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Udeozor, Victor Chukwuemeka (2011) Influence of Culture on Entrepreneurial Orientation and Performance of Nigerian Firms. [Dissertation (University of Nottingham only)] (Unpublished)
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INFLUENCE OF CULTURE ON ENTREPRENEURIAL ORIENTATION AND
PERFORMANCE OF NIGERIAN FIRMS
A Dissertation
by
Udeozor Chukwuemeka Victor
Submitted to the postgraduate school of Nottingham University Business School in
partial fulfilment of the requirements for the degree of
MASTERS IN SCIENCE SEPTEMBER 2011
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
1 Abstract | University of Nottingham
Dedication
To God, for his wisdom and grace, and to my parents for their unspeakable motivation.
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
2 Abstract | University of Nottingham
Acknowledgement
―The race is not to the swift, nor the battle to the strong, neither bread to the wise, nor riches to men of
understanding, nor favor to men of skill… but God that shows mercy‖ [Eccl 9:11 and Rom 9:16]
My deepest gratitude is to God for the wisdom and strength I received without which this project
would not have come to fruition.
I deeply appreciate my supervisor, Mathew Hughes, for his mentoring, and friendship not just during
this project but also through my MSc program. His dedication and eye for detail, smiles and
encouragements, patience and unyielding support kept me motivated through this project. I also
specially appreciate him for critical statistical assistance.
My personal thanks to my Pastor, Yom, for his encouraging words and prayer. My gratitude also to
my friend Toyin ―lush‖ for his timely advice.
Special thanks to Virginia and Ife for their invaluable inputs which added richness to the text and a
depth to the analysis of the project. I take responsitility however, of any errors or ommission that may
appear in this dissertation.
To all my classmates, especially Bow, Olu, Virginia, Julia and Andrea for their crucial support and
contributions at the early stage of this project. I hope we will continue to keep communication and
keep the network alive at least till the inks fades off our certificates.
Finnaly to my parents, Mr and Mrs J. C Udeozor, who spent fortune to give me this life changing
experience I say a big thank you. I‘m indebted to them. To my siblings, especially Mr. Okechukwu J
Udeozor, for his encouragements and moral support. And to my dear friend, Grace Ani for her kind
words of encouragement.
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
3 Abstract | University of Nottingham
Abstract
The influence of culture on entrepreneurship has continued to attract scholarly interest and empirical
scrutiny for the last two decades. Some international researches have explored the effect of national
culture on entrepreneurial orientation (EO). Researchers have also explored the effect of EO on
performance. However the inconsistencies in the findings of these studies have exposed the ambiguity
of the relationships. Part of the reason for these inconsistencies, is in the treatment of EO. Most
studies take a gestalt approach while a few recent ones take a component level approach which
examines the independent relationship of the dimensions of EO with culture and with performances
respectively. The other part of the reason for inconsistencies, is the context in which the studies where
made. Just as Lumpkin and Dess (1996) cautioned, the EO-performance relationship has been found
to be context specific. Until now, no empirical study of the effect of the five dimensions of EO on
performance in the Nigerian context has been made. This study addresses the inconsistences by
extending the knowledge on the influence of culture on the five dimensions of EO and the effect of
the five dimensions of EO on firms‘ performance to the Nigerian context.
Data was collected from 47 firms located and operating in Nigeria and analysed. The first part of the
results shows that culture does not affect innovativeness; it significantly affects risk taking and
autonomy but does not significantly affect proactiveness and competitive aggressiveness; the second
part shows that culture has no direct impact on performance; the third part, which supports the
concerns of Lumpkin and Dess (1996) and is largely consistent with the result of Hughes and Morgan,
(2007), shows that only innovativeness has a positive relationship with firms‘ performance;
proactiveness, competitive aggressiveness and autonomy have no effect while risk taking has a
negative relationship with performance.
From these results, managerial implications and recommendations for future research was offered.
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
4 Abstract | University of Nottingham
Contents
Abstract ................................................................................................................................................... 3
Table of Tables ........................................................................................................................................ 6
Table of Figures ....................................................................................................................................... 7
Introduction .................................................................................................................................... 8 1
Entrepreneurial Orientation and firm performance ................................................................. 8 1.1
Research problem ................................................................................................................. 10 1.2
Research objectives .............................................................................................................. 11 1.3
Research design .................................................................................................................... 11 1.4
Contributions to Literature ................................................................................................... 11 1.5
Structure of dissertation ........................................................................................................ 12 1.6
Literature Review .......................................................................................................................... 13 2
Corporate Entrepreneurship (CE) ......................................................................................... 13 2.1
2.1.1 Management and Corporate Entrepreneurship ........................................................... 14
2.1.2 Corporate Entrepreneurship and performance ............................................................ 15
Antecedents of Entrepreneurial Orientation ........................................................................ 16 2.2
2.2.1 The EO construct ........................................................................................................... 16
2.2.2 EO-performance construct ............................................................................................ 17
2.2.3 EO-Strategy construct ................................................................................................... 19
Theoretical framework and Hypothesis development ................................................................. 20 3
EO-Performance of firms ...................................................................................................... 20 3.1
3.1.1 Role of Top management: Leadership and organisational structure ............................. 21
3.1.2 The role of culture ......................................................................................................... 22
Culture and Entrepreneurial Orientation.............................................................................. 28 3.2
3.2.1 Management in sub-Saharan Africa (SSA) .................................................................... 28
3.2.2 African cultural patterns ............................................................................................... 29
Research Design ............................................................................................................................ 35 4
Sample population and sampling method ............................................................................ 35 4.1
Key informants ...................................................................................................................... 35 4.2
Data collection and response rate ........................................................................................ 35 4.3
Control Variables ................................................................................................................... 36 4.4
Measures ............................................................................................................................... 36 4.5
4.5.1 Entrepreneurial orientation .......................................................................................... 37
4.5.2 Performance.................................................................................................................. 39
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
5 Abstract | University of Nottingham
4.5.3 Dimensions of culture ................................................................................................... 39
Data preparation ................................................................................................................... 40 4.6
Data analyses, Reliability and validity ................................................................................... 40 4.7
The analytical technique for testing hypothesis ................................................................... 41 4.8
4.8.1 Model Equation ............................................................................................................. 44
4.8.2 Interpreting MLR model ................................................................................................ 44
4.8.3 Assumptions used in the MLR model ............................................................................ 44
Results of Data Analysis ................................................................................................................ 45 5
Models .................................................................................................................................. 45 5.1
Discussion ...................................................................................................................................... 49 6
Culture and Entrepreneurial Orientation.............................................................................. 49 6.1
Entrepreneurial Orientation and Performance .................................................................... 50 6.2
Culture and performance ...................................................................................................... 51 6.3
Conclusions, Implications and Limitations .................................................................................... 52 7
Contributions to the Literature .............................................................................................. 52 7.1
7.1.1 Dimensions (national culture vs. EO) performance Method ........................................ 52
7.1.2 Risk taking undermines performance initiatives .......................................................... 52
7.1.3 Culture does not affect innovation ............................................................................... 53
7.1.4 Culture does not directly affect performance initiatives .............................................. 53
Implications for managers ..................................................................................................... 53 7.2
Limitations ............................................................................................................................ 54 7.3
7.3.1 Nature of sample population ........................................................................................ 54
7.3.2 Sample size .................................................................................................................... 54
7.3.3 Measurement Scale ...................................................................................................... 55
7.3.4 Other limitations ........................................................................................................... 55
Future research ...................................................................................................................... 55 7.4
Conclusion ............................................................................................................................. 56 7.5
References ............................................................................................................................................ 57
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
6 Table of Tables | University of Nottingham
Table of Tables
Table 3-1 previous study on culture and entrepreneurship .................................................................................. 25
Table 3-2 Identification and Definition of Cultural Dimensions Based on Hofstede (1980) .................................. 30
Table 3-3 List of hypothesis .................................................................................................................................. 33
Table 3-4 A diagrammatic representation of the hypotheses and their relationships ......................................... 34
Table 4-1 Descriptive Statistics of control variables ............................................................................................. 36
Table 4-2 Measures and Factor Readings ............................................................................................................ 37
Table 4-3 Descriptive statistics of measures ........................................................................................................ 41
Table 4-4 Correlations between dimensions of EO and Performance ................................................................... 42
Table 4-5 Correlations between culture and performance ................................................................................... 42
Table 4-6 Correlations between dimensions of culture and dimensions of EO ..................................................... 43
Table 5-1 Multiple Regression Analysis results-a ................................................................................................ 46
Table 5-2 Multiple Regression Analysis results-b ................................................................................................ 47
Table 6-1 Results of Hypotheses ........................................................................................................................... 50
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
7 Table of Figures | University of Nottingham
Table of Figures
Figure 3-1 Conceptual Framework of Entrepreneurial Orientation Lumpkin and Dess, 1998 .............................. 21
Figure 3-2 A model for culture association with Entrepreneurship (Hayton, George and Zahra, 2002) ............... 24
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
8 Introduction | University of Nottingham
Introduction 1
Today‘s business environment is characterised as highly dynamic and fiercely competitive
(Dreyer & Grønhaug, 2004; Slater & Olson, 2002). Faced with limited resources, firms must therefore
strategically implement only those activities that will render competitive advantage and drive
performance. Corporate entrepreneurship (CE) has been viewed as a legitimate path to this end
(Ireland et al., 2006a, b; Morris et al., 2008). The study of CE has created an interest in understanding
postures firms take to act entrepreneurially, leading to the development of entrepreneurial orientation
(EO) construct (Miller and Friesen, 1982; Miller, 1983). EO is described as multidimensional
construct that involves the propensity to act autonomously, a willingness to innovate, proactiveness to
exploiting market opportunities, willingness to take risks, tendency to be aggressive towards
competitors (Miller, 1983; Covin & Slevin, 1989, 1991; Lumpkin and Dess, 1996).
The popular belief is that EO is highly beneficial to firm. Many studies including Covin and
Slevin, 1986; Wiklund and Shepherd, 2005; Zahra and Covin, 1995; and Rauch et al., 2009, suggest
that it is positively related with performance. While this belief is correct to some extent, some
scholars including Lumpkin and Dess (1996) caution the universal applicability and an ad hoc
approach to implementing EO. The results of empirical research on the various antecedents and
moderators of the EO-performance relationship have been inconsistent. This inconsistency in research
findings has exposed the ambiguity in EO-performance relationship. Though several authors have
attempted to investigate the EO-performance relationship, the limited international research on it has
done little to clarify this ambiguity. Majority of these studies are based on Western context with
samples from with small, medium and large firms across multiple manufacturing industries. Empirical
research on the influence of culture on the EO-performance relationship in the West African context is
highly under developed.
Entrepreneurial Orientation and firm performance 1.1
One of the earliest scholars to conceptualise EO is Miller (1983). He suggests that for a firm
to be considered as entrepreneurial in the first place that firm must have the propensity to take risk, be
proactive and innovative. These in his view are the dimensions of EO. Lumpkin and Dess (1996) went
on to extend the dimensions to include competitive aggressiveness and autonomy. Several researches
that have investigated EO-performance have viewed EO as a construct with these five dimensions.
The results of these studies suggest that EO is beneficial to firm performance (Covin and Slevin,
1986; Wiklund and Shepherd, 2005; Zahra and Covin, 1995; Rauch et al., 2009).
There are two main issues these researches may not have taken into account: first, the role of
internal and external factors that may moderates the relationship, second, the multidimensionality of
EO construct. A pragmatic way to explore the EO construct is to take a contingency perspective
(Aldrich and Pfeffer, 1976).
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
9 Introduction | University of Nottingham
Lumpkin and Dess (1996) noted that although at the start of new entry all the dimensions of
EO may be present, all of them may not guarantee high performance for the venture. He cautioned
that the EO-performance relationship may be contingent on a host of external and internal factors.
Some external factors that have been shown to moderate the EO-performance construct include
technological sophistication, environmental dynamism, environmental hostility, industrial life cycle
stage and national culture (Covin and Slevin, 1990, 1991; Wiklund and Shepherd, 2005; Lee et al.,
2001; Stam and Elfring, 2008); while the internal factors include top management values and
philosophies, organisational resources and competencies, organisational culture and organisational
structure (Arbaugh et al., 2005). Miller, (1983) and Khandwalla, (1987) note that the effectiveness of
EO is inextricable from the external environment of a firm.
Studies that have taken internal and external factors into account find that the EO-
performance construct is dependent on the circumstances of the firm. Covin and Slevin, (1991) find
that the relationship holds when a firm is in a highly competitive, unforgiving, hostile environment
but does not hold when firm is in a non-hostile or benign environment. They also found EO to be
more beneficial to young firms in emerging industries than to new firms in advanced industries. These
findings confirm the caveat of Lumpkin and Dess‘ (1996) seminal work that the relationship between
EO and performance is context specific.
Some studies advocate that understanding how firms can effectively implement EO also
requires consideration of internal organizational processes and design (Lumpkin and Dess, 1996;
Wiklund and Shepherd, 2005). De Clerq et al., (2010) find that social exchanges underlie firms‘
capability to effectively combine knowledge (De Luca and Atuahene-Gima, 2007) and are conducive
to entrepreneurial behavior when internal relationships are characterized by fairness, trust, and
organizational support (Hornsby et al., 2002, Kuratko et al., 2005).
Furthermore, extant literature maintains that managers play a pivotal role in the effective
implementation of EO (Quinn, 1985; Hornsby et al., 2009; De Clerq et Al., 2010; Zahra, 2010). By
creating impetus for cross-functional initiatives and collaboration that facilitate knowledge exchange,
managers can ultimately help to capture the firm's entrepreneurial potential. Quinn, (1985) suggest
that flexibility and tolerance on the part of managers will enhance the effective implementation of EO.
Recently, there has been a growing interest on the influence of culture on EO which has
resulted in empirical scrutiny (Davidsson, 1995; Davidsson & Wiklund, 1997; Shane, 1992, 1993).
Most of these empirical studies have used Hofstede‘s conceptualization of national culture. In general,
these studies suggest that entrepreneurship is facilitated by cultures that are high in masculinity, low
in power-distance, low in uncertainty avoidance, and high in individualism. However, inconsistences
have been noted (Shane, 1994a, 1994b, 1995; Shane & Venkataraman, 1996 Kogut & Singh, 1988;
Makino & Neupert, 2000; Steensma, Marino, & Weaver, 2000; Geletkanycz, 1997).
Unfortunately, in most studies EO is treated as a gestalt (Covin and Slevin, 1986; Zahra and
Covin, 1995; Rauch et al., 2009). This kind of approach to EO reduces its analytical power (Ogbonna
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
10 Introduction | University of Nottingham
and Harris, 1998a; Pettigrew, 1979). A component-level study captures the activities of the
dimensions. By this token, Lumpkin and Dess (1996) found evidence to show that the five EO
dimensions vary independently with performance and that the relationship is circumstance dependent
contrary to prior findings (Miller, 1983) that suggest that they co-vary. The implication of his study is
that some dimensions of EO may be beneficial to performance in some instances and may not be
beneficial in other instances (e.g., Hughes and Morgan, 2007; Hughes, Hughes and Morgan, 2007). In
support of this, Hughes and Morgan (2007) found that while proactiveness and innovativeness has a
positive relationship with performance of young firms, risk taking has a negative relationship,
whereas competitive aggressiveness and autonomy has no relationship at all.
As dimensions of EO vary independently with performance, the dimensions of culture may
vary independently with the dimensions of EO and that relationship may also vary with context. But
there are no empirical results to support this statement. However, with the inconsistences in the
findings of how the dimensions of culture affect EO and strategy one can argue that answers and
embedded in the relationship between dimensions of culture and dimensions of EO.
So far, what is known is that the dimensions of EO vary independently with performance, and
that the dimensions of national culture vary with EO. However, inconsistencies in research findings
call for more empirical studies. What is unknown is how the dimensions of culture vary with the
dimensions of EO and how the dimensions of EO vary with performance in the Nigerian context.
As earlier mentioned, most researches on these relationships have focused on firms in
Western context. If one acknowledges that findings grounded on Western epistemology may be
invalid in outside the Western context, then in national context, a different cultural setting leaves us
with little understanding of how to organise a firm entrepreneurially.
Research problem 1.2
In Western context, firms notably keep power distance to a barest minimum and employees
are highly individualistic (Hofstede, 1980a). On the other hand, sub-Sahara Africa cultures are noted
for high power distance, seniority and collectivism (Granovetter, 1985). These different cultural
patterns are reflected in how organisations are designed and managed (Baltes and Staudinger, 2000;
Beugre and Offodile, 2000; Hofstede, 1991; Trompenaars and Hampden-Turner, 1998). For instance,
firms in Nigeria tend to be owned by founders and families. They tend to be paternalistic; promote
values of high power distance (Hofstede, 1980a); respect of seniority and authority (Blunt and Jones
1995; Kuada 1994; Leonard 1987; Montgomery 1987; Tuma 1988); collectivism. They have
bureaucratic control and centralised decision making with little delegation and worker empowerment
– direction and orders tend to be top-down (Somers, 1995; Sommer et al., 1996). By contrast, Western
firms are flatter in structure, less bureaucratic, lower power distance, promote individualism,
decentralised decision making and more empowering to their workers –that is upholding the values of
democracy, equalitarianism and participation. (Chen, 2001; El Kahal, 2002). Yet current literature on
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
11 Introduction | University of Nottingham
CE maintains that low bureaucratic and informal atmosphere is highly beneficial to firm‘s
performance. The differences in cultural pattern do affect how firms are organized, their EO and
performance but there is little knowledge of what goes on at the dimensional level. Hence the
following research questions which form the primary focus of this study are raised:
How do the dimensions of national culture as conceptualised by Hofstede (1980a) relate with
the dimensions of EO in the Nigerian setting?
How do the dimensions of EO relate with the performance of firms in Nigeria?
How do dimensions of national culture relate with the performance of Nigerian firms.
Research objectives 1.3
In line with the research questions above, the objectives of this study are;
1. To review the literature on CE and EO.
2. To conceptualise the factors that affect EO and performance
3. To develop a set of empirically testable hypotheses linking national culture, EO and
performance.
4. To test the hypotheses by designing an appropriate survey instrument, collect data and
employ appropriate analytical methods
5. Present all the results of this study, discuss the implications of the findings, the limitations of
the research and make recommendations for future research.
Research design 1.4
To carry out this study, sample was be created by random selection of firms located and
operating in Nigeria. Then for each sampling unit, potential informants were considered (Kumar,
Stern, & Anderson, 1993). For an informant to be suitable for the information needs of this study the
informant had to have worked with the firm for at least six months –a period enough be
knowledgeable of internal and external issues to the firm (Huber & Power, 1985; Stubbart, 1989).
To generate data, an online survey was administered through Survey Monkey®. The survey
adhered, as far as was feasible, to the principles of the Tailored Design Method (Dillman, 2000); pre-
notification correspondence with the link to the survey, and a series of first and second follow-up
reminders were sent respectively to sampling units. Good practice recommended by Dillman (2000)
concerning questionnaire salience, length, return postage, anonymity guarantee, and university
sponsorship was considered in creating the survey. The data obtained was then analysed using
SPSS™ and conclusions were deduced.
Contributions to Literature 1.5
With the trend towards globalisation and diminishing resources, there is a greater need for
organisations and managers to have a much broader understanding of how firms can be organised in
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
12 Introduction | University of Nottingham
different contexts including Nigeria to be entrepreneurial, but also to know the dimensions of EO to
deploy in those contexts. Deploying dimensions of EO that are not necessary for performance
improvement or even undermines performance initiatives is tantamount to resource wastage which
could lead to an unintentional strategic decision to fail (Hughes and Morgan, 2007). With regards to
this, this research makes the following contributions to CE literature; first, it addresses the argument
that the dimensions of culture may vary independently with each dimension of EO; second, from the
Nigerian perspective, it addresses Lumpkin and Dess‘ (1996) caution that some dimensions of EO
might be of no benefit or might even undermine the performance of firms depending on the
circumstances of the firm (Hughes and Morgan, 2007) hence it joins the growing list of researches
that share this view; third, it addresses Hayton, George and Zahra‘s (2002) concern that culture might
not affect firm performance. Hence, by connecting the link between culture, EO and performance,
managers can encourage those cultural patterns and value that positively relate with those dimensions
of EO the can improve performance.
Structure of dissertation 1.6
For the purpose of clarity this study was organised in the following order. Chapter 1
(literature review) establishes a foundation for the study by drawing from extant knowledge. It begins
by giving an overview of corporate entrepreneurship from a progenitor of EO perspective. Then it
proceeds by developing a historical perspective on EO, from classical to contemporary works: it
discusses the EO construct, the EO-performance construct, and the EO-strategy construct. Chapter 2
(Theoretical framework and hypothesis development) examines the factors that affect EO-
performance construct based one contingency theory and the focuses on two: role of managers and
role of culture. It then proceeds by examining how management works in sub-Saharan African and the
cultural pattern of the region based on Hofstede‘s conceptualisation. It ends with the development of
the hypotheses to be tested in this study. Chapter 3 (Research Design) outlines the method used to test
the hypotheses developed for the study. It describes the samples and the sampling method adopted for
data generation strategy. Next it reviews the key informants, the method used for data collection, a
summary of how the data was prepared for analysis; the measures used for the study and detailed
description of the analytical technique used. Chapter 4 highlights the findings of this study. Chapter 5
explains in detail the results of the analyses under the following sub-headings: culture and EO; EO
and performance; and culture and performance. Chapter 6 highlights significant contributions to
literature, the important implications, limitations of this study and recommendations for future
research.
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
13 Literature Review | University of Nottingham
Literature Review 2
To establish a foundation for this study it is important to begin by drawing from extant
knowledge. For this reason, this chapter will first give an overview of corporate entrepreneurship
from a progenitor of entrepreneurial orientation perspective. Then it proceeds by developing a
historical perspective on entrepreneurial orientation, from classical (e.g. Miller, 1983) to
contemporary (Hughes and Morgan, 2007) works: it discusses the EO construct, the EO-Performance
construct and the EO-strategy construct.
Corporate Entrepreneurship (CE) 2.1
As firms move through the various stages of their life cycle, they often have to revitalize their
skills and build innovative capabilities to survive, achieve profitability, and stimulate growth (Zahra et
al., 2009). As Griener (1972) suggests, companies must adopt appropriate strategies, structure and
posture to cope with those stages. Corporate Entrepreneurship (CE) is the means by which these firms
build and exploit innovation capabilities to drive performance and remain competitive. As a field of
research, CE has attracted more attention in the last few years because of the growing need for firms
to become more proactive, innovative and diversify into new markets to survive and flourish in
competitive environments (Burgelman, 1983a, b; MacMillan and Day, 1987). According to Covin and
Slevin, "the growing interest in the study of CE is a response to the belief that such activity can lead
to improved performance in established organizations" (Covin and Slevin, 1991, p. 19).
Schollhammer (1982) also suggests that CE is "the key element for gaining competitive advantage
and consequently greater financial rewards" (p. 210).
CE is a term used to describe entrepreneurial behaviour in organisational context (Morris et
al., 2008). It is the means by which established companies reinvent themselves by innovations and
renewal and novel venturing initiatives (Ling, et al., 2008). Over the past 30 years of studying CE,
various scholars have attempted to conceptualise it. Perhaps the most comprehensive
conceptualisation is offered by Miller (1983) who views it as encompassing three related components:
product innovation, proactiveness and risk taking. According to Zahra et al., (2009), CE is the set of
activities within the operations of firms which stimulates innovation and encourages calculated risk
taking which leads to diversification into new markets. This is a comprehensive definition that
captures the dimensions conceptualised by Miller (1983).
CE has been viewed as a legitimate path to survival and high levels of organizational
performance (Ireland et al., 2006a, b; Morris et al., 2008; Rauch et al., 2009). But as Barringer and
Bluedorn (1999) suggest, entrepreneurial behaviour and attitudes are necessary for CE to be
effectively undertaken. Entrepreneurial behaviour, as referred to here, is characterised by
proactiveness and risk taking. Zahra and O‘Neil (1998) note that when factors in the external and
internal environment interact, managers should be challenged to respond creatively and act in
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
14 Literature Review | University of Nottingham
innovative ways. This kind of corporate entrepreneurial behaviour in firms is invaluable for the
purpose of profitability (Zahra, 1991), strategic renewal (Guth & Ginsberg, 1990), fostering
innovativeness (Baden-fuller, 1995), acquiring knowledge for future revenue streams (McGrath,
Venkataraman, & MacMillian, 1994), and international success (Birkenshaw, 1997). Large firms like
Apple who have achieved superior financial performance and are market leaders in their industries
have remained successful because they consistently maintain such activities that stimulate and sustain
entrepreneurship within their organisations, pioneering the creation and introduction of new products
and technologies. Other successful firms like 3M, IBM and Hewlett-Packard that have existed for a
long period have sustained their market share and maintained steady growth rate by constantly
revamping their organisational skills and innovation capabilities through the use of proactiveness,
innovativeness and calculated risk taking which captures the essence of CE. If firms will successfully
undertake CE, top management have a huge role to play in the use of those dimensions of CE. As
such the next sub headings discuss the role of management in CE and the relationship between CE
and performance.
2.1.1 Management and Corporate Entrepreneurship
In their work, Zahra et al. (2009) identifies two factors that can complement each other to
drive CE activities: Boards of Directors (BoD) and absorptive capacity for gaining access to varied
and current knowledge. In their view, BOD represent the highest level of firms governing system
while absorptive capacity refers to firms‘ ability to identify, capture and process and utilise ‗new
knowledge‘ acquired from various external sources. This ‗new knowledge‘ could be obtained by
joining alliances, selectively hiring key personnel (Morrow et al., 2007; Sirmon et al., 2007),
changing the composition or decision-making process of a company‘s BoDs (Ucbasaran et al., 2003)
or undertaking R&D activities (Cohen and Levinthal, 1990). Zahra et al. (2009) argue that because
BODs have a duty and commitment to protect and create more wealth for their shareholder, effective
resource management is their central focus and that motivates them to accumulate needed resources,
and effectively leverage their use to create competitive advantage and exploit new opportunities
advantageously (Sirmon, Hitt and Ireland, 2007). This means that CE starts with the BODs. This
argument is in line with a stream of research that suggests CE is reflected in top management's risk
taking with regard to: investment decisions and strategic actions in the face of uncertainty, the
extensiveness and frequency of product innovation, the related tendency toward technological
leadership, and the pioneering nature of the firm as evident in the propensity to aggressively and
proactively compete with industry rivals (Zahra 1991). Hence organisations cannot be entrepreneurial
without entrepreneurial BODs. It is intuitive to say that entrepreneurship within large firms must flow
from the top granted that authorisation, autonomy or supportive environment that fosters
entrepreneurship must be provided by BoDs, but a strategic vision by the BoDs which is imperative,
cannot in isolation lead to CE because other aspects of the firm need to adapt to change to ensure the
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
15 Literature Review | University of Nottingham
vision proliferates. With that in mind, its implementation is often multi-level and multi-actor
dependent (Ireland et al, 2009). That is, lower level manager and all other employees must buy-in to
the BoDs‘ strategic vision and embrace a culture of entrepreneurship for CE to be successfully
undertaken.
2.1.2 Corporate Entrepreneurship and performance
Although extant literature has established a relationship between CE and firms‘ performance,
there‘s an argument about a positive correlation between them. Zahra and Covin (1995) investigated
the influence of CE on firm‘s financial performance and their results suggest that CE has a positive
impact on financial measures of business performance in the long-run.
Furthermore, studies have shown that CE is a particularly effective practice among firms
operating in hostile environments as opposed to firms in benign environments (Covin and Slevin
1988, 1989). Hostile environment here include, but not limited to, highly competitive environment.
However, CE is not a panacea for improving the financial performance of firms. And in fact it could
be too costly and dangerous in the short-run. For example, being a pioneer in an industry could have
impressive benefits (Lieberman and Montgomery, 1988) as evidenced in the case of Apple because
they can target premium market segments and charge correspondingly high prices, control access to
the market by dominating distribution channels, and establish their products as the industry's standard.
These actions help them to acquire and sustain high market share and achieve profitability (Miller,
Gartner and Wilson, 1989).
Unfortunately, pioneering has concomitant costs and risks; the cost of investing heavily in
developing name recognition, building distribution channels, and safeguarding against imitation by
competitors; the risk of losing the first mover advantage. The returns on these investments can be very
disappointing (Rosenbloom and Cusumano 1987; Teece 1986). This argument supports why some
firms prefer to be conservative and cautious about risk taking, proactiveness and innovativeness. For
example, Iridium (a spin-off of Motorola) was launched with the brilliant idea of selling satphones to
a wide consumer market before the mobile phone boom. Disappointingly, it completely failed to find
its foot in the mobile phone industry.
Even when a first mover is successful in the market, if such first mover lack asymmetric
competitive advantage, later entrants can challenge it with heavy advertising and better pricing
(Carpenter and Nakamoto, 1989). Alternatively, a later entrant may choose to move away from the
first mover and develop a more desirable position rendering the first mover of no effect (Carpenter
and Nakamoto, 1989). Blackberry vs. iPhone is a good example to buttress this point. Instead of
competing with Blackberry on email push, iPhone developed a more desirable position by providing
more user friendly interface, features, apps and intuitive design.
The point is that CE is ambiguous. To effectively understand it, scholars have developed three
predictive models to explain its antecedents and consequences (Zahra et al., 1999). The three models
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are, first, the construct model: which looks at EO vis-à-vis its antecedents (Covin and Slevin, 1986,
1991); second, the EO-strategy, which studies the relationship between EO and strategies; third the
performance model, which explores the EO-performance relationship (Covin and Slevin, 1989; Zahra
and Covin, 1995; Dess et al., 1997; Hughes and Morgan, 2007). Having established the concept of CE
which is like a progenitor of entrepreneurial orientation, and discussed the role of managers in
implementing CE and the relationship of CE with performance, the rest of this chapter will examine
the EO and the EO-performance constructs.
Antecedents of Entrepreneurial Orientation 2.2
2.2.1 The EO construct
The work of Miller (1983) that identifies entrepreneurship as a phenomenon that encompasses
three dimensions, innovations, risk taking and innovativeness is among the first to conceptualise the
EO construct. He defines an entrepreneurial firm as 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). He emphasizes that all three dimensions of the construct must be
present for a firm to qualify as entrepreneurial arguing that a non-entrepreneurial firm ―is one that
innovates very little, is highly risk averse, and imitates the moves of competitors instead of leading
the way‖ (p. 771). Sequel to his work, Covin and Slevin (1988, p. 218) refined the definition of EO
construct stating that, ―the entrepreneurial orientation of a firm is demonstrated by the extent to which
the top managers are inclined to take business-related risks (the risk-taking dimension), to favour
change and innovation in order to obtain competitive advantage for their firms (the innovation
dimension), and to compete aggressively with other firms (the proactiveness dimension) (Miller,
1983).‖
These definitions make it difficult to distinguish between CE and EO. One of the earliest
works to make a distinction between them is Lumpkin and Dess (1996). They compared both
phenomena to the concepts of ‗Content‘ and ‗Process‘ established in strategic management
vocabulary. They related entrepreneurship to ‗content‘ while Entrepreneurial orientation to ‗process‘.
‗Content‘ is summarized in the question ―what business shall we enter?‖ The answer to this question
determines how a firm will deploy resources and relate with the market. The outcome of this answer
is a new entry. New entry is the act of creating a new venture either within an existing firm or as a
start-up (Burgelman, 1983). It might be carried out by an individual, a small firm or the strategic unit
of a large corporation (Zahra et al., 1991). However, for the purpose of this discussion, it helps limit
the scope to entrepreneurship at the corporate level, and this means that new entry is the central idea
underlying the concept of CE. On the other hand, ‗Process‘ implies those methods, practices, and
decision making styles that managers use to determine what opportunities to pursue and what risks to
take. Based on this comparison, they define EO as processes, practices and decision-making activities
that lead to new entry.
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This ‗new entry‘ view of entrepreneurship has been criticised to be limiting in scope by
scholars who favour opportunity base view (Stevenson and Jarillo, 1990). Perhaps the most
comprehensive definition of EO is the one De Clerq et al. (2010) suggest. They define a firm's
entrepreneurial orientation (EO) as:
‗a strategic posture that involves a propensity to be innovative; to depart from established
practices and entertain new ideas and experimentations; proactive, in that it beats competitors
to new market opportunities; and open to risks in exploring new products, services, and
markets‘ (p. 89).
Strategic/entrepreneurial posture is evidenced in three ways within an organisation: top
management risk-taking orientation in the face of uncertainty; propensity to innovate and tendency
toward technological leadership; aggressiveness and proactiveness to compete with industry rivals
(Covin and Slevin, 1991; Lumpkin and Dess, 1996; Miller, 1983). This is a pragmatic definition that
encompasses the five dimensions used to characterise EO: the propensity to act autonomously, a
willingness to innovate, proactiveness to exploiting market opportunities, willingness to take risks,
tendency to be aggressive towards competitors (Covin & Slevin, 1989, 1991; Lumpkin and Dess,
1996; Miller, 1983). Hence we adopt De Clerq et al. (2010) definition for this study. Innovativeness is
the tendency to go beyond the current state of things and engage creativity and combinations of new
ideas that may lead to new product (Lumpkin and Dess, 1996). Risk taking means a propensity to take
bold actions like committing large portions of resources to ventures with uncertain outcomes but with
the hope that it will lead to new and unknown market entry (Lumpkin and Dess, 1996). Proactiveness
means anticipating and capturing new opportunities, and participating in emerging markets (Lumpkin
and Dess, 1996). Autonomy is the independence and freedom to act entrepreneurially (Lumpkin and
Dess, 1996). Competitive aggressiveness is a disposition to challenge competitors directly and
intensely with an intension to outperform them in the marketplace (Lumpkin and Dess, 1996).
2.2.2 EO-performance construct
The widely held believe that EO and performance of firms are positively correlated has been
debated by scholars over the years. Some studies demonstrate the beneficial influence of EO on firm
performance (with an r > .30 e.g. Covin and Slevin, 1986; Wiklund and Shepherd, 2005; Zahra and
Covin, 1995; Rauch et al., 2009). Rauch et al. (2009) meta-analysis indicates that this positive
relationship is moderately high (r=.242). However, some studies suggest that this relationship does
not hold (Smart and Conant, 1994), others argue for the lack of universal applicability of an
entrepreneurial strategic posture (Hart, 1992). Covin and Slevin (1991) suggest that the EO-
performance relationship holds when a firm is in highly competitive, unforgiving, ‗hostile‘
environment, but may not hold when the firm is in a non-hostile or benign environment. They found
that EO is more beneficial to young firms in emerging industry than new ventures in more advanced
industries (Covin and Slevin, 1990). Hughes and Morgan (2007) also conclude from their study that
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there is insufficient systematic evidence to support the belief that EO is universally beneficial to the
performance of firms. These arguments have prompted further theoretical and empirical elaboration of
the EO–performance relationship (Lumpkin and Dess, 1996).
Though Miller (1983) strongly emphasized that the trio: innovative; risk taking and
proactiveness dimensions must be present for a firm to qualify as entrepreneurial, and other scholars
have argued for autonomy and competitive aggressiveness, Lumpkin and Dess (1996) cautions that
these dimensions may be present when a firm engages in new entry but all of them may not
necessarily be present for firms to be successful entrepreneurially. That is, although new entries are
indications of a proactive response to opportunities, an effort to take risk and probably a willingness
to be innovative as the case may be, successful new entries may be achieved when only some of these
factors are in operation. This means that the extent to which each of these dimensions can be used to
predict or qualify the success or performance of firms may be contingent on a host of external factors
like industry environment, or internal variables such as organisational structure and the characteristics
of founders or top managers, such as the actions they take or do not take (Lumpkin and Dess, 1996).
To emphasize their argument, Lumpkin and Dess (1996) found evidence to show that the five
dimensions vary independently contrary to prior findings (Miller, 1983) that suggest that they co-vary.
Thus, they conclude that the EO-performance relationship is context specific. The implication of this
conclusion is that in some context, some dimensions of EO may exist which may be absent in other
contexts, and that its dimensions may or may not positively influence firm performance (e.g., Hughes
and Morgan, 2007; Hughes, Hughes and Morgan, 2007). In support of this line of argument, Hughes
and Morgan (2007) find that while proactiveness and innovativeness has a positive relationship with
performance of young firms, risk taking has a negative relationship, whereas competitive
aggressiveness and autonomy has no relationship at all. Although one can argue that their study is
limited to firms at their embryonic stage in UK, it reinforces the argument that EO-performance
relationship is context specific.
Drawing from the arguments above, it is safe to conclude that EO-performance relationship is
context specific. That is, the relationship is moderated by some factors such as environmental
hostility, turbulence, and dynamism (Covin and Covin, 1990; Wiklund and Shepherd, 2005), external
networks (Lee et al., 2001; Stam and Elfring, 2008), and national culture (Arbaugh et al., 2005). Take
for instance a rapidly changing environment like the mobile phone industry, where products have
short life span; on one hand, established firms in such environment will benefit from being innovative
(innovativeness), proactively seeking new opportunities (proactiveness), taking risks to aggressively
position new products/services before its competitors does (risk taking and competitive
aggressiveness). On the other hand, risk taking and competitive aggressiveness might undermine the
success of an emerging firm with very little resources and capabilities (Hughes and Morgan, 2007).
Such firms need more formalised structures to manage their resources (Sine, Mitsuhashi and Kirsch,
2006) and to deploy only those entrepreneurial behaviours that best drive the firm‘s performance
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(Hughes and Morgan, 2007). Even with established firms, competitive aggressiveness could be
counterproductive. A classic example to buttress this point is HP and TouchPadTM
. HP launched
TouchPadTM
in a bid to compete with market giant- Apple. The product completely failed and was
withdrawn from the market two months after launch.
Indeed EO has a cost attached to it. Unfortunately most studies on EO and performance focus
on the correlation between them. Very few, if any has investigated the cost vis-à-vis the benefits of
EO. Undertaking EO involves deployment of resources and the outcome of such act might be costly
and even devastating.
2.2.3 EO-Strategy construct
Some studies advocate that understanding how firms can enable and effectively implement
EO also requires consideration of internal organizational processes and design (Lumpkin and Dess,
1996; Wiklund and Shepherd, 2005). One such process is strategic decision making process. Strategic
decisions have the potential for transforming firms. How these strategic decisions are made especially
in the face of uncertainty, and the processes from which they evolve have been investigated by many
scholars (Hart, 1992; Rajagopalan, Rasheed, & Datta, 1993). The processes involved in making
strategic decisions synthesis many aspects of organizational culture, shared value system, and
corporate vision (Hart, 1992). Many scholars have tried to conceptualize the process (Fredrickson,
1986; Hart, 1992; and Snow, 1978), and suggest there is a strong relationship between decision
making process and EO (Lumpkin and Dess, 1996). Most of the factors that influence strategic
decision making process―social exchanges, culture and personal values, economy and others―also
influence entrepreneurial processes and practices (De Clerq et al., 2010). These social factors which
are largely under explored influence the effective undertaking of EO by moderating knowledge
exchange within the organization (De Clerq et al., 2010).
Though various authors have investigated EO variables and how they moderate the EO-
performance relationship, majority of those investigations are based on Western context.
Acknowledging that EO is context specific the problem with having just ‗Western context studies‘ is
it gives a one-sided or partial account of EO, thus leaving literature with little knowledge on how
firms in non-Western context may be organised to be entrepreneurial and achieve high performance.
Moving on, the next chapter will expatiate on EO-performances construct with a focus on the role of
national culture on the relationship.
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Theoretical framework and Hypothesis development 3
Building on the foundations set out in chapter 1, this chapter examines two factors that affect
the EO-performance construct: role of managers and role of culture. Following this, it then discusses
how culture affects dimensions of EO. The chapter then proceeds by examining how management
works in sub-Saharan African and the cultural pattern of the region. It ends with the development of
the hypotheses to be tested in this study.
EO-Performance of firms 3.1
Firms are organic in nature. And like all living organisms, firms have the natural tendency to
respond to stimuli. Covin and Slevin (1991) conceptualise the stimuli that firms respond to as external
and internal variables. External variables include technological sophistication, environmental
dynamism, environmental hostility, and industrial life cycle stage whereas internal variables are top
management values1 and philosophies, organisational resources and competencies, organisational
culture and organisational structure (Covin and Slevin, 1991). Several scholars have developed
theories and undertaken empirical research that demonstrate existence and effectiveness of EO and its
dimensions are inextricable from firms‘ external environment (Miller, 1983; Khandwalla, 1987).
Nonetheless, just as external variables define the EO of firms, firms can also induce changes in
external variables by responding aggressively to it (Miller and Friesen, 1982). For instance the release
of iPhone in 2007 changed the smartphone industry and made it more dynamic and competitive.
Depending on the environment a firm finds itself EO may be favourable (Covin and Slevin,
1989) less favourable or even detrimental to their performance (Miller and Friesen, 1983; Hughes and
Morgan, 2007). Building on Covin and Slevin‘s (1991) conceptualisation of factors that affect EO,
several authors extend internal/organisational factors that influence EO-performance of firms into five
(Hornsby et al., 2000). They are: appropriate use of rewards; gaining top management support;
resource availability; Supportive organizational structure; and risk taking and tolerance for failure.
Given that these factors are decided by management, one can argue that they can be influenced by top
management values and philosophies. Those management values and philosophies are influenced by
the national culture surrounding them. For instance, based on their discretion, top management can
design a flexible structure that fosters creativity and free flow of information and also a culture with
high tolerance for risk-taking and failure.
As noted earlier, the factors that affect EO of firms are numerous. It helps to focus on the two
variables: ‗role of management‘ and ‗role of culture in EO of firms‘ as they are more relevant to this
discourse. The figure below is a diagrammatic representation of how the factors moderate the EO-
performance relationship, based on Lumpkin and Dess‘ (1996) conceptual framework.
1 Values, which form the core of any culture, are broad tendencies to prefer certain states of affairs over others (Hofstede,
1991)
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Figure 3-1 Conceptual Framework of Entrepreneurial Orientation Lumpkin and Dess, 1998
3.1.1 Role of Top management: Leadership and organisational structure
Extant literature suggests that EO is a top-down phenomenon (Quinn, 1985; Hornsby et al.,
2009; De Clerq et Al., 2010; Zahra, 2010) that is the process must start at the very top of the
organization. To effectively undertake EO, Quinn (1985) suggests that top management needs
flexibility and tolerance for ambiguity in its strategic vision. In their work, De Clerq et al (2010)
provide a theoretical elaboration of how the internal social context affects the EO–performance
relationship. They advocate that procedural justice and trust in the relationships between functional
departments can foster EO, and argue that by fostering commitment and inspiration throughout the
ranks of the organization, top managers can create further impetus for cross-functional initiatives and
collaboration that facilitate knowledge exchange and ultimately help fulfil the firm's entrepreneurial
potential.
Some bodies of research including Hayton (2005) suggest that organizational structure and
culture are the most important aspects of managing entrepreneurship within organisations. In their
work on conceptualization of entrepreneurship as opportunity-based firm behaviour, Stevenson and
Jarillo (1990), noted that flat managerial structure characterise firms who behave entrepreneurially.
Though they do not concede that flat structure is always necessary for firms to be entrepreneurial
since certain internal and external factor could necessitate firms to favour hierarchical structure, they
stress that flat organisational structure brings flexibility and increases communication as well as to
give employees the autonomy to exercise and enhance their creativity. For example, they point out
that a hierarchical approach is necessary in the face of greater complexities of tasks like planning,
coordination, and controlling functions. Hence they conclude that it‘s up to managers to foster
conditions favourable to EO within their organization. Designing the structure of the management –in
terms of removing unnecessary bureaucracy and hierarchy- to encourage communication, enhance
Entrepreneurial
orientation
Risk taking
Innovativeness
Proactiveness
Competitive
aggressiveness
autonomy
Organisational factors
Role of manager
Environmental factor
National culture
Firm‘s Performance
Market share growth
Gross profit Margin
Return on Investment
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22 Theoretical framework and Hypothesis development | University of Nottingham
creativity and therefore stimulate entrepreneurship is highly dependent upon the manager‘s personal
values, attitude and beliefs which are forged by his culture, social exchanges, and expectations. Since
these values, attitudes and beliefs are reflected in different national cultures, how they fit in with the
existing organisational culture and the influence of national culture on them could be a major factor in
the differences in how firms in the west and other parts of the world are managed.
Some studies have shown that leadership style of top managements directly affect the
performance of their firms (Gardner and Stough 2002). Following their study, Bass and Avolio, 1993
concludes that transformational leadership2 is significantly more correlated to the business
performance than transactional leadership3 and passive avoidant leadership
4 because it embodies the
concept of entrepreneurial leadership proposed by Gupta et al. (2004). According to Cohen (2004),
entrepreneurial/charismatic leaders with clear and realist vision and strategy are needed to give firms
inspiration and drive to brave dynamic, complex, uncertain, and competitive environments. Although
charismatic leadership may be effective at times, the ―dark side of charisma‖ is also well documented
(e.g., Conger, 1989; Howell, 1988) and evidenced by totalitarian, exploitive, self-aggrandizing
charismatics, extreme centralization of authority, irresponsiveness to new ideas and suggestions which
in the long-run may be detrimental to performance of the organisation.
Having established that managerial style affect performance, it is important to acknowledge
that the leadership style a manager adopts depends on his values, beliefs and philosophies which are
dependent on his culture.
3.1.2 The role of culture
Culture is defined as a set of shared values, beliefs, and expected behavior of a people
(Hofstede, 1980a). Those values embedded in cultures define the degree to which societies perceive
entrepreneurial behaviours such as risk taking, and independent thinking. In this same token, culture
and its characteristics may affect how societies organise their firms. Cultural patterns vary across
regions and consequently their impact on firms varies. Hofstede (1980a) conceptualized these patterns
in various national cultures into power distance; collectivism/individualism; masculinity/feminism;
uncertainty avoidance. In various national contexts, the differences in the dimensions of national
culture are well established (Hofstede, 1981, 1991; Phatak, 1986; Trompenaars and Hampden-Turner,
1998), and their implications on managerial styles and employee behaviour (Chen and Francesco,
2000; Miroshnik, 2002) have been noted. For instance, Mexico is characterised by a very high level of
―power distance‖ contrary to United States that is characterised by a very low. As a result of this gap,
2 According to Yammarino & Bass (1990), transformational leaders or charismatic leaders transform organisations (Tichy
and Devanna, 1990) articulating a realistic vision of the future that can be shared, stimulating subordinates intellectually, and
paying attention to the differences among the subordinates 3 Transactional leaders are those who recognize what followers want to get from their work; try to see that followers get
what they desire if their performance warrants it; exchanges (promises of) rewards for appropriate levels of effort; and
responds to followers‘ self-interests as long as they are getting the job done (Bass, 1985). 4 Passive-avoidant leaders are leaders who shy away from important decisions and abstain from an active leadership role
(Bass, 1985).
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Hofstede (1981) suggests that a management tool such as ―Management by Objectives‖5, popular in
the United States, may be inappropriate in Mexico; Mexican managers will not accept delegating
important tasks to their subordinates because of their weak sense of egalitarianism. They will not also
favor a participative managerial model. He also noted that matrix structures which ought to be a way
of dealing with external complexity, overcome internal tensions and bring more flexibility to firms
does not seem work in countries like Germany and France. In France, the reason for this is that it
violates the principle of unity of command and hierarchical line and in Germany it goes against the
absolute need for clear structures, information channels, roles and responsibilities. In short it conflicts
with their cultural values. This example highlights the contextual impact of cultural values on EO.
3.1.2.1 Influence of national culture on entrepreneurial orientation
How societies perceive such entrepreneurial behaviours like risk taking and their attitude
towards the uncertainty and failure associated with it, can either foster or deter the propensity for the
citizens of that society to be entrepreneurial (e.g., Herbig & Miller, 1992; Herbig, 1994;Hofstede,
1980a). This school of thought, some scholars think, explains the disparity in the entrepreneurship
spirit of US and UK. US people are more entrepreneurial than UK. Theorists argue that this is because
US have high tolerance for risk and failure whereas UK has low tolerance for failure. This is one
example of how much impact culture can have on entrepreneurial orientation. Not all scholars favour
this idea that culture impact on entrepreneurship. Some argue that the since personal traits and
characteristics of entrepreneurs, such as independent thinking and risk taking, are consistent
regardless of the culture that births those entrepreneurs. (McGrath et al., 1992b), culture should have
no effect on EO. Though there might be some evidence to support this argument, one can draw
lessons from Mother Nature to counter this argument. It is well known that a good seed will not do
well, if it grows in the first place, in an inhibiting environment (like infertile ground) compared to a
supportive environment. By the same token, entrepreneurship may not flourish in a hostile
environment. Culture determines the degree of supportiveness or otherwise, of a society making it
more legitimate for entrepreneurship to thrive or die (Etzioni, 1987).
This relationship between culture and entrepreneurship as a subject for debate has attracted
more scholarly interest and empirical scrutiny over the last decade (Davidsson, 1995; Davidsson &
Wiklund, 1997; Shane, 1992, 1993). Most of these empirical studies have used Hofstede‘s
conceptualization of national culture. In general, these studies suggest that entrepreneurship is
facilitated by cultures that are high in masculinity, low in power-distance, low in uncertainty
avoidance, and high in individualism. Table 3-1 presents a summary of studies on culture-EO. Though
some studies have shown that culture significantly relates with entrepreneurial outcomes, Hayton,
George and Zahra, (2002) share a concern that culture might only be a moderator.
5 Management by Objectives or MBO is a tool for strategic planning in management that aims at articulating the company‘s
goals into clear and measurable targets which are broken down into specific objectives for each individual in the company
(Drucker, 1954).
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Figure 3-2 A model for culture association with Entrepreneurship (Hayton, George and Zahra, 2002)
The figure above is a model that shows how culture might moderate entrepreneurial
outcomes. The nature and extent of culture‘s impact on aspects of corporate entrepreneurship like
choice of entry mode (Kogut & Singh, 1988; Makino & Neupert, 2000; Shane, 1994a), preference for
cooperative strategies (Steensma, Marino, & Weaver, 2000), and preferences regarding innovation-
championing styles (e.g., Shane, 1994b; Shane, 1995; Shane & Venkataraman, 1996) has been
investigated by scholars and some discrepancies have been well noted .
For instance, some studies hypothesize that culture affects choice of strategies for mode of
entry into new market (Kogut & Singh, 1988; Makino & Neupert, 2000; Shane, 1994a); they suggest
that firms in uncertainty-avoiding (i.e. uncertainty avoidance) societies will prefer joint ventures over
acquisitions (Kogut & Singh, 1988), and firms in low power-distance societies prefer licensing to
direct investment (Shane, p. 994b). This view point is not consistent with the findings of (Makino &
Neupert, 2000). They noted that Japanese firms with moderate power-distance and high uncertainty
avoidance usually prefer wholly owned subsidiaries to joint ventures, whereas American firms with
low power distance and low uncertainty avoidance prefer joint ventures to wholly owned subsidiaries.
These discrepancies are reflection of the idiosyncrasies of the national context wherein those
studies were made. The ethos therefore is that cultural dimensions impact in different ways the EO of
firms across national context i.e. culture-EO relationship is national context specific. In Berger‘s
words, ―It is culture that serves as the conductor to entrepreneurship‖ (Berger, 1991, p. 122). This
means that a national culture that supports values and behaviours that foster EO is imperative for
entrepreneurship to thrive. In this regard, the following sub headings clarify how culture might affect
the dimensions of EO.
(Society)
Economic Context Economic growth
Industry conditions
Industrial infrastructure
Cultural Values
Individualism-Collectivism
Uncertainty avoidance
Power-distance
Masculinity-feminism
Cognition
Schemata - knowledge structures
Heuristics - decision preferences
Beliefs and Behaviors
Risk taking
Locus of control
Self efficacy
Needs and Motives
Need for achievement
Need for affiliation
Individual and social goals
Institutional Context
Social systems institutions
Regulatory and legal systems Entrepreneurship
New-venture creation
Small and micro business
Self-employment
Corporate venturing
(Individual
)
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Table 3-1 previous study on culture and entrepreneurship
Authors Research question Major Findings
Shane (1992) What is the association betwenn
national culture and national
rates of innovation
National rates of innovation are
positively correlated with
individualism and power
distance
Shane (1993) What effect does national
culture have on national
innovation
National rates of innovation are
positively correlated with
individualism and negatively
correlated with uncertainty
avoidance and power distance
McGrath & MacMillan (1992) Across culture, do entrepreneurs
share common perception about
non entrepreneurs?
Across diverse cultures there is
a common set of perceptions
held by entrepreneurs about
non-entrepreneurs
MacGrath et al., (1992b) It there a set of values that are
held by entrepreneurs versus
non-entrepreneurs across
cultures?1
Across cultures, entrepreneurs
score high in power distance,
individualism and masculinity.
And low in uncertainty
avoidance.
Muller & Thomas Do entrepreneurial traits vary
systematically across cultures?
Cultures high in individualism
are correlated with an internal
locus of control. Cultures high
in individualism and low in
uncertainty avoidance rate
highest in the measure of
entrepreneurial orientation
(innovativeness and internal
locus of control)
Thomas & Muller How prevalent are four key
entrepreneurial traits
(innovativeness, locus of
control, risk taking, energy)
across cultures?
Entrepreneurial traits
(innovativeness, locus of
control, risk taking, energy)
decrease as cultural distance
from the US increases.
3.1.2.1.1 Risk taking
The willingness to take risk and accept the consequences that bear the unknown is the
fundamental characteristic of entrepreneurs or entrepreneurship. New entries are made because
individuals and firms alike elect to forfeit the security of jobs or the current state of art within
organisations and pursue their new ideas (Lumpkin and Dess, 1996). Thus, risk taking is a very
important dimension of EO. Entrepreneurs are not deterred by the uncertainty that comes with their
actions, but with their eyes fixed on the anticipated outcome, they are motivated by a hope that is
geared towards success. Despite the lack of consensus, all definitions of entrepreneurship, or who an
entrepreneur is, acknowledge risk taking as a trait that is characteristic of all entrepreneurs, regardless
of what culture it is. Risk taking is an attitude. It is a way of life. Like other values, it can be
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reinforced or deterred by culture. A culture that encourages adventure and proclivity, tolerance for
ambiguity, trying new things, challenging conventional wisdom, committing resources to
experimentation and gives room for failure will reinforce it. But a culture that is uncertainty averse;
that prefers to leave things that way they are and accept events as ‗the will of god‘, or at most, settle
for predictable outcomes, will deter it. In Nigeria, the Igbos‘ are generally accepted as the most
entrepreneurial tribe. Most of them are who are engaged in entrepreneurial activities are successful
entrepreneurs. A logical explanation to this is found in their culture. Igbos‘ are explorative. They are
more travelled than any other tribe in Nigeria. They are encouraged to endeavour to fend for
themselves and not rely on their fathers‘ wealth from a very early age. So from early in life, most of
them start committing to different activities in search for green pastures. This hard work, explorative
and risk taking propensity might be the reason behind this fact.
3.1.2.1.2 Innovativeness
Schumpeter (1934) argues that innovations are capable of punctuating market equilibrium by
destroying old markets and creating new ones. This is what he called ―creative destruction.‖
Innovation plays a very important role in the success of firms. It gives firms competitive advantage.
But like Peter Drucker said, innovations are not a ―flash of genius‖, but series of tasks with a clear
sense of purpose organised in a systematic manner promoted and supported by management (Drucker,
1985). In other words, innovation is a product of circles of trial and error which is encouraged by
management. Hence, the strength of innovativeness is embedded in the culture surrounding it. If a
culture supports new ideas, novel solution to problem and experimentation then innovativeness is
more likely to be greater. Such culture will experience results like new technologies, products and
processes. This is probably the best explanation for the success of East-Asia vis-à-vis Africa. East-
Asian cultures share very similar cultural patterns as sub-Saharan African‘s cultures. Amongst these
cultural patterns are respects for seniority, high power distance, collectivism and responsibility to
expended family. While some bodies of literature argue that cultural values hold the answers to the
economic backwardness of sub-Saharan African countries, reports acknowledge that the economy of
countries like China and India with similar cultural values have increased dramatically over the two
decades. One can argue that there are many other reasons to the development of East-Asia such as
policies, social and human capital, but in the context of national culture, orientation towards
innovativeness and risk taking are suggested answers to this disparity.
3.1.2.1.3 Proactiveness
Proactiveness can render first-mover advantage to a firm. Lieberman and Montgomery (1988)
argue that first-mover advantage is the best strategy for capitalizing on a market opportunity as the
first mover can capture unusually high profits and quickly establish their brand as the market
standard. However, proactiveness is not limited to first-mover and first move does not guarantee this
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27 Theoretical framework and Hypothesis development | University of Nottingham
advantage. There are many examples to support this counter argument. For instance, Apple was not
the first mover into digital music but is has established its iTunes brand as the standard for the
industry. Nevertheless, the point here is that proactiveness offers some advantages. Proactiveness cuts
across all other dimensions of EO like risk taking and innovativeness. Hence a culture that supports
innovativeness and risk taking may support proactiveness and a culture that deters them may also
have similar affect it.
3.1.2.1.4 Competitive aggressiveness
Competitive aggressiveness places emphasis on achievement and performance in management
psychology, expectancy-value theorist (Atkinson, 1957; Eccles et al., 1983; Wigfield, 1994; Wigfield
& Eccles, 1992) argue that high expectation and value for an activity increases individuals‘
persistence and aggressiveness for performance and achievement. However, lack of recognition of
achievements and performance can be demotivating (Hezberg, 1959). Thus, a culture that fairly
rewards achievements and performances will provide an environment for individuals to be motivated
by how they perceive opportunities.
3.1.2.1.5 Autonomy
The driving force behind the creation of new ventures is the independence and freedom to act
entrepreneurially. Such actions taken independently of stifling constraints connote autonomy. As such
autonomy is a key dimension of EO. However, for autonomy to be as productive as possible,
entrepreneurs must operate within enabling cultures. Such cultures should allow entrepreneurs to act
independently, maintain personal control and pursue opportunities without societal constraints and
restrains. For firms to promote this kind of culture, they must be committed to decentralization of
authority, lower power distance and high tolerance for risk and uncertainty (Pinchot, 1985).
From the discussions so far, two conclusions are clear: first, EO-performance relationship is
context specific; second, culture-EO relationship is national context specific. The implication of these
conclusions is that those dimensions of EO that render high performance to Western firms may give
totally different result in different national context because of the prevailing culture in that nation and
replicating such dimensions in different national context might be a recipe for disaster. But given that
most literature suggests that EO is positively related with performance, it is reasonable to test for a
positive relationship. Hence the following two hypotheses are made:
H1: All the dimensions of EO are positively related to performance of Nigerian firms.
H2: EO mediates the relationship between culture and performance of Nigerian firms.
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Culture and Entrepreneurial Orientation 3.2
3.2.1 Management in sub-Saharan Africa (SSA)
In management, two fundamental issues that govern the productivity of businesses are; the
ability of managers to lead and the propensity of workers to work. The former deals with ‗leadership‘
and the later deals with ‗motivation‘. The following sub-sessions will discuss how culture affects
these management practices.
3.2.1.1 Leadership
Leadership in SSA is mostly characterised by high power distance and autocracy, uncertainty
avoidance and risk averseness, family ties and interpersonal relationship. As N‘dongko (1999) notes,
―African managers are seldom driven by organizational objectives and goals. As soon as an African is
appointed to a management position, he then appoint his relatives and family members to positions of
responsibility in the organization African managers do not strive for challenges and excellence, but
rather they remain content with the status quo and mediocrity‖ (p. 114). These attitudes are product of
the prevailing culture. Hofstede argues that
―the crucial fact about leadership in any culture is that it is a complement to subordinateship...
Whatever a naive literature on leadership may give us to understand, leaders cannot choose
their styles at will; what is feasible depends to a large extent on the cultural conditioning of a
leader‘s subordinates‖ (Hofstede, 1980b, p. 57)
Empirical investigations suggest that in general, African managers are authoritarian in their
leadership and their subordinates remain deferent and loyal them (Blunt and Jones 1995; Kuada 1994;
Leonard 1987; Montgomery 1987; Tuma 1988). This authoritarian disposition reinforced by a culture
that endorses ascribed status and respect for seniority (Kauda, 1994), large power distance (Hofstede,
1980, 1991). Management has all the power and regulates rewards and punishment while workers are
expected to do their work and obey management‘s directives. In this way organisations are mostly,
hierarchical, highly bureaucratic, and communication is mainly one way, from top to bottom
(Kiggundu et al., 1983). In essence, centralisation of authority characterises organisational culture
within sub-Saharan African firms.
Previous empirical research findings suggest that greater degrees of centralisation and
formalisations have a propensity to lower the ability of firms to acquire more information, disseminate
and use such information (Deshpande, 1982). To emphasize this point, Martins and Terlanche (2003)
suggest that a flexible structure with high degree of freedom, autonomy and empowerment enhances
creativity and innovation. Hence they conclude that informal and decentralised organisational
structures tend to favours EO. Contrary to this, Kuada and Buatsi‘ (2003) empirical study on the
market orientation and management practices in Ghanaian firms suggest that centralization and
formalisation has a positive impact on market orientation of Ghanaian firms. This finding is in
consonance with the results of Miller (1983) which suggest that centralization positively correlates
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with entrepreneurship. Even if this positive impact is in the short-run, as Kuada and Buatsi suggest,
the argument that management practices and leadership styles that are successful in the West may not
be successful in different cultural contexts, is reinforced.
3.2.1.2 Work Motivation
Mahungwa and Schmidt (1983) found six factors that affect work motivation in sub-Saharan
African firms. They are growth and advancement opportunities, the nature of the work itself, material
and physical provisions elements, interpersonal relations, concerns about fairness in organizational
practices, and personal matters. Jones et al. (1996) suggest that strong relationship with bosses with a
purpose of benefiting from their favour is also a motivating factor for some workers. Such benefits
include, pay rise, bonus or promotion. Most African firms do not operate performance-based
compensation but instead managers and workers are rewarded according to their needs and tenure in
office. Performance appraisal is bias due to personal relationship and family ties. That means,
appraisal is largely based on compliance rather than productivity (Thairu, 1999).This kind of practice
may lead to employee apathy, thereby preventing organizational growth.
3.2.2 African cultural patterns
The attributes of organisational cultures are shaped by the prevailing culture in the society
(Granovetter, 1985). Many of the difference in organizational behaviour between African and
Western world are not necessarily due to managerial failure but to lack of fundamental similarities in
the value priorities of the societies that encapsulates them (Leonard, 1987). Across sub-Sahara Africa,
cultural patterns are characterised by diversity, contrasts and contradictions (Kiggundu, 1988: 170).
Even within Nigeria, tribal, religious and ethnic differences are substantial. But despite this vast
diversity, there are some common features that cut across African cultural patterns. Some of these are
respect for elders, respect for authorities, pride of class and social status, family orientation,
collectivism and consensus decisions and so on (Hofstede, 1991).
For the purpose of this study, it is best to focus on the most salient cultural patterns that relate
to this discourse. They include respect for elders and deference to power, collectivism and power
distance. These cultural patterns have been considered to be important in describing management
practices in sub-Saharan African (Blunt and Jones, 1992).
3.2.2.1 High Power distance
High power distance implies a situation where individuals in a society who are less powerful
accept unequal distribution of power and willingly regard such distribution as normal (Hofstede,
1980). Within firms, high power distance is reflected in centralisation of authority, tall organisational
structures where lower level employees cannot take decisions without reference to superiors and open
criticism is rare. Several empirical studies suggest that many African cultures score high on power
distance (Hofstede, 1991; Beugre and Offodile, 2001; Montgomery, 1987).
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Table 3-2 Identification and Definition of Cultural Dimensions Based on Hofstede (1980)
Cultural Dimension Definition
Power Distance—degree of tolerance for
hierarchical or unequal relationships
High—large degree of tolerance for unequal
relationships
Low—small degree of tolerance for unequal
relationships
Uncertainty Avoidance—degree of
acceptance for uncertainty or willingness to
take risk
Strong—little acceptance for uncertainty or risk
Weak—generally accepting for uncertainty and
risk
Individualism—degree of emphasis placed
on individual accomplishment
Individualism—large degree of emphasis on
individual
accomplishment
Collectivism—large degree of emphasis on group
accomplishment
Masculinity—degree of stress placed on
materialism
Masculinity—large degree of stress on
materialism and
wealth
Femininity—large degree of stress on harmony
and
relationships
High power distance is reinforced by respect for seniority. Africans hold a lot of respect for
their seniors and therefore the older a person is the more he6
is respected. The reason for this respect
for age is not very clear. The most common reason is that Africans believe there is a strong correlation
between age and wisdom. This belief is derived from the master-servant apprenticeship that
characterised the pre-Westernisation era; when skills and knowledge were majorly thought by masters
who are normally elderly. Because these elderly ones have acquired some knowledge and skills,
thanks to their wealth of experience, younger ones often look up to them for knowledge (Baltes and
Staudinger, 2000). With Westernization of African countries, this correlation are no longer true
(Baltes and Staudinger, 2000). People now respect the wisdom of an individual more than his age
6 He, his or him, as used here and every other place in this study is used to qualify both male and female and has
no gender bias motive.
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(Beugre and Offodile, 2001); those with modern skills or higher position tend to command more
respect. Irrespective of this, respect for seniority still shape interpersonal relationships. The
implication is that even when granted to employees, autonomy may be of no effect because of a
natural tendency of allegiance to seniors (or authority). Hence the hypothesis:
H3a: High power distance is negatively related to autonomy in Nigerian firms.
Some body of research suggest that centralization of authority give managers a clear focus
and can improve the EO of firms. This is because centralization of authority makes managers respond
faster to situations. That is centralization is positively correlated with proactiveness. Given that high
power distance leads to centralization of authority, one can argue that it is positively related to
proactiveness. Hence:
H3b: High power distance is positively related to proactiveness of Nigerian firms
3.2.2.2 Collectivism
According to Hofstede (1980), ―Collectivism pertains to societies in which people from birth
onwards are integrated into strong, cohesive in-groups, which throughout people's lifetime continue to
protect them in exchange for unquestioning loyalty‖ (p. 51). Africa culture is characterised by group
activities (Dia, 1991; Hofstede, 1991). Africans feel comfortable in groups than individually (group
legitimacy) (Ahiauzu, 1989). Given the widely accepted fact that there‘s power in synergy, one can
argue that collectivism has positive effect on firm‘s performance through a positive relationship with
EO. But the effects of group legitimacy on business performance are not clear. Some scholars argue
that it positively affects firms‘ performance (Adler and Kwon, 2002; Nahapiet and Ghoshal, 1998),
while others argue otherwise (Burt, 1992; Uzzi, 1997). Shared creativity norms which is a function
of group activities, are likely to encourage groupthink which may lead to similar knowledge transfer.
This has the potential of locking a firm in specific trajectories thereby reducing firms‘ openness to
new ideas and thereby could impair the performance of firms. Also the predominance of groups
requires consensus decision making. Consensus is achieved through long discussion and negotiations
which could slow down decision making process7. The implication is that group legitimacy or
collectivism could have a positive or negative consequence on firm‘s EO. For the purpose of this
study, it helps to breakdown this relationship to the component level and investigates how
collectivism might affect the individual dimensions of culture. Hence the following hypotheses:
H4a: Collectivism is positively related to risk taking in Nigerian firms
H4b: Collectivism is positively related to innovativeness Nigerian firms
H4c: Collectivism is positively related to aggressiveness Nigerian firms
H4d: Collectivism is negatively related to proactiveness Nigerian firms
H4e: Collectivism is positively related to autonomy Nigerian firms
7 The author thanks the senior colleague who raised this line of argument after reviewing this study.
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3.2.2.3 Uncertainty avoidance
Unlike Western cultures, African cultures are not inclined towards controlling the external
environment but rather to comply with it. One of the consequence patterns is a tendency to avoid
uncertainty (Hofstede, 1980). African societies are risk-averse. They avoid situations that bring
change because of fear of the uncertainty that comes with the unknown. Selah (1985) notes that
traditional values in Kenya discourage change but encourage people to accept things that way they
are. This attitude cuts across sub-Saharan Africa. Africans are very religious. People are quick to
accepting circumstances as ‗the will of the gods‘. When events occur they aptly find explanations in
spirituality rather than finding logical answers. Such lack of curiosity leads to mediocrity and content
with status quo. This explains why most African firms are reluctant to confront status quo with
innovations. To buttress this point, Montgomery (1987) opines that African managers are
conservative. They prefer to accept the present as it is than to brave the unpredictable future and
accept the uncertainty that follows the act. These values and attitude emphasise blind obedience to
authorities and general avoidance of risks within firms. Hence the hypotheses:
H5a: Uncertainty avoidance is negatively related to risk taking
H5b: Uncertainty avoidance is negatively related to proactiveness
3.2.2.4 Masculinity
Members of masculine cultures are assertive; they value achievement, courage and
competition and view the world in terms of winners and losers (Hofstede, 1991). On the other hand,
feminist cultures tend to discourage the notion of competition believing that negotiation and
compromise can be used to resolve conflicts (Hofstede, 1980a). Although Africans are risk averse,
they are assertive and competitive in nature. This makes them tend towards the masculine end of
Hofstede (1980a) masculinity/feminism continuum. Given that firms in Nigeria are successful in spite
of their masculine tendencies, we make our fourth hypothesis:
H6a: Masculinity is positively related to risk taking.
H6b: Masculinity is positively related to competitive aggressiveness
H6c: Masculinity is positively related to autonomy
For the purpose of clarity shows a list of all the hypotheses and gives a diagrammatic
representation of the hypotheses relationship.
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33 Theoretical framework and Hypothesis development | University of Nottingham
Table 3-3 List of hypothesis
H1: All the dimensions of EO are positively related to performance of Nigerian firms.
H2: EO mediates the relationship between culture and performance of Nigerian firms.
H3a: High power distance is negatively related to autonomy in Nigerian firms.
H3b: High power distance is positively related to proactiveness of Nigerian firms
H4a: Collectivism is positively related to risk taking in Nigerian firms
H4b: Collectivism is positively related to innovativeness Nigerian firms
H4c: Collectivism is positively related to aggressiveness Nigerian firms
H4d: Collectivism is negatively related to proactiveness Nigerian firms
H4e: Collectivism is positively related to autonomy Nigerian firms
H5a: Uncertainty avoidance is negatively related to risk taking
H5b: Uncertainty avoidance is negatively related to proactiveness
H6a: Masculinity is positively related to risk taking.
H6b: Masculinity is positively related to competitive aggressiveness
H6c: Masculinity is positively related to autonomy
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Table 3-4 A diagrammatic representation of the hypotheses and their relationships
H1 All the dimensions of EO are positively
related to performance of Nigerian firms
H3-6
performance
H2
EO mediates the relationship between
culture and performance of Nigerian
firms
EO
H3a High power distance is negatively
related to autonomy in Nigerian firms.
Risk Taking
H3b High power distance is positively related
to proactiveness of Nigerian firms
H4a Collectivism is positively related to risk
taking in Nigerian firms
H4b Collectivism is positively related to
innovativeness Nigerian firms
Autonomy
H4c Collectivism is positively related to
aggressiveness Nigerian firms
H4d Collectivism is negatively related to
proactiveness Nigerian firms
Proactiveness
H4e Collectivism is positively related to
autonomy Nigerian firms
H5a Uncertainty avoidance is negatively
related to risk taking
H5b Uncertainty avoidance is negatively
related to proactiveness
Competitive
aggressiveness
H6a Masculinity is positively related to risk
taking
H6b Masculinity is positively related to
competitive aggressiveness
H6c Masculinity is positively related to
autonomy
Innovativeness
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35 Research Design | University of Nottingham
Research Design 4
This chapter outlines the research design used to test the hypotheses developed in the
preceding chapter. It begins by justifying and describing the samples and the sampling method
adopted as the channel for the execution of data generation strategy. Next it reviews the respondents
and the method used for data collection in this study. Following this, a summary of how the data was
prepared for analysis will be made. Next, the measures (Table 4-2) used for the study will be
discussed in reasonable detail, that will be followed by a detailed description of the analytical
technique used.
Sample population and sampling method 4.1
Defining the sample population for this study takes into account the geographical location of
the units at the time of sampling. Thus, the population for this study is Nigerian based firms. Because
the focus of this study is to investigate EO and firm performance in a national context, testing the
hypothesis did not require focusing on specific industry context and firm context. Consequently, a list
of 120 Nigerian firms cutting across various industries was compiled by randomly sampling the firms
on the directory of Yellow Pages‟ website and the website of Lagos, Edo and Abia states‘ Chamber of
Commerce. Owing to low IT orientation and poor internet facilities in Nigeria, some of the listed
firms did not have a good websites, if they had at all, thus much information on firms could not be
gathered from the web.
Key informants 4.2
The informants targeted for this study were first line managers and lower level employees
who have been with the firm from up to 6 months (Kumar, Stern, & Anderson, 1993). This category
of employees was identified as most relevant informant for this study for two reasons: first, they
understand the culture and disposition of the firm to risk taking proactiveness and innovativeness
(Huber & Power, 1985; Stubbart, 1989; Hmieleski and Baron. 2008). Second they are in a better
position to give an objective view of their firms with regards to both the culture and entrepreneurial
posture than top managers will do (Baum, Locke and Kirkpatrick, 1998).
Data collection and response rate 4.3
To gather data, an online survey method was adopted. A questionnaire was created on Survey
Monkey® and the link to the questionnaire‘s webpage was sent to some of the sampling unit by
means of email. These sampling units are those firms whose email address was available in the same
directory from where they were sampled at the time of sampling. Those sampling units who could not
be contacted by email because their email address was not available in the directory as at the time of
sampling were contacted by telephone to take the questionnaire. In creating and administering the
survey, Dillman (2000) Tailored Design Method was adopted. Features like questionnaire salience,
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36 Research Design | University of Nottingham
length, anonymity and confidentiality guarantees, and many other features of this protocol were
thoroughly considered to secure a good response rate (Cycyota and Harrison, 2002). Pre-notification
emails and the link to the questionnaire, and a series of follow-up correspondence were sent
respectively to sampling units (Dillman, 2000).
Owing to consistent follow up emails and calls made to all the respondents and non-
respondents, a total of 61 responses were received resulting in a response rate of 50 %. Nonetheless it
is necessary to acknowledge that apathy towards survey in Nigeria and lack of time on the part of
respondents limited the responses. All the responses were received in the first two weeks in August
2011.
Of the 61 samples collected, 47 qualified for this study with the remaining 14 been removed
owing to excessive amounts of incomplete information. This subsample represents firms with
different ownership types in different industries. All the firms qualify as small medium and large
enterprise because they either have above ten employees or an annual turnover of over N2 million
(£8,000). Given that most extant studies on culture, EO and performance focus on small, medium or
large firms, the choice of focusing on these firms is justified especially as it makes this study more
comparable with extant literature. Also, all of them have been in business for over a year and by
considering their turnover, they can be presumably approximated to established firms. Notably, most
of the respondents did not give the actual turnover of their firm as they were reluctant to divulge that
information (Bamford et al., 2000). Though the values they gave may not reflect their actual
performance, it qualified them for this study.
Control Variables 4.4
Control variables included the age of the firm, the age of the respondents in the firm, and the
numerical size of the firms. These control variables were significant for two reasons: first, they helped
to ensure that firms used in this study qualify are classified as small, medium or large but not micro
firms. Second they helped to ensure that respondents have been with the firms for at least 6 months, a
duration that is enough to understand firm‘s culture. See Table 4-1 for average of the variables.
Controls N Minimum Maximum Mean Std. Deviation Variance
Respondents Age 46 .30 30.00 3.5196 4.88333 23.847
Firm Age 45 1.00 150.00 18.7111 23.36919 546.119
Numerical Strength 46 3.00 15500.00 1.0196E3 2733.98433 7.475E6
Table 4-1 Descriptive Statistics of control variables
Measures 4.5
EO, performance and dimensions of culture were employed in this study. The items used in
measuring them were adapted from established scales with slight modification where needed. All
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37 Research Design | University of Nottingham
items were anchored with a seven-point Likert response ranging from „strongly disagree‟ to „strongly
agree‟. All three measures are described below, and their items are included in the Table 4-2.
4.5.1 Entrepreneurial orientation
A firm with sound entrepreneurial posture is characterized by strong risk-taking propensity,
frequent and extensive technological and product innovation, proactiveness, aggressive competitive
orientation and autonomy for corporate venturing (Lumpkin and Dess 1996). These five
characteristics constitute firms EO. In Miller‘s (1983) point of view, for a firm to be considered as
entrepreneurial in the first place, the trio risk taking, innovativeness and proactiveness must be
present:
“In general, theorist will not call a firm entrepreneurial if it changed its technology or
product-line… simply by directly imitating competitors while refusing to take any risks. Some
proactiveness would be essential as well. By the same token, risk-taking firms that are highly
leveraged financially are not necessarily entrepreneurial. They must also engage in product-market
or technological innovation” (Miller, 1983, p. 780)
Table 4-2 Measures and Factor Readings
Scale composition Standardized Factor
Loading
Entrepreneurial Orientation
Risk-taking (In general top managers of your firm favor…) (α=0.808)
A strong emphasis on getting things done even if it means disregarding
formal procedures
0.590
A strong emphasis on experimentation and trying new things or doing
normal routines in new and different ways
0.657
A strong proclivity for high- risk projects (with chances of high returns) 0.787
Bold aggressive posture in order to maximise the probability of exploiting
potential opportunities
0.838
Innovativeness (In general top managers of your firm favor…) (α=0.712)
Dramatic changes in product or services 0.661
Enthusiasm in trying out new and novel ideas 0.783
Enthusiasm in trying out new ways to do things 0.832
Proactiveness (In dealing with its competitors, my firm) (α=0.865)
Typically initiates actions which competitors then respond to 0.881
Is very often the first business to introduce new products/services,
administrative techniques
0.839
Competitive aggressiveness (In dealing with competitors, my firm) (α=0.826)
Actively scans for the market entry of new competition 0.701
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Is very aggressive and intensely competitive 0.801
Typically adopts a very competitive ―undo-the-competitors‖ posture 0.738
Autonomy (In general top managers of your firm favor…) (α=0.588)
A strong tendency to let the requirements of the situations and the
individual‘s personality define proper on-job behaviour
0.909
Emphasis on getting line and staff personnel to be flexible with their
formal job descriptions
0.550
Performance (α=0.866)
Sales increased 0.884
Number of employees increased 0.847
Profit increased 0.812
Market share increased 0.834
Cultural Dimensions (How do you agree with the following statements about your firm)
High Power distance (α=0.609)
Top managers and least member of staff (say for instance cleaners) don‘t
see themselves as equals
0.734
Top managers don‘t take initiatives from lower member of staff 0.600
Authority is centralized at the top management level 0.685
Collectivism (α=0.529)
Employer-employee relationship is perceived as a family link 0.724
Relationships prevail over tasks 0.821
Collective interest prevail over individual interests 0.657
Masculine/Feminism (α=0.572)
Managers are decisive and assertive 0.769
Male boss decision based on facts 0.754
Uncertainty (Risk Aversion) (α=0.858)
Top management don‘t like to make changes to products 0.792
Too many regulations and protocols before making decisions 0.751
Low tolerance for deviant and innovative ideas and behaviour 0.841
Reluctant to innovate 0.848
α (Cronbach‘s Alpha) = Reliability factor
Therefore a scale that encompassed these five dimensions was used for this study. The scale
had 14 items. This scale was developed by Covin and Slevin (1986) and validated by Lumpkin and
Dess (1996), although it was slightly modified for this study. The items focused on risk taking,
innovativeness, proactiveness, autonomy, and competitive aggressiveness. The respondents were
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asked to which indicate the extent to which each of the items of the scale characterize their firm‘s EO
on a seven-point Likert-type scales.
4.5.2 Performance
As noted by Bamford et al. (2000), respondents are reluctant to divulge performance
information in questionnaires which in most cases renders the accuracy of such data questionable. To
handle this challenge, researchers have adopted subjective measures of performance since there is
little or no difference between subjective and objective measures of performance (Wall et al., 2004;
Geringer and Hebert, 1991; Dess and Robinson, 1984). Thus, using perceived performance methods
should strengthen the reliability and the validity of the data. Wiklund (1999) suggested that a
performance measurement scale should have indicators for growth as well as for financial
performance.
Hence, four items that indicates growth and financial performance are used in this study to
measure performance. These include increase in sales, increase in numbers of employees, profitability
and increase in market share. The items are adopted from Gupta and Govindarajan (1984) with slight
modifications. They are chosen because of their reliability and common use in literature. Respondents
were asked to indicate on a seven-point Likert-type scale, ranging from „strongly disagree‘ to
„strongly agree‟, the degree to which the item was consistent with their firms.
4.5.3 Dimensions of culture
As previously noted, African culture is characterized by high power distance, collectivism,
masculinity and uncertainty avoidance (Hofstede, 1980). To test these dimensions, a scale of 11 items
was used. The specific items of this scale were adapted from Hofstede (1980) with slight
modifications. The items focused on Hofstede‘s dimensions of national culture: High power distance,
collectivism, masculinity, and uncertainty avoidance. The respondents were asked to indicate the
degree to which each of the items in this scale was consistent with their firm.
Some studies suggest that the association between specific Hofstede‘s cultural dimensions is
not stable (Hayton, George and Zarha, 2002) resulting in conducting analyses of the influence of the
various cultural dimensions independently even when constructs were expected to co-vary. But this
was not the case with this study. As seen from, all the items of the scale loaded significantly into a
unidimensional scale which indicates that Hofstede scale is suitable for testing cultural dimensions in
Nigeria.
Furthermore Shane (1992, 1993) argued that sample size and heterogeneity limitations on the
interaction effects among cultural values have not been systematically addressed. He suggested that a
potential solution to this problem is to identify culturally homogeneous regions that are smaller than
countries. This is especially relevant in the case of Nigeria were the cultural diversity is intense. It is
unclear whether broad cultural characterizations such as Hofstede's (1980b) can sufficiently capture
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40 Research Design | University of Nottingham
the variance of highly culturally heterogeneous countries like Nigeria. But for the purpose of this
study the scale seemed adequate.
Data preparation 4.6
Using Survey Monkey® to create the questionnaire makes it easier to code the response
categories. After collecting the responses, the already coded data was downloaded in an excel format
(.xml) and imported into SPSS® for Windows TM
(Version 17) statistical package where further
coding, recoding (where necessary), data cleansing and analysis were made. All missing data was
treated by listwise deletion. The coding technique was clarified with a senior academic colleague to
ensure correctness.
SPSS® is a powerful statistics engine widely accepted as the best software for data analysis
(Foster, 2001). It was used to perform the statistical analysis used for this study. Among this analysis
are descriptive analysis, correlation analysis, factor, scale reliability (see Table 4-3 for summary of
results) and multiple linear regression analysis.
Data analyses, Reliability and validity 4.7
The items of this national culture, EO and performance scales were factor-analyzed to assess
their dimensionality or factorial validity of their items because individually they focus on different
aspect of the scales. Factorial validity is a form of construct validity (Allen and Yen, 1979). In
performing this validity test, principal component analysis with Varimax rotation at Kaiser Criterion
(Kaiser 1958; eigenvalues >1) with a listwise deletion of all missing data was used.
According to Moser and Stevens (1992) factor loadings or .522 of larger can be considered to
be significant. A high loading on a single factor indicates that the different aspects of entrepreneurial
orientation empirically related and constitute a unidimensional scale. All the items loaded
significantly (p < 0.01) above 0.522 on their specific construct (see Table 4-2). EO gave an average
loading of 0.773; performance gave an average loading of 0.844; and dimensions of culture gave
average loading of 0.748. These values indicate that it is appropriate to combine the items of different
scales into a single or unidimensional scale. Table 4-3 shows the summary of the analyses
Descriptive analysis like mean and standard deviation was also made. For EO, each firm‘s
mean rating on the various dimensions were used as their EO index. The higher the index, the more
entrepreneurial the firm is. This scale has a mean value of 4.605 and a standard deviation of 0.988.
For national culture, the mean ratings were used as the degree of influence national culture has on the
firms‘ culture. The higher the score, the more influence national culture has on firms‘ culture. The
scale has a mean value of 4.283, a standard deviation of 0.861. The performance scale had has a mean
value of 5.158 –an indication of a good performance– and a standard deviation of 1.527
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Table 4-3 Descriptive statistics of measures
N Average
Factor loading
α σ Mean KMO
Entrepreneurial
Orientation
36 0.773 0.869 0.988 4.605 0.623
Performance 46 0.844 0.866 1.527 5.158 0.796
Cultural
Dimensions
36 0.748 0.749 0.861 4.283 0.565
α (Cronbach‘s Alpha) = Reliability factor; σ = Standard Deviation
The constructs were tested for reliability using Cronbach alpha (1951). The alpha coefficients
and the factor loadings all exceeded the 0.50 threshold of significance (Fornell and Larker, 1981). In
fact the all the items scored an average that is above 0.72 which is considered to be high by Nunnally’s
(1967). This clearly indicates that the scales are highly reliable. Also the average variance extracted
(AVE) for each construct ranged from 0.56 to 0.85, satisfying the 50 percent cut-off suggested to
signal convergent validity (Fornell and Larker, 1981).
Correlation analyses show that collectivism correlates with risk taking and autonomy (p<
0.05) while masculinity correlates with risk taking (p<0.05). See Table 4-6; all the dimensions of
culture did not correlate with performance (see
Table 4-5 ); among the dimensions of EO, only innovativeness correlate with performance
(see Table 4-4 ).
The analytical technique for testing hypothesis 4.8
The hypotheses made in this study suggest that the dimensions of culture affect the
dimensions of EO in different ways, and that the dimensions of EO affect performance in different
ways. The most appropriate technique for testing these kinds of hypotheses of causal relationships is a
multiple linear regression (MLR) analysis. MLR was chosen over other techniques like structural
equation modeling SEM (McQuitty, 2004; Shook et al., 2004) to test the hypotheses based on two
main reasons: first, theorists suggest that it is the simplest and most comprehensive method for testing
causal relationship hypotheses in cross-sectional design like this study (Shook et al., 2004). Second,
given the research goals and the use of principal component analysis, MLR technique gives greater
flexibility for multivariate analysis.
MLR analysis is a statistical technique used to model the linear relationship between variable
(criterion) and one or more independent variables (predictors) (Hair et al., 1998). The goal is to
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42 Research Design | University of Nottingham
identify the independent variable that predicts the dependent variable (Foster, 2001). MLR analysis
serves two broad purposes: first, to identify if any significant statistical relationships exist between
the proposed independent variables and the dependent variable, second, to confirm if, when taken
together, the significant statistical independent variables contribute strongly to the explanation (or
prediction) of the dependent variable.
Table 4-4 Correlations between dimensions of EO and Performance
Performance Aggressive RiskTaking Innovativeness Proactive Autonomy
Performance Pearson Correlation
1
Sig. (1-tailed)
Aggressive Pearson Correlation
.259 1
Sig. (1-tailed) .067
RiskTaking Pearson Correlation
-.129 .397** 1
Sig. (1-tailed) .230 .009
Innovativeness Pearson Correlation
.369* .427
** .351
* 1
Sig. (1-tailed) .015 .005 .019
Proactive Pearson Correlation
.163 .596** .372
* .400
** 1
Sig. (1-tailed) .174 .000 .014 .009
Autonomy Pearson Correlation
.210 .166 .345* .129 .122 1
Sig. (1-tailed) .113 .171 .021 .230 .243
*. Correlation is significant at the 0.05 level (1-tailed).
**. Correlation is significant at the 0.01 level (1-tailed).
a. Listwise N=35
Table 4-5 Correlations between culture and performance
Performance Uncertainty Collectivism HighPowerDist Masculinity
Performance Pearson Correlation 1
Sig. (1-tailed)
Uncertainty Pearson Correlation .004 1
Sig. (1-tailed) .491
Collectivism Pearson Correlation .082 .046 1
Sig. (1-tailed) .318 .394
HighPowerDist Pearson Correlation .007 .426** .074 1
Sig. (1-tailed) .484 .005 .333
Masculinity Pearson Correlation .028 .348* .276 .121 1
Sig. (1-tailed) .435 .019 .052 .240
**. Correlation is significant at the 0.01 level (1-tailed). *. Correlation is significant at the 0.05 level (1-tailed).
a. Listwise N=36
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Table 4-6 Correlations between dimensions of culture and dimensions of EO
Uncertainty Collectivism HighPowerDist Masculinity Aggressive RiskTaking Innovativeness Proactive Autonomy
Uncertainty Pearson Correlation 1
Sig. (1-tailed)
Collectivism Pearson Correlation .093 1
Sig. (1-tailed) .322
HighPowerDist Pearson Correlation .533**
.082 1
Sig. (1-tailed) .002 .343
Masculinity Pearson Correlation .306 .390* .288 1
Sig. (1-tailed) .060 .022 .073
Aggressive Pearson Correlation .226 .319 -.138 .015 1
Sig. (1-tailed) .129 .052 .245 .470
RiskTaking Pearson Correlation -.065 .433* -.063 .346
* .324
* 1
Sig. (1-tailed) .373 .012 .377 .039 .050
Innovativeness Pearson Correlation .001 -.115 -.060 .141 .295 .191 1
Sig. (1-tailed) .497 .284 .383 .242 .067 .171
Proactive Pearson Correlation -.182 .124 -.140 .161 .385* .313 .244 1
Sig. (1-tailed) .182 .269 .242 .211 .024 .056 .110
Autonomy Pearson Correlation .140 .346* .305 .015 .063 .204 -.159 .011 1
Sig. (1-tailed) .243 .038 .061 .471 .378 .154 .214 .479
**. Correlation is significant at the 0.01 level (1-tailed). *. Correlation is significant at the 0.05 level (1-tailed). a. Listwise N=27
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4.8.1 Model Equation
The MLR model equation employed in this research is given below:
Y =a + b1X + b2x + b3X, +ε
Where,
Y = the dependent variable (dimensions of EO or Performance),
X = the theoretically defined independent variable (dimensions of EO or dimensions of
national culture),
a = the constant; b1, b2, b3 = coefficient of independent variables; ε =the error term
4.8.2 Interpreting MLR model
The explanatory power of regression is summarized in R2 value (also called the coefficient of
determination). It is often described as the proportion of variance explained by regression. It measures
the proportion of variance of the dependent variable about its mean that is explained by the
independent variables (Hair et al., 1998). Its value varies from 0 to 1. Although high R2 does not
imply causation, the higher it is the more its explanatory power (Hair et al., 1998). A weakness with
R2 is that it can be made arbitrarily high thereby inflating accuracy by including more dependent
variables in the model. Adjusted R2
helps to compensate for this artificial accuracy. F ratio is used to
estimate the statistical significance of the regression. The advantage of F ratio is that it takes into
account the degrees of freedom, which is a factor of the sample size and number of dependent
variables. Hence it can be used to validate R2.
Another important regression factor is β (Beta). Β is the standardized regression coefficient
that allows comparison of an independent variable with a dependent variable. (Churchill, 1999)
In MLR analysis, <0.1 is widely accepted as the threshold for significance levels of all
coefficient. Particularly for relatively smaller samples as in this study, Sauley and Bedean (1989)
noted that a p < 0.10 level of significance can be satisfactory. Hence p < 0.10 was adopted as the
significance level for this study.
4.8.3 Assumptions used in the MLR model
Provided that the assumptions used in the MLR model are satisfied, the regression estimators
are unbiased, efficient and consistent. ―Unbiased means that the expected value of the estimator is
equal to the true value of the parameter. Efficient means that the estimator has a smaller variance than
any other estimator. Consistent means that the bias and variance of the estimator approach zero as the
sample size approaches infinity.‖ (Ostrom, 1990, p. 14). Some of the basic assumptions used in the
MLR model are: first, the relationship between the independent variable and the dependent variable
are linear; second, the variance of the residuals is constant; third, the error term is normally
distributed, forth, errors are uncorrelated with the individual dependent variables; fifth, the expected
value of the residuals is zero; sixth, the residuals are random, or uncorrelated in time (Ostrom, 1990).
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Results of Data Analysis 5
This chapter highlights the findings of this study. Using multiple linear regression analysis 8
regression models were developed to test the hypotheses in the study. These models investigate the
causal relationships between constructs as proposed in this study. In model 1, the dimensions of
culture were the independent variables and EO was the dependent variable. In model 2 to 6, the
dimensions of culture were the independent variables and individual dimensions on EO were the
dependent variables. In model 7, the dimensions of culture were the independent variables and
performance was the dependent variable. In model 8, the dimensions of EO were the independent
variables and performance was the dependent variable.
Checks for multicollinearity were also performed on the models by testing the variance
inflation factors (VIF) and the conditioning index. The VIF of all the variables in the models ranged
between 1.109 and 1.774 and their condition index peaked at 16.084. These values are within the
tolerable limits set out by Hair, Anderson, Tatham, and Black (1998) which clearly suggest that there
is no multicollinearity between the models. Some of the regression models are statistically significant
and possess good explanatory power. Those models that were not statistically were also discussed
within the context that the model does not possess sufficient explanatory power. Table 5-2 a & b show
the summary of the models. However the regression results for each model are presented in Appendix
A.
Models 5.1
Model 1 (p<0.1; R2 = 18%) tests the effect of the dimensions of culture on EO (Table 5-1).
The parameter of β coefficient (β = 0.346, p=0.024) was only significantly positive for collectivism.
This suggests that collectivism positively relates with EO. Unfortunately, this model does not
sufficiently explain the effect of culture on EO. As noted by researchers, treating culture as a unitary
concept reduces its value as an analytic tool (Martin, 1992; Ogbonna and Harris, 1998a; Pettigrew,
1979). To handle this, models 2 to 6 were developed to give detailed insight on how culture might
affect the dimensions of EO.
Model 2 (p<0.05; R2 = 21%) tests the effect of culture on risk taking dimension of EO. The
model shows that collectivism (β = 0.282, p=0.058) and masculinity (β =0.282, p=0.075) are
significantly and positively associated with risk taking. This result supports H4a and H6a. However,
although the direction of the coefficient (β =-0.261) for uncertainty avoidance (p=0.112) was as the
predicted for H5a (that is negatively related to risk taking), this result is not statistically significant.
But given that β is high, there is the potential indication of Type 1 error which is generally due to low
sample size. If this is the case, the author therefore argues that at higher sample size, H5a could
significantly and negatively relate with risk taking.
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Table 5-1 Multiple Regression Analysis results-a
Model Model Properties Dependent
variables
Independent Variables
Model 1 R2 = 0.177 EO Uncertainty
Adjusted R2 = 0.098 Collectivism
F-value= 2.256 HighPowerDist
Sig. = 0.079* Masculinity
Model 2 R2 = 0.206 RiskTaking Uncertainty
Adjusted R2 = 0.131 Collectivism
F-value= 2.731 HighPowerDist
Sig. = 0.042** Masculinity
Model 3 R2 = 0.312 Autonomy Uncertainty
Adjusted R2 = 0.247 Collectivism
F-value= 4.768 HighPowerDist
Sig. = 0.003*** Masculinity
Model 4 R2 =0.116 Aggressive Uncertainty
Adjusted R2 = 0.032 Collectivism
F-value = 1.1380 HighPowerDist
Sig. = 0.257 Masculinity
Model 5 R2 = 0.113 proactive Uncertainty
Adjusted R2= -0.028 Collectivism
F-value = 1.332 HighPowerDist
Sig.= 0.274 Masculinity
Model 6 R2 =0.044 innovativeness Uncertainty
Adjusted R2= -0.047 Collectivism
F-value = 0.481 HighPowerDist
Sig.= 0.750 Masculinity
Model 7 R2 = 0.055 performance Uncertainty
Adjusted R2= -0.037 Collectivism
F-value = 0.600 HighPowerDist
Sig.= 0.665 Masculinity
Model 8 R2 = 0.251 Performance Aggressive
Adjusted R2 = 0.159 RiskTaking
F-value= 2.742 Innovativeness
Sig. = 0.032** Proactive
Autonomy Uncertainty =Uncertainty avoidance; HighPowerDist=High power distance; RiskTaking=Risk taking; Aggressiveness
=Competitive aggressiveness;
Model 3 (p<0.05; R2 = 31%). This model tests the effect of culture on autonomy. It finds that
collectivism (β =0.372, p<0.009) is significantly and positively related to autonomy while masculinity
(β =-0.266, p=0.071) has a significantly negative relationship with autonomy. Thus this finding
support H4e but not H6c. Surprisingly, the model suggest that high power distance (β =0.356,
p=0.016) is significantly positively associated with autonomy which is contrary to H3a.
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Model 4 test the effect of culture on competitive aggressiveness dimension of EO. The model
suggests that collectivism has a positive effect on competitive aggressiveness which is consistent with
H4c, whereas masculinity has a negative effect on competitive aggressiveness which does not support
H6b. However, this conclusion is only in the context that the model (p=0.257) is too weak
(significance is slightly out of the p<0.1 levels) to explain this causal effect. Thus, this result should
be interpreted with caution.
Model 5 test the effect of culture on proactiveness. This model does not support H5b and
H4d. With a coefficient of β=0.305, this model reveals that high power distance is significantly and
positively associated with proactiveness (p < 0.1). This supports H3b. Unfortunately like model 4,
the model is too weak (p=0.274) to explain the variance of proactiveness with high power distance.
Thus, the result should be interpreted with cautions as well.
Given that models 4 and 5 are near the p<0.1 significance levels, the author maintains that a
higher sample size they could become significant enough to support their findings. Model 6 (p=0.750)
suggests that national culture has no influence on innovativeness whatsoever. With such significance
that is so distant form the p<0.1 levels, one can argue that a higher sample size will hardly make any
difference to the results.
Model 7 does not suggest any direct relationship between culture and performance exist. It
therefore follows that culture does not directly impact the performance of Nigerian firms. This renders
H7a and H7b invalid. This result though, is consistent with Hayton et al., (2002) concern that national
culture may only play a moderation role but not causal role in entrepreneurial outcomes of firms.
Model 8 test the effect of the dimension of EO on performance of Nigerian firms. The model
is significant at p<0.05 with R2 of 25% and suggests that risk taking and innovativeness impact on
performance. But while innovativeness (β =0.368, p=0.021) seem to significantly and positively affect
performance, risk taking (β =-0.323, p=0.042) has a significantly negative effect. Given that culture
has no direct relationship with firm‘s performance but relates with the dimensions of EO in different
ways, and that the dimensions of EO (risk taking and innovation) impact on firm performance, it
follows that EO mediates the relationship between culture and performance. This conclusion supports
H2.
Table 5-2 Multiple Regression Analysis results-b
Model Independent
Variables
Standardized
regression
coefficient (β)
t-value Sig. VIF Condition
Index
1 Uncertainty -0.085 -0.520 0.606 1.360 7.067
Collectivism 0.346 2.347 0.024** 1.109 8.906
HighPowerDist 0.181 1.167 0.250 1.224 11.045
Masculinity 0.081 0.515 0.609 1.262 16.084
intercept 3.979 1.000
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2 Uncertainty -0.261 -1.626 0.112 1.360 7.067
Collectivism 0.282 1.949 0.058* 1.109 8.906
HighPowerDist 0.074 0.487 0.629 1.224 11.045
Masculinity 0.282 1.824 0.075* 1.262 16.084
intercept 2.350 1.000
3 Uncertainty -0.026 -0.177 0.860 1.360 7.067
Collectivism 0.372 2.759 0.009*** 1.109 8.906
HighPowerDist 0.356 2.511 0.016** 1.224 11.045
Masculinity -0.266 -1.851 0.071* 1.262 16.084
intercept 2.240 1.000
4 Uncertainty 0.130 0.768 0.447 1.360 7.067
Collectivism 0.278 1.819 0.076* 1.109 8.906
HighPowerDist 0.030 0.187 0.853 1.224 11.045
Masculinity -0.280 -1.718 0.093* 1.262 16.084
intercept 3.164 1.000
5 Uncertainty -0.268 -1.584 0.121 1.360 7.067
Collectivism 0.091 0.597 0.554 1.109 8.906
HighPowerDist 0.305 1.899 0.064* 1.224 11.045
Masculinity 0.025 0.152 0.880 1.262 16.084
intercept 2.307 0.026 1.000
6 Uncertainty -0.157 -0.894 0.376 1.360 7.067
Collectivism 0.044 0.278 0.782 1.109 8.906
HighPowerDist 0.205 1.226 0.227 1.224 11.045
Masculinity 0.041 0.243 0.809 1.262 16.084
intercept 3.669 1.000
7 Uncertainty -0.052 -0.293 0.771 1.360 7.067
Collectivism 0.150 0.940 0.353 1.109 8.906
HighPowerDist 0.178 1.059 0.296 1.224 11.045
Masculinity -0.038 -0.221 0.826 1.262 16.084
intercept 2.723 1.000
8 Aggressive 0.095 0.530 0.599 1.774 7.805
RiskTaking -0.323 -2.100 0.042** 1.298 10.423
Innovativeness 0.368 2.391 0.021** 1.295 11.327
Proactive 0.112 0.663 0.511 1.548 12.398
Autonomy 0.199 1.364 0.180 1.165 15.144
intercept 2.624 0.012 1.000
* p≤0.01; ** p≤0.01; *** p≤0.01
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49 Discussion | University of Nottingham
Discussion 6
The goal of this study which was clarified from the beginning of this document was to
investigate the influence of culture on EO and how culture and EO impact on the performance of
Nigerian firms. To fully understand the causal relationships between these concepts, this study took a
component approach instead of a gestalt approach. This means that this study investigated how the
dimensions of culture relate with the dimensions of EO, and how the dimensions of both phenomena
relate with performance. To achieve this data was collected from firms located and operating in
Nigeria in August 2011 and analysed by multiple linear regressions. This chapter explains in detail the
results of the analyses under the following sub-headings: culture and entrepreneurial orientation;
entrepreneurial orientation and performance; and culture and performance.
The major highlights of the findings are first, not all EO dimensions are relevant to
performance improvement. In fact, some of them might even work against initiatives to improve
performance. This is consistent with Lumpkin and Dess‘ (1996) argument on EO and performance
metrics. Second, culture has no direct influence on performance. This result supports Hayton et al.,
(2002) concern that culture may not have a direct effect on entrepreneurial outcomes. Third, culture
does not affect all the dimensions of EO. It significantly affects risk taking and autonomy dimensions
and may not affect proactiveness and competitive aggressiveness, but does not affect the propensity to
be innovative.
Culture and Entrepreneurial Orientation 6.1
The relationship between culture and EO has been debated by scholars for decades. Some
authors argue that this relationship does not exist (McGrath et al., 1992b) others argue that culture
creates a legitimate environment for entrepreneurship to thrive or die (Etzioni, 1987) hence the
relationship is valid. Over the last ten years, this debate has been subjected to empirical testing. In
general, the results of those studies suggest that high power distance, collectivism, and uncertainty
avoidance are negatively related with EO and masculinity is positively related with EO (Davidsson,
1995; Davidsson & Wiklund, 1997; Shane, 1992, 1993). The problem with this gestalt approach to
EO is first, it masks the fact that all dimensions of EO might not be affected by culture and second, it
does not capture the fact that the dimensions of culture might relate in different ways with the
dimensions of EO. Within the limits of statistical significance, the findings of this study suggest that
culture only affects risk taking and autonomy in the Nigerian context. It further suggests that
collectivism is positively related with both EO dimensions which support H4a and H4c; it suggests
that masculinity is positively related to risk taking and negatively related to autonomy which supports
H6a but refutes H6c; it suggest that high power distance only affects autonomy and the relationship is
positive which refutes H3a; and that uncertainty avoidance does not have any effect on risk taking
and autonomy. There was no evidence to suggest that culture affects innovativeness. Model 4 reveals
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50 Discussion | University of Nottingham
that collectivism positively relates with competitive aggressiveness as was expected from H4c,
whereas masculinity negatively relate with it (which refutes H6c). However, this result should be
interpreted with caution as the model lacks strong explanatory power. This is also the case with model
5 which suggest that high power distance positively relates with proactiveness. See table x for a list of
hypotheses that where supported and those refuted by the regression models.
On the whole, regression model 1 reveals that collectivism is positively related with EO. This
is contrary to the findings of empirical studies done in a western context. This contradiction is a
reflection of the idiosyncrasies of the context in which the studies were made. This is an evidence to
support the earlier argument in the literature review that the relationship between culture and EO is
national context specific and therefore that studies done in a Western context may be irrelevant in a
non-Western context. Another explanation for the contradiction between the findings of this study and
those of previous studies is the gestalt approach to dealing with EO. The problem with this kind of
approach is that it masks the fact that the dimensions of EO might relate in different ways with the
dimensions of culture. A component level approach, as is the case of this study, unleashes is full value
as an analytical tool thus yielding a comprehensive explanation of the intricate relationship between
the dimensions of both EO and culture (Ogbonna and Harris, 1998a; Pettigrew, 1979).
One obvious managerial implication of this result is this: when there is the need to deploy the
risk taking and competitive aggressiveness dimensions of EO, managers should encourage
collectivism. See the next chapter for further implications.
Table 6-1 Results of Hypotheses
Models Hypotheses Those supported Those refuted
1 None None None
2 H4a; H5a; H6a H4a; H6a H5a
3 H4e; H3a; H6c H4e; H3a; H6c
4 H4c; H6b H4c H6b
5 H3b; H4d; H5b H3b H4d; H5b
6 H4b H4b
7 H7a; H7b H7a; H7b
8 H1 H1* H1*
*=innovation related positively with performance but other EO dimension did not.
Entrepreneurial Orientation and Performance 6.2
There is a widely held belief that EO is beneficial to the performance of firms (Covin and
Slevin, 1986; Rauch et al., 2009). Miller (1993) argues that a disposition towards entrepreneurial
behaviour characterised with risk taking, innovativeness and proactiveness, will guarantee improved
firm performance. Some other scholars argue that an entrepreneurial posture may not always be
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51 Discussion | University of Nottingham
necessary for success but rather contingent on a host of external factors (Hart, 1992; Covin and
Slevin, 1990). Lumpkin and Dess (1996) contend that even when an entrepreneurial posture is needed,
all the dimensions of EO may not be needed to guarantee high performance. Some dimensions of EO
might even have a negative relationship with performance depending on the circumstance (Hughes
and Morgan, 2007). The findings of this study support this line of argument. Indeed, only
innovativeness and risk taking dimensions showed a relationship with performance. Innovativeness
was found to be positively related with performance and risk taking was found to be negatively
related with it.
The implication of this result is that all dimensions on EO are not necessary to render high
performance to firms and that the dimensions needed at any moment depends on the environmental
conditions of the firm. Another obvious implication of this result is that a gestalt approach to
investigating EO masks that the fact that higher performance might be a consequence of one or two
dimensions of EO and that deploying some dimensions might undermine initiatives to improve
performance. Thus, firms should not strive to implement all the dimensions of EO to qualify as been
entrepreneurial or be guaranteed high performance but should be cautious at implementing each
dimension. For example, drawing from the result of this study, it is better for Nigerian firms to be
more innovative and less interested in pursuing high risk ventures especially when the risk involved
outweighs the outcome.
Culture and performance 6.3
Earlier in the literature review section, culture was described as a media for entrepreneurship.
Berger (1991) described culture as a conductor to entrepreneurship. This means that a national
culture that supports values and behaviours like proactiveness, risk taking and innovativeness will
foster entrepreneurship and drive performance of firms in society (Herbig & miller, 1992; Hofstede,
1980a). Thus, the relationship between culture and performance was construed. Interestingly, this
study found no evidence to suggest that culture has any direct relationship with firm performance. But
given that collectivism and masculinity positively relates with risk taking dimension of EO and risk
taking negatively relates with firm performance, it can be logically deduced that collectivism and
masculinity negatively relates to performance. If the statement ‗there is power in synergy and
collaboration‘ is true, one can argue that collectiveness should have a positive effect on performance.
But it is possible that groupthink which has the potential of locking a firm in specific trajectories
could impair performance. It is also possible that collectivism can slow down decision making process
which may delay firm‘s quick response to seize opportunities thereby impairing their performance.
The implication for managers therefore, is to drive performance by discouraging collectivism and
masculinity in workplace. The figure below shows the relationship between national culture and firm
performance
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
52 Conclusions, Implications and Limitations | University of Nottingham
Conclusions, Implications and Limitations 7
The objective of this chapter is to highlight the important implications and limitations of this
study. The chapter begins with the important contributions of the findings of this study to the
literature and the lessons for managers of firms in Nigeria; it then highlights the limitations of the
study and the implications for further research and ends with a recommendation for further research.
Contributions to the Literature 7.1
This study set out to investigate the causal relationship between national culture and EO and
how both impact performance. To understand these relationships, this study explored first, whether
the dimensions of culture as conceptualized by Hofstede (1980) relate with all the dimensions of EO
as conceptualized by Lumpkin and Dess (1996) and the direction of such relationships if they exist;
then it explored whether each dimension of EO was equally valuable in securing improved
performance. Fundamentally, this study makes three significant contributions to literature: first, it
finds that dimensions of culture vary independently with each dimension of EO; second, form the
Nigerian perspective, it addresses Lumpkin and Dess‘ (1996) caution that some dimensions of EO
might be of no benefit or might even undermine the performance of firms depending on the
circumstances of the firm (Hughes and Morgan, 2007) hence it joins the growing list of researcher
who share similar view; third, it addresses the concern that culture might affect firm performance.
7.1.1 Dimensions (national culture vs. EO) performance Method
Studies of national culture-EO relationship and EO-performance relationships have largely
been carried out separately. Separating these relationships does little to help in understanding which
dimensions of culture might be beneficial to performance and which dimensions might be harmful to
performance initiatives. This study fills this gap by bridging both relationships. To the author‘s
knowledge, this study is among the earliest works, if not the first, to bridge the gap between national
culture, EO and performance by examining how the dimensions of culture relates with the dimensions
of EO and how the dimensions of EO relate with performance in the African context.
7.1.2 Risk taking undermines performance initiatives
EO has been offered as a recipe for high performance (Miller 1983; Covin and Slevin, 1991;
Rauch et al., 2009) and most of the studies on EO-performance relationship have treated EO as a
unified whole. But a few studies argue that this gestalt approach to EO may be misleading in
suggesting that a relentless pursuit of all the dimensions of EO guarantees high performance
(Lumpkin and Dess, 1996; Hughes and Morgan, 2007; (e.g., Matsuno et al., 2002 and Morgan and
Strong, 2003). Though recent studies have investigated this relationship without a gestalt approach,
most of them have been based on Western context. Some authors have noted inconsistencies in
replicating Western concepts outside the Western context. It is useful to test the EO-performance
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
53 Conclusions, Implications and Limitations | University of Nottingham
construct in various contexts to determine its universal applicability and this is one of the relevance of
this study. As Lumpkin and Dess (1996) cautioned EO-performance relationship, this study found that
risk taking negatively affects but innovativeness positively affect the performance of Nigerian firms.
This finding is largely supported by Hughes and Morgan (2007) who suggests that risk taking is
detrimental to the performance of emerging firms.
7.1.3 Culture does not affect innovation
Another important contribution to the body of knowledge that this study makes is that it found
evidence to show that culture does not affect innovativeness. Hence in understanding the disparity in
innovativeness of sub-Saharan countries like Nigeria and East Asian countries like China who share
some similarities in cultural patterns, answers should be sought in other concepts other than cultural
patterns and dimensions.
7.1.4 Culture does not directly affect performance initiatives
The last but important contribution of this study is that national culture does not affect
innovativeness. Therefore culture cannot explain the disparity in innovativeness or technological
disparity between the West and Africa.
Implications for managers 7.2
One major objective of managers is to achieve superior performance for their firms. Thus
managers should discourage cultures that inhibit entrepreneurship and deploy only those tools that
effectively boost performance. This study reveals that innovativeness has the capacity to drive
performance while risk taking undermines performance initiatives. It was also found that collectivism
and masculinity fosters risk taking propensity. Hence, manager should discourage collectivism and
masculinity tendencies within work place and increase the use of innovativeness dimension of EO to
boost the performance of their firms.
Some reasons why firms fail at achieving intended performance include weak social and
human capital. Weak social and human capital render firms incapable of making full use of EO which
is resource intensive when implemented in full (Hughes and Morgan, 2007). When examined, firms in
this study where found to intensively use EO dimensions. The average mean for risk taking (4.455)
innovativeness (4.814), proactiveness (4.815), competitive aggressiveness (4.383) and autonomy
(4.652) suggested intense use all the dimensions of EO. This indicates that they deploy dimensions
that have not relevance or even undermine performance initiative which is a form of misapplication of
resources since different dimensions of EO were found to affect firms differently. This could be a
reason why firms fail to realise as much performance as they intend. For instance, this study suggests
that risk taking may nullify the benefits of innovativeness to firm performance when used together.
Also using dimensions like autonomy proactiveness and competitive aggression which do not affect
performance will be a waste of firms‘ limited resources which should have been channelled into more
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
54 Conclusions, Implications and Limitations | University of Nottingham
productive activities. The ethos then is that ―ad hoc approach to the implementation of EO is
potentially damaging since it unwittingly leads to waste of resources and consequently leads to an
intended strategic decision to undermine firm‘s performance‖ (Hughes and Morgan, 2007, p. 657).
Therefore firms should be very careful and strategically implement only those EO that improves
firm‘s performance and discourage cultures that seemly encourage tendencies that jeopardize
performance.
Limitations 7.3
In many ways this study satisfies the requirements for a standard research: the survey was
designed according to standard specification like Dillman (2000) Tailor made design, and the
discussions were as objective possible. Yet it is important to note some limitations of this study. Three
important limitations are identified. They are nature of sample population, sample size and scale used
for measurement.
7.3.1 Nature of sample population
For the purpose of this study, firms located and operating in Nigeria were randomly selected
form directories of Nigerian firms. Given that Nigeria is highly culturally diverse (with over 250
ethnic groups –US, 2011), the problem with sampling from this kind of population is that firms from
contrasting cultures might have been used together in this study. There is a possibility that this might
affect the outcome of the research. Shane (1992,1993) suggest that studies of national culture should
be made in groups smaller than country for the purpose of homogeneity. But this does not
significantly question the credibility of the research because many other researches include Hofstede‘s
(1980a) conceptualisation of national culture cut across several cultures. Another issue with the nature
of the sample is that it did not focus on any specific kind of firm. Most EO-performance studies focus
on technology and manufacturing firms. Since EO-performance relationship is context specific it is
logical to conclude that the relationship between the dimensions of EO and performance might vary
across industries. Hence lack of sample homogeneity is considered as a limitation of this study
7.3.2 Sample size
Most empirical studies of culture-EO and EO-performance relationships are mostly done with
about 100 samples. Owing to time constraint, this study was made with 47 samples. Given this low
sample number, one can argue that the results of the study are inconclusive. Also there was an
indication of the possibility of Type one error. For instance, models 4 and 5 may become statistically
significant with higher number of samples. Granted, higher sample number could make models 4 and
5 more significant, yet the chances that such higher number will change some results like model 6 are
very low because the model is quite far from the significance limit for regression models. This
therefore suggest that although the sample number for this study maybe low, there‘s no question about
the credibility and importance of the results to the body of knowledge
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
55 Conclusions, Implications and Limitations | University of Nottingham
7.3.3 Measurement Scale
The scale used to measure EO was developed by Covin and Slevin (1991) and that used for
culture was developed by Hofstede (1980a). These scales where created in a Western context, hence
may not be very reliable in none Western context. In fact Hofstede‘ (1980a) culture scales have been
reported to be temporarily unstable (Hayton, George and Zahra, 2002). The scale has been criticised
for two reasons: first the Western epistemology in which his traits are grounded; second the
generalizability and timelessness of the findings (his finding are based on only IBM, at one point in
time). These criticisms also hold true for Covin and Slevin‘s (1991) EO scales. Hence using such
Western context designed scales may affect the result in a different way. Therefore, there is a need to
develop scales for African context
7.3.4 Other limitations
The first limitation of this design in the study is the lack of inter-rater scores to compare with
the key informant data. However the author argues that inter-rater score were not necessary in this
study for two reasons. First, it was difficult and expensive enough to get one informant to respond to
the survey within the short time allocated for data gathering. Waiting for inter-rater scores would
delay data gathering which might compromise the reliability of the data set.
Another limitation is the use of cross-sectional data. Theorists argue that the use of cross-
sectional data limits the ability to draw causal conclusions from the data. Given that it takes a long
time to gather longitudinal data, it is practically impossible to go down that route for this study. Since
this is the case of this study, theories and findings of prior empirical studies can be used to support the
conclusions of causal relationships. Hence, the author argues that the theoretical foundation for the
hypotheses developed in chapter 2 of this study is sufficient enough to support drawing causal
concisions.
Future research 7.4
Following the finding of this study that national culture does not seem to have an impact on
the performance of Nigerian firms, further research is needed to understand how other organisational
factors like social and human capital might affect performance.
Given the finding of the study suggest that different dimensions of EO have different
performance implications, and that EO-performance relationship is context specific, further research
is needed to understand when Nigerian firms should deploy EO and what dimensions of EO to deploy.
It should investigate how other environmental factors might affect the implementation of EO and how
EO affects firm age.
Furthermore, since national culture could not explain the disparity between highly innovative
West and poorly innovative Africa, further research should explore other possible explanations like
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
56 Conclusions, Implications and Limitations | University of Nottingham
organizational processes and design. Such research should consider the combine effect of national
culture and organisational culture on EO and performance of Nigerian firms.
Last, given the limitation placed by sample size and characteristic, future research should test
the findings of this study with larger sample size. Where possible such study should homogenous
either by considering specific industrial context or sampling from a less culturally diverse population.
Conclusion 7.5
This study has investigated the influence culture has on EO and firm performance and finds
that culture has no direct in relationship with performance improvements and that it affect the
different dimensions of EO in various ways. It is therefore imperative for managers to encourage only
those cultures that enhance their favoured EO dimension. Further research should be made to extend
this knowledge in the Nigeria context.
INFLUENCE OF CULTURE ON EO AND PERFORMANCE OF NIGEIRIAN FIRMS 2011
57 References | University of Nottingham
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