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DETERMINING THE STATISTICAL SIGNIFICANCE OF ENVIRONMENTAL
UNCERTAINTY ON THE RELATIONSHIP AMONG PERFORMANCE,
ENTREPRENEURIAL ORIENTATION, AND STRATEGY FOR WASHINGTON
STATE MANUFACTURING FIRMS
by
David L. Slotwinski
GEORGE KALIDONIS, PhD, Faculty Mentor and Chair
MARY K. EVANS-KASALA, PhD, Committee Member
VINCENT DEFAZIO, DM, Committee Member
William A. Reed, PhD, Acting Dean, School of Business & Technology
A Dissertation Presented in Partial Fulfillment
Of the Requirements for the Degree
Doctor of Philosophy
Capella University
November 2010
UMI Number: 3432170
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David Slotwinski, 2010
Abstract
The purpose of the research was to answer the question to what degree does
environmental uncertainty impact the relationship between entrepreneurial orientation
and strategy to explain firm performance. Based on the primary research question, the
study research hypothesis was that there will be no significant impact for environmental
uncertainty on the relationship between entrepreneurial orientation and strategy to explain
the variability in firm performance. Inclusive within the hypothesis were 6 subhypotheses
supporting the dependent variable of firm performance, the independent variables of
entrepreneurial orientation, and strategy, and the moderating variable of environmental
uncertainty. Based on the collected data, the research concluded that while there was no
significant impact for environmental uncertainty on the relationship between
entrepreneurial orientation and strategy to explain the variability in firm performance,
entrepreneurial orientation is a significant indicator of firm performance. The research
further showed the lesser roles of adopting either a prospector or defender strategy and
that it was the business leaders entrepreneurial orientation that facilitated a firms ability
to navigate an uncertain business environment rather than a specific strategy. The study
was geographically localized and limited to testing a sample of small privately owned,
Washington State manufacturing firms with a minimum of 5 employees and no more than
500 employees. In order to test theory presented in previous research that there is a
relationship among the variables firm performance, entrepreneurial orientation, strategy,
and environmental uncertainty, a test model was developed and the components of the
model and hypothesis were analyzed using ordinary least squares (OLS) hierarchical
regression. By determining the statistical significance of environmental uncertainty on

the relationship among performance, entrepreneurial orientation, and strategy among a
geographically based cohort, theory was advanced and insight was gained into the
localized impact of the variable relations. In addition, an alternative method for
measuring strategy types was proposed. The knowledge from the study may help future
researchers, entrepreneurs, and business students better understand the localizing effect of
entrepreneurial orientation and strategy, as moderated by environmental uncertainty on
firm performance.
iv
Dedication
This dissertation is dedicated to my spouse, Roselyn, whose love, understanding,
and patience provided tremendous support and encouragement to me throughout the
period of my doctoral studies.
iii
Acknowledgments
A special acknowledgement goes to Dr. George Kalidonis, faculty mentor and
chair. Without his wisdom, encouragement, support, and guidance, I would not have
successfully navigated the demanding, arduous tasks associated with completion of this
doctoral thesis. I would also like to thank my committee members, Dr. Mary K. Evans-
Kasala and Dr. Vincent DeFazio, for their constructive criticism, guidance, and support
that greatly assisted with the development and application of my research skills and the
refinement of my work.
In addition, I owe special thanks to the staff of Panther Professional Editing, Port
Orchard, WA who assisted with the final formatting and editing of my dissertation and to
the staff of Immedia, Fife, WA who provided support for the mailing of my research
survey.
iv
Table of Contents
Acknowledgments iv
List of Tables viii
List of Figures xi
CHAPTER 1. INTRODUCTION 1
Introduction of the Problem 1
Background of the Study 4
Statement of the Problem 6
Purpose of the Study 7
Rationale 8
Research Question and Hypothesis 10
Nature of the Study 12
Significance of the Study 16
Definition of Terms 17
Assumptions and Limitations 20
Organization of the Remainder of the Study 22
CHAPTER 2. LITERATURE REVIEW 23
Entrepreneurship and the Entrepreneurial Domain 23
Entrepreneurial Traits and Behaviors 28
Measuring Firm Performance 32
Entrepreneurial Orientation 34
Strategy 38
v
Environmental Uncertainty 41
Future Trends and Modeling 45
CHAPTER 3. METHODOLOGY 47
Overview of Research Question and Hypothesis 47
Research Design 48
Collecting Small Business Research Data 50
Test Sample 53
Instrumentation and Measures 54
Data Collection 58
Data Analysis 60
Validity and Reliability 63
Ethical Considerations 66
CHAPTER 4. RESULTS 67
Data Collection and Survey Responses 67
Data Analysis 68
Analysis of Model and Hypotheses Testing 73
CHAPTER 5. DISCUSSION, IMPLICATIONS, RECOMMENDATIONS 111
Summary and Discussion of Results 113
Analysis of Research 114
Recommendations 121
REFERENCES 128
APPENDIX A. SURVEY INSTRUMENT 139
vi
APPENDIX B. CORRELATIONS AND STATISTICS 145
APPENDIX C. DEMOGRAPHICS 155
vii
List of Tables
Table 1. Scales and References 55
Table 2. H1 Model Summary 75
Table 3. H1 ANOVA 76
Table 4. H1 Coefficients 76
Table 5. H2a Model Summary 77
Table 6. H2a ANOVA 78
Table 7. H2a Coefficients 78
Table 8. H2b Model Summary 79
Table 9. H2b ANOVA 80
Table 10. H2b Coefficients 80
Table 11. H2c Model Summary 81
Table 12. H2c ANOVA 82
Table 13. H2c Coefficients 82
viii
Table 23. H4 Model Summary 90
Table 24. H4 ANOVA 90
Table 25. H4 Coefficients 91
ix
Table 44. Subhypotheses Summary 113
Table 45. Chi-Square Test Results A 118
Table 46. Chi-Square Test Results B 119
Table B1. Inter-item Correlations 145
Table B2. Reliability Statistics 154
Table B3. Summary Item Statistics 154
Table C1. Gender 155
Table C2. Age 155
Table C3 Title 155
Table C4. Primary Business Area 156
Table C5. Age of Business 156
Table C6. Number of Employees 156
Table C7. Private Ownership 157
x
List of Figures
Figure 1. Adapted Moreno and Casillas model 13
Figure 2. Test model 14
Figure 3. Adapted Moreno and Casillas model 49
Figure 4. Test model 50
Figure 5. Test model with hypotheses 74
Figure 6. Test model with hypotheses and findings 110
xi
CHAPTER 1. INTRODUCTION
Introduction of the Problem
Entrepreneurship and small business are vital to the economy of American and of
Washington State. According to data presented within the Small Business Economy for
data year 2006, a Report to the President (Office of Advocacy, 2007), per officials at the
United States Department of Commerce, Bureau of the Census, in 2004 within the United
States firms with fewer than 500 employees, had a net gain of 1.86 million new jobs,
while large firms with 500 or more employees had a net loss of 181,000 jobs (Office of
Advocacy, 2007, p. 1). The report further indicated that, Small firms employed 50.9% of
the private-sector workforce and generated 50.7% of nonfarm private gross domestic
product (p. 9). This level of economic impact was further confirmed by the authors of
the Panel Study of Entrepreneurial Dynamics [PSED] (Reynolds, 2007b; Reynolds &
Curtin, 2008), which showed that new firms are the dominant source of net job growth,
consequently having a significant impact on economic growth, innovation, and job
creation (Reynolds, Carter, Gartner, & Greene, 2004).
In Washington State, the impact of small businesses, particularly employer firms
with less than 500 employees, is even greater. In 2006, the officials of the Small Business
Administration, Office of Advocacy estimated that within the State of Washington, there
were 198,200 employer firms, of which 194,600 had less than 500 employees (Small
1
Business Administration Office of Advocacy, 2007). Employers of firms with fewer than
500 employees accounted for 98.2% of the state's employer businesses, and employed in
excess of 1.3 million people and represented 55.8% of the states nonfarm private labor
force, which is approximately 5% above the national average of 50.9% (Small Business
Administration Office of Advocacy). When compared nationally, Washington States
start-up and closure rates consistently rank in the top 10 for both rankings (Washington
State Department of Revenue, 2007).
Based on the data, it can be inferred that Washington State is both economically
dependent upon entrepreneurship and small businesses, yet challenged by the presence of
one of the highest rates of business start-ups and closures in the nation. Entrepreneurs and
business owners facing business start-up and expansion decisions experience this
dilemma, and simultaneously economic development planners and venture capitalists are
impacted as they decide how to allocate and distribute limited resources among the
numerous competing start-ups.
Given Washington States high business start-ups and closures rates, coupled with
limited local, state, and federal economic development dollars, the problem for
entrepreneurs and investors is the identification of new business ideas and firms with
entrepreneurial orientations, and competitive strategies that have the potential to
positively impact performance and economic development within the Washington State
business environment. Although the ideal would be to have a prediction model that would
project future firm performance, the reality is that entrepreneurial research is just
2
beginning to move into individual and firm behavior theory and organizational modeling
(Gartner, 1988; Smart & Conant, 1994).
To address this Washington State business environment issue, the study
determined the statistical significance of environmental uncertainty on the relationship
among performance, entrepreneurial orientation, and strategy using a sample of
Washington State manufacturing firms. The research expanded on and tested theories
presented in previous studies of the relationship between entrepreneurial orientation and
firm performance (Covin & Slevin, 1989, 1991; Lumpkin & Dess, 1996, 2001; Wiklund
& Shepherd, 2005), strategy and firm performance (Lumpkin & Dess, 1996), and
environmental uncertainty and firm performance (Covin & Slevin, 1989; Lumpkin &
Dess, 2001; Miller, 1983; Miller & Friesen, 1978). Of practical value, this research
confirmed statistically conventional wisdom that a business leaders entrepreneurial
orientation is the dominant variable relative to firm performance and that neither strategy
nor environmental uncertainty is as significant.
The research design used in this study was based on a simplified version of the
causal model developed and tested by Moreno and Casillas (2008) that measured the
relationships among entrepreneurial orientation, strategy, environmental uncertainty,
resources, and growth. Variables within the test model are firm performance,
entrepreneurial orientation, strategy, and environmental uncertainty. To support this
research and demonstrate that entrepreneurial behaviors can be modeled and the
relationships among the four variables measured, a sample of Washington State privately-
3
owned manufacturing firms with at least 5, and no more than 500 employees, was
surveyed.
Background of the Study
The research domain that encompasses the field of study of entrepreneurs and
entrepreneurship is rich, complex, broad in scope, yet somewhat undisciplined and
undefined (Beaver & Jennings, 2005; Carland, Hoy, Boulton, & Carland, 1984;
Davidsson, 2004; Smart & Conant, 1994). According to Watkins-Mathys and Lowe
(2005), the domain of entrepreneurship, unlike other fields of study, is not driven by
established working paradigms, but rather based primarily on practice.
Although entrepreneurship has been studied since the 1500s, to date, many of the
researchers have been hindered by the domains lack of a common definition, reliance on
small samples, and the use of simplistic analytical methods (Beaver & Jennings, 2005;
Carland et al., 1984; Smart & Conant, 1994). In addition, a major limiting factor to small
business entrepreneurial research is that much of the data used to support the research has
been supplied by self-reporting (Conant, Mokwa, Varadarajan 1990; Huber & Power
1985; Lukas, 1999; Snow & Hambrick 1980; Zahra, 1993b) and access to data bases
containing detailed private firm information are limited or expensive to access (Haviland
& Savych, 2007).
As the domain has evolved, limitations from trait-based studies have led
researchers to focus more on behaviors and processes (Smart & Conant, 1994) or as
posited by Gartner (1988), to shift entrepreneurial researchers from being focused on
whom entrepreneurs are to what entrepreneurs do. Further analyzing the process, Covin
4
and Slevin (1989) went on to identify the key dimensions of these entrepreneurial
organizing processes as innovation, risk taking, and pro-activeness.
As the study of entrepreneurship expanded to include recognition that
organizations could act entrepreneurial, Covin and Slevin (1991) outlined the advantages
for studying the dynamics of entrepreneurship from a firm behavior perspective rather
than the more traditional study of individual entrepreneur traits. As a result, Covin and
Slevin (1991) proposed a conceptual model of entrepreneurship based on firm behavior.
In the model, Covin and Slevin (1991) depicted the effects of entrepreneurial orientation
on firm performance and demonstrated how the external environment, strategy, and select
internal variables, such as organization culture, structure, resources, competencies, and
philosophies affected entrepreneurial posture.
In introducing the model, Covin and Slevins (1991) contended that the use of a
firm-behavior model for entrepreneurship had significant advantages over the traditional
individual entrepreneur trait-based models and theories. Covin and Slevin (1991)
supported their conceptual model with the argument that an entrepreneurs effectiveness
could be measured from firm performance, and that firm performance is a function of
both organizational and individual behavior.
Moreno and Casillas (2008) expanded on that theory and developed a model
designed to measure the relationship among entrepreneurial orientation (EO), strategy,
and the firm growth aspect of firm performance. In their contingent model, unlike many
of the previous researchers who focused on the relationship between performance and
entrepreneurial orientation, Moreno and Casillas narrowed the scope of the dependent
5
variable to growth rather than performance and posited that entrepreneurial orientation
affects firm growth through strategic behavior, moderated by external (environmental)
and internal (resources) factors.
To test their model, Moreno and Casillas (2008) used a sample selected from
Spains Centra database. The results of the study indicated that the relationship between
the variables entrepreneurial orientation and growth was positive, although highly
complex.
By using behavior-based models, Covin and Slevin (1991) and Moreno and
Casillas (2008) have promoted the concept that the entrepreneurial process is driven by
an entrepreneurs behaviors rather than their personal traits, which is further supported by
Lyon, Lumpkin, and Dess (2000). In addition, because behaviors can be measured and
managed, the use of a behavior-based model accounts for the affect and management of
organizational strategies, structures, systems, and cultures (Lyon et al.), which in turn
contributes to furthering the understanding of the dynamics of entrepreneurship.
Statement of the Problem
The problem for Washington State officials, entrepreneurs and investors is the
identification of new business ideas and firms with entrepreneurial orientations, and
competitive strategies that have the potential to positively impact performance and
economic development within the States business environment that has high business
start-ups and closures rates, and limited local state and federal economic development
dollars. To address this Washington State business environment issue, the statistical
significance of environmental uncertainty on the relationship among performance,
6
entrepreneurial orientation, and strategy was determined in the study using a sample of
Washington State small, private manufacturing firms.
The study expanded upon and tested theories presented in previous studies
relative to the relationship between entrepreneurial orientation and firm performance
(Covin & Slevin, 1989, 1991; Lumpkin & Dess, 1996, 2001; Wiklund & Shepherd,
2005), strategy and firm performance (Lumpkin & Dess, 1996), and environmental
uncertainty and firm performance (Covin & Slevin, 1989; Lumpkin & Dess, 2001;
Miller, 1983; Miller & Friesen, 1978). In addition, the studys research design used a
model to measure the relationships among four primary variables - firm performance,
entrepreneurial orientation, strategy, and environmental uncertainty. Conceptually, this
model was based on one developed and tested by Moreno and Casillas (2008) that
showed the relationships among entrepreneurial orientation, strategy, environmental
uncertainty, resources and growth. For this research, the model was simplified out of
practicality and because of limited researcher resources.
Purpose of the Study
The purpose of this study was to determine the statistical significance of
environmental uncertainty on the relationship among performance, entrepreneurial
orientation, and strategy using a sample of Washington State manufacturing firms. The
study was geographically localized and limited to testing a sample of small privately
owned Washington State manufacturing firms with at least 5 employees and no more
than 500 employees. Washington State based privately-owned manufacturing firms were
selected for this study because when compared nationally, Washington States small
7
business start-up and closure rates consistently rank in the top 10 for both rankings
(Washington State Department of Revenue, 2007). This excessive turnover rate provided
a unique opportunity to further explore the moderating affect of environmental
uncertainty among the variables firm performance, entrepreneurial orientation and
strategy.
Using the Moreno and Casillas (2008) model as a template, a model was
developed that used four primary variables--firm performance, entrepreneurial
orientation, strategy, and environmental uncertainty--to test the applicability of theory
presented by previous researchers (Covin & Slevin, 1989, 1991; Lumpkin & Dess 1996,
2001; Miller, 1983; Miller & Friesen, 1978; Wiklund & Shepherd, 2005) that there is a
relationship among firm performance, entrepreneurial orientation, strategy, and
environmental uncertainty. In narrowing the scope of the Moreno and Casillas model,
firm performance was substituted for growth, as firm performance had been previously
used as a dependent variable in numerous studies (Covin & Slevin, 1989, 1991; Lumpkin
& Dess, 1996, 2001; Wiklund & Shepherd, 2005), and eliminated the resource variable
due to the lack of availability of suitable firm data.
Rationale
The rationale for conducting this study was to test and expand the theory
presented in previous studies of the relationship between entrepreneurial orientation and
firm performance (Covin & Slevin, 1989, 1991; Lumpkin & Dess, 1996, 2001; Wiklund
& Shepherd, 2005), strategy and firm performance (Lumpkin & Dess, 1996), and
8
environmental uncertainty and firm performance (Covin & Slevin, 1989; Lumpkin &
Dess, 2001; Miller, 1983; Miller & Friesen, 1978).
By determining the statistical significance of environmental uncertainty on the
relationship among performance, entrepreneurial orientation, and strategy among a
geographically based cohort, theory was advanced and further insight gained into the
localized impact of environmental uncertainty on the relationship among firm
performance, entrepreneurial orientation, and strategy. It was anticipated that having this
knowledge would help future researchers, entrepreneurs, and business students to
understand better the localizing effect of these variables on firm performance.
Although it was anticipated that the hypothesis and model would confirm
statistically significant relationships, actual results proved to be inconclusive. However,
the research did confirm conventional wisdom that a business leaders entrepreneurial
orientation was the dominant variable relative to firm performance and that neither
strategy nor environmental uncertainty was as significant. Because the research was
limited by geography and industry type, the research can be used as a foundation for an
expanded follow-on study designed to test and to assess external validity of the study
findings across broader geographic areas and multiple industries (Cooper & Schindler,
2006; Short, Ketchen, & Palmer, 2002). Such an expanded study would also allow
researchers to explore causation which was beyond the scope of this study (Leedy &
Ormrod, 2005).
9
Research Question and Hypothesis
The primary research question addressed in the study was to what degree does
research hypothesis for correlation analysis was there will be no significant impact for
environmental uncertainty on the relationship between entrepreneurial orientation and
strategy to explain the variability in firm performance. The six subhypothesis of the
research hypothesis analyzed as part of the ordinary least squares (OLS) regression
analysis are
H1: There will be a relation between the entrepreneurial orientation of a firm and
the firms performance.
Numerous researchers have examined the relationship between a firms leaders
having an entrepreneurial orientation and the firms performance and have found a
positive relationship (Covin & Slevin, 1991; Wiklund, 1999; Wiklund & Shepherd,
2005). Similar findings, as moderated by the environment were anticipated.
H2: There will be a relation between a firms strategy and the firms performance.
In multiple studies, the performance of defenders, prospectors, and analyzer has
been shown to be equal to or higher than that of reactors (Woodside, Sullivan, &
Trappey, 1999). Additionally, it was anticipated that the environment would moderate the
relationship with the dynamism (Hough & White, 2003) or the hostility (Covin & Slevin,
1989; Zahra & Neubaum, 1998) of the environment influencing the strategy and
performance.
10
H3: There will be a relation between a firms entrepreneurial orientation and a
firms strategy.
With regard to the relationship between entrepreneurial orientation and strategy,
many experts consider the nature of this relationship to be indirect (Covin & Slevin,
1989; Lumpkin & Dess, 1996). However, it is anticipated that entrepreneurial firm
leaders will use more growth-oriented strategies.
H4: Environmental uncertainty will moderate the relation between a firms
entrepreneurial orientation and a firms performance.
strategy and a firms performance.
entrepreneurial orientation and strategy.
Environmental dynamism is a widely studied dimension of environmental
uncertainty and is often used as a contingent predictor between strategy making and firm
performance (Hough & White, 2003). The relationship between entrepreneurial
orientation and hostility has been tested in multiple studies. For the most part, the
research has indicated that in hostile environments, having an entrepreneurial posture
leads to increased firm performance (Covin & Slevin, 1989; Zahra & Neubaum, 1998)
with the relationship being less positive in a stable environment (Miller & Friesen, 1983).
Although in their study, Moreno and Casillas (2008) failed to confirm the
environment moderating the entrepreneurial orientation-growth relation, the high
turnover rate for Washington State businesses was used as a unique opportunity to retest
11
this hypothesis based on the substitution of firm performance for growth and the
differences in samples.
Nature of the Study
developed that used four primary variables: firm performance, entrepreneurial
orientation, strategy, and environmental uncertainty to test the applicability of theory
presented in previous research (Covin & Slevin, 1989, 1991; Lumpkin & Dess, 1996,
positive relationship among firm performance, entrepreneurial orientation, strategy, and
environmental uncertainty.
In narrowing the scope of the Moreno and Casillas model, firm performance was
substituted for growth, as firm performance had been previously used as a dependent
variable in numerous studies (Covin & Slevin, 1989, 1991; Lumpkin & Dess, 1996,
2001; Wiklund & Shepherd, 2005). Although the Moreno and Casillas model considered
the impact of firm resources, as noted by Dess and Robinson (1984), Fiorito and Laforge
(1986), and Sapienza, Smith, and Gannon (1988), the lack of suitable, available primary
and secondary data on small private firm often constrains small business research, which
is the case with the sample of privately owned, Washington State firms where accurate
financial/resource data was not available.
Although the nature and strength of correlations between variables were
measured, these measures alone were insufficient for inferring the cause(s) of the
relationships (Leedy & Ormrod, 2005), as the causal relationships appeared to be
12
asymmetrical, difficult to establish (Cooper & Schindler, 2006), and beyond the scope of
this research.
Shown in Figure 1 is the Moreno and Casillas model (2008), and Figure 2 shows
the revised test model used in the research.
Figure 1. Adapted Moreno and Casillas model. From Entrepreneurial Orientation and
Growth of SMEs: A Causal Model (p. 509), by A. Moreno and J. Casillas, 2008,
Entrepreneurship: Theory & Practice, 32. Copyright 2008 by Entrepreneurship: Theory
& Practice. Used with Permission.
13
Figure 2. Test model.
Although having reliable and valid objective data and performance measures is
preferred (Sapienza et al., 1988; White, 1996), finding such measures with regard to
private small business performance is limited. Dess and Robinson (1984) contended that
subjective data should only be used when objective data is not available or as an
alternative, the researcher must remove performance from the research design. Scales
used for data gathering were extracted from previously published research articles related
to the measured constructs.
Firm performance. To measure firm performance, subjective measures were used
based on performance measures used by Zahra and Covin (1994) and scales developed by
Zahra (1993b). Subjective performance measures were used because reliable, verifiable
14
data was not available and measuring firm performance was integral to the research
design (Dess & Robinson, 1984).
Entrepreneurial orientation. To measure entrepreneurial orientation, scales
developed by Covin and Slevin, (1989) were used. The scale by Covin and Slevin (1989)
used three items to measure a firms leadership leaning towards innovation, three items to
measure a firms leadership proactiveness, and three items to measure a firms leadership
risk-taking.
Strategy. To measure strategy, the Conant et al. (1990) multi-itemed scale was
originally selected, as it was structured relative to Miles and Snows (2003) 11 adaptive
cycles. However, during the conduct of the data collection phase, the Conant et al. scale
was determined to be too lengthy for participants to complete, and thus appeared to
negatively impact the survey response rate. When it became necessary to conduct a
second survey, the single-item paragraph descriptor scale developed by Moreno and
Casillas (2008) was substituted for the Conant et al. scale.
Environmental uncertainty. To measure the environmental impacts of dynamism
and hostility, the scales developed by Miller (1987), and Miller and Friesen (1983) were
used. Although the scales measured dynamism, hostility, and environmental
heterogeneity, the majority of researchers (Lumpkin & Dess, 2001, Wiklund & Shepherd,
2005; Zahra & Garvis, 2000) tended to focus primarily on dynamism and hostility which
was similar to this study.
To gather firm data, entrepreneurial researchers often rely on self-reporting as an
appropriate method for gathering firm data (Conant et al., 1990; Huber & Power 1985;
15
Lukas, 1999; Snow & Hambrick, 1980; Zahra, 1993b). For data collection, a mail survey
and self-reporting was used.
Significance of the Study
Given Washington States high business start-ups and closures rates, coupled with
limited local state and federal economic development dollars, the problem for
entrepreneurs and investors is the lack of an assessment tool to help with the
identification of firms with entrepreneurial orientations and competitive strategies with
the greatest potential to positively impact performance and future economic development.
The goal was to provide insights into the factors influencing regional firm performance
and assist economic development districts, investors, and entrepreneurs to better
understand the phenomenon of and impact of environmental uncertainty on the
relationships among entrepreneurial orientation, strategy, and firm performance.
The practical aspect of this research was four-fold. First, it was used to provide
investors and researchers with a tool for assessing the impact of environmental
uncertainty within the Washington State business climate on entrepreneurial orientation,
strategy and firm performance. Second, it was used to raise the level of awareness among
business owners and investors of the affects of environmental uncertainty particularly
within Washington States historically turbulent small business turn-over phenomenon.
Third, it will be used to provide a means by which a Washington State entrepreneur or
business student can assess the strengths and weaknesses of his or her motivations,
business idea(s), and strategies relative to the states business environment. Fourth, it
16
confirmed conventional wisdom regarding the significant role a business leaders
entrepreneurial orientation has on firm performance.
Definition of Terms
Because the topic of entrepreneurship has been defined multiple ways, researchers
often conflict because of differences caused by varying definitions and measurements
(Miles, Arnold, & Thompson, 1993). As examples, Hisrich and Peters (as cited in Sadler-
Smith, Hampson, Chaston, & Badger, 2003) defined entrepreneurship as the process of
creating something different with value by devoting the necessary time, and effort,
assuming the accompanying financial, psychological, and social risks and receiving the
resulting rewards of monetary and personal satisfaction (p. 6).
Smart and Conant (1994), recognizing that a single definition of entrepreneurship
did not exist and that it was unlikely in the near future that there would be a commonly
accepted definition, proposed a definition encompassing both individual traits as well as
behavior skills.
Entrepreneurship is a dynamic, goal oriented process whereby an individual

combines creative thinking to identify marketplace needs and new opportunities
with the ability to manage secure resources and adapt to the environment to
achieve desired results will assume in some portion of risk for the venture. (para.
12)
Although the definition of entrepreneurship by Smart and Conant (1994) could be
applied to large or mega-corporations, for the purpose of this study, the focus was on
Washington State privately owned manufacturing firms with at least 5 employees and no
more than 500 employees. Consequently, it was important to make a distinction between
17
the terms small business or life style venture and small entrepreneurial or start-up
venture, as well as small business owner and entrepreneur. Again, as with the discussion
of the definition of entrepreneurship, each of these terms have been defined differently by
various researchers which contributes to the domains ambiguity.
Beaver and Jennings (2005) stated one of the fundamental questions yet to be
adequately addressed within the entrepreneurship research domain is whether small
business owner-mangers are entrepreneurs. While Carland et al. (1984) argued that
growth is the significant factor that distinguishes a small or life style business from the
entrepreneurial firm; it could also be argued that the entrepreneurial firms leadership
should, as outlined by Schumpeter (1934/1963), focus on profitability and growth
through innovation and strategic processes (Beaver & Jennings). Thus, to recognize the
differences between a small business and an entrepreneurial firm, as well as the
difference between a small business owner and an entrepreneur, the following definitions
posited by Carland et al. were used in this research paper. The definitions are
Small business venture: A small business venture is any business that is

independently owned and operated, not dominant in its field, and does not engage
in any new marketing or innovative practices.
Entrepreneurial venture: An entrepreneurial venture is one that engages in
at least one of Schumpeters four categories of behavior: that is, the principal
goals of an entrepreneurial venture are profitability and growth and the business is
characterized by innovative strategic practices.
Small business owner: A small business owner is an individual who
establishes and manages a business for the principal purpose of furthering
personal goals. The business must be the primary source of income and will
consume the majority of ones time and resources. The owner perceives the
business as an extension of his or her personality, intricately bound with family
needs and desires.
Entrepreneur: An entrepreneur is an individual who establishes and
manages a business for the principal purposes of profit and growth. The
18
entrepreneur is characterized principally by innovative behavior and will employ
strategic management practices in the business. (p. 358)
An additional term that needs to be defined is entrepreneurial orientation. Like the
definitions for entrepreneurship, the key processes and behaviors firms use when acting
entrepreneurial have been defined differently and with slight variations. As examples,
Covin and Slevin (1991) used the label entrepreneurial posture to describe a firms
leadership risk taking, innovation, and pioneering behaviors. Lumpkin and Dess (1996)
used the term entrepreneurial orientation to describe five key entrepreneurial processes -
autonomy, innovativeness, risk taking, pro-activeness, and competitive aggressiveness.
Naman and Slevin (1993) used the term entrepreneurial style to describe a firms
leadership business risk taking, competitive proactiveness, and innovativeness. This study
similar to Naman and Slevin used the term entrepreneurial orientation to refer to a firms
leadership risk taking, proactiveness and innovativeness.
Miller and Friesen (1978) used the terms dynamism, heterogeneity, and hostility
to describe the environmental dimensions that impact a firms external environment. For
this study, the Miller and Friesen descriptions were used to define dynamism,
heterogeneity and hostility and the definitions are
Dynamism in the environment is manifested by the amount and unpredictability

of change in customer tastes, production, or service technologies, and the modes
of competition in the firms principal industries.
Heterogeneity in the environment concerns the differences in competitive
tactics, customer tastes, product lines, channels of distribution, etc.
Hostility in the environment is evidenced by price, product, technological,
and distribution competition, severe regulatory restrictions, shortages of labor or
raw materials, and unfavorable demographic trends (e.g., the drying up of
markets). (p. 922)
19
Strategies used throughout this study are the classical definitions of Miles and
Snow (2003). The definitions of defender, prospector, analyzer, and reactor are
Defenders: Defenders are organizations which have narrow product-market

domains. Top managers in this type of organization are highly expert in their
organizations limited area of operation but do not tend to search outside of their
domain for new opportunities. As a result of this narrow focus, these
organizations seldom need to make major adjustments in their technology,
structure, or methods of operation. Instead, they devote primary attention to
approving the efficiency of their existing operations.
Prospectors: Prospectors are organizations which almost continually
search for market opportunities, and they regularly experiment with potential
responses to emerging environmental trends. Thus, these organizations often are
the creators of change and uncertainty to which the competitors must respond.
However, because of their strong concern for product and market innovation,
these organizations usually are not completely efficient.
Analyzers: Analyzers are organizations which operate in two types of
product-market domains, one relatively stable, the other changing. In the stable
areas, these organizations operate routinely and efficiently through use of
formalized structures and processes. In the more turbulent areas, top managers
watch the competitors closely for new ideas, and then they rapidly adopt those
which appear to be the most promising.
Reactors: Reactors are organizations in which top managers frequently
perceived change and uncertainty occurring in their organizational environments
are unable to respond effectively. Because this type of organization lacks a
consistent strategy-structure relationship, it seldom makes adjustments to any sort
until forced to do so by environmental pressures. (p. 29)
Assumptions and Limitations
Given available time and financial resources, the primary assumption made was
that sufficient data was available on Washington private manufacturing firms and that
survey participants would answer the survey in sufficient quantities to allow for analysis
of the data. Study limitations were associated with the studys validity, use of self-
reporting, causality, and generalizability.
20
According to Boyer and Pagell (2000), validity should be determined using more
than one method. Because data used to support this research was collected through the
use of one method of data collection--a mail survey questionnaire based on Likert scales
and paragraph descriptors-it is possible that the validity of the data and subsequent
findings may be subject to variance (Short et al., 2002).
The second limitation was caused by the reliance on self-reporting measures by
one participant per firm. Although tests for validity and reliability showed high
confidence levels, the use of multimethods and multirater instruments would produce
stronger findings (Gupta & Govindarajan, 1984; Snow & Hambrick, 1980)
The third limitation was one of causality inferred from the associational terms
used in stating the hypotheses. From these terms, it could be inferred that there was more
than an association, but also an effect. Because the study was based on a snapshot or
cross section of data, the data lacked the richness and depth necessary for testing
causality that would be found in a longitudinal study unconstrained by time and limited
financial resources (Gupta & Govindarajan, 1984).
The fourth major limitation was limited generalization caused by the nature of the
sample which is based on one industry located in a specific geographical area, which
limited the ability to replicate data and environmental influences (Snow & Hambrick
1980).
21
Organization of the Remainder of the Study
The remainder of the study is organized into four chapters consisting of a
literature review, the studys methodology, results, and discussion, implications and
recommendations.
Given the abundance and richness of literature related to the domain of
entrepreneurship, a rather extensive literature review is presented. The intent of this
literature review was to first outline the complexities and vastness of the subject area of
entrepreneurship, second demonstrate the evolution of entrepreneurial research and third,
expound on the study of firm behavior as a foundation for understanding entrepreneurial
effectiveness.
Chapter 3. Methodology contains a detailed discussion of the studys research
design, sample methods, instrumentation, measures, data analysis techniques, and
limitations.
Chapter 4. Results, contains a detailed discussion of the studys data collection,
validation and reliability testing of scales, and the results of hypotheses testing using
simple and multiple hierarchical regression analysis techniques.
Chapter 5. Discussion, implications and recommendations summarizes the
findings from this study and makes recommendations for future research
22
CHAPTER 2. LITERATURE REVIEW
The focus of this literature review was on those dimensions of entrepreneurs and
entrepreneurship germane to this studys purpose to test theory that there is a relationship
among a firms performance, entrepreneurial orientation, and strategy, as moderated by
environmental uncertainty. Areas of entrepreneurship discussed are entrepreneurship and
the entrepreneurial domain, entrepreneurial traits and behaviors, firm performance,
entrepreneurial orientation, strategy, and environmental uncertainty.
Entrepreneurship and the Entrepreneurial Domain
The research domain that encompasses the field of study of entrepreneurs and
entrepreneurship is rich, complex, broad in scope, yet somewhat undisciplined and
undefined (Beaver & Jennings, 2005; Carland et al., 1984; Davidsson, 2004; Smart &
Conant, 1994). The numerous studies of entrepreneurs and entrepreneurship have
indicated that the domain is multifaceted and encompasses dimensions of multiple
disciplines such as economics, finances, history, strategy management (Low &
MacMillan, 1988), which have produced numerous definitions and perspectives relative
to the domain. To illustrate the impact of this lack of domain specificity, Davidsson
(2004) cited seven different definitions from seven different researchers while Naman
and Slevin (1993) illustrated the domains multiple perspectives by citing 21 various
23
studies on entrepreneurship encompassing firm behavior, the environment, strategy, and
performance.
Consequently, because there is no agreed upon definitions for entrepreneurship or
entrepreneurs, Watkins-Mathys and Lowe (2005) stated, Research in small business and
entrepreneurship research is still largely based on practice, and is, therefore not yet
bounded by concepts of absolute truths that are found in established fields, where the
functionalist paradigm tends to dominate (p. 664). Consequently, because of the lack of
specificity, the domains complexity, and multiple perspectives, the domains models and
theories continue to lack rigorous testing (Chell, 2007), and it is believed by some
researchers that there may never be a unified model or commonly accepted definition
(Beaver & Jennings, 2005).
Entrepreneurship Schools of Thought
To further understand the dynamics of entrepreneurship, it is necessary to review
several varying schools of thought as to what is entrepreneurship. As an example, Chell
(2007) posited that there are two major schools or perspectives. Proponents of the first
perspective view the entrepreneur as a creator of wealth, capital, jobs, and large industrial
empires. Proponents of the second perspective, a more academic view, conceptualize the
nature of entrepreneurship into a conglomerate of differing views and perspectives
running the gamut from personality trait based theory (Beaver & Jennings, 2005;
Naffziger & Kuratko, 1994), theory based on the creation of new organizations or
businesses (Gartner, 1985, 1988; Low & MacMillan, 1988) and theory based on either
individual or firm level behaviors (Beaver & Jennings; Gartner, 1985, 1988). In addition,
24
there have been numerous arguments whether business creation should be included as a
necessary part of entrepreneurship (Davidsson, 2004; Gartner, 1985, 1988; Low &
MacMillan; 1988) or whether distinctions should be made between small businesses and
entrepreneurial businesses (Beaver & Jennings; Carland et al., 1984).
Gartner (2001) discussed two perspectives, the first that of Shane and
Venkataraman and the second that held by the Academy of Managements
Entrepreneurial Division. According to Shane and Venkataraman (2000), the study of the
performance of individuals and small or new businesses belongs in the domain of
strategic management and that the entrepreneurship domain should focus on the
dimensions of opportunities, such as how and why opportunities are created, how and by
whom opportunities are discovered; and how, once discovered, opportunities are
exploited and marketed.
To capture the essence of the Academy of Managements perspective on
entrepreneurship, Gartner (2001) cited the broader Academy of Management
Entrepreneurship Division domain statement, which indicated that entrepreneurship
encompasses the creation and management of new businesses, small businesses and
family businesses and the characteristics and special problems of entrepreneurs (as cited
in Gartner, p. 30). Gartner (2001) stated this perspective was lacking specificity and
covered a plethora of multiple, limitless, unconnected topics which were more
representative of the state of entrepreneurship research than the more focused Shane and
Venkataraman (2000) view, which relates poorly to the majority of entrepreneurial
research.
25
Davidsson (2004) offered another perspective, derived from considering a
Drucker task-oriented, self-motivated, personal-gains perspective contrasted with a
Schumpeterian perspective based on innovation, change-oriented behaviors, self-
employment, and value creation. In trying to develop a definition that included all aspects
of each reality, Davidsson moved from a small business perspective of entrepreneurship
to one of organizational creation and the start-up of new firms that included both
behavior, and outcomes that made a difference in the market place.
Acting Entrepreneurial
Trait-based, early entrepreneurial researchers tended to focus on who becomes an
entrepreneur rather than the acts or behaviors of the entrepreneur (Beaver & Jennings,
2005; Naffziger & Kuratko, 1994). Gartner (1985, 1988), seeing the fallacy in this
approach posited that the focus of entrepreneurial research should be on the process
rather than the traits attributes and characteristics of the entrepreneur and thus called for a
behavioral approach.
If the purpose of entrepreneurial behavior is to create value that allows a firm to
compete, generate wealth, and sustain itself (Chell 2007), then it can be argued that for an
individual to behave entrepreneurial, his or her behavior is influenced by the individuals
personal environment, disposition, and characteristics, as impacted by the economic
situation (Naffziger & Kuratko, 1994). For identification of an entrepreneurial firm,
Schumpeter (1934/1963) identified five categories of behavior. These five behaviors are
1. the introduction of new goods,
2. the introduction of new methods of production,
26
3. opening of new markets,
4. opening of new sources of supply,
5. industrial reorganization.
For an individual or a firm to act entrepreneurial, there must be specific behaviors
(Naffziger & Kuratko).
In addition to Schumpeters (1934/1963) five categories of entrepreneurial
behaviors, additional factors separate small business owners and entrepreneurs. Sadler-
Smith et al. (2003) stated among the distinctions between small business owners and
entrepreneurs is that small business owners tend to focus on management functions-
planning, controlling, monitoring, and evaluating while entrepreneurs tend to focus on
innovation, risk taking, and proactiveness to create wealth. In addition, Chell (2007)
suggested entrepreneurs are driven by challenge and can be distinguished from the
owners-managers or lifestyle business owners by their ability to not only see
opportunities, but to also assess, decide and act in an appropriate manner that creates
value and contributes to wealth creation. According to Covin and Slevin 1986 (as cited in
Naman& Slevin, 1993), Entrepreneurship can be viewed as a characteristic of
organizations and can be measured by looking at managerial behavior as the firm engages
in the entrepreneurial process (p. 138.).
Level of Analysis
Although there have been numerous studies of entrepreneurship, difficulty
remains for researchers to synchronize the competing views into coherent theory
development and systematic study (Gartner, 2001; Reynolds et al., 2004). Most
27
entrepreneur researchers agree that the focus on personal traits and the psychological
characteristics of successful entrepreneurs is inadequate (Beaver & Jennings, 2005; Smart
& Conant, 1994) and call for a focus on behavior and new firm-organizational creation
(Gartner 1985, 1988, 2001; Low & MacMillan, 1988).
Given the current multiperspective face of entrepreneurship, the dilemma is to
select the right definition, level of analysis, and theory appropriate for the constructs
being studied (Davidsson & Wiklund, 2001). For the study, the level of analysis was at
the firm, and entrepreneurship was defined by Smart and Conant (1994) as
Entrepreneurship is a dynamic goal-oriented process whereby an individual

combines creative thinking to identify market place needs and new opportunities
with the ability to manage, secure resources, and adapt to the environment to
achieve desired results while assuming some portion of risk for the venture. (para.
12)
Entrepreneurial Traits and Behaviors
A significant amount of entrepreneurship research has been on the specific
personal traits of the entrepreneurs. The use of this early one dimensional focus limited
theory development. However, as the domain has matured, researchers have shifted their
focus to behaviors, processes, and firm creation (Gartner, 1985, 1988; Smart & Conant,
1994).
Because the use of conventional wisdom assumed that a great portion of
entrepreneurial success was attributable to a firms owner or founder, it was logical for
the researchers to initially focus on trying to identify the traits and characteristics of
successful entrepreneurs (Hofer & Sandberg, 1987). Among the traits and characteristics
28
studied were (a) demographics, such as family background, age, education, gender, and
experience; (b) psychological variables, such the need for achievement, power, control,
as well as attitudes towards ambiguity and risk-taking; and (c) behavioral variables, such
as initiative, energy, drive and self-confidence (Hofer & Sandberg).
Although some researchers stated that personal demographics and psychological
characteristics could be used to determine whether or not a person is likely to start a
business (Hofer &Sandberg, 1987), Davidsson (2004) argued that although there is a
consistent relationship between education and the likelihood of starting a business, there
are no personal factors that can be used to determine or predict who will seek out an
entrepreneurial career. Davidsson (2004) further explained that it is the firm rather than
the individual that is nascent and as a result being a nascent entrepreneur is provisional.
In addition, with regard to firm success, research has indicated that most
demographics and psychological characteristics have little impact (Gartner, 1985; Hofer
& Sandberg, 1987) while learnable behavioral skills do (Gartner, 1985). According to
Hofer and Sandberg, among these behavioral skills associated with new firm success are
(a) recognizing needs associated with environmental changes, (b) being motivated to act
on an individuals perceptions, (c) taking effective actions based on perceptions, and (d)
motivating others to act in concert.
In studies of firm growth, researchers have found that personal traits and
competencies do not act in isolation to influence growth, but rather contribute through
their indirect impacts on more direct performance links (Smith, Baum, & Locke, 2001).
Although there is an indirect effect on firm performance, testing of relationships between
29
traits and performance continually showed weak relationships accounting for less than
7% of variance (Smith et al.). Given the weak relationships, Smith et al. posited that traits
have little relevance, do not stand alone, and that those studied in the past, have perhaps
been the wrong ones.
Taking a somewhat different view of the role of traits and characteristics,
Reynolds (2007a) believed that studying traits was not only counterproductive but, also
missed the important role teams play in business creation. Reynolds (2007a) posited that
there are five concepts associated with entrepreneurs and business creation that lead to
five different levels of analysis. The five concepts Reynolds (2007a) described are
personality traits, high growth and capitalization, innovation and innovativeness,
opportunity recognition and business creation. In Reynolds (2007a) model personality
traits can be analyzed at the personal attributes level, while high growth and
capitalization, innovation and innovativeness, and opportunity recognition can be
analyzed on any one of three levels including personal, on-going firm, or new firm.
Business creation is the only dimension of Reynolds model focused solely on new firm
creation and the nascent nature of entrepreneurship.
The conclusion that was drawn from this discussion was that a workable
definition of entrepreneurship should include individual characteristics, as well as
behaviors (Carland et al., 1984; Smart & Conant, 1994) and the focus of entrepreneur
researchers should be on organization behaviors or firm creation rather than individual
characteristics and traits (Davidsson, 2004; Gartner, 1985).
30
As the study of entrepreneurship expanded to include recognition that
organizations could act entrepreneurial, Covin and Slevin (1991) introduced a conceptual
model of entrepreneurship as firm behavior. In introducing the model, it was the
contention of Covin and Slevin (1991) that the use of a firm-behavior model for
entrepreneurship had significant advantages over the traditional individual entrepreneur
trait-based models and theories. Among Covin and Slevins (1991) arguments supporting
their conceptual model were that an entrepreneurs effectiveness could be measured from
firm performance, and that firm performance is a function of both organizational and
individual behavior. By using a behavior-based model, Covin and Slevin (1991) further
promoted the concept that the process is driven by entrepreneurs behaviors rather than
their personal traits. In addition, because behaviors can be measured and managed, the
use of a behavior based model can be used to account for the affect and management of
organizational strategies, structures, systems, and cultures, which in turn simplifies the
overall understanding of the mysteries of entrepreneurship.
In addition, many early entrepreneurial researchers tended to focus on individuals
based on an assumption that entrepreneurs were different and the reasons why they were
different explained their actions (Dodd & Anderson, 2007). From a socio-economic
perspective, Dodd and Anderson argued that entrepreneurs share a structure agency
relationship with society in which neither dominates, yet both influence the other. This
lead Dodd and Anderson to posit that entrepreneurship is based on the networking of
individuals and that entrepreneurs and entrepreneurship do not function in isolation,
particularly with regard to opportunity identification, evaluation and resource acquisition.
31
Measuring Firm Performance
While proponents of most strategic management theories and branches of the
management domain consider performance as a key construct (Venkatraman &
Ramanujam, 1986), Covin and Slevin (1991) were emphatic and posited that firm
performance is the ultimate dependent variable. Elaborating on this construct, it has been
further argued that performance measuring is integral to entrepreneurship (Naffziger &
Kuratko, 1994). Although the use of financial measures to gage performance is generally
accepted by researchers (Naffziger & Kuratko), the trend is for researchers to expand the
scope of performance by not only include financials, but by also looking at operational
characteristics (Venkatraman & Ramanujam).
Studying managers, Weinzimmer, Nystrom, and Freeman (1998) found growth in
sales the most common measure of overall organizational performance. Expanding on
this, in their model of entrepreneurship as firm behavior, Covin and Slevin (1991) posited
that a firms economic performance had two components-growth and profitability. This
rather simple difference in approaches can highlight one of the challenges associated with
measuring growth or performance and that is that different researchers use different
approaches, measures, and formulas with minimal discussion of appropriateness
(Weinzimmer et al.; White, 1996).
Among researchers, there is no consensus on the best measure of small firm
performance, with general acceptance among researchers that growth is the most
important measure (Dess, 1987; White, 1996; Wiklund, 1999). Reliance on growth, as an
indicator of small firm performance, is based on the tendency among researchers to rely
32
on available data. While private firm financial data was often not available, often growth
data for sales, new employees, and capital investments was available which in turn
caused growth to be considered the more accurate measure (Wiklund). However, others
believed that performance is multidimensional and that using both financial performance
and growth factors provides a richer description of firm performance (Covin & Slevin,
1991; Venkatraman & Ramanujam, 1986).
In a review of 35 previous studies on firm performance, Weinzimmer et al. (1998)
discovered that 83% of the researchers used sales or revenues as the only measure of
growth. Believing the use of one factor to be limiting, Weinzimmer et al. further argued
that size cannot be measured by simply considering sales and that the number of
employees and assets needed to also be factored. Similarly, Lumpkin and Dess (1996)
posited that firm performance is multidimensional and better described by the use of both
financial and growth measures.
For small businesses, growth is complex and conceptual based on the owners
perceptions of performance and his or her perceived ability to produce positive outcomes
based on behaviors (Morrison, Breen, & Ali, 2003). Covin and Slevin (1989) stated,
Performance is, presumably a function not only of a firms organization structure and
strategic posture, but also of the fit between these variables and the firms business
practices and competitive tactics (p. 84). In the expansion of the understanding of the
phenomenon of firm growth and performance, research has shown a correlation between
a firms growth and entrepreneurial orientation or entrepreneurial behaviors (Moreno &
Casillas, 2008).
33
Although adopting an entrepreneurial posture seems intuitive to creating and
sustaining high-performance, there is little empirical evidence used to support a strong
positive relationship between a firm having an entrepreneurial posture and firm
performance (Covin & Slevin, 1991). However, several studies indicate the relationship
between entrepreneurial posture and firm performance is moderated by the environmental
conditions (Covin & Slevin, 1991, p. 12) and as Shrader, Taylor, and Dalton (1984)
suggested the stronger argument is that organizational performance is contingent upon
the relationship between strategy and the environment, with neither environmental nor
strategic planning factors able to stand alone, as a better predictor of firm performance.
Similarly, Lyon et al. (2000) pointed to the increased number of empirical studies
showing that entrepreneurial behavior and firm performance is more contingent than
direct and that future research will call for the use of more sophisticated modeling in
understanding the relationship between entrepreneurial behavior and firm performance.
Entrepreneurial Orientation
Like the definitions for entrepreneurship, the key processes and behaviors that
leaders of firms use when acting entrepreneurial have been defined differently and with
slight variations. As examples, Covin and Slevin (1991) used the label entrepreneurial
posture to describe a firms leaders risk taking, innovation, and pioneering behaviors;
Lumpkin and Dess (1996) used the term entrepreneurial orientation to describe five key
entrepreneurial processes including autonomy, innovativeness, risk taking, proactiveness,
and competitive aggressiveness. Naman and Slevin (1993) used the term entrepreneurial
34
style to describe a firms business risk taking, competitive proactiveness, and
innovativeness.
Representing a strategic orientation, a firms leadership entrepreneurial
orientation combines aspects of decision-making, methods, and practices that then serve
to define how the firm operates, rather than what the firm does (Lumpkin & Dess, 1996).
Conceptually, entrepreneurial orientation is a multidimensional concept (Covin & Slevin,
1989; Miller, 1983) and depicts the willingness on the part of business leaders to sustain a
competitive advantage, and aggressively compete against other business leaders through
business risk taking, change, and innovation (Covin & Slevin, 1988; Miller, 1983). Miller
(1983) stated, An entrepreneurial firm is one that engages in product-market innovation,
undertakes somewhat risky ventures, and is first to come up with proactive innovations,
beating competitors to the punch (p. 771). Whether entrepreneurial orientation is defined
by three dimensions, including innovativeness, risk taking, and proactiveness (Covin &
Slevin, 1986 as cited in Covin & Slevin, 1988; Covin & Slevin, 1989; Miller, 1983) or
expanded to five by including aggressiveness and autonomy (Lumpkin & Dess, 1996),
the dimensions are independent and exist in contextual relationships involving
environmental factors and the firms organizational characteristics (Lumpkin & Dess,
1996).
The five entrepreneurial dimensions, as defined by Lumpkin and Dess (1996), are
(a) autonomy refers to acting independently, making key decisions, and moving forward
regardless of constraints and obstacles; (b) innovativeness represents a firms willingness
to support and new ideas, experimentation, and creativity processes that lead to new
35
products, services or technologies; (c) risk-taking has contextual meaning, generally
implying the willingness of a firm, given uncertainty, to take bold actions, support risky
projects, commit resources, and move into new markets in order to achieve the firms
objectives; (d) proactiveness refers to a firms future looking perspective, anticipating
future demands, seeking opportunities in the pursuit of new-ventures, or the introductions
of new products or services ahead of the firms competition; and (e) competitive
aggressiveness refers to the firms willingness to directly and openly, and aggressively
challenge its competition in the market place (Lumpkin & Dess, 1996, 2001). In contrast
to other researchers, such as Covin and Slevin (1989, 1991), it was Lumpkin and Dresss
(1996, 2001) contention that a firms competitive aggressiveness represented the level of
intensity of a firms efforts to compete while proactiveness represented a firms
leadership forward-looking view of the marketplace and future demands.
Although Lumpkin and Dess (1996) added the two additional dimensions of
autonomy and competitive aggressiveness, a number of researchers (Covin & Slevin,
1989, 1991; Knight, 1997; Miller, 1983; Naman & Slevin, 1993; Wiklund, 1999; Zahra,
1993b) have used three dimensions- innovation, risk-taking, and proactiveness in their
studies to measure entrepreneurial behaviors.
Entrepreneurial Orientation-Environment
Three environmental factors influence firm behavior and performance: dynamism,
heterogeneity, and hostility (Miller, 1987) and multiple researchers have considered the
contingent relationship (Dess, Lumpkin, & Covin, 1997) between entrepreneurial
orientation and the environment.
36
Generally, leaders in firms in dynamic environments are more likely than leaders
in firms in stable environments to follow innovative strategies (Miller, 1987; Miller &
Friesen 1983). With regard to heterogeneity, research by Miller and Freisen (1983)
indicated minimal differences between unsuccessful and successful firms with one
caveat; the successful firms had a stronger positive relationship between heterogeneity
and innovation. In hostile environments, although hostility is unfavorable for
proactiveness (Lumpkin & Dess, 2001, Miller & Friesen, 1983) and risk-taking (Miller &
Friesen, 1983), research by Covin and Slevin (1989) has indicated that small firms with a
high entrepreneurial orientation achieve high performance and that it is logical for the
leader of a firm to assume an entrepreneurial posture when faced with a hostile
environment (Covin & Slevin, 1989, 1991).
Entrepreneurial Orientation-Performance and Strategy
Authors of numerous studies have examined the relationship between a firm
having an entrepreneurial orientation and the firms performance and have found a
relationship (Covin & Slevin, 1991; Wiklund, 1999; Wiklund & Shepherd, 2005). In
addition, according to Lumpkin and Dess (1996), this relationship is also mitigated by
industry, as well as environment. Although some researchers inferred that the more
entrepreneurial a firm, the better it will perform, others have either failed to find a
significant relationship (Smart & Conant, 1994) or have failed to confirm one (Wiklund
& Shepherd). Consequently, with regard to the relationship between entrepreneurial
orientation and strategy, analysis has been hindered by contingent impacts of
37
environmental challenges, and organizational complexities that correlations fail to
adequately explain (Dess et al., 1997).
Summary and Conclusions
Entrepreneurial orientation, focused on innovation proactiveness, and risk-taking
places emphasis on processes over individual actors (Wiklund, 1999). In the study of the
role of entrepreneurial orientation, contingent, complex relationships existed between
entrepreneurial orientation and the environment, as well as between entrepreneurial
orientation and firm performance as moderated by industry and firm characteristics
(Lumpkin & Dess, 1996). Unanswered questions remain with regards to the
independence of entrepreneurial strategy making and related organizational activities
(Dess et al., 1997).
Strategy
Selecting a competitive strategy is one of the most important decisions a small
business owner makes (Borch, Huse, & Senneseth, 1999) and when coupled with
competitive advantage, is integral to achieving above average performance (Porter,
1985). Within entrepreneurial research, to assess strategy, most researchers have relied on
scales designed to measure either Porters (1980, 1985) competitive strategies or Miles
and Snows (2003) organizational strategies.
Porter's Competitive Strategies
Porter (1980, 1985) outlined two fundamental competitive advantages: low cost
and differentiation. Based on these two principal competitive advantages, he outlined
38
three generic competitive strategies of overall cost leadership, differentiation, and
focused. As described by Porter (1980), an overall cost leadership strategy can be defined
as providing goods or services at a low cost relative to competitors, a differentiation
strategy infers that a firms products or services are perceived industry-wide as unique,
and a focus strategy implies that a firms leaders have targeted goods and services on a
particular market segment, buyer, group, or product line.
Miles and Snow Organizational Strategies
According to Miles and Snow (2003), the process of adjusting to environmental
uncertainty is quite complex, and as a result, the firm goes through an adaptive process or
cycle of simultaneous adjustments in entrepreneurial, technology, structure, and
innovative domains. In this adaptive cycle, firm leaders independently select their
markets, develop their products and services, organize, interface with the environment,
and compete within their selected industry (Miles & Snow). Although Miles and Snow
suggested it is highly improbable that any two strategies will be exactly alike, as firms
begin to compete within an industry, one of four environmental coping strategies
including defenders, prospectors, analyzers, or reactors emerge.
Summary and Conclusion
Borch et al. (1999) analysis of the two strategy types indicated that each is
focused on the competitive positioning part of strategy. Miles and Snow (2003) focused
their organization strategies on an organization-environment adaptive cycle (Segev,
39
1987) while Porter (1980) focused his understanding of competitive strategies by making
distinctions between differentiation and cost leadership (Borch et al.)
Although the strategies have different degrees of focus, Segev (1987) posited that
it can be argued that Porters (1980) differentiation strategy approximates Miles and
Snow (2003) prospectors, and Porters cost leadership strategy approximates Miles and
Snows defenders. Miles and Snow analyzers, as suggested by Hambrick (1983),
represented a hybrid organization, and along with reactors, would be found on a
continuum somewhere between the two extremes (Segev).
With regard to the use of Porters competitive strategies, one would generally
associate differentiation with innovation, new products and entrepreneurial behaviors
while strategies based on low cost would seem to align with established firms (Dess et
al., 1999). However, in two separate research projects, one by Dess et al. (1997) and one
by Zahra and Covin (1993, as cited in Dess et al., 1997), the opposite was found to be
statistically significant. In the Dess et al. (1997) study, it was indicated that in firms using
low cost strategies with managers using entrepreneurial decision making, performance
was high rather than low, and in the Zahra and Covin study, cost leadership was shown to
be positively related to new product development.
In applying the Miles and Snow (2003) strategy types in entrepreneurial research,
there is no requirement to match an organization with any one specific strategy. Miles
and Snow suggested the level of performance among defenders, prospectors, and
analyzers was similar for a given industry. However, prospectors and analyzers tend to
exhibit more entrepreneurial behavior, defenders less, and reactors the least (Segev,
40
1987). Similarly, with regard to performance and based on multiple studies, the
performance of defenders, prospectors, and analyzer is equal to or higher than reactors
(Woodside et al., 1999).
Although researchers have used both Miles and Snow and Porter strategy
descriptors (Moreno & Casillas, 2008; Smith et al., 2001), there appears to be no clear
consensus as to which set of strategy descriptors is best suited for entrepreneurial studies.
However, when studying entrepreneurial firms, Miles and Snow may offer some
advantages because the strategies are well grounded in organizational adaptation theories,
are widely used and cited in entrepreneurial literature, and have proven to be reliable in
theory testing (Zahra & Covin, 1994).
Environmental Uncertainty
The environment has played a seminal role in the study of entrepreneurship, as
numerous researchers have linked environmental effects on the presence and
effectiveness of entrepreneurial activities and ventures (Covin & Slevin, 1991).
According to Penrose (1995), the environment is unique for each firm, and is fluid and
capable of being manipulated by leaders of a firm to achieve their own objectives with
opportunities limited by uncertainty or by the firms view. Milliken (1987) explored the
concept of uncertainty by defining uncertainty as a persons lack of ability to make
accurate predictions with environmental uncertainty representing the uncertainties caused
by a firms external environment.
Khandwalla (1977) explained a firms environment as a source of external
pressure placed on a firm that coexists with the pressures and dynamics that define an
41
organization. Under the interdependent relationship that is present between a firm and its
environment, there are three states of relationship: (a) dominated or start-up firms with
very little or no control over environmental inputs, (b) firms that have parity, and (c)
those dominant (such as the federal government) with a large degree of influence over
environmental inputs and exports (Khandwalla). As a result, according to Khandwalla,
the environment and a firms relationship to its environment has a significant impact on
the firms ability to execute its business strategy and compete in the market place.
Khandwalla (1977) further posited that there are five major environmental
dimensions that impact an organization. The dimensions are (a) turbulence or
unpredictability, (b) hostility or stressful, and risky, (c) diverse or heterogeneous, (d)
technical complexity or requiring complex information for decision making, and (e)
restrictiveness or constrained. Building on Khandwallas work, Miller and Friesen (1978)
posited that a firms environment does not totally control a firms strategic response and
that firms can adjust to environmental pressures through their analyzing activities,
innovations in products or markets, use of niche strategies, or in other words, their
entrepreneurial orientation.
According to Covin and Slevin (1991), multiple studies indicate the relationship
between entrepreneurial orientation, and firm performance as moderated by the
environment. In their 1978 study, Miller and Friesen used the terms dynamism,
heterogeneity, and hostility as the variables for measuring the dynamic nature of the
environment. In this study, the variable definitions used by Miller and Friesen (1978)
were selected to define dynamism, heterogeneity and hostility.
42
Dynamism, Hostility, and Heterogeneity
Environmental dynamism is a widely studied dimension often used as a
contingent predictor between strategy making and firm performance (Hough & White,
2003). Researchers have found that in dynamic environments, there is increased
entrepreneurial orientation among small firms (Miles, Covin, & Heeley, 2000), as well as
possible increased risk taking and innovation as research has shown that slow rational
decision making misses opportunities in a dynamic market yet performs well in a slower
paced, stable environment(Hough & White, 2003).
Like dynamism, the relationship between entrepreneurial orientation and hostility
has been tested in multiple studies. For the most part, the research has shown that in
hostile environments, having an entrepreneurial posture leads to increased firm
performance (Covin & Slevin, 1989; Zahra & Neubaum, 1998) with the relationship
being less positive in a stable environment (Miller & Friesen, 1983). However, similar
research by Miles et al. (1993) showed an opposite relationship that entrepreneurial
orientation had a significant negative correlation in a hostile environment, contradicting
much of the literature.
According to Dess and Beard (1984), a heterogenic market place is one defined
by complexity and uncertainty with increased needs for analysis and information
handling. Zahra (1991) described a heterogeneous environment as one that is diverse,
complex, and provides a firm with opportunities for innovation in the development of
diverse products and services designed to meet varying customer needs across different
markets and market segments (Miller & Friesen, 1983). Peterson and Berger (1971) and
43
Wilson (as cited in Zahra 1991) stated increases in environmental heterogeneity often
correspond with increases in a firms innovation and entrepreneurial orientation.
For most research projects, the selection of the three environmental dimensions to
include in the study is related to the research objectives (Zahra, 1993a). Although
heterogeneity has been identified as an external environmental factor, two factors
including dynamism and hostility tend to be measured most (Lumpkin & Dess, 2001;
Moreno & Casillas, 2008; Wilkund & Shephard, 2005) and similarly, this study was
focused on the environmental impact dimensions of hostility and dynamism as market
heterogeneity is beyond the scope of the study.
Summary and Conclusions
The environment has played a seminal role in the study of entrepreneurship as
numerous researchers have linked environmental effects on the presence and
effectiveness of entrepreneurial activities and ventures (Covin & Slevin, 1991).
Based on the studies of a firm entrepreneurial orientation and environmental
uncertainty, according to Miles et al. (1993), two different conclusions can be made. The
first, based on the beliefs of Khandwalla (1977) and Covin and Slevin (1989, 1991) is
that there is a positive relationship between environmental hostility and a firms
willingness to be adopt an entrepreneurial orientation. Second, based on the minority
view of Miller and Friesen (1983) with respect to performance, there are negative
relationships between increased hostility and increases in innovation or entrepreneurial
orientation.
44
Future Trends and Modeling
This literature review of entrepreneurial literature and research has shown that the
field of study of entrepreneurs and entrepreneurship is rich, complex, broad in scope, yet
somewhat undisciplined and undefined (Beaver & Jennings, 2005; Carland et al., 1984;
Davidsson, 2004; Smart & Conant, 1994). The numerous studies of entrepreneurs and
entrepreneurship cited in the review showed the domains multifaceted characteristics
that encompassed dimensions of multiple disciplines, such as economics, finances,
history, strategy management (Low & MacMillan, 1988) which have produced numerous
definitions and perspectives relative to the domain. Although the domain is rich in
studies, much of the research remains unsophisticated and with regard to small
businesses, challenged by the lack of archival data necessary to support expanded, in-
depth research (Chandler & Lyon, 2001).
As the level of research sophistication increases, the trend will be to show that
relationships among measured constructs are more complex and require the use of more
rigorous models and contiguous variables for testing (Lyon et al., 2000). As an example,
from a study of the relationship between entrepreneurial orientation and firm
performance relationship, Lumpkin and Dess (1996) concluded that entrepreneurial
activity can act independently, affecting varying dimensions of performance in opposite
directions. According to Lyon et al. (2000), the trend among empirical researchers has
been to find that relationships between constructs, such as entrepreneurial behavior and
firm performance are less direct, more contingent, independent, and mitigated by the
environment (Zahra, 1993a) thus, increasing the complexity of defining the relationships
45
as well as the modeling needed to test for them (Lyon et al.) and ultimately show
causality.
Consequently, as relationships are proven to be more complex, contingent, and
independent, the trend over time will be a movement to the use of more sophisticated
modeling and stronger statistical measures (Chandler & Lyon, 2001). In addition, given
the role of organization creation in entrepreneurship, the establishment of large
longitudinal data bases, such as the Panel Study of Entrepreneurial Dynamics (PSED)
(Reynolds, 2007b; Reynolds & Curtin, 2008) can be used by researchers to test multiple
variables and constructs with verifiable small business data providing the researcher with
the ability to follow a firm throughout the business creation-development lifecycle
(Reynolds et al., 2004).
46
CHAPTER 3. METHODOLOGY
The purpose of this study was to determine the statistical significance of
environmental uncertainty on the relationship among performance, entrepreneurial
orientation, and strategy using a sample of Washington State manufacturing firms. This
study was geographically localized and limited to testing a sample of small privately
owned, Washington State manufacturing firms with at least 5 and no more than 500
employees.
Overview of Research Question and Hypothesis
The primary research question addressed in this study was to what degree does
studys research hypothesis for correlation analysis was there will be no significant
impact for environmental uncertainty on the relationship between entrepreneurial
orientation and strategy to explain the variability in firm performance.
Inclusive within the hypothesis are six subhypotheses supporting the dependent
variable of firm performance and independent variables of entrepreneurial orientation,
and strategy, and the moderating variable of environmental uncertainty. The components
of the hypothesis that were analyzed as part of the ordinary least squares (OLS)
hierarchical regression analysis are
47
H1. There will be a relation between the entrepreneurial orientation of a firm and
H2. There will be a relation between a firms strategy and the firms performance.
H3. There will be a relation between a firms entrepreneurial orientation and a
firms strategy.
H4. Environmental uncertainty will moderate the relation between a firms
Research Design
developed that uses four primary variables--firm performance, entrepreneurial
orientation, strategy, and environmental uncertainty to test the applicability of theory
presented in previous research (Covin & Slevin, 1989, 1991; Lumpkin & Dess, 1996,
relationship among firm performance, entrepreneurial orientation, strategy, and
environmental uncertainty.
In narrowing the scope of the Moreno and Casillas (2008) model, firm
performance was substituted for growth, as firm performance had been previously used
as a dependent variable in numerous studies (Covin & Slevin, 1989, 1991; Lumpkin &
48
Dess, 1996, 2001; Wiklund & Shepherd, 2005). In addition, although the Moreno and
Casillas model was used to consider the impact of firm resources, as noted by Dess and
Robinson (1984), Fiorito and Laforge (1986), and Sapienza et al. (1988), the lack of
suitable, available primary and secondary data on small private firm often constrains
small business researchers, which was the case with the sample of privately owned,
Washington State firms where accurate financial/resource data is not available.
Figure 3. Adapted Moreno and Casillas model. From Entrepreneurial Orientation and
Growth of SMEs: A Causal Model (p. 509), by A. Moreno and J. Casillas, 2008,
Entrepreneurship: Theory & Practice, 32. Copyright 2008 by Entrepreneurship: Theory
& Practice. Used with Permission.
49
Figure 4. Test model.
Although the nature and strength of correlations between variables was measured,
these measures alone were insufficient for use in inferring the cause(s) of the
relationships (Leedy & Ormrod, 2005). Because causal relationships tend to be
asymmetrical, and difficult to establish (Cooper & Schindler, 2006), inferring causality
was beyond the scope of this research.
Collecting Small Business Research Data
Although small businesses have great economical impact, several factors unique
to these businesses, can tend to impact and limit researchers. As an example, small firms
typically have more limited resources, and often lack critical skills and expertise which
tend to limit their available options and strategy choices (Fiorito & Laforge, 1986) which
50
creates problems for researchers when collecting primary and secondary data from small
privately held firms. As a result, most researchers, tend to focus their research on
medium to large firms where primary and secondary data are more readily available and
thus less is known about how small react strategically (Miles et al., 2000).
Small private firm owners and managers, often fear breaches in confidentiality
and are unwilling and sometimes unable to provide desired data (Dess & Robinson, 1984;
Fiorito & Laforge, 1986; Sapienza et al., 1988). In addition, data is often not factual,
complete, compressible and verifiable (Dess & Robinson; Ward & Duray, 2000).
Although having reliable and valid objective data and performance measures was
preferred (Sapienza et al.; White, 1996), finding such measures with regard to private
small business performance was limited for the reasons specified and as a result, small
business researchers are faced with the dilemma of using subjective data.
Use of Subjective Measures
Although objective measures are preferred, research by Dess and Robinson
(1984) indicated that return on assets and sales growth could be measured subjectively.
Similarly, Covin and Slevin (1988), Naman and Slevin (1993), and Zahra (1993b) also
used subjective performance measures in their research and found that when the
subjective and objective measures were correlated to establish subjective validity, the
correlations were high and the subjective data was valid and reliable for analyses.
However, to ensure validity, Covin and Slevin, and Zahra also correlated the subjective
data with small samples of objective data solicited from among the surveyed firms.
51
In addition, Dess and Robinson (1984) contended that subjective data should only
be used when objective data is not available or as an alternative, the researcher must
remove performance from the research design. Because reliable objective data was not
available and firm performance was critical to the design, the researcher utilized
subjective performance measures similar to those used by Zahra (1993b).
Use of Self-Reporting
Numerous entrepreneurial researchers have relied on self-reporting as an
appropriate method for gathering firm data (Conant et al., 1990; Huber & Power 1985;
Lukas 1999; Snow & Hambrick 1980: Zahra, 1993b). Because a small firms senior
executives are the most knowledgeable individuals with regard to the firms business
strategies, perceptions of uncertainty, and future competitive intent (Zahra, 1993b; Lyon
et al., 2000; and Weaver, Dickson, Gibson, & Turner, 2002), small business executives
are often used as single source respondents.
Additional administrative reasons for the use of single source respondents are: (a)
reduced administrative costs, (b) cost savings from multiple mailings to the same firm
allow for increased sample size and reach, and (c) an increased willingness on the part of
firms to respond since only one individual is involved in completing the survey (Lyon et
al., 2000). However, although studies cited by Lyon et al. indicated strong levels of
convergent and discriminate validity for data collect from single-sources, Lyon et al. also
pointed out that reliance on single respondents can introduce common method variances
that may affect the strength of measures relationships while differing perceptions can lead
to inconsistent findings.
52
Test Sample
To test the model and simplify the collection effort, a heterogeneous purposive
sample (Short et al., 2002) was selected from among the population of Washington State
private manufacturing firms identified under North American Industry Classification
System (NAICS) Codes 310000-339999 with at least 5 employees and less than 500
employees. The list of available firms was extracted from the LexisNexis Academic
company dossier available on-line through the Capella University Library. Although this
list may have not have been up-to-date and consequently, not exactly match with the
target population (Thompson, 1992), given limited resources, it represented the best
available data set.
All private firms were searched under the following criteria: State: Washington;
Firm type: all private; Industry NAICS codes: 31000-339999(Manufacturing); Firm
size/employment: 5 > 500. The initial query produced a population of 4756 firms. After
further refinement and the removal of private-parent, private-subsidiary, and listings with
incomplete firm names the population of remaining firms was 4327.
To determine the appropriate sample size, several methods were reviewed. As an
example for a population size of approximately 5000, Leedy and Ormrod (2005)
recommend a sample of 400 while Krejcie and Morgan (1970) recommended a sample of
380 for a population of 4000 and 381 for a population of 5000. According to Howell
(2007), when using regression techniques, multiple methods exist for determining
minimal sample sizes. Advocates for one of the methods claim the sample size should
include a minimum of 10 observations for each predictor, another is that the number of
53
observations should exceeded the number of predictors by at least 50, and advocates for
another model based on the direction of statistical power indicated that for one predictor
124 cases are required and for five predictors, 187 cases are necessary to achieve a
population correlation of .30 (Howell). Because the researcher used four predictors to
achieve a population correlation of .30, it is estimated that172 cases would be required.
Because mail response rates range from 22% to 44% (Cobanoglu, Warde, &
Moreo, 2001; Kaplowitz, Hadlock, & Levine, 2004; Kwak & Radler, 2002; Shannon &
Bradshaw, 2002), to obtain a minimum of 172 cases based on Howell (2007), the
required sample would range between 782 (22% response rate) and 391 (44 % response
rate). As increased cases lead to stronger results and reduce error (Short et al., 2002), the
researcher preferred to sample 782 of the 4327 firms within the population. However,
given resource constraints, the best that could be achieved was to initially survey 433 or
10% of the population which was expected to yield between 95 and 191 cases.
Instrumentation and Measures
The survey questionnaire (see Appendix A) developed and used to support this
research was based on processes and procedures used by, described by, and reported on
in academic research texts (Cooper & Schindler, 2006; DeVellis, 2003). Scales used for
data gathering were extracted from previously published research articles relating to the
measured constructs and are shown in Table 1. The selected scales have been reported to
be reliable and valid, and likewise, data gathered to support this research showed similar
levels of reliability and validity.
54
Table 1. Scales and References
Scale Reference
Firm Performance Zahra, 1993b
Entrepreneurial Orientation Covin & Slevin, 1989
Strategy Conant, Mokwa,& Varadarajan, 1990;Moreno &

Casillas, 2008
Environmental Uncertainty Miller, 1987
Firm Performance Measures
To measure firm performance, subject measures were used based on performance
measures and scales developed by Zahra and Covin (1994) and by Zahra (1993b).
Subjective performance measures were used because reliable, verifiable data was not
available and measuring firm performance was integral to the research design (Dess &
Robinson, 1984).
Zahra (1993b) collected both subjective and objective data for firm return on
assets (ROA) and sales growth. Each subjective measure was rated twice by each
participant, once for importance to the firm, and once to measure the executives level of
satisfaction with the performance. To test the validity of the subjective measures, Zahra
also solicited objective data from the respondents and approximately 66% provided the
requested data. Zahra next ran simple correlations comparing the two sets of measures.
Because the results reflected a high correlation between the two measures, Zahra used the
subjective measures in his analysis.
55
As part of the survey, similar to Zahra (1993b), each participant was asked to
provide data on their average sales growth and return on assets for the past 3 years.
Subjective and objective data was compared to establish validity for the subjective
measures (Covin & Slevin, 1988; Zahra, 1993b; Zahra & Covin 1994).
Entrepreneurial Orientation Measures
After reviewing scales designed for measuring entrepreneurial orientation
developed and used by Khandwalla (1977), Miller and Friesen (1983), Covin and Slevin
(1989), and Covin and Covin (1991), the researcher opted to use the scales developed by
Covin and Slevin (1989). The Covin and Slevin scale uses three items to measure a firms
leaning towards innovation, three items to measure a firms proactiveness, and three
items to measure a firms risk-taking. Of the nine items, four were original to the scale,
and five were adapted from instruments previously developed and used by Miller, and
Friesen and Khandwalla (Covin & Slevin, 1989).
To assess the validity of their scales, Covin and Slevin (1988, 1989) used factor
analysis to determine the strength of the relationship among the factors, as related to the
three aspects of entrepreneurial orientation. Similarly, factor analysis was applied to
determine the construct validity of the scales. According to Knight (1997), the
Khandwalla scale, as refined by Miller and Friesen (1978), and Covin and Slevin (1989),
was found to have strong reliability and validity.
56
Strategy Measures
To measure strategy, the scale developed by Conant et al. (1990) was initially
used. The Conant et al. scale is multi-itemed and structured to correspond to the 11
adaptive cycles of Miles and Snows (2003). In the development of this scale, Conant et
al. used a panel of organization theory and strategy researchers and an iterative process to
revise the questions and response-options to ensure content validity. The scale has been
used by numerous researchers (Lukas, 1999; Woodside et al., 1999) and has been proven
to test well for reliability and validity.
To score the scale, Conant et al. (1990) classified an organization as being a
defender, prospector, analyzer, or reactor based on a simple majority rule based on the
number of categorical response. Ties involving reactors, as one category, were scored as
reactors and ties not involving the reactor category were scored as analyzers, representing
a hybrid organization with both defender and prospector characteristics (Woodside et al.,
1999).
Although the original research plan called for the use of the Conant et al. (1990)
scale, low survey response rates caused the researcher to reconsider the use of this scale.
When it became necessary to conduct a second survey, the second questionnaire was
shorten by 10 items with the substitution of the single-item paragraph descriptor scale
developed by Moreno and Casillas (2008). This scale, unlike the Conant et al. scale, was
used to ask the participant to classify his or her firm as a defender, prospector, analyzer,
reactor based on single paragraph descriptions of each strategy type (Moreno & Casillas).
57
Environmental Uncertainty Measures
To measure environmental impacts, the scales developed by Miller (1987), and
Miller and Friesen (1983) were used. Although in addition to dynamism and hostility, the
scales measure environmental heterogeneity, the majority of researchers (Lumpkin &
Dess, 2001; Wiklund & Shepherd, 2005; Zahra & Garvis, 2000) tended to focus primarily
on the dynamism and hostility aspects of environmental uncertainty.
According to Dess (1987), by selecting the sample from one industry and
geographical region, the impact of environmental heterogeneity can be reduced while
increasing consistency. Since the survey sample was based on one industry and the level
of exploration did not delve into firm market segmentation, heterogeneity was not
measured. Consequently, the study used 8 of the 9 Miller (1987) environmental
uncertainty measures to measure environmental dynamism and hostility.
Control and Demographic Variables
For this type research, commonly cited control variables include firm age, size,
and type (Zahra & Neubaum, 1998). Similarly, firm demographics collected as part of the
research included the number of employees, firm age, and firm type. Participant
demographics were limited to the participants title, age and gender.
Data Collection
It is a preference among researchers to use self-reporting mail surveys as a
collection tool with the principal recipient being the survey firms managers, executives,
founders, and owners (Brush & Vanderwerf, 1992).
58
To collect the data, the use of either mail or web surveys was considered, as
research has shown each to offer distinct advantages and disadvantages. Principally,
research has consistently indicated mail surveys to have higher response rates than web-
surveys (Cobanoglu et al., 2001; Kaplowitz et al., 2004; Kwak & Radler, 2002; Shannon
& Bradshaw, 2002) while web surveys have quicker responses rates, are less costly to
execute, require no manual data handling, and tend to be easier for the respondent to
navigate (Cobanoglu et al.; Kaplowitz et al.; Kwak & Radler; Shannon & Bradshaw).
Although the use of web surveys appeared to offer several cost and time saving
advantages, many of the firms identified among the sample population lacked e-mail
addresses, making it impossible to survey those firms electronically.
Survey response rate research has indicated that there are several actions a
researcher can take to increase the response rate. One of the major acts is to promote the
survey under university sponsorship (Greer & Lohtia, 1994, Porter & Whitcomb, 2007),
which consistently achieves the highest response rates relative to other forms of
sponsorship. Unfortunately, current Capella University policy precludes learners from
using Capella letter headed stationary. However, research by Shannon and Bradshaw
(2002) has further indicated that in addition to university sponsorship, the use of pre-
notification letters and stamped return postage also contributed to increased response
rates. In addition, as a further aid to increasing response rates, as noted by Fiorito and
Laforge (1986), the questionnaire was kept simple and short to reduce participant
completion time.
59
To collect the data, the researcher initially surveyed the selected sample of
Washington State manufacturing firms through a mail survey. Both the pre-notification
and survey letter were prepared on plain white stationery and included pre-stamped return
envelopes. The pre-notification and survey cover letter explained the purpose of the
research, described how the participants identity, and privacy would be protected and
offered the participant an opportunity to obtain a copy of the survey results. Participants
were asked to complete and return the questionnaire in a pre-stamped envelope and
following a 2-week grace period, postcards were sent to thank those who participated and
reminders were sent to those who had not returned the survey asking them to do so.
Data Analysis
The measurement scales used in this study have been previously used and the
collected data analyzed using various methods. As examples, Miles et al. (1993) used
Pearson correlation to test for significant degree of statistical association between
environmental hostility and a firms entrepreneurial orientation and Moreno and Casillas
(2008) used the multivariate analysis technique of partial least squares. Flynn, Schroeder,
and Sakakibara (1994) and Hinkin (1995) posited that the relationships contained within
hypotheses are usually tested using either correlation or regression analysis.
To determine the correct statistical test to be used for analysis, the following
factors were considered:
1. The test model consisted of a dependent variable of firm performance, and
two independent variables of entrepreneurial orientation and strategy, and a
moderator variable of environmental uncertainty.
60
2. Scales used for measuring each variable (less strategy type) were Likert scales
that could be classified as rating, multidimensional and interval (Cooper &
Schindler, 2006).
3. Within the research question, the relationships among the variables appeared
to be asymmetrical rather than either symmetrical or reciprocal (Cooper &
Schindler).
4. With correlation, an index was calculated to measure the nature of the
relationships between variables; while with regression, an equation was
developed to predict the values of the dependent variable (Cooper &
Schindler).
Based on the identified factors, coupled with the ability of regression analysis to
relate the explanatory power of one or more independent variables to the dependent
variable (Von Eye & Schuster, 1998), and because multiple regression can be used to
predict, estimate, and describe (Ryan, 1997), the researcher conducted the statistical
analysis using OLS hierarchical multiple regression techniques (Frazier, Tix, & Barron,
2004; Kahane, 2001) run on the computer-based student version of the SPSS Version
18 software.
The object of the regression was to demonstrate the correlations of the
independent variables entrepreneurial orientation and strategy towards the dependent
variable firm performance. The impact of the moderating variable-environmental
uncertainty was measured using moderated regression.
The generalized equations for the hypotheses are:
61
Y1 = (constant) + b1X1 + e
Y1 = (constant) + b1X2a + e
Y1 = (constant) + b1X2b + e
Y1 = (constant) + b1X2c + e
firms strategy.
Y2a = constant + b1X1 + e
Y2b = constant + b1X1 + e
Y2c = constant + b1X1 + e
Y = (constant) + b1X1 + b2M + b3(X1*M)
Y = (constant) + b1X2a + b2M + b3(X2a*M)
Y = (constant) + b1X2b + b2M + b3(X2b*M)
Y = (constant) + b1X2c + b2M + b3(X2c*M)
62
Y2a = (constant) + b1X1 + b2M + b3(X1*M)
Y2b = (constant) + b1X1 + b2M + b3(X1*M)
Y2c = (constant) + b1X1 + b2M + b3(X1*M)
In the equations, Y1 is the dependent variable firm performance, b1, b2, b3 are the
slopes of the regression equation, X1 is the independent variable entrepreneurial
orientation, X2 (X2a Analyzer, X2b Defender, X2c Prospector) is the independent variable
strategy, and M is the moderator variable environmental uncertainty. Y2 is the dependent
variable strategy (Y2a Analyzer, Y2b Defender, Y 2c Prospector ) used in the testing of
hypotheses 3 and 6.
Prior to conducting the regression analysis, a correlation analysis was conducted
among the variables of each subhypothesis to determine the extent and significance of
any relationships.
Validity and Reliability
Validity is the extent to which an instrument is used to measure the construct it
was designed to measure (Chandler & Lyon, 2001; Flynn et al., 1994) and reliability to
the degree the instrument is error free and capable of providing consistent accurate
measures (Chandler & Lyon; Flynn et al.)
With regard to establishing validity, the constructs often used in entrepreneurial
research are difficult to quantify making it paramount that the test questions and
measurements be relevant and representative of the measured construct (Chandler &
Lyon, 2001). Preferred means for analyzing and assessing construct validity is through
confirmatory factor analysis (Flynn et al., 1994; Hinkin, 1995; Knight, 1997).
63
According to Hinkin (1995), Likert scales typically used in entrepreneurial
research have increased reliability until the inclusion of 5 points after which, reliability
increases level off. Hinkin, supported by DeVellis (2003), further cautioned that the
introduction of negative or reverse scoring questions fails to contribute positively to
questionnaires and may reduce the validity of responses by introducing systematic error
to the scales. For this study, six reverse-scoring questions were included among the eight
questions used to generate the environmental uncertainty variable.
When collecting primary data, one means for establishing reliability is the use of
multiple item measures rather than single item measures to establish consistency
(Chandler & Lyon, 2001; Venkatraman & Grant, 1986). According to Nunnally and
Bernstein (1994), single item scales often (a) correlate poorly with the attribute in
question, (b) often relate to other attributes, (c) may not correlate to a degree with any
attribute or factor, and (d) have considerable random error. With multi-item scales, the
conditions are minimized, as the incidental factors tend to average out when all factors
are combined (Nunnally & Bernstein). Scales used in this research to measure firm
performance, entrepreneurial orientation, and environmental uncertainty were all multi-
item.
The Conant et al. (1990) scale used in the original survey was also multi-item;
however, the Moreno and Casillas (2008) scale substituted in the second questionnaire
was single-itemed and subject to increased error as described by Nunnally and Bernstein
(1994). According to Hinkin (1995), Knight (1997), Nunnally and Bernstein (1994),
Ward and Duray (2000), the most popular way to assess reliability is the use of
64
Cronbachs alpha, which shows how much a set of items such as those contained within
the scale measuring entrepreneurial orientation are interrelated to each other (Hinkin;
Knight; Ward & Duray;).
The scales used in this study to measure firm performance, entrepreneurial
orientation, strategy, and environmental uncertainty were all Likert scales that can be
classified as rating, multidimensional and interval. Previous test coefficients for each of
the instruments were:
1. Firm performance. Testing of the subjective firm performance scale by Zahra
(1993b) had coefficients of .77 and .74 while a similar measure used by Covin
and Slevin (1989) produced an inter-item reliability coefficient of 0.88.
2. Entrepreneurial orientation. The entrepreneurial orientation scale developed
by Covin and Slevin (1989) was tested using factor analysis and proved to
factorial valid. All items loaded above 0.5 on a single factor and an inter-item
reliability coefficient of 0.87 (Covin & Slevin).
3. Strategy. For the 11 questions that constitute the Conant et al. (1990) scale
used to test strategy, the reliability coefficients ranged from 0.56 to 0.82 with
a mean of 0.69, which approximates Nunallys recommended guideline of
0.70 (Conant et al.). The alternative Moreno & Casillas (2008) scale used in
the second questionnaire is a single-item scale and consequently, no inter-item
reliability test was conducted.
65
4. Environmental uncertainty. For the Miller (1987) environmental scale, data
was collected on two data bases. For the first data base, the coefficient
average was 0.81 and for the second was .078 (Miller).
Ethical Considerations
This study was approved by the Capella University IRB on November 23, 2009
and subsequently approved as revised on February 28, 2010. The original IRB application
was modified due to low survey response rates that necessitated the administration of a
second survey. All survey participants were randomly selected from qualifying firms
listed in the LexisNexis Academic company dossier available on-line through the Capella
University library. Informed consent during the original survey was obtained by a
separate document returned with the survey and in the subsequent survey participants
were advised of informed consent requirements in the cover letter and acknowledged
informed consent by returning the survey.
The ethical implications associated with this research were minimal and limited to
ensuring and protecting the privacy and anonymity of participants and their survey
responses. This was achieved by having no identifying marks on either the questionnaires
or the return envelopes, and by collecting, cataloging, and storing the return
questionnaires in files separate and secure from the researchers common work files and
computer stored documents. Neither children nor special category persons were contacted
or surveyed as part of the research.
66
CHAPTER 4. RESULTS
This chapter consists of the results of data collection, validation, and reliability
testing of scales, and hypothesis testing using simple, and multiple hierarchical regression
analysis techniques. The model summary, ANOVA, and coefficient tables are provided
for each regression procedure.
Data Collection and Survey Responses
Two surveys were conducted to support this research. The first survey involved
mailings to 433 small Washington State based manufacturing firms and the second
mailing consisted of the mailing of 1147 surveys. Participants were randomly selected
from among a population of 4327 small, privately-owned Washington State
manufacturing firms; there were no duplicates between the two survey lists. Although a
pre-notification letter and two follow-up thank you/reminder notices were mailed as part
of the first survey, only 11 surveys were returned representing an overall response rate of
3 % of which 5 (1%) were useable. This was well below expected responses rates for
mail surveys ranging from 22% to 44% (Cobanoglu et al., 2001; Kaplowitz, et al., 2004;
Kwak & Radler, 2002; Shannon & Bradshaw, 2002). Based on informal discussions with
small business owners, it was determined that the major factors that influenced the
response rate were the requirement to sign and return a completed informed consent
form, the length of the survey, and the perceived requirement to provide financial data.
67
Consequently the survey was revised and to shorten the survey, the Moreno and
Casillas (2008) one-paragraph descriptor question for determining strategy was
substituted for the 11 item Conant et al. (1990) scale used in the original questionnaire. In
addition, all necessary elements of the informed consent document were incorporated into
a revised cover letter eliminating the requirement for the respondent to return a separate
signed consent form. Following approval by the Capella University Institutional Review
Board (IRB), the second survey (see Appendix A) was mailed to 1147 small
manufacturing firms. This second survey generated 65 responses of which 64 were
useable. Although this 6% response is below response rates obtained by previous small
business researchers (Moreno & Casillas, 2008; Todd, 2006; Zahara & Garvis, 2000), it
should be noted that this survey was conduct during a major economic recession when
national unemployment was at 9.7%, Washington State unemployment was at 9.5%, and
national unemployment in the manufacturing sector was at 12.6% (Bureau of Labor
Statistics, 2010).
Data Analysis
All analysis was completed using the student version of SPSS Version 18. Prior
to the analysis of the main model and hypothesis testing, the data were screened for
missing values, outliers, and multicollinearity. Further, scale analysis was conducted on
the entrepreneurial orientation and environmental uncertainty scales and appropriate
dummy coding was applied to the categorical data collected from the paragraph
descriptor strategy type measure. In addition, a comparison was also made between the
data contained within the five initial survey responses and the second survey. Although
68
the descriptive statistics were reviewed and compared to those of the second survey, the
limited number of cases was too few to allow the SPSS software to run a reliability or
correlation analysis. However, based on the descriptive review, the data provided by the
participants in both surveys appeared to be similar in nature.
Missing Data, Outliers, and Multicollinearity
Of the 30 questions contained within the survey, only one question (Question 8)
had greater than 5% missing data. Three of the 64 cases had greater than 10% of the data
missing; two were missing 19.4% or 6 items, and the third was missing 45.2% or 14
items. To determine if the data was missing at random, Littles Missing Completely at
Random (MCAR) test was run resulting in p = .954, which is greater than .05 indicating
that the missing data pattern had a high probability of being random (Tabachnick &
Fidell, 2007). Missing data were handled through mean estimation (Tabachnick & Fidell)
and the SPSS listwise default option (Cooper & Schindler, 2006). Since there did not
appear to be any significant outliers, it was opted to eliminate the three cases with 19.4%
to 45.2% missing data points.
Multicollinearity was determined using Pearsons product movement correlations
(Tabachnick & Fidell, 2007). According to Tabachnick and Fidell, any bivariate
correlations above .70 are indicators of the possibility that two variables may measure the
same construct and that any readings above .90 should be dealt with by deleting one of
the variables. As shown in Appendix B, correlations greater than .70 were found between
Hostility-Market and Hostility-Unpredictability (.710), Return on Assets (ROA)
Satisfaction and Sales Satisfaction (.712), Sales Satisfaction and Average Performance
69
(.866) and ROA Satisfaction and Average Performance (.829). Correlations between
ROA Satisfaction, Sales Satisfaction, and Average Performance were anticipated, as
Average Performance was derived from the ROA Satisfaction and Sales Satisfaction
scores. Only the average performance variable was used in the main model analysis.
Analysis of Demographic Data
Appendix C shows the firm and participant demographic data collected in
conjunction with this research for the demographic and control variables of gender, age,
participant title, age of business, number of employees, and private ownership. Of the 61
participants, 48 (78.7%) were male, 11(18%) were female, and 2 provided no answer.
Nineteen (45.9%) of participants were 55 to 64 years of age and 36 (59%) identified
themselves as firm owners/founders. Additionally, 45 (73.8%) of the businesses were 11
to 50 years old, 58 (95.1%) indicated private ownership, and 43 (70.5%) had 3 to 25
employees while only 1 had greater than 250 employees.
Analysis of Firm Performance Data
Because subjective financial data was used in the regression models, participants
were asked to provide data on their percentage of change in sales, as well as return on
assets. Of the 64 participants, 36 provided sales data with 15 of the 36 also providing
return on assets data. Given the volatile nature of the economy during the data collection
period (January 2010 to April 2010), the range for the sales data was -127% to +218%
and the range for the return on asset data was -60% to +100%. Extreme values were
identified, removed, and subsequently, box plots were constructed to compare the
70
reported financial data with the average performance scale constructed from the
subjective data (Cooper & Schindler, 2006; Norusis, 2006). A correlation was run
between the subjective and objective data (Covin & Slevin, 1988; Zahra, 1993b, Zahra &
Covin 1994). The Pearson correlation for average performance sales percentage was .018
and the Pearson correlation for average performance return on asset (ROA) percentage
was .031. Based on the visual inspection of the box plots and the correlations being
significant at the 0.05 level, the subjective financial data was deemed to be valid.
Analysis of Entrepreneurial Orientation Scale
A 9-item scale, developed by Covin and Slevin (1989) was used to measure a
firms entrepreneurial orientation. Within the scale, three items were associated with the
measurement of each aspect of entrepreneurial orientation (innovation, proactiveness, and
risk-taking). To measure dimensionality, a factorial analysis was conducted (George &
Mallery, 2007; Tabachnick & Fidell, 2007). Prior to conducting the factorial analysis,
Cronbachs alpha was determined to be .850, showing the reliability of the items.
According to Allen and Yen (as cited by Covin & Slevin, 1989), factorial validity is a
means of construct validity when all items load above 0.5 on a single-factor. When
tested, all items loaded on a single factor with a range of .526 to .791 and an average
loading of .680. Consequently, it was appropriate to combine the items into a single scale
(Allen & Yen, as cited by Covin & Slevin, 1989). A single scale was constructed and this
scale had a mean of 4.046, a standard deviation of 1.089, a range from 1 to 6.22, and an
inter-item reliability coefficient of .871.
71
Analysis of Strategy Type Measure
In the first survey, strategy type was measured using the 11-item scale developed
by Conant et al. (1990). Although multiple item scales are more reliable than single item
scales (Nunnally & Bernstein, 1994), in order to shorten the second survey in anticipation
of a higher survey return rate, the single, paragraph descriptor measure developed by
Moreno and Casillas (2008) was substituted.
The Moreno and Casillas (2008) scale, similar to the Conant et al (1990) scale,
measures strategy type categorically with the different values of prospector, analyzer,
defender and reactor having no shared numerical relationship (Garson, 2010;
Stockburger, n.d.). As a result, the categorical variables were recoded into three dummy
variables of prospector, analyzer, and defender with reactor held as the reference category
(Field, 2009; Moreno & Casillas, 2008; Nunnally & Bernstein, 1994). Once converted to
a dichotomous variable, the variable was included in the hypothesis testing (Stockburger,
n.d.).
In the regression analysis, it was opted to run separate regressions for each
dummy strategy type variable (Garson, 2010). By using this procedure, it was recognized
that there was increased potential for the loss of some statistical power and the increased
chance for a Type II error(s) (Garson).
Analysis of Environmental Uncertainty Scale
An 8-item scale developed by Miller (1987) was used to measure environmental
uncertainty. Within the scales, the two dimensions of environmental uncertainty
measured were dynamism and hostility. When tested for reliability, the inter-item
72
reliability produced a Cronbachs alpha of .282, significantly less than the .70 value used
to benchmark reliability (Nunnally & Bernstein, 1994). As a result, further reliability
analyses were conducted among the 8 items (George & Mallery, 2007; Moreno &
Casillas, 2008) that resulted in the elimination of 6 of the 8 items. The remaining 2 items
of HostilityMarket and Hostility-unpredictability were then combined into a single scale
(Moreno & Casillas) with a mean of 4.27, a standard deviation of 1.1052, a range from 2
to 7 and an inter-item reliability coefficient of .778.
Analysis of Model and Hypotheses Testing
The primary research question this study was developed to answer was to what
degree does environmental uncertainty impact the relationship between entrepreneurial
orientation and strategy to explain firm performance. Based on the primary research
question, the studys research hypothesis for correlation analysis was that there will be no
significant impact for environmental uncertainty on the relationship between
entrepreneurial orientation and strategy to explain the variability in firm performance.
Inclusive within the hypothesis were six subhypotheses supporting the dependent variable
of firm performance, the independent variables of entrepreneurial orientation, and
strategy, and the moderating variable of environmental uncertainty.
firms strategy.
73
Hypotheses Testing
Hypothesis testing for the model was conducted by use of the Student version of
SPSS Version 18. Hypotheses H1, H2, and H3 were tested using simple regression;
hypotheses H4, H5, and H6 were tested using ordinary least squares hierarchical multiple
regression techniques.
Figure 5. Test model with hypotheses.
74
Simple Regression Analyses
H1O: There will be no relation between the entrepreneurial orientation of a firm
and the firms performance.
H1A: There is a relation between the entrepreneurial orientation of a firm and the
firms performance.
To test this hypothesis, a simple regression analysis was run using performance as
the dependent variable and entrepreneurial orientation as the independent variable. Tables
2, 3, and 4 show the model summary, the ANOVA, and the coefficients, respectively. At
a significance level of .05, the null hypothesis was rejected as there was a positive
relation between a firms entrepreneurial orientation and the firms performance (Cooper
& Schindler, 2006; Field, 2009; Howell, 2007).
Table 2. H1 Model Summary
Model R R Square Adjusted R Std. Error of

Square the Estimate
1 .372a .138 .124 4.39542
a. Predictors: (Constant), Entrepreneurial Quotient

b. Dependent Variable: Average (Ave) Performance
75
Table 3. H1 ANOVA
Model Sum of Squares df Mean Square F Sig.
1 Regression 183.124 1 183.124 9.479 .003a
Residual 1139.865 59 19.320
Total 1322.989 60

b. Dependent Variable: Ave Performance
Table 4. H1 Coefficients
Model Unstandardized Coefficients Standardized t Sig.

Coefficients
B Std. Error Beta
1 (Constant) 4.324 2.182 1.982 .052
Entrepreneurial Quotient 1.604 .521 .372 3.079 .003
a. Dependent Variable: Ave Performance
Based on the model summary, 86.2% of the variance between the entrepreneurial
orientation of a firm and the firms performance was influenced by other variables (Field,
2009).
Within the ANOVA, an F-ratio of 9.479 and a p-value of .003 indicated a less
than a 0.3% chance that an F ratio this large would happen if the null hypothesis was
true. In addition, the critical value for F determined for df (1,59), = .05 was 4.004
(Cooper & Schindler, 2006). Because the F ratio was greater than the critical value, the
null hypothesis was rejected, as there were statistically significant differences between
76
the means (Cooper & Schindler, 2006). This conclusion was reached based on the t test
on the regression coefficients that had a sig. of .003 which was significant at the .05 level
(Field, 2009; Howell, 2007). According to Howell (2007), both methods are acceptable
for testing statistical significance.
H2aO: There will be no relation between an analyzer strategy and firm
performance.
H2aA : There will be a relation between an analyzer strategy and firms
performance.
the dependent variable and an analyzer strategy as the independent variable. Tables 5, 6,
and 7 show the model summary, the ANOVA, and the coefficients, respectively. At a
significance level of .05, the null hypothesis was accepted, as there appeared to be no
statistical significance between having an analyzer strategy and firm performance
(Cooper & Schindler, 2006; Field, 2009; Howell, 2007).
Table 5. H2a Model Summary

Square the Estimate
1 .151a .023 .006 4.68116
a. Predictors: (Constant), Analyzer

77
Table 6. H2a ANOVA
1 Regression 30.106 1 30.106 1.374 .246a
Residual 1292.882 59 21.913
Total 1322.989 60

Table 7. H2a Coefficients

Coefficients
B Std. Error Beta
1 (Constant) 11.484 .828 13.878 .000
Analyzer -1.407 1.200 -.151 -1.172 .246
Based on the model summary, 97.7% of the variance between the firm having an
analyzer strategy and firms performance was influenced by other variables (Field, 2009).
Within the ANOVA, an F ratio of 1.374 and a p-value of .246 indicated a 24.6%
chance that an F ratio this large would happen if the null hypothesis was true. In addition,
the critical value for F determined for df (1,59), = .05 was 4.004 (Cooper & Schindler,
2006). Because the F ratio was less than the critical value, the null hypothesis was
accepted, as there appeared to be no statistically significant differences between the
means (Cooper & Schindler, 2006). This conclusion can also be reached based on the t
78
test on the regression coefficients that had a Sig. of .246, which was not significant at the
.05 level (Field, 2009; Howell, 2007). According to Howell (2007), both methods are
acceptable for testing statistical significance.
H2bO: There will be no relation between a defender strategy and firm
performance.
H2bA: There will be a relation between a defender strategy and firm performance.
the dependent variable and the defender strategy as the independent variable. Tables 8, 9,
and 10, respectively show the model summary, the ANOVA, and the coefficients. At a
significance level of .05, the null hypothesis was accepted, as there appeared to be no
statistical significance between having a defender strategy and firm performance (Cooper
& Schindler, 2006; Field, 2009; Howell, 2007).
Table 8. H2b Model Summary

Square the Estimate
1 .106a .011 -.006 4.70863
a. Predictors: (Constant), Defender

79
Table 9. H2b ANOVA
1 Regression 14.866 1 14.886 .671 .416a
Residual 1308.103 59 22.171
Total 1322.989

Table 10. H2b Coefficients

Coefficients
B Std. Error Beta
1 (Constant) 11.034 .659 16.735 .000
Defender -1.334 1.628 -.106 -.819 .416
Based on the model summary, 98.9% of the variance between the firm having a
defender strategy and firms performance was influenced by other variables (Field,
2009).
Within the ANOVA, an F ratio of .671 and a p-value of .416 indicated a 41.6%
the critical value for F determined for df (1,59), = .05 was 4.004(Cooper & Schindler,
accepted, because there appeared to be no statistically significant differences between the
80
H2cO: There will be no relation between a prospector strategy and firm
performance.
H2cA: There will be a relation between a prospector strategy and firm
performance.
the dependent variable and the prospector strategy as the independent variables. Tables
11, 12, and 13, respectively show the model summary, the ANOVA, and the coefficients.
At a significance level of .05, the null hypothesis was accepted, as there appeared to be
no statistical significance between having a prospector strategy and firm performance
(Cooper & Schindler, 2006; Field, 2009; Howell, 2007).
Table 11. H2c Model Summary

Square the Estimate
1 .098a .010 -.007 4.71257
a. Predictors: (Constant), Prospector

81
Table 12. H2c ANOVA
1 Regression 12.698 1 12.698 .572 .453a
Residual 1310.290 59 22.208
Total 1322.989 60

Table 13. H2c Coefficients

Coefficients
B Std. Error Beta
1 (Constant) 10.578 .680 15.552 .000
Prospector 1.114 1.473 .098 .756 .453
Based on the model summary, 99% of the variance between the firm having a
prospector strategy and firms performance was influenced by other variables (Field,
2009).
Within the ANOVA, an F ratio of .572 and a p value of. .453 indicated 45.3%
82
H3aO: There will be no relation between a firms entrepreneurial orientation and
an analyzer strategy.
H3aA: There will be a relation between a firms entrepreneurial orientation and an
analyzer strategy.
To test this hypothesis, a simple regression analysis was run using an analyzer
strategy as the dependent variable and entrepreneurial orientation as the independent
variable. Tables 14, 15, and 16, respectively show the model summary, the ANOVA, and
the coefficients. At a significance level of .05, the null hypothesis was accepted, as there
appeared to be no statistical significance between a firms entrepreneurial orientation and
a firm having an analyzer strategy (Cooper & Schindler, 2006; Field, 2009; Howell,
2007).
Model R R Square Adjusted R Square Std. Error of

the Estimate
1 .154a .024 .007 .50170

b. Dependent Variable: Analyzer
83
Table 15. H3a ANOVA
Model
Sum of Squares df Mean Square F Sig.
1 Regression .363 1 .363 1.441 .235a
Residual 14.850 59 .252
Total 15.213 60

b. Dependent Variable: Analyzer

Coefficients
B Std. Error Beta
1 (Constant) .764 .249 3.069 .003
Entrepreneurial Quotient -.071 .059 -.154 -1.201 .235
a. Dependent Variable: Analyzer
orientation of a firm and the firm having an analyzer strategy was influenced by other
variables (Field, 2009).
Within the ANOVA, an F ratio of 1.441 and a p value of .253 indicated a 25.3%
2006). Because the F ratio was lesser than the critical value, the null hypothesis was
84
.05 level (Field, 2009; Howell, 2007). According to Howell, both methods are acceptable
for testing statistical significance.
H3bO: There will be no relation between a firms entrepreneurial orientation and a
defender strategy.
H3bA: There will be a relation between a firms entrepreneurial orientation and a
defender strategy.
To test this hypothesis, a simple regression analysis was run using a defender
the coefficients. At a significance level of .05, the null hypothesis was rejected as there
was a negative relation between a firms entrepreneurial orientation and the firm having a
defender strategy (Cooper & Schindler, Field, 2009; 2006; Howell, 2007).

Square the Estimate
1 .484a .234 .221 .32943

b. Dependent Variable: Defender
85
Table 18. H3b ANOVA
1 Regression 1.958 1 1.958 18.040 .000a
Residual 6.403 59 .109
Total 8.361 60

b. Dependent Variable: Defender

Coefficients
B Std. Error Beta
1 (Constant) .835 .164 5.106 .000

a. Dependent Variable: Defender
orientation of a firm and the firm having a defender strategy was influenced by other
Within the ANOVA, an F ratio of 18.040 and a p value of. .000 indicated a less
(Cooper & Schindler, 2006). Because the F ratio was greater than the critical value, the
null hypothesis was rejected, as there are statistically significant differences between the
means (Cooper & Schindler). This conclusion can also be reached based on the t test on
86
the regression coefficients that has a sig. of .000, which was significant at the .05 level
(Field, 2009; Howell, 2007). According to Howell, both methods are acceptable for
testing statistical significance.
H3cO: There will be no relation between a firms entrepreneurial orientation and a
prospector strategy.
H3cA: There will be a relation between a firms entrepreneurial orientation and a
prospector strategy.
To test this hypothesis, a simple regression analysis was run using the prospector
the coefficients. At a significance level of .05, the null hypothesis was rejected, as there
was a positive relation between a firms entrepreneurial orientation and a firm having a
prospector strategy (Cooper & Schindler, 2006; Field, 2009; Howell, 2007).
Adjusted R Std. Error of

Square the Estimate
Model R R Square
1 .444a .197 .183 .37317
b. Dependent Variable: Prospector
87
Table 21. H3c ANOVA
1 Regression 2.013 1 2.013 14.459 .000a
Residual 8.216 59 .139
Total 10.230 60

b. Dependent Variable: Prospector

Coefficients
B Std. Error Beta
1 (Constant) -.468 .185 -2.524 .014
Entrepreneurial Quotient .168 .044 .444 3.802 .000
a. Dependent Variable: Prospector
orientation of a firm and the firm having a prospector strategy was influenced by other
Within the ANOVA, an F ratio of 14.459 and a p value of .000 indicated a less
(Cooper & Schindler, 2006). Because the F ratio is greater than the critical value, the null
hypothesis was rejected, as there were statistically significant differences between the
88
means (Cooper & Schindler). This conclusion can also be reached based on the t test on
the regression coefficients that had a Sig. of .000, which was significant at the .05 level
(Field, 2009; Howell, 2007). According to Howell, both methods are acceptable for
testing statistical significance.
Multiple Regression Analyses
H4O: Environmental uncertainty will not moderate the relation between a firms
H4A: Environmental uncertainty will moderate the relation between a firms
To test this hypothesis, a hierarchal multiple regression analysis was run using
performance as the dependent variable and entrepreneurial orientation and environmental
uncertainty as the independent variables. Order of entry for the independent variables was
entrepreneurial orientation followed by environmental uncertainty. Tables 23, 24, and 25,
respectively show the model summary, ANOVA, and coefficients. Under Model 1, at a
significance level of .05, the null hypothesis was rejected, as there was a positive relation
between a firms entrepreneurial orientation and the firms performance (Cooper &
Schindler, 2006; Field, 2009; Howell, 2007). However, the impact of environmental
uncertainty variable (Model 2), as a moderator was insignificant and consequently, the
null hypothesis was accepted (Cooper & Schindler; Field; Howell).
89
Table 23. H4 Model Summary
Model R R Square Adjusted R Std. Error of the

Square Estimate
1 .372a .138 .124 4.39542
2 .373b .139 .110 4.43088

b. Predictors: (Constant), Entrepreneurial Quotient, Environmental Uncertainty
c. Dependent variable: Ave Performance
Table 24. H4 ANOVA
1 Regression 183.124 1 183.124 9.479 .003a
Residual 1139.865 59 19.320
Total 1322.989 60
2 Regression 184.292 2 92.146 4.693 .013b
Residual 1138.697 58 19.633
Total 1322.989 60

b. Predictors: ( Constant), Entrepreneurial Quotient, Environmental Uncertainty
c. Dependent Variable: Ave Performance
90
Table 25. H4 Coefficients

Coefficients
B Std. Error Beta
1 (Constant) 4.324 2.182 1.982 .052
2 (Constant) 4.965 3.427 1.449 .153
Environmental Uncertainty -.128 .526 -.030 -.244 .808
Based on the Model 2 summary, 86.1% of the variance was influenced by other
variables. The addition of the environmental uncertainty variable appeared to contribute
minimally to further explaining variance (Field, 2009).
Under Model 1, the null hypothesis was rejected. Within Model 2, the F ratio of
4.693 and p value of .013 indicated a less than a 1.3% chance that an F ratio this large
would happen if the null hypothesis was true. The p value was less than .05 and the F
ratio, although significantly smaller than Model 1, remained greater than the critical value
of 4.004 (Cooper & Schindler, 2006). Although weaker, the model retained its fit with the
addition of the environmental uncertainty variable, and the null hypothesis was rejected
(Cooper & Schindler; Field, 2009).
Under Model 2, when environmental uncertainty was added as moderator, t = -
.244 with sig. = .808. Consequently, it was concluded that environmental uncertainty
contributed limited value to the model (Field, 2009; Howell, 2007). Based on the data,
91
although the null hypothesis was originally rejected for Model 1, under Model 2, the null
hypothesis was accepted, as environmental uncertainty did not appear to moderate
entrepreneurial orientation (Field, Howell).
H5aO: Environmental uncertainty will not moderate the relation between an
analyzer strategy and a firms performance.
H5aA: Environmental uncertainty will moderate the relation between an analyzer
performance as the dependent variable, and the analyzer strategy and environmental
the analyzer strategy followed by environmental uncertainty. Tables 26, 27, and 28,
significance level of .05, the null hypothesis was accepted (Cooper & Schindler, 2006;
Field, 2009; Howell, 2007). The impact of the environmental uncertainty variable as a
moderator (Model 2) was insignificant and consequently, the null hypothesis was
accepted (Cooper & Schindler; Field; Howell).
92
Adjusted R Std. Error of the

Square Estimate
Model R R Square
1 .151a .023 .006 4.68116
2 .184b .034 .001 4.69420

b. Predictors: (Constant), Analyzer, Environmental Uncertainty
Table 27. H5a ANOVA
1 Regression 30.106 1 30.106 1.374 .246a
Residual 1292.882 59 21.913
Total 1322.989 60
2 Regression 44.931 2 22.465 1.020 .367b
Residual 1278.058 58 22.035
Total 1322.989 60

b. Predictors: (Constant), Analyzer, Environmental Uncertainty
93

Coefficients
B Std. Error Beta
1 (Constant) 11.484 .828 13.878 .000
Analyzer -1.407 1.200 -.151 -1.172 .246
2 (Constant) 13.443 2.528 5.318 .000
Analyzer -1.476 1.206 -.158 -1.224 .226
Environmental -.451 .550 -.106 -.820 .415

Uncertainty
Under Model 1, the null hypothesis was accepted. Within Model 2, F ratio =
1.020 and p value = .367.013 indicating 36.7% chance that an F ratio this large would
happen if the null hypothesis was true. The p value was greater than .05 and the F ratio
remained greater than the critical value of 4.004 (Cooper & Schindler, 2006).
Consequently, the null hypothesis was accepted (Cooper & Schindler; Field, 2009).
Under Model 2 the environmental uncertainty was added as moderator, t = -.820
with Sig. = .415. Consequently, it was concluded that environmental uncertainty
the null hypothesis was accepted, as environmental uncertainty did not appear to
moderate the relation between an analyzer strategy and firm performance (Field, Howell).
94
H5bO: Environmental uncertainty will not moderate the relation between a
defender strategy and a firms performance.
H5bA: Environmental uncertainty will moderate the relation between a defender
performance as the dependent variable and the defender strategy and environmental
the defender strategy followed by environmental uncertainty. Tables 29, 30, and 31,
Field, 2009 Howell, 2007). The impact of the environmental uncertainty variable as a
accepted (Cooper & Schindler; Howell; Field).

Square Estimate
1 .106a .011 -.006 4.70863
2 .135b .018 -.016 4.73225

b. Predictors: (Constant), Defender, Environmental Uncertainty
95
Table 30. H5b ANOVA
1 Regression 14.886 1 14.886 .671 .416a
Residual 1308.103 59 22.171 .539
Total 1322.989 60
2 Regression 24.123 2 12.062 .539 .586b
Residual 1298.865 58 22.394
Total 1322.989 60

b. Predictors: (Constant), Defender, Environmental Uncertainty

Coefficients
B Std. Error Beta
1 (Constant) 11.034 .659 16.735 .000
Defender -1.334 1.628 -.106 -.819 .416
2 (Constant) 12.541 2.437 5.146 .000
Defender -1.215 1.647 -.097 -.738 .464
Environmental -.357 .556 -.084 -.642 .523

Uncertainty
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Under Model 1, the null hypothesis was accepted. Within Model 2, the F ratio =
.539 and p value = .586 indicating a 58.6% chance that an F ratio this large would happen
if the null hypothesis was true. The p value was less than .05 and F ratio remained greater
than the critical value of 4.004 (Cooper & Schindler, 2006). Consequently, the null
hypothesis is accepted (Cooper & Schindler; Field, 2009).
Under Model 2, when environmental uncertainty was added as moderator, t = -
.642 with Sig. = .523. Consequently, it can be concluded that environmental uncertainty
moderate the relation between the defender strategy and firm performance (Field,
Howell).
H5cO: Environmental uncertainty will not moderate the relation between a
prospector strategy and a firms performance.
H5cA: Environmental uncertainty will moderate the relation between a prospector
performance as the dependent variable and the prospector strategy and environmental
the prospector strategy followed by environmental uncertainty. Tables 32, 33, and 34,
Field, 2009; Howell, 2007). The impact of the environmental uncertainty variable as a
97
accepted (Field; Cooper & Schindler; Howell).
Model R R Square Adjusted R Square Std. Error of the

Estimate
1 .098a .010 -.007 4.71257
2 .134b .018 -.016 4.73292

b. Predictors: (Constant), Prospector, Environmental Uncertainty
Table 33. H5c ANOVA
1 Regression 12.698 1 12.698 .572 .453a
Residual 1310.290 59 22.208
Total 1322.989 60
2 Regression 23.758 2 11.879 .530 .591b
Residual 1299.231 58 22.401
Total 1322.989 60

b. Predictors: (Constant), Prospector, Environmental Uncertainty
98

Coefficients
B Std. Error Beta

1 (Constant) 10.578 .680 15.552 .000
Prospector 1.114 1.473 .098 .756 .453
2 (Constant) 12.246 2.471 4.957 .000
Prospector 1.076 1.481 .095 .726 .471
Environmental -.389 .553 -.091 -.703 .485

Uncertainty
Under Model 1, the null hypothesis was accepted. Within Model 2, F ratio = .530
and p value = .591 indicating a 59.1% chance that an F ratio this large would happen if
the null hypothesis was true. The p value is greater than .05 and F ratio was less than the
critical value of 4.004 (Cooper & Schindler, 2006). Consequently, the null hypothesis
was accepted (Cooper & Schindler; Field, 2009).
Under Model 2, when environmental uncertainty was added as a moderator, t = -
.703 with Sig. = .485. Consequently, it was concluded that environmental uncertainty
99
moderate the relation between a prospector strategy and firm performance (Field;
Howell).
H6aO: Environmental uncertainty will not moderate the relation between a firms
entrepreneurial orientation and analyzer strategy.
H6aA: Environmental uncertainty will moderate the relation between a firms
To test this hypothesis, a hierarchal multiple regression analysis was run using the
analyzer strategy as the dependent variable and entrepreneurial orientation and
environmental uncertainty as the independent variables. Order of entry for the
independent variables was entrepreneurial orientation followed by environmental
uncertainty. Tables 35, 36, and 37, respectively show the model summary, ANOVA, and
coefficients. Under Model 1, at a significance level of .05, the null hypothesis was
accepted (Cooper & Schindler, 2006; Field, 2009; Howell, 2007). The impact of the
environmental uncertainty variable, as a moderator (Model 2), was insignificant and
consequently, the null hypothesis was accepted (Field; Cooper & Schindler; Howell).

Square Estimate
1 .154a .024 .007 .50170
2 .183b .034 .000 .50345

c. Dependent Variable: Analyzer
100
Table 36. H6a ANOVA
.363 1 .363 1.441 .235a

1 Regression
Residual 14.850 59 .252
Total 15.213 60
2 Regression .512 2 .256 1.010 .370b
Residual 14.701 58 .253
Total 15.213 60

c. Dependent Variable: Analyzer
Model Unstandardized Standardized t Sig.

Coefficients Coefficients
B Std. Error Beta
1 (Constant) .764 .249 3.069 .003
2 (Constant) .993 .389 2.552 .013
Environmental -.046 .060 -.101 -.767 .446

Uncertainty
a. Dependent Variable: Analyzer
Based on the Model 2 summary, 96.6% of the variance is influenced by other
101
Under Model 1, the null hypothesis was accepted. Within Model 2, F ratio =
1.010 and p value = .370 indicating a 37% chance that an F ratio this large would happen
if the null hypothesis was true. The p value was greater than .05 and F ratio, was less than
the critical value of 4.004 (Cooper & Schindler, 2006). Consequently, the null hypothesis
was accepted (Cooper & Schindler; Field, 2009).
Under Model 2, when environmental uncertainty was added as a moderator, t = -
.767 with Sig. = .446. Consequently, it can be concluded that environmental uncertainty
the null hypothesis was accepted as environmental uncertainty did not appear to moderate
the relation between a firms entrepreneurial orientation and an analyzer strategy (Field,
Howell).
H6bO: Environmental uncertainty will not moderate the relation between a firms
entrepreneurial orientation and defender strategy.
H6bA: Environmental uncertainty will moderate the relation between a firms
entrepreneurial orientation and defender strategy.
defender strategy as the dependent variable and entrepreneurial orientation and
uncertainty. Tables 38, 39, and 40, respectively, show the model summary, ANOVA, and
coefficients. At a significance level of .05, the null hypothesis was rejected, as there was
a positive relation between a firms entrepreneurial orientation and the firms
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performance (Cooper & Schindler, 2006; Field, 2009; Howell, 2007). However, the
impact of environmental uncertainty variable as a moderator was insignificant and
consequently, the null hypothesis was accepted (Cooper & Schindler; Field; Howell).
Adjusted R Square Std. Error of the

Estimate
Model R R Square
a
1 .484 .234 .221 .32943
2 .485b .235 .209 .33209

c. Dependent Variable: Defender
Table 39. H6b ANOVA
1 Regression 1.958 1 1.958 18.040 .000a
Residual 6.403 59 .109
Total 8.361 60
2 Regression 1.964 2 .982 8.905 .000b
Residual 6.396 58 .110
Total 8.361 60

c. Dependent Variable: Defender
103

Coefficients
B Std. Error Beta
1 (Constant) .835 .164 5.106 .000
Entrepreneurial -.166 .039 -.484 -4.247 .000

Quotient
2 (Constant) .787 .257 3.066 .003
Entrepreneurial -.164 .040 -.479 -4.104 .000

Quotient
Environmental .010 .039 .028 .242 .809

Uncertainty
a. Dependent Variable: Defender
Under Model 1, the null hypothesis was rejected. Within Model 2, F ratio = 8.905
and p value = .000 indicating less than a .1% chance that an F ratio this large would
happen if the null hypothesis was true. The p value was less than .05 and F ratio,
although significantly smaller than Model 1, remained greater than the critical value of
4.004 (Cooper & Schindler, 2006). Consequently, the model retained its fit with the
addition of the environmental uncertainty variable and the null hypothesis was rejected
Under Model 2, when environmental uncertainty was added as a moderator, t =
.242 with sig. = .809. Consequently, it was concluded that environmental uncertainty
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hypothesis was accepted, as environmental uncertainty did not appear to moderate the
relation between a firms entrepreneurial orientation and a defender strategy (Field;
Howell).
H6cO: Environmental uncertainty will not moderate the relation between a firms
entrepreneurial orientation and a prospector strategy.
H6cA: Environmental uncertainty will moderate the relation between a firms
entrepreneurial orientation and a prospector strategy.
prospector strategy as the dependent variable and entrepreneurial orientation and
uncertainty. Tables 41, 42, and 43, respectively show the model summary, ANOVA, and
coefficients. Under Model 1, at a significance level of .05, the null hypothesis was
rejected, as there was a positive relation between a firms entrepreneurial orientation and
a prospector strategy (Cooper & Schindler, 2006; Field, 2009; Howell, 2007). However,
the impact of environmental uncertainty variable as a moderator was insignificant and
consequently, the null hypothesis was accepted (Cooper & Schindler; Field; Howell).
105
Adjusted R Std. Error of

Square the Estimate
Model R R Square
1 .444a .197 .183 .37317
2 .446b .199 .171 .37596

c. Dependent Variable: Prospector
Table 42. H6c ANOVA
1 Regression 2.013 1 2.013 14.459 .000a
Residual 8.216 59 .139
Total 10.230 60
2 Regression 2.031 2 1.016 7.186 .002b
Residual 8.198 58 .141
Total 10.230 60

c. Dependent Variable: Prospector
106

Coefficients
B Std. Error Beta
1 (Constant) -.468 .185 -2.524 .014
2 (Constant) -.547 .291 -1.882 .065
Environmental Uncertainty .016 .045 .043 .357 .722
a. Dependent Variable: Prospector
Under Model 1, the null hypothesis was rejected. Within Model 2, the F ratio =
7.186 and p value = .002 indicating a less than 2% chance that an F ratio this large would
happen if the null hypothesis was true. The p value was less than .05 and F ratio,
although significantly smaller than Model 1, remained greater than the critical value of
4.004 (Cooper & Schindler, 2006). Consequently, the model retained its fit with the
addition of the environmental uncertainty variable and the null hypothesis was rejected
Under Model 2, when environmental uncertainty was added as a moderator, t =
.357 with Sig. = .722. Consequently, it was concluded that environmental uncertainty
107
hypothesis was accepted, as environmental uncertainty did not appear moderate the
relation between a firms entrepreneurial orientation and prospector strategy (Field;
Howell).
Summary of Regression Analyses
Based on the analysis presented in the previous section, the following summation
can be made with regard to hypotheses.
H1: There will be a relation between the entrepreneurial orientation of a firm and
the firms performance--Supported.
H2: There will be a relation between a firms strategy and the firms performance-
- Not supported:
2a: Analyzer strategy--Not supported
2b: Defender strategy--Not Supported
2c: Prospector strategy--Not supported
H3: There will be a relation between a firms entrepreneurial orientation and a
firms strategy--Partially supported
3a: Analyzer strategy--Not Supported
3b: Defender strategy--Supported
3c: Prospector strategy--Supported
entrepreneurial orientation and a firms performance--Not supported
108
strategy and a firms performance--Not supported
5a: Analyzer Strategy--Not supported
5b: Defender Strategy--Not supported
5c: Prospector Strategy--Not supported
entrepreneurial orientation and strategy--Not supported
6a: Analyzer Strategy--Not supported
6b: Defender Strategy--Not supported
6c: Prospector Strategy--Not supported
Based on the data and limitations of this study, the researcher concluded that there
was no significant impact for environmental uncertainty on the relationship between
entrepreneurial orientation and strategy to explain the variability in firm performance.
However, interpreting the subhypotheses findings from an economic development
perspective, the data confirmed conventional wisdom that a business leaders
entrepreneurial orientation was a statistically significant indicator of firm performance.
The research further indicated the lesser roles of adopting either a prospector or defender
strategy and that it was the business leaders entrepreneurial orientation that facilitated a
firms ability to navigate an uncertain business environment rather than a specific
strategy.
109
Figure 6. Test model with hypotheses and findings.
110
CHAPTER 5. DISCUSSION, IMPLICATIONS, RECOMMENDATIONS
The purpose of the research was to answer the research question to what degree
does environmental uncertainty impact the relationship between entrepreneurial
orientation and strategy to explain firm performance. Based on the primary research
question, the study research hypothesis was that there will be no significant impact for
environmental uncertainty on the relationship between entrepreneurial orientation and
strategy to explain the variability in firm performance. Inclusive within the hypothesis
were six subhypotheses supporting the dependent variable of firm performance, the
independent variables of entrepreneurial orientation, and strategy, and the moderating
variable of environmental uncertainty.
To conduct this research, a model was constructed based on research models
developed by Covin and Slevin (1989) and Moreno and Casillas (2008). The study
model, a simplification of the Moreno and Casillas model, was designed to show the
relationship among a firms entrepreneurial orientation, strategy type, and performance,
as moderated by environmental uncertainty. In the conduction of the research, three
dimensions of entrepreneurial orientation including innovativeness, risk taking, and
proactiveness, were measured using scales developed by Covin and Slevin (1989) and
two dimensions of environmental uncertainty including dynamism and hostility were
measured using scales developed by Miller (1987). Firm strategy was measured based on
Miles and Snow (2003) strategy types using initially the Conant et al. (1990) scale and
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subsequently the Moreno and Casillas (2008) scale. Firm performance was measured
subjectively based on techniques developed by Zahra (1993b).
The sample used in this research consisted of small privately owned Washington
State manufacturing firms randomly selected from the LexisNexis database. Unique to
this localized study were the economic conditions under which the data were collected. In
March 2010 when the data was collected, national unemployment rate was 9.7%,
Washington State unemployment rate was 9.5%, and national unemployment rate in the
manufacturing sector was 12.6% (Bureau of Labor Statistics, 2010). Conceivably, these
high unemployment rates may have influenced survey response rates as well responses.
Study validity, reliability, generalizability were all limited by the selected sample,
the small number of survey responses received by the researcher (Short et al., 2002), and
the use of multiple significance tests. Because of the low response rate, the level of
significance used for hypothesis testing was .05 rather than the more stringent .001 often
used by researchers (Cooper & Schindler, 2006; Howell, 2007). Additionally, it was also
recognized that the small number of responses coupled with the .05 level of significance
may have contributed to increased potential for Type II errors (Howell).
To test for Type I error, the Bonferroni method (Bland, 2004; Field, 2009) was
used to calculate a corrected critical significant level based on the researchs reliance on
the use of 14 significance tests. The adjusted P value was .036. When the adjust P value
was compared against the P values for all significance tests, the findings remained valid
and thus one can conclude that the findings are valid at the studys .05 level of
significance.
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Summary and Discussion of Results
Among the six subhypotheses, one was fully supported, one was partially
supported, and four were not supported. Table 44 shows an abbreviated summary of the
subhypothesis findings.
Table 44. Subhypotheses Summary
Subhypothesis Relationship between Outcome
Subhypothesis 1 Entrepreneurial orientation towards firm Supported

performance
Subhypothesis 2 Firm strategy towards firm performance Not supported- all strategies
Subhypothesis 3 Firms entrepreneurial orientation toward a Partially supported

firms strategy.
Analyzer strategy-No
Defender strategy-Yes
Prospector strategy-Yes
Subhypothesis 4 Environmental uncertainty as a moderator Not supported
between entrepreneurial orientation towards
firm performance
Subhypothesis 5 Environmental uncertainty as a moderator Not supported- all strategies

between firm strategy towards firm
performance
Subhypothesis 6 Environmental uncertainty as a moderator Not supported- all strategies

between a firms entrepreneurial orientation
toward a firms strategy.
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Analysis of Research
Entrepreneurial Orientation, Firm Performance and Environmental Uncertainty
Two of the six subhypothesis tested the relation between a firms entrepreneurial
orientation and firm performance. The first tested the relation without regard to
environmental uncertainty and the second tested the same relation for the additional
affect of environmental uncertainty.
Subhypothesis1, there will be a relation between the entrepreneurial orientation of
a firm and a firms performance, was supported positively. This finding was used to
confirm existing theory, supported by numerous researchers, that there is a positive
relation between a firms entrepreneurial orientation and the firms performance (Covin
& Slevin, 1991; Wiklund, 1999; Wiklund & Shepherd, 2005). In addition, modeling by
Moreno and Casillas (2008) further showed such a correlation between a firms growth
and entrepreneurial orientation or entrepreneurial behaviors.
Subhypothesis 4, environmental uncertainty will moderate the relation between a
firms entrepreneurial orientation and a firms performance, was not supported, as the
research showed a relationship between a firms entrepreneurial orientation and
performance, but failed to establish a moderating effect for environmental uncertainty.
Although, previous research by Lumpkin and Dess (1996) showed that the
entrepreneurial orientation-firm performance relationship was mitigated by industry as
well as environment, similar to this study, others have either failed to find a significant
relationship (Smart & Conant, 1994) or have failed to confirm one (Wiklund & Shepherd,
114
2005). Because research continues to fail to support one construct, this remains an area
open for further study and investigation.
Strategy Type, Firm Performance, and Environmental Uncertainty
Two of the six subhypothesis tested the relation between a firms strategy type
and firm performance. The first tested the relation without regard to environmental
uncertainty and the second tested the same relation for the additional affect of
environmental uncertainty. To test these hypotheses, regressions were run using dummy
variables (Field, 2009; Moreno & Casillas, 2008; Nunnally & Bernstein, 1994) for each
of the three categorical strategy types, analyzer, defender, and prospector. The reactor
strategy was used as the reference category.
Neither Subhypothesis 2: there will be a relation between a firms strategy and the
firms performance, nor Subhypothesis 5: environmental uncertainty will moderate the
relation between a firms strategy and a firms performance, were supported for any of
the three strategy types. This finding is supported by previous research by Shrader,
Taylor, and Dalton (1984) who posited that organizational performance was contingent
upon the relationship between strategy and the environment with neither environmental
nor strategic planning factors able to stand alone as a better predictor of firm
performance. In addition, according to Dess et al. (1997), analysis of the relationship
between entrepreneurial orientation and strategy is hindered by contingent impacts of
environmental challenges and organizational complexities that correlations fail to
adequately explain. Consequently, as more empirical studies show that the relationship
between entrepreneurial behavior and firm performance is more contingent than direct,
115
future research will call for the use of more sophisticated modeling in understanding the
relationship (Lyon et al., 2000).
Entrepreneurial Orientation, Strategy Type, and Environmental Uncertainty
Two of the six subhypothesis tested the relation between a firms entrepreneurial
orientation and strategy type. The first tested the relation without regard to environmental
uncertainty and the second tested the same relation for the additional effect of
environmental uncertainty. To test these hypotheses, regressions were run using dummy
variables for each of the three categorical strategy types of analyzer, defender, and
prospector. The reactor strategy was used as the reference category.
Subhypothesis 3, indicating that there will be a relation between a firms
entrepreneurial orientation and a firms strategy, was supported for the defender
(negatively) and prospector (positively) strategies, but not the analyzer strategy. The use
of this finding supports previous research. In applying the Miles and Snow (2003)
strategy types in entrepreneurial research, there is no requirement to match an
organization with any one specific strategy. Although according to Miles and Snow, the
level of performance among defenders, prospectors, analyzers is similar for a given
industry, research has indicated that prospectors and analyzers tend to exhibit more
entrepreneurial behavior while defenders show less, and reactors the least (Segev, 1987).
For defenders and prospectors, the research findings are supported by Segevs findings.
Subhypothesis 6: Environmental uncertainty will moderate the relation between a
firms entrepreneurial orientation and strategy, was not supported for any of the
strategies. Recognizing the environment has played a seminal role in the study of
116
entrepreneurship, numerous researchers have linked environmental effects on the
presence and effectiveness of entrepreneurial activities and ventures (Covin & Slevin,
1991). According to Khandwalla (1977), the environment and a firms relationship to the
environment have a significant impact on the firms leaderships ability to execute
business strategy and compete in the market place. Although there are multiple studies
that show the relationship between entrepreneurial orientation, and firm performance as
moderated by the environment (Covin & Slevin, 1991), results from this study failed to
confirm such a relationship. This finding reinforces the need for more detailed regional
studies of small privately owned manufacturing firms to determine the generalizability of
the existing constructs.
Patterns of Distribution and Significance among Case Groups
In addition to the regressions associated with the main model, chi-square analyses
were conducted among several control variables and the strategy type variable to
determine independence or dependence between the pairings (Field, 2009; George &
Mallery, 2007; Norusis, 2006). The pairing selected for cross-tabulation were gender and
strategy type, age of participants and strategy type, age of business and strategy type,
number of employees and strategy type, and title of participant and strategy type.
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Table 45. Chi-Square Test Results A
Value df Sig.
Gender-strategy type 15.332 6 .018
Participant age-strategy type 12.789 9 .172
Business age-strategy type 9.109 9 .427
Participant title-strategy type 17.265 9 .045
Number employees strategy type 17.330 15 .300
As seen in Table 45, gender (p < .05) and participant title (p < .05) had a
significant association with strategy type and the notion of independence was rejected
(Field, 2009; George & Mallery, 2007; Norusis, 2006). Participant age (p > .05), business
age (p > .05), and number of employees (p > .05) appeared to be independent of strategy
type (Field; George & Mallery; Norusis). From this data, it would appear that gender
coupled with individual experience and level of responsibility were key influencers on
strategy selection and this relationship is one worthy of further exploration by
researchers.
The research also explored the independence--dependence relation between
strategy type and the three continuous variables of average performance, entrepreneurial
orientation, environmental uncertainty (Field, 2009; George & Mallery, 2007; Norusis,
2006). Because the average performance, entrepreneurial orientation, and environmental
uncertainty variables are continuous, each was converted into two separate categories
based on the variable means (George & Mallery). For the performance variable, the two
categories represented below average firm performance and above average firm
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performance; for the entrepreneurial orientation variable, the categories represented
respondents with a below average entrepreneurial orientation and participants with above
average entrepreneurial orientation; for the environmental uncertainty variable, the two
categories represented those who viewed uncertainty at a level below the variable mean
and those who viewed uncertainty at a level above the variable mean.
Once the categories were established, pairings selected for cross-tabulation and
chi-square analysis were strategy type and performance, strategy type and entrepreneurial
orientation, and strategy type and environmental uncertainty.
Table 46. Chi-Square Test Results B
Value df Sig.
Strategy type- performance .293 3 .961
Strategy type- entrepreneurial orientation 26.084 3 .000
Strategy type- environmental uncertainty 1.352 3 .717
It can be seen in Table 46 that entrepreneurial orientation (p < .05) had a
significant association with strategy type and the notion of independence was rejected
(Field, 2009; George & Mallery, 2007; Norusis, 2006). However, performance (p > .05),
and environmental uncertainty appeared to be independent of strategy type (Field;
George & Mallery; Norusis). These findings are synchronous with those determined by
the regressions and further demonstrate the complexity of the strategy-performance and
strategy- environmental uncertainty relations documented by researchers.
119
Conclusions
Inclusive within the tested hypothesis were six subhypotheses supporting the
dependent variable--firm performance, the independent variables--entrepreneurial
orientation, and strategy, and the moderating variable--environmental uncertainty.
With regard to the primary research hypothesis, there will be no significant
impact for environmental uncertainty on the relationship between entrepreneurial
orientation and strategy to explain the variability in firm performance, analysis of the data
failed to establish a significant impact for environmental uncertainty on the relationships.
Consequently, in answering the research question, to what degree does environmental
uncertainty impact the relationship between entrepreneurial orientation and strategy to
explain firm performance, the research results have proven to be inconclusive. The
findings from this research appear to support neither of the two possible conclusions
posited by Miles et al. (1993) that either based on the beliefs of Khandwalla (1977) and
Covin and Slevin (1989, 1991) there is a positive relationship between environmental
hostility and a firms leaderships willingness to be adopt an entrepreneurial orientation,
or in opposition, as posited by Miller and Friesen (1983) that with respect to
performance, there are negative relationships between increased hostility and increases in
innovation or entrepreneurial orientation.
In addition to the statistically significant findings relative to the research question
and hypothesis, synthesis of the subhypotheses findings from an economic development
perspective confirmed conventional wisdom that a business leaders entrepreneurial
orientation was a statistically significant indicator of firm performance. The research
120
further demonstrated the lesser roles of adopting either a prospector or defender strategy
and that it was the business leaders entrepreneurial orientation that facilitated a firms
ability to navigate an uncertain business environment rather than a specific strategy.
This research can be used to support the conclusions that entrepreneurial activity
can act independently, affecting varying dimensions of performance in opposite
directions (Lumpkin & Dess, 1996). In addition, this research also confirmed the trend in
empirical entrepreneurial research (Lyon et al., 2000) that the relationships among the
variables firm performance, entrepreneurial orientation, strategy type, and environmental
uncertainty are complex, contingent, less direct, and independent (Zahra, 1993a), which
during future analysis, will necessitate the use of more sophisticated modeling and
stronger statistical measures (Chandler & Lyon, 2001) to show causality.
Recommendations
Research-Data Driven
The conduction of this research validated the difficulties that researchers face in
the conduct of small business research (Dess & Robinson, 1984; Fiorito & Laforge, 1986;
Sapienza et al., 1988) especially among small privately owned firms during a recession.
The research also confirmed the validity of using subjective financial data and techniques
for comparing subjective data with objective data (Sapienza et al.; White, 1996, Zahra,
1993b). Among the participants, 56% provided change in percentage of sales data and
among the 36 participants who provided sales data, 17 (47%) also provided some form of
return on assets (ROA) data. The change in return on assets data proved to be of little
121
value (Dess & Robinson, 1984; Ward & Duray, 2000) as several participants wrote
comments on their surveys indicating a lack of understanding of what was meant by
return on assets. Consequently, the researcher concluded that in seeking objective
financial data from small privately owned businesses, it appeared best to rely on sales (or
perhaps revenues), which has also been used by researchers (Weinzimmer et al., 1998)
and more clearly understood by participants.
The next recommendations are associated with the selected sample size and the
survey length. For the initial survey, a sample of 433 was selected based on anticipated
mail survey return rates of 22% to 44% (Cobanoglu et al., 2001; Kaplowitz et al, 2004;
Kwak & Radler, 2002; Shannon & Bradshaw, 2002). The first mailed survey produced an
actual return rate of 3% which was far below anticipated return rates. Following an ad
hoc meeting with small business owners and former small business owners, it was
determined that three steps should be taken to improve response rates. These three steps
were:
1. Eliminate the requirement to sign and return a completed informed consent
form,
2. Reduce the length of the survey,
3. Make optional any request for financial data.
Once these changes were made to the survey instrument, a second mailing was
sent to a new randomly selected population of 1147 small manufacturing firm owners.
This second mailing resulted in the return of 64 surveys (6%), which was again below
return rates achieved by other small business researchers (Moreno & Casillas, 2008;
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Todd, 2006; Zahara &Garvis, 2000). Based on the experience, it is the researchers
recommendation that future researchers of small privately owned businesses anticipate
these lower survey return rates and plan accordingly, otherwise the power of the
statistical analysis will be greatly diminished (Howell 2007).
In addition, given the implications of low response rates on reliability and
validity, to avoid respondent confusion, future researchers should strive to not use
negative or reverse scoring questions. According to Hinkin, (1995) and DeVellis (2003),
the introduction of negative or reverse scoring questions fail to contribute positively to
questionnaires and may reduce the validity of responses by introducing systematic error
to the scales.
Future Research
Based on the literature review, there is a need for more study and the use of more
sophisticated models in the exploration of the dynamics and complexity of the
relationship among firm performance, strategy type, entrepreneurial orientation, and
environmental uncertainty pertaining to small privately owned businesses. The focus of
this research was only on small privately-owned manufacturing industry classification
firms regionalized to Washington State. As such, the study may lack generalizability
(Snow & Hambrick, 1980) and may be limited by the low survey response rates and
reliance on self-reporting measures.
Future researchers should strive to use multiple measures (Venkatraman & Grant,
1986) to include multimethod, multirater measurements (Gupta & Govindarajan, 1984)
and multiple respondents (Chandler & Lyon, 2001) which should provide stronger
123
statistical test results. In addition, although hypotheses are stated in associational terms,
there is an implied interaction or effect that goes beyond an association. Unfortunately,
the cross sectional nature of the data provided only a snapshot and prevented testing for
causality. It is recommended that to further explore causality, future researchers should
consider conducting a longitudinal study less constrained by time and resources than this
study.
Another recommendation of this research is an alternative method for measuring
Miles and Snow strategy types. Because the strategy type variable is categorical and must
be converted to dummy variables for inclusion into the regressions, its inclusion as a
dependent variable weakened the power of the statistical tests (Garson, 2010).
Because the Miles and Snow strategy types are well grounded in organizational
adaptation theories, are widely used and cited in entrepreneurial literature, and have
proven to be reliable in theory testing (Zahra & Covin, 1994), it remains this researchers
contention that the Miles and Snow strategy types are most appropriate for use in small
business research. However, this does not mean that the scales used to measure the Miles
and Snow strategy types must remain categorical and based on descriptors. Any new
scale(s) should be ordinal (Likert type) rather than categorical and should cover multiple
dimensions of strategy. Once these multiple-item scales are validated, researchers would
be provided a new tool that would allow for more sophisticated modeling and statistical
testing for small business research. Below are proposals for three such questions that
integrate an element of the entrepreneurial orientation, environmental uncertainty and
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performance variables used in this research into a Miles and Snow (2003) strategy type
measure based on a Likert scale.
The following three questions are designed to measure a firms dominant strategy
based on descriptors derived from the Miles and Snow (2003) and Moreno and Casillas
(2008) definitions of the reactor, defender, prospector, and analyzer strategy types.
We react. When we perceive change and uncertainty occurring in our

organizational environment we are unable to respond effectively and make changes when
forced to by external pressures (Miles & Snow, 2003; Moreno & Casillas, 2008).
We defend. We are highly expert in our narrow domain but tend not to look further
for new opportunities; we seldom need to make major adjustments and are primarily
focused on improving our existing operations (Miles & Snow, 2003; Moreno & Casillas,
2008).
We analyze. We tend to operate in both relatively stable and changing

environments. In stable areas, we operate routinely and efficiently through use of our
structure and processes while in more turbulent areas we tend to watch our competitors
closely for new ideas, and then they rapidly adopt those which appear to be the most
promising (Miles & Snow, 2003; Moreno & Casillas, 2008).
We prospect. We tend to continually search for new opportunities and are willing to
experiment when faced with new emerging trends. We are in front of our competitors and
are often the creators of change and uncertainty within our domain. (Miles & Snow,
2003; Moreno & Casillas, 2008).
What best describes your business strategy type given your current operating
environment?
We react---------------we defend-----------we analyze-----------we prospect
1 5 7
What best describes your business strategy with regard to your competition, your market
share, your firms performance and your firms growth?
We react..we defend we analyzewe prospect
1 5 7
What strategy type best describes your level of proactiveness, innovation, and risk
taking?
We react..we defend.. we analyze.we prospect
1 5 7
125
The draft questions were used to accomplish the integration of the four Miles and
Snow (2003) strategy types with the entrepreneurial orientation, performance and
environmental uncertainty variables and thus, it is the contention this would provide an
ordinal measure rather than a categorical measure, simplifying and strengthening
statistical testing of the strategy type variable.
Future researchers should also explore the relationship between environmental
uncertainty, competitive strategy, and performance as mitigated by manufacturing
strategy. This concept was explored by Ward and Duray (2000) whose data suggested
that the relationship between competitive strategy and performance is mediated by
manufacturing strategy. In addition, future researchers should also consider leadership as
additional variable as numerous researchers have positively linked strategy and firm
growth to leadership (ORegan, Ghobadian & Sims, 2005).
It is also recommended that future researchers recognize and measure the
differences between a small business and an entrepreneurial firm, as well as the
difference between a small business owner and an entrepreneur by using control variables
based on the definitions of small business venture, entrepreneurial venture, small
business owner, and entrepreneur as posited by Carland et al. (1984). If these questions
had been asked as part of the survey, the researcher could have run cross-tabulation and
chi-square analyses to determine the independence or dependence of each with the
entrepreneurial orientation, environmental uncertainty, strategy type and performance
variables thus providing greater utility in the practical applications of the research.
126
From a practical aspect, the research was used to confirm for investors and
researchers the significant impact of entrepreneurial orientation on firm performance
while demonstrating the practicality and need for more sophisticated modeling for
assessing the economic impact of entrepreneurial orientation within Washington States
business climate. Second, the research was used to create limited, yet increased
awareness among the surveyed small manufacturing business owners of the relation(s)
among environmental uncertainty, entrepreneurial orientation, strategy, and performance
and the importance of entrepreneurial orientation on firm performance. Third, this
research provides a base model by which a Washington State entrepreneur or business
student can assess the strengths and weaknesses of his or her motivations, business
idea(s), and strategies relative to the states business environment.
In conclusion, because this research is based on a narrow sampling of Washington
State manufacturing firms it should be treated as a preliminary economic development
study and subsequently followed by an enhanced study of multiple industries to assess
external validity of the study findings (Short et al., 2002). From an expanded study,
future researchers will be able to determine if similar findings would be present in other
business sectors and regions.
127
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APPENDIX A. SURVEY INSTRUMENT
Research Questionnaire: Washington State Manufacturing Firms

Researcher:
Capella University, School of Business and Technology
Thank you for your time and participation in this academic research project.
Questions 1-4 are designed to gather generic information about your firm that will help
with the cataloging and analysis of the data.
1. Please check the category that best describes your firms primary area of
business:
Manufacturing ____ Services_____ Other_____.
2. How many years has your firm been in business?
0-2____3-5___6-10___11-20___21-50___Over 50_____.
3. Approximately how many employees do you have?
3-25____26-49____50-75____76-99____100-250_____251-500____
4. Is your firm privately owned?
Yes______No_______
_________________________________________________________________
Questions 5- 13 are designed to measure your firms innovativeness, proactiveness and
risk-taking. Each contains a 7-point scale and please circle the number that best
represents your firms status.
5. In general, the top managers of my firm favor a strong emphasis on

The marketing of tried and true R&D, technological leadership
products and services. and innovations.
1 2 3 4 5 6 7
139
6. How many new lines of products or services has your firm marketed in the past 5
years?
No new lines Very many new lines
of products or services of products or services.
1 2 3 4 5 6 7
7. Changes in product or service lines

Have been mostly of a minor nature Have usually been quite dramatic
1 2 3 4 5 6 7
8. In dealing with its competitors, my firm

Typically responds to actions Typically initiates actions
which competitors initiate. which competitors respond to.
1 2 3 4 5 6 7

Is very seldom the first business to Is very often the first business
introduce new products/services to introduce new products/services
administrative techniques, administrative techniques,
operating technologies, etc. operating technologies, etc.
1 2 3 4 5 6 7

Typically seeks to avoid Typically adopts a very competitive,
competitive clashes preferring undo-the-competitors posture.
a live-and-let-live posture.
1 2 3 4 5 6 7
11. In general, the top managers of my firm have

A strong proclivity A strong proclivity for high-risk
for low risk projects projects (with chances of
(with normal and certain rates of return). of very high returns).
1 2 3 4 5 6 7
140
12. In general, the top managers of my firm believe that...
Owing to the nature of the environment, Owing to the nature of the
it is best to explore it gradually via timid, of the environment, bold
incremental behavior wide-ranging acts are
necessary to achieve the
firms objectives.
1 2 3 4 5 6 7
13.. When confronted with decision-making situations involving uncertainty, my

firm..
Typically adopts a cautious, Typically adopts a bold,
wait-and-see posture in order to aggressive posture in order
minimize the probability of to maximize the probability
making costly decisions. of exploiting potential.
1 2 3 4 5 6 7
__________________________________________________________________
Questions 14-21 are designed to characterize your firms operating environment over the
past 5 years. Each contains a 7-point scale and please circle the number that best
represents your firms status.
Changes in your firms external environment over the past five years can be
characterized as:
14. Growth opportunities in the environment.

Have decreased dramatically Have increased dramatically
1 2 3 4 5 6 7
15. Production/service technology in your principal industry.

Has changed very much Has remained the same
1 2 3 4 5 6 7
16. Rate of innovation of new operating processes and new products or services in
your principal industry .
Rate has fallen dramatically Rate has dramatically increased
1 2 3 4 5 6 7
141
17. Research and development (R&D) activity in your principal industry
Has substantially increased Has fallen off greatly
1 2 3 4 5 6 7
18. Market activities of your key competitors

Have become far less predictable Have become far more predictable
1 2 3 4 5 6 7

Have become far more hostile Have become far less hostile
1 2 3 4 5 6 7

Now affect the firm in many more Now affect the firm in far fewer
areas areas
(i.e., pricing, marketing, production, quality).
1 2 3 4 5 6 7
21. Legal, political and economic constraints (i.e. government regulations)

Have proliferated greatly Almost no change
over the past 5 years.
1 2 3 4 5 6 7
______________________________________________________________________
Questions 22 uses paragraph descriptors to identify strategy types. Please make one
selection.
22. Which of the four descriptions below best describes your firm? (Circle only one
letter.)
A. My firm focuses on a reduced product/market range, in which a relatively stable range

of products and services is offered. It does not lead the way with new developments in
the sector and tends to be unaware of any changes that do not affect its current
operations. The firm is dedicated to conducting its activities in the best way possible (to
the highest quality).
B. My firm continually searches for new business opportunities and experiments with
emerging trends in the environment. It wants to be "the first in line" for new
142
products/markets, even though they do not always end up being profitable. The firm
responds quickly to any sign of an environment, in which an opportunity is provided.
C. My firm maintains a stable line of products and services but, at the same time, tries to
implement the most promising changes in the sector after a careful analysis. The
precaution shown when it comes to watching its competitors has made the company "the
second in line" for new products/markets. However, it is able to gain a high level of
efficiency in relation to costs.
D. My firm constantly changes direction in relation to its product/market. It is sometimes

very innovative when it comes to introducing new products and services, but at other
times the company only innovates if there is evidence that it will be successful. Most of
the time, it acts under the pressure of the environment.
________________________________________________________________________
Questions 23-26 use a 5-point scale to collect data on your firms performance. Please
circle the number that best represents your firms status.
23. Over the past 3 years, for your firm how important is increasing growth in
sales?
Of no or little importance Of major importance
1 2 3 4 5
24. Over the past 3 years, for your firm how important is increasing return on
assets?
Of no or little importance Of major importance
1 2 3 4 5
25. Over the past 3 years, how satisfied are your firms top managers with your
firms sales growth?
Not at all satisfied Highly satisfied
1 2 3 4 5
26. Over the past 3 years, how satisfied are your firms top managers with your
firms return on assets?
Not at all satisfied Highly satisfied
1 2 3 4 5
________________________________________________________________________
143
Questions 27-29 are designed to gather generic information about you that will help with
the cataloging and analysis of the data.
27. Your title is.
Owner/Founder ________, President/CEO ________, Other_____
28. Your age is.
18-24____, 25-34_______, 35-44______, 45-54_____, 55-64_____, Over 65_____
29. Your gender is Male____ Female_____
Recognizing that small business owners are reluctant to share financial information,
questions 30- 33 are optional. If you choose to respond, your financial data will only be
used to validate the subjective performance measure used in this research.
30. What was your firms approximate sales for.
2006_________ 2007_________ 2008_________
31. What was your firms percentage rate of sales growth (change) for the period
2006-2008?
__________%
32. What was your firms return on assets for
2006______ 2007______ 2008___________
33. What was your firms percentage rate of growth in return on assets for the
period 2006-2008?
__________%
Thank you, you have done it! I appreciate your time and assistance with this valuable
research.
Questions 5-13 adapted from Strategic Management of Small Firms in Hostile and Benign Environments,
by Covin, J. G., & Slevin, D. P. (1989). Strategic Management Journal, 10, 75-87; Questions 14-21
adapted from The Structural and Environmental Correlates of Business Strategy by Miller, D. (1987,
Jan/Feb). Strategic Management Journal, 8, 55-76;Question 22 adapted from Entrepreneurial Orientation
and Growth of SMEs: A Causal Model, by A. Moreno and J. Casillas, 2008, Entrepreneurship: Theory &
Practice, 32; Questions 23-26 adapted from New Product Innovation in Established Companies:
Associations with Industry Strategy Variables, by Zahra, S. A. (1993, Winter). Entrepreneurship Theory
and Practice, 47-69; used and published with permissions.
144
APPENDIX B. CORRELATIONS AND STATISTICS
Table B1. Inter-item Correlations
Area of Age of Number of

Gender Age Title Business Business Employees Private
Gender 1.000
Age -.164 1.000
Title .036 -.214 1.000
Primary Area of
Business -.108 .085 .171 1.000
Age of Business .015 .141 -.056 -.124 1.000
Number of
Employees -.062 .103 .126 -.132 .259 1.000
Private -.093 -.004 -.014 -.077 -.156 -.016 1.000
Innovation 1 -.062 .103 -.045 -.064 -.299 .088 .253
Innovation 2 -.187 -.004 .184 -.102 -.012 .281 .091
Innovation 3 -.018 .022 -.068 -.122 -.019 .006 .129
Proactive 1 -.282 -.094 -.002 -.092 -.346 .076 -.005
Proactive 2 -.076 .001 -.344 -.144 -.148 .088 .124
Proactive 3 -.118 -.164 -.055 .030 -.170 .085 .170
Risk-Taking 1 -.212 .011 -.120 .087 -.308 .028 .224
Risk-Taking 2 -.155 -.009 .023 .042 -.098 .073 .137
Risk-Taking 3 -.181 .008 .216 -.052 -.102 -.028 .289
145
Table B1. Inter-item Correlations (continued)
Area of Age of Number of
Gender Age Title Business Business Employees Private
Dynamism-
Growth -.121 -.009 -.254 -.157 -.305 .141 .234
Dynamism-
technology .033 .330 .031 .009 .059 -.067 -.056
Dynamism-
Innovation -.092 -.141 -.143 .249 -.203 .012 .030
Dynamism- R &
D .053 .071 .000 -.079 .115 -.202 -.142
Hostility-
Competition -.142 .227 -.086 -.090 .084 .034 .323
Hostility- Market -.293 .086 -.130 -.082 -.203 -.056 -.121
Hostility-
Unpredictability .016 .129 -.083 -.089 -.178 .022 -.094
Hostility
Regulation -.044 .110 -.114 .042 -.041 .169 .180
Strategy type -.178 -.123 .020 -.032 .056 .237 -.123
Sales Growth .087 -.041 .191 .080 -.171 -.053 .116
ROA Growth .056 .069 .174 .364 -.072 -.043 .164
Sales Satisfaction -.009 -.093 .090 -.144 -.179 .077 .097
ROA Satisfaction .065 -.182 .075 -.200 -.300 -.033 .118
Ave Performance .048 -.190 .162 -.067 -.349 .001 .208
146
Innovate Innovate Innovate Proactive Proactive Proactive

1 2 3 1 2 3
Gender
Age
Title
Primary Area of
Business
Age of Business
Number of Employees
Private
Innovation 1 1.000
Innovation 2 .374 1.000
Innovation 3 .395 .456 1.000
Proactive 1 .468 .270 .131 1.000
Proactive 2 .606 .251 .441 .435 1.000
Proactive 3 .314 .129 .132 .190 .189 1.000
Risk-Taking 1 .389 .224 .453 .255 .483 .488
Risk-Taking 2 .581 .210 .337 .369 .434 .470
Risk-Taking 3 .398 .213 .377 .500 .347 .409
Dynamism- Growth .405 .226 .196 .371 .345 .318
Dynamism- technology .068 .040 .125 -.112 -.196 -.080
Dynamism- Innovation .372 .413 .412 .316 .406 .093
Dynamism- R & D -.094 .045 .035 -.075 -.139 -.205
Hostility- Competition .233 .297 .225 .080 .147 .197
Hostility- Market .044 .253 -.051 .401 .244 .138
Hostility-
Unpredictability .071 .137 -.195 .330 .272 .049
147
Innovate Innovate Innovate Proactive Proactive Proactive

1 2 3 1 2 3
Hostility Regulation .211 .075 .104 -.081 .202 .118
Strategy type -.055 .235 .152 -.009 .141 .304
Sales Growth .101 .050 .208 -.086 .197 -.011
ROA Growth -.033 -.140 -.110 -.074 -.074 -.024
Sales Satisfaction .366 .058 .055 .313 .205 .142
ROA Satisfaction .218 -.026 .009 .341 .156 .312
Ave Performance .325 .029 .059 .308 .238 .252
148
Risk- Risk- Risk- Dynamism Dynamism Dynamism Dynamism

T1 T2 T3 Growth Technology Innovation R&D
Gender
Age
Title
Primary Area of
Business
Age of Business
Number of
Employees
Private
Innovation 1
Innovation 2
Innovation 3
Proactive 1
Proactive 2
Proactive 3
Risk-Taking 1 1.000
Risk-Taking 2 .571 1.000
Risk-Taking 3 .388 .501 1.000
Dynamism-
Growth .334 .263 .221 1.000
Dynamism-
technology -.138 .026 .167 -.086 1.000
Dynamism-
Innovation .257 .223 .081 .282 -.245 1.000
Dynamism- R
&D -.091 -.024 .004 -.188 .175 -.296 1.000
149
Risk- Risk- Risk- Dynamism Dynamism Dynamism Dynamism

T1 T2 T3 Growth Technology Innovation R&D
Hostility-
Competition .146 .202 .188 .218 .233 .090 -.389
Hostility-
Market .087 -.014 .272 .271 .005 -.048 -.035
Hostility-
Unpredictability -.127 -.043 .040 .212 -.123 -.085 -.165
Hostility
Regulation .204 -.025 .056 .159 .187 .006 -.011
Strategy type .245 .079 .231 .097 -.173 .103 -.164
Sales Growth .136 .097 .025 -.163 .153 .145 -.125
ROA Growth .029 .148 -.164 -.174 -.220 .162 -.277
Sales
Satisfaction .098 .315 .211 .439 .087 .085 .105
ROA
Satisfaction .080 .361 .312 .395 -.141 .077 -.109
Ave
Performance .199 .394 .197 .384 -.101 .166 -.103
150
Hostility Hostility Hostility Hostility

Competition Market Unpredictability Regulation Strategy Type
Gender
Age
Title
Primary Area of
Business
Age of Business
Number of
Employees
Private
Innovation 1
Innovation 2
Innovation 3
Proactive 1
Proactive 2
Proactive 3
Risk-Taking 1
Risk-Taking 2
Risk-Taking 3
Dynamism- Growth
Dynamism-
technology
Dynamism-
Innovation
Dynamism- R & D
Hostility-
Competition 1.000
151
Hostility Hostility Hostility Hostility

Competition Market Unpredictability Regulation Strategy Type
Hostility- Market .181 1.000
Hostility-
Unpredictability .159 .710 1.000
Hostility Regulation .162 .003 .018 1.000
Strategy type -.007 .123 .003 .095 1.000
Sales Growth .086 -.036 .067 .191 -.031
ROA Growth .010 -.156 .059 -.325 -.041
Sales Satisfaction -.073 .004 .061 -.012 -.031
ROA Satisfaction -.016 .099 .181 -.004 .105
Ave Performance .008 .032 .170 -.039 -.007
152
Sales ROA Sales ROA Ave

Growth Growth Satisfaction Satisfaction Performance
Gender
Age
Title
Primary Area of
Business
Age of Business
Number of
Employees
Private
Innovation 1
Innovation 2
Innovation 3
Proactive 1
Proactive 2
Proactive 3
Risk-Taking 1
Risk-Taking 2
Risk-Taking 3
Dynamism- Growth
Dynamism-
technology
Dynamism-
Innovation
Dynamism- R & D
Hostility-
Competition
153
Sales ROA Sales ROA Ave

Growth Growth Satisfaction Satisfaction Performance
Hostility Market
Hostility-
Unpredictability
Hostility Regulation
Strategy type
Sales Growth 1.000
ROA Growth .156 1.000
Sales Satisfaction -.067 .022 1.000
ROA Satisfaction -.148 .054 .712 1.000
Ave Performance .163 .303 .866 .829 1.000
Table B2. Reliability Statistics
Cronbach's Alpha Based on

Cronbach's Alpha Standardized Items N of Items
.748 .702 30
Table B3. Summary Item Statistics
Summary Item Statistics
Maximum/
Mean Minimum Maximum Range Minimum Variance N of Items
Inter-Item
Correlations .073 -.389 .866 1.255 -2.229 .039 30
154
APPENDIX C. DEMOGRAPHICS
Table C1. Gender
Cumulative
Gender Frequency Percent Valid Percent Percent
Male 48 78.7 78.7 78.7
Female 11 18.0 18.0 96.7
No answer 2 3.3 3.3 100.0
Total 61 100.0 100.0
Table C2. Age
Cumulative
Age Frequency Percent Valid Percent Percent
35-44 8 13.1 13.1 13.1
45-54 19 31.1 31.1 44.3
55-64 28 45.9 45.9 90.2
65> 6 9.8 9.8 100.0
Total 61 100.0 100.0
Table C3. Title
Cumulative
Title Frequency Percent Valid Percent Percent
Owner/founder 36 59.0 59.0 59.0

President/CEO 15 24.6 24.6 83.6
Other 9 14.8 14.8 98.4
No answer 1 1.6 1.6 100.0
Total 61 100.0 100.0
155
Table C4. Primary Business Area
Cumulative
Primary Business Area Frequency Percent Valid Percent Percent
Manufacturing 52 85.2 85.2 85.2

Services 7 11.5 11.5 96.7
Other 2 3.3 3.3 100.0
Total 61 100.0 100.0
Table C5. Age of Business
Age of Business Frequency Percent Valid Percent Cumulative Percent
6-10 7 11.5 11.5 11.5

11-20 20 32.8 32.8 44.3
21-50 25 41.0 41.0 85.2
50> 9 14.8 14.8 100.0
Total 61 100.0 100.0
Table C6. Number of Employees
Number of Employees Frequency Percent Valid Percent Cumulative Percent
3-25 43 70.5 70.5 70.5

26-49 10 16.4 16.4 86.9
50-75 2 3.3 3.3 90.2
76-99 3 4.9 4.9 95.1
100-250 2 3.3 3.3 98.4
251-500 1 1.6 1.6 100.0
Total 61 100.0 100.0
156
Table C7. Private Ownership
Private Ownership Frequency Percent Valid Percent Cumulative Percent
Yes 58 95.1 95.1 95.1

No 3 4.9 4.9 100.0
Total 61 100.0 100.0
157

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DETERMINING THE STATISTICAL SIGNIFICANCE OF ENVIRONMENTAL

UNCERTAINTY ON THE RELATIONSHIP AMONG PERFORMANCE,

ENTREPRENEURIAL ORIENTATION, AND STRATEGY FOR WASHINGTON

STATE MANUFACTURING FIRMS

GEORGE KALIDONIS, PhD, Faculty Mentor and Chair

MARY K. EVANS-KASALA, PhD, Committee Member

VINCENT DEFAZIO, DM, Committee Member

William A. Reed, PhD, Acting Dean, School of Business & Technology

A Dissertation Presented in Partial Fulfillment

Of the Requirements for the Degree

All rights reserved

INFORMATION TO ALL USERS

environmental uncertainty impact the relationship between entrepreneurial orientation

uncertainty on the relationship between entrepreneurial orientation and strategy to explain

supporting the dependent variable of firm performance, the independent variables of

entrepreneurial orientation, and strategy, and the moderating variable of environmental

significant impact for environmental uncertainty on the relationship between

entrepreneurial orientation and strategy to explain the variability in firm performance,

entrepreneurial orientation is a significant indicator of firm performance. The research

relationship among the variables firm performance, entrepreneurial orientation, strategy,

regression. By determining the statistical significance of environmental uncertainty on

localized impact of the variable relations. In addition, an alternative method for

entrepreneurial orientation and strategy, as moderated by environmental uncertainty on

This dissertation is dedicated to my spouse, Roselyn, whose love, understanding,

and patience provided tremendous support and encouragement to me throughout the

period of my doctoral studies.

A special acknowledgement goes to Dr. George Kalidonis, faculty mentor and

List of Tables viii

Introduction of the Problem 1

Background of the Study 4

Statement of the Problem 6

Purpose of the Study 7

Research Question and Hypothesis 10

Nature of the Study 12

Significance of the Study 16

Assumptions and Limitations 20

Organization of the Remainder of the Study 22

CHAPTER 2. LITERATURE REVIEW 23

Entrepreneurship and the Entrepreneurial Domain 23

Entrepreneurial Traits and Behaviors 28

Measuring Firm Performance 32

Future Trends and Modeling 45

Overview of Research Question and Hypothesis 47

Collecting Small Business Research Data 50

Instrumentation and Measures 54

Validity and Reliability 63

Data Collection and Survey Responses 67

Analysis of Model and Hypotheses Testing 73

CHAPTER 5. DISCUSSION, IMPLICATIONS, RECOMMENDATIONS 111

Summary and Discussion of Results 113

Analysis of Research 114

APPENDIX A. SURVEY INSTRUMENT 139

APPENDIX C. DEMOGRAPHICS 155

Table 1. Scales and References 55

Table 2. H1 Model Summary 75

Table 5. H2a Model Summary 77

Table 6. H2a ANOVA 78

Table 7. H2a Coefficients 78

Table 8. H2b Model Summary 79

Table 9. H2b ANOVA 80

Table 10. H2b Coefficients 80

Table 11. H2c Model Summary 81

Table 12. H2c ANOVA 82