Entrepreneurial orientation within small firms: a critical review of why leadership and contextual factors matter

Abstract

To better understand the relationship between entrepreneurial orientation and performance, this paper conducted a major review of published work on the entrepreneurial process with a focus on small businesses. Following the review, it became evident that even though the extant literature indicated that both entrepreneurial orientation and transformational leadership influenced firm performance, there was limited literature examining how these two important organisational variables related to each other, and how they interacted to influence firm performance within the context of small businesses. Therefore, the purpose of this paper is to evaluate the extant literature on entrepreneurial orientation, transformational leadership and firm performance and then build a logical framework depicting the interrelationships between transformational leadership, entrepreneurial orientation and organisational effectiveness within the context of small businesses. Specifically, we advance a conceptual research framework, which explicates some pathways through which leader behaviours influence the firm entrepreneurial orientation and overall firm effectiveness. We conclude the paper by outlining a future research agenda for effectively leading entrepreneurial organisations within the small business sector.