Exploring Proactiveness as a Moderator in the Process of Perceiving Industrial Munificence: A Field Study of SMEs in Four Countries

Utilizing information processing theory, we investigated the role that proactiveness plays in the organizational process of perceiving objective industrial munificence. Specifically, we examined the moderating effect of proactiveness in the munificence perception process, as well as the mediating impact of perceived munificence on the relationship between objective munificence and firm performance. Data collected from 227 companies in four countries and seven manufacturing industries support both hypotheses. The implications of these findings for managerial practice and future research are discussed. Introduction There is an assumption in the entrepreneurship literature that firms must accurately match their strategies to their external environment in order to maximize firm performance (Lumpkin and Dess 2001; Covin and Slevin 1989). Extant theory posits that although environmental contingencies provide the stimulus, or set the constraints, for organizational activities, organizations that are able to utilize appropriate strategies to match their environmental settings create a performance advantage (Pfeffer 1997; Donaldson 1995; Jones 1995; Child 1972; Chandler 1962). However, firms must be able to accurately "perceive" the nature of their external operating environment in order to formulate and implement effective strategies. Yet the nature of the relationship between objective environmental attributes and the accuracy of firms' perceptions regarding the external environment is largely unknown. The primary objective of our study is to establish a theoretical link between objective levels of industry munificence and organizational perceptions of industry munificence, and to determine how this link impacts firm performance. Though previous research has acknowledged that objective and perceived industrial munificence are distinct concepts (Keats and Hitt 1988), the relationship between these two constructs has received little, if any, empirical attention or support in the entrepreneurship literature (Jauch and Kraft 1986). In fact, prior research has failed to uncover a direct relationship between these two variables and has thus assumed that they tend to vary independently of one another. (Tosi, Aldag, and Storey 1973). The accuracy in perceiving and locating objective resources is an important research topic because it represents a prerequisite for firms to formulate appropriate strategies and achieve organizational effectiveness (Busenitz et al. 2003; Mitchell et al. 2000). Utilizing information processing theory, our study will argue that proactive firm behaviors represent one of the primary links between objective and perceived environmental characteristics. Information processing theory posits that organizations that possess valuable and relevant information are able to utilize more appropriate strategies than organizations that do not possess this information (Busenitz et al. 2003; Mitchell et al. 2000). Our study will explore how firms that utilize proactive behaviors will have greater access to and will derive more benefit from these information-based resources. Specifically, we will argue that proactiveness impacts the accuracy of organizational perceptions of objective industrial munificence. We will also argue that perceived munificence displays a mediating impact on the relationship between objective industrial munificence and firm performance. We begin the study by examining the primary tenants of information processing theory. Next, we elaborate on the moderating role played by organizational proactiveness in the munificence perception process. Entrepreneurial firms are recognized as valuing the proactive discovery of external opportunities (Busenitz et al. 2003), but an accurate understanding of the process that firms utilize to uncover these external opportunities remains elusive. We then utilize information processing theory to examine the mediating role that perceived munificence plays in the relationship between objective industry munificence and firm performance. …