perspectives, 30-65.

[9] Erken, H., Donselaar, P., & Thurik, R. (2011). Total Factor Productivity and the Role of Entrepreneurship. SSRN Electronic Journal.

[10] Floyd, S. W., & Wooldridge, B. (1997). Middle management’s strategic influence and organizational performance. Journal of Management studies, 34(3), 465-485.

[11] Floyd, S.W., Lane, P.J., (2000). Strategizing throughout the organization: managing role conflict in strategic renewal. Academy of Management Review 25(1), 154–177.

[12] Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.

[13] Granovetter, M. (1985). Economic action and social structure: The problem of embeddedness. American journal of sociology, 91(3), 481-510.

[14] Hair, J. F., Babin, B. J., Anderson, R. E., & Black, W. C. (2019). Multivariate data analysis (8th ed.). Cengage Learning.

[15] Huang, S., Huang, Q., & Soetanto, D. (2022). Entrepreneurial orientation dimensions and the performance of high-tech and low-tech firms: A configurational approach. European Management Journal.

[16] Hughes, M., & Morgan, R. E. (2007). Deconstructing the relationship between entrepreneurial orientation and business performance at the embryonic stage of firm growth. Industrial Marketing Management, 36(5), 651–661.

[17] Ketchen, D., & Short, J. (2012). Strategic Management: Evaluation and Execution (v. 1.0). Chapter, 2, 70-75.

[18] Kim, W.C., Mauborgne, R., (1998). Procedural justice, strategic decision making, and the knowledge economy. Strategic Management Journal 19, 323–338.

[19] Kreiser, P. M., Marino, L. D., & Weaver, K. M. (2002). Assessing the psychometric properties of the entrepreneurial orientation scale: A multi-country analysis. Entrepreneurship theory and practice, 26(4), 71-93.

[20] Leana III, C. R., & Van Buren, H. J. (1999). Organizational social capital and employment practices. Academy of management review, 24(3), 538-555.

[21] Li, H., & Atuahene-Gima, K. (2001). Product innovation strategy and the performance of new technology ventures in China. Academy of Management Journal, 44(6), 1123–1134.

[22] Li, Y. H., Huang, J. W., & Tsai, M. T. (2009). Entrepreneurial orientation and firm performance: The role of knowledge creation process. Industrial Marketing Management, 38(4), 440–449.

[23] Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135-172.

[24] Mehralian, M. M. (2022). Effect of internet of things on marketing performance: the mediating role of entrepreneurship orientation. In 25th Iranian Conference on Business Development and Digital Transformation.

[25] Mom, T. J., Van Den Bosch, F. A., & Volberda, H. W. (2007). Investigating managers' exploration and exploitation activities: The influence of top‐down, bottom‐up, and horizontal knowledge inflows. Journal of management studies, 44(6), 910-931.

[26] Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of management review, 23(2), 242-266.

[27] Netemeyer, R. G., Johnston, M. W., & Burton, S. (1990). Analysis of role conflict and role ambiguity in a structural equation framework. Journal of Applied Psychology, 75, 148–157.

[28] Okangi, F. P. (2019). The impacts of entrepreneurial orientation on the profitability growth of construction firms in Tanzania. Journal of Global Entrepreneurship Research, 9(1), 1–23.

[29] Rempel, J. K., & Holmes, J. G. Zanna (1986). How do I trust thee. Psychology Today, February, 28-34.

[30] Soomro, B. A., & Shah, N. (2019). Determining the impact of entrepreneurial orientation and organizational culture on job satisfaction, organizational commitment, and employee’s performance. South Asian Journal of Business Studies.

[31] Tammi, T., Reijonen, H., & Saastamoinen, J. (2017). Are entrepreneurial and market orientations of small and medium-sized enterprises associated with targeting different tiers of public procurement?. Environment and Planning C: Politics and Space, 35(3), 457-475.

[32] Tsai, W., & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy of management Journal, 41(4), 464-476.

[33] Vasconcelos, V. N. D. S. A., Silveira, A., & Bizarrias, F. S. (2016). The relations between entrepreneurial orientation, organizational learning and organizational performance of small enterprises. International Journal of Professional Business Review, 1(2), 1-14.

[34] Wales, W. J., Covin, J. G., & Monsen, E. (2020). Entrepreneurial orientation: The necessity of a multilevel conceptualization. Strategic Entrepreneurship Journal, 14(4), 639-660.

[35] Yli-Renko, H., Autio, E., Sapienza, H.J., (2001). Social capital, knowledge acquisition and knowledge exploitation in young technology-based firms. Strategic Management Journal 22 (June–July), 587–614.

[36] Zaheer, A., McEvily, B., Perrone, V., (1998). Does trust matter? Exploring the effects of interorganizational and interpersonal trust on performance. Organization Science 9 (2), 141–159.

Abstract

References

How to cite