The role of entrepreneurial orientation on business performance: Empirical evidence from selected Tanzanian SME's

Abstract

The objective of the study is to assess the effects of entrepreneurial orientation (EO) on business performance among SMEs in Tanzania. This study was conducted in Dar es Salaam employing a sample of 143 SMEs. The study attempted to differentiate EO into five theoretical dimensions, namely product innovation, risk taking, proactiveness, competitive aggressiveness, and autonomy. Structural Equation Modeling (SEM) was applied to fit the model, where EO dimensions were independent variables and SME performance was the dependent variable. The researchers used cluster analysis (CA), multiple discriminant analysis (DA) and factor analysis (FA) to assess whether the SMEs are following divergent EO dimensions. MANOVA was performed for the clusters to assess significant difference between EO-dimensions. The study gleaned the following; first EO does play a crucial role in influencing profitability, particularly autonomy was negatively related to performance hence suggesting that personnel tend to underperform when given sufficient freedom to act. The relationship to performance for the other dimensions of EO was positive. Secondly, EO exhibits a possibility of multidimensionality based on a maximum of three dimensions, namely; aggressiveness, innovation, and pro-activeness, while risk-taking blended into these prior dimensions autonomy was embedded within aggressiveness.