Entrepreneurial Orientation: An Empirical Study of the Risk-Propensity Dimension of Entrepreneurs

Abstract

ABSTRACT The goal of this paper was to analyze the relationship that might exist between risk taking propensity and the entrepreneurial orientation of entrepreneurs. In order to test that relationship, a contingency approach was used by splitting a sample of entrepreneurs into three different sets based on the Carlands' trichotomy of entrepreneurs. A sample of 1003 entrepreneurs was used for the study, and 103 responses were used for analysis. The result of the study indicates that the relationship between risk propensity and the entrepreneurial orientation of entrepreneurs is contingent to the set of entrepreneurs. INTRODUCTION The entrepreneurial orientation construct in entrepreneurship has received considerable attention from researchers, even if there are some controversies in its dimensions (Josien, 2008; Gurol & Atsan, 2006; Lyon, Lumpkin, & Dess, 2000; Aragon-Correa, 1998; Barringer & Bluedorn, 1999; Zahra & Covin, 1995; Dess & Lumpkin, 1996). This high level of interest is stemming from the significant impact the entrepreneurial activity has on an economy. This economical impact can be seen through the number of jobs created by entrepreneurs. Entrepreneurial ventures, defined as small firms with fewer than 500 employees, accounted for 69% of the total employment growth for the 1992-1996 period. Small business ventures represented all of the employment growth in goods-producing industries, 59% of the growth in service, and 79% of the growth in information technology (U.S. Small Business Administration, 2000). A careful analysis of the results of the research mentioned above reveal that conflicting results have been found. For some researchers, entrepreneurial orientation is composed of three dimensions: innovativeness, proactiveness, and risk taking (Wiklund & Shepherd, 2005; Morris & Sexton, 1996). For some others, that same concept has five dimensions: autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness (Dess & Lumpkin, 1996). There are also some researchers who use a different set of five dimensions: achievement, personal control, innovation, self-esteem, and opportunism (Robinson, 1987; Shanthakumar, 1992), and one researcher even included two more dimensions to the previous model: risk taking and independence (Solymossy, 1998). One of the more salient areas of conflicting results is within the risk taking dimension of entrepreneurs. Indeed, risk taking has always been a part of the early entrepreneurship literature, dating back to Cantillon (1734) who argued that the principal factor that separated entrepreneurs from hired employees was the uncertainty and risk of self-employment. Furthermore, the risk propensity dimension of entrepreneurs has yielded different outcomes: Palmer (1971) and Liles (1974) reported that entrepreneurial functions primarily involve risk taking. In addition calculated risk taking is reported to be a strategic behavior of entrepreneurs (Hoy & Carland, 1983). However, some other findings may indicate that entrepreneurs may be risk-averse due to their strategic behavior (Burns & Kippenberger, 1988). Similarly, chief executives with external control were found to be conservative in their decision-making, while chief executives with internal locus of control were more prepared to adopt riskier decisions (Miller & Friesen, 1982). Conversely, the need for achievement is associated with risk taking propensities (McClelland, 1961). Furthermore, Brockhaus (1980) has reported inconsistencies in the risk-taking propensity of entrepreneurs. Finally, Gurol and Atsan (2006) found a difference in risk taking propensity between entrepreneurial students versus non-entrepreneurial students based on 400 Turkish students. As we can see, the literature review shows without a doubt that there are conflicting results as far as the risk propensity dimension is concerned. Therefore, it might be fruitful to examine why some researchers have found antagonistic results about the risk dimension in the entrepreneurial orientation of entrepreneurs. …

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