Effect of adaptive capability and entrepreneurial orientation on SBU performance: moderating role of success trap

Abstract

PurposeWhile prior research has theorized the relevance of adaptive capability (AC) to firm performance, skepticism remains regarding boundary conditions of the AC – performance relationship. This study aims to attempt to understand the intervening effect of entrepreneurial orientation (EO) impacting strategic business unit (SBU) performance. The authors further explore the moderating influence of the success trap on the AC – EO relationship.Design/methodology/approachData from a sample of 293 SBU heads in an Indian information technology (IT) firm is analyzed using ordinary least squares regression. The authors performed a mediation and moderation test on the data using the Hayes PROCESS SPSS macro. Specifically, this study used Model 4 and Model 7 of the PROCESS macro to test the mediation and moderated–mediation models.FindingsThe results reveal that EO positively mediates the relationship between AC and SBU performance and the success trap negatively moderates the AC – EO relationship.Research limitations/implicationsThe paper refers to empirical research of strategic business units of an IT services firm in India. Further research in other cultures and industry settings is required to generalize the findings.Practical implicationsThe findings suggest that to improve performance, managers in entrepreneurial software firms should develop an adaptive and innovative culture to avoid success traps.Originality/valueThe study establishes the crucial role of a firm’s AC as the driver of improved performance in a turbulent environment. This study complements the literature concerning the AC-performance relationship with the introduction of EO as mediating variable.