The effect of entrepreneurial orientation on new venture performance

What is it about?

This paper develops and tests a model that highlights the roles of improvisation and absorptive capacity as important mediating mechanisms through which entrepreneurial orientation (EO) influences new venture performance. Furthermore, we examine the interactive effect of improvisation and absorptive capacity on new venture performance. The results show that (a) improvisation and absorptive capacity both mediate the relationship between EO and new venture performance; (b) the interaction between improvisation and absorptive capacity is positively related to new venture performance; (c) improvisation moderates the indirect relationship between EO and new venture performance via absorptive capacity; and (d) absorptive capacity moderates the mediation of improvisation in the relationship between EO and new venture performance. With these findings, this paper provides insights into how different learning modes can enhance the EO-performance relationship.

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Photo by Marvin Meyer on Unsplash

Photo by Marvin Meyer on Unsplash

Why is it important?

This study has several contributions. Firstly, this study proposes and validates an EO-learning mode-new venture performance model that explains how EO influences improvisation and absorptive capacity to achieve new venture performance, which enriches the literature on EO-performance relationship. Secondly, the organizational learning perspective has been considered as a lens to explain EO-performance relationship, which contributes to the organizational learning theory. Thirdly, we respond to the call from Bergh and Lim to examine the joint effect of improvisation and absorptive capacity on firm performance, which provides empirical support for the complementary role of different learning modes in creating and maintaining sustainable competitive advantages. Finally, we answer the question of how new ventures in emerging economies can improve their firm performance through an EO, which provides an explanation of the EO-performance relationship that is different from that of developed western economies.