Entrepreneurial Responses to Hostile Environments

Abstract

Previous research examining the relationship between environmental hostility and a firm’s entrepreneurial orientation (EO) has been plagued by inconsistent results. The current study draws upon theories of constrained strategic choice and threat rigidity to shed light on the complex nature of the hostility-EO relationship. Utilizing data consisting of 21,129 observations taken from 3,075 firms during 1999-2010. Using objective measures of EO, our results suggest that EO exhibits an inverse U-shaped relationship with environmental hostility. Further, the results suggest that recoverable slack moderates this inverse U-shaped relationship by attenuating the relationship at high levels of recoverable slack, while accentuating the relationship at low levels of recoverable slack. Taken together, these findings lend support to theoretical arguments suggesting that a firm’s environmental context has an identifiable impact on its willingness to display an EO, and that the unencumbered structural resources embedded...