REASSESSING THE ENVIRONMENT-EO LINK: THE IMPACT OF ENVIRONMENTAL HOSTILITY ON THE DIMENSIONS OF ENTREPRENEURIAL ORIENTATION.

Abstract

This study utilized data from 1,307 firms in eight countries to assess the impact of environmental hostility on three sub-dimensions of entrepreneurial orientation (EO): innovation, risk-taking, and proactiveness. The results of this study indicate that environmental conditions play a significant role in the strategic decision-making process that occurs within SMEs. The relationship between environmental hostility and EO was found to be much more complex than suggested by earlier research. First, levels of innovation were found to be negatively associated with environmental hostility. Second, a curvilinear relationship was found to exist between risk-taking and hostility, with extreme levels of hostility or munificence acting to discourage risk-taking. However, the hypothesized positive relationship between hostility and proactive firm behavior was not supported by our analyses. The differential relationships between hostility and the three sub-dimensions of EO may help to explain the inconsistent results that have plagued past entrepreneurship research on the strategy-hostility link. The implications of these results for researchers and managers are discussed and future research directions are suggested.