Effects of entrepreneurial and market orientations on the performance of micro, small and medium enterprises in Iligan City

• Main Author: Resurreccion, Pamela F.
• Format: text
• Language: English
• Published: Animo Repository 2015
• Online Access: https://animorepository.dlsu.edu.ph/etd_doctoral/1320
• Institution: De La Salle University

Small and medium enterprises (SMEs) have been widely regarded as a driver of economic growth. Given the social and economic benefits of entrepreneurship, businesses in the Philippines and in Iligan City, in particular, are predominantly micro in size and seem to remain so for much of its lifespan. Thus, anchored on the conceptual framework proposed by Lumpkin and Dess(1996) on the link between EO and performance, and further enriching our understanding of this relationship by incorporating Peng’s institution-based view of business strategy, the study investigated formal institutional context as an antecedent of entrepreneurial orientation, as well as the moderating roles of market conditions, market orientation, and social capital, on the relationship between entrepreneurial orientation and firm performance. The MSME respondents were investigated using mostly measures adapted from previous studies and were validated accordingly by experts from the academe as well as by business owners. Primary data were gathered through a survey and were analyzed using the following statistical tools: hierarchical cluster analysis, confirmatory and exploratory factor analysis, path analysis, and analysis of variance. Results show that MSMEs in Iligan City appear to have moderate perceptions on the locale’s formal institutional context and slightly above moderate perceptions on the city’s market conditions. The study found that respondents have moderate levels of entrepreneurial orientation; high levels of market orientation; and slightly above moderate levels of social capital. The path models developed in this study suggest that formal institutional context significantly influence entrepreneurial orientation but not sufficient as indicated by its low explanatory power. It is also found that market conditions positively influence the relationship between entrepreneurial orientation and sales performance and profitability. Social capital negatively affects the relationship of entrepreneurial orientation with sales performance, profitability, and innovation performance. Market orientation is found to enhance the entrepreneurial orientation – customer performance link. It is further found that market share growth is directly affected by entrepreneurial and market orientations; customer performance is directly influenced by social capital; and competitive advantage is directly affected by entrepreneurial orientation, market orientation, and social capital. In the light of these findings, the government is called to strengthen business support through stakeholders’ involvement in legislation and in strengthening MSME development programs in partnership with the academe. MSMEs are recommended to engage in social capital building initiatives that have clear and direct contribution to its resource base, which could be utilized to achieve financial and non-financial goals. Further studies can focus on other contingent factors affecting the entrepreneurial orientation – performance relationship, the utilization of other multivariate techniques to further explore the relationships among entrepreneurial and market orientations, market conditions, formal institutional context, and social capital; and increasing the representation of small and medium enterprises in the sample.