Entrepreneurship Orientation towards Business Performance of Small and Medium Scale Enterprises: Reference to Hambanthota District, Sri Lan

a Buddhika Niranjan Gamage1 !bstract Entrepreneurship has played an important role in economic growth, innovation, competitiveness and in poverty alleviation in Sri Lanka whereas SME sector in the country has great potential to generate economic ene!its and accounts !or a out "#$ o! all industrial esta lishments, %#$ o! the total industrial output and %$ o! employment& 'mong these industrial sectors, Small and Medium Scale Enterprises (SMEs) !orm the ack one o! the Sri Lanka economy& *his study investigated the degree o! Entrepreneurial +rientation (E+) o! !i!ty seven manu!acturing SMEs in ,am anthota -istrict, Sri Lanka (,-SL) and the e!!ects o! E+ dimensions including proactiveness, innovativeness, and risk taking to Business .er!ormance (B.)& *he study e/plored the degree o! E+ dimensions o! !i!ty seven esta lished manu!acturing SMEs in ,-SL and its relationship with per!ormance& -i!!erent analy0ing methods have een used !or the study& Semi structured interviews and 1uestionnaires were used as the main instruments !or data collection& 2ualitative and 1uantitative techni1ues were applied !or data analysis& Simple Linear 3egression analy0ed the relationship etween E+ and usiness per!ormance& Multiple regression analyses were employed to identi!y the relationship among the E+ dimensions and usiness per!ormance varia les with which degree o! E+ o! SMEs was determined y the mean value and ased on the result o! .earson correlation analysis the signi!icance o! the relationship among varia les was esta lished& 3elia ility analysis ensured the internal consistency and relia ility o! measures& 4ron ach5s alpha was calculated to con!irm the relia ility o! constructs +! the usiness per!ormance varia les 6innovativeness7 and 6proactiveness7 signi!icantly a!!ect the usiness per!ormance& ,owever, the most important varia le to descri e the usiness per!ormance is 6innovativeness7& *he most important varia le to measure the usiness per!ormance is growth in num er o! employees& "e#words: Small 8 Medium Scale Enterprises , Entrepreneurial +rientation, Business per!ormance, ,am antota -istrict, Sri Lanka

Lecturer in Economics , -epartment o! Economics, 9aculty o! Social Sciences, :niversity o! ;elaniya, Sri Lanka uddhikangamage<yahoo&com

$% &ntroduction SME accounts !or a out "#$ o! all industrial esta lishments, %#$ o! the total industrial output and %$ o! employment in Sri Lanka (Munidasa, =##>)& SMEs in Sri Lanka operate either as individual enterprises or in groups, clusters& Some o! them were set up y the government to operate in industrial estates& More than ?# industrial estates run y Board o! @nvestment, Ministry o! @ndustries, @ndustrial -evelopment Board, :r an -evelopment 'uthority and .rivate sector& 'ccording to the @ndustrial -evelopment Board (@-B) a small industry can hold capital investment in plant and machinery that does not e/ceed A# persons (4entral Bank o! Sri Lanka, 1BB>)& 'ccording to the -epartment o! Small @ndustries (-S@) SMEs are those with capital investment o! less than 3s& A million and !ewer than A# employees& 'ccording to the Corld Bank !inanced @nvestment 'ssistant Scheme, SMEs are those investment in !i/ed assets at original ook value , e/cluding land and uilding , do not e/ceed 3s& > million& 'ccording to Sri Lanka E/port -evelopment Board (SLE-B) !or e/port oriented enterprises, SMEs have capital investment e/cluding lands and uildings o! less than 3s& A# million (,ewaliyanage, =##1)& 'ccording to the European :nion, it is also important to consider num er o! employees, amount o! turnover and alance sheet total& *he Corld Bank de!ines SME enterprises in Sri Lanka ased on the num er o! employeesD 9ewer than EB employees are Small si0ed,A#FBB employees are Medium si0ed and more than 1## employees are large si0ed& *he current research is carried out with selected esta lished manu!acturing SMEs in ,am antota -istrict, Sri Lanka (,-SL)& *he district o! ,am antota is one administrative district among three districts namely Galle, Matara and ,am antota in Southern .rovince& ,-SL is recording its highest development rate in recent years& *he area has recently ecome an entrepreneurial hu & Esta lishment o! a new har or and proposed airport in ,-SL are the two most important !actors !or this acceleration& Large scale projects, aiming at developing the in!rastructure o! the area indicate a move towards the development o! the district into a hu o! economic development& *he growth o! the enterprises in num ers, the growth percentage in ,-SL was slightly higher (9ernando, =##1)& Studies o! entrepreneurship in Southern region o! Sri Lanka are rare and still in their nascent stageG although more in depth studies emphasi0ing entrepreneurship should help in enhancing SME per!ormance towards achieving local and regional development& *he research tries to give etter understand on the degree o! E+ and how E+ impact the B. o! SMEs in ,-SL& @t is also important to clari!y the nature o! the E+& 'n E+ re!ers to the processes, practice and decision making activities that lead to new entry& @t emerges !rom a strategic choice perspective which asserts that new entry opportunities can e success!ully undertaken y 6peace!ul enactment7& *he key dimensions that characteri0e an E+ includeG ' propensity 'ct automatically ' willingness to innovate and take risks ' tendency to e aggressive toward competitors .roactive related to marketplace opportunities (Lumpkin 8 -ess, 1BB?) 'll o! these !actorsFautonomy, innovativeness, risk taking, proactiveness and competitive aggressiveness may e represent when a !irm engages in new entry& Lumpkin and -ess (1BB?) advocated that the dimensions o! E+ may vary independently which implies that the

in!luence o! individual dimensions o! E+ on !irm per!ormance should e emphasi0ed& @t is not same that each dimension a!!ects !irm per!ormance& *he study tries to e/plore the degree o! E+ dimensions o! esta lished manu!acturing SMEs in ,-SL and its relationship with per!ormance& *his will e the primary o jective o! the research& 'part !rom the main o jective, it is also important to analy0e the e/tent o! E+ dimensions o! proactiveness, innovativeness and risk taking demonstrated y manu!acturing SMEs in ,-SL& 'nother Secondary o jective is to analy0e the overall E+ and B. o! manu!acturing SMEs in ,-SL& *he study has also !ormulated !our research 1uestions to help to etter achieve the main o jective o! the research& 1& ,ow do the entrepreneurs !rom ,-SL ehave in the -imension o! @nnovativeness towards B.H =& ,ow do the entrepreneurs !rom ,-SL ehave in the -imension o! 3isk taking towards B.H %& ,ow do the entrepreneurs !rom ,-SL ehave in the -imension o! .roactiveness towards B.H E& ,ow do the entrepreneurs !rom ,-SL ehave in the three -imensions towards B.H '% Literature Re(iew Definin) SMEs *here is no single and clear de!inition o! small and medium scale enterprises ecause, !or e/ample, a IsmallI !irm in, say, the petrochemical industry is likely to have much higher levels o! capitali0ation, sales and possi ly employment, than a small !irm in the car repair trades (Storey 1BBED >)& ,owever, the terms Jenterprise5 and J!irm5 are also o!ten usedG in the vast majority o! cases small esta lishments in developing countries are independent !irms (Little 1B>")& Small enterprises can e categori0ed into diverse ways depending on a countryIs pattern and researcherIs o jectives& 9or e/ample, the Bolton 4ommittee (1B"1) tried to overcome the pro lem o! de!inition y !ormulating two categories o! de!initionG an Jeconomic5 de!inition and a Jstatistical5 de!inition& 'ccording to the economic de!inition, there are three criteria !or understanding a small !irmG small !irms had a relatively small share o! their market placeG they were managed y owners or part ownersG and thirdly they were independent, in the sense o! not !orming part o! a large enterprise& Meanwhile, the statistical de!inition was designed to address three main issues& *he !irst is to 1uanti!y the current si0e o! the small !irm sector and its contri ution to economic aggregates& *he second purpose is to compare the e/tent to which the small !irm sector has changed its economic contri ution over time& 9inally, the statistical de!inition has to ena le a comparison to e made etween the contri ution o! small !irms in one country with that o! other nations (Storey 1BBED B)& 'n alternative economic de!inition was given y Cynarc0yk, Storey, Short, 8 ;easey (1BB%)& *hey argue that there are three central respects in which small !irms are di!!erent to large !irmsD uncertainty, innovation and evolution& *he central distinction etween large and small !irms is the greater e/ternal uncertainty o! the environment in which the small !irm
3

operates, together with the greater internal consistency o! its motivations and actions& *he second di!!erence etween large and small !irms is their role in in novation& Schumpeter (1B%E) saw small !irms playing a role through the introduction o! totally new products, and 3othwell (1B>B) saw that the early development o! the semiFconductor industry in 4ali!ornia stemmed !rom the esta lishment o! small !irms which h were a le to grow e/tremely rapidly& *hus, the third area o! di!!erence etween small and large !irms is the much likelihood o! evolution and change in the smaller !irm& Sri Lanka does not have a nationally accepted de!inition !or SME as yet& ,owever, having considered various de!initions adopted y di!!erent institutions in Sri Lanka, the task !orce !or SME sector development programme, appointed y Ministry o! Enterprise -evelopment, industrial policy and industrial promotion has suggested to include usinesses with 3s& A# Million o! assets value e/cluding land and uildings !or medium scale enterprises and asset value not e/ceeding 3s& =# Million !or small scale enterprises& *he term 6enterprise7 is de!ined to include any usiness activity or enterprise engaged in industry, agriF usiness andKor services whether single proprietorship, partnership, or corporate venture& Dimensions of EO 3esearch has identi!ied several dimensions o! E+& Miller suggested that an entrepreneurial !irm is one that 6engages in product market innovation, undertakes somewhat risky ventures, and is the !irst to come up with Lproactive innovations, eating competitors to the punch7 (1B>%D ""1)& *his identi!ies innovativeness, riskFtaking, and proactiveness as key dimensions to an entrepreneurial orientation& *his conceptuali0ation has een adopted y numerous scholars to characteri0e an entrepreneurial strategic posture (4ovin 8 Slevin, 1B>B G Gins erg, 1B>AG Miller, 1B>%G Morris 8 .aul, 1B>"G Naman 8 Slevin, 1BB%G Scha!er, 1BB#)& ,owever, other scholars have suggested that !ive dimensions have een use!ul !or characteri0ing E+G the additional two dimensions eing autonomy and competitive aggressiveness (Lumpkin 8 -ess, 1BB?)& 'lthough compelling arguments e/ist !or oth lines o! thinking, the most widely utili0ed operationali0ation o! E+ in entrepreneurship and strategic management literature is ased on the three dimension model (;reiser et al&, =##=)& &nno(ati(eness Lumpkin and -ess de!ine innovativeness as the tendency !or a !irm to 6engage in new ideas, novelty, e/perimentation, and creative processes that may result in new products, services, or technological processes7 (Lumpkin 8 -ess, 1BB?D 1E=)& @nnovativeness may occur in a range !rom trying a new advertising venue to passionately pursuing a new technology (,age, 1B>#)& 3egardless o! the e/tent o! innovativeness, it represents a asic willingness to depart !rom e/isting technologies or practices and venture eyond the state o! the art (;im erly, 1B>1)& Ris *a in) 4antillon, who was the !irst to !ormally use the term entrepreneurship, distinguished entrepreneurs !rom regular employees y arguing that they !aced the uncertainty and risk associated with sel!Femployment (4antillon, 1"%E)& 'lso, in the 1>##s, Mohn Stuart Mill stated that riskFtaking was the dominant characteristic involved with entrepreneurship (Mc4lelland, 1B?#)& *here are various de!initions o! riskFtaking, although one that most
4

closely relates to entrepreneurship is Miller and 9riesen5s de!inition which de!ines it as the degree to which managers are willing to make large and risky resource commitments that have a reasona le chance o! costly !ailures (Miller 8 9riesen, 1B">)& *he notion that risk is innately uilt into entrepreneurship has continued to gain acceptance in the literature as the years have gone y (;reiser et al&, =##=)& Proacti(eness .roactiveness is de!ined y Lumpkin and -ess as an opportunityFseeking, !orwardFlooking perspective involving introducing new products or services ahead o! the competition and acting in anticipation o! !uture demand to create change and shape the environment (Lumpkin 8 -ess, =##1)& *his does not necessarily mean that a !irm has to e the !irst to introduce new products or services, rather a !irm can e just as proactive y eing the !astestF!ollower (Miller 8 4amp, 1B>A)& Business Performance of SMEs .er!ormance is a multidimensional concept and the relationship etween E+ and per!ormance may depend upon the indicators used to assess per!ormance (Lumpkin 8 -ess, 1BB?)& *he empirical literature reports a high diversity o! per!ormance indicators (4om s, 4rook, 8 Shook, =##AG Nenkataraman 8 3amanujam, 1B>?)G a common distinction is etween !inancial and nonF!inancial measures& NonF!inancial measures include goals such as satis!action and glo al success ratings made y owners or usiness managersG !inancial measures include assessments o! !actors such as sales growth and 3+@ (Smith, 1B"?)& 3egarding !inancial per!ormance, there is o!ten a low convergence etween di!!erent indicators (Murphy, *railer, 8 ,ill, 1BB?)& +n a conceptual level, one can distinguish etween growth measures and measures o! pro!ita ility& Chile these concepts are empirically and theoretically related, there are also important di!!erences etween them (4om s, 4rook 8 Shook, =##A)& 9or e/ample, usinesses may invest heavily in long term growth, there y sacri!icing shortFterm pro!its& *he conceptual argument o! the E+O per!ormance relationship !ocuses mainly on !inancial aspects o! per!ormance& Businesses with high E+ can target premium market segments, charge high prices and 6skim7 the market ahead o! competitors, which should provide them with larger pro!its and allow them to e/pand !aster (Pahra 8 4ovin, 1BBA)& *he relationship etween the E+ construct and nonF!inancial goals, such as increasing the satis!action o! the owner o! the !irm, is less straight!orward& Ce argue that there is little direct e!!ect o! E+ on nonF!inancial goals ecause this relationship is tenous& 9or e/ample, i! nonF!inancial goals are o! prime importance, the uncertainty associated with the old initiatives and risk taking implied y an E+ could potentially lead to agony, sleepless nights, and less satis!action& ,owever, satis!action may increase ecause o! etter !inancial per!ormance& ,owever indirect e!!ects are usually smaller than direct e!!ect& *here!ore, it appears reasona le to assume that the relationship should e higher !or E+ and !inancial per!ormance than !or E+ and non!inancial per!ormance& +% Research Methodolo)# +%$ Sample Desi)n and Data ,ollection *he research is designed to collect in!ormation on "# manu!acturing sectors in ,-SL& *he selected "# manu!acturing !irms !all under the capital investment in plant and machinery
5

limit o! E million rupees or less, e/cluding land and uildings& *he num er o! employees5 ranges !rom A to less than A# persons according to the de!inition o! SMEs y the @ndustrial -evelopment Board (@-B) o! Sri Lanka& +%' Measures *he two asic parameters used y the study was Entrepreneurship orientation (E+) and Business .er!ormance (B.)& 'll measures o! E+ dimensions and B. were drawn !rom literature& Evaluation o! E+ is made out o! % dimensions, @nnovativeness .roactiveness 3isk *aking *he two dimensions o! autonomy and competitive aggressiveness has een dropped out as they have several meanings in organi0ational conte/t and it is di!!icult to put appropriate measures in E+ conte/t& @n previous studies, growth is used as a pro/y !or B.& *he study use di!!erent aspects o! B. such as !inancial per!ormance measures& *o this end the study uses sales growth, employment growth, pro!it (preFta/), market share growth and ownerKmanager5s satis!action& +%+ !nal#sis of Data Both 1ualitative and 1uantitative methods are used to analy0e data& Multiple regression analysis is used to determine the relationship among E+ dimensions and B. varia les& 't !irst, the degree o! E+ o! SMEs is determined y the mean value& Signi!icance o! the relationship among varia les is esta lished ased on the results o! .earson correlation analysis& 3elia ility analysis is per!ormed in order to ensure the internal consistency and relia ility o! measures& 4ron ach5s alpha is calculated to con!irm the relia ility o! construct& -% Results and Discussion *he individual varia les listed in the 1uestionnaire are grouped into three categories& *hey areD (E&1) 4ompany characteristicsF company age, provincial location, ur anKrural location, usiness sector, company ownership, num er o! partners, !amily partners, startFup employees, year one employees, and current employees& (E&=) +wnerFmanager characteristicsF gender, age, educational 1uali!ications, past usiness ownerships, prior employment status and main reason to start usiness& (E&%) E+FB. -imensionsF 3elationship etween three E+ dimensions with B.

-%$ ,ompan# ,haracteristics 9indings indicate that majority o! companies (a out AE $) are in the age category o! Q?# months& ' higher percentage o! the usinesses were located in ur an areas (A#&>>$) in the Southern .rovince& *he results indicates that companies are located evenly oth in ur an and rural areas& ,owever, analysis o! age y location (ur an, rural) suggests that companies less than =E months o! age are higher in rural areas than ur an areas& *he distri utions o! companies with age more than Q ?# months in ur an and rural areas are similar and around A#$& @t is discovered that 1B&%$ o! !irms operate in local markets onlyG "1&B%$ has e/panded& to the provincial domainG %&A1$ do usiness nationwideG and only %$ o! small producers deal with the !oreign market& *he largest percentage o! companies is in the !ood and everages industry which is e1ual to a out =B&>= percent& @t is !ound out that the proportion o! !ull time and part time employees has not changed signi!icantly over time up to A years& *he num ers o! employees at three di!!erent stages are similar or not changed& -%' Owner.mana)er characteristics Cith regard to the maleF!emale distinction, it !ound that >E&=1 per cent o! the small usiness owners were males& ' out %1$ o! the managers are in %#F%B years age category and in E#F EB years o! age category& 1E&#E$ o! the respondents are under the age o! %# whilst ?%&1?$ o! the respondents are in the %#FEB age racket& 1"&AE$ o! the respondents are in the A#FAB age racket while the rest are a ove the age o! ?# (A&=?$)& *he gathered data indicated that a out E"$ o! the owner managers are G4E +Klevels 1uali!ied !ollowed y G4E 'Klevels& Many o! the respondents had previous e/perience in usiness e!ore em arking on their current usiness activity& *he data indicate that it is the !irst usiness o! "A $ o! the ownerFmanagers& 9or a out 1B&%$ o! the entrepreneurs, the e/isting usiness venture has een the !irst ever income earning activity& ' out A#$ o! the ownerFmangers are previously had engaged in some !orm o! income earning activities e!ore they started or inherited the e/isting usinesses& +! the previously employed %%$ percent are employed in the same industry prior to present usiness& Signi!icantly di!!erent levels o! employment growth were achieved depending on the ownerF managers5 reasons !or starting their usinesses& @n !irst place is the group o! ownerFmanagers who started the usiness with intentions to make more money, with =E&A?$& @t is not surprising that ==&>1$ o! the ownerFmanagers who started a usiness a!ter identi!ying a promising opportunity&

-%+ E(aluatin) EO dimension *he entrepreneur orientations o! companies are descri ed y degree o! innovativeness, degree o! risk seeking and degree o! proactiveness o! the companies& *o study these orientations, the scores o! three varia les, i&e& innovativeness, risk seeking and proactiveness were !irst trans!ormed to PFscores& *he degree o! the said properties was computed using the PFscores and are listed in *a le 1

/.scores of EO dimensions *able $ : / Scores to classif# the de)ree of entrepreneur orientation (ariables

Degree very low low o!era"e #ig# very #ig#

Z score range if zscore >=-2 & zscore <=-1 if zscore >-1 & zscore <=0 if zscore >0 & zscore <=1 if zscore >1 & zscore <=2 if zscore >2

*he results indicate that degrees o! innovativeness o! a out E#$ o! the companies are moderate& Moreover, degree o! innovativeness is very low in 1B$ o! the companies and low in =?$ o! the companies& +nly 1=$ o! the companies have high degree o! innovativeness& Most importantly, only 1$ o! the companies accounted !or very high degree o! innovativeness& 'nalysis o! degree o! risk seeking indicates that the degrees o! risk seeking o! a out 1=$ o! the companies are very low& -egree o! risk seeking is low in E=$ o! the companies and moderate in %1$ o! the companies& +nly 1#$ o! the companies have high degree o! risk seeking& *he very high degree o! risk seeking is o served in %$ o! the companies& *his result suggests that more than A# $ o! the companies do not take risks& 'nalysis o! degree o! proactiveness indicates that the degrees o! proactiveness o! a out =1$ o! the companies are moderate& Moreover, degree o! proactiveness is very low in 1"$ o! the companies and low in %>$ o! the companies& +nly ==$ o! the companies have high degree o! proactiveness& *he very high degree o! proactiveness is not o served in any o! the companies& *his result also indicates that proactiveness o! more than hal! o! the companies are low&

-%+%' Business Performance of companies *his study com ines !ive measures to capture usiness per!ormance, sales growth, employment growth, pro!it growth, market share growth and ownerFmanager satis!action& -i!!erently stated, the usiness will per!orm well i! there is an increase in sales, employment, pro!it, market share and ownerFmanager satis!action& 'll companies5 sales are growing while most o! them record a decent growth o! sales& Most o! the companies (=>&#") have a sales growth rate o! more than 1#$& @rrespective previous results, most companies do not e/ceed employment growth o! 1$& Least num er o! SMEs +nly 1&"A$ SMEs e/ceeds employment growth o! 1#$& *he pro!it growth o! the companies is calculated in millions& *his help to calculate negative pro!it or positive pro!it in selected SMEs& Most o! the companies are raising pro!it less than = million L;3 (E%&>?$)& +nly A&=? $ o! SMEs maintain a strong pro!it limit which e/ceeds more than 1# million L;3& Sta le market share growth is recorded y =>$ o! SMEs while e1ual num er o! SMEs (1"&AE$) attain market share growth o! R1$ and 1F=& Most o! the company ownersFmanagers are
$

satis!ied with the per!ormance o! their companies& 'lmost %>&?$ indicate that they are highly satis!ied with the per!ormance& +nly ?$ (very low %$ and low %$) are not happy with the per!ormance& 0ariable to predict business performance *he results o! principle component analysis !or usiness per!ormance varia les are shown in *a le =& *he results in *a le = indicated that !actor 1 e/plains a out A#$ o! the usiness per!ormance and !actor = e/plains =#$ o! the usiness per!ormance and altogether !irst two !actors e/plain "#$ o! the varia ility in usiness per!ormance among companies&

*able ' Results of principle component factor anal#sis for business performance varia les
%ac"or analysis& correla"ion '( )er of o)s = 57 *e"#o!+ ,rinci,al fac"ors -e"aine! fac"ors = 3 -o"a"ion+ .(nro"a"e!/ '( )er of ,ara s = 10 %ac"or 0igenval(e Difference 1ro,or"ion 2( (la"ive %ac"or1 2350404 135041 03501$ 03501$ %ac"or2 1300003 032452 032000 03701$ %ac"or3 03704$7 03243$ 031410 03$42$ %ac"or4 0346107 031361 030422 034350 %ac"or5 0332444 3 030650 130000 5- "es"+ in!e,en!en" vs3 sa"(ra"e!+ c#i2.10/ = 7233$ 1ro)>c#i2 = 030000 %ac"or loa!ings .,a""ern a"ri6/ an! (ni7(e variances salesgr"# 037275 e ,ly "gr"# 03$33$ ,rofi" 037424 8"s#rgr"# 0370$ ow ansa"is 033432

031747 -0302$5 -032033 -03403$ 03$743

034403 03304 033244 033357 030$1

*he results in *a le = indicates that !actor 1 is governed e1ually y !our varia les namely, employment growth, pro!it, sales growth, market growth have higher weights& *hus, !actor e/plains the physical and !inancial growth o! the company and hence it could e la eled as physical and financial factor& ,owever, the weight !or varia le employment growth is (#&>%%) is the highest among other weights o! !actor 1& *hus, it could e argued that it is the est indicator to assess the usiness per!ormance& *he second !actor is a out the sel!F satis!action o! the owner manager& *his result suggests that the est !actor to assess the usiness per!ormance is growth in physical and !inancial !actors o! the company& -%+%+ Relationships between business performance and entrepreneur orientations *he simple linear regression model etween usiness per!ormance and innovativeness is statistically highly signi!icant (pFvalueS#&##1)& ,owever, the low 3Fs1ure o! #&1> !or the model suggests that relationship is weak and innovativeness account !or only 1> percent o! the changes (varia ility) in usiness per!ormance& *here should e other varia les related to
4

usiness per!ormance that should ade1uately&

e in the model to e/plain the

usiness per!ormance

*he regression model !or relationship etween usiness per!ormance and innovativeness is shown elowG

BP = 1&E?1 + #&E#?(innovativeness )
*his suggests that usiness per!ormance increases innovativeness in 1 unit&

(1) y #&E units with the increase o!

*he simple linear regression model etween usiness per!ormance and proactiveness is statistically signi!icant (pFvalueS#&#E>)& *his suggests that usiness per!ormance increases with the increase o! proactiveness (9igure A&=)& ,owever, the low 3Fs1ure o! #&#" !or the model suggests that relationship is weak and proactiveness account !or only " percent o! the changes (varia ility) in usiness per!ormance&

BP = =&#1" + #&#&=%#( proactiveness )

(=)

*he regression model !or usiness per!ormance and proactiveness showed in model = indicates that usiness per!ormance increases linearly with #&=% units with the increase o! proactiveness in one unit (model =)&

Relationship between business performance and entrepreneur orientation 'nalysis o! relationship o! usiness per!ormance separately with innovativeness, risk seeking and procativeness indicated the e!!ect o! each o! said three !actors separately on usiness per!ormance& ,owever, these e!!ects may change i! all three varia les (innovativeness, risk seeking and procativeness) are in the same statistical model& @n reality, all these three !actors a!!ect simultaneously on usiness per!ormance& *here!ore, a multiple linear regression model was esta lished to the check the relationship entrepreneur orientation varia les and usiness per!ormance and the results are shown in *a le %& Result of multiple linear re)ression between BO and EO (ariables% *able + Result of multiple linear re)ressions between business performance and entrepreneur orientation (ariables
)(si,efor innova"iveness ris8see8ing ,roac"ivenss >cons 2oef3 9 "!3 0rr3 " 23$7 -0334 0344 2372 1>" 03006 037 0335 03004 :45; 2onf3<n"erval= 03104307 -0332$03 -0312511 03364577 036137$1 0322146$ 03347306 23454467

033615441 031257573 -030530314 03137106 031110474 03117765$ 13412272 03514$53$

*he multiple linear regression model etween usiness per!ormance and entrepreneur orientation varia les is statistically signi!icant (pFvalueS#&##")& *his suggests that usiness
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per!ormance increases with the increase o! entrepreneur orientation& ,owever, innovativeness is the only signi!icant varia le ( pFvalS#&##?)& *he multiple linear regression model is shown elow&

BP = 1&E1 + #&111( proactiveness ) #&#A%( riskseeking ) + #&%?=(innovativeness )

(%) ,owever, the 3Fs1ure o! the model is #&=# and it suggests that entrepreneur orientation predict only =# percent o! the changes (varia ility) in usiness per!ormance& @t was shown previously that innovativeness can predict a out 1>$ o! the varia ility in usiness per!ormance and risk seeking is not important to e/plain the usiness per!ormance& *his raises the 1uestion o! importance o! the varia le 6procativeness7 in the model& *hus, stepwise !orward selection varia le selection procedure was e/ecuted !or the same data to identi!y the most important varla le(s) to predict usiness per!ormance& Stepwise re)ression for selection of most important (ariable1s2 *a le E shows result stepwise varia le selection procedure showed that varia le innovativeness alone is su!!icient to predict the usiness per!ormance&

*able - Result of stepwise (ariable selection procedure showed that (ariable inno(ati(eness alone is sufficient to predict the business performance% usipe!orm 4oe!!ici& Std& Err& t .Qt #&##1 #&### TBA$ 4on!& @ntervalU

innovativeness #&E#??=A #&11A=#EB %&A% Vcons 1&E?1??A #&%?#E?E> E&#A 9orward selectionD pe(#&=), pr(#&%)

#&1"A"EB #&?%"A#1 #&"%B="> =&1>E#A%

*he result indicates that innovativeness is the most important usiness orientation varia le&

-%+%- Efficienc# of business performance and entrepreneur orientation 9ive varia les are used to descri e the usiness per!ormance, namely, 6sales growth7 6employement growth7 6pro!it7 6market growth7 and 6owner manager5s satis!action7& *he ma/imum score !or each o! the !ive varia le is A& *hus, a company that e/cellent in all the !ive dimensions can get the ma/imum score o! =A& *hus , ratio o! attained score y =A in each company multiplied y 1## indicate the level o! development o! the company& *his varia le was regressed with the usiness orientation varia les& *he results indicate that innovativeness has a signi!icant e!!ect on e!!iciency o! usiness per!ormance&

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Reliabilit# and (alidit# of the measures *he results o! the relia ility analysis using 4ron atch5s alpha test !or di!!erent dimensions o! usiness orientation and usiness per!ormance are shown in *a le A& *able 3 results of reliabilit# anal#sis
Di ension <nnova"iveness -is8 "a8ing 1roac"iveness @(siness ,erfor ance overall "es" scores ?verage in"eri"e '( )er of i"e covariance+ in "#e scale+ 037774261 0351$5523 03$464723 035320$02 032547776 s 9 cale relia)ili"y coefficien" 17 034514 21 03$541 $ 03$$41 5 037277 51 03$431

's the coe!!icient alpha e/ceeds the #&"# level, it suggests that the relia ility o! the measurements (innovativeness, risk taking, proactiveness and usiness per!ormance) are achieved as recommended y Nunnally (1B">)& *he alpha values !or all items used to measure E+ dimensions and usiness per!ormance varia les were #&#&>B%& 4onsidering the alpha values o! the measures used in this study, it could e declared that the internal consistency and relia ility o! the measures are accepta le& 3 ,onclusion +! the usiness per!ormance varia les 6innovativeness7 and 6proactiveness7 signi!icantly a!!ect the usiness per!ormance& ,owever, the most important varia le to descri e the usiness per!ormance is 6innovativeness7& *he most important varia le to measure the usiness per!ormance is growth in num er o! employees& -egree o! innovativeness and procativeness is moderate in the majority o! the companies& ,owever, degree o! risk seeking is low in most o! the companies& *he li!e cycle o! a company has many stages namely, introduction, growth, maturity, and decline& *he time duration !or each phase o! the li!e cycle could vary y industry to which a company elongs& ,owever, A years is a reasona le time period to judge the sta ility and sustaina ility o! a company& Most o! the companies in this study are more than A years o! age and that indicate that they are esta lished& *o which industries these companies elong toH Chy and how they survive during decline phase need to studied in the !uture research& @t could also e possi le that these companies are just maintaining their usiness at the same level throughout the li!e cycle& *hus, in !uture research, emphasis should e given to collect aseline data or preFpost type 1uestions& Secondary data analysis !rom availa le records o! the company is suggested& *hree varia les selected !or measuring usiness per!ormance, namely, innovativeness, proactiveness and risk seeking mostly descri e the situation at the introduction or start up phase o! the usiness& *he usiness per!ormance which is e/plained company growth varia les descri e the situation at maturity stage or di!!erent stages o! the continuum o! usiness growth& 3elating these two sets o! varia les to study the cause and e!!ect relationships etween usiness per!ormance and usiness orientation may not e ideal and it has to e studied in the !uture& ' complementary analysis o! the same data using alanced score card approach is recommended&

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