Bivariate Analysis

To further explain the moderating effect between EO and resource attributes, this dissertation examines this relationship by splitting the sample by a dummy variable:

environmental dynamism. Figure 4-12 presents the graphs of the OLS regression lines between EO and value for two subgroups, namely, the high level of environmental dynamism and the low level of environmental dynamism. Figures 4-13 shows that EO has a positive and significant impact on value for the subgroup of the high level of environmental dynamism, and a positive, but insignificant, association for the subgroup of low level of environmental dynamism. This result indicates that EO is not stimulated to enhance the value of resource-capability combinations in a static environment, whereas higher environmental dynamism is more likely to encourage firms with EO to exploit the value of their resource-capability combinations.

Figure 4-13 suggests that, when firms face a high level of environmental dynamism, EO leads to significant and positive rareness-enhancing. However, when firms face a low level of environmental dynamism, the association between EO and rareness is still positive, but insignificant. This result indicates that EO encourages a firm to grasp the rareness of resource-capability combinations in a higher environmental dynamism. Facing a static environment, the probability becomes weak that firms with EO obtain the rareness of resource-capability combinations.

The results of the bivariate analyses are exactly the same as those of the regression analyses and SEM analyses. These results highlight differences between the subsamples with high and low levels of environmental dynamism by employing several statistical approaches.

Therefore, Hypotheses 6a and 6b are strongly supported again.

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Figure 4-12: Association between EO and value: Bivariate analysis

Figure 4-13: Association between EO and rareness: Bivariate analysis

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Chapter 5

Conclusions

EO, a strategy-making process, has been an emerging issue in strategy process research in the field of strategic management, which is an organizational-level phenomenon and is to understand how it contributes to firm performance (Hart, 1992; Hitt et al., 2001). Such process, EO, is rarely predictive of in isolation. It is well recognized in strategic literature that the profits, competitive advantage, and satisfactions of firms are derived from at least two major aspects: organizational-inside forces (internal resources and capabilities) and organizational-outside forces (external environmental dynamism). In this study, EO benefits greatly derives from two mainly strategic logic: (1) analysis of industrial structure for outside;

(2) the recognition and exploitation of valuable and rare resources for inside, and thereby both outside-in and inside-out logic are integrated in this proposed model.

With regard to the theories, in recent years, EO has become a main concept in the domain of entrepreneurship that has been viewed as a central research topic in strategic management (Meyer, Neck, & Meeks, 2002), and the resource-based view (Alvarez &

Busenitz, 2001; Barney, 2001; Brown et al., 2001; Conner, 1991) and environmental dynamism (Conner, 1991; Covin & Slevin, 1989; Miller, 1983) are likely to advance our insights into entrepreneurship.

The purpose of this dissertation is to examine the EO issue by introducing resource attributes (value and rareness of resource-capability combinations) and environmental

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dynamism into the EO-performance relationship. Although a high level of EO may enhance firms’ abnormal returns and growth, solely pursuing a strong EO strategy may not be sufficient to improve firm performance (Covin & Slevin, 1989; Ireland, Hitt, & Sirmon, 2003;

Stam & Elfring, 2008). Thereby, this dissertation specifically attempts to answer the following questions to solve above issue: (1) The EO-performance relationship may be not so straightforward, and thus this dissertation proposes following two sub-questions. Does a firm with EO obtain the value of resource-capability combinations? Or, does a firm with EO obtain the rareness of resource-capability combinations? (2) What variables might influence the EO-performance relationship? Is the relationship between EO and firm performance mediated by the value of resource-capability combinations? Or, is the relationship between EO and firm performance mediated by the rareness of resource-capability combinations? (3) What contextual variables might influence the EO-the resource attributes relationship?

Particularly, this dissertation expects to examine whether this relationship is influenced by environmental dynamism. More specifically, is the relationship between EO and the value of resource-capability combinations magnified by environmental dynamism? Or, is the relationship between EO and the rareness of resource-capability combinations magnified by the rareness of resource-capability combinations?

The data for this dissertation was collected from public sources and a questionnaire survey. The questionnaire was distributed to the top management or CEO in firms, and those top managers were the respondents. Additional data was collected via a secondary database maintained by the Taiwan Economic Journal (TEJ). Based on the data collected from the secondary database (TEJ) and the questionnaire, this study has built a structural equation model (SEM) and an ordinary-least-squares (OLS) regression model to empirically test all the hypotheses.

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5.1 Major Findings

The major findings of this dissertation are as follows:

1. EO is found to be positively related to the value of resource-capability combination, and EO is also positively related to rareness. Therefore, Hypotheses 1 and 2 are supported (see Table 5-1). That is, EO Firms with strong EO are likely to recognize and utilize valuable and rare resource-capability combinations. The results of this study support the resource-based perspective of entrepreneurship (Covin & Slevin, 1991; Lumpkin & Dess, 1996).

2. Value is positive related to firm performance when CA and satisfaction are regarded as performance, implying that the higher the value of resource-capability combinations in a firm, the greater is its performance. And, the rareness is introduced into the models that show the similar results.

However, there is no significant positively relationship between the value/rareness and firm performance when ROA and TQ are regarded as performance, implying that firm profits or abnormal returns can not be achieved even though a firm owns value/rareness of resource-capability combinations. Therefore, Hypotheses 3 and 4 are partially supported (see Table 5-1).

3. Following Baron and Kenny’s (1986) procedure, this study tests the mediating effect by using several statistics methods, including OLS multiple regression analysis, the comparison of competing models, and Sobel tests. With respect to internal factors of the firm, although the relationship between EO and performance (including ROA and TQ) is not mediated by value and by rareness, the relationship between EO and performance (including competitive advantage and satisfaction) is found to be significantly mediated by value and by rareness. Therefore, Hypotheses 5a and 5b

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are partially supported (see Table 5-1)

4. With respect to external factors, environmental dynamism is viewed as moderating variable and introduced into the proposed model in this study. It is found that environmental dynamism strengths the relationship between EO and value/rareness of resource-capability combinations.

5. This study interviews two top managers who represent four firms of different industries respectively during the period of July 2012. Based on the following procedures, the interview samples are selected by this study. (1) The questionnaire survey includes 201 public firms that are selected as the sample. (2) Personal invitation letters are sent to top managers by email. (3) Top managers may be usually friendly and accessible. (4) The case represents the most complicated phenomenon of the real cases, so that nearly all relevant issues will be encountered. When obtaining the agreement of two firms (including YAGEO Company and GIGA-BYTE Technology Company), the interviews are conducted.

All the results of interviews are represented in Appendix B. This dissertation mainly introduce propositions and forms theoretical framework by pilot study. According pilot study, the research framework between among “EO, environmental dynamism, value and rareness, and performance” has been constructed (please see Figure B-14 in Appendix B), and the findings are as follows. (1) A firm with EO would influence obtainment and exploit of value. (2) A firm with EO would influence obtainment and exploit of rareness. (3) The value would influence firm performance. (4) The rareness would influence firm performance. (5) In stimulation of environmental dynamism, a firm has the characteristics of EO that would influence it to cultivate or grasp value or rareness.

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Table 5-1: Summary of Research Findings

Hypotheses Firm performance Firm performance

CA Satisfaction ROA Tobin’s q H1: EO is positively associated with the value of resource-capability

combinations. ^{Supported Supported} Supported Supported

H2: EO is positively associated with the rareness of resource-capability

combinations. ^{Supported Supported} Supported Supported

H3: The value of resource-capability combinations is positively associated with

firm performance. ^{Supported Supported} Not Supported Not Supported

H4: The rareness of resource-capability combinations is positively associated with

firm performance. ^{Supported Supported} Not Supported Not Supported

H5a: The value of resource-capability combinations positively mediates the

relationship between EO and firm performance. ^{Supported Supported} Not Supported Not Supported H5b: The rareness of resource-capability combinations positively mediates the

relationship between EO and firm performance. ^{Supported Supported} Not Supported Not Supported H6a: Environmental dynamism strengthens the relationship between EO and the

value of resource-capability combinations. Supported Supported Supported Supported H6b: Environmental dynamism strengthens the relationship between EO and the

rareness of resource-capability combinations. Supported Supported Supported Supported

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5.2 Implications

The aim of this dissertation is to ascertain whether EO would result in firm performance by adding external factors and internal factors. Based on the results of examination in Chapter 4, this dissertation summarizes following implications.

1. Existing studies have tried to sort out the complexities regarding the possible associations between EO and the specific resource/capability. Some scholars content that EO represents a type of resource/capability; thus, EO and resource/capability are viewed as the same construct (Conner, 1991; Foss, Klein, Kor, Mahoney, 2008;

Stevenson, & Gumpert, 1985; Lee, Lee, & Pennings, 2001). These scholars argue that entrepreneurship is an intrinsic feature of the resource-based framework, and the commitment and control of resources can be viewed as characteristics of a firm’s entrepreneurial focus (Foss et al., 2008; Stevenson and Gumpert, 1985).

In contrast, some scholars argue that the relationship between entrepreneurship and resource/capability might not be so straightforward (Alvarez & Busenitz, 2001;

Barney & Arikan, 2001; Ireland, Hitt, & Sirmon, 2003; Lumpkin & Dess, 1996).

Specifically, resource/capability and EO might represent completely different constructs and their associations deserve close examination (Lumpkin and Dess, 1996; 2001; Miller, 1983). This study challenges the conventional wisdom of the resource heterogeneity approach, which may over-emphasize the relationship between the role of a specific resource/capability and firm performance (Deephouse, 2000). The results of this study show that EO and resources/capabilities attributes (including value and rareness) represent different constructs (Ireland et al., 2003;

Lumpkin & Dess, 1996).

2. RBV is used by strategic management scholars and integrated increasingly by

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entrepreneurship scholars, identifying and explaining sustained competitive advantage and persistent performance differences among firms (Alvarez & Barney, 2002; Ireland et al., 2003). A firm with EO has a unique mindset or cognitive value resources and capabilities, thus grasping opportunities to own them. This firm’s unique bundle of resources and capabilities, valuable resource-capability combinations, is different from those of competitive firms (Alvarez & Busenitz, 2001). The results also show that entrepreneurial orientation is positively associated with the value of resource-capability combinations.

3. Some studies point out that a firm with EO has an insight into the value of resources while others do not have the capability of recognition and may be unable to employ these resources, which implies that such resources and capabilities are rare (Casson, 1982; Shane & Venkataraman, 2000). Newbert’s (2007) empirical study reports that a firm with EO knows better how to exploit rare resources and is more motivated to identify rare resource-capability combinations. The results of this study also show that EO has a positive influence on the rareness of resource-capability combinations.

4. Based on the above argument, a firm’s EO stems from its innovation, proactiveness, and risk-taking, which determines the value and rareness of resource-capability combinations. This dissertation further explores whether firms with EO are likely to enhance their firm performance by reducing costs or differentiating products/services via the combination of resources and capabilities. All the results are examined in two different outcomes. Some results indicate that the relationship between EO and firm performance (including CA and satisfaction) is mediated by the value or rareness of resource-capability combinations while other results show that there is no relationship between EO and firm performance (including ROA and TQ) through these combinations. This implicates that a firm with EO lead to the high levels of

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ambition, courage, and challenge, which support it to do right things rather than efficient things. That is, the promotion of competitive advantage and satisfaction is regarded as a main direction by firms with high levels of EO than with low levels of EO, and thereby such firms concern about prospective markets and needs of customers by grasping and exploiting value and rareness resources and capabilities. A firm with EO is more effort to obtaining competitive advantage or satisfaction in long-term than abnormal returns in short-term. Therefore, to aggressively carry off economic returns, even though a firm has entrepreneurial posture, it may be not expect to develop core competence by cultivating and exploiting valuable or rare resources and capabilities.

5. As to the association between resources attributes and firm performance, differing from Western firms (Newbert, 2008), Taiwanese firms show inconsistent results.

With respect to the four indicators of firm performance, value and rareness have positive impact on competitive advantage and satisfaction, as opposed to ROA and TQ. There may be three reasons for explaining the results. First, Data for EO and resources attributes is derived from subjective measures while data for ROA and Tobin’s q is derived from objective measures. These two different sources may lead to the insignificance of this relationship. Second, ROA and Tobin’s q from a TEJ database are financial measures, and they may not really reflect valuable or rare resources. Especially, new ventures may not obtain such resources in their start-up years, thus resulting in negative economic returns (Luke et al., 2007). In addition, financial measures only present accounting returns rather than the advantages that are gained from intellectual, human and organizational capital. With respect to EO, the innovation of products, a forward-looking perspective and risk-taking are associated with intellectual, human, and organizational capital, thus yielding firm performance.

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Third, the measurement of ROA and Tobin’s q may be influenced by a so-called

“Financial Tsunami” environment.

6. Based on the theoretical framework, this dissertation investigates the effects of EO on firm performance from following perspectives. (1) In addition to prior internal factors from inside-out view, (2) this study further explores whether a firm with EO can obtain the value or rareness of resource-capability combinations in a high level of environmental dynamism from outside-in view. It is found that a firm with EO does exert a positive influence on value and rareness, yet it seems that EO alone is not a major driving force in determining value and rareness (Covin & Slevin, 1991; Zahra, 1993). In order to survive in all stages of the organizational cycle, firms with EO aggressively seize valuable/rare resources and capabilities to reduce uncertainty that they face, but conservative firms without innovation, proactiveness, and risk-taking might exploit valuable/rare resources and capabilities in a low level of environmental dynamism rather than in a high level of environmental dynamism (Jones, 2007) (please see Figure 4-13). However, ignoring environmental dynamism, a firm’s EO is still pursing performance through high levels of value and rareness (Covin & Slevin, 1991; Lumpkin & Dess, 1996; Zahra, 1993).

Moreover, by interviewing Mr. Huang and Mr. White in YAGEO Company and GIGA-BYTE Technology Company respectively (Appendix B), this study finds that both internal factors (such as intelligent, financial, organizational, and human resources and capabilities) and external factors (such as environmental dynamism) would influence firm performance. That is, both resources attributes in an organization and environmental dynamism in the out an organization are simultaneously considered in business operation from strategic thinking and analytical framework. Thus, a firm can build strategic positions and may have

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opportunities to improve performance by fitting internal resources/capabilities and environmental dynamism (Figure 5-1). With respect to the view of IO and entrepreneurship theory, when a firm with EO cognizes new opportunities and enters new markets in environmental dynamism, the critical resources/capabilities utilized by this firm may not be viewed as valuable resources/capabilities by its competitors.

Therefore, the situation of environmental dynamism is necessary to precipitate the effect of EO on resource attributes; that is, environmental dynamism plays a significant supporting role in facilitating the value/rareness of resource-capability combinations for a firm with EO (Schumpeter, 1934). However, top managers in case study emphasize no matter what environment a firm faces, valuable and rare resources/capabilities are important in strategic position, which is consistent with the concept of RBV (Barney, 1991). Therefore, according to the strategic logic, when the influence of EO on firm performance can be promoted, firms must simultaneously consider two views: inside-out and outside-in.

External factor Internal factor

Figure 5-1 Strategic Logic of Inside-out and Outside-in

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7. In the field of strategic management, some research issues can be empirically examined by using a questionnaire survey or secondary data to measure the constructs of management issues. However, the limitation in scales and measures of items may lead to miss some important variables in the framework of this study.

Therefore, this dissertation provides case study from firms’ practices to identify and support the accuracy of research propositions, through interviewing a top manager in firms. Based on the literature of RBV, entrepreneurship theory, and environmental dynamism, this dissertation acquires several constructs and further constructs the propositions between these constructs by pilot case to fill a gap of literature (Yin, 1994). In terms of these propositions and literature review, all hypotheses are built in this dissertation. Finally, all hypotheses are strong supported or partially supported by several statistical analyses. Thus, the research framework of the associations between EO, environmental dynamism, value and rareness, and firm performance is not only proposed by operations of firms and literature but also supported by statistical analyses.

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5.3 Research Limitations and Directions

Despite its contributions, this study has following limitations that possibly pave the way for future research.

1. This study relies on the self-reported data from top managers, so it may be involved with a common method variance (CMV). To address the potential concerns of common method bias and single informant bias, several procedural and statistical remedies were used (Podsakoff et al., 2003). Regarding the procedural remedies (ex ante preventive methods), the managers were guaranteed anonymity and the questionnaires were mailed directly to them. Item ambiguity was also reduced, and related items were separated to avoid the respondents guessing the relationship between the variables (Podsakoff et al., 2003). As for the statistical remedies (ex post testing methods), Harman’s single-factor test, a widely-adopted post hoc remedy, was used to estimate whether our data had a CMV problem or not (Podsakoff and Organ, 1986). The results showed that the first factor accounted for only 10.34% of variance among the variables. This implied that there were no serious CMV problems in our data.

2. The data of this study was derived from diverse industries in Taiwan, and the empirical evidence derived from a single country may not be able to generalize the situation of other developed or developing economies. Future studies may consider collecting data from various countries to achieve more generalizable research findings.

3. Several studies have suggested that the effect of EO on firm performance is a long-term rather than a short-term (Wiklund, 1999; Zahra & Covin, 1995). A firm with EO is viewed as a first-mover and introduces new products or services ahead