A contextual study of the relationships between entrepreneurial orientation dimensions and employment growth of small businesses

Abstract

The business environment in South Africa (SA) is characterised by limited resources, high uncertainty and stiff competition which have contributed to the high level of unemployment in the country. The economy is generating few jobs. Across different spheres of society – academia, industry and government – emphasis is being placed on entrepreneurship and small businesses as drivers of economic growth and employment creation. Scholars of entrepreneurship have used entrepreneurial orientation (EO) widely to delineate firm-level entrepreneurial behaviour and intensity using the uni-dimensional and multi-dimensional conceptualisation. EO as a consolidated construct is confirmed to have a relationship with the performance of businesses. However, business performance does not translate into business growth nor is it the same as employment growth. It appears that the association between EO and employment growth has attracted less attention in research despite its importance to theory and practice. In addition, studies on the antecedents of EO – such as its relationship with task environment variables and its consequences on employment growth – are limited in SA. Hence this study examines the nexus between the environment, the sub-dimensions of EO and employment growth. It hypothesises relationships between two environmental variables: dynamism and hostility and five dimensions of EO: innovativeness, pro-activeness, risk-taking, competitive aggressiveness and autonomy. Similarly, it tests the relationships between these dimensions and employment growth; directly and as moderated by environmental dynamism and hostility. To a greater extent, it considers established SMMEs that have transited through the survival phase into the growth phase of business operation. Using a survey method, data is collected from small business across SA from which 1031 SMMEs were considered for statistical analysis and this entailed the use of descriptive techniques that measures central tendencies and inferential techniques such as correlation analysis factor analysis, regression analysis and partial-least-square structural equation modelling and graphical illustration with use of pie charts and bar charts. The sample consists of service and non-service sector businesses but professional and consulting services constitute close to a third of the sample. Findings from this study reveal that SMMEs in SA display a moderate to high EO and only four of its dimensions (proactive-innovation, risk-taking, competitive aggressiveness and autonomy) were visible statistically. Statistically significant relationships were found between environmental hostility and dynamism and the dimensions of EO for the entire sample. The relationships between the dimensions of EO and employment growth were statistically insignificant except for medium-sized businesses (MSBs) in which proactive-innovation and competitive aggressiveness indicated a statistically significant negative relationship with employment growth. In conclusion, this study contributes to the understanding of EO as a construct given that it considers the environment as its antecedent. It lays emphasis on the multi-variate relationships between environmental hostility, environmental dynamism, and each of the dimensions of EO. From a methodological perspective, this study employs an objective approach to measuring employment growth using Gibrat’s law. It demystifies the complex relationships between the business environment and the dimensions of EO and concomitantly sheds light on employment growth. It amplifies the role of the environment in small business development and identifies the dimensions of EO that could deemed relevant to employment generation. Finally, it advocates the need for context-specific entrepreneurial strategies to develop components of the SMME cohort and effective promotion of job creation.