Entrepreneurial Behavior in SMEs: CEO Regulatory Focus as a Determinant of Effectual Orientation

Abstract

In order to successfully deal with uncertainty resulting from today’s turbulent environments, established firms may benefit from employing entrepreneurial approaches such as effectuation. Although literature initially introduces effectuation as an individual-level decision-making logic to manage uncertainty, scholars expand its reach to the whole organization, redefining effectuation as a strategic orientation. However, our understanding on how managers can actively promote effectual behavior within established firms is limited. Drawing on upper echelons theory, we aim to close this research gap by examining the impact of CEO’s personality, in particular regulatory focus, on effectual orientation. Our results base on primary research data of 448 CEOs from established SMEs in Germany. We find a positive relationship between promotion focus and effectual orientation, whereas prevention focus positively relates to the conservative effectuation sub-dimension being affordable loss. Our study advances literature by relating regulatory focus to entrepreneurial behavior in the corporate context and establishing an important antecedent to effectual orientation.