INFLUENCE OF CULTURE ON ENTREPRENEURIAL...

Udeozor, Victor Chukwuemeka (2011) Influence of Culture on Entrepreneurial Orientation and Performance of Nigerian Firms. [Dissertation (University of Nottingham only)] (Unpublished)

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INFLUENCE OF CULTURE ON ENTREPRENEURIAL ORIENTATION AND

PERFORMANCE OF NIGERIAN FIRMS

A Dissertation

by

Udeozor Chukwuemeka Victor

Submitted to the postgraduate school of Nottingham University Business School in

partial fulfilment of the requirements for the degree of

MASTERS IN SCIENCE SEPTEMBER 2011

INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011

1 Abstract | University of Nottingham

Dedication

To God, for his wisdom and grace, and to my parents for their unspeakable motivation.



Acknowledgement

―The race is not to the swift, nor the battle to the strong, neither bread to the wise, nor riches to men of

understanding, nor favor to men of skill… but God that shows mercy‖ [Eccl 9:11 and Rom 9:16]

My deepest gratitude is to God for the wisdom and strength I received without which this project

would not have come to fruition.

I deeply appreciate my supervisor, Mathew Hughes, for his mentoring, and friendship not just during

this project but also through my MSc program. His dedication and eye for detail, smiles and

encouragements, patience and unyielding support kept me motivated through this project. I also

specially appreciate him for critical statistical assistance.

My personal thanks to my Pastor, Yom, for his encouraging words and prayer. My gratitude also to

my friend Toyin ―lush‖ for his timely advice.

Special thanks to Virginia and Ife for their invaluable inputs which added richness to the text and a

depth to the analysis of the project. I take responsitility however, of any errors or ommission that may

appear in this dissertation.

To all my classmates, especially Bow, Olu, Virginia, Julia and Andrea for their crucial support and

contributions at the early stage of this project. I hope we will continue to keep communication and

keep the network alive at least till the inks fades off our certificates.

Finnaly to my parents, Mr and Mrs J. C Udeozor, who spent fortune to give me this life changing

experience I say a big thank you. I‘m indebted to them. To my siblings, especially Mr. Okechukwu J

Udeozor, for his encouragements and moral support. And to my dear friend, Grace Ani for her kind

words of encouragement.



Abstract

The influence of culture on entrepreneurship has continued to attract scholarly interest and empirical

scrutiny for the last two decades. Some international researches have explored the effect of national

culture on entrepreneurial orientation (EO). Researchers have also explored the effect of EO on

performance. However the inconsistencies in the findings of these studies have exposed the ambiguity

of the relationships. Part of the reason for these inconsistencies, is in the treatment of EO. Most

studies take a gestalt approach while a few recent ones take a component level approach which

examines the independent relationship of the dimensions of EO with culture and with performances

respectively. The other part of the reason for inconsistencies, is the context in which the studies where

made. Just as Lumpkin and Dess (1996) cautioned, the EO-performance relationship has been found

to be context specific. Until now, no empirical study of the effect of the five dimensions of EO on

performance in the Nigerian context has been made. This study addresses the inconsistences by

extending the knowledge on the influence of culture on the five dimensions of EO and the effect of

the five dimensions of EO on firms‘ performance to the Nigerian context.

Data was collected from 47 firms located and operating in Nigeria and analysed. The first part of the

results shows that culture does not affect innovativeness; it significantly affects risk taking and

autonomy but does not significantly affect proactiveness and competitive aggressiveness; the second

part shows that culture has no direct impact on performance; the third part, which supports the

concerns of Lumpkin and Dess (1996) and is largely consistent with the result of Hughes and Morgan,

(2007), shows that only innovativeness has a positive relationship with firms‘ performance;

proactiveness, competitive aggressiveness and autonomy have no effect while risk taking has a

negative relationship with performance.

From these results, managerial implications and recommendations for future research was offered.



Contents

Abstract ................................................................................................................................................... 3

Table of Tables ........................................................................................................................................ 6

Table of Figures ....................................................................................................................................... 7

Introduction .................................................................................................................................... 8 1

Entrepreneurial Orientation and firm performance ................................................................. 8 1.1

Research problem ................................................................................................................. 10 1.2

Research objectives .............................................................................................................. 11 1.3

Research design .................................................................................................................... 11 1.4

Contributions to Literature ................................................................................................... 11 1.5

Structure of dissertation ........................................................................................................ 12 1.6

Literature Review .......................................................................................................................... 13 2

Corporate Entrepreneurship (CE) ......................................................................................... 13 2.1

2.1.1 Management and Corporate Entrepreneurship ........................................................... 14

2.1.2 Corporate Entrepreneurship and performance ............................................................ 15

Antecedents of Entrepreneurial Orientation ........................................................................ 16 2.2

2.2.1 The EO construct ........................................................................................................... 16

2.2.2 EO-performance construct ............................................................................................ 17

2.2.3 EO-Strategy construct ................................................................................................... 19

Theoretical framework and Hypothesis development ................................................................. 20 3

EO-Performance of firms ...................................................................................................... 20 3.1

3.1.1 Role of Top management: Leadership and organisational structure ............................. 21

3.1.2 The role of culture ......................................................................................................... 22

Culture and Entrepreneurial Orientation.............................................................................. 28 3.2

3.2.1 Management in sub-Saharan Africa (SSA) .................................................................... 28

3.2.2 African cultural patterns ............................................................................................... 29

Research Design ............................................................................................................................ 35 4

Sample population and sampling method ............................................................................ 35 4.1

Key informants ...................................................................................................................... 35 4.2

Data collection and response rate ........................................................................................ 35 4.3

Control Variables ................................................................................................................... 36 4.4

Measures ............................................................................................................................... 36 4.5

4.5.1 Entrepreneurial orientation .......................................................................................... 37

4.5.2 Performance.................................................................................................................. 39



4.5.3 Dimensions of culture ................................................................................................... 39

Data preparation ................................................................................................................... 40 4.6

Data analyses, Reliability and validity ................................................................................... 40 4.7

The analytical technique for testing hypothesis ................................................................... 41 4.8

4.8.1 Model Equation ............................................................................................................. 44

4.8.2 Interpreting MLR model ................................................................................................ 44

4.8.3 Assumptions used in the MLR model ............................................................................ 44

Results of Data Analysis ................................................................................................................ 45 5

Models .................................................................................................................................. 45 5.1

Discussion ...................................................................................................................................... 49 6

Culture and Entrepreneurial Orientation.............................................................................. 49 6.1

Entrepreneurial Orientation and Performance .................................................................... 50 6.2

Culture and performance ...................................................................................................... 51 6.3

Conclusions, Implications and Limitations .................................................................................... 52 7

Contributions to the Literature .............................................................................................. 52 7.1

7.1.1 Dimensions (national culture vs. EO) performance Method ........................................ 52

7.1.2 Risk taking undermines performance initiatives .......................................................... 52

7.1.3 Culture does not affect innovation ............................................................................... 53

7.1.4 Culture does not directly affect performance initiatives .............................................. 53

Implications for managers ..................................................................................................... 53 7.2

Limitations ............................................................................................................................ 54 7.3

7.3.1 Nature of sample population ........................................................................................ 54

7.3.2 Sample size .................................................................................................................... 54

7.3.3 Measurement Scale ...................................................................................................... 55

7.3.4 Other limitations ........................................................................................................... 55

Future research ...................................................................................................................... 55 7.4

Conclusion ............................................................................................................................. 56 7.5

References ............................................................................................................................................ 57


6 Table of Tables | University of Nottingham

Table of Tables

Table 3-1 previous study on culture and entrepreneurship .................................................................................. 25

Table 3-2 Identification and Definition of Cultural Dimensions Based on Hofstede (1980) .................................. 30

Table 3-3 List of hypothesis .................................................................................................................................. 33

Table 3-4 A diagrammatic representation of the hypotheses and their relationships ......................................... 34

Table 4-1 Descriptive Statistics of control variables ............................................................................................. 36

Table 4-2 Measures and Factor Readings ............................................................................................................ 37

Table 4-3 Descriptive statistics of measures ........................................................................................................ 41

Table 4-4 Correlations between dimensions of EO and Performance ................................................................... 42

Table 4-5 Correlations between culture and performance ................................................................................... 42

Table 4-6 Correlations between dimensions of culture and dimensions of EO ..................................................... 43

Table 5-1 Multiple Regression Analysis results-a ................................................................................................ 46

Table 5-2 Multiple Regression Analysis results-b ................................................................................................ 47

Table 6-1 Results of Hypotheses ........................................................................................................................... 50


7 Table of Figures | University of Nottingham

Table of Figures

Figure 3-1 Conceptual Framework of Entrepreneurial Orientation Lumpkin and Dess, 1998 .............................. 21

Figure 3-2 A model for culture association with Entrepreneurship (Hayton, George and Zahra, 2002) ............... 24


8 Introduction | University of Nottingham

Introduction 1

Today‘s business environment is characterised as highly dynamic and fiercely competitive

(Dreyer & Grønhaug, 2004; Slater & Olson, 2002). Faced with limited resources, firms must therefore

strategically implement only those activities that will render competitive advantage and drive

performance. Corporate entrepreneurship (CE) has been viewed as a legitimate path to this end

(Ireland et al., 2006a, b; Morris et al., 2008). The study of CE has created an interest in understanding

postures firms take to act entrepreneurially, leading to the development of entrepreneurial orientation

(EO) construct (Miller and Friesen, 1982; Miller, 1983). EO is described as multidimensional

construct that involves the propensity to act autonomously, a willingness to innovate, proactiveness to

exploiting market opportunities, willingness to take risks, tendency to be aggressive towards

competitors (Miller, 1983; Covin & Slevin, 1989, 1991; Lumpkin and Dess, 1996).

The popular belief is that EO is highly beneficial to firm. Many studies including Covin and

Slevin, 1986; Wiklund and Shepherd, 2005; Zahra and Covin, 1995; and Rauch et al., 2009, suggest

that it is positively related with performance. While this belief is correct to some extent, some

scholars including Lumpkin and Dess (1996) caution the universal applicability and an ad hoc

approach to implementing EO. The results of empirical research on the various antecedents and

moderators of the EO-performance relationship have been inconsistent. This inconsistency in research

findings has exposed the ambiguity in EO-performance relationship. Though several authors have

attempted to investigate the EO-performance relationship, the limited international research on it has

done little to clarify this ambiguity. Majority of these studies are based on Western context with

samples from with small, medium and large firms across multiple manufacturing industries. Empirical

research on the influence of culture on the EO-performance relationship in the West African context is

highly under developed.

Entrepreneurial Orientation and firm performance 1.1

One of the earliest scholars to conceptualise EO is Miller (1983). He suggests that for a firm

to be considered as entrepreneurial in the first place that firm must have the propensity to take risk, be

proactive and innovative. These in his view are the dimensions of EO. Lumpkin and Dess (1996) went

on to extend the dimensions to include competitive aggressiveness and autonomy. Several researches

that have investigated EO-performance have viewed EO as a construct with these five dimensions.

The results of these studies suggest that EO is beneficial to firm performance (Covin and Slevin,

1986; Wiklund and Shepherd, 2005; Zahra and Covin, 1995; Rauch et al., 2009).

There are two main issues these researches may not have taken into account: first, the role of

internal and external factors that may moderates the relationship, second, the multidimensionality of

EO construct. A pragmatic way to explore the EO construct is to take a contingency perspective

(Aldrich and Pfeffer, 1976).



Lumpkin and Dess (1996) noted that although at the start of new entry all the dimensions of

EO may be present, all of them may not guarantee high performance for the venture. He cautioned

that the EO-performance relationship may be contingent on a host of external and internal factors.

Some external factors that have been shown to moderate the EO-performance construct include

technological sophistication, environmental dynamism, environmental hostility, industrial life cycle

stage and national culture (Covin and Slevin, 1990, 1991; Wiklund and Shepherd, 2005; Lee et al.,

2001; Stam and Elfring, 2008); while the internal factors include top management values and

philosophies, organisational resources and competencies, organisational culture and organisational

structure (Arbaugh et al., 2005). Miller, (1983) and Khandwalla, (1987) note that the effectiveness of

EO is inextricable from the external environment of a firm.

Studies that have taken internal and external factors into account find that the EO-

performance construct is dependent on the circumstances of the firm. Covin and Slevin, (1991) find

that the relationship holds when a firm is in a highly competitive, unforgiving, hostile environment

but does not hold when firm is in a non-hostile or benign environment. They also found EO to be

more beneficial to young firms in emerging industries than to new firms in advanced industries. These

findings confirm the caveat of Lumpkin and Dess‘ (1996) seminal work that the relationship between

EO and performance is context specific.

Some studies advocate that understanding how firms can effectively implement EO also

requires consideration of internal organizational processes and design (Lumpkin and Dess, 1996;

Wiklund and Shepherd, 2005). De Clerq et al., (2010) find that social exchanges underlie firms‘

capability to effectively combine knowledge (De Luca and Atuahene-Gima, 2007) and are conducive

to entrepreneurial behavior when internal relationships are characterized by fairness, trust, and

organizational support (Hornsby et al., 2002, Kuratko et al., 2005).

Furthermore, extant literature maintains that managers play a pivotal role in the effective

implementation of EO (Quinn, 1985; Hornsby et al., 2009; De Clerq et Al., 2010; Zahra, 2010). By

creating impetus for cross-functional initiatives and collaboration that facilitate knowledge exchange,

managers can ultimately help to capture the firm's entrepreneurial potential. Quinn, (1985) suggest

that flexibility and tolerance on the part of managers will enhance the effective implementation of EO.

Recently, there has been a growing interest on the influence of culture on EO which has

resulted in empirical scrutiny (Davidsson, 1995; Davidsson & Wiklund, 1997; Shane, 1992, 1993).

Most of these empirical studies have used Hofstede‘s conceptualization of national culture. In general,

these studies suggest that entrepreneurship is facilitated by cultures that are high in masculinity, low

in power-distance, low in uncertainty avoidance, and high in individualism. However, inconsistences

have been noted (Shane, 1994a, 1994b, 1995; Shane & Venkataraman, 1996 Kogut & Singh, 1988;

Makino & Neupert, 2000; Steensma, Marino, & Weaver, 2000; Geletkanycz, 1997).

Unfortunately, in most studies EO is treated as a gestalt (Covin and Slevin, 1986; Zahra and

Covin, 1995; Rauch et al., 2009). This kind of approach to EO reduces its analytical power (Ogbonna



and Harris, 1998a; Pettigrew, 1979). A component-level study captures the activities of the

dimensions. By this token, Lumpkin and Dess (1996) found evidence to show that the five EO

dimensions vary independently with performance and that the relationship is circumstance dependent

contrary to prior findings (Miller, 1983) that suggest that they co-vary. The implication of his study is

that some dimensions of EO may be beneficial to performance in some instances and may not be

beneficial in other instances (e.g., Hughes and Morgan, 2007; Hughes, Hughes and Morgan, 2007). In

support of this, Hughes and Morgan (2007) found that while proactiveness and innovativeness has a

positive relationship with performance of young firms, risk taking has a negative relationship,

whereas competitive aggressiveness and autonomy has no relationship at all.

As dimensions of EO vary independently with performance, the dimensions of culture may

vary independently with the dimensions of EO and that relationship may also vary with context. But

there are no empirical results to support this statement. However, with the inconsistences in the

findings of how the dimensions of culture affect EO and strategy one can argue that answers and

embedded in the relationship between dimensions of culture and dimensions of EO.

So far, what is known is that the dimensions of EO vary independently with performance, and

that the dimensions of national culture vary with EO. However, inconsistencies in research findings

call for more empirical studies. What is unknown is how the dimensions of culture vary with the

dimensions of EO and how the dimensions of EO vary with performance in the Nigerian context.

As earlier mentioned, most researches on these relationships have focused on firms in

Western context. If one acknowledges that findings grounded on Western epistemology may be

invalid in outside the Western context, then in national context, a different cultural setting leaves us

with little understanding of how to organise a firm entrepreneurially.

Research problem 1.2

In Western context, firms notably keep power distance to a barest minimum and employees

are highly individualistic (Hofstede, 1980a). On the other hand, sub-Sahara Africa cultures are noted

for high power distance, seniority and collectivism (Granovetter, 1985). These different cultural

patterns are reflected in how organisations are designed and managed (Baltes and Staudinger, 2000;

Beugre and Offodile, 2000; Hofstede, 1991; Trompenaars and Hampden-Turner, 1998). For instance,

firms in Nigeria tend to be owned by founders and families. They tend to be paternalistic; promote

values of high power distance (Hofstede, 1980a); respect of seniority and authority (Blunt and Jones

1995; Kuada 1994; Leonard 1987; Montgomery 1987; Tuma 1988); collectivism. They have

bureaucratic control and centralised decision making with little delegation and worker empowerment

– direction and orders tend to be top-down (Somers, 1995; Sommer et al., 1996). By contrast, Western

firms are flatter in structure, less bureaucratic, lower power distance, promote individualism,

decentralised decision making and more empowering to their workers –that is upholding the values of

democracy, equalitarianism and participation. (Chen, 2001; El Kahal, 2002). Yet current literature on



CE maintains that low bureaucratic and informal atmosphere is highly beneficial to firm‘s

performance. The differences in cultural pattern do affect how firms are organized, their EO and

performance but there is little knowledge of what goes on at the dimensional level. Hence the

following research questions which form the primary focus of this study are raised:

How do the dimensions of national culture as conceptualised by Hofstede (1980a) relate with

the dimensions of EO in the Nigerian setting?

How do the dimensions of EO relate with the performance of firms in Nigeria?

How do dimensions of national culture relate with the performance of Nigerian firms.

Research objectives 1.3

In line with the research questions above, the objectives of this study are;

1. To review the literature on CE and EO.

2. To conceptualise the factors that affect EO and performance

3. To develop a set of empirically testable hypotheses linking national culture, EO and

performance.

4. To test the hypotheses by designing an appropriate survey instrument, collect data and

employ appropriate analytical methods

5. Present all the results of this study, discuss the implications of the findings, the limitations of

the research and make recommendations for future research.

Research design 1.4

To carry out this study, sample was be created by random selection of firms located and

operating in Nigeria. Then for each sampling unit, potential informants were considered (Kumar,

Stern, & Anderson, 1993). For an informant to be suitable for the information needs of this study the

informant had to have worked with the firm for at least six months –a period enough be

knowledgeable of internal and external issues to the firm (Huber & Power, 1985; Stubbart, 1989).

To generate data, an online survey was administered through Survey Monkey®. The survey

adhered, as far as was feasible, to the principles of the Tailored Design Method (Dillman, 2000); pre-

notification correspondence with the link to the survey, and a series of first and second follow-up

reminders were sent respectively to sampling units. Good practice recommended by Dillman (2000)

concerning questionnaire salience, length, return postage, anonymity guarantee, and university

sponsorship was considered in creating the survey. The data obtained was then analysed using

SPSS™ and conclusions were deduced.

Contributions to Literature 1.5

With the trend towards globalisation and diminishing resources, there is a greater need for

organisations and managers to have a much broader understanding of how firms can be organised in



different contexts including Nigeria to be entrepreneurial, but also to know the dimensions of EO to

deploy in those contexts. Deploying dimensions of EO that are not necessary for performance

improvement or even undermines performance initiatives is tantamount to resource wastage which

could lead to an unintentional strategic decision to fail (Hughes and Morgan, 2007). With regards to

this, this research makes the following contributions to CE literature; first, it addresses the argument

that the dimensions of culture may vary independently with each dimension of EO; second, from the

Nigerian perspective, it addresses Lumpkin and Dess‘ (1996) caution that some dimensions of EO

might be of no benefit or might even undermine the performance of firms depending on the

circumstances of the firm (Hughes and Morgan, 2007) hence it joins the growing list of researches

that share this view; third, it addresses Hayton, George and Zahra‘s (2002) concern that culture might

not affect firm performance. Hence, by connecting the link between culture, EO and performance,

managers can encourage those cultural patterns and value that positively relate with those dimensions

of EO the can improve performance.

Structure of dissertation 1.6

For the purpose of clarity this study was organised in the following order. Chapter 1

(literature review) establishes a foundation for the study by drawing from extant knowledge. It begins

by giving an overview of corporate entrepreneurship from a progenitor of EO perspective. Then it

proceeds by developing a historical perspective on EO, from classical to contemporary works: it

discusses the EO construct, the EO-performance construct, and the EO-strategy construct. Chapter 2

(Theoretical framework and hypothesis development) examines the factors that affect EO-

performance construct based one contingency theory and the focuses on two: role of managers and

role of culture. It then proceeds by examining how management works in sub-Saharan African and the

cultural pattern of the region based on Hofstede‘s conceptualisation. It ends with the development of

the hypotheses to be tested in this study. Chapter 3 (Research Design) outlines the method used to test

the hypotheses developed for the study. It describes the samples and the sampling method adopted for

data generation strategy. Next it reviews the key informants, the method used for data collection, a

summary of how the data was prepared for analysis; the measures used for the study and detailed

description of the analytical technique used. Chapter 4 highlights the findings of this study. Chapter 5

explains in detail the results of the analyses under the following sub-headings: culture and EO; EO

and performance; and culture and performance. Chapter 6 highlights significant contributions to

literature, the important implications, limitations of this study and recommendations for future

research.


13 Literature Review | University of Nottingham

Literature Review 2

To establish a foundation for this study it is important to begin by drawing from extant

knowledge. For this reason, this chapter will first give an overview of corporate entrepreneurship

from a progenitor of entrepreneurial orientation perspective. Then it proceeds by developing a

historical perspective on entrepreneurial orientation, from classical (e.g. Miller, 1983) to

contemporary (Hughes and Morgan, 2007) works: it discusses the EO construct, the EO-Performance

construct and the EO-strategy construct.

Corporate Entrepreneurship (CE) 2.1

As firms move through the various stages of their life cycle, they often have to revitalize their

skills and build innovative capabilities to survive, achieve profitability, and stimulate growth (Zahra et

al., 2009). As Griener (1972) suggests, companies must adopt appropriate strategies, structure and

posture to cope with those stages. Corporate Entrepreneurship (CE) is the means by which these firms

build and exploit innovation capabilities to drive performance and remain competitive. As a field of

research, CE has attracted more attention in the last few years because of the growing need for firms

to become more proactive, innovative and diversify into new markets to survive and flourish in

competitive environments (Burgelman, 1983a, b; MacMillan and Day, 1987). According to Covin and

Slevin, "the growing interest in the study of CE is a response to the belief that such activity can lead

to improved performance in established organizations" (Covin and Slevin, 1991, p. 19).

Schollhammer (1982) also suggests that CE is "the key element for gaining competitive advantage

and consequently greater financial rewards" (p. 210).

CE is a term used to describe entrepreneurial behaviour in organisational context (Morris et

al., 2008). It is the means by which established companies reinvent themselves by innovations and

renewal and novel venturing initiatives (Ling, et al., 2008). Over the past 30 years of studying CE,

various scholars have attempted to conceptualise it. Perhaps the most comprehensive

conceptualisation is offered by Miller (1983) who views it as encompassing three related components:

product innovation, proactiveness and risk taking. According to Zahra et al., (2009), CE is the set of

activities within the operations of firms which stimulates innovation and encourages calculated risk

taking which leads to diversification into new markets. This is a comprehensive definition that

captures the dimensions conceptualised by Miller (1983).

CE has been viewed as a legitimate path to survival and high levels of organizational

performance (Ireland et al., 2006a, b; Morris et al., 2008; Rauch et al., 2009). But as Barringer and

Bluedorn (1999) suggest, entrepreneurial behaviour and attitudes are necessary for CE to be

effectively undertaken. Entrepreneurial behaviour, as referred to here, is characterised by

proactiveness and risk taking. Zahra and O‘Neil (1998) note that when factors in the external and

internal environment interact, managers should be challenged to respond creatively and act in



innovative ways. This kind of corporate entrepreneurial behaviour in firms is invaluable for the

purpose of profitability (Zahra, 1991), strategic renewal (Guth & Ginsberg, 1990), fostering

innovativeness (Baden-fuller, 1995), acquiring knowledge for future revenue streams (McGrath,

Venkataraman, & MacMillian, 1994), and international success (Birkenshaw, 1997). Large firms like

Apple who have achieved superior financial performance and are market leaders in their industries

have remained successful because they consistently maintain such activities that stimulate and sustain

entrepreneurship within their organisations, pioneering the creation and introduction of new products

and technologies. Other successful firms like 3M, IBM and Hewlett-Packard that have existed for a

long period have sustained their market share and maintained steady growth rate by constantly

revamping their organisational skills and innovation capabilities through the use of proactiveness,

innovativeness and calculated risk taking which captures the essence of CE. If firms will successfully

undertake CE, top management have a huge role to play in the use of those dimensions of CE. As

such the next sub headings discuss the role of management in CE and the relationship between CE

and performance.

2.1.1 Management and Corporate Entrepreneurship

In their work, Zahra et al. (2009) identifies two factors that can complement each other to

drive CE activities: Boards of Directors (BoD) and absorptive capacity for gaining access to varied

and current knowledge. In their view, BOD represent the highest level of firms governing system

while absorptive capacity refers to firms‘ ability to identify, capture and process and utilise ‗new

knowledge‘ acquired from various external sources. This ‗new knowledge‘ could be obtained by

joining alliances, selectively hiring key personnel (Morrow et al., 2007; Sirmon et al., 2007),

changing the composition or decision-making process of a company‘s BoDs (Ucbasaran et al., 2003)

or undertaking R&D activities (Cohen and Levinthal, 1990). Zahra et al. (2009) argue that because

BODs have a duty and commitment to protect and create more wealth for their shareholder, effective

resource management is their central focus and that motivates them to accumulate needed resources,

and effectively leverage their use to create competitive advantage and exploit new opportunities

advantageously (Sirmon, Hitt and Ireland, 2007). This means that CE starts with the BODs. This

argument is in line with a stream of research that suggests CE is reflected in top management's risk

taking with regard to: investment decisions and strategic actions in the face of uncertainty, the

extensiveness and frequency of product innovation, the related tendency toward technological

leadership, and the pioneering nature of the firm as evident in the propensity to aggressively and

proactively compete with industry rivals (Zahra 1991). Hence organisations cannot be entrepreneurial

without entrepreneurial BODs. It is intuitive to say that entrepreneurship within large firms must flow

from the top granted that authorisation, autonomy or supportive environment that fosters

entrepreneurship must be provided by BoDs, but a strategic vision by the BoDs which is imperative,

cannot in isolation lead to CE because other aspects of the firm need to adapt to change to ensure the



vision proliferates. With that in mind, its implementation is often multi-level and multi-actor

dependent (Ireland et al, 2009). That is, lower level manager and all other employees must buy-in to

the BoDs‘ strategic vision and embrace a culture of entrepreneurship for CE to be successfully

undertaken.

2.1.2 Corporate Entrepreneurship and performance

Although extant literature has established a relationship between CE and firms‘ performance,

there‘s an argument about a positive correlation between them. Zahra and Covin (1995) investigated

the influence of CE on firm‘s financial performance and their results suggest that CE has a positive

impact on financial measures of business performance in the long-run.

Furthermore, studies have shown that CE is a particularly effective practice among firms

operating in hostile environments as opposed to firms in benign environments (Covin and Slevin

1988, 1989). Hostile environment here include, but not limited to, highly competitive environment.

However, CE is not a panacea for improving the financial performance of firms. And in fact it could

be too costly and dangerous in the short-run. For example, being a pioneer in an industry could have

impressive benefits (Lieberman and Montgomery, 1988) as evidenced in the case of Apple because

they can target premium market segments and charge correspondingly high prices, control access to

the market by dominating distribution channels, and establish their products as the industry's standard.

These actions help them to acquire and sustain high market share and achieve profitability (Miller,

Gartner and Wilson, 1989).

Unfortunately, pioneering has concomitant costs and risks; the cost of investing heavily in

developing name recognition, building distribution channels, and safeguarding against imitation by

competitors; the risk of losing the first mover advantage. The returns on these investments can be very

disappointing (Rosenbloom and Cusumano 1987; Teece 1986). This argument supports why some

firms prefer to be conservative and cautious about risk taking, proactiveness and innovativeness. For

example, Iridium (a spin-off of Motorola) was launched with the brilliant idea of selling satphones to

a wide consumer market before the mobile phone boom. Disappointingly, it completely failed to find

its foot in the mobile phone industry.

Even when a first mover is successful in the market, if such first mover lack asymmetric

competitive advantage, later entrants can challenge it with heavy advertising and better pricing

(Carpenter and Nakamoto, 1989). Alternatively, a later entrant may choose to move away from the

first mover and develop a more desirable position rendering the first mover of no effect (Carpenter

and Nakamoto, 1989). Blackberry vs. iPhone is a good example to buttress this point. Instead of

competing with Blackberry on email push, iPhone developed a more desirable position by providing

more user friendly interface, features, apps and intuitive design.

The point is that CE is ambiguous. To effectively understand it, scholars have developed three

predictive models to explain its antecedents and consequences (Zahra et al., 1999). The three models



are, first, the construct model: which looks at EO vis-à-vis its antecedents (Covin and Slevin, 1986,

1991); second, the EO-strategy, which studies the relationship between EO and strategies; third the

performance model, which explores the EO-performance relationship (Covin and Slevin, 1989; Zahra

and Covin, 1995; Dess et al., 1997; Hughes and Morgan, 2007). Having established the concept of CE

which is like a progenitor of entrepreneurial orientation, and discussed the role of managers in

implementing CE and the relationship of CE with performance, the rest of this chapter will examine

the EO and the EO-performance constructs.

Antecedents of Entrepreneurial Orientation 2.2

2.2.1 The EO construct

The work of Miller (1983) that identifies entrepreneurship as a phenomenon that encompasses

three dimensions, innovations, risk taking and innovativeness is among the first to conceptualise the

EO construct. He defines an entrepreneurial firm as one that ―engages in product market innovation,

undertakes somewhat risky ventures, and is first to come up with ‗proactive‘ innovations, beating

competitors to the punch‖ (p. 771). He emphasizes that all three dimensions of the construct must be

present for a firm to qualify as entrepreneurial arguing that a non-entrepreneurial firm ―is one that

innovates very little, is highly risk averse, and imitates the moves of competitors instead of leading

the way‖ (p. 771). Sequel to his work, Covin and Slevin (1988, p. 218) refined the definition of EO

construct stating that, ―the entrepreneurial orientation of a firm is demonstrated by the extent to which

the top managers are inclined to take business-related risks (the risk-taking dimension), to favour

change and innovation in order to obtain competitive advantage for their firms (the innovation

dimension), and to compete aggressively with other firms (the proactiveness dimension) (Miller,

1983).‖

These definitions make it difficult to distinguish between CE and EO. One of the earliest

works to make a distinction between them is Lumpkin and Dess (1996). They compared both

phenomena to the concepts of ‗Content‘ and ‗Process‘ established in strategic management

vocabulary. They related entrepreneurship to ‗content‘ while Entrepreneurial orientation to ‗process‘.

‗Content‘ is summarized in the question ―what business shall we enter?‖ The answer to this question

determines how a firm will deploy resources and relate with the market. The outcome of this answer

is a new entry. New entry is the act of creating a new venture either within an existing firm or as a

start-up (Burgelman, 1983). It might be carried out by an individual, a small firm or the strategic unit

of a large corporation (Zahra et al., 1991). However, for the purpose of this discussion, it helps limit

the scope to entrepreneurship at the corporate level, and this means that new entry is the central idea

underlying the concept of CE. On the other hand, ‗Process‘ implies those methods, practices, and

decision making styles that managers use to determine what opportunities to pursue and what risks to

take. Based on this comparison, they define EO as processes, practices and decision-making activities

that lead to new entry.



This ‗new entry‘ view of entrepreneurship has been criticised to be limiting in scope by

scholars who favour opportunity base view (Stevenson and Jarillo, 1990). Perhaps the most

comprehensive definition of EO is the one De Clerq et al. (2010) suggest. They define a firm's

entrepreneurial orientation (EO) as:

‗a strategic posture that involves a propensity to be innovative; to depart from established

practices and entertain new ideas and experimentations; proactive, in that it beats competitors

to new market opportunities; and open to risks in exploring new products, services, and

markets‘ (p. 89).

Strategic/entrepreneurial posture is evidenced in three ways within an organisation: top

management risk-taking orientation in the face of uncertainty; propensity to innovate and tendency

toward technological leadership; aggressiveness and proactiveness to compete with industry rivals

(Covin and Slevin, 1991; Lumpkin and Dess, 1996; Miller, 1983). This is a pragmatic definition that

encompasses the five dimensions used to characterise EO: the propensity to act autonomously, a

willingness to innovate, proactiveness to exploiting market opportunities, willingness to take risks,

tendency to be aggressive towards competitors (Covin & Slevin, 1989, 1991; Lumpkin and Dess,

1996; Miller, 1983). Hence we adopt De Clerq et al. (2010) definition for this study. Innovativeness is

the tendency to go beyond the current state of things and engage creativity and combinations of new

ideas that may lead to new product (Lumpkin and Dess, 1996). Risk taking means a propensity to take

bold actions like committing large portions of resources to ventures with uncertain outcomes but with

the hope that it will lead to new and unknown market entry (Lumpkin and Dess, 1996). Proactiveness

means anticipating and capturing new opportunities, and participating in emerging markets (Lumpkin

and Dess, 1996). Autonomy is the independence and freedom to act entrepreneurially (Lumpkin and

Dess, 1996). Competitive aggressiveness is a disposition to challenge competitors directly and

intensely with an intension to outperform them in the marketplace (Lumpkin and Dess, 1996).

2.2.2 EO-performance construct

The widely held believe that EO and performance of firms are positively correlated has been

debated by scholars over the years. Some studies demonstrate the beneficial influence of EO on firm

performance (with an r > .30 e.g. Covin and Slevin, 1986; Wiklund and Shepherd, 2005; Zahra and

Covin, 1995; Rauch et al., 2009). Rauch et al. (2009) meta-analysis indicates that this positive

relationship is moderately high (r=.242). However, some studies suggest that this relationship does

not hold (Smart and Conant, 1994), others argue for the lack of universal applicability of an

entrepreneurial strategic posture (Hart, 1992). Covin and Slevin (1991) suggest that the EO-

performance relationship holds when a firm is in highly competitive, unforgiving, ‗hostile‘

environment, but may not hold when the firm is in a non-hostile or benign environment. They found

that EO is more beneficial to young firms in emerging industry than new ventures in more advanced

industries (Covin and Slevin, 1990). Hughes and Morgan (2007) also conclude from their study that



there is insufficient systematic evidence to support the belief that EO is universally beneficial to the

performance of firms. These arguments have prompted further theoretical and empirical elaboration of

the EO–performance relationship (Lumpkin and Dess, 1996).

Though Miller (1983) strongly emphasized that the trio: innovative; risk taking and

proactiveness dimensions must be present for a firm to qualify as entrepreneurial, and other scholars

have argued for autonomy and competitive aggressiveness, Lumpkin and Dess (1996) cautions that

these dimensions may be present when a firm engages in new entry but all of them may not

necessarily be present for firms to be successful entrepreneurially. That is, although new entries are

indications of a proactive response to opportunities, an effort to take risk and probably a willingness

to be innovative as the case may be, successful new entries may be achieved when only some of these

factors are in operation. This means that the extent to which each of these dimensions can be used to

predict or qualify the success or performance of firms may be contingent on a host of external factors

like industry environment, or internal variables such as organisational structure and the characteristics

of founders or top managers, such as the actions they take or do not take (Lumpkin and Dess, 1996).

To emphasize their argument, Lumpkin and Dess (1996) found evidence to show that the five

dimensions vary independently contrary to prior findings (Miller, 1983) that suggest that they co-vary.

Thus, they conclude that the EO-performance relationship is context specific. The implication of this

conclusion is that in some context, some dimensions of EO may exist which may be absent in other

contexts, and that its dimensions may or may not positively influence firm performance (e.g., Hughes

and Morgan, 2007; Hughes, Hughes and Morgan, 2007). In support of this line of argument, Hughes

and Morgan (2007) find that while proactiveness and innovativeness has a positive relationship with

performance of young firms, risk taking has a negative relationship, whereas competitive

aggressiveness and autonomy has no relationship at all. Although one can argue that their study is

limited to firms at their embryonic stage in UK, it reinforces the argument that EO-performance

relationship is context specific.

Drawing from the arguments above, it is safe to conclude that EO-performance relationship is

context specific. That is, the relationship is moderated by some factors such as environmental

hostility, turbulence, and dynamism (Covin and Covin, 1990; Wiklund and Shepherd, 2005), external

networks (Lee et al., 2001; Stam and Elfring, 2008), and national culture (Arbaugh et al., 2005). Take

for instance a rapidly changing environment like the mobile phone industry, where products have

short life span; on one hand, established firms in such environment will benefit from being innovative

(innovativeness), proactively seeking new opportunities (proactiveness), taking risks to aggressively

position new products/services before its competitors does (risk taking and competitive

aggressiveness). On the other hand, risk taking and competitive aggressiveness might undermine the

success of an emerging firm with very little resources and capabilities (Hughes and Morgan, 2007).

Such firms need more formalised structures to manage their resources (Sine, Mitsuhashi and Kirsch,

2006) and to deploy only those entrepreneurial behaviours that best drive the firm‘s performance



(Hughes and Morgan, 2007). Even with established firms, competitive aggressiveness could be

counterproductive. A classic example to buttress this point is HP and TouchPadTM

. HP launched

TouchPadTM

in a bid to compete with market giant- Apple. The product completely failed and was

withdrawn from the market two months after launch.

Indeed EO has a cost attached to it. Unfortunately most studies on EO and performance focus

on the correlation between them. Very few, if any has investigated the cost vis-à-vis the benefits of

EO. Undertaking EO involves deployment of resources and the outcome of such act might be costly

and even devastating.

2.2.3 EO-Strategy construct

Some studies advocate that understanding how firms can enable and effectively implement

EO also requires consideration of internal organizational processes and design (Lumpkin and Dess,

1996; Wiklund and Shepherd, 2005). One such process is strategic decision making process. Strategic

decisions have the potential for transforming firms. How these strategic decisions are made especially

in the face of uncertainty, and the processes from which they evolve have been investigated by many

scholars (Hart, 1992; Rajagopalan, Rasheed, & Datta, 1993). The processes involved in making

strategic decisions synthesis many aspects of organizational culture, shared value system, and

corporate vision (Hart, 1992). Many scholars have tried to conceptualize the process (Fredrickson,

1986; Hart, 1992; and Snow, 1978), and suggest there is a strong relationship between decision

making process and EO (Lumpkin and Dess, 1996). Most of the factors that influence strategic

decision making process―social exchanges, culture and personal values, economy and others―also

influence entrepreneurial processes and practices (De Clerq et al., 2010). These social factors which

are largely under explored influence the effective undertaking of EO by moderating knowledge

exchange within the organization (De Clerq et al., 2010).

Though various authors have investigated EO variables and how they moderate the EO-

performance relationship, majority of those investigations are based on Western context.

Acknowledging that EO is context specific the problem with having just ‗Western context studies‘ is

it gives a one-sided or partial account of EO, thus leaving literature with little knowledge on how

firms in non-Western context may be organised to be entrepreneurial and achieve high performance.

Moving on, the next chapter will expatiate on EO-performances construct with a focus on the role of

national culture on the relationship.


20 Theoretical framework and Hypothesis development | University of Nottingham

Theoretical framework and Hypothesis development 3

Building on the foundations set out in chapter 1, this chapter examines two factors that affect

the EO-performance construct: role of managers and role of culture. Following this, it then discusses

how culture affects dimensions of EO. The chapter then proceeds by examining how management

works in sub-Saharan African and the cultural pattern of the region. It ends with the development of

the hypotheses to be tested in this study.

EO-Performance of firms 3.1

Firms are organic in nature. And like all living organisms, firms have the natural tendency to

respond to stimuli. Covin and Slevin (1991) conceptualise the stimuli that firms respond to as external

and internal variables. External variables include technological sophistication, environmental

dynamism, environmental hostility, and industrial life cycle stage whereas internal variables are top

management values1 and philosophies, organisational resources and competencies, organisational

culture and organisational structure (Covin and Slevin, 1991). Several scholars have developed

theories and undertaken empirical research that demonstrate existence and effectiveness of EO and its

dimensions are inextricable from firms‘ external environment (Miller, 1983; Khandwalla, 1987).

Nonetheless, just as external variables define the EO of firms, firms can also induce changes in

external variables by responding aggressively to it (Miller and Friesen, 1982). For instance the release

of iPhone in 2007 changed the smartphone industry and made it more dynamic and competitive.

Depending on the environment a firm finds itself EO may be favourable (Covin and Slevin,

1989) less favourable or even detrimental to their performance (Miller and Friesen, 1983; Hughes and

Morgan, 2007). Building on Covin and Slevin‘s (1991) conceptualisation of factors that affect EO,

several authors extend internal/organisational factors that influence EO-performance of firms into five

(Hornsby et al., 2000). They are: appropriate use of rewards; gaining top management support;

resource availability; Supportive organizational structure; and risk taking and tolerance for failure.

Given that these factors are decided by management, one can argue that they can be influenced by top

management values and philosophies. Those management values and philosophies are influenced by

the national culture surrounding them. For instance, based on their discretion, top management can

design a flexible structure that fosters creativity and free flow of information and also a culture with

high tolerance for risk-taking and failure.

As noted earlier, the factors that affect EO of firms are numerous. It helps to focus on the two

variables: ‗role of management‘ and ‗role of culture in EO of firms‘ as they are more relevant to this

discourse. The figure below is a diagrammatic representation of how the factors moderate the EO-

performance relationship, based on Lumpkin and Dess‘ (1996) conceptual framework.

1 Values, which form the core of any culture, are broad tendencies to prefer certain states of affairs over others (Hofstede,

1991)



Figure 3-1 Conceptual Framework of Entrepreneurial Orientation Lumpkin and Dess, 1998

3.1.1 Role of Top management: Leadership and organisational structure

Extant literature suggests that EO is a top-down phenomenon (Quinn, 1985; Hornsby et al.,

2009; De Clerq et Al., 2010; Zahra, 2010) that is the process must start at the very top of the

organization. To effectively undertake EO, Quinn (1985) suggests that top management needs

flexibility and tolerance for ambiguity in its strategic vision. In their work, De Clerq et al (2010)

provide a theoretical elaboration of how the internal social context affects the EO–performance

relationship. They advocate that procedural justice and trust in the relationships between functional

departments can foster EO, and argue that by fostering commitment and inspiration throughout the

ranks of the organization, top managers can create further impetus for cross-functional initiatives and

collaboration that facilitate knowledge exchange and ultimately help fulfil the firm's entrepreneurial

potential.

Some bodies of research including Hayton (2005) suggest that organizational structure and

culture are the most important aspects of managing entrepreneurship within organisations. In their

work on conceptualization of entrepreneurship as opportunity-based firm behaviour, Stevenson and

Jarillo (1990), noted that flat managerial structure characterise firms who behave entrepreneurially.

Though they do not concede that flat structure is always necessary for firms to be entrepreneurial

since certain internal and external factor could necessitate firms to favour hierarchical structure, they

stress that flat organisational structure brings flexibility and increases communication as well as to

give employees the autonomy to exercise and enhance their creativity. For example, they point out

that a hierarchical approach is necessary in the face of greater complexities of tasks like planning,

coordination, and controlling functions. Hence they conclude that it‘s up to managers to foster

conditions favourable to EO within their organization. Designing the structure of the management –in

terms of removing unnecessary bureaucracy and hierarchy- to encourage communication, enhance

Entrepreneurial

orientation

Risk taking

Innovativeness

Proactiveness

Competitive

aggressiveness

autonomy

Organisational factors

Role of manager

Environmental factor

National culture

Firm‘s Performance

Market share growth

Gross profit Margin

Return on Investment



creativity and therefore stimulate entrepreneurship is highly dependent upon the manager‘s personal

values, attitude and beliefs which are forged by his culture, social exchanges, and expectations. Since

these values, attitudes and beliefs are reflected in different national cultures, how they fit in with the

existing organisational culture and the influence of national culture on them could be a major factor in

the differences in how firms in the west and other parts of the world are managed.

Some studies have shown that leadership style of top managements directly affect the

performance of their firms (Gardner and Stough 2002). Following their study, Bass and Avolio, 1993

concludes that transformational leadership2 is significantly more correlated to the business

performance than transactional leadership3 and passive avoidant leadership

4 because it embodies the

concept of entrepreneurial leadership proposed by Gupta et al. (2004). According to Cohen (2004),

entrepreneurial/charismatic leaders with clear and realist vision and strategy are needed to give firms

inspiration and drive to brave dynamic, complex, uncertain, and competitive environments. Although

charismatic leadership may be effective at times, the ―dark side of charisma‖ is also well documented

(e.g., Conger, 1989; Howell, 1988) and evidenced by totalitarian, exploitive, self-aggrandizing

charismatics, extreme centralization of authority, irresponsiveness to new ideas and suggestions which

in the long-run may be detrimental to performance of the organisation.

Having established that managerial style affect performance, it is important to acknowledge

that the leadership style a manager adopts depends on his values, beliefs and philosophies which are

dependent on his culture.

3.1.2 The role of culture

Culture is defined as a set of shared values, beliefs, and expected behavior of a people

(Hofstede, 1980a). Those values embedded in cultures define the degree to which societies perceive

entrepreneurial behaviours such as risk taking, and independent thinking. In this same token, culture

and its characteristics may affect how societies organise their firms. Cultural patterns vary across

regions and consequently their impact on firms varies. Hofstede (1980a) conceptualized these patterns

in various national cultures into power distance; collectivism/individualism; masculinity/feminism;

uncertainty avoidance. In various national contexts, the differences in the dimensions of national

culture are well established (Hofstede, 1981, 1991; Phatak, 1986; Trompenaars and Hampden-Turner,

1998), and their implications on managerial styles and employee behaviour (Chen and Francesco,

2000; Miroshnik, 2002) have been noted. For instance, Mexico is characterised by a very high level of

―power distance‖ contrary to United States that is characterised by a very low. As a result of this gap,

2 According to Yammarino & Bass (1990), transformational leaders or charismatic leaders transform organisations (Tichy

and Devanna, 1990) articulating a realistic vision of the future that can be shared, stimulating subordinates intellectually, and

paying attention to the differences among the subordinates 3 Transactional leaders are those who recognize what followers want to get from their work; try to see that followers get

what they desire if their performance warrants it; exchanges (promises of) rewards for appropriate levels of effort; and

responds to followers‘ self-interests as long as they are getting the job done (Bass, 1985). 4 Passive-avoidant leaders are leaders who shy away from important decisions and abstain from an active leadership role

(Bass, 1985).



Hofstede (1981) suggests that a management tool such as ―Management by Objectives‖5, popular in

the United States, may be inappropriate in Mexico; Mexican managers will not accept delegating

important tasks to their subordinates because of their weak sense of egalitarianism. They will not also

favor a participative managerial model. He also noted that matrix structures which ought to be a way

of dealing with external complexity, overcome internal tensions and bring more flexibility to firms

does not seem work in countries like Germany and France. In France, the reason for this is that it

violates the principle of unity of command and hierarchical line and in Germany it goes against the

absolute need for clear structures, information channels, roles and responsibilities. In short it conflicts

with their cultural values. This example highlights the contextual impact of cultural values on EO.

3.1.2.1 Influence of national culture on entrepreneurial orientation

How societies perceive such entrepreneurial behaviours like risk taking and their attitude

towards the uncertainty and failure associated with it, can either foster or deter the propensity for the

citizens of that society to be entrepreneurial (e.g., Herbig & Miller, 1992; Herbig, 1994;Hofstede,

1980a). This school of thought, some scholars think, explains the disparity in the entrepreneurship

spirit of US and UK. US people are more entrepreneurial than UK. Theorists argue that this is because

US have high tolerance for risk and failure whereas UK has low tolerance for failure. This is one

example of how much impact culture can have on entrepreneurial orientation. Not all scholars favour

this idea that culture impact on entrepreneurship. Some argue that the since personal traits and

characteristics of entrepreneurs, such as independent thinking and risk taking, are consistent

regardless of the culture that births those entrepreneurs. (McGrath et al., 1992b), culture should have

no effect on EO. Though there might be some evidence to support this argument, one can draw

lessons from Mother Nature to counter this argument. It is well known that a good seed will not do

well, if it grows in the first place, in an inhibiting environment (like infertile ground) compared to a

supportive environment. By the same token, entrepreneurship may not flourish in a hostile

environment. Culture determines the degree of supportiveness or otherwise, of a society making it

more legitimate for entrepreneurship to thrive or die (Etzioni, 1987).

This relationship between culture and entrepreneurship as a subject for debate has attracted

more scholarly interest and empirical scrutiny over the last decade (Davidsson, 1995; Davidsson &

Wiklund, 1997; Shane, 1992, 1993). Most of these empirical studies have used Hofstede‘s

conceptualization of national culture. In general, these studies suggest that entrepreneurship is

facilitated by cultures that are high in masculinity, low in power-distance, low in uncertainty

avoidance, and high in individualism. Table 3-1 presents a summary of studies on culture-EO. Though

some studies have shown that culture significantly relates with entrepreneurial outcomes, Hayton,

George and Zahra, (2002) share a concern that culture might only be a moderator.

5 Management by Objectives or MBO is a tool for strategic planning in management that aims at articulating the company‘s

goals into clear and measurable targets which are broken down into specific objectives for each individual in the company

(Drucker, 1954).



Figure 3-2 A model for culture association with Entrepreneurship (Hayton, George and Zahra, 2002)

The figure above is a model that shows how culture might moderate entrepreneurial

outcomes. The nature and extent of culture‘s impact on aspects of corporate entrepreneurship like

choice of entry mode (Kogut & Singh, 1988; Makino & Neupert, 2000; Shane, 1994a), preference for

cooperative strategies (Steensma, Marino, & Weaver, 2000), and preferences regarding innovation-

championing styles (e.g., Shane, 1994b; Shane, 1995; Shane & Venkataraman, 1996) has been

investigated by scholars and some discrepancies have been well noted .

For instance, some studies hypothesize that culture affects choice of strategies for mode of

entry into new market (Kogut & Singh, 1988; Makino & Neupert, 2000; Shane, 1994a); they suggest

that firms in uncertainty-avoiding (i.e. uncertainty avoidance) societies will prefer joint ventures over

acquisitions (Kogut & Singh, 1988), and firms in low power-distance societies prefer licensing to

direct investment (Shane, p. 994b). This view point is not consistent with the findings of (Makino &

Neupert, 2000). They noted that Japanese firms with moderate power-distance and high uncertainty

avoidance usually prefer wholly owned subsidiaries to joint ventures, whereas American firms with

low power distance and low uncertainty avoidance prefer joint ventures to wholly owned subsidiaries.

These discrepancies are reflection of the idiosyncrasies of the national context wherein those

studies were made. The ethos therefore is that cultural dimensions impact in different ways the EO of

firms across national context i.e. culture-EO relationship is national context specific. In Berger‘s

words, ―It is culture that serves as the conductor to entrepreneurship‖ (Berger, 1991, p. 122). This

means that a national culture that supports values and behaviours that foster EO is imperative for

entrepreneurship to thrive. In this regard, the following sub headings clarify how culture might affect

the dimensions of EO.

(Society)

Economic Context Economic growth

Industry conditions

Industrial infrastructure

Cultural Values

Individualism-Collectivism

Uncertainty avoidance

Power-distance

Masculinity-feminism

Cognition

Schemata - knowledge structures

Heuristics - decision preferences

Beliefs and Behaviors

Risk taking

Locus of control

Self efficacy

Needs and Motives

Need for achievement

Need for affiliation

Individual and social goals

Institutional Context

Social systems institutions

Regulatory and legal systems Entrepreneurship

New-venture creation

Small and micro business

Self-employment

Corporate venturing

(Individual

)



Table 3-1 previous study on culture and entrepreneurship

Authors Research question Major Findings

Shane (1992) What is the association betwenn

national culture and national

rates of innovation

National rates of innovation are

positively correlated with

individualism and power

distance

Shane (1993) What effect does national

culture have on national

innovation

National rates of innovation are

positively correlated with

individualism and negatively

correlated with uncertainty

avoidance and power distance

McGrath & MacMillan (1992) Across culture, do entrepreneurs

share common perception about

non entrepreneurs?

Across diverse cultures there is

a common set of perceptions

held by entrepreneurs about

non-entrepreneurs

MacGrath et al., (1992b) It there a set of values that are

held by entrepreneurs versus

non-entrepreneurs across

cultures?1

Across cultures, entrepreneurs

score high in power distance,

individualism and masculinity.

And low in uncertainty

avoidance.

Muller & Thomas Do entrepreneurial traits vary

systematically across cultures?

Cultures high in individualism

are correlated with an internal

locus of control. Cultures high

in individualism and low in

uncertainty avoidance rate

highest in the measure of

entrepreneurial orientation

(innovativeness and internal

locus of control)

Thomas & Muller How prevalent are four key

entrepreneurial traits

(innovativeness, locus of

control, risk taking, energy)

across cultures?

Entrepreneurial traits

(innovativeness, locus of

control, risk taking, energy)

decrease as cultural distance

from the US increases.

3.1.2.1.1 Risk taking

The willingness to take risk and accept the consequences that bear the unknown is the

fundamental characteristic of entrepreneurs or entrepreneurship. New entries are made because

individuals and firms alike elect to forfeit the security of jobs or the current state of art within

organisations and pursue their new ideas (Lumpkin and Dess, 1996). Thus, risk taking is a very

important dimension of EO. Entrepreneurs are not deterred by the uncertainty that comes with their

actions, but with their eyes fixed on the anticipated outcome, they are motivated by a hope that is

geared towards success. Despite the lack of consensus, all definitions of entrepreneurship, or who an

entrepreneur is, acknowledge risk taking as a trait that is characteristic of all entrepreneurs, regardless

of what culture it is. Risk taking is an attitude. It is a way of life. Like other values, it can be



reinforced or deterred by culture. A culture that encourages adventure and proclivity, tolerance for

ambiguity, trying new things, challenging conventional wisdom, committing resources to

experimentation and gives room for failure will reinforce it. But a culture that is uncertainty averse;

that prefers to leave things that way they are and accept events as ‗the will of god‘, or at most, settle

for predictable outcomes, will deter it. In Nigeria, the Igbos‘ are generally accepted as the most

entrepreneurial tribe. Most of them are who are engaged in entrepreneurial activities are successful

entrepreneurs. A logical explanation to this is found in their culture. Igbos‘ are explorative. They are

more travelled than any other tribe in Nigeria. They are encouraged to endeavour to fend for

themselves and not rely on their fathers‘ wealth from a very early age. So from early in life, most of

them start committing to different activities in search for green pastures. This hard work, explorative

and risk taking propensity might be the reason behind this fact.

3.1.2.1.2 Innovativeness

Schumpeter (1934) argues that innovations are capable of punctuating market equilibrium by

destroying old markets and creating new ones. This is what he called ―creative destruction.‖

Innovation plays a very important role in the success of firms. It gives firms competitive advantage.

But like Peter Drucker said, innovations are not a ―flash of genius‖, but series of tasks with a clear

sense of purpose organised in a systematic manner promoted and supported by management (Drucker,

1985). In other words, innovation is a product of circles of trial and error which is encouraged by

management. Hence, the strength of innovativeness is embedded in the culture surrounding it. If a

culture supports new ideas, novel solution to problem and experimentation then innovativeness is

more likely to be greater. Such culture will experience results like new technologies, products and

processes. This is probably the best explanation for the success of East-Asia vis-à-vis Africa. East-

Asian cultures share very similar cultural patterns as sub-Saharan African‘s cultures. Amongst these

cultural patterns are respects for seniority, high power distance, collectivism and responsibility to

expended family. While some bodies of literature argue that cultural values hold the answers to the

economic backwardness of sub-Saharan African countries, reports acknowledge that the economy of

countries like China and India with similar cultural values have increased dramatically over the two

decades. One can argue that there are many other reasons to the development of East-Asia such as

policies, social and human capital, but in the context of national culture, orientation towards

innovativeness and risk taking are suggested answers to this disparity.

3.1.2.1.3 Proactiveness

Proactiveness can render first-mover advantage to a firm. Lieberman and Montgomery (1988)

argue that first-mover advantage is the best strategy for capitalizing on a market opportunity as the

first mover can capture unusually high profits and quickly establish their brand as the market

standard. However, proactiveness is not limited to first-mover and first move does not guarantee this



advantage. There are many examples to support this counter argument. For instance, Apple was not

the first mover into digital music but is has established its iTunes brand as the standard for the

industry. Nevertheless, the point here is that proactiveness offers some advantages. Proactiveness cuts

across all other dimensions of EO like risk taking and innovativeness. Hence a culture that supports

innovativeness and risk taking may support proactiveness and a culture that deters them may also

have similar affect it.

3.1.2.1.4 Competitive aggressiveness

Competitive aggressiveness places emphasis on achievement and performance in management

psychology, expectancy-value theorist (Atkinson, 1957; Eccles et al., 1983; Wigfield, 1994; Wigfield

& Eccles, 1992) argue that high expectation and value for an activity increases individuals‘

persistence and aggressiveness for performance and achievement. However, lack of recognition of

achievements and performance can be demotivating (Hezberg, 1959). Thus, a culture that fairly

rewards achievements and performances will provide an environment for individuals to be motivated

by how they perceive opportunities.

3.1.2.1.5 Autonomy

The driving force behind the creation of new ventures is the independence and freedom to act

entrepreneurially. Such actions taken independently of stifling constraints connote autonomy. As such

autonomy is a key dimension of EO. However, for autonomy to be as productive as possible,

entrepreneurs must operate within enabling cultures. Such cultures should allow entrepreneurs to act

independently, maintain personal control and pursue opportunities without societal constraints and

restrains. For firms to promote this kind of culture, they must be committed to decentralization of

authority, lower power distance and high tolerance for risk and uncertainty (Pinchot, 1985).

From the discussions so far, two conclusions are clear: first, EO-performance relationship is

context specific; second, culture-EO relationship is national context specific. The implication of these

conclusions is that those dimensions of EO that render high performance to Western firms may give

totally different result in different national context because of the prevailing culture in that nation and

replicating such dimensions in different national context might be a recipe for disaster. But given that

most literature suggests that EO is positively related with performance, it is reasonable to test for a

positive relationship. Hence the following two hypotheses are made:

H1: All the dimensions of EO are positively related to performance of Nigerian firms.

H2: EO mediates the relationship between culture and performance of Nigerian firms.



Culture and Entrepreneurial Orientation 3.2

3.2.1 Management in sub-Saharan Africa (SSA)

In management, two fundamental issues that govern the productivity of businesses are; the

ability of managers to lead and the propensity of workers to work. The former deals with ‗leadership‘

and the later deals with ‗motivation‘. The following sub-sessions will discuss how culture affects

these management practices.

3.2.1.1 Leadership

Leadership in SSA is mostly characterised by high power distance and autocracy, uncertainty

avoidance and risk averseness, family ties and interpersonal relationship. As N‘dongko (1999) notes,

―African managers are seldom driven by organizational objectives and goals. As soon as an African is

appointed to a management position, he then appoint his relatives and family members to positions of

responsibility in the organization African managers do not strive for challenges and excellence, but

rather they remain content with the status quo and mediocrity‖ (p. 114). These attitudes are product of

the prevailing culture. Hofstede argues that

―the crucial fact about leadership in any culture is that it is a complement to subordinateship...

Whatever a naive literature on leadership may give us to understand, leaders cannot choose

their styles at will; what is feasible depends to a large extent on the cultural conditioning of a

leader‘s subordinates‖ (Hofstede, 1980b, p. 57)

Empirical investigations suggest that in general, African managers are authoritarian in their

leadership and their subordinates remain deferent and loyal them (Blunt and Jones 1995; Kuada 1994;

Leonard 1987; Montgomery 1987; Tuma 1988). This authoritarian disposition reinforced by a culture

that endorses ascribed status and respect for seniority (Kauda, 1994), large power distance (Hofstede,

1980, 1991). Management has all the power and regulates rewards and punishment while workers are

expected to do their work and obey management‘s directives. In this way organisations are mostly,

hierarchical, highly bureaucratic, and communication is mainly one way, from top to bottom

(Kiggundu et al., 1983). In essence, centralisation of authority characterises organisational culture

within sub-Saharan African firms.

Previous empirical research findings suggest that greater degrees of centralisation and

formalisations have a propensity to lower the ability of firms to acquire more information, disseminate

and use such information (Deshpande, 1982). To emphasize this point, Martins and Terlanche (2003)

suggest that a flexible structure with high degree of freedom, autonomy and empowerment enhances

creativity and innovation. Hence they conclude that informal and decentralised organisational

structures tend to favours EO. Contrary to this, Kuada and Buatsi‘ (2003) empirical study on the

market orientation and management practices in Ghanaian firms suggest that centralization and

formalisation has a positive impact on market orientation of Ghanaian firms. This finding is in

consonance with the results of Miller (1983) which suggest that centralization positively correlates



with entrepreneurship. Even if this positive impact is in the short-run, as Kuada and Buatsi suggest,

the argument that management practices and leadership styles that are successful in the West may not

be successful in different cultural contexts, is reinforced.

3.2.1.2 Work Motivation

Mahungwa and Schmidt (1983) found six factors that affect work motivation in sub-Saharan

African firms. They are growth and advancement opportunities, the nature of the work itself, material

and physical provisions elements, interpersonal relations, concerns about fairness in organizational

practices, and personal matters. Jones et al. (1996) suggest that strong relationship with bosses with a

purpose of benefiting from their favour is also a motivating factor for some workers. Such benefits

include, pay rise, bonus or promotion. Most African firms do not operate performance-based

compensation but instead managers and workers are rewarded according to their needs and tenure in

office. Performance appraisal is bias due to personal relationship and family ties. That means,

appraisal is largely based on compliance rather than productivity (Thairu, 1999).This kind of practice

may lead to employee apathy, thereby preventing organizational growth.

3.2.2 African cultural patterns

The attributes of organisational cultures are shaped by the prevailing culture in the society

(Granovetter, 1985). Many of the difference in organizational behaviour between African and

Western world are not necessarily due to managerial failure but to lack of fundamental similarities in

the value priorities of the societies that encapsulates them (Leonard, 1987). Across sub-Sahara Africa,

cultural patterns are characterised by diversity, contrasts and contradictions (Kiggundu, 1988: 170).

Even within Nigeria, tribal, religious and ethnic differences are substantial. But despite this vast

diversity, there are some common features that cut across African cultural patterns. Some of these are

respect for elders, respect for authorities, pride of class and social status, family orientation,

collectivism and consensus decisions and so on (Hofstede, 1991).

For the purpose of this study, it is best to focus on the most salient cultural patterns that relate

to this discourse. They include respect for elders and deference to power, collectivism and power

distance. These cultural patterns have been considered to be important in describing management

practices in sub-Saharan African (Blunt and Jones, 1992).

3.2.2.1 High Power distance

High power distance implies a situation where individuals in a society who are less powerful

accept unequal distribution of power and willingly regard such distribution as normal (Hofstede,

1980). Within firms, high power distance is reflected in centralisation of authority, tall organisational

structures where lower level employees cannot take decisions without reference to superiors and open

criticism is rare. Several empirical studies suggest that many African cultures score high on power

distance (Hofstede, 1991; Beugre and Offodile, 2001; Montgomery, 1987).



Table 3-2 Identification and Definition of Cultural Dimensions Based on Hofstede (1980)

Cultural Dimension Definition

Power Distance—degree of tolerance for

hierarchical or unequal relationships

High—large degree of tolerance for unequal

relationships

Low—small degree of tolerance for unequal

relationships

Uncertainty Avoidance—degree of

acceptance for uncertainty or willingness to

take risk

Strong—little acceptance for uncertainty or risk

Weak—generally accepting for uncertainty and

risk

Individualism—degree of emphasis placed

on individual accomplishment

Individualism—large degree of emphasis on

individual

accomplishment

Collectivism—large degree of emphasis on group

accomplishment

Masculinity—degree of stress placed on

materialism

Masculinity—large degree of stress on

materialism and

wealth

Femininity—large degree of stress on harmony

and

relationships

High power distance is reinforced by respect for seniority. Africans hold a lot of respect for

their seniors and therefore the older a person is the more he6

is respected. The reason for this respect

for age is not very clear. The most common reason is that Africans believe there is a strong correlation

between age and wisdom. This belief is derived from the master-servant apprenticeship that

characterised the pre-Westernisation era; when skills and knowledge were majorly thought by masters

who are normally elderly. Because these elderly ones have acquired some knowledge and skills,

thanks to their wealth of experience, younger ones often look up to them for knowledge (Baltes and

Staudinger, 2000). With Westernization of African countries, this correlation are no longer true

(Baltes and Staudinger, 2000). People now respect the wisdom of an individual more than his age

6 He, his or him, as used here and every other place in this study is used to qualify both male and female and has

no gender bias motive.



(Beugre and Offodile, 2001); those with modern skills or higher position tend to command more

respect. Irrespective of this, respect for seniority still shape interpersonal relationships. The

implication is that even when granted to employees, autonomy may be of no effect because of a

natural tendency of allegiance to seniors (or authority). Hence the hypothesis:

H3a: High power distance is negatively related to autonomy in Nigerian firms.

Some body of research suggest that centralization of authority give managers a clear focus

and can improve the EO of firms. This is because centralization of authority makes managers respond

faster to situations. That is centralization is positively correlated with proactiveness. Given that high

power distance leads to centralization of authority, one can argue that it is positively related to

proactiveness. Hence:

H3b: High power distance is positively related to proactiveness of Nigerian firms

3.2.2.2 Collectivism

According to Hofstede (1980), ―Collectivism pertains to societies in which people from birth

onwards are integrated into strong, cohesive in-groups, which throughout people's lifetime continue to

protect them in exchange for unquestioning loyalty‖ (p. 51). Africa culture is characterised by group

activities (Dia, 1991; Hofstede, 1991). Africans feel comfortable in groups than individually (group

legitimacy) (Ahiauzu, 1989). Given the widely accepted fact that there‘s power in synergy, one can

argue that collectivism has positive effect on firm‘s performance through a positive relationship with

EO. But the effects of group legitimacy on business performance are not clear. Some scholars argue

that it positively affects firms‘ performance (Adler and Kwon, 2002; Nahapiet and Ghoshal, 1998),

while others argue otherwise (Burt, 1992; Uzzi, 1997). Shared creativity norms which is a function

of group activities, are likely to encourage groupthink which may lead to similar knowledge transfer.

This has the potential of locking a firm in specific trajectories thereby reducing firms‘ openness to

new ideas and thereby could impair the performance of firms. Also the predominance of groups

requires consensus decision making. Consensus is achieved through long discussion and negotiations

which could slow down decision making process7. The implication is that group legitimacy or

collectivism could have a positive or negative consequence on firm‘s EO. For the purpose of this

study, it helps to breakdown this relationship to the component level and investigates how

collectivism might affect the individual dimensions of culture. Hence the following hypotheses:

H4a: Collectivism is positively related to risk taking in Nigerian firms

H4b: Collectivism is positively related to innovativeness Nigerian firms

H4c: Collectivism is positively related to aggressiveness Nigerian firms

H4d: Collectivism is negatively related to proactiveness Nigerian firms

H4e: Collectivism is positively related to autonomy Nigerian firms

7 The author thanks the senior colleague who raised this line of argument after reviewing this study.



3.2.2.3 Uncertainty avoidance

Unlike Western cultures, African cultures are not inclined towards controlling the external

environment but rather to comply with it. One of the consequence patterns is a tendency to avoid

uncertainty (Hofstede, 1980). African societies are risk-averse. They avoid situations that bring

change because of fear of the uncertainty that comes with the unknown. Selah (1985) notes that

traditional values in Kenya discourage change but encourage people to accept things that way they

are. This attitude cuts across sub-Saharan Africa. Africans are very religious. People are quick to

accepting circumstances as ‗the will of the gods‘. When events occur they aptly find explanations in

spirituality rather than finding logical answers. Such lack of curiosity leads to mediocrity and content

with status quo. This explains why most African firms are reluctant to confront status quo with

innovations. To buttress this point, Montgomery (1987) opines that African managers are

conservative. They prefer to accept the present as it is than to brave the unpredictable future and

accept the uncertainty that follows the act. These values and attitude emphasise blind obedience to

authorities and general avoidance of risks within firms. Hence the hypotheses:

H5a: Uncertainty avoidance is negatively related to risk taking

H5b: Uncertainty avoidance is negatively related to proactiveness

3.2.2.4 Masculinity

Members of masculine cultures are assertive; they value achievement, courage and

competition and view the world in terms of winners and losers (Hofstede, 1991). On the other hand,

feminist cultures tend to discourage the notion of competition believing that negotiation and

compromise can be used to resolve conflicts (Hofstede, 1980a). Although Africans are risk averse,

they are assertive and competitive in nature. This makes them tend towards the masculine end of

Hofstede (1980a) masculinity/feminism continuum. Given that firms in Nigeria are successful in spite

of their masculine tendencies, we make our fourth hypothesis:

H6a: Masculinity is positively related to risk taking.

H6b: Masculinity is positively related to competitive aggressiveness

H6c: Masculinity is positively related to autonomy

For the purpose of clarity shows a list of all the hypotheses and gives a diagrammatic

representation of the hypotheses relationship.



Table 3-3 List of hypothesis

H1: All the dimensions of EO are positively related to performance of Nigerian firms.

H2: EO mediates the relationship between culture and performance of Nigerian firms.

H3a: High power distance is negatively related to autonomy in Nigerian firms.

H3b: High power distance is positively related to proactiveness of Nigerian firms

H4a: Collectivism is positively related to risk taking in Nigerian firms

H4b: Collectivism is positively related to innovativeness Nigerian firms

H4c: Collectivism is positively related to aggressiveness Nigerian firms

H4d: Collectivism is negatively related to proactiveness Nigerian firms

H4e: Collectivism is positively related to autonomy Nigerian firms

H5a: Uncertainty avoidance is negatively related to risk taking

H5b: Uncertainty avoidance is negatively related to proactiveness

H6a: Masculinity is positively related to risk taking.

H6b: Masculinity is positively related to competitive aggressiveness

H6c: Masculinity is positively related to autonomy



Table 3-4 A diagrammatic representation of the hypotheses and their relationships

H1 All the dimensions of EO are positively

related to performance of Nigerian firms

H3-6

performance

H2

EO mediates the relationship between

culture and performance of Nigerian

firms

EO

H3a High power distance is negatively

related to autonomy in Nigerian firms.

Risk Taking

H3b High power distance is positively related

to proactiveness of Nigerian firms

H4a Collectivism is positively related to risk

taking in Nigerian firms

H4b Collectivism is positively related to

innovativeness Nigerian firms

Autonomy

H4c Collectivism is positively related to

aggressiveness Nigerian firms

H4d Collectivism is negatively related to

proactiveness Nigerian firms

Proactiveness

H4e Collectivism is positively related to

autonomy Nigerian firms

H5a Uncertainty avoidance is negatively

related to risk taking

H5b Uncertainty avoidance is negatively

related to proactiveness

Competitive

aggressiveness

H6a Masculinity is positively related to risk

taking

H6b Masculinity is positively related to

competitive aggressiveness

H6c Masculinity is positively related to

autonomy

Innovativeness


35 Research Design | University of Nottingham

Research Design 4

This chapter outlines the research design used to test the hypotheses developed in the

preceding chapter. It begins by justifying and describing the samples and the sampling method

adopted as the channel for the execution of data generation strategy. Next it reviews the respondents

and the method used for data collection in this study. Following this, a summary of how the data was

prepared for analysis will be made. Next, the measures (Table 4-2) used for the study will be

discussed in reasonable detail, that will be followed by a detailed description of the analytical

technique used.

Sample population and sampling method 4.1

Defining the sample population for this study takes into account the geographical location of

the units at the time of sampling. Thus, the population for this study is Nigerian based firms. Because

the focus of this study is to investigate EO and firm performance in a national context, testing the

hypothesis did not require focusing on specific industry context and firm context. Consequently, a list

of 120 Nigerian firms cutting across various industries was compiled by randomly sampling the firms

on the directory of Yellow Pages‟ website and the website of Lagos, Edo and Abia states‘ Chamber of

Commerce. Owing to low IT orientation and poor internet facilities in Nigeria, some of the listed

firms did not have a good websites, if they had at all, thus much information on firms could not be

gathered from the web.

Key informants 4.2

The informants targeted for this study were first line managers and lower level employees

who have been with the firm from up to 6 months (Kumar, Stern, & Anderson, 1993). This category

of employees was identified as most relevant informant for this study for two reasons: first, they

understand the culture and disposition of the firm to risk taking proactiveness and innovativeness

(Huber & Power, 1985; Stubbart, 1989; Hmieleski and Baron. 2008). Second they are in a better

position to give an objective view of their firms with regards to both the culture and entrepreneurial

posture than top managers will do (Baum, Locke and Kirkpatrick, 1998).

Data collection and response rate 4.3

To gather data, an online survey method was adopted. A questionnaire was created on Survey

Monkey® and the link to the questionnaire‘s webpage was sent to some of the sampling unit by

means of email. These sampling units are those firms whose email address was available in the same

directory from where they were sampled at the time of sampling. Those sampling units who could not

be contacted by email because their email address was not available in the directory as at the time of

sampling were contacted by telephone to take the questionnaire. In creating and administering the

survey, Dillman (2000) Tailored Design Method was adopted. Features like questionnaire salience,



length, anonymity and confidentiality guarantees, and many other features of this protocol were

thoroughly considered to secure a good response rate (Cycyota and Harrison, 2002). Pre-notification

emails and the link to the questionnaire, and a series of follow-up correspondence were sent

respectively to sampling units (Dillman, 2000).

Owing to consistent follow up emails and calls made to all the respondents and non-

respondents, a total of 61 responses were received resulting in a response rate of 50 %. Nonetheless it

is necessary to acknowledge that apathy towards survey in Nigeria and lack of time on the part of

respondents limited the responses. All the responses were received in the first two weeks in August

2011.

Of the 61 samples collected, 47 qualified for this study with the remaining 14 been removed

owing to excessive amounts of incomplete information. This subsample represents firms with

different ownership types in different industries. All the firms qualify as small medium and large

enterprise because they either have above ten employees or an annual turnover of over N2 million

(£8,000). Given that most extant studies on culture, EO and performance focus on small, medium or

large firms, the choice of focusing on these firms is justified especially as it makes this study more

comparable with extant literature. Also, all of them have been in business for over a year and by

considering their turnover, they can be presumably approximated to established firms. Notably, most

of the respondents did not give the actual turnover of their firm as they were reluctant to divulge that

information (Bamford et al., 2000). Though the values they gave may not reflect their actual

performance, it qualified them for this study.

Control Variables 4.4

Control variables included the age of the firm, the age of the respondents in the firm, and the

numerical size of the firms. These control variables were significant for two reasons: first, they helped

to ensure that firms used in this study qualify are classified as small, medium or large but not micro

firms. Second they helped to ensure that respondents have been with the firms for at least 6 months, a

duration that is enough to understand firm‘s culture. See Table 4-1 for average of the variables.

Controls N Minimum Maximum Mean Std. Deviation Variance

Respondents Age 46 .30 30.00 3.5196 4.88333 23.847

Firm Age 45 1.00 150.00 18.7111 23.36919 546.119

Numerical Strength 46 3.00 15500.00 1.0196E3 2733.98433 7.475E6

Table 4-1 Descriptive Statistics of control variables

Measures 4.5

EO, performance and dimensions of culture were employed in this study. The items used in

measuring them were adapted from established scales with slight modification where needed. All



items were anchored with a seven-point Likert response ranging from „strongly disagree‟ to „strongly

agree‟. All three measures are described below, and their items are included in the Table 4-2.

4.5.1 Entrepreneurial orientation

A firm with sound entrepreneurial posture is characterized by strong risk-taking propensity,

frequent and extensive technological and product innovation, proactiveness, aggressive competitive

orientation and autonomy for corporate venturing (Lumpkin and Dess 1996). These five

characteristics constitute firms EO. In Miller‘s (1983) point of view, for a firm to be considered as

entrepreneurial in the first place, the trio risk taking, innovativeness and proactiveness must be

present:

“In general, theorist will not call a firm entrepreneurial if it changed its technology or

product-line… simply by directly imitating competitors while refusing to take any risks. Some

proactiveness would be essential as well. By the same token, risk-taking firms that are highly

leveraged financially are not necessarily entrepreneurial. They must also engage in product-market

or technological innovation” (Miller, 1983, p. 780)

Table 4-2 Measures and Factor Readings

Scale composition Standardized Factor

Loading

Entrepreneurial Orientation

Risk-taking (In general top managers of your firm favor…) (α=0.808)

A strong emphasis on getting things done even if it means disregarding

formal procedures

0.590

A strong emphasis on experimentation and trying new things or doing

normal routines in new and different ways

0.657

A strong proclivity for high- risk projects (with chances of high returns) 0.787

Bold aggressive posture in order to maximise the probability of exploiting

potential opportunities

0.838

Innovativeness (In general top managers of your firm favor…) (α=0.712)

Dramatic changes in product or services 0.661

Enthusiasm in trying out new and novel ideas 0.783

Enthusiasm in trying out new ways to do things 0.832

Proactiveness (In dealing with its competitors, my firm) (α=0.865)

Typically initiates actions which competitors then respond to 0.881

Is very often the first business to introduce new products/services,

administrative techniques

0.839

Competitive aggressiveness (In dealing with competitors, my firm) (α=0.826)

Actively scans for the market entry of new competition 0.701



Is very aggressive and intensely competitive 0.801

Typically adopts a very competitive ―undo-the-competitors‖ posture 0.738

Autonomy (In general top managers of your firm favor…) (α=0.588)

A strong tendency to let the requirements of the situations and the

individual‘s personality define proper on-job behaviour

0.909

Emphasis on getting line and staff personnel to be flexible with their

formal job descriptions

0.550

Performance (α=0.866)

Sales increased 0.884

Number of employees increased 0.847

Profit increased 0.812

Market share increased 0.834

Cultural Dimensions (How do you agree with the following statements about your firm)

High Power distance (α=0.609)

Top managers and least member of staff (say for instance cleaners) don‘t

see themselves as equals

0.734

Top managers don‘t take initiatives from lower member of staff 0.600

Authority is centralized at the top management level 0.685

Collectivism (α=0.529)

Employer-employee relationship is perceived as a family link 0.724

Relationships prevail over tasks 0.821

Collective interest prevail over individual interests 0.657

Masculine/Feminism (α=0.572)

Managers are decisive and assertive 0.769

Male boss decision based on facts 0.754

Uncertainty (Risk Aversion) (α=0.858)

Top management don‘t like to make changes to products 0.792

Too many regulations and protocols before making decisions 0.751

Low tolerance for deviant and innovative ideas and behaviour 0.841

Reluctant to innovate 0.848

α (Cronbach‘s Alpha) = Reliability factor

Therefore a scale that encompassed these five dimensions was used for this study. The scale

had 14 items. This scale was developed by Covin and Slevin (1986) and validated by Lumpkin and

Dess (1996), although it was slightly modified for this study. The items focused on risk taking,

innovativeness, proactiveness, autonomy, and competitive aggressiveness. The respondents were



asked to which indicate the extent to which each of the items of the scale characterize their firm‘s EO

on a seven-point Likert-type scales.

4.5.2 Performance

As noted by Bamford et al. (2000), respondents are reluctant to divulge performance

information in questionnaires which in most cases renders the accuracy of such data questionable. To

handle this challenge, researchers have adopted subjective measures of performance since there is

little or no difference between subjective and objective measures of performance (Wall et al., 2004;

Geringer and Hebert, 1991; Dess and Robinson, 1984). Thus, using perceived performance methods

should strengthen the reliability and the validity of the data. Wiklund (1999) suggested that a

performance measurement scale should have indicators for growth as well as for financial

performance.

Hence, four items that indicates growth and financial performance are used in this study to

measure performance. These include increase in sales, increase in numbers of employees, profitability

and increase in market share. The items are adopted from Gupta and Govindarajan (1984) with slight

modifications. They are chosen because of their reliability and common use in literature. Respondents

were asked to indicate on a seven-point Likert-type scale, ranging from „strongly disagree‘ to

„strongly agree‟, the degree to which the item was consistent with their firms.

4.5.3 Dimensions of culture

As previously noted, African culture is characterized by high power distance, collectivism,

masculinity and uncertainty avoidance (Hofstede, 1980). To test these dimensions, a scale of 11 items

was used. The specific items of this scale were adapted from Hofstede (1980) with slight

modifications. The items focused on Hofstede‘s dimensions of national culture: High power distance,

collectivism, masculinity, and uncertainty avoidance. The respondents were asked to indicate the

degree to which each of the items in this scale was consistent with their firm.

Some studies suggest that the association between specific Hofstede‘s cultural dimensions is

not stable (Hayton, George and Zarha, 2002) resulting in conducting analyses of the influence of the

various cultural dimensions independently even when constructs were expected to co-vary. But this

was not the case with this study. As seen from, all the items of the scale loaded significantly into a

unidimensional scale which indicates that Hofstede scale is suitable for testing cultural dimensions in

Nigeria.

Furthermore Shane (1992, 1993) argued that sample size and heterogeneity limitations on the

interaction effects among cultural values have not been systematically addressed. He suggested that a

potential solution to this problem is to identify culturally homogeneous regions that are smaller than

countries. This is especially relevant in the case of Nigeria were the cultural diversity is intense. It is

unclear whether broad cultural characterizations such as Hofstede's (1980b) can sufficiently capture



the variance of highly culturally heterogeneous countries like Nigeria. But for the purpose of this

study the scale seemed adequate.

Data preparation 4.6

Using Survey Monkey® to create the questionnaire makes it easier to code the response

categories. After collecting the responses, the already coded data was downloaded in an excel format

(.xml) and imported into SPSS® for Windows TM

(Version 17) statistical package where further

coding, recoding (where necessary), data cleansing and analysis were made. All missing data was

treated by listwise deletion. The coding technique was clarified with a senior academic colleague to

ensure correctness.

SPSS® is a powerful statistics engine widely accepted as the best software for data analysis

(Foster, 2001). It was used to perform the statistical analysis used for this study. Among this analysis

are descriptive analysis, correlation analysis, factor, scale reliability (see Table 4-3 for summary of

results) and multiple linear regression analysis.

Data analyses, Reliability and validity 4.7

The items of this national culture, EO and performance scales were factor-analyzed to assess

their dimensionality or factorial validity of their items because individually they focus on different

aspect of the scales. Factorial validity is a form of construct validity (Allen and Yen, 1979). In

performing this validity test, principal component analysis with Varimax rotation at Kaiser Criterion

(Kaiser 1958; eigenvalues >1) with a listwise deletion of all missing data was used.

According to Moser and Stevens (1992) factor loadings or .522 of larger can be considered to

be significant. A high loading on a single factor indicates that the different aspects of entrepreneurial

orientation empirically related and constitute a unidimensional scale. All the items loaded

significantly (p < 0.01) above 0.522 on their specific construct (see Table 4-2). EO gave an average

loading of 0.773; performance gave an average loading of 0.844; and dimensions of culture gave

average loading of 0.748. These values indicate that it is appropriate to combine the items of different

scales into a single or unidimensional scale. Table 4-3 shows the summary of the analyses

Descriptive analysis like mean and standard deviation was also made. For EO, each firm‘s

mean rating on the various dimensions were used as their EO index. The higher the index, the more

entrepreneurial the firm is. This scale has a mean value of 4.605 and a standard deviation of 0.988.

For national culture, the mean ratings were used as the degree of influence national culture has on the

firms‘ culture. The higher the score, the more influence national culture has on firms‘ culture. The

scale has a mean value of 4.283, a standard deviation of 0.861. The performance scale had has a mean

value of 5.158 –an indication of a good performance– and a standard deviation of 1.527



Table 4-3 Descriptive statistics of measures

N Average

Factor loading

α σ Mean KMO

Entrepreneurial

Orientation

36 0.773 0.869 0.988 4.605 0.623

Performance 46 0.844 0.866 1.527 5.158 0.796

Cultural

Dimensions

36 0.748 0.749 0.861 4.283 0.565

α (Cronbach‘s Alpha) = Reliability factor; σ = Standard Deviation

The constructs were tested for reliability using Cronbach alpha (1951). The alpha coefficients

and the factor loadings all exceeded the 0.50 threshold of significance (Fornell and Larker, 1981). In

fact the all the items scored an average that is above 0.72 which is considered to be high by Nunnally’s

(1967). This clearly indicates that the scales are highly reliable. Also the average variance extracted

(AVE) for each construct ranged from 0.56 to 0.85, satisfying the 50 percent cut-off suggested to

signal convergent validity (Fornell and Larker, 1981).

Correlation analyses show that collectivism correlates with risk taking and autonomy (p<

0.05) while masculinity correlates with risk taking (p<0.05). See Table 4-6; all the dimensions of

culture did not correlate with performance (see

Table 4-5 ); among the dimensions of EO, only innovativeness correlate with performance

(see Table 4-4 ).

The analytical technique for testing hypothesis 4.8

The hypotheses made in this study suggest that the dimensions of culture affect the

dimensions of EO in different ways, and that the dimensions of EO affect performance in different

ways. The most appropriate technique for testing these kinds of hypotheses of causal relationships is a

multiple linear regression (MLR) analysis. MLR was chosen over other techniques like structural

equation modeling SEM (McQuitty, 2004; Shook et al., 2004) to test the hypotheses based on two

main reasons: first, theorists suggest that it is the simplest and most comprehensive method for testing

causal relationship hypotheses in cross-sectional design like this study (Shook et al., 2004). Second,

given the research goals and the use of principal component analysis, MLR technique gives greater

flexibility for multivariate analysis.

MLR analysis is a statistical technique used to model the linear relationship between variable

(criterion) and one or more independent variables (predictors) (Hair et al., 1998). The goal is to



identify the independent variable that predicts the dependent variable (Foster, 2001). MLR analysis

serves two broad purposes: first, to identify if any significant statistical relationships exist between

the proposed independent variables and the dependent variable, second, to confirm if, when taken

together, the significant statistical independent variables contribute strongly to the explanation (or

prediction) of the dependent variable.

Table 4-4 Correlations between dimensions of EO and Performance

Performance Aggressive RiskTaking Innovativeness Proactive Autonomy

Performance Pearson Correlation

1

Sig. (1-tailed)

Aggressive Pearson Correlation

.259 1

Sig. (1-tailed) .067

RiskTaking Pearson Correlation

-.129 .397** 1

Sig. (1-tailed) .230 .009

Innovativeness Pearson Correlation

.369* .427

** .351

* 1

Sig. (1-tailed) .015 .005 .019

Proactive Pearson Correlation

.163 .596** .372

* .400

** 1

Sig. (1-tailed) .174 .000 .014 .009

Autonomy Pearson Correlation

.210 .166 .345* .129 .122 1

Sig. (1-tailed) .113 .171 .021 .230 .243

*. Correlation is significant at the 0.05 level (1-tailed).

**. Correlation is significant at the 0.01 level (1-tailed).

a. Listwise N=35

Table 4-5 Correlations between culture and performance

Performance Uncertainty Collectivism HighPowerDist Masculinity

Performance Pearson Correlation 1

Sig. (1-tailed)

Uncertainty Pearson Correlation .004 1


Collectivism Pearson Correlation .082 .046 1

Sig. (1-tailed) .318 .394

HighPowerDist Pearson Correlation .007 .426** .074 1

Sig. (1-tailed) .484 .005 .333

Masculinity Pearson Correlation .028 .348* .276 .121 1

Sig. (1-tailed) .435 .019 .052 .240

**. Correlation is significant at the 0.01 level (1-tailed). *. Correlation is significant at the 0.05 level (1-tailed).

a. Listwise N=36



Table 4-6 Correlations between dimensions of culture and dimensions of EO

Uncertainty Collectivism HighPowerDist Masculinity Aggressive RiskTaking Innovativeness Proactive Autonomy

Uncertainty Pearson Correlation 1

Sig. (1-tailed)

Collectivism Pearson Correlation .093 1


HighPowerDist Pearson Correlation .533**

.082 1

Sig. (1-tailed) .002 .343

Masculinity Pearson Correlation .306 .390* .288 1

Sig. (1-tailed) .060 .022 .073

Aggressive Pearson Correlation .226 .319 -.138 .015 1

Sig. (1-tailed) .129 .052 .245 .470

RiskTaking Pearson Correlation -.065 .433* -.063 .346

* .324

* 1

Sig. (1-tailed) .373 .012 .377 .039 .050

Innovativeness Pearson Correlation .001 -.115 -.060 .141 .295 .191 1

Sig. (1-tailed) .497 .284 .383 .242 .067 .171

Proactive Pearson Correlation -.182 .124 -.140 .161 .385* .313 .244 1

Sig. (1-tailed) .182 .269 .242 .211 .024 .056 .110

Autonomy Pearson Correlation .140 .346* .305 .015 .063 .204 -.159 .011 1

Sig. (1-tailed) .243 .038 .061 .471 .378 .154 .214 .479

**. Correlation is significant at the 0.01 level (1-tailed). *. Correlation is significant at the 0.05 level (1-tailed). a. Listwise N=27



4.8.1 Model Equation

The MLR model equation employed in this research is given below:

Y =a + b1X + b2x + b3X, +ε

Where,

Y = the dependent variable (dimensions of EO or Performance),

X = the theoretically defined independent variable (dimensions of EO or dimensions of

national culture),

a = the constant; b1, b2, b3 = coefficient of independent variables; ε =the error term

4.8.2 Interpreting MLR model

The explanatory power of regression is summarized in R2 value (also called the coefficient of

determination). It is often described as the proportion of variance explained by regression. It measures

the proportion of variance of the dependent variable about its mean that is explained by the

independent variables (Hair et al., 1998). Its value varies from 0 to 1. Although high R2 does not

imply causation, the higher it is the more its explanatory power (Hair et al., 1998). A weakness with

R2 is that it can be made arbitrarily high thereby inflating accuracy by including more dependent

variables in the model. Adjusted R2

helps to compensate for this artificial accuracy. F ratio is used to

estimate the statistical significance of the regression. The advantage of F ratio is that it takes into

account the degrees of freedom, which is a factor of the sample size and number of dependent

variables. Hence it can be used to validate R2.

Another important regression factor is β (Beta). Β is the standardized regression coefficient

that allows comparison of an independent variable with a dependent variable. (Churchill, 1999)

In MLR analysis, <0.1 is widely accepted as the threshold for significance levels of all

coefficient. Particularly for relatively smaller samples as in this study, Sauley and Bedean (1989)

noted that a p < 0.10 level of significance can be satisfactory. Hence p < 0.10 was adopted as the

significance level for this study.

4.8.3 Assumptions used in the MLR model

Provided that the assumptions used in the MLR model are satisfied, the regression estimators

are unbiased, efficient and consistent. ―Unbiased means that the expected value of the estimator is

equal to the true value of the parameter. Efficient means that the estimator has a smaller variance than

any other estimator. Consistent means that the bias and variance of the estimator approach zero as the

sample size approaches infinity.‖ (Ostrom, 1990, p. 14). Some of the basic assumptions used in the

MLR model are: first, the relationship between the independent variable and the dependent variable

are linear; second, the variance of the residuals is constant; third, the error term is normally

distributed, forth, errors are uncorrelated with the individual dependent variables; fifth, the expected

value of the residuals is zero; sixth, the residuals are random, or uncorrelated in time (Ostrom, 1990).


45 Results of Data Analysis | University of Nottingham

Results of Data Analysis 5

This chapter highlights the findings of this study. Using multiple linear regression analysis 8

regression models were developed to test the hypotheses in the study. These models investigate the

causal relationships between constructs as proposed in this study. In model 1, the dimensions of

culture were the independent variables and EO was the dependent variable. In model 2 to 6, the

dimensions of culture were the independent variables and individual dimensions on EO were the

dependent variables. In model 7, the dimensions of culture were the independent variables and

performance was the dependent variable. In model 8, the dimensions of EO were the independent

variables and performance was the dependent variable.

Checks for multicollinearity were also performed on the models by testing the variance

inflation factors (VIF) and the conditioning index. The VIF of all the variables in the models ranged

between 1.109 and 1.774 and their condition index peaked at 16.084. These values are within the

tolerable limits set out by Hair, Anderson, Tatham, and Black (1998) which clearly suggest that there

is no multicollinearity between the models. Some of the regression models are statistically significant

and possess good explanatory power. Those models that were not statistically were also discussed

within the context that the model does not possess sufficient explanatory power. Table 5-2 a & b show

the summary of the models. However the regression results for each model are presented in Appendix

A.

Models 5.1

Model 1 (p<0.1; R2 = 18%) tests the effect of the dimensions of culture on EO (Table 5-1).

The parameter of β coefficient (β = 0.346, p=0.024) was only significantly positive for collectivism.

This suggests that collectivism positively relates with EO. Unfortunately, this model does not

sufficiently explain the effect of culture on EO. As noted by researchers, treating culture as a unitary

concept reduces its value as an analytic tool (Martin, 1992; Ogbonna and Harris, 1998a; Pettigrew,

1979). To handle this, models 2 to 6 were developed to give detailed insight on how culture might

affect the dimensions of EO.

Model 2 (p<0.05; R2 = 21%) tests the effect of culture on risk taking dimension of EO. The

model shows that collectivism (β = 0.282, p=0.058) and masculinity (β =0.282, p=0.075) are

significantly and positively associated with risk taking. This result supports H4a and H6a. However,

although the direction of the coefficient (β =-0.261) for uncertainty avoidance (p=0.112) was as the

predicted for H5a (that is negatively related to risk taking), this result is not statistically significant.

But given that β is high, there is the potential indication of Type 1 error which is generally due to low

sample size. If this is the case, the author therefore argues that at higher sample size, H5a could

significantly and negatively relate with risk taking.



Table 5-1 Multiple Regression Analysis results-a

Model Model Properties Dependent

variables

Independent Variables

Model 1 R2 = 0.177 EO Uncertainty

Adjusted R2 = 0.098 Collectivism

F-value= 2.256 HighPowerDist

Sig. = 0.079* Masculinity

Model 2 R2 = 0.206 RiskTaking Uncertainty



Sig. = 0.042** Masculinity

Model 3 R2 = 0.312 Autonomy Uncertainty



Sig. = 0.003*** Masculinity

Model 4 R2 =0.116 Aggressive Uncertainty


F-value = 1.1380 HighPowerDist

Sig. = 0.257 Masculinity

Model 5 R2 = 0.113 proactive Uncertainty

Adjusted R2= -0.028 Collectivism


Sig.= 0.274 Masculinity

Model 6 R2 =0.044 innovativeness Uncertainty




Model 7 R2 = 0.055 performance Uncertainty




Model 8 R2 = 0.251 Performance Aggressive

Adjusted R2 = 0.159 RiskTaking

F-value= 2.742 Innovativeness

Sig. = 0.032** Proactive

Autonomy Uncertainty =Uncertainty avoidance; HighPowerDist=High power distance; RiskTaking=Risk taking; Aggressiveness

=Competitive aggressiveness;

Model 3 (p<0.05; R2 = 31%). This model tests the effect of culture on autonomy. It finds that

collectivism (β =0.372, p<0.009) is significantly and positively related to autonomy while masculinity

(β =-0.266, p=0.071) has a significantly negative relationship with autonomy. Thus this finding

support H4e but not H6c. Surprisingly, the model suggest that high power distance (β =0.356,

p=0.016) is significantly positively associated with autonomy which is contrary to H3a.



Model 4 test the effect of culture on competitive aggressiveness dimension of EO. The model

suggests that collectivism has a positive effect on competitive aggressiveness which is consistent with

H4c, whereas masculinity has a negative effect on competitive aggressiveness which does not support

H6b. However, this conclusion is only in the context that the model (p=0.257) is too weak

(significance is slightly out of the p<0.1 levels) to explain this causal effect. Thus, this result should

be interpreted with caution.

Model 5 test the effect of culture on proactiveness. This model does not support H5b and

H4d. With a coefficient of β=0.305, this model reveals that high power distance is significantly and

positively associated with proactiveness (p < 0.1). This supports H3b. Unfortunately like model 4,

the model is too weak (p=0.274) to explain the variance of proactiveness with high power distance.

Thus, the result should be interpreted with cautions as well.

Given that models 4 and 5 are near the p<0.1 significance levels, the author maintains that a

higher sample size they could become significant enough to support their findings. Model 6 (p=0.750)

suggests that national culture has no influence on innovativeness whatsoever. With such significance

that is so distant form the p<0.1 levels, one can argue that a higher sample size will hardly make any

difference to the results.

Model 7 does not suggest any direct relationship between culture and performance exist. It

therefore follows that culture does not directly impact the performance of Nigerian firms. This renders

H7a and H7b invalid. This result though, is consistent with Hayton et al., (2002) concern that national

culture may only play a moderation role but not causal role in entrepreneurial outcomes of firms.

Model 8 test the effect of the dimension of EO on performance of Nigerian firms. The model

is significant at p<0.05 with R2 of 25% and suggests that risk taking and innovativeness impact on

performance. But while innovativeness (β =0.368, p=0.021) seem to significantly and positively affect

performance, risk taking (β =-0.323, p=0.042) has a significantly negative effect. Given that culture

has no direct relationship with firm‘s performance but relates with the dimensions of EO in different

ways, and that the dimensions of EO (risk taking and innovation) impact on firm performance, it

follows that EO mediates the relationship between culture and performance. This conclusion supports

H2.

Table 5-2 Multiple Regression Analysis results-b

Model Independent

Variables

Standardized

regression

coefficient (β)

t-value Sig. VIF Condition

Index

1 Uncertainty -0.085 -0.520 0.606 1.360 7.067

Collectivism 0.346 2.347 0.024** 1.109 8.906

HighPowerDist 0.181 1.167 0.250 1.224 11.045

Masculinity 0.081 0.515 0.609 1.262 16.084

intercept 3.979 1.000



2 Uncertainty -0.261 -1.626 0.112 1.360 7.067

Collectivism 0.282 1.949 0.058* 1.109 8.906

HighPowerDist 0.074 0.487 0.629 1.224 11.045

Masculinity 0.282 1.824 0.075* 1.262 16.084


3 Uncertainty -0.026 -0.177 0.860 1.360 7.067

Collectivism 0.372 2.759 0.009*** 1.109 8.906

HighPowerDist 0.356 2.511 0.016** 1.224 11.045

Masculinity -0.266 -1.851 0.071* 1.262 16.084


4 Uncertainty 0.130 0.768 0.447 1.360 7.067

Collectivism 0.278 1.819 0.076* 1.109 8.906

HighPowerDist 0.030 0.187 0.853 1.224 11.045

Masculinity -0.280 -1.718 0.093* 1.262 16.084


5 Uncertainty -0.268 -1.584 0.121 1.360 7.067

Collectivism 0.091 0.597 0.554 1.109 8.906

HighPowerDist 0.305 1.899 0.064* 1.224 11.045

Masculinity 0.025 0.152 0.880 1.262 16.084

intercept 2.307 0.026 1.000

6 Uncertainty -0.157 -0.894 0.376 1.360 7.067

Collectivism 0.044 0.278 0.782 1.109 8.906

HighPowerDist 0.205 1.226 0.227 1.224 11.045

Masculinity 0.041 0.243 0.809 1.262 16.084


7 Uncertainty -0.052 -0.293 0.771 1.360 7.067

Collectivism 0.150 0.940 0.353 1.109 8.906

HighPowerDist 0.178 1.059 0.296 1.224 11.045

Masculinity -0.038 -0.221 0.826 1.262 16.084


8 Aggressive 0.095 0.530 0.599 1.774 7.805

RiskTaking -0.323 -2.100 0.042** 1.298 10.423

Innovativeness 0.368 2.391 0.021** 1.295 11.327

Proactive 0.112 0.663 0.511 1.548 12.398

Autonomy 0.199 1.364 0.180 1.165 15.144

intercept 2.624 0.012 1.000

* p≤0.01; ** p≤0.01; *** p≤0.01


49 Discussion | University of Nottingham

Discussion 6

The goal of this study which was clarified from the beginning of this document was to

investigate the influence of culture on EO and how culture and EO impact on the performance of

Nigerian firms. To fully understand the causal relationships between these concepts, this study took a

component approach instead of a gestalt approach. This means that this study investigated how the

dimensions of culture relate with the dimensions of EO, and how the dimensions of both phenomena

relate with performance. To achieve this data was collected from firms located and operating in

Nigeria in August 2011 and analysed by multiple linear regressions. This chapter explains in detail the

results of the analyses under the following sub-headings: culture and entrepreneurial orientation;

entrepreneurial orientation and performance; and culture and performance.

The major highlights of the findings are first, not all EO dimensions are relevant to

performance improvement. In fact, some of them might even work against initiatives to improve

performance. This is consistent with Lumpkin and Dess‘ (1996) argument on EO and performance

metrics. Second, culture has no direct influence on performance. This result supports Hayton et al.,

(2002) concern that culture may not have a direct effect on entrepreneurial outcomes. Third, culture

does not affect all the dimensions of EO. It significantly affects risk taking and autonomy dimensions

and may not affect proactiveness and competitive aggressiveness, but does not affect the propensity to

be innovative.

Culture and Entrepreneurial Orientation 6.1

The relationship between culture and EO has been debated by scholars for decades. Some

authors argue that this relationship does not exist (McGrath et al., 1992b) others argue that culture

creates a legitimate environment for entrepreneurship to thrive or die (Etzioni, 1987) hence the

relationship is valid. Over the last ten years, this debate has been subjected to empirical testing. In

general, the results of those studies suggest that high power distance, collectivism, and uncertainty

avoidance are negatively related with EO and masculinity is positively related with EO (Davidsson,

1995; Davidsson & Wiklund, 1997; Shane, 1992, 1993). The problem with this gestalt approach to

EO is first, it masks the fact that all dimensions of EO might not be affected by culture and second, it

does not capture the fact that the dimensions of culture might relate in different ways with the

dimensions of EO. Within the limits of statistical significance, the findings of this study suggest that

culture only affects risk taking and autonomy in the Nigerian context. It further suggests that

collectivism is positively related with both EO dimensions which support H4a and H4c; it suggests

that masculinity is positively related to risk taking and negatively related to autonomy which supports

H6a but refutes H6c; it suggest that high power distance only affects autonomy and the relationship is

positive which refutes H3a; and that uncertainty avoidance does not have any effect on risk taking

and autonomy. There was no evidence to suggest that culture affects innovativeness. Model 4 reveals



that collectivism positively relates with competitive aggressiveness as was expected from H4c,

whereas masculinity negatively relate with it (which refutes H6c). However, this result should be

interpreted with caution as the model lacks strong explanatory power. This is also the case with model

5 which suggest that high power distance positively relates with proactiveness. See table x for a list of

hypotheses that where supported and those refuted by the regression models.

On the whole, regression model 1 reveals that collectivism is positively related with EO. This

is contrary to the findings of empirical studies done in a western context. This contradiction is a

reflection of the idiosyncrasies of the context in which the studies were made. This is an evidence to

support the earlier argument in the literature review that the relationship between culture and EO is

national context specific and therefore that studies done in a Western context may be irrelevant in a

non-Western context. Another explanation for the contradiction between the findings of this study and

those of previous studies is the gestalt approach to dealing with EO. The problem with this kind of

approach is that it masks the fact that the dimensions of EO might relate in different ways with the

dimensions of culture. A component level approach, as is the case of this study, unleashes is full value

as an analytical tool thus yielding a comprehensive explanation of the intricate relationship between

the dimensions of both EO and culture (Ogbonna and Harris, 1998a; Pettigrew, 1979).

One obvious managerial implication of this result is this: when there is the need to deploy the

risk taking and competitive aggressiveness dimensions of EO, managers should encourage

collectivism. See the next chapter for further implications.

Table 6-1 Results of Hypotheses

Models Hypotheses Those supported Those refuted

1 None None None

2 H4a; H5a; H6a H4a; H6a H5a

3 H4e; H3a; H6c H4e; H3a; H6c

4 H4c; H6b H4c H6b

5 H3b; H4d; H5b H3b H4d; H5b

6 H4b H4b

7 H7a; H7b H7a; H7b

8 H1 H1* H1*

*=innovation related positively with performance but other EO dimension did not.

Entrepreneurial Orientation and Performance 6.2

There is a widely held belief that EO is beneficial to the performance of firms (Covin and

Slevin, 1986; Rauch et al., 2009). Miller (1993) argues that a disposition towards entrepreneurial

behaviour characterised with risk taking, innovativeness and proactiveness, will guarantee improved

firm performance. Some other scholars argue that an entrepreneurial posture may not always be



necessary for success but rather contingent on a host of external factors (Hart, 1992; Covin and

Slevin, 1990). Lumpkin and Dess (1996) contend that even when an entrepreneurial posture is needed,

all the dimensions of EO may not be needed to guarantee high performance. Some dimensions of EO

might even have a negative relationship with performance depending on the circumstance (Hughes

and Morgan, 2007). The findings of this study support this line of argument. Indeed, only

innovativeness and risk taking dimensions showed a relationship with performance. Innovativeness

was found to be positively related with performance and risk taking was found to be negatively

related with it.

The implication of this result is that all dimensions on EO are not necessary to render high

performance to firms and that the dimensions needed at any moment depends on the environmental

conditions of the firm. Another obvious implication of this result is that a gestalt approach to

investigating EO masks that the fact that higher performance might be a consequence of one or two

dimensions of EO and that deploying some dimensions might undermine initiatives to improve

performance. Thus, firms should not strive to implement all the dimensions of EO to qualify as been

entrepreneurial or be guaranteed high performance but should be cautious at implementing each

dimension. For example, drawing from the result of this study, it is better for Nigerian firms to be

more innovative and less interested in pursuing high risk ventures especially when the risk involved

outweighs the outcome.

Culture and performance 6.3

Earlier in the literature review section, culture was described as a media for entrepreneurship.

Berger (1991) described culture as a conductor to entrepreneurship. This means that a national

culture that supports values and behaviours like proactiveness, risk taking and innovativeness will

foster entrepreneurship and drive performance of firms in society (Herbig & miller, 1992; Hofstede,

1980a). Thus, the relationship between culture and performance was construed. Interestingly, this

study found no evidence to suggest that culture has any direct relationship with firm performance. But

given that collectivism and masculinity positively relates with risk taking dimension of EO and risk

taking negatively relates with firm performance, it can be logically deduced that collectivism and

masculinity negatively relates to performance. If the statement ‗there is power in synergy and

collaboration‘ is true, one can argue that collectiveness should have a positive effect on performance.

But it is possible that groupthink which has the potential of locking a firm in specific trajectories

could impair performance. It is also possible that collectivism can slow down decision making process

which may delay firm‘s quick response to seize opportunities thereby impairing their performance.

The implication for managers therefore, is to drive performance by discouraging collectivism and

masculinity in workplace. The figure below shows the relationship between national culture and firm

performance


52 Conclusions, Implications and Limitations | University of Nottingham

Conclusions, Implications and Limitations 7

The objective of this chapter is to highlight the important implications and limitations of this

study. The chapter begins with the important contributions of the findings of this study to the

literature and the lessons for managers of firms in Nigeria; it then highlights the limitations of the

study and the implications for further research and ends with a recommendation for further research.

Contributions to the Literature 7.1

This study set out to investigate the causal relationship between national culture and EO and

how both impact performance. To understand these relationships, this study explored first, whether

the dimensions of culture as conceptualized by Hofstede (1980) relate with all the dimensions of EO

as conceptualized by Lumpkin and Dess (1996) and the direction of such relationships if they exist;

then it explored whether each dimension of EO was equally valuable in securing improved

performance. Fundamentally, this study makes three significant contributions to literature: first, it

finds that dimensions of culture vary independently with each dimension of EO; second, form the

Nigerian perspective, it addresses Lumpkin and Dess‘ (1996) caution that some dimensions of EO

might be of no benefit or might even undermine the performance of firms depending on the

circumstances of the firm (Hughes and Morgan, 2007) hence it joins the growing list of researcher

who share similar view; third, it addresses the concern that culture might affect firm performance.

7.1.1 Dimensions (national culture vs. EO) performance Method

Studies of national culture-EO relationship and EO-performance relationships have largely

been carried out separately. Separating these relationships does little to help in understanding which

dimensions of culture might be beneficial to performance and which dimensions might be harmful to

performance initiatives. This study fills this gap by bridging both relationships. To the author‘s

knowledge, this study is among the earliest works, if not the first, to bridge the gap between national

culture, EO and performance by examining how the dimensions of culture relates with the dimensions

of EO and how the dimensions of EO relate with performance in the African context.

7.1.2 Risk taking undermines performance initiatives

EO has been offered as a recipe for high performance (Miller 1983; Covin and Slevin, 1991;

Rauch et al., 2009) and most of the studies on EO-performance relationship have treated EO as a

unified whole. But a few studies argue that this gestalt approach to EO may be misleading in

suggesting that a relentless pursuit of all the dimensions of EO guarantees high performance

(Lumpkin and Dess, 1996; Hughes and Morgan, 2007; (e.g., Matsuno et al., 2002 and Morgan and

Strong, 2003). Though recent studies have investigated this relationship without a gestalt approach,

most of them have been based on Western context. Some authors have noted inconsistencies in

replicating Western concepts outside the Western context. It is useful to test the EO-performance



construct in various contexts to determine its universal applicability and this is one of the relevance of

this study. As Lumpkin and Dess (1996) cautioned EO-performance relationship, this study found that

risk taking negatively affects but innovativeness positively affect the performance of Nigerian firms.

This finding is largely supported by Hughes and Morgan (2007) who suggests that risk taking is

detrimental to the performance of emerging firms.

7.1.3 Culture does not affect innovation

Another important contribution to the body of knowledge that this study makes is that it found

evidence to show that culture does not affect innovativeness. Hence in understanding the disparity in

innovativeness of sub-Saharan countries like Nigeria and East Asian countries like China who share

some similarities in cultural patterns, answers should be sought in other concepts other than cultural

patterns and dimensions.

7.1.4 Culture does not directly affect performance initiatives

The last but important contribution of this study is that national culture does not affect

innovativeness. Therefore culture cannot explain the disparity in innovativeness or technological

disparity between the West and Africa.

Implications for managers 7.2

One major objective of managers is to achieve superior performance for their firms. Thus

managers should discourage cultures that inhibit entrepreneurship and deploy only those tools that

effectively boost performance. This study reveals that innovativeness has the capacity to drive

performance while risk taking undermines performance initiatives. It was also found that collectivism

and masculinity fosters risk taking propensity. Hence, manager should discourage collectivism and

masculinity tendencies within work place and increase the use of innovativeness dimension of EO to

boost the performance of their firms.

Some reasons why firms fail at achieving intended performance include weak social and

human capital. Weak social and human capital render firms incapable of making full use of EO which

is resource intensive when implemented in full (Hughes and Morgan, 2007). When examined, firms in

this study where found to intensively use EO dimensions. The average mean for risk taking (4.455)

innovativeness (4.814), proactiveness (4.815), competitive aggressiveness (4.383) and autonomy

(4.652) suggested intense use all the dimensions of EO. This indicates that they deploy dimensions

that have not relevance or even undermine performance initiative which is a form of misapplication of

resources since different dimensions of EO were found to affect firms differently. This could be a

reason why firms fail to realise as much performance as they intend. For instance, this study suggests

that risk taking may nullify the benefits of innovativeness to firm performance when used together.

Also using dimensions like autonomy proactiveness and competitive aggression which do not affect

performance will be a waste of firms‘ limited resources which should have been channelled into more



productive activities. The ethos then is that ―ad hoc approach to the implementation of EO is

potentially damaging since it unwittingly leads to waste of resources and consequently leads to an

intended strategic decision to undermine firm‘s performance‖ (Hughes and Morgan, 2007, p. 657).

Therefore firms should be very careful and strategically implement only those EO that improves

firm‘s performance and discourage cultures that seemly encourage tendencies that jeopardize

performance.

Limitations 7.3

In many ways this study satisfies the requirements for a standard research: the survey was

designed according to standard specification like Dillman (2000) Tailor made design, and the

discussions were as objective possible. Yet it is important to note some limitations of this study. Three

important limitations are identified. They are nature of sample population, sample size and scale used

for measurement.

7.3.1 Nature of sample population

For the purpose of this study, firms located and operating in Nigeria were randomly selected

form directories of Nigerian firms. Given that Nigeria is highly culturally diverse (with over 250

ethnic groups –US, 2011), the problem with sampling from this kind of population is that firms from

contrasting cultures might have been used together in this study. There is a possibility that this might

affect the outcome of the research. Shane (1992,1993) suggest that studies of national culture should

be made in groups smaller than country for the purpose of homogeneity. But this does not

significantly question the credibility of the research because many other researches include Hofstede‘s

(1980a) conceptualisation of national culture cut across several cultures. Another issue with the nature

of the sample is that it did not focus on any specific kind of firm. Most EO-performance studies focus

on technology and manufacturing firms. Since EO-performance relationship is context specific it is

logical to conclude that the relationship between the dimensions of EO and performance might vary

across industries. Hence lack of sample homogeneity is considered as a limitation of this study

7.3.2 Sample size

Most empirical studies of culture-EO and EO-performance relationships are mostly done with

about 100 samples. Owing to time constraint, this study was made with 47 samples. Given this low

sample number, one can argue that the results of the study are inconclusive. Also there was an

indication of the possibility of Type one error. For instance, models 4 and 5 may become statistically

significant with higher number of samples. Granted, higher sample number could make models 4 and

5 more significant, yet the chances that such higher number will change some results like model 6 are

very low because the model is quite far from the significance limit for regression models. This

therefore suggest that although the sample number for this study maybe low, there‘s no question about

the credibility and importance of the results to the body of knowledge



7.3.3 Measurement Scale

The scale used to measure EO was developed by Covin and Slevin (1991) and that used for

culture was developed by Hofstede (1980a). These scales where created in a Western context, hence

may not be very reliable in none Western context. In fact Hofstede‘ (1980a) culture scales have been

reported to be temporarily unstable (Hayton, George and Zahra, 2002). The scale has been criticised

for two reasons: first the Western epistemology in which his traits are grounded; second the

generalizability and timelessness of the findings (his finding are based on only IBM, at one point in

time). These criticisms also hold true for Covin and Slevin‘s (1991) EO scales. Hence using such

Western context designed scales may affect the result in a different way. Therefore, there is a need to

develop scales for African context

7.3.4 Other limitations

The first limitation of this design in the study is the lack of inter-rater scores to compare with

the key informant data. However the author argues that inter-rater score were not necessary in this

study for two reasons. First, it was difficult and expensive enough to get one informant to respond to

the survey within the short time allocated for data gathering. Waiting for inter-rater scores would

delay data gathering which might compromise the reliability of the data set.

Another limitation is the use of cross-sectional data. Theorists argue that the use of cross-

sectional data limits the ability to draw causal conclusions from the data. Given that it takes a long

time to gather longitudinal data, it is practically impossible to go down that route for this study. Since

this is the case of this study, theories and findings of prior empirical studies can be used to support the

conclusions of causal relationships. Hence, the author argues that the theoretical foundation for the

hypotheses developed in chapter 2 of this study is sufficient enough to support drawing causal

concisions.

Future research 7.4

Following the finding of this study that national culture does not seem to have an impact on

the performance of Nigerian firms, further research is needed to understand how other organisational

factors like social and human capital might affect performance.

Given the finding of the study suggest that different dimensions of EO have different

performance implications, and that EO-performance relationship is context specific, further research

is needed to understand when Nigerian firms should deploy EO and what dimensions of EO to deploy.

It should investigate how other environmental factors might affect the implementation of EO and how

EO affects firm age.

Furthermore, since national culture could not explain the disparity between highly innovative

West and poorly innovative Africa, further research should explore other possible explanations like



organizational processes and design. Such research should consider the combine effect of national

culture and organisational culture on EO and performance of Nigerian firms.

Last, given the limitation placed by sample size and characteristic, future research should test

the findings of this study with larger sample size. Where possible such study should homogenous

either by considering specific industrial context or sampling from a less culturally diverse population.

Conclusion 7.5

This study has investigated the influence culture has on EO and firm performance and finds

that culture has no direct in relationship with performance improvements and that it affect the

different dimensions of EO in various ways. It is therefore imperative for managers to encourage only

those cultures that enhance their favoured EO dimension. Further research should be made to extend

this knowledge in the Nigeria context.


57 References | University of Nottingham

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