title: A tale of two predictors
title: the impact of regulatory focus and entrepreneurial orientation on small
      and medium-sized enterprises
titleType: Subtitle
Creators: name: Huang, Shuangfa
Publisher: name: Lancaster University
Year: 2018

description: Small and medium-sized enterprises (SMEs) contribute significantly to
      economic growth and job creation. Given the importance of SMEs, this study
      examines the factors that may impact their outcomes (i.e., behaviours and
      performance). In particular, it examines the effects of chief executive
      officers’ (CEOs’) regulatory focus and firms’ entrepreneurial orientation
      (EO) on SMEs. Regulatory focus theory suggests that people can pursue
      their goals via a promotion focus (associated with a concern for growth
      and a desire for gains) or a prevention focus (associated with a concern
      for safety and a desire to avoid losses). As an individual-level
      motivational characteristic, regulatory focus underlies the motives people
      are aiming to satisfy, the goals they pursue, and the strategic means they
      prefer to implement in striving for their goals. Since CEOs are the top
      decision makers, their decisions induced by regulatory focus should have
      an impact on firms they lead. Additionally, EO refers to a firm-level
      behavioural construct that involves three independent dimensions, namely,
      innovativeness, risk-taking, and proactiveness. Since organisations often
      rely on entrepreneurial activities to renew themselves, their levels of
      innovativeness, risk-taking, and proactiveness should have an impact on
      their performance.
      
      This study expands research on regulatory focus theory and entrepreneurial
      orientation through examining (a) the effects of CEO regulatory focus on
      SME performance and how the effects differ between firms operating in
      different industry environments (i.e., high-tech and low-tech industries);
      (b) the independent effects of firms’ levels of innovativeness,
      risk-taking, and proactiveness on SME performance and how the effects
      differ between firms operating in different industry environments; and (c)
      the influences of CEO regulatory focus on SMEs’ levels of innovativeness,
      risk-taking, and proactiveness. In so doing, this study also contributes
      to entrepreneurship research in two ways. First, it provides insights
      about how the effects of regulatory focus and the dimensions of EO on SMEs
      are contingent on the industry environment in which firms operate. Second,
      it sheds light on how the individual-level characteristic and firm-level
      behaviours differ in explaining the variance in firm outcomes.
      
      I collected online survey data from 110 SMEs in the UK. The empirical
      results demonstrate that CEO regulatory focus is associated with SME
      performance. Specifically, CEO promotion focus is positively, and CEO
      prevention focus is negatively associated with SME performance. Industry
      environment moderates the relationship between CEO promotion focus and SME
      performance. That is, CEO promotion focus has stronger effects on SMEs in
      high-tech industries than those in low-tech ones. However, a moderating
      role of industry environment on the relationship between CEO prevention
      focus and SME performance is not observed. The findings also suggest that
      the three dimensions of EO have unique effects on SME performance.
      Specifically, there is an inverted U-shaped relationship between
      innovativeness and SME performance, a U-shaped relationship between
      risk-taking and SME performance, and a positive linear relationship
      between proactiveness and SME performance. Industry environment moderates
      the performance effects of innovativeness and proactiveness on SMEs except
      for risk-taking. In particular, innovativeness has stronger effects on
      SMEs in low-tech industries, whereas proactiveness has stronger effects on
      SMEs in high-tech industries. Moreover, the empirical results demonstrate
      that CEO promotion focus positively impact SMEs’ levels of innovativeness
      and proactiveness except risk-taking, while CEO prevention focus
      negatively impact SMEs’ levels of risk-taking and proactiveness except
      innovativeness.
      
      The empirical results indicate that innovativeness, risk-taking, and
      proactiveness together account for 14% of the variance in SME performance,
      whereas CEO promotion and prevention focus account for 6% of the variance
      in SME performance. As such, firm-level entrepreneurial behaviours
      regarding innovativeness, risktaking, and proactiveness are more robust
      predictors in explaining the variance in SME performance than
      individual-level CEO characteristic concerning promotion and prevention
      focus. Additionally, the results reveal that CEO promotion and prevention
      focus are the antecedents of SMEs’ entrepreneurial behaviours. While
      regulatory focus and EO refer to different natures of phenomenon and
      represent constructs at different levels, this study shows that both
      factors have substantial impacts on organisations. Therefore, to
      understand the organisational outcomes of SMEs, it is paramount to
      consider CEO regulatory focus and EO.