Transformational leadership moderating the entrepreneurial orientation and firm performance relationship

Abstract

Existing research have shown that the strength of the relationship between entrepreneurial orientation (EO) and firm performance is contingent. This research study seeks to determine if transformational leadership (TL) will moderate the relationship between EO and firm performance in the context of South Africa SMEs from different industries. An explanatory quantitative study of 164 SMEs from different industries were conducted to firstly determine the EO and firm performance relationship and secondly to determine the moderating effect of TL on the said relationship. The study only considered three dimensions of EO these include innovativeness, proactiveness and risk-taking. EO and its dimensions was measured using the Hughes and Morgan (2007) scale. TL was measured using an adapted MLQ-6S scale to measure TL. A linear regression analysis found a positive relationship between EO and firm performance. Risk-taking was found not to have any relation to firm performance. The moderated multiple regression was performed using PROCESS v3 within SPSS and found that TL has no moderating effect on EO and the three dimensions of EO and firm performance respectively. A limitation of this research study is that it considered TL as a unidimensional construct that sought self-reporting insight from owner-managers of SMEs in an emerging economy. Further studies into the contingent relationship between EO and firm performance, in an emerging market context, can use the presented results and the literature review as a foundation to further research factors the can improve the EO and the firm performance relationship.