The effects of entrepreneurial orientation on strategy choice and management control in nonprofit organizations

Abstract

In light of increasing relevance of strategic considerations in the nonprofit sector, this study investigates the entrepreneurial orientation of nonprofit CEOs and its linkage to strategic decision-making. The study provides initial insights into the types and effects of CEO entrepreneurial orientation, corresponding strategic choices, and differences in the implementation of strategies through managerial control in nonprofit organizations. Semi-structured expert interviews were conducted with the top managers of German nonprofit hospitals. The interviews were evaluated using qualitative content analysis. The findings are consistent with upper echelon theory, which considers management characteristics to be a determinant of strategic decision making, acting as a mediator between the external environment and strategic choices. The analysis includes two levels: (1) the entrepreneurial orientation of nonprofit CEOs at the individual level and (2) strategic choices on competitive strategies and their implementation at the organizational level. The findings show that the competitive environment evokes different types of entrepreneurial orientation that influence the approach of nonprofit CEOs to strategic decisions and implementation processes. Highly entrepreneurial CEOs prefer prospector strategies over defender or reactor strategies. CEOs with low levels of entrepreneurial orientation tend to use controls diagnostically, whereas CEOs exhibiting medium to high levels of entrepreneurial orientation use controls interactively. This study extends the existing literature by providing evidence of the types of managerial entrepreneurial orientation in nonprofit organizations and the resulting effects on strategic planning and implementation processes. This paper thus sheds light on a key determinant of strategic decision-making and implementation in nonprofit organizations.