INTERPRENEURSHIP: EXAMINING THE EFFECTS OF

SOCIAL STRUCTURE ON THE ENTREPRENEURIAL

ORIENTATION - ORGANIZATIONAL

PERFORMANCE RELATIONSHIP

by

CURTIS B. MOORE, B.S., M.A.

A DISSERTATION

IN

MANAGEMENT

Submitted to the Graduate Faculty of Texas Tech University in

Partial Fulfillment of the Requirements for

the Degree of

DOCTOR OF PHILOSOPHY

Approved

Q^j persoriofti eCQí m t ^

Accepted

' -y V Dean of the Graduate School

August, 2004

Copyright 2 004, Curtis B. Moore, Texas Tech University

ACKNOWLEDGEMENTS

I would like to express my appreciation to many people

who contributed to my dissertation progress. Barry A.

Macy, who served as the dissertation Chair, provided many

hours of counsei, direction, and support, as well as the

data, for the creation of this dissertation. Marvin

Washington provided his unique perspective throughout the

work, as well as his time and support. Keith Brigham

provided additional strength in the area of

entrepreneurship, which was of the utmost importance to me.

Dennis Arnett, not only provided his expertise in the

statistical method, but also took an interest in the

theoretical underpinnings of this work. I am deeply

grateful to each of you.

In addition to my committee, the faculty in the

Management Area at Texas Tech University was instrumental

in my finishing the Ph.D. program. From the beginning,

Alex Stewart, Kimberly Boal, and Jerry Hunt had a profound

impact on me. These scholars not only expected the Ph.D.

students to know the academic literature in management, but

gently demanded we develop interesting and creative

research ideas. In addition to the faculty who taught the

seminars in management research, John Blair and Ritch

Sorenson trusted me enough to "get me feet wet" with their

datasets. I feel very fortunate to have had the

opportunity to spend time with this group of people and to

participate in academic work with them.

In addition to my committee and the other faculty

members at Texas Tech University, three Ph.D. students had

a significant effect on me. Hadi Al-Horr, Mark Hoelscher,

and Terry Rock will likely never know how invaluable their

friendship was to me as I went through the daunting process

of completing this Ph.D. program and resulting

dissertation. I surely would not have finished without

their support and friendship. With only one huge

exception, all of the Ph.D. students at Texas Tech

University were supportive, intelligent, and helped to

create a sense of solidarity.

Finally, my wife, Jena Moore, was always optimistic

and supportive throughout the process. She inspired me not

only to finish this dissertation, but to make it something

I could be proud of.

11

TABLE OF CONTENTS

ACKNOWLEDGMENTS i

ABSTRACT v

LIST OF TABLES vii

LIST OF FIGURES viii

CHAPTER

I. INTRODUCTION 1

Purpose of the Study 4

Research Questions 5

Contributions 5

Organization of the Dissertation 7

II. LITERATURE REVIEW 9

Resource Based View of the Firm 11

Resource-Advantage Theory 17

Resource Theory and

Entrepreneurship 2 0

Organizational Social Capital 28

Resource Theory and

Organizational Social Capital 31

Hypothesis Development 3 8

Competing Models 42

111

III. RESEARCH METHODOLOGY, SAMPLE, and MEASURES

Sample

Measures

Analysis

IV. ANALYSIS AND RESULTS

Measurement Model

Structural Model

Rival Models

Summary of Results

DISCUSSION AND CONCLUSION V.

The Three Models

Entrepreneurship Theory

Resource Theory

Summary and Conclusions

Contributions

Limitations

Future Directions

REFERENCES

APPENDICES

A. Measurement Scales

B. Prospector Pureness Score

C. Key Account Management Team Continuum

53

56

58

65

72

73

75

78

82

89

91

96

102

110

112

116

117

119

128

131

133

IV

ABSTRACT

The term 'interpreneurship' is used to refer to macro-

level, relationally focused entrepreneurship.

Interpreneurship is similar to both 'intrapreneurship' and

'alliance entrepreneurship.' There are, however,

substantive differences. The term 'intrapreneurship' as

originally coined by Pinchot (1985) in his book discussing

how the entrepreneurial spirit can be cultivated within

established companies, generally refers to macro-level

entrepreneurship, such as corporate entrepreneurship. The

term has also been used to refer to entrepreneurship at

lower organizational units (e.g. strategic business unit

level) in large firms (Lumpkin & Dess, 1996). The term is

used to identify entrepreneurship within an organization or

organizational unit. Therefore, interpreneurship and

intrapreneurship both refer to macro-level (e.g.

organizational or organizational unit) entrepreneurship.

Alliance entrepreneurship (Sarkar, Echambadi, &

Harrison, 2001) is similar to interpreneurship in that both

of these concepts are macro-level constructs and involve

some type of relationship Jbetu een organizations. However,

alliance entrepreneurship does not focus on relational

attributes, but instead, focuses on the number of external

ties with other organizations (i.e., key supplier

relationships with their large preferred customers). Also,

this approach is concerned with only one firm's competitive

advantage, not other partnering firms. Interpreneurship,

on the other hand, takes a relational approach to the study

of entrepreneurship in large firms and is concerned with

the quality of network ties, not just the quantity of ties.

Interpreneurship is the combining of two distinct

types of resources in innovative ways. The two resources

are entrepreneurial orientation and relational resources.

Interpreneurship seems most important for organizations who

are constrained in their ability for product innovation,

such as manufacturing retail, personal, and household goods

(the supplier in this study). Instead such organizations

have to innovate on their business processes, systems, and

structures that include innovation in managing inter-

organizational relationships, such as those between

suppliers and their preferred customers.

VI

LIST OF TABLES

1. Construct Means, Standard Deviations, and Intercorrelations 85

2. Reliability of Reflective Measures for Entrepreneurial Orientation and Relational Social Capital Components 86

3. Properties of PLS Measurement Model 87

4. Results-PLS Models 88

5. Prospector Pureness Score 132

vu

LIST OF FIGURES

1. Literature Reviewed 48

2. Theoretical Model of the Interaction between Entrepreneurial Orientation and Social Capital 49

3. Interaction Only Model (Model 1) 50

4. Competing Model with Social Capital as a Mediator (Model 2) 51

5. Competing Model with Social Capital as a Direct Relationship (Model 3) 52

6. KAM Team Continuum 134

viu

CHAPTER I

INTRODUCTION

In the empirical entrepreneurship literature,

organizations that have an entrepreneurial orientation have

been found to have significant, positive performance

differentials over other firms. Entrepreneurship has been

criticized for being atheoretical and merely a "research

setting" or "teaching application" (Shane and Venkataraman,

2000). Macro-level entrepreneurship also fails to

incorporate social structure into their models. In

addition to adding to existing entrepreneurship theory,

this dissertation attempts to extend the research on social

structure into the study of the effects of entrepreneurial

orientation on firm's performance in buyer-supplier

relationships.

The term "interpreneurship" is used to refer to macro-

level, relationally focused entrepreneurship.

Interpreneurship is similar to both "intrapreneurship"

(Pinchot, 1985) and "alliance entrepreneurship" (Sarkar,

Echambadi, & Harrison, 2001). There are, however,

substantive differences. The term "intrapreneurship" as

originally coined by Pinchot (1985) in his book discussing

how the entrepreneurial spirit can be cultivated within

established companies, generally refers to macro-level

entrepreneurship, such as corporate entrepreneurship. The

term has also been used to refer to entrepreneurship at

lower organizational units (e.g. strategic business unit

level) in large firms (Lumpkin & Dess, 1996). The term is

used to identify entrepreneurship within an organization or

organizational unit. Therefore, interpreneurship and

intrapreneurship both refer to macro-level (e.g.

organizational or organizational unit) entrepreneurship.

Alliance entrepreneurship (Sarkar, Echambadi, &

Harrison, 2001) is similar to interpreneurship in that both

of these concepts are macro-level constructs and involve

some type of relationship jbetween organizations (e.g.,

buyer and supplier organizations). However, alliance

entrepreneurship does not focus on relational attributes,

but instead, focuses on the number of external ties with

other organizations (i.e., key supplier relationships with

their large preferred customers). Also, this approach is

concerned with only one of firm's competitive advantage,

not other partnering firms. Interpreneurship, on the other

hand, takes a relational approach to the study of

entrepreneurship in large firms and is concerned with the

quality of network ties, not just the quantity of ties.

Interpreneurship is defined as the combining of

entrepreneurial resources and relational resources.

Interpreneurship seems most important for organizations who

are constrained in their ability for product innovation,

such as manufacturing retail, personal, and household goods

(the supplier in this study). Instead such organizations

have to innovate on their business processes, systems, and

structures that include innovation in managing inter-

organizational relationships, such as those between

suppliers and their preferred customers.

The approach taken in this dissertation shares an

affinity with a focus on entrepreneurial processes rather

than trait approaches to the study of entrepreneurship

(Gartner, 1985; Gartner, Carland, Hoy, & Carland, 1988;

Gartner, Bird, & Starr, 1992). The trait-process debate is

characterized by debate on the legitimacy of

entrepreneurship research that seeks to identify unique

traits of the individual entrepreneur versus a focus on the

processes, systems, and structures in innovative

organizations.

Purpose of the Study

The study described herein explores the effect of

social structure of organizations on entrepreneurial

processes and organizational performance outcomes. While

the hypothesized model conceptualizes social structure as

having an interaction effect with entrepreneurial

orientation and resulting in firm performance, two

competing models are conceptualized that use social capital

as a mediator (Model 2) or a direct effect (Model 3) on

firm performance. Social capital, when used as an

interaction term, taps into the contingent nature of

organizational social structure, thereby, allowing the

particular social structure to enhance or restrict the

relationship between entrepreneurial orientation and firm

performance.

In addition to exploring the role of social structure,

this research also explores an alternative conception of

entrepreneurship to product innovation. Macro-level

entrepreneurship has been mostly concerned with product

innovation. However, entrepreneurship has been

conceptualized to include process innovation or

entrepreneurship in factor markets (Schumpeter, 1934).

Specifically, this dissertation looks at innovation in

management processes, systems, and structures, namely-

inter-organizational relationship management and uses

resource theory (resource allocation theory and resource

based view of the firm) to test hypotheses pertaining to

firm performance for both the buyer and supplier firms.

Research Questions

The study attempts to answer two research questions.

The first question is: "In markets where product

innovation has limited feasibility, does entrepreneurship

still relate to firm performance?". The second question is

"If so, what effect does social structure have on the

relationship between entrepreneurship and organizational

performance?".

Contributions

This study makes a contribution to the

entrepreneurship, social capital, and interorganizational

relationship literatures. The study explores

entrepreneurship that is not constrained to product

innovation, but includes process innovation. Additionally,

the study also tests the influence of organizationai social

structure on entrepreneurial orientation in a large firm

with several strategic alliances with preferred customers.

Finally, the dissertation also measures multiple dimensions

of entrepreneurial orientation and uses the dimensions to

construct a formative measure of firm-level

entrepreneurship.

In addition to the contribution made to

entrepreneurship research, the study also contributes to

the research in social capital. The study tests a model of

organizational social capital as a macro-level construct

referring to actors that are collectives (e.g. a business

unit) rather than at the individual-level of analysis.

Although social capital theory is argued to occur at higher

levels of analysis than the individual level, few studies

have tested more macro conceptions of social capital. In

fact, even community studies have used individual level

data (Putnam, 1993). The model tested in the study also

conceptualizes social capital as an asset stock of

relational resources. Consequently, the study provides

insight into how an organization's relational resources can

lead to increasing firm performance.

In addition to contributions made to both

entrepreneurship and organizational social capital

research, there are very few empirical studies that use

entrepreneurial orientation or social capital in alliances

or buyer supplier relationships. While there is one study

that uses the concept of 'alliance entrepreneurship,' their

conceptualization does not take into account organizational

social structure. Therefore, the study makes a

contribution to the conceptual and empirical literature on

alliances and buyer-supplier relationships with a model of

buyer-supplier outcomes that incorporates both

entrepreneurial orientation and organizational social

capital.

Organization of the Dissertation

In chapter 2, the several literatures relevant to this

study will be reviewed. First, a review of the literature

on resource theories, which includes the foundational work

in the Resource Based View (RBV) and Resource-Advantage (R-

A) theory, will be discussed. Following this section,

entrepreneurial orientation (EO) will be conceptualized as

a resource using RBV and R-A theory. Finally, the

literature on organizational social capital will be

reviewed, followed by a conceptualization of relational

resources using R-A theory. Chapter 2 wiil conclude with

the presentation of hypotheses and the three models to be

7

tested. Chapter 3 will present research methodology.

sample, and measures. Chapter 4 will present results of

the study. Chapter 5 contains a discussion of the results,

as well as the conclusion, future research directions, and

limitations of the study.

CHAPTER II

LITERATURE REVIEW

The purpose of this chapter is to outline a general

framework for studying entrepreneurship in organizations

involved in inter-organizational alliances, specifically

innovations in buyer-supplier relationships. The

theoretical underpinnings for the proposed study come from

scholarly works in entrepreneurship, social capital theory,

RA theory, resource based view of the firm, and

interorganizational relationships, as well as

organizational structure and design. Figure 1 maps out the

relationships between the three main literatures utilized

in this study, as well as the relationships between the

literatures.

The figure indicates that the theoretical foundation

for relational resources comes from the intersection

between resource theory (R-A theory and RBV) and inter-

organizational relationships (from marketing, management,

and sociology). The foundation for conceptualizing

entrepreneurial resources comes from the intersection

between the entrepreneurship literature and resource

theory. Alliance entrepreneurship, as described in Chapter

9

1, comes from of the literature on inter-organizational

relationships, specifically strategic alliances in the

management and marketing literatures, and the

entrepreneurship literature. Finally, interpreneurship has

its roots in the all three literatures (i.e.

entrepreneurship, resource theory, and inter-organizational

relationships).

The basic argument of this study is that macro-

business, entrepreneurial factors (e.g., risk-taking,

proactiveness, innovation, business autonomy, and

competitive aggressiveness) interact with certain

relational processes or factors (e.g., trust, commitment,

shared values, and organizational compatibility) for firms

trying to gain competitive advantage via strategic

alliances with their preferred organizational customers

(see Figure 2). This process can be viewed through a

variety of lens, but Resource-Advantage Theory and the

Resource Based View provide exceptionally relevant

viewpoints to explain why these relational factors can

interact in a way that provides an organization a

competitive advantage over their competitors. The early,

foundational work in the Resource Based View of the firm

will be outlined, followed by Resource-Advantage Theory.

10

Resource Based View of the Firm

The early development of the resource based view of

the firm conceptualized resources as being created from

combinations of more basic units referred to as 'factors'

(Barney, 1986) or 'assets' (Dierickx and Cool, 1989).

Factors or assets are the building blocks that create

resources. These two terms will be treated as essentially

the same (for further discussion of their differences the

reader is referred to Black and Boal, 1994). Barney (1986)

notes that resource factor markets are imperfect and

differentiates factors into those that can be traded in a

strategic factor market and those that cannot. Therefore,

tradable factors are valued in terms of known availability

and rareness. Alternatively, Barney notes that a firm's

competitive advantage generally results from non-tradable

factors that are firm specific and whose value is not known

to competitors. Dierckx and Cool (1989) note that

strategic factor markets are incomplete and differentiate

resource factors as either asset flows or asset stocks. An

asset flow is one that can be adjusted immediately, while

an asset stock is accumulated over time from asset flows.

Asset stocks require an investment of asset flows over the

11

course of time. This investment requires management

attention. The goal of management is the development of

unique asset stocks that lead to competitive advantage

(Wernerfelt, 1984; Penrose, 1959).

The Resource Based View of the Firm is most concerned

with the creation of above normal rents by firms with

differing endowments of resources (Barney, 1986, 1991,

1992; Dierckx and Cool, 1989; Amit and Shoemaker, 1993;

Conner, 1991). Barney introduces the VRIO (i.e., valuable,

rare, inimitable, organizational orientation) framework to

identify the characteristics of firm resources that are

needed to sustain competitive advantage (Barney, 1992). In

this framework, resources are evaluated by their having the

characteristics of being valuable, rare, inimitable/non-

substitutable, and their organizational orientation.

Dierckx and Cool (1989) note that sustainability of a

firm's competitive advantage relies on the inability of

rivals to substitute or imitate a firm's resources.

Substitutability and imitability are based on the

characteristics of the asset accumulation process: time

compression diseconomies, asset mass efficiencies, inter-

connectedness, asset erosion, and causal ambiguity.

12

Amit and Shoemaker (1993) expand on the VRIO framework

and develop a finer-grained set of resource

characteristics. The characteristics they develop are

complementarity, scarcity, limited tradability,

inimitability, limited substitutability, appropriability,

durability, and overlap with strategic industry factors.

Significant contributions are made with the notion of

durability and complementarity. Durability relates to the

amount of investment required to offset a resource's

depreciation or erosion. Complementarity refers to the

relationship or the increase in the strategic value that a

resource has with other resources.

A review of the "Resource Based View of the Firm"

identifies three general sources of competitive advantage.

The three general sources of competitive advantage are

based on the nature of the resource/s, path dependencies,

and management processes. The first source is the nature

of the resources themselves. Barney (1986) posits that

resources may be tradable or non-tradable in strategic

factor markets. A firm may be lucky or have a more

informed perception of the value of resources because

factor markets are incomplete. Barney (1986) prescribes

that firms are more likely to develop resources that lead

13

to competitive advantage based on internal analysis of the

firm and that a firm's heterogeneity is based on its

endowment of resources. Dierckx and Cool (1989) discuss

the idea of asset stocks and flows. Asset flows are those

resources that are accumulated or combined over time to

create an asset stock. They theorize that a firm's

competitive advantage is based on the nature of the asset

stock, such as imitability, substitutability, causal

ambiguity, etc.

Dierckx and Cool (1989) also discuss the path

dependent nature of resources, which is the second general

theme in RBV. Historical events and time compression

diseconomies are indicative of the role of unique path

dependencies. Many organizations have unique histories

that place them in a favorable competitive position. For

example, Caterpillar has a unique history, in which, the U.

S. federal government financed much of the organization's

global expansion during World War II. Additionally, many

resources are characterized by time compression

diseconomies, in which the time required for the

development of resources cannot be compressed into a

shorter period of time. Dierckx and Cool (1989) use an

14

example of attempting to pack a Master's degree into half

the time by doubling all inputs into the degree.

Finally, the third general theme found in the

literature on RBV relates to management processes. This

area is significantly under researched and suggests a

theory of macro entrepreneurship. The various

organizational processes of combining of resources, network

relationships of resources, and accumulation of resources

are all types of managerial processes that impact the

ultimate value of resources (Dierckx and Cool, 1989;

Barney, 1986; Teece, Pisano, & Shuen, 1997; Wernerfelt,

1984; Amit & Shoemaker, 1993; Black and Boal, 1994). For

example, managers must make investment decisions regarding

the future value of resources in order to accumulate

resources

Early work in the resource based view began to advance

the notion of relationships and resources in order to

address the combining and accumulation of resources. Black

and Boal (1994) have developed a network framework that

describes the relationships between factors, resources, and

core competencies and their resulting networks based on

Amit and Shoemaker's resource characteristics. Their

thesis maintains that a resource is a network of factors.

15

Consequently, a core competency is a network of resources.

Black and Boal's (1994) conceptualization moves from a

description of resource characteristics towards an

inclusion of the relationships between factors, between

resources, and between core competences.

Black and Boal's (1994) network approach makes a

contribution to the literature on the resource based view

of the firm by including enhancing, compensating, and

suppressing relationships, termed cogency relationships, in

the analysis of a firm's networks of factors or stocks,

resources, and core competencies. A compensatory

relationship "exists when a change in the level of one

resource is offset by a change in the level of another

resource" (p. 138). An enhancing relationship is one that

occurs one factor magnifies the impact of another factor.

Finally, a suppressing relationship exists "when the

presence of one factor diminishes the impact of another"

(p.l39). Amit and Shoemaker (1993) also introduced the

idea of resources that had an "enhancing" relationship with

other resources. The prescription, then, for managers is

to combine certain resources into core competencies in a

way that is durable, inimitable, and reduces the mobility

16

of the competence. R-A theory provided the needed

evolution to address the combination of resources.

Resource-Advantage Theory

Resource-Advantage theory is a general theory of

competition and extended theoretical notions from the

resource based view in addition to others. In R-A theory,

"competition is the disequilibrating, ongoing process that

consists of the constant struggle among firms for a

comparative advantage in resources that will yield a

marketplace position of competitive advantage and, thereby,

superior financial performance." (Hunt and Arnett, 2 0 03,

pg. 6) . Consequently, the "marketplace position of

competitive advantage ... results from the firm, relative to

its competitors, having a set or bundle of resource

assortments that enable the firm to produce an offering for

some market segment(s) that (a) is perceived to be of

superior value and (b) is produced at lower costs" (Hunt

and Arnett, 2003, pg. 6). In R-A Theory, financial

performance is a result of market position, which, in turn,

is the result of comparative (dis)advantage in resources

between firms.

17

This dissertation is couched in Resource-Advantage

Theory for two reasons. The first reason has to do with R-

A Theory's conception of resources to include both tangible

and intangible assets. Hunt (1997, p. 437) defines

"resources as tangible and intangible entities available to

the firm that enable it to produce efficiently and/or

effectively a market offering that has value to some market

segment(s)." Thus, R-A theory expands the view of

resources to include any entity that has an "enabling

capacity."

R-A Theory provides a theoretical foundation for

organizational competences'^ (Prahalad and Hamel, 1990;

Sanchez, Heene, and Thomas, 1996). Competences are higher-

order, socially complex, interconnected, combinations of

basic resources in that they are knowledge-based abilities

to combine, accumulate, and leverage existing stocks of

resources (Hunt and Arnett, 2003) . Competences can be

viewed as asset flows, which mean they can be adjusted to

create levels of an asset stock (Dierckx & Cool, 1989). An

entrepreneurial orientation is argued to be a "dynamic

capability" (i.e. dynamic competence) (Teece, Pisano, &

' The term competence is similar to the notion of core competency with an emphasis on a set of competences rather than sole reliance on one core competency.

18

Shuen, 1997) that is an intangible, socially complex

resource that contributes to a firm's ability to innovate

and ultimately compete. This conception is consistent with

Schumpeter's (1934) conception of entrepreneurial

innovation as creating new combinations of resources. An

entrepreneurial orientation is one in which organizational

units combine existing resources in new combinations,

thereby creating new stocks of resources. Thus, R-A theory

provides a theoretical stream of research for an

organization's entrepreneurial competence being a resource

by definition.

The second reason has to do with the use of relational

resources in a theory of relational entrepreneurship.

Organizational social capital is conceptualized as a

relational resource in this dissertation. R-A Theory is a

"moderately socialized, embedded" (Hunt and Arnett, 2003)

theory of competition and, as a result, does not fall into

"over-socialized" or "under-socialized" conceptions of

economic action (Granovetter, 1985). Hence, R-A Theory

does not reduce human motivation to utility maximization

(i.e. under-socialized) as is the case of neoclassical

economics; nor does R-A Theory commit action to a function

of social categories that an actor occupies. The effect of

19

R-A Theory being a moderately socialized theory of

competition is that social relations and social structures

can affect competition both positively and negatively (Hunt

and Arnett, 2 0 03).

R-A Theory's conception of resources, as well as it

being a moderately socialized, embedded theory of

competition, allows for the effects of organizational

social structure to be enhancing or limiting (i.e. a

contingent effect) and the presence of relational resources

(Hunt and Arnett, 2003). Recall that the definition of

resource includes resources that are available to a firm,

not just those resources necessarily owned or controlled by

it. The study herein conceptualizes organizational social

capital as a stock of productive relational resources.

These resources reside at the relationship level and are

not owned, but are available, to the firm.

Resource Theory and Entrepreneurship

The resource based view of the firm holds that the

existence of imperfect strategic factor markets (Barney,

1986) and incomplete factors markets (Dierckx and Cool,

1989) provide firms with a basis for a competitive

advantage. Penrose's (1959) seminal work on the growth of

20

the firm identified the notion of 'productive opportunity,'

which is the productive possibility that its entrepreneurs'

can see and take advantage of. The main idea of the RBV is

that firms are heterogeneous in terms of their endowments

of productive resources and the resulting efficiency

differences yield differential rents (Barney, 1986, 1991,

1992; Dierckx and Cool, 1989; Amit and Shoemaker, 1993;

Conner, 1991; Hunt, 2000) . Additionally, the utilization

and bundling of sets of these resources is organized in an

administrative framework and yield different 'services'

when organized and structured differently.

Penrose (1959) makes a distinction between management

and entrepreneurial services in a corporate setting.

Managerial services relate to the execution of

entrepreneurial ideas and to the supervision of existing

operations. Entrepreneurial services are related to the

introduction and acceptance of new ideas by the firm,

fundamental changes in the administrative organization of

the firm, and the making of plans for expansion, including

the method of expansion. Penrose (1959) additionally

allows for the entrepreneur to be a functional component of

the firm, no matter what their position or occupational

classification may be. She further theorizes that the

21

firm's entrepreneurs will influence the 'best' use of

resources and notes the importance of the entrepreneur's

perception as defining the productive opportunity of the

firm. Shane and Venkataraman (2000) also note that

entrepreneurship is concerned with the discovery and

exploitation of profitable opportunities, that

entrepreneurship can be undertaken by an individual or

collectively (e.g. a group of people in a collection of

business units working as a "team"), and entrepreneurial

opportunities include situations in which new organizing

methods can be introduced and sold at greater than their

cost of production (Casson, 1982).

Equilibrium-based models of economic activity preclude

that entrepreneurship is not present or randomly

distributed across the population (Shane & Venkataraman,

2000). In fact, classical economics purports that an

industry characterized by nearly perfect competition, such

as the global manufacturing of consumer goods (this study's

sample), resembles closely a perfectly competitive market,

such that long-run economic profit or 'rent' for firms in

the industry is zero. However, the entrepreneur is central

to Austrian economic theory (Kirzner, 1997; Hunt, 2000).

Kirzner (1997) maintains that entrepreneurial discovery is

22

a systematic process in which market participants acquires

more complete knowledge about supply and demand, as well as

the driving force behind this systematic process. Kirzner

(1997) highlights Austrian economics view of markets as

entrepreneurally driven process based on the work of Mises

(1949) and the role of imperfect, incomplete knowledge

which is enhanced via market interaction from Hayek (1945).

Many economic theorists consider innovation as the

entrepreneur's method of acquiring wealth. R-A Theory

emphasizes innovation as contributing to the dynamism of

competition and the creation of competences (Hunt and

Arnett, 2003; Hunt, 2000). Competences are higher-order,

socially complex, interconnected, combinations of basic

resources in that they are knowledge-based skills and

abilities to combine, accumulate, and leverage existing

stocks of resources (Hunt and Arnett, 2 003). Competences

can be viewed as asset flows, which mean they can be

adjusted to create levels of an asset stock (Dierckx &

Cool, 1989). Entrepreneurial orientation is argued to be a

"dynamic capability" (i.e. dynamic competence) (Teece,

Pisano, Sc Shuen, 1997) that is an intangible, socially

complex resource that organizations leverage in order to

innovate. This conception is consistent with Schumpeter's

23

(1934) conception of entrepreneurial innovation as creating

new combinations of resources. An entrepreneurial

orientation is one in which organizational units combine

existing resources in new combinations, thereby creating

new stocks of resources.

Schumpeter's (1934) conception of organizational

innovation does not necessarily require product innovation

but can include innovative ways of organizing certain

processes, systems, and structures (Schumpeter, 1934). In

fact, entrepreneurial innovation has been theorized as the

main driver in economic change (Schumpeter, 1934) by

discovering and exploiting inefficiencies in a market

(Kirzner, 1997). As a result, many firms that are not

necessarily viewed as being product innovators can still be

considered as having entrepreneurial capabilities that

enables the organization to obtain above normal returns and

maintain a competitive advantage (Hunt, 2 000). This

dissertation extends these ideas to include the

entrepreneurial management of inter-organizational,

alliance relationships.

Entrepreneurial opportunities exist in factor markets,

as weli as in product markets (Schumpeter, 1934).

Schumpeter (1934) and Kirzner (1997) both note that

24

different members of society have different beliefs or

valuations of resources, which provides for entrepreneurial

opportunity. Drucker (1985) also finds that an

entrepreneurial opportunity exists through the exploitation

of market inefficiencies that result from information

asymmetry.

Entrepreneurship creates economic value through

association with the discovery and exploitation of

profitable business opportunities (Shane & Venkataraman,

2000; Lumpkin & Dess, 1996). In addition, entrepreneurial

activities also create value when they facilitate 'access

relationships' to resources and capabilities that are

strategic to competitiveness and performance (Stuart,

2000). Most of the entrepreneurship literature has focused

on entrepreneurship in product markets (Venkataraman,

1997). However, as noted above, entrepreneurial

opportunities also exist in factor markets (Schumpeter,

1934) .

As the previous discussion describes, entrepreneurship

is broader than is typically studied at the individual

level of analysis and is often conceptualized as a firm-

level phenomenon. Penrose (1959) has a significantly

different depiction of the entrepreneur than does

25

Schumpeter (1934) . While Schumpeter views the entrepreneur

as the innovator from the point of view of the economy,

Penrose views the entrepreneur as the innovator from the

point of view of the firm. Penrose (1959) holds that many

of the most important services that a firm's entrepreneurs

provide actually shape and condition the firm itself.

Therefore, based on the discussion above, macro

entrepreneurship (e.g. corporate or business level

entrepreneurship), where the level of analysis is at the

firm-level or business unit-level, can be viewed as

creating the conditions in which the entrepreneurial

services presented by Penrose (1959) are fostered.

Although numerous descriptions of perspectives on

entrepreneurship exist (e.g., Cooper & Dunkelberg, 1986;

Schollhammer, 1982; Webster, 1977), there has been little

consensus between researchers. As a result, the

entrepreneurial orientation (EO) approach has surfaced and

proposes that the degree to which a firm or business unit

acts entrepreneurally can be viewed in terms of the

organization's innovativeness, risk-taking, and

proactiveness (Zahra et. al., 1999; Covin & Slevin, 1996;

Ireland, Hitt, Camp, & Sexton, 2001; Ireland & Hitt, 2000).

Lumpkin & Dess (1996) offer two additional dimensions to

26

the EO perspective, business autonomy and competitive

aggressiveness. An entrepreneurial orientation (EO) is a

managerial, process-oriented approach to the study of

entrepreneurship. Instead of attempting to identify

individual traits, such as personality variables, a process

approach identifies activities that entrepreneurs (whether

individuals or organizations) undertake to make the firm

more competitive. EO is often used when researchers are

studying corporate actors as the entrepreneur and

entrepreneurship's relationship to performance (Covin &

Slevin, 1989, 1991; Miller, 1983). Therefore,

entrepreneurial orientation describes how the process of

entrepreneurship is undertaken.

A firm's or business unit's ability to act

entrepreneurally will impact the degree to which it is able

to build synergistic relationships with other firms (e.g.

suppliers, customers, partners) and, as a result, its

ability to sustain a competitive advantage. In effect, the

firm's ability to create capabilities and build synergies

between resources is core to the entrepreneurial process.

As a result, the above five dimensions of EO can be viewed

as resource factors that, when combined, become a strategic

resource and lead to competitive advantage. Therefore, a

27

network of EO dimensions will vary from one organization to

another and could be a source of sustainable advantage.

The argument herein is that a firm's ability to act

entrepreneurally will relate positively to its performance.

This relationship is a function of internal entrepreneurial

management processes and external relational factors in the

case of inter-organizational, alliance relationships like a

supplier-buyer relationship.

Organizational Social Capital

The central thesis in social capital theory is that

certain relationships provide an important and valuable

resource. Like other forms of capital (e.g. human,

financial, structural, customer, and relationship), social

capital is productive, in that it facilitates action by

actors (Adler & Kwon, 1999; Coleman, 1988) . The actor may

be an individual or a collectivity such as a group,

business unit, or entire organization. Organizational

social capital refers to relational resources in fairly

general terms. Organizational social capital is not a

single phenomenon but refers to a variety of entities,

which have two elements in common: it consists of some

aspect of social structures and facilitates action by

28

actors (Coleman, 1988). In fact, viewing organizational

"social capital as a resource is one way of introducing

social structure into the rational action paradigm" (p.

Coleman, 1988, p. S95).

Two approaches, the egocentric and structural

approaches, can be found in the social capital literature

(Nahapiet Sc Ghoshal, 1998; Ghoshal & Tsai, 1998; Walker,

Kogut, Sc Shan, 1997) . The 'egocentric approach' refers to

social capital as a resource that inheres in the social

network of an actor (e.g., an individual, a group or team,

a business unit or a firm) and facilitates action by the

actor^. The 'sociocentric approach' views social capital as

a characteristic of the entire network. Granovetter's

(1992) work on relational and structural embeddedness is

helpful to distinguish the two approaches to the study of

social capital. "Relational embeddedness" refers to the

relationships that actors develop with one another through

interactions. "Structural embeddedness" refers to the

overall pattern of connections between actors. Thus,

social capital is concerned with relational resources that

affect individual actors, as well as relational resources

^ The term "relational social capital" will be used throughout the rest of the manuscript to indicate the use of the 'egocentric approach' for developing theoretical propositions conceming the literature on social capital.

29

that are contained within the overall social structure of a

network. Actors are theorized as individuals or

collectives such as groups or firms.

Social capital has been found to promote cooperation,

which facilitates development of new forms of association

and innovative organization (Fukuyama, 1995; Jacobs, 1965;

Putnam, 1993) . Social capital has been found to have an

inverted U-shape relationship with firm performance (Uzzi,

1997). Social capital has been hypothesized to positively

influence the creation and sharing of organizational

knowledge (Nahapiet & Ghoshal, 1998) . The ul1;imate testing

of the Nahapiet and Ghoshal's (1998) model found social

capital to have significant positive effects of resource

exchanges and combinations within an organization, which

resulted in knowledge creation, knowledge sharing, and

product innovation (Tsai & Ghoshal, 1998). Finally, social

capital in the form of trust between transacting parties

has been argued to mitigate the likelihood of opportunism

and reduce transaction costs (Putnam, 1993). Therefore,

social capital has been shown to have significant, positive

explanatory power in organizational research.

30

Resource Theory and Organizational Social Capital

R-A Theory's conception of relational resources

extends the role of relationships into its framework of

resources. Relational resources are characterized by

heterogeneity and imperfect mobility, can lead to a

competitive advantage in marketplace positions, and result

in positive financial performance (Hunt, 2000, 1997). The

literature in R-A theory has cited research in social

capital (Hunt, 2000) and relationship marketing (Hunt,

1997). Hunt (2000) notes that relational capital

constitutes part of what Coleman (1988) calls "social

capital". Additionally, R-A theory shares an affinity with

economic sociology in that certain organizational social

relations can enhance or inhibit firm performance (Hunt,

2000; Uzzi, 1996). As a result, R-A theory maintains a

much broader view of capital than neoclassical theory and

includes relationship capital (Hunt, 2000, 1997; Hunt and

Arnett, 2003) . Relational social capital is defined as a

stock of relational resources, which includes relationships

with customers, suppliers, competitors, and governmental

agencies (Hunt, 2000, 1997; Hunt and Arnett, 2003).

The literature on inter-organizational relationships

in management (e.g. strategic alliances, partnerships) and

31

marketing (e.g. alliances, relationship marketing) provide

insight into developing dimensions of relational social

capital. With almost no exception, the empirical studies

in social capital research focus on "individuals" as

"actors,""' despite the theory being used for individual and

firm level of analyses. Relational social capital is

conceptualized herein as a latent construct that is formed

or caused by four dimensions of an inter-organizational

relationship: trust, commitment, shared values, and

compatibility. Each of these four dimensions shed light on

what it is about social relationships that can constitute

useful firm resources. In fact, the first systematic study

of social capital by Pierre Bourdieu (1985) defined the

concept as "the aggregate of the actual or potential

resources which are linked to the possession of a durable

network of more or less institutionalized relationships of

mutual acquaintance or recognition" (Bourdieu, 1985, p.

248), thereby indicating the presence of multiple, combined

resources.

^ See Chung, Singh, & Lee (2000) for a limited treatment of social capital as an inter-organizational variable. Also, Putnam (1995) suggests that social capital across firms is often developed ttirough extensive participation in local community affairs.

32

Organizational Trust

The first dimension of social capital is

organizational trust. Trust between actors (e.g. a

supplier and its preferred customer) is noted throughout

the social capital literature as an indicator of social

capital (Coleman, 1998; Adler and Kwon, 1999). In general,

the typical discussion of trust and trustworthiness

corresponds to the economic nature of trust (Deutsch,

1958) , in which trust emerges through interaction and

facilitates exchange relationships between the parties.

Organizational trust has also been argued as a key enabler

of organizational innovation (Fountain, 1999), key to all

positive relational exchanges between organizations (Dwyer,

Schurr, and Oh, 1987; Morgan and Hunt, 1994; Spekman,

1988), and key to creating intellectual capital in

organizations (Nahapiet and Ghoshal, 1998) . Additionally,

positive capabilities for actors in a given society, which

are the direct result of the degree of trust between

societal actors, have been argued to arise from social

capital (Fukuyma, 1995, 1997). Finally, organizational

trust has explanatory power for the success of alliances by

mitigating risk associated with malfeasance, as well as

leveraging complementary resources (Sherman, 1992; Ring and

33

Van de Ven, 1992; Dyer and Singh, 1998; Jap, 1999; Monczka,

Petersen, Handfield, & Ragatz; 1998; Das and Teng, 2001;

Sivadas & Dwyer, 2000). Clearly, there is support that

trust facilitates action by both individuals and

organizations, thereby constituting a productive resource

(i.e., social capital). This conceptualization of

organizational trust helping form organizational social

capital is consistent with the egocentric approach, in

which relational social capital as a productive resource

that can be leveraged by an organization or business unit

(Nahapiet & Ghoshal, 1998; Ghoshal & Tsai, 1998; Walker,

Kogut, & Shan, 1997).

Organizational Commitment

The second dimension of relational social capital,

organizational commitment to a long-term relationship with

another organization, can be argued to provide the

structure necessary for relational resources to be

productive and provide a competitive advantage.

Organizations that have increased relational capital, as

evidenced by being committed to long-term relationships

with other organizations, tend to be willing to forego

short-term losses for long-term gains as well as constrain

34

opportunism (i.e. the principle of reciprocity) (Chung,

Singh, and Lee, 2000). Organizational commitment is often

argued to facilitate the creation of organizational trust

(Coleman, 1988), which has significant empirical support in

organizational relationships in the marketing literature

(e.g., Morgan and Hunt, 1994), community relationships in

the sociology literature (e.g., Putnam, 1993), and

strategic alliances in the management literature (e.g.,

Ring and Van de Ven, 1992) . Additionally, long-term,

committed relationships with other organizations increase a

firm's ability to compete because they are firm resources

that lead to competitive advantage (Arnett, German, & Hunt,

2003; Hunt, 1997, 2003; Hunt & Morgan, 1995).

Organizational commitment is considered one of the main

factors influencing the success of interorganizational

relationships (Anderson and Narus, 1998; Hunt, Lambe, and

Wittmann, 2 002; Mohr and Spekman, 1994; Morgan and Hunt,

1994; Ring and Van de Ven, 1992; Van de Ven, 1984; Sivadas

Sc Dwyer, 2000) , resulting in the formation of

organizational relational social capital.

35

Shared Organizational Values

The third dimension of organizational relational

social capital, shared organizational values, provide a

source for the development of social capital (Lewicki and

Bunker, 1995; Adler & Kwon, 1999). Shared organizational

values between organizations facilitate action in a variety

of ways. For example, a shared or common context is

argued, and ultimately supported empirically, to promote

the transfer of knowledge between organizational units

(Szulanski, 1996). Also, social solidarity (i.e. social

cohesion arising from common interests or shared values)

promotes 'generalized reciprocity' between organizations,

when "a helpful act is performed, not in response to any

specific benefit received, but in honor of the social

exchange relationship itself" (Emerson, 1981, p. 33).

Additionally, shared values between organizations promote

joint investment in inter-organizational relationships, as

well as providing a foundation for development of the

alliance relationship (Dwyer, Shurr, and Oh, 1987).

Finally, some degree of shared values between organizations

is argued to result in organizations being able to tap into

cospecialized resource structures (Teece, 1986). The

ability to leverage complementary resources is also

36

supported in the empirical research on strategic alliances

(e.g., Chung, Singh, and Lee, 2000). Therefore, the degree

of shared values between organizations constitutes a

productive resource that facilitates action, thereby

forming relational social capital.

Organizational Compatibility

The fourth dimension of relational social capital,

organizational compatibility, also constitutes a productive

resource. Organizational compatibility has positive

empirical support for enhancing the effectiveness of

interorganizational relationships (Ruiekert and Walker,

1987; Van de Ven and Ferry, 1980). Organizational

compatibility is postulated to provide a role in the

development of synergy between resources, especially with

complementarity of resources having a significant effect on

alliance success (Chung, Singh, & Lee, 2000) In fact,

under the VIRO framework (Barney, 1991), resources must be

bundled and fit within the organization's cultural context

in order to lead to competitive advantage. Consequently,

in the case of inter-firm resources in inter-organizational

strategic alliances, organizational compatibility is an

important relational resource that enhances business

37

performance. Furthermore, organizations that are more

compatible with one another are more likely to fully commit

to and invest in these interorganizational relationships

(Dwyer, Schurr & Oh, 1987; Morgan & Hunt, 1994). Thus,

organizational compatibility helps form organizational

relational social capital.

To summarize, relational social capital is defined as

a relationally situated, productive resource (Coleman,

1990). Therefore, relational social capital affects intra-

firm resource exchange and combination (Ghoshal & Tsai,

1998; Nahapiet & Ghoshal, 1998) and is complementary to

other forms of capital such as human and financial capital

(Adler Sc Kwon, 1999) . This is especially important for

firms whose product innovating capability is constrained by

the markets that they operate in. Therefore, hypotheses

will be developed below to explore the relationship between

relational social capital and the relationship between the

dimensions of EO and firm performance.

Hypothesis Development

Entrepreneurial orientation (EO) research has

traditionally studied the positive effects of

38

entrepreneurship on firm performance (Lumpkin & Dess, 1996;

Zahra et. al., 1999; Covin & Slevin, 1996; Ireland, Hitt,

Camp, Sc Sexton, 2001; Ireland & Hitt, 2000) . In fact, the

central concern, to date, has been predicting or relating

indicators to increased firm performance. Also, much of

the literature on inter-organizational relationships is

couched in resource based theory (e.g. Resource-Advantage

Theory-Hunt, 2000; Resource Based View of the firm-Penrose,

1959; Barney, 1986; Dierickx & Cool, 1989; Teece, Pisano, &

Shuen, 1997; Wenerfelt, 1984) and, as a result, is

concerned with how to gain sustained levels of competitive

advantage and superior firm performance. Empirical studies

in the alliance literature, specifically buyer-supplier

relationships, can be broadly viewed in terms of their

dependent or exogenous variables, as well as measures

relating to relationships and resources (Homburg, Workman,

Sc Jensen, 2000, 2002; Moon and Armstrong, 1994; Webster,

1992; Wotruba, 1991). A sampling of this literature

reveals a focus on certain resources utilized as a

competitive advantage to increase firm performance (Perry,

Pearce, & Sims, 1999; Bucklin & Sengupta, 1993; Cardozo,

Ship, Sc Roering, 1987; Day, 1995; Jap, 1999; Homburg et.

al., 2002; Macy, Arnett, Wilcox, & Farias, 2003).

39

Many researchers use RBV theory to explain and

empirically study inter-organizational relationships.

However, most of these explanations focus more on the

nature of the resources and inter-organizational

relationships rather than the managerial processes that

make for a competitive advantage by leveraging valuable

resources or relationships between suppliers and customers.

One core notion of the resource theory view of the firm is

that synergy between certain resources leads to economic

profit by making resources more inimitable (Hunt, 2000;

Dierickx & Cool, 1989; Amit and Shoemaker, 1993; Black and

Boal, 1994). Interpreneurship is the combining of

entrepreneurial resources with relational resources and is

expected to have synergistic effects on firm performance.

Hypothesis 1: The interaction between entrepreneurial orientation and relational social capital will have a positive relationship with the supplier firm's sales growth.

In terms of R-A Theory, comparative advantages in

entrepreneurial resource positions lead to market segment

competitive advantage, which results in positive financial

performance (Hunt, 2 000) . Additionally, Lumpkin and Dess

40

(1996) further argue that firm performance is a multi-

dimensional construct, which should include financial and

non-financial measures. Therefore, the study described

herein will use multiple measures of performance. The

study uses quarterly sales growth over a five year period

as an objective, "hard" measure of performance. In

addition to financial performance, the study also

incorporates a "soft" measure of competitive advantage for

both the buyer and supplier. Therefore, interpreneurship

is expected to relate positively to objective ("hard"), as

well as perceptual ("soft") measures of organizational

performance.

Hypothesis 2: The interaction between entrepreneurial orientation and relational social capital will have a positive relationship with the supplier firm's competitive advantage.

Organizational social capital refers to the stock of

relational resources that a firm has available to it (Hunt,

2000; Hunt and Arnett, 2003). Relational resources are

resources that are available, rather than owned, by firms

in an interorganizational relationship. As a result,

interpreneurship is conceptualized as entrepreneurship that

occurs between firms. Therefore, interpreneurship is

41

expected to have a positive relationship with the buyer's

competitive advantage, as well.

Hypothesis 3: The interaction between entrepreneurial orientation and relational social capital will have a positive relationship with the buyer firm's competitive advantage.

Competing Models

This dissertation is proposing a competing models

framework for examining the effects of entrepreneurship and

social capital on performance for firms in buyer-supplier

alliances. This is especially true for exploratory

analysis, such as the study proposed in this dissertation,

when research on a construct suggests differing

relationships with other constructs. The hypothesized

model (see Figure 3) conceptualizes social capital as a

moderator. A moderator is a variable that affects the

direction and/or strength of the relationship between an

independent or predictor variable and a dependent or

criterion variable, which is modeled as an interaction

between the independent variable and dependent variable

(Baron & Kenny, 1986).

However, two other alternative models exist, namely

social capital as a mediator (versus a moderator) or having

42

a direct relationship with the dependent variables

(presented in Figures 4 and 5, respectively). While a

moderator variable is one that influences the strength

between two other variables, a mediator variable is one

that explains the relationship between the independent and

dependent variables (Baron & Kenny, 1986). The literature

in marketing, specifically the literature in relationship

marketing (e.g., Hunt Sc Arnett, 2003; Hunt, 1997) typically

treats relational-type (e.g. trust, long-term orientation,

commitment) constructs as having mediating effects.

Examples of relationally oriented mediators in empirical

marketing studies include Morgan & Hunt's (1994) key

mediating variable model using trust and commitment as

mediators; long-term orientation as a mediator in Kalwani &

Narayandas (1995); trust and cooperation as mediators in

Anderson & Narus (1990) ; and trust and cooperation as

mediators in Smith and Barclay (1997) . Therefore, Model 2

(see Figure 4) treats social capital as a mediating

variable.

The marketing literature has tended to use

relationally oriented constructs (e.g., organizational

trust, organizational commitment, long-term relationship

orientation, shared organizational values) as mediators.

43

"Whereas moderator variables specify when certain effects

will hold, mediators speak to how or why such effects

occur" (Baron & Kenny, 1986, p. 1176). Thus, marketing

theory suggests that these relational constructs account

for or the relationship between the predictor and the

criterion variables. As a result, a significant

relationship should not exist between the variables, unless

the mediating variable is included in the analysis.

Therefore, the marketing literature might argue that the

relationship between inter-organizational entrepreneurship

and organizational performance is not significant without a

significant relationship between the organizations.

However, this dissertation argues that the interaction

between the constructs will have the strongest effect on

organizational performance. As a result, we expect

Hypothesis 4a: The interaction only model will have a stronger positive relationship with the supplier firm's sales growth than the mediating model.

Hypothesis 4b: The interaction only model will have a stronger positive relationship with the supplier firm's competitive advantage than the mediating model.

Hypothesis 4c: The interaction only model will have a stronger positive relationship with the buyer firm's competitive advantage than the mediating model.

44

In addition to a mediating model, an alternative

competing model would be relational social capital having a

direct relationship with performance variables (see Figure

5). The management literature tends to use relational

constructs (e.g. social capital, organizational trust) as

having a direct effect on organizational performance.

Examples of the use of relationally oriented constructs as

having direct effects include the use of social capital as

a direct effect by Nahapiet and Ghoshal (1998) in the

development of intellectual capital within organizations;

organizational social capital as a driver of alliance

formation by Chung, Singh, and Lee (1996); commitment,

trust, joint problem solving, and information sharing

between organizations having a direct affect on the success

of an alliance by Monczka, Petersen, and Handfield (1998);

having had a prior organizational relationship, similarity

between organizational partners, organizational partner

reputation and shared decision making having a direct

effect on alliance outcomes by Saxton (1997); and

organizational trust having a direct affect on risk

perception in strategic alliances by Das and Teng (2001,

1998) .

45

An alternative conception of the effects of relational

resources is held in the management literature. Relational

attributes tend to be modeled as having direct effects on

organizational performance in the management literature on

strategic alliances. The interpretation would be that

interfirm entrepreneurship and relational attributes have

significant, independent effects on organizational

performance. Each construct would be considered to have a

significant relationship to organizational performance, but

including both constructs as direct effects should increase

the amount of variance explained in the dependent variable.

Although this may be the case, this dissertation has argued

that the strongest effect on organizational performance

will be the interaction between the constructs. Therefore,

we expect

Hypothesis 5a: The interaction only model will have a stronger positive relationship with the supplier firm's sales growth than the direct effects model.

Hypothesis 5b: The interaction only model will have a stronger positive relationship with the supplier firm's competitive advantage than the direct effects model.

Hypothesis 5c: The interaction only model will have a stronger positive relationship with the buyer firm's competitive advantage than the direct effects model.

46

The competing model approach provides an analyticai

technique to compare and test the three models that have

some degree of theoretical support. This dissertation

argues that relational social capital and entrepreneurial

orientation are both sufficient and necessary conditions

for the organizational units in this dissertation.

Therefore, a relationship, even a significant one, can

exist between the independent constructs (firm-level

entrepreneurship and relational social capital) and

dependent constructs (firm performance) as prior research

supports. However, the argument in this study is for

organizations involved in alliances with their buyers, is

that the interaction between the two constructs will prove

to have the strongest relationship with the organizational

performance constructs, which is somewhat contrary to

research in marketing and management.

47

Entrepreneurshi

Entrepreneurial Resources

Resource Theory (RBV&R-ATheory)

Interpreneurship

Alllance Entrepreneurship

Tnter-Organizational Relationships

Figure 1: Literature Reviewed

Relational Res urces

48

13

Figure 2: Theoretical Model of the Interaction between Entrepreneurial Orientation and Social Capital Predicting Firm Performance

49

© © © ©

,''X^: Entrepreneuriarx \ Orientation y

'71^ x1 x2 x3

©©©

'^ J> = Data from Supplier

^ ^ '^ = Data from Buyer

..'; =Objective Supplier Data

n : Supplier's Sales Growth

n Buyer's Competitive Advantage

y2 y3 y3 y3 y3

yi

fe)

9 ) (510) (^11) (^12) (}\3)

Hs: Supplier's " s Competitive )

^ ^ Advantage

y2 y3 y3 y3

Figure 3: Interaction Only Model (Model 1\

\^\i] l'-ie) 1^17)

y3 20

50

,' Entrepreneurial \ Orientation

) = DatafromSupplier

CD- Datafrom Buyer

_.,.•• = Objective Supplier Data

Supplier's Competitive* Advantage /

Figure 4: Competing Model with Social Capital as a Mediator (Model 2)

51

Entrepreneurial Orientation

>, _ X =DatafromSupplier

C3 :Dataf DmBuyer

*• • • . . . . • • * ^ObjecfveSupplierData

X

Sales Growth :

/ \ Supplier's Competitivei

\ Advantage /

^ ^ . ^

Figure 5: Competing Model with Social Capital as a Direct Relationship (Model 3)

52

CHAPTER III

RESEARCH METHODOLOGY, SAMPLE, and MEASURES

A debate between "trait" and "process" research is

evident in the entrepreneurship iiterature, in which

researchers debate the legitimacy of trait versus process

approaches to studying entrepreneurship. The trait school,

which has traditionally attempted to find traits of

individual entrepreneurs, has not produced replicated

results (Gartner, Carland, Hoy, & Carland, 1988; Gartner,

Bird, Sc Starr, 1992; Gartner, 1985). Gartner (1985) has

argued for researchers to define entrepreneurship by what

entrepreneurs do, which he defines as the creation of new

organizations This dissertation takes a complementary view

to Gartner's (1985), in that the focus is on the processual

issues in entrepreneurship. However, while agreeing that

entrepreneurship research will have greater success with

more of a focus on process, this dissertation does not

agree that entrepreneurship ends when a new organization is

created as does Gartner (1985). This dissertation argues

that entrepreneurship can be viewed in a Schumpeterian

fashion as the creative combining of resources.

53

The level of analysis for this dissertation is the

coilective set of business units or profit and loss teams

of employees acting as an "enterprise team". Enterprise

teams typically function as standalone, modified profit

centers, much like a strategic business unit (SBU) and

operate as a mini-business (Arnett, Macy, Sc Wilcox, 2003;

Arnett, Macy, & Wilcox, 2004; Macy, forthcoming). EO

research has been conceptualized at the firm and SBU level

for large organizations in prior research (Lumpkin & Dess,

1996). Using the EO research at the business unit or

enterprise team level is a natural extension in the case of

the research conducted in this study.

The focal firm in this study^ (i.e. the supplier)

invested approximately 500 million dollars into designing

and implementing a front-back organizational structure

(Galbraith, 2002). The front-end of the organization is

organized and designed as a market structure, while the

back-end is organized as a product structure. Enterprise

teams are constructed on the front end of the structure and

are organized around preferred customers. These enterprise

teams interact with 1 to 4 preferred customers and act as a

" The sample comes from the Texas Center, Texas Tech University Exemplar Study by Macy, Wilcox, and Amett(2001).

54

buffer and innovator between preferred customers and the

supplier firm. These full-time business units are multi

functional and are typically staffed with sales, marketing,

production, finance, information technology, and logistics.

Their size ranges from 12 to over 200 members on an

enterprise team. The average age of team members is 39 (sd

= 3.5) with average salary of $84,000 (sd = $11,000). The

enterprise team's revenue per customer ranges from $27

million to $4.5 billion.

Therefore, enterprise teams are conceptualized as

'mini-businesses' and work directly with large, preferred

customers on a full-time basis. They tend to have a

significant level of business autonomy and function

independently- These business teams are consistent with

Gartner's (1985) view of entrepreneurship as the creation

of new organizations, especially in defining firm

entrepreneurship in terms of an existing organization

creating additional organizational units or forms.

However, this dissertation takes the idea of creation a

step further to explore how these new organizations

function. Thus, the notion of entrepreneurship is viewed

from a process, rather than a trait, perspective (e.g.

entrepreneurship as an action verb as opposed to a noun).

55

Using dyadic data should significantly contribute to

the research on organizational social capital in a

significant way. Social capital has been proposed to have

a stronger effect in closed networks (Coleman, 1990). The

data gathered for this study is dyadic from both the

perspective of the multiple buyers/customers and a single

supplier firm. A dyadic relationship would be considered

the simplest closed network and constitute a closed network

with two actors. The methodology is quite important when

proposing a moderately, socialized study of economic action

between organizations because the performance effects for

the buyer and supplier are considered. The dataset

includes quarterly objective sales data gathered on each

business unit (e.g., team) over five years, structured

interview, one-on-one data from each business unit, and

structured interview data from the alliance partner's

mirror team (the preferred large customers). All measures

are at the enterprise team level of analysis.

Sample

Due to the difficulty of obtaining dyadic data, a

global consumer products manufacturer was enlisted. The

organization provided demographic and performance data

56

regarding each business team or unit and encouraged its

large, key customers to participate in the field study.

The supplier has a totai of 44 full-time, multifunctional

customer business development teams in North America. Four

teams did not participate in the gathering of data on the

organizational effectiveness of each team. Therefore, the

initiai data gathering resulted in forty responses (91%).

A structured interview was utilized to gather both the

supplier and buyer data. In the second stage of the data

coilection, forty of the preferred, key customers were

contacted and thirty preferred customers that corresponded

to the 3 0 remaining business teams agreed to participate.

75% of the contacted preferred customers agreed to

participate in the study. Additionally, one-on-one

structured interviews were set up with high-level

respondents in each customer organization who were

knowledgeable about their supplier business team-customer

reiationships (e.g., many were with the customer's vice-

president of merchandizing). The structured interviews

iasted approximately one hour to one and one-half [1'^)

hours. The first two stages of the study resulted in a

total of 3 0 pairs of responses from both the business teams

and the preferred customers. During the third stage of

57

data collection, objective sales data for the 30 enterprise

teams were provided from the supplier.

Measures^

Entrepreneurial Orientation

The basic argument in this study is that firms have

some level of entrepreneurial behaviors rather than being

entrepreneurial or not, and the level of entrepreneurship

is related to firm performance. Most researchers to date

have used Milier and Friesen's (1982) reflective measure of

firm-level entrepreneurship based on Miller's (1983)

conceptualization, despite the ubiquity of labels used for

corporate entrepreneurship (Zahra, et. al, 1999) to measure

macro-level entrepreneurship. Miller's (1983)

conceptualization inciudes three dimensions of

entrepreneurial orientation: proactiveness, innovation, and

risk taking. Lumpkin and Dess (1996) added two additional

dimensions to include a propensity to act autonomously and

aggressively towards competition.

Although some prior scholarly work has suggested that

the dimensions of entrepreneuriai orientation covary with

See Appendix A for description of measures.

58

one another(e.g. Covin & Slevin, 1989), Lumpkin and Dess

(1996) specifically argue that these five dimensions of

entrepreneurial orientation vary independently and cite

contingency research that supports their claim of

independent covariation (e.g. Brockhaus, 1980;

Schollhammer, 1982; Cooper & Dunkelberg, 1986; Webster,

1977) .

Black and Boal (1994) conceptualize resources as

networks of resource factors or asset flows and a

competency as a network of resources. R-A theory considers

refers to resources and competences as resources that

provide a comparative advantage in a particular market or

market segment (Hunt, 2000). In this dissertation,

entrepreneurial orientation has been conceptualized as a

"competency" or "capability" in Black and Boal's (1994)

terms or as a "resource" in R-A theory's. Either

conception of a certain resource is consistent with the

measurement of the resource with a formative scale, in

which the items in a formative scale form or cause the

latent variable or construct (Arnett et. al. 2003). The

items in a formative scale need not necessarily be highly

correlated either, since they are capturing different

59

dimensions of the construct (Arnett et. al. 2003). Using a

formative scale to measure entrepreneurial orientation

means that entrepreneurial orientation is formed by the EO

dimensions (i.e., proactiveness, risk-taking, competitively

aggressive, high levels of business autonomy, and

innovation).

Miles and Snow's Prospector—Defender typology (Miles,

Snow, Meyer, and Coleman, 1978) has been suggested as

capturing, at ieast partially, multi-dimensional aspects of

an entrepreneurial orientation (Lumpkin and Dess, 1996).

Characteristics of the Prospector include product and

market innovation, competitively aggressive, and risk-taker

(Miles et. al. , 1978) . Each of the business units in this

study was given several scenarios and asked which of the

strategic descriptive scenarios were characteristic of

their organization and their core competition in the last

three years. Percentage scores (see Appendix B) are

computed to indicate the degree to which the organization

fits the perfect types described by Miles et. al.(1978).

The strategy type score was divided by the sume of the

extent scores a bank received on other strategy type

60

dimensions (defender, analyzer, reactor), and this resulted

in a strategy type percentage or pureness score.

In addition to utilizing Prospector data to measure

the construct entrepreneurial orientation, a Proactive

Behavior scale is used to capture the proactiveness

dimension of EO. The scale is as follows:

• Team Proactive Behavior (7-point scale - very dissatisfied to very satisfied)^

1. Our team actively seeks out areas for Continuous Improvement.

2. Our team continuously revises work processes. 3. Our team seeks alternative solutions to problems. 4. Our team seeks innovative solutions to problems. 5. Our team addresses issues before they become major

problems.

Finally, Business Autonomy was measured using a three-

item scale was created. The scale is as follows:

• Business Autonomy (7-point scale - very dissatisfied to very satisfied)

1. How much autonomy is there in your team? That is, to what extent does you work permit your team to decide on their own how to go about doing the work? [Very Little: The work gives us almost no team "say" about how and when the work is done./ Moderate Autonomy: Many things are standardized and not under our control, but we can make some decisions about the work./ Very Much: The work gives us almost complete responsibility for deciding how and when the work is done. (1-7 pts)]

' The Proactiveness scale failed to meet reHabihty standards and was uUimately dropped.

61

2. The team's work gives us considerable opportunity for independence and freedom in how we do the work.

3. The team's work denies us any chance to use our personal initiatives or judgments in carrying out the work.*

Relationai Social Capital

Social capital is a relational resource and, as a

result, is also measured using a formative scale.

Therefore, relationai social capital is conceptualized to

include the following dimensions from the buyer's (not the

supplier's) perspective using dyadic data: organizational

trust in the supplier, organizational commitment to the

supplier, the degree of organizational compatibility, and

the level of shared organizational values between the buyer

and supplier. These factors are also important dimensions

of social capital. The social capital dimensions are

measured using multi-item scales. An average of each

scale's items is used to construct the formative scale for

social capital. The scaies are as follows:

• Customer's Organizational Commitment (Morgan and S. Hunt, 1994) (7-point scale - strongly disagree to strongly agree)

^ * indicates a reversed item.

62

The Customer-Supplier reiationship that my firm has with [supplier name]:

1. Is something we are very committed to. 2. Is of very little importance to us. (r) 3. Is something my firm intends to maintain

indefinitely. 4. Is very much like my family. 5. Is something my firm really cares about.

• Organizational Compatibility (Bucklin and Sengupta 1993 and Ruekert and Walker (1987). (7-point scale - strongly disagree to strongly agree)

1. [Supplier name]'s goals and objectives are consistent with those of this firm.

2. [Supplier name] 's top leadership and this firm's top leadership have similar operating values and philosophies.

3. [Supplier name]'s top leadership has a different management style from that of the top leadership in this firm.*

• Shared Values (Morgan and Hunt 1994)(7-point scale -strongly disagree to strongly agree)

In our relationship, [supplier name]: 1. ...and our firm has very similar feelings about the

desired ievel of quality for our products. 2 . ...and our f irm of ten disagree about the importance of

satisfying our customer (the end user) (r). 3 . ...and our f irm place very similar importance on the

integrity and honesty fo our employees.

*Customer's Organizational Trust (7-point scale - strongly disagree to strongly agree)

Please indicate the extent of Strategic Partnership level that your Firm has with its [supplier's name] in the following partnerships:

Trust between Customer and [supplier name].

63

Organizational Performance Measures

The study uses multiple measures for organizational

performance. Lumpkin and Dess (1996) call for multiple

measures of performance in macro entrepreneurship research.

Two types of organizational performance can be drawn from

their discussion, namely strategic and financial

performance. Strategic Performance was conceptualized as

the degree of competitive advantage a firm has over its

rivals. A formative scale was developed to measure the

Jbuyer's and supplier' s competitive advantage. The scale was

developed through extensive one-on-one structured

interviews with employees from both the manufacturer and

its customers and focused on factors that enterprise teams

could potentially influence. The scale asks the respondent

to evaluate on a 7-point scale (no competitive advantage to

an enormous competitive advantage) the degree to which they

have a competitive advantage over their core competition on

four different factors: distribution, product quality,

ability to implement plans and strategies, and fully

dedicated customer business team.

The model also includes a "hard", objective measure

for the supplier's organizational performance, the average

percentage increase in sales volume over the last four

64

quarters as a financial performance measure. This measure

controls for customer size differences. Sales growth is

used in much of extant corporate entrepreneurship.

Analysis

The analysis chosen for this study is Partial Least

Squares (PLS) analysis developed by Wold (1980), which

includes evaluating both the measurement model and the

structural model. Partial Least Squares is an approach to

structural equation modeling. In general, causal modeling

techniques provide the researcher with the ability to use

multiple predictor and criterion variables when modeling

reiationships, and construct unobserved latent variables

based on observed variables. LISREL, EQS, and AMOS are

covariance-based methods that maximize the fit between the

hypothesized covariance matrix implied by the model and the

sample covariance matrix (Rigdon, 1998).

The basic PLS method, on the other hand, consists of a

series of ordinary least squares (OLS) regressions, which

attempts to maximize the variance explained by a model

(Chin, 1998) . Instead of explaining the covariation of the

indicators, PLS analysis minimizes the variance of all

dependent variables by obtaining parameter estimates based

65

on the ability to minimize the residual variances of

dependent variables. Interestingly, PLS analysis minimizes

the residual variances of both the observed variables and

the resulting latent constructs formed by the observed

variables. PLS is often used when theoretical knowledge is

less strong and a greater reliance on the data is used,

such as in exploratory analyses.

The data will be analyzed using partial least square

(PLS) analysis for several reasons. One reason that PLS

was chosen to analyze the structural equation model rather

LISREL, has to due to with its ability to accommodate small

sample sizes. Given the sample size of the proposed study,

PLS is the optimal technique for analysis of this field

research data. PLS analysis recommends the researcher have

a sample size that is at least equal to the larger of the

following: five times the scale with the largest number of

formative indicators or five times the largest number of

structural paths directed at any one construct in the

structural model (Chin, 1998) . Therefore, with a sample

size of 30 business or enterprise teams, a model could have

a maximum of six (6) structural paths directed to any one

construct or any formative scale could contain at most six

(6) indicators. PLS ailows the researcher to work with

66

complex models without the constraints of a large sample

size as compare to EQS and LISREL.

An additional benefit to using PLS anaiysis is that

PLS does not assume normality (Chin, 1998; Sellin, 1989),

which is often problematic in social science research. In

addition to PLS anaiysis being a nonparametric technique,

PLS does not suffer from indeterminacy problems like other

causai modeling techniques (e.g. such as those used by EQS

or LISREL) (Chin, 1998; Sellin, 1989). Indeterminacy is a

result of not being able to estimate scores for latent

variables, which results in an inability to predict

observed indicators. PLS analysis produces a linear

combination of observed indicators to predict latent

constructs, thereby solving the indeterminacy problem. In

addition to assumptions concerning normality and problems

regarding indeterminacy, PLS analysis is advantageous in

that it does not assume error free measurement. Therefore,

indicators with weaker relationships to related indicators

and the latent construct are given lower ratings (Chin,

Marcolin, & Newsted, 1996). A final reason PLS anaiysis is

an appropriate statistical technique is that PLS can be

used to estimate models using formative and reflective

measures (Sellin, 1989) . In causal modeling techniques

67

such as LISREL and EQS, the measurement items of a

formative scale are summated and treated as a single

indicant for the latent variable/construct. PLS analysis

allows the researcher to investigate the measurement model

with any combination of reflective or formative measures.

Standard reliability analysis (Cronbach's alpha) is

not appropriate to evaluate formative measures because the

components in a formative measure shouid not be highly

correlated, thus reducing the reliability coefficient for

the scale (Arnett, Laverie, and Meiers, 2003). Items in a

formative scale are assumed to "form" or "cause" the latent

construct. These items should tap into different

dimensions of the construct and should not be highly

correlated because they do not measure the same underlying

phenomenon.

Standard reliability analysis (Cronbach's alpha) will

be used to study the properties of the reflective

measurement scaies and the items that make them up. A

reliability anaiysis procedure calculates a number of

commonly used measures of scale reliability and also

provides information about the relationships between

individual items in the scaie. Therefore, an estimate of

inter-rater reliability is computed. Cronbach's alpha,

68

which is a measure of internai consistency and based on the

average inter-item correlation, should be 0.70 or above

(Nunnally, 1978). This measure allows the researcher to

determine the extent to which the items in the reflective

scale are related to each other. The measure of internal

consistency is essentially a measure of the repeatability

of the scale as a whole ánd indicates. Reflective scales

are assumed to have a high degree of correlation between

items since they are a "reflection" of the latent variable

or construct.

The set of items for the Social Capital formative

scale are listed below. A set of items for each relational

social capital item is included. The measurement

properties of the formative scale will be evaluated using

based on the guidelines suggested by Arnett, Laverie, and

Meiers (2003) . First, the formative indicators for each

construct should have low standard errors relative to their

measurement paths, which is computed by dividing the path

loading by the standard error computed by the PLS analysis.

Secondly, the tolerance statistics for each formative

indicator shouid be below the 0.50 level recommended by

Sellin (1989). The tolerance statistics is a measure of

muiticoliinearity and is computed by the PLS program by

69

using a jackknifing algorithm. Finally, Arnett et. al.

(2003) suggest that the construct should demonstrate

external validity, thereby correlating with other construct

in the model as theory would suggest.

The analysis of Model 1 (Figure 3) involves the use of

an interaction term, namely entrepreneurial orientation and

relational social capital. The approach used to perform a

PLS analysis that includes an interaction is based on Chin,

Marcolin, & Newsted (1996). The approach essentially

involves the use of standardized indicators of the

predictor variable and moderator variable. Then product

indicators are developed by creating all possible products

from the two sets of indicators. These product indicators

are then used to reflect the latent interaction variable.

Models 2 and 3 (Figures 4 and 5, respectively) will be

tested via traditional causal modeling techniques in PLS.

The structural models for all three proposed models will be

evaluated using the variance extracted (Arnett et. al.,

2003) . PLS analysis provides an R' statistic for each

endogenous construct. Therefore, an R statistic will be

provided for Growth, Buyer's Competitive Advantage, and

Supplier's Competitive Advantage. Since Model 2 (Figure 4)

has an additional endogenous construct (i.e. the mediator

70

sociai capital), an R statistic will be provided for the

relational social capital latent construct.

In addition to R statistics, the Stone-Geisser test of

predictive relevance assesses model fit in PLS analysis

(Geisser, 1975; Stone, 1974). The jackknifing procedure

involves "blindfolding" one case at a time. Then, the

model parameters are re-estimated using the remaining N-1

cases, followed by predicting the omitted case values on

the basis of the remaining parameters (Sellin, 1989). The

procedure results in the Q test statistic, which is the

jackknife anaiogue of the R statistics. If Q > 0, the

model has predictive relevance, while if Q < 0, the model

iack predictive relevance. The higher the O values, then

the higher the predictive relevance of the model.

71

CHAPTER 4

ANALYSIS AND RESULTS

The analysis chosen for this study is Partial Least

Squares (PLS) analysis developed by Wold (1980). Partial

Least Squâres is an approach to structural equation

modeling. In general, causal modeling techniques provide

the researcher with the ability to use multiple predictor

and criterion variables when modeling relationships, and

construct unobserved latent variables based on observed

variables. PLS evaluates both the measurement model and

the structural model through a recursive procedure.

The basic, recursive PLS method consists of a series

of ordinary least squares (OLS) regressions, which attempts

to maximize the variance expiained by a model (Chin, 1998).

Instead of explaining the covariation of the indicators,

PLS analysis minimizes the variance of all dependent

variables by obtaining parameter estimates based on the

ability to minimize the residual variances of dependent

variables. Interestingly, PLS analysis minimizes the

residual variances of jboth latent and observed dependent

variables. As a result, both the measurement and

structural models maximize the variance explained in the

72

endogenous constructs (i.e., R statistics) in the

endogenous constructs.

Measurement Model

Structured interview data, consisting of scales and a

single item indicant, were used to form measures for the

latent constructs (i.e., Entrepreneurial Orientation (EO)

and Relational Social Capital (RSC). Three measures were

used for Entrepreneurial Orientation (see Table 2): a

single indicant for the degree to which a business unit

maintained a Prospector type strategy, a Proactiveness

scale consisting of five items (a = .51), and an Autonomy

scale consisting of three items (a = .74). As a result,

the Proactiveness scale was dropped due to its internai

reliability being below 0.70 (Nunnelly, 1978). In the PLS

analysis, each of the measures were treated as a single

item in the formative measure for the entrepreneurial

orientation construct. Therefore, the EO construct was

formed by two items: a Prospector pureness score and an

Autonomy score (computed as the average of the three items

in the scale).

From a review of the iiterature, four components of

Relational Social Capital (RSC) were identified and

73

measured (see Table 2): a single item indicant for

Organizational Trust, an Organizational Commitment scale

consisting of five items (a = .70), an Organizational

Compatibility scale consisting of three items (a = .82),

and a Shared ORganizational Values scale consisting of

three items (a = .07). All of the dimensions were measured

from the customer's perspective using questionnaire data.

All of the data for relational social capital were used

except for the Shared Values scale due to its poor

reliability (Nunnelly, 1978). Again, each of the measures

was treated as a single item in the formative measure for

the relational social capital construct. Therefore, the

RSC construct was formed by three items: a single indicant

for the degree that the customer trusted the business unit,

the average of the commitment items, and the average of the

organizational compatibility items.

In addition to the EO and RSC constructs, a latent

construct was created for both the supplier's (CA-S) and

the buyer's competitive advantage (CA-B). The supplier and

the customer were asked to evaluate on a 7-point scaie (no

competitive advantage to an enormous competitive advantage)

the degree to which they have a competitive advantage over

rivals on four different factors: distribution, product

74

quality, ability to implement plans and strategies, and

fully dedicated customer business teams. Ali of the

competitive advantage measures loaded in the expected

direction. However, one item on the supplier's competitive

advantage construct, namely the degree to which the

business unit has a competitive advantage in distribution

(Item CA-Sl), had a large standard error in relation to its

standard loading. One item on the buyer's competitive

advantage construct, the degree to which the business unit

had a competitive advantage in product quality (Item CA-

B2) , also had a large standard error in relation to the

standardized loading. A large standard error in relation

to a standardized loading generally indicates that the

indicator can be dropped. However, both items were left in

the model in order to use the same measures for the

supplier's and the buyer's competitive advantage.

Structural Model

In the following discussion two additional criterion

for model assessment wili be discussed. One of the two

criterion is the R statistic which is the percentage of

variance explained in the endogenous construct (Barclay,

1991) . In addition to the R statistic, a Q statistic,

75

which is the Stone-Geisser test of predictive relevance

(Geisser, 1975; Stone, 1974), is computed by blindfolding

one observation at a time and using the model to predict

the values for the endogenous constructs. Table 4 contains

the results for the three competing structural models.

Hypothesized Model

The results reveal that 100% of the estimates of the

structurai paths ((3) have low standard errors relative to

the path estimates. Supplier sales growth is related

positively ((B=.54, SE=.22) to the interaction between

entrepreneurial orientation and relational social capital,

which provides support for Hi. In addition, the interaction

between entrepreneurial orientation and relational social

capital is positiveiy related to the supplier's competitive

advantage ((3=.50, SE=.14) and buyer's competitive advantage

((3=.55, SE=.15), which provides support for H and H3.

Organizational performance is a multidimensional construct

and the measurement of only a single dimension produces

biases that impact the size of the relationship to

performance (Lumpkin & Dess, 1996). The dataset used in

this dissertation inciudes objective sales growth data for

the supplier, in addition to data from both the buyer and

76

supplier enterprise teams. By using an objective

performance measure (quarterly saies growth over a five

year period) and perceptual measures (the competitive

advantage scaie) in this study, the likelihood of having a

level of bias that ultimateiy impacts the size of the

relationship to performance is significantly reduced.

Also, all three performance constructs perform similarly

based on the similar betas ((3) and standard errors (SE) .

Finaliy, all three of the constructs have large betas in

relation to their standard errors.

The results are largely consistent with existing EO

and alliance research. Both constructs, entrepreneurial

orientation and relational social capital, consistently

have moderately strong relationships to organizational

performance. However, existing research generally only

includes objective or perceptual performance measures,

whereas this dissertation inciudes both. In addition to

the supplier's sales growth and competitive advantage, a

measure of the customer/buyer's competitive advantage was

included as an organizational performance construct.

Research has yet to exam if the level of entrepreneurial

orientation in one organization has any relationship to the

performance in another organization. The R statistics for

77

the three performance measures, supplier's sales growth,

supplier's competitive advantage, buyer's competitive

advantage, are 29%, 25%, and 30%, respectively. These

results indicate the relationship between the interaction

of EO and RSC is similar for all three performance measures

(supplier's sales growth, supplier's competitive advantage,

customer/buyer's competitive advantage) based on the

variance explained (i.e., R2 statistics) in each measure.

Although H \ H ^ and H are supported, the results at this

point do not indicate if the hypothesized model

(interaction only model) performs better than the other two

models (i.e., mediating model and direct effect model).

The two additionai modeis, as well as the H and H set of

hypotheses, will be evaluated in the next section.

Rival Models

Mediating Modei

The mediating model uses reiational social capital as

a mediator between entrepreneurial orientation and

organizational performance (i.e., supplier sales growth,

supplier's competitive advantage, and buyer's competitive

advantage). The model accounts for 15% of variance in

sales growth, 22% of the variance in supplier's competitive

78

advantage, and 15% of the variance in the buyer's

competitive advantage. The Q statistics are all positive

for the mediating modei's organizational performance

constructs, as well. However, the Q statistics for

relational social capital is negative (Q = -0.02), which

indicates the model lacks predictive relevance for the

relational social capital construct.

Three of the four path coefficients (75%) are

supported. Entrepreneurial orientation does not have a

significant relationship relational social capital.

However, relational social capital did have a positive,

significant relationship with supplier sales growth (P=.39,

SE=.12), supplier'8 competitive advantage ((3=.47, SE=.15),

and buyer's competitive advantage ((3=.39, SE=.15). While

the model's mediating construct, relational social capital,

relates to organizational performance, the entrepreneuriai

orientation construct does not relate to relational social

capital. The direct effects modei, discussed below,

explores the direct reiationship between entrepreneurial

orientation and the organizational performance constructs.

79

Direct Effects Model

The direct effect model uses entrepreneurial

orientation and relational social capital to directly

predict the organizational performance constructs. The

direct effects model accounts for 7% of the variance in

sales growth, 20% of supplier's competitive advantage, and

20% of the buyer's competitive advantage. The model lacks

predictive relevance for sales growth (Q = -.23) and

buyer's competitive advantage (Q^=-.04). The model does

have minimal predictive relevance for the supplier's

competitive advantage (Q^=.01).

Only two of the six paths (33%) in the direct effects

model are significant. The paths from EO and RSC to sales

growth are not significant. While the path from EO to

supplier's competitive advantage is significant and

positive (|3=.35, SE=.15), relational social capital is not

related to supplier's competitive advantage. Finally,

while relational social capital is positively related to

competitive advantage for the buyer (p=.36, SE=.13),

entrepreneurial orientation is not related to the buyer's

competitive advantage. Therefore, the direct effects model

seems to lack consistently strong relationships between

predictor and criterion variables.

80

To summarize, the results for the three models that

were tested are located in Table 4. The percentages of the

significant paths for the hypothesized model (interaction

only), mediating model, and direct effects were 100%, 75%,

and 33%, respectively. These results suggest that the

interaction only model has the best performance out of the

three models. However, each of the endogenous constructs

will be assessed below.

Supplier Sales Growth: The hypothesized model and the

mediating model both had predictive relevance as evidenced

by positive Q statistics of .07 and .04, respectively. The

hypothesized model was able to predict more of the variance

in supplier sales growth than the mediating model (29%

versus 15%), which provides partial support for H^A- The

direct effects model, however, had a negative Q statistic,

as well as failing to have any significant paths. Thus,

support is found for Hsa.

Competitive Advantaqe-Supplier: The hypothesized,

mediating, and direct effects models had positive

predictive relevance (Q' =.15, .12, and .01 respectively).

While the Q2 statistic for the hypothesized model is larger

that the mediating model, the difference is not

substantial. Therefore, only partial support for H4B is

81

reported. However, the difference between the Q statistics

for the interaction only and direct effects model is

substantial, thereby providing support for HSB.

Additionally, the three models had similar R statistics

(25%, 22%, and 20%). All three of the models appear to be

able to predict the supplier's competitive advantage based

on the R statistics.

Competitive Advantage-Buyer: The hypothesized and

mediating model have positive predictive relevance (Q

statistics of .19 and .03, respectively), while the direct

effects model has negative predictive relevance (Q = -

0.04). However, the hypothesized model is able to predict

more of the variance (R = 30%) in the buyer's competitive

advantage than the mediating model (R = 15%) . The

differences in Q and R statistics are substantial for all

three models, with the interaction only model having the

largest values. Therefore, support is provided for H c and

HSC-

Summary of Results

The results confirm and support the theory developed

previously. The argument was made that the interaction

between reiational social capital and entrepreneurial

82

orientation would have a strong, positive relationship to

the supplier's saies growth (Hi) , supplier's competitive

advantage (H ) , and the buyer's competitive advantage (H3) .

All three of these hypotheses were ultimately supported.

However, at least two other alternative relationships

between entrepreneurial orientation and relational social

capital were possible. Consequently, a mediating and a

direct effects model were developed.

Following the testing of the hypothesized interaction

only model, two alternative models were tested (i.e.,

mediating and direct effects models). While the models

were essentially exploratory due to lack of existing

theory, the interaction only model was expected to have the

strongest relationship to the performance measures.

Clearly, the direct effects model lacks explanatory power

based on the Q statistics, R statistics, and percentage of

paths that are significant. However, the mediating model's

Q and R statistics indicate strong relationships between

the relational social capital construct and organizational

performance measures. However, the relationship between

entrepreneurial orientation and relational social capital

lacks predictive power. The results, therefore, appear to

be strongest for the interaction only model. In the next

83

chapter, the implications of the study's results will be

discussed.

84

Table 1 Construct Means, Standard Deviations, and Intercorrelations

Mean SD 1 1. Entrepreneurial Orientation x Relational Social Capital 1.00

2. Sales Growth .54 1.00

3. Competitive Advantage-Supplier .50 .47 1.00

4. Competitive Advantage-Buyer .55 .38 .56 1.00

85

Table 2

Reliability of Reflective Measures for Entrepreneurial Orientation

and Relational Social Capital Components

' Single indicant

Standardized Reliability

Entrepreneurial Oríentation Components

Prospector—Defender^

Autonomy .74

Proactiveness .61

Relatíonal Social Capital Components

Commitment -70

Trust^

Organizational Compatibility -82

Shared Values -07

86

Table 3

Properties of Measurement Model for Formative Measures

Standardized Loading (std .error) Tolerance

Entrepreneurial Orientation x Relational Social Capital EOxRSCl .50(.20) .97 E0xRSC2 .69(.15) .95 E0xRSC3 .27(.18) .87 E0xRSC4 .46(.14) .88 E0xRSC5 .43(.33) .93 E0xRSC6 .70(.06) .63

Sales Growth^ _ _

Competitive Advantage-Supplier CA-Sl .14(.19) .11 CA-S2 .61(.08) .10 CA-S3 .43(.15) .08 CA-S4 .83(.06) .07

Competitive Advantage-Buyer CA-Bl .70(.10) .08 CA-B2 .31(.21) .39 CA-B3 .55(.15) .28 CA-B4 .63(.12) .17

' Single indicant

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CHAPTER V

DISCUSSION AND CONCLUSION

The term "interpreneurship" was (iefined as the

combining or bundling of entrepreneurial resources with

relational resources. Consequently, this dissertation

explored the role that entrepreneurial orientation and

relational social capital played in increasing supplier

sales growth and competitive advantage for both the buyer

supplier firms in a strategic alliance relationship. This

dissertation found that these two constructs

(entrepreneurial orientation and relational social capital)

have a strong relationship to the supplier firm's sales

volume, as well as the competitive advantage of jboth the

supplier and its preferred customers.

The basic argument of this study is that macro-

business, entrepreneurial factors (e.g., risk-taking,

proactiveness, innovation, autonomy, and competitive

aggressiveness) interact with certain relational processes

or factors (e.g., trust, commitment, shared values, and

organizational compatibility) for firms trying to gain

competitive advantage via strategic alliances with their

preferred organizational customers (see Figure 2) . By

89

examining the effects of organizational social structure on

the relationship between entrepreneurial orientation and

organizational performance, support was found for the

multiplicative effect of entrepreneurial orientation and

relational social capital on organizational performance.

As a result, small changes in either construct results in

large changes in performance, which supports the

synergistic effects of resource combination (Hunt, 2000;

Dierickx & Cool, 1989; Amit & Shoemaker, 1993; Black and

Boal, 1994) .

This dissertation found strong support for the

theoretical assertion that entrepreneurship can be

conceptualized as the combining or bundling of resources,

and that this combination of resources has a significant,

positive effect on organizational performance. In fact,

the combining of resources across organizations, rather

than within, resulted in the strongest effect on

organizational performance for both the supplier and

customer organizations in the strategic alliance

relationships. This chapter will be organized around three

themes: presentation of the results of the three models

that were tested, how the results relate to

90

entrepreneurship theory, and the support found for resource

theory.

The Three Models

Direct Effects Model

Three models were developed and tested in this

dissertation, namely an interaction only model, a direct

effects model, and a mediating model. Of the three models

(Interaction Only, Mediating, Direct Effects), the direct

effects model was least able to adequately produce

significant results, which is surprising given the fact

that the supplier firm in this dissertation has very

powerful customers. The supplier organization relies on

its thirty (30) preferred customers for approximately 80%

of its revenue (80-2 0 rule. Based on this, theory would

suggest that their relationships with their preferred

customers would significantly affect their performance.

Based on empirical studies in the management literature,

the tendency is to investigate entrepreneurship and

relational constructs as having direct effects on

organizational performance. The results of this study fail

to support the argument that relational social capital and

91

entrepreneurial orientation have direct, independent

effects when both are included in a model.

The direct effects model is based on the argument that

entrepreneurial and relational resources have independent

effects on organizational performance. In the resource

based view, the firm is defined as a collection of unique

resources (Barney, 1986) and these resources provide a

competitive advantage for the firm (Hunt, 2000). If this

is the case, then an entrepreneurial orientation (the

conceptualization of entrepreneurial resources) and

relational social capital (the conceptualization of

relational resources) should have independent effects on

organizational performance. However, when tested in the

direct effects model, the entrepreneurship measures used in

this study did not have a significant relationship to

either sales growth or the preferred customer's competitive

advantage. Additionally, relational social capital failed

to have a significant relationship to either the supplier's

sales growth or the supplier's competitive advantage.

Therefore, for these thirty business units sampled, more

resources do not necessarily result in significantly

improved organizational performance as suggested by some

resource theory.

92

Mediating Model

The mediating model's explanation is that firms with a

more entrepreneurial orientation will better predict

investments in relational resources. Theory suggests that

entrepreneurship promotes the investment and identification

of valuable resources. Schumpeter (1934) and Kirzner

(1997) both note that different members of society have

different beliefs or valuations of resources, which

provides for entrepreneurial opportunity. As a result,

there should be a strong, positive relationship with an

entrepreneurial orientation, if an entrepreneurial

orientation helps identify valuable resources (e.g.,

relational resources). This mediating model, where

relational social capital mediated the relationship between

entrepreneurial orientation and organizational performance,

was tested in the second competing model. If the thrity

supplier enterprise units sampled in this study used

entrepreneurial processes to identify resources, such as

relationships with other organizations, and this

significantly impacted organizational performance, then all

of the paths in the mediating model would have been

significant. However, in the mediating model,

93

entrepreneurial orientation failed to have a significant

relationship to relational social capital. Therefore, an

entrepreneurial orientation in the business units sampled

did not identify valuable relational resources, despite the

strategic relationships with their preferred customers

being strongly related to the organization's performance.

Based on the theoretical explanation above, relational

social capital was used to mediate the relationship between

entrepreneurial orientation and organizational performance.

Although this model was able to produce significant results

for all of the organizational performance measures, there

was not a significant relationship between entrepreneurial

orientation and relational social capital. Consequently.

there seems to bee no evidence in this study that

relational social capital is impacted by or related to

entrepreneurial orientation. Based on the results from the

mediating model, there seems to be no support for the

notion that a business unit's ability to act

entrepreneurially will impact the degree to which it is

able to identify synergistic relationships with other

firms.

94

Interaction Only Model

This dissertation has logically built a model that

combines two distinct resources and relates those to

organizational performance. This model used

entrepreneurial orientation and relational social capital

as an interaction, without any main effects, and related

this interaction to the organizational performance

constructs. As a result, we are able to move from a naîve

expectation that essentially says "entrepreneurship is

always a good thing" to a more sophisticated, theoretical

explanation of the entrepreneurial process of combining

organizational resources. The results of this study

clearly support the theoretical assertions made in Chapter

Two of this dissertation. In fact, all of the hypotheses

that were generated based on the theory that resource

combination should relate most strongly to organizational

performance rather than the other conceptions (direct

effects and the mediating model), were ultimately

supported. Below I will discuss how the results of the

testing of these three models contribute to both

entrepreneurship theory and resource theory.

95

Entrepreneurship Theory

This dissertation began by comparing interpreneurship

with "alliance entrepreneurship" and "intrapreneurship".

The measures for entrepreneurial orientation failed to have

a significant, positive relationship with organizational

performance when controlling for the effect of the

relational attributes (i.e., the direct effects model).

Consequently, the study failed to find support for

intrapreneurship (i.e., the entrepreneurial spirit within

an organization) have a strong, positive relationship to

organizational performance.

For the organizational units in this study, product

innovation had constrained feasibility. As a result, the

entrepreneurial resources failed to provide significant

sales growth or a strong competitive advantage for either

alliance partners. Therefore, the study did not find

support that an entrepreneurial orientation resulted in

improved organizational performance when controlling for

the effects of relational resources.

Alliance entrepreneurship finds that the number of

alliances an organization pursues is directly related to

the organization's performance (Sarkar, Echambadi, &

Harrison, 2001). The argument is made that an organization

96

will experience improved performance if it is

entrepreneurial in seeking alliance partners, as measured

by the number of alliances. This theory was tested with a

model that used entrepreneurial orientation to predict

relational social capital in a strategic buyer-supplier

relationship. This model failed to find a significant,

positive relationship between entrepreneurial orientation

and relational social capital. Thus, this study seems to

cast doubt on the effect of an entrepreneurial orientation

is choosing alliance partners.

The argument was made in this study that an

alternative conception of entrepreneurship was needed for

firms with constrained feasibility of product innovation.

The results of the direct effects model and the mediating

model find entrepreneurial orientation has having limited

independent effects on organizational performance. First,

the direct effects model failed to relevantly predict sales

growth and the buyer's competitive advantage. The direct

effects model had only minimal predictive relevance for the

competitive advantage of the supplier, as well. Second,

although the mediating model had predictive relevance for

the organizational performance measures, there was not a

significant relationship between entrepreneurial

97

orientation and relational social capital. These results

taken together indicate that entrepreneurial orientation

has only a limited, independent effect on organizational

performance for the business units sampled in this

dissertation and suggests the need for an alternative

conception of entrepreneurship.

The alternative conception of entrepreneurship

proposed in this dissertation is the combining or bundling

of resources. Consequently, the argument was made that

interpreneurship was the combining of entrepreneurial with

relational resources and this combination was especially

effective for organizations with constrained feasibility of

product innovation. The results of the study apparently

find that an organization which is capable of combining

resources will have superior organizational performance

over its core competitors and have a competitive advantage,

even when the feasibility of innovating on products is

limited.

In the management literature, entrepreneurship within

organizations (i.e. "intrapreneurship") has been found to

have a positive relationship to organizational performance.

Empirical studies have found support that the number of

external ties to the firm have a positive relationship to

98

firm performance (Sarker et. al., 2001; Chung et. al.,

2000). This dissertation failed to find an independent

effect of entrepreneurship relating to the supplier's

organizational performance. This seems likely to be the

result of the supplier organization having constrained

feasibility for product innovation. What is interesting,

however, is that the organization's entrepreneurial

orientation did have a strong relationship to

organizational performance when combined with relational

resources. These resources are at the level of the

relationship Jbetween organizations rather than within a

single organization. Therefore, support is shown in this

study that entrepreneurial processes can actually occur

beyond the boundaries of an organization when combined with

the quality of the interorganizational relationship.

One of the objectives of this study was to further

develop macro entrepreneurship theory. Entrepreneurship

research has been criticized for being atheoretical and

described as a research setting rather than a distinct area

in management research. Entrepreneurship continues to be

plagued by lack of organizational theory despite having a

stream of empirical research that finds a statistically

significant relationship with organizational performance.

99

For macro conceptions of entrepreneurship, such as

corporate entrepreneurship, resource theory provides much

needed theoretical insight. However, a link to economic

perspectives of entrepreneurship (i.e., Schumpeter (1934))

is necessary.

Schumpeter (1934) advances entrepreneurship theory by

characterizing it as the combining of resources and

relating this process to growth of economies. The problem

for organizational research is that his theory is at the

level of the economy. Penrose (1959) theorizes the

entrepreneur as a functional part of the modern

organization and relates entrepreneurship to the growth of

the firm. Therefore, by melding these two theoretical

conceptions of entrepreneurship together, one can make the

theoretical assertion that an entrepreneurial process for

existing organizations is the combining of resources.

The supplier firm in this dissertation designed and

implemented a front-back, lateral organizational structure

(Galbraith, 1978, 1994, 2002). The front-end of the

organization is organized and designed as a market

structure, while the back-end is organized as a product

structure. The thirty business units or enterprise teams

are constructed on the front-end of the structure and are

100

organized around preferred "five star" customers. The

enterprise teams are created to act as a buffer and

innovator between preferred customers and the supplier

firm. This dissertation finds that the creation of these

enterprise teams promotes entrepreneurial processes within

these business units and not only has a significant,

positive relationship with the supplier's competitive

advantage, but also the buyer firm's competitive advantage.

These enterprise teams or business units are able to

leverage the relational social capital resources with

partnering firms by combining these relationally-based

resources with entrepreneurial resources and positively

impact firm performance. This process of combining certain

resources has a significant, positive relationship with the

supplier firm's financial performance. To our knowledge,

this is the first empirical test of Galbraith's (1978,

1994, 2002) front-end design. This dissertation supports

the view that the front-end design is a competitive

advantage that produces superior firm performance.

In the following section, the impact of the results of

this dissertation on resource theory is examined further.

101

Resource Theory

The RBV literature has identified multiple sources of

competitive advantage, which include both the nature of the

resource/s and management processes. A common prescription

is for firms to develop resources "in house" based on the

internal analysis of the firm because a firm's

heterogeneity is based on its endowment of resources

(Barney, 1986; Dierckx and Cool, 1989). However, research

that focuses on the management processes related to

resources is significantly under researched and suggests a

theory of firm entrepreneurship. The various

organizational processes of combining of resources, network

relationships of resources, and accumulation of resources

are all types of managerial processes that impact the

ultimate value of resources (Dierckx and Cool, 1989;

Barney, 1986; Teece, Pisano, & Shuen, 1997; Wernerfelt,

1984; Amit & Shoemaker, 1993; Black and Boal, 1994).

Early work in the resource based view began to advance

the notion of relationships and resources in order to

address the combining and accumulation of resources (e.g.,

Black and Boal, 1994; Amit and Shoemaker, 1993) . Although

this line of inquiry has been largely forgotten, when

extended and combined with Schumpeter's (1934) ideas about

102

entrepreneurship, the case can be made that combining

resources is a valid conceptualization of entrepreneurial

processes in organizations.

This dissertation finds more support for conceptions

of resource-based competitive advantage that focuses more

on the relationships between resources (e.g., Black and

Boal, 1994; Amit and Shoemaker, 1993) rather than the

nature of a resource. What appears to be most significant

are the processes by which managers develop and combine

resources. While entrepreneurial resources and relational

resources meet the VRIO framework, they do not appear to

have independent effects on the competitive advantage of an

organization. What appears to be most important is the

managerial process and systems of combining resources.

In addition to the process of combining resources, the

effect resources have upon one another is important. Hunt

(1997, p. 437) defines "resources as tangible and

intangible entities available to the firm that enable it to

produce efficiently and/or effectively a market offering

that has value to some market segment(s)". Thus, R-A

theory expands the view of resources to include any entity

that has an "enabling capacity". An organization's

entrepreneurial orientation should provide this enabling

103

capacity. In a similar fashion, relationships with

customers can provide an enabling capacity that is

available to, rather than owned by, the supplier firm. By

using measurements of the quality of network ties between

organizations, rather than only the number of external

ties, the study finds that the strategic relationships

between organizations is strongly related to the

performance of both organizations. However, the study

finds that the quality of the relationships between

organizations (i.e., relational social capital) is a

necessary, but not sufficient, condition for both

organizations' competitive advantage.

In addition to synergy, the combining of resources,

particularly entrepreneurial and relational ones, is

significant when considering sustained competitive

advantage. The Resource Based View of the firm has

typically focused on sustained competitive advantage. The

sustainability has recently been questioned and the

argument made regarding more "dynamic capabilities"

(Eisenhardt and Martin, 2000) . This dissertation found

that organizational performance was a multidimensional

construct and not consistently related to simpler

conceptions of basic resources. In fact, the normative

104

arguments of some of the early RBV research in which

competitive advantage is based on the uniqueness of

resources owned by the firm (e.g., Barney, 1986) seem not

to be supported in this dissertation.

The results of this dissertation support the

theoretical notion that entrepreneurship, conceptualized

and modeled as the combining of resources, has a

significant, positive relationship to organizational

performance. In fact, the combining of entrepreneurial and

relational resources significantly explained the variance

in competitive advantage for both the supplier and its

customers. Thus, this dissertation finds that innovation

need not necessarily be constrained to product innovation,

but can include combining resources into core competences

that give a firm competitive advantage.

As noted above, the foundational work in the resource

based view began to advance the notion of relationships

between resources in order to address the combining and

accumulation of resources. The prescription for managers

was to combine certain resources into core competencies in

a way that is durable, inimitable, and reduces the mobility

of the competence. Since, a capability or competence is

the networking or combining of resources (Black and Boal,

105

1994; Hunt, 2000), then the study herein supports the idea

that organizations can have an interpreneurial competence.

To the degree that this competence is socially complex,

immobile, and durable, competitive advantage leading to

superior organizational performance can be achieved (Hunt,

2 000; Barney, 1991).

An interpreneurial competence is a function of the

quality of an organization's relationships and its ability

to be entrepreneurial. Clearly, an interpreneurial

competence is socially complex since the competence is

based directly on the quality of an interorganizational

relationship. An interpreneurial competence is also

immobile. An organization's strategic relationship with

another organization develops over time and requires

considerable investment. This was true in the multi-

international supplier firm, which spent over ten years

designing and redesigning their enterprise teams to be a

competitive advantage.

Relational social capital was conceptualized as the

result of interorganizational trust, organizational

commitment, organizational compatibility, and shared

organizational values, which develop and change over time.

As a result, relational resources cannot be imitated by

106

other organizations without significant investments of

time, thereby resulting in limited mobility. Finally, an

interpreneurial competence is durable. In fact, an

interpreneurial competence is partially based on the degree

of commitment to a long-term relationship with strategic

partner organizations.

Competences are higher-order, socially complex,

interconnected, combinations of basic resources in that

they are knowledge-based abilities to combine, accumulate,

and leverage existing stocks of resources (Hunt and Arnett,

2003). An interpreneurial competence involves the socially

complex process of developing interorganizational

relationships that are characterized by trust, commitment,

and compatibility. These relationships can be combined

with entrepreneurial resources and result in a competitive

advantage. This is likely a highly evolved process in

which organizations must learn how to combine these rare

resources. The research finds that a front-end designed,

multi-functional business unit's ability to combine and

leverage these resources has a strong, positive

relationship with organizational performance and both

firms' competitive advantage.

107

The study finds support for the definition of

resources to include those resources that that are

available to, versus owned by, an organization found in

Resource-Advantage Theory (Hunt, 1997). Research on

strategic alliances finds support for the notion of a

competence in managing interorganizational relationships

(Jap, 1999; Dyer & Singh, 1998). An alternative to the

competence explanation is that relationships characterized

by organizational trust, organizational commitment, and

organizational compatibility are valuable resources that,

when combined with other resources, provide a competitive

advantage and produce superior firm performance. Indeed,

other researchers (e.g., Eisenhardt and Martin, 2000) find

support for the resource combination argument. Indeed,

other researchers (e.g., Black and Boal, 1994) argue that a

capability (e.g. a relational competence) is a higher order

construct formed by networking resources together.

Therefore, the competence and resource combination

explanations may not be alternative explanations, but

actually be complementary explanations.

Finally, the results of this dissertation provide

insight into research on strategic interorganizational

relationships. The study failed to find that relational

108

resources had a strong, independent effect on Sales Growth

or the supplier's Competitive Advantage when controlling

for the effects of entrepreneurial orientation. The

results indicate that the combining of relational resources

with other resources, such as entrepreneurial resources,

has the strongest relationship with performance outcomes.

It appears that interorganizational relationships are a

means to an end, not an end in itself. While the level of

relational social capital provides a productive resource,

these resources seemingly must be combined with additional

resources to provide a competitive advantage and improved

financial performance for the business units sampled.

The egocentric perspective in social capital research

argues that relationships constitute a valuable resource to

collectives (e.g., teams, business units, organizations),

as well as individuals (Putnam, 1993). However, research

has not been clear regarding more macro views of social

capital. Is it the result of or consequence of other

organizational factors? This study conceptualized

relational social capital as being formed by the asset

flows of organizational trust, organizational commitment,

shared organizational values, and organizational

compatibility. The resulting macro, relational social

109

capital construct explained a significant amount of

variance in some of the performance constructs in all three

models.

It appears that the combining of more basic resource

factors, such as organizational trust, organizational

commitment, and organizational compatibility, form a

resource that is often related to organizational

performance. This relational resource has a synergistic

effect with other resources, such as entrepreneurial

resources examined in this dissertation. Therefore, this

dissertation provides empirical support for macro,

egocentric perspectives of social capital by providing

empirical evidence of the construct's relationship with

organizational performance measures. Although the

construct does not have a clear independent effect on

organizational performance for the business units studied

in this dissertation, it has a significant enhancing effect

when combined with other resources.

Summary and Conclusions

This study began with two questions. The first

question was "In markets where product innovation has

limited feasibility, does entrepreneurship still relate to

110

firm performance?" The second question was "If so, what

effect does social structure have on the relationship

between entrepreneurship and organizational performance?"

The results of this study suggest the answer to the first

question is "yes", depending on what we mean be

entrepreneurship. When measures of entrepreneurial

orientation interact with measures of relational social

capital, the effect is a strong, positive relationship.

However, the results fail to support entrepreneurship

having a strong, positive relationship with all three

measures of organizational performance used in this study,

unless combined with another resource (i.e., relational

resources).

This study found that the answer to the second

question is the social structure, as conceptualized as

relational social capital, had an "enabling capacity" for

entrepreneurial processes. Although the effect of social

structure was generally positive and significant, it

produced the strongest effect when combined with other

resources (i.e., entrepreneurial resources). The following

sections will outline the contributions and limitations of

this dissertation.

111

Contributions

The study makes several contributions to research in

entrepreneurship, social capital, and interorganizational

relationships.

Entrepreneurship

A broader conception of entrepreneurship was developed

in this dissertation. Rather than focus solely on product

innovation, the study characterized entrepreneurship as

including innovations in organizations processes, such as

the management of interorganizational relationships.

Entrepreneurship research has been criticized for lacking

theory to explain the empirical results found in studies

(Shane & Venkataraman,2 000) As a result, resource theory

(i.e., resource based view and resource-advantage theory)

combined with economic theory (i.e., Schumpeter and

Austrian economics) was used to develop a combination

theory. The theory developed in this dissertation

conceptualized entrepreneurship as the combining of

resources and tested the theory on a sample of business

units for a large, global supplier of household goods and

its customers. The results seem to support the

conceptualization of entrepreneurship as resource

112

combination and suggest that entrepreneurship can, in fact,

occur between organizations as opposed to solely within.

In addition to developing entrepreneurship theory,

several models were developed that test the influence of

organizational social structure on the relationship between

entrepreneurial orientation and organizational performance.

The results suggest that relational social capital (the

measure of social structure effects) has the strongest

effects on organizational performance for both the supplier

and its preferred customers in this sample as an

interaction with entrepreneurial orientation.

Finally, entrepreneurship was argued to be a resource

available to an organization. Consequently, an

entrepreneurial resource was conceptualized to be a

formative measure of entrepreneurial orientation (EO)

consisting of risk-taking, proactiveness, innovation,

competitive aggressiveness, and autonomy. Much of the

extant entrepreneurial orientation research that uses the

dimensions, or a subset of the dimensions, does not treat

them as independent dimensions. By constructing a

formative measure, as opposed to a reflective measure, the

dimensions are allowed to vary independently of one

another. The existing reflective measure of entrepreneiral

113

orientation basically requires an organization to be high

in all dimensions of EO to be considered entrepreneurial.

The formative measure allows the researcher to tap into

qualitative differences in entrepreneurial orientation and

provides a richer measurement of EO. Consequently, rather

than an organization being considered either

entrepreneurial or not entrepreneurial, researchers are

able to measure the level of EO.

Social Capital

In addition to the formative measure constructed to

measure entrepreneurial orientation, a formative measure

was used to capture the effects of relational social

capital. Social capital was argued to be an asset stock of

relational resources available to an organization based on

the egocentric treatment of social capital. Thus, the

resource of relational social capital was argued to be

formed by the asset flows of trust, commitment,

organizational compatibility, and shared values between

organizations. The measurement of relational social

capital using a formative measure makes a contribution to

social capital research by providing a measurement

methodology consistent with the theory of

114

interorganizational relationships providing a resource to

organizations.

Social capital was also conceptualized as a macro-

level construct. Rather than focus on the resources that

relationships provide to an individual (i.e., individual

level of analysis), the study focused on a collective

(e.g., a business unit) as the unit of analysis. Few

studies test more macro treatments of social capital

theory. In addition to traditional social capital theory,

this dissertation provides the first empirical test of

Galbraith's (1978, 1994, 2002) front-end organizational

design, in which front-end business units are organized

around preferred customers. The dissertation finds support

for the role of profit and loss enterprise teams or multi-

functional customer account teams in promoting

entrepreneurship and effective strategic,

interorganizational relationships. Therefore, a

contribution is made by extending social capital theory to

the examination of interorganizational relationships, as

well as addressing organizational design issues that focus

an organization on its preferred customers.

115

Strategic Interorganizational Relationships

Few studies, empirical or theoretical, use

entrepreneurial orientation or social capital to understand

and examine the effects of interorganizational

relationships on organizational performance. In fact,

interorganizational relationship research into both of

these constructs has used the number of ties as a measure

of social capital and entrepreneurship. For example,

Sarker et. al. (2001) use the number of alliances as a

measure of alliance entrepreneurship. In a similar vein,

CITE (Chung, et. al., 2000) use the number of external ties

a firm has as a measure of social capital. By providing a

more descriptive measure of both entrepreneurial

orientation and social capital, this study contributes to

research studying interorganizational relationships.

Limitations

The study has several limitations that can be improved

upon in the future. First, the study used an alternative

measure of entrepreneurial orientation rather than

traditional macro entrepreneurship scales. The measure

used for proactiveness was dropped from the study due to

lack of internal reliability, as well. Also, measurement

116

problems occurred with the measure developed for social

capital. Specifically, the degree of shared values was

dropped from the models due to it lacking internal

reliability. Future research should continue to refine the

measurement of entrepreneurial orientation and social

capital.

Another limitation of the study has to do with its

external validity. Due to the difficulty in obtaining

dyadic data, a single multi-international seller firm and

its customers were used as data sources. Future research

should attempt to replicate the results found in this study

with a large number of firms in order to assess the degree

to which the results can be generalized to other firms.

The study relied on cross-sectional data, also. Future

studies should collect additional types of data to test the

ideas proposed in this study.

Future Directions

The study used interorganizational trust as a

dimension of relational social capital. However, the level

of trust within the business unit and the degree to which

to the business unit trusts the supra-organization was not

addressed. In general, trust involves some degree of risk-

117

taking. The risk-taking involved to trust others, whether

they be individuals or collectives (e.g., groups, business

units, organizations), would likely promote risk-taking

within the business unit. Therefore, future research could

address the degree to which trust between business unit

members, as well as the trust between the organization and

business units, fosters risk-taking in the business unit

and the organization as a whole.

Finally, the degree of strategic fit between

organizations has not been addressed in the either the

management or marketing alliance literature. One future

direction would be to examine the degree to which strategic

fit between organizations relates to organizational

performance for alliance partners and their relationship

quality. Perhaps, the degree of strategic fit between

organizations has significant, positive performance

implications for firms participating in alliances.

118

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APPENDIX A

MEASUREMENT SCALES

128

• Customer Commitment (Morgan and S. Hunt, 1994) (7-point scale - strongly disagree to strongly agree)

The Customer-Supplier relationship that my firm has with [supplier name]:

Is something we are very committed to. Is of very little importance to us. (r) Is something my firm intends to maintain indefinitely. Is very much like my family. Is something my firm really cares about.

• Organizational Compatibility (Bucklin and Sengupta 1993 and Ruekert and Walker (1987). (7-point scale -strongly disagree to strongly agree)

[Supplier name]'s goals and objectives are consistent with those of this firm. [Supplier namej's top leadership and this firm's top leadership have similar operating values and philosophies. [Supplier name]'s top leadership has a different management style from that of the top leadership in this firm.*

• Shared Values (Morgan and Hunt 1994) (7-point scale -strongly disagree to strongly agree)

In our relationship, [supplier name]: ...and our firm has very similar feelings about the desired level of quality for our products. ...and our firm often disagree about the importance of satisfying our customer (the end user) (r). ...and our firm place very similar importance on the integrity and honesty fo our employees.

• Customer's Trust (7-point scale - strongly disagree to strongly agree)

Please indicate the extent of Strategic Partnership level that your Firm has with its [supplier's name] in the following partnerships:

Trust between Customer and [supplier name].

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• Buyer's and supplier's competitive advantage (7-point scale - no competitive advantage to an enormous competitive advantage)

Indicate the degree to which they have a competitive advantage over rivals in:

Distribution Product quality Ability to implement plans and strategies Fully dedicated customer business team

• Team Proactive Behavior (7-point scale - very dissatisfied to very satisfied)

Our CBD team actively seeks out areas for Continuous Improvement. Our team continuously revises work processes. Our team seeks alternative solutions to problems. Our team seeks innovative solutions to problems. Our CBD team addresses issues before they become major problems.

• Team Autonomy (7-point scale - very dissatisfied to very satisfied)

How much autonomy is there in your CBD team? That is, to what extent does you work permit your team to decide on their own how to go about doing the work?

[Very Little: The work gives us almost no team "say" about how and when the work is done./ Moderate Autonomy: Many things are standardized and not under our control, but we can make some decisions about the work./ Very Much: The work gives us almost complete responsibility for deciding how and when the work is done. (1-7 pts)]

The team's work gives us considerable opportunity for independence and freedom in how we do the work. The team's work denies us any chance to use our personal initiatives or judgments in carrying out the work.*

* Reversed Item

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APPENDIX B

PROSPECTOR PURENESS SCORE

131

The Prospector Pureness score is computed by dividing

the response to the Prospector strategic type description

by the sum of the responses to the other strategic type

descriptions (Doty, 1990). A higher pureness score

mdicates that the business unit is perceived to be more

indicative of a pure Prospector strategic type (see Table 5

below for examples of computation). All of the strategic

typology response scales are 7-point Likert-type (i.e., 1

to 7) response scales. Therefore, the range of the

pureness score (see Minimum and Maximum score in Table 5)

is from .05 (1 divided by 21) to 2.33(7 divided by 3).

Finally, the same process is used to compute the Reactor,

Analyzer, and Defender pureness scores, as well as the

business unit's core competition®.

Table 5 Computation of Strategic Typology Pureness Score

Prospector Type

Response 1

7

6 7

Defender Type

Response 7

1

5 2

Analyzer Type

Response 7

1

3 4

Reactor Type

Response 7

1

1 1

Prospector Pureness Score 1/(7+7+7)= 0.05 Minimum Score

7/ (1 + 1 + 1)= 2.33 Maximiim Score

6/(5+3+1)= 0.67 7/(2+4+1)= 1.00

' Only the Prospector strategic type was used in this dissertation.

132

APPENDIX C

KEY ACCOUNT MANAGEMENT TEAM CONTINUUM

133

Figure 6 (see below) is a continuum that contains the

evolution of Key Account Management Teams. The "enterprise

teams" used in this dissertation began to involve in the

1990's and function as "mini-business" units (i.e., profit

and loss centers).

Figure 6 Key Account Management Team Continuum

Core Selling National National Selling Category Teams/ Horizontal Account Account Center IVIanagement Enterprise Venture

Managers Teams Teams Teams Teams Teams

1950s 1960s I

1970s I

1980s 1990s I

Future I

Transaction-Based

Long-term Relationship

Formal Partnership

Formal AUiance

Source: A(dapted from Macy forthcoming

134