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Are You Entrepreneurially Oriented?

Entrepreneurship research is becoming a significant stream in today’s management literature. There’s an ongoing and growing interest among researchers in the psychology, motivations, and success factors of entrepreneurship. Researchers attempt to make the selectiveness of the entrepreneurial process clearer and shed light on what differentiates successful entrepreneurial ventures from those that fail.

One of the most researched theories in entrepreneurship research is the Entrepreneurial Orientation (EO) theory. EO refers to the practices, actions, decision-making, and processes that a firm or an individual makes when entering a new market or launching a new product. This theory has been widely researched not only because it is considered a coherent and comprehensive framework of the entrepreneurial process, but also because it has been associated with higher business performance. This post will introduce EO’s five key factors, based on the research of G.T. Lumpkin and Gregory G. Dess, two researchers from Northeastern State University and the University of Texas, respectively.

Autonomy: Autonomy, freedom, and independence are key values to be found at the root of entrepreneurship. An individual must be free to explore and develop a novel idea in order for the entrepreneurial process to accrue. Research among SMBs suggests that business owners who maintained strong central authority and acted as their company’s knowledge leaders had the most entrepreneurial-oriented firms.

Innovativeness: Innovativeness refers to the firm’s willingness to engage in the creation and development of new ideas, and to support creativity and experimentation, in order to develop new products and technology. This openness to accept, explore, and eventually adopt new and creative visions is the first step to their realization, as part of the entrepreneurial process.

Risk Taking: Risk taking is an inevitable part of the entrepreneurial process. The resources often invested in developing an innovative product may lay heavy even on large firms, let alone small firms. Risk also means uncertainty and exploration of the unknown. It will come as no surprise to you that entrepreneurially oriented firms are characterized by risk-taking behavior; they are willing to make extensive resource commitments and tolerate ambiguity in the hopes of making high returns in the future.

Proactiveness: Just as in anything else in life, in the entrepreneurial process, time equals money. Entrepreneurs need to be proactive and seize the opportunities of their innovative ideas. A forward-looking approach that identifies the gaps and dynamics of the market is crucial to entrepreneurial success. Stalling and hesitation may damage the prospects of gaining the first-mover advantage in the market, which will lead to smaller revenues and necessitate a greater investment in brand-building.

Competitive Aggressiveness: In short, this dimension of EO refers to the willingness of the firm to play hardball in order to achieve a superior stance in the marketplace and outperform competitors. Examples for competitive aggressiveness are: starting a price war, research competitor’s weaknesses and targeting them, or focusing on high added value, to name a few.

I find Entrepreneurial Orientation to be not only smart in theory, but also in practice. I think it is an easy-to-understand framework that helps business leaders assess how entrepreneurial they really are. With that said, it is important to remember that the EO approach is context-sensitive; innovativeness can be the key factor when entering a certain new market, while being an aggressive competitor might not be relevant.

Which dimension was the most important when you started your entrepreneurial journey? As it changed along the way?

Based on: Lumpkin, G.T., and Gregory G. Dess. “Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance.” Academy of Management Review. 21.1 (1996): 135-72. Print.

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