THE EFFECT OF CORPORATE FRUGALITY ON CRISIS PREPAREDNESS: THE MEDIATING ROLE OF ENTREPRENEURIAL ORIENTATION

Abstract

This study explores relationships between Corporate Frugality (CF), Entrepreneurial Orientation (EO) and Crisis Preparedness (CP). CP was proposed as the surrogate measure for firm performance during actual crises. EO is also examined as a potential mediator in the CF-CP association. The hypotheses were tested using partial least squares structural equation modeling with data collected from randomly selected small businesses operating in the Tripolitania region of northwestern Libya during the current economic instability caused by civil unrest. Further, COVID-19 pandemic cases had significantly risen among the population at the time of the study. The findings show that CF can be instrumental in responding to market crisis requirements, while innovativeness only results in better CP and partially mediates the CF-CP association. These findings validate the CF construct, but entrepreneurs must cautiously proceed when exercising EO in response to crises. Furthermore, the study casts new light on how the association between EO dimensions and performance can differ across contexts. Building on the resource-based view and pecking order theory and integrating them with contingency theory, this study is the first to explore the effect of EO and its dimensions as the mediator between CF and CP.