Entrepreneurial locus of control and competitive strategies – The moderating effect of environmental dynamism

Abstract

Past research suggests that entrepreneurs with an internal locus-of-control personality trait tend to undertake innovative strategies, whereas their external counterparts tend to prefer low-cost strategies. This paper examines the impact of environmental dynamism on this entrepreneurial locus of control–competitive strategy relationship, arguing that the strategy preferences driven by the locus-of-control personality trait produce unconventional strategy–environment (mis)matches. Drawing upon a social learning theory framework, we examine the competitive strategies of 84 entrepreneurs. The results show that internal entrepreneurs prefer product innovation strategies in stable environments, whereas external entrepreneurs opt for low-cost strategies in dynamic environments. Extant strategy contingency thinking suggests that these unconventional strategy–environment combinations may well lead to business failure.