Entrepreneurial Innovation and Risk Taking On Firm Performance: Empirical Evidence from Entrepreneurial Enterprises in Ghana

Purpose – The theme of this paper is entrepreneurial innovation and risk taking. Precisely, the paper has twofold objectives: to investigatethe effect of innovation on firm performance and: to explore influence of risk taking on entrepreneurial firm performance Design/methodology/approach – A quantitative survey was conducted with a total of 250entrepreneurs participating in this survey. Findings – The results suggest that innovation has a significant positive effect on firm performance. Furthermore, risk-taking also have a statistically significant influence on firm performance. Research limitations/implications – The study just focused on only the entrepreneurial businesses in the capital city. Future explorative studies in a similar vein may be executed through channels of national and local development agencies to capture other entrepreneurial business. KEYWORDS: Entrepreneurial Orientation, Entrepreneurship, Innovation, Risk Taking, Firm Performance. --------------------------------------------------------------------------------------------------------------------------------------Date of Submission: 20-11-2018 Date of acceptance: 06-12-2018 --------------------------------------------------------------------------------------------------------------------------------------I. BACKGROUND OF STUDY In the last decades, entrepreneurial issues haveimpaired the global interest, due to the phenomenon’s focus on new firm creation and its regional and national vital positive outcomes, highlighted by the economic approach (Ács, & Naudé, 2013). In a world and an environment where there are a rapid change and shortened product and business model lifecycles, the future profit streams from existing operations are uncertain and businesses need to constantly seek out new opportunities and strategies. Today’s business environment is repeatedly described as complex and uncertain (Dhaliwal, 2016). According to Arisi-Nwugballa, Elom, and Onyeizugbe, (2016). , this can place emerging young firms in vulnerable positions by compromising their ability to compete against established competitors. With such complexity in conducting business transactions, entrepreneurial orientation (EO) can be regarded as a crucial factor to ensure the success of a business which means that firms need to force and look for new opportunities. Research indicates that high growth, particularly in young firms, is an especially significant contributor to the job, output, and productivity growth and that entrepreneurs act as a trigger head to give a spark to economic activities by his entrepreneurial decisions (Naudé, 2013). The business orientation philosophy of corporations is one of the main determinants for strategic activities and plans undertaken (Kask & Linton, 2013). Strategic entrepreneurial orientation (EO) is deemed as an antecedent of business performance and growth (Nasri, & Zekovksi, 2014). EO has become a more important tool that equips start-up firms with flexibility, adaptability, and durability required for survival because most important characteristics of today's world are extensive changes, increased complexity, and competition (Chirani, Farahbod & Pourvahedi, 2013). EO has become a central concept in the domain of entrepreneurship that has received a substantial amount of theoretical and empirical attention (Covin, Greene, & Slevin, 2006). Consistent with Covin and Slevin’s (1990) belief that EO represents a unidimensional construct, most studies for almost two decades have summed across all dimensions of EO to create a single variable hence viewing EO to be measured as unidimensional that is summing the different aspect into one singular scales for the dimensionality of the EO construct (Rauch, Wiklund & Frese, 2004). In examining the entrepreneurial process, it is beneficial to identify the unique contribution of each subdimension of EO such that firms could seek the best combination to improve firm performance (Kreiser, Marino & Weaver 2002). Recognition of usefulness of each configuration of EO dimensions will be conducted by determining the importance of their usage in firm performance. Particularly over the last the decade, innovativeness and risk taking has turned into an striking area of study for researchers who have endeavored to Entrepreneurial Innovation And Risk Taking On Firm Performance: Empirical Evidence . www.ijbmi. org 66 | Page define, and investigate its performance impacts, especially due to its practical relevance. This study will be looking at two of the dimension and the effect in firm performance: innovativeness and risk-taking II. LITERATURE REVIEW 2.1 ENTREPRENEURSHIP Entrepreneurship has become one of the most popular areas of research in management studies. It has seen much publicity in recent years, for instance publicity in media and the number of events and awards that relate to entrepreneurship. In many parts of the world, it is quite common to read news articles where entrepreneurs are featured as a mysterious breed of people that start businesses turning something insignificant into something valuable or makes the impossible possible (The entrepreneurial dialogue, 2011). An entrepreneur is a businessperson who not only conceives and organizes ventures but also frequently takes risks in doing so.Wong, Ho and Autio (2005) defines entrepreneurship as an activity that involves the discovery, evaluation, and exploitation of opportunities to introduce new goods and services, ways of organizing, markets, processes, and raw materials through organizing efforts that previously had not existed. This means that entrepreneurship, the entrepreneurial function can be conceptualized as the discovery of opportunities and the subsequent creation of new economic activity, often via the creation of a new organization. 2.2 The concept of entrepreneurial orientation The construct of entrepreneurial orientation (EO) has been examined in a large stream of research. Tang et. al. (2008) proposed that entrepreneurial orientation (EO) refers to methods, practices and decision-making styles of managers or business owners of the firms which act entrepreneurially. However, according to Wiklund and Shepherd (2005), EO refers to the strategy-making processes that provide organizations with a basis for entrepreneurial decisions and actions. Lumpkin and Dess (2001) also argue that EO refers to the processes, practices and decision-making activities that lead to new entries. They considered EO as a process construct, which is concerned with the methods, practices, and decision-making styles. This study, therefore, adopts Lumpkin and Dess’s (2009) definition of an entrepreneurial orientation as the strategy-making processes that provide organizations with a basis for entrepreneurial decisions and actions used by the managers. The construct of EO originates from Miller’s (1983) work, in which entrepreneurial firms are defined as those that are geared towards innovation in the product-market field by carrying out risky initiatives, and which are the first to develop innovations in a proactive way in an attempt to defeat their competitors (Miller, 1983). EO can be viewed as a characteristic of organizations, which can be measured by looking at top management’s entrepreneurial style, as evidenced by the firms’ strategic decisions and operating management philosophy (Pratono, & Mahmood, 2015). The specific dimensions of EO were introduced for the first time by Miller (1983). He identified the salient dimensions of EO as innovative, risktaking, and proactive. More than a decade after Miller’s work (1983), Lumpkin and Dess in 1996 proposed five dimensions of EO, namely: autonomy, innovativeness, risk-taking, proactiveness and competitive aggressiveness (Lumpkin & Dess ,2001). In other words, they added two additional dimensions, that is autonomy and competitive aggressiveness to complement the three dimensions proposed by Miller (1983). Lumpkin and Dess (2001) argued that, to be successful, a firm requires autonomy from strong leaders or creative individuals, without any restrictions from the firm’s bureaucracy. The other dimension, competitive aggressiveness, describes Lumpkin and Dess idea of beating competitors to the punch. It represents how firms respond to threats and not only seize opportunities as indicated by Miller’s proactive dimension. Clearly, EO refers to the specific organizational level behavior to perform risktaking, autonomous activities, engaged in innovation and react proactively and aggressively to outperform the competitors in the marketplace (Lumpkin & Dess 2001) According to Lumpkin and Dess (2001) innovativeness reflects the tendency to engage in and support new ideas, novelty, experimentation and creative processes resulting in newness. Proactiveness reflects firm’s actions in exploiting and anticipating emerging opportunities by develop and introduce as well as making improvement towards a product (Lumpkin & Dess, 2001). Risk-taking represents the willingness to commit resources to undergo activities and projects which resulted in uncertainty of the outcomes (Lumpkin & Dess, 2001). Meaning the the extent to which a firm is willing to make large and risky commitments. Competitive aggressiveness is the intensity of firms to improve their position to outdo and overtake their competitors in the market (Lumpkin & Dess, 2001). It is characterized by a strong offensive posture directed at overcoming competitors and may be quite reactive as when a firm aggressively enters a market that a rival has identified. Autonomy refers to an independent action of individual or teams in ensuring ideas and concepts are being carried out till completion (Lumpkin & Dess, 2001). Autonomy gives employees the chance to perform effectively by being independent, self-directed, and creative. Entrepreneurial Innovation And Risk Taking On Firm Performance: Empirical Evidence . www.ijbmi. org 67 | Page In terms of conceptualizing EO, schol