Reviewing Entrepreneurial Orientation and
Researching its Influence on Change Projects
Johan de Haan
University of Groningen, Groningen MscBa, Faculty of Economics & Business
1
ABSTRACT
Researchers have long been interested in entrepreneurship and its effect on organizational performance. Moreover, literature in organization theory has paid increasing attention to organizational change. This study combined these two areas of interest and researches the effect of entrepreneurial orientation (EO) on change effectiveness, and the employment of four change strategies in SMEs. To ensure a solid research on this question, we have taken into account the measurement of EO in this research. Following a debate in the current entrepreneurship literature, we elaborated on the operationalization and dimensionality of the EO construct using two different measurement scales. Two datasets were combined to create a sample of 198 change agents in SMEs who completed a survey. We found that EO predicts change effectiveness and the use of the change strategies. Furthermore, we conclude that operationalization choices can influence the results of a study, and are therefore very important in EO research.
Key words: entrepreneurial orientation, organizational change, change effectiveness,
2
INTRODUCTION
Entrepreneurship concerns moving away from the current state of equilibrium (Schumpeter, 1934) and moving towards a new equilibrium (Hayek, 1948; Arend and Chen, 2011), suggesting that entrepreneurship implies engaging in organizational change. However, studies that research the relationship between entrepreneurship and organizational change are scarce. Therefore, we contribute to the existing literature by combining entrepreneurship- and change literature, to research the effect of entrepreneurial orientation on organizational change projects. Such research is important, as organizations constantly engage in changes such as reorganizations, downsizing, and the implementation of new technologies, in order to remain competitive (Nikolaou, Gouras, Vakola and Bourantas, 2007); the recent economic crisis makes these changes even more important (Mohrman and Worley, 2009). Successful change is hard to achieve for organizations. Many studies have concluded that most change projects in organizations are unsuccessful (Higgs and Rowland, 2011). This suggests that research into the effectiveness of organizational change projects is needed.
3 Literature in organizational change distinguishes two main groups of individuals, the agents and the recipients of the change. The change agents manage and lead the change, whereas the change recipients are the employees who are responsible for executing the change and changing the operations of the company. Ford, Ford and D’Amelio (2008) point out that most researchers presume that failure in organizational change is caused by change recipients, viewing change agents as helpless victims of the irrational behavior of recipients. However, Ford et al. (2008) argue that change agents also have a large role in this respect, and have a significant influence on the outcome of organizational change. The change agent is the person who leads and implements the change. Following Ford et al. (2008, p. 362), we define change agents as ‘those who are responsible for identifying the need for change, creating a vision and specifying a desired outcome, and then making it happen’. Change agents can approach a change in several ways. A change strategy typifies the way in which they try to implement a certain change (Weick and Quinn, 1999). This study will focus on the role of change agents and their strategic choices in approaching change, and how the EO of an organization plays a role in this.
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THEORETICAL FRAMEWORK
Change effectiveness
The organizational change literature lacks a clear definition of change effectiveness. Researchers that work with this concept typically do so without developing a definition (e.g. Arvonen and Petterson, 1999; Smith, 2002). Cameron (1980) provides four complementary approaches in assessing and defining organizational effectiveness. The most widely used approach is the goal approach, defining effectiveness in terms of the extent to which an organization accomplishes its goals. The second approach, the system resource approach, defines effectiveness as the extent to which the organization acquires necessary resources. The third approach focuses on the internal processes of the organization; in this approach effectiveness means smooth internal functioning and information flow. The fourth and final approach focuses on the satisfaction of stakeholders. Fu and Yuki (1999) explain that effectiveness has two dimensions, the ‘result’ and the ‘process’ dimension (see also Higgs and Rowland, 2005). The first and fourth approaches of defining effectiveness provided by Cameron (1980) are consistent with the result dimension, the second and third approaches are in line with the process dimension. Organizational change also includes achieving certain goals, the use of resources, a change in internal processes, and stakeholder satisfaction (Kraatz and Zajac, 2001; Beck, Brüderl and Woywode, 2008). Therefore, the approaches and dimensions of organizational effectiveness are useful in defining change effectiveness. Following the two dimensions, change effectiveness is defined as the satisfaction of stakeholders with the process and the outcome of the change.
Change strategies
5 acting on such an uncertain environment (Bamford and Forester, 2003; Burnes, 2004). Orlikowski (1996) explains that emergent changes are continuous changes which are ongoing, evolving and cumulative; a new pattern of organizing is established without explicit intentions beforehand.
Change agents can employ a range of methods to approach an organizational change. Their choice can depend on the situation, and/or it can be a result of their preference (Dunphy and Stace, 1993). Next to the distinction between planned and emergent change, planned change has in its turn been divided in several approaches. A well-known classification of planned change strategies is that of Chin and Benne (1969). They distinguish between the empirical-rational, normative-reeducative, and the power-coercive strategy.
The normative-reeducative (NORE) strategy acknowledges that change is a complex phenomenon (Kennedy, 1987). This strategy builds on the idea that people act on the values and attitudes which are common in their environment, and that accepting change means the need to change these values and attitudes. Collaboration is important, and ideas and input from others are welcome (Quinn, Spreitzer and Brown, 2000). Involvement and creating win-win situations are fundamental in this strategy.
The empirical-rational (EMRA) strategy is characterized by the belief that people are rational human beings who will only adopt a change if they are convinced that it is beneficial to them (Kennedy, 1987). This strategy builds on the idea that resistance to change is likely to come from ignorance and superstition, and can be countered by educating the recipients about the logic and the benefits of the change (Quinn et al., 2000). Reason and logic are fundamental in this strategy; recipients will adopt the change if they understand it and if it is in their self-interest. The NORE and EMRA strategy both seek to persuade the change recipients to accept the organizational change. In the NORE strategy recipients are persuaded by being involved and creating win-win situations. In the EMRA strategy they are persuaded by showing them their own benefits. Therefore, these strategies can be referred to as ‘persuading strategies’ (Vos and Brand, 2012).
6 in which organizational change is not accepted - the use of this strategy can be necessary (Kennedy, 1987). The change recipients are guided by the people who possess the power and the authority, and are forced to adopt the change initiative (Quinn et al, 2000).
Finally, next to the three planned change strategies, we take into account the emergent (EMER) strategy (Orlowski, 1996). According to Burnes (2004), advocates of emergent change see change as a process in which parts of an organization deal separately and independently with one problem and goal at a time. Managers transform their organizations over time by responding to pressures in their internal and external environment. According to Bamford and Forester (2003), emergent change is less dependent on formal plans and guidelines, and more on reaching an understanding of the complexity of the issues involved. It is closely linked to developments in the environment. This strategy is obviously very different from the former three, as these are planned change strategies. The unintended nature which is embedded in this approach makes it questionable whether this is a real strategy, as a change agent cannot deliberately choose it (Bamford and Forrester, 2003). A change agent can however intend to facilitate a situation, thereby alowing emergent change to happen (Plowman, Baker, Beck, Kulkarni, Solansky, and Travis, 2007). Change agents then act as facilitators, whereas in planned change projects they act as controllers (Bamford and Forrester, 2003). Therefore, we also classify this approach as a strategy.
Entrepreneurial Orientation
7 Miller (1983) provided the starting point for identifying the dimensions of EO. He argued that an entrepreneurial firm engages in product market innovation and risky ventures, and is among the first companies in its industry to develop proactive innovations. Covin and Slevin (1989) have, among others (see Lumpkin and Dess, 1996), built further on Miller’s conceptualization and identified three core dimensions of EO: innovativeness, proactiveness and risk taking.
Innovativeness is the key to gaining a competitive advantage for organizations (de Jong and Vermeulen, 2006). According to de Jong and Vermeulen (2006), the statement of Freeman and Soete (1997) that ‘not to innovate is to die’ is widely recognized in literature. ‘Newness’ is a pivotal element in the concept of innovation (Perez- Luño et al, 2011). Therefore, innovation can be defined as the development and use of new behaviors or ideas in organizations, which are manifested in terms of a new product, service, production method, market, organizational structure or administrative system (Damanpour and Wischnevsky, 2006).
Proactive firms constantly seek new opportunities to exploit, trying to get ahead of their competition (Venkatraman, 1989). They are expected to closely scan and monitor their environment to spot these new opportunities. Proactiveness also means elimination of operations and products which are in the final phases of its life cycle (Venkatraman, 1989). These firms strive for a first-mover advantage (Perez- Luño et al., 2011). Proactiveness can be defined as the organizational pursuit of business opportunities which are perceived to be positive or favorable to the firm (Stevenson and Jarillo, 1990). This definition is consistent with the definition provided by Lumpkin and Dess (2001), who view it as an opportunity seeking and forward looking perspective, in which new products and/or services are introduced ahead of competition, and firms act in anticipation of future demand in order to create change and to shape the environment. Both definitions share the idea that proactiveness concerns actively searching for opportunities that are beneficial for the organization.
8 to view situations more optimistic and favorable than non-entrepreneurs (Palich and Bagby, 1995; Busenitz, 1999). Lumpkin and Dess (2001, p. 431) explain that risk taking means a tendency to take bold actions such as venturing into unknown new markets, committing a large portion of resources to ventures with uncertain outcomes, and/or borrowing heavily.
Two related issues regarding the EO construct are subject of discussion in the current entrepreneurship literature. We present these issues, and we use our results to draw some conclusions on them. First, researchers are in debate about the dimensionality of the construct. Some scholars adopt a unidimensional view, where the three dimensions covary, (e.g. Covin and Slevin, 1991), while others adopt a multidimensional view, assuming the three dimensions may vary independently (e.g. Kreiser and Davis, 2010). The multidimensional view implies that the effect of the individual dimensions should (also) be studied individually. The unidimensional view implies that the dimensions are interrelated and should therefore not be studied separately, but only as a whole.
9 in completing the forced-choice type of statements such as the items of Covin and Sleven (1989), leading them to employ a unipolar Likert scale to measure EO. Moreover, George and Marino (2011) observed that some of the answer possibilities did not have the same meaning for all respondents. This could be a result from the bipolarity of the scale, which can be confusing for respondents, as in some of the items the opposite ends of the scale do not fully exclude each other. For example, the first item of the scale asks respondents to choose if their companies’ focus is primarily on bringing tried and true products and services to the market, or creating innovative products and services. However, a firm may primarily focus on their existing products, but can be very innovative at the same time by trying to create new products or services. Therefore, some of the bipolar items seem to be combined unipolar items. Gannon and Ostrom (1996) performed three experiments comparing bipolar scales with unipolar scales and concluded that they are not necessary interchangeable. Consequently, if unipolar items are combined into bipolar items, this does not result in similar answers (Gannon and Ostrom, 1996).
Hypothesis development
The effect of EO on the change strategies
In this section we will hypothesize the relationships between EO and the four change strategies. For each relation, we start with presenting our expectation, and continue by explaining our argumentation.
10 Companies with a higher EO are also likely to employ a higher level of implementation of the EMRA change strategy. Atuahene-Gima and Ko (2001) argue that an entrepreneurial orientation of an organization leads to congruent behavior on the employee level. As a result, an organization with a higher EO will have employees who act accordingly to this, and therefore they will understand the necessity of the organization to be innovative and proactive, which encompasses organizational change. This makes the use of an EMRA strategy easier to employ for change agents, as the use of arguments is more achievable in this situation. If change recipients in this company would be resistant to change, this would inhibit the company to have a high EO.
The arguments above lead to the following hypotheses:
Hypothesis 1a: The higher a firm’s Entrepreneurial Orientation, the more the change agent will tend to adopt a normative-reeducative change strategy.
Hypothesis 1b: The higher a firm’s Entrepreneurial Orientation, the more the change agent will tend to adopt an empirical-rational change strategy.
This study will determine whether the relationship between EO and the use of a POCO strategy is positive or negative. There are arguments for both directions. As EO encompasses quick customer response (Lumpkin and Dess, 1996), a POCO strategy could prove useful to save time of arguments and persuasion. However, as argued above, change recipients of companies with an EO are expected to be less resistant to change, making the use of this strategy probably less necessary.
11
The effect of EO on change effectiveness
Companies with a higher EO tend to focus more on R&D, implement new types of technology, new types of managerial- and production processes, and to develop new technical solutions and products that are not only ahead of competition, but even ahead of customers’ recognition of their need for this solutions (Lisboa, Skarmeas and Lages, 2010). Wiklund and Shepherd (2003) describe EO as a firm’s strategic orientation which reflects its willingness to break away from the tried and true. It is viewed as an important strategic resource, as EO reflects the firm’s philosophy of how to do business and how to align the company with its environment (Lisboa et al., 2010). Firms with a higher EO pursue new market opportunities and renew their existing areas of operation (Hult and Ketchen, 2001). The dimensions of EO are innovativeness, proactiveness and risk taking. Innovativeness is the tendency to favor change and support new ideas (Rauch, Wiklund, Lumpkin and Frese, 2009). Proactiveness is an attitude of anticipation and acting on future changes in the market, and pioneering new products and processes (Li, Wei, and Liu, 2010). Risk taking involves a willingness of a firm to commit resources to new projects with uncertain outcomes (Baker and Sinkula, 2009). Therefore, these three dimensions breathe organizational change and are likely to cause a higher effectiveness of a change. Wiklund and Shepherd (2003) found a strong positive relationship between EO and firm performance. A prerequisite to achieve this performance is to adapt to the environment and therefore, to change (Nikolaou et al., 2007). The tendency of firms with a high EO to seize new opportunities and anticipate on changes in the market suggests these companies should be well able to engage in successful organizational change. Therefore, we come to the following hypothesis:
Hypothesis 2: The higher a firm’s Entrepreneurial Orientation, the more successful these firms are in organizational change.
METHOD
12 purpose of this study, as a comparison between the two scales could be made. The first database included data from a survey conducted in 2011, the second database included data from a survey in 2012.
Data collection and sample
The two databases contained data of change agents in SMEs. The first data were collected in a survey in 2011 of 119 change agents. The second data were collected in a survey in 2012, containing 105 change agents. Respondents were individuals that had recently been change agents in a change project, and were found through the personal networks of the interviewers.
The study initially included 224 respondents; 26 cases were excluded from the dataset before the analyses. Two of the cases included companies with more than 250 employees and are therefore not classified as SMEs, and 10 of the cases had too many missing values. Finally, 14 cases were excluded as they included companies that were situated outside the Netherlands. Therefore, we worked with a final sample of 198 change agents.
Of the sample, 83.3% was male and 16.7% female. The age of the change agents ranged from 20 to 65 years (M = 43.89, SD = 11.20); 62.1% finished higher vocational or university education, 27.8% finished secondary school and the remaining 10.1% finished primary school. The size of the companies ranged between 10 and 250 employees. Most of the companies in the sample had 10 to 50 employees (74.2%). The average age of the companies was near to 33 years (M = 32.78, SD = 62.58).
13
Measures
Entrepreneurial orientation. As mentioned above, this variable was measured differently in the two surveys. In the first survey a scale with 14 items was used, based on Baker and Sinkula (2009), Covin and Slevin (1989), and Runyan et al. (2008). This scale contained four questions about innovativeness (e.g. ‘I consider innovations to be the most important orientation of our strategy’), four questions about proactiveness (e.g. ‘I consider the company to be proactive, we try to create opportunities in our market’), four questions about risk orientation (e.g. ‘Taking risk is an absolute prerequisite in this company for survival’), and two questions about profit and growth orientation (e.g. ‘one of the most important goals of this company is to generate profit’). The reliability of the scale was acceptable (Cronbach’s alpha = 0,63). We refer to this scale as EO-eclectic. In the second survey, the bipolar scale of Covin and Slevin (1989) with nine items was used to measure EO, containing three questions on innovation, three on proactiveness and three on risk orientation. This is the standard scale of measuring EO (George and Marino, 2011). The reliability of this scale was good (Cronbach’s alpha = 0,70). We refer to this scale as EO-C&S.
14 other. Therefore, reliability analysis is appropriate for this variable but not for the change strategies.
Change effectiveness. This variable was measured on a six-item scale, measuring the satisfaction of the change agent with the extent to which the change goals are accomplished and the process of the change project. This scale is based on Higgs and Rowland (2005) and Fu and Yuki (1999), and focuses on the perceived success of the result (three items) and perceived success of the process (three items). An example item of this scale is: ‘Overall, with the result of the change I am..’, ranging from ‘very unsatisfied’ to ‘very satisfied’. The reliability of this scale was good (Cronbach’s alpha = 0,83).
Analyses
Several analyses were performed for this study. The main descriptives and bivariate correlations were analyzed for a first impression of the data. Next, four regression analyses were performed to determine if EO predicts the use of specific change strategies, and one to assess EO’s direct effect on change effectiveness. All control variables were included in these analyses. Furthermore, bivariate correlations among the EO dimensions were performed to determine their interrelation, and additional regression analyses were performed to determine the direct effects of the individual dimensions of EO on change effectiveness. Moreover, separate analyses with the two distinct EO variables were performed to gauge the differences between these two measurements.
Control variables
Several variables were included in the analyses to control for their influence:
Gender. The gender of the change agent was included as a control variable and was measured in the questionnaire. Males are more inclined to rate their change entrepreneurial abilities higher (Thébaud, 2010), and could prefer the use of different strategies.
15 Education of respondent. More effective changes could be the result of a higher intelligence and education. Therefore, education of the change agent was included as control variable and measured in the questionnaire.
Age of firm. The age of a firm could influence the capability to change. Young firms are likely to be continuously changing and growing, whereas older firms are likely to have ‘found their place in the market’ and be more bureaucratic. Therefore, the age of the firm was included as control variable. Firm age was measured in months.
Industry. Some industries are more turbulent than others. As a result, the industry in which a firm operates could influence their capability to engage in change projects. Therefore, industry was included as a control variable.
Firm size. Smaller firms are expected to be more flexible and adaptable. Consequently, the firm size could influence the capability of the organization to engage in change projects. Therefore, firm size in amount of employees was included as control variable.
Common method bias
As we only collected data from change agents, a single source, we performed two analyses to assess the possible effect of common method variance on our findings. First, we employed one of the post-hoc tests that is proposed by Podsakoff and Organ (1986): the Harman’s (1976) one factor test. In this procedure, all the variables of interest are entered in a factor analysis. The results of the unrotated factor solution were examined. The assumption is that when a single factor emerges, or when one factor accounts for the majority of the covariance in the independent and criterion variables, a substantial amount of common method variance is present. The unrotated factor solution showed that a single factor did not account for a significant amount of the variance of our independent and dependent variables. Therefore, this test gives no indication that our results are affected by the common method bias.
16 orientation. The self-report bias is often related to the motivation to excel in a certain domain (Paulhus and John, 1998). Persons with a higher achievement orientation have a desire to meet higher standards and attain excellence (McClelland, 1985). For example, Gramzow, Elliot, Asher, and McGregor (2003) found that need for achievement predicted exaggeration of academic performance among students. Therefore, a higher achievement orientation can serve as a proxy for the self-report bias. The scale for this factor was adopted from Utsch and Rauch (2000), and was adjusted to focus on change (e.g. for the change process I developed clear goals). Therefore, the expression of these characteristics in a certain situation (i.e. organizational change) was measured. We controlled for this variable in analyzing the relationship between EO and change effectiveness, and the relationships between the change strategies and change effectiveness. The outcomes of the partial correlation showed that EO and EMRA correlated significantly with change effectiveness on a 90% confidence level (r = 0.12, p = 0.09; and r = 0.15, p = 0.04 respectively). This indeed shows that there is a very small influence of the common method bias, as the correlations between our research variables become somewhat less significant in this procedure. This shows that such a proxy is necessary to control for this bias when researching change effectiveness in a similar setting as ours. However, controlling for the common method bias does not influence our results to a large extent, which gives us more confidence that our research is not affected by such a bias.
RESULTS
Main descriptives and correlations
For a first impression of the data, the main descriptives and bivariate correlations are presented in Table I. The EO variable is standardized as this construct encompasses two measurements. The means of the change strategies show that the NORE strategy is used most (M = 4.78), and the EMER strategy is employed the least (M = 3.68). Change effectiveness was rated high on average (M = 5.58).
17 correlations with change effectiveness. EO only correlates significantly with EMRA. The table shows no significant correlations between EO and any of the other strategies. Moreover, some significant correlations exist between the change strategies. NORE correlates significantly with EMRA, POCO and EMER. Furthermore, EMER and POCO correlate significantly with each other.
TABLE I
Correlations between variables
Mean SD 1 2 3 4 5 6 1 EO 0,00 1,00 - 2 EMRA 4,78 ,90 ,199** - 3 NORE 4,15 1,08 ,073 ,302** - 4 POCO 3,91 1,03 ,127 ,031 -,313** - 5 EMER 3,68 ,91 -,045 ,115 ,479** -,153* - 6 Ch Eff 5,58 ,91 ,153* ,194** ,162* ,104 ,086 -
** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed)
Hypotheses testing
18 relationship. There was no significant effect of EO on EMER (β = -0.04, p = 0.52). Therefore, we cannot derive any relationship between EO and EMER from our results.
TABLE II
Regression outcomes EO on change strategies
Adj. R2 β Sig
Empirical-Rational 0,04 0,20 0,01**
Normative-Reeducative 0,05 0,09 0,22
Power-Coercive 0,03 0,12 0,10*
Emergent -0,01 -0,04 0,52
** Significant at the 0.05 level (2-tailed) * Significant at the 0.10 level (2-tailed)
Change effectiveness We tested for the direct influences of EO on change effectiveness using regression analysis. Our results showed that EO significantly predicted change effectiveness (β = 0.16, p = 0.02). These results support our hypothesis 2 that a higher EO causes firms to be more successful in implementing change projects.
Additional analyses
19 As the analyses above indicated a significant difference between the two measurement scales of EO, we performed additional regression analyses in which the effect of the two EO measures on change effectiveness was estimated separately. The regression analysis of the EO-eclectic variable on change effectiveness showed highly significant results (β = 0.52, p = 0.01). However, the regression with the EO-C&S variable was highly insignificant (β = 0.01, p = 0.94). These large differences are striking. Following the discussion on the dimensionality of EO, we performed a correlation analysis to determine the relationships between the dimensions. A correlation analysis showed that only half of the correlations are significant (see table III).
TABLE III
Correlations between dimensions EO
Inn Pro Ris
Inn (standard) - Pro (standard) 0,31** - Ris (standard) 0,21 0,41** - Inn (eclectic) - Pro (eclectic) 0,65** - Ris (eclectic) 0,18 0,09 -
** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed)
These results suggest that EO is a formative construct. Although significant correlations between some dimensions exist, the absence of significant correlations between other dimensions indicates that the dimensions can vary independently. This also implies that the effects of the dimensions could be studied separately. Therefore, we performed the regression analyses of all the separate dimensions on change effectiveness. Interestingly, only the innovation and the pro-activeness dimension of the EO-eclectic variable significantly predict change effectiveness (β = 0.44, p < 0.01; β = 0.41, p < 0.01 respectively).
20 positive influence on change effectiveness, however these results were not significant on a 95% confidence interval (β = 0.14, p = 0.06; and β = 0.14, p = 0.07 respectively).
DISCUSSION AND CONCLUSION
Although organizational change is difficult, it is necessary for organizations. If companies do not change, the resulting inertia can deny the organizations ability to adapt to their environments and survive (Labianca, Fairbank, Andrevski and Parzen, 2009). Therefore, it is important to study the antecedents of change strategies and effective organizational change. To our knowledge, EO is not yet studied as antecedent of organizational change strategies and effectiveness. We have paid attention to this gap and studied these effects. Furthermore, the collection of individual researches on EO calls for a reexamination of this concept, and for researchers to study the differences and implications of the different operationalizations (George, 2011). We compared the outcomes of the analyses with the two EO measures separately and discuss the differences.
Discussion of the findings
21 This could be due to the fact that companies with a high EO are consciously engaged in creating new products/services and seizing opportunities, instead of ‘letting it emerge’.
Secondly, this study examined the operationalization of EO. We used two measures of EO and combined these, and we also examined the results of the relationships that included this variable with the separate measures. Although the variables are measured in different cases, the large differences in the results suggest the two measures are not interchangeable. The EO-eclectic variable had a very significant positive effect on change effectiveness, whereas the EO-standard variable had no effect on change effectiveness. These results confirm the concerns of George (2011) that the different studies of EO using different operationalizations lead to a collection of individual studies instead of a common body of knowledge. However, although consistently using the standard scale would contribute to building a common body of knowledge, this scale has some major disadvantages as we have discussed before. Furthermore, we have studied the relationships between the three dimensions of EO. The results showed that they did not all correlate with each other. These results suggest that being innovative and proactive does not necessarily implies taking risks. Therefore, they provide evidence for the formative nature of this construct. Because of this formative nature, we also regressed the individual dimensions on change effectiveness. This showed that only the innovativeness and proactiveness dimensions of the EO-Eclectic variable had a significant influence on change effectiveness. This could be due to the fact that risk taking inherently results in some failures. Possibly, organizations cannot afford this is an increasingly competitive environment, and focus on innovations and proactive behaviors that do not include excessive risks.
Implications
22 research was entered, contributing to our understanding of change processes in SMEs. Our results showed that SMEs need to exploit their natural tendency to be entrepreneurial (Kraus et al., 2012). This contributes to effectively engaging in change projects, which is necessary to perform well as an organization (Nikolaou et al., 2007). Furthermore, we showed that change agents in companies with a higher EO use the EMRA or the POCO strategy to approach organizational change. The POCO strategy also directly affects change effectiveness.
Second, we showed that studies on change effectiveness can be sensitive to the common method bias. We argued that achievement orientation can serve as a proxy for this bias in the partial correlation procedure. Our results showed that this bias did have a small influence, however the results were robust to this. Researchers in this field are advised to adopt this measure in their research and perform a partial correlation procedure to account for this bias.
23 results. This could be related to the bipolarity of the scale of Covin and Slevin (1989), which could lead to different results than employing items on the same dimension on a unipolar scale. Future research should investigate the appropriateness of this scale in other settings and countries.
This study also has some important practical implications. First, the results of this study suggest that an entrepreneurial orientation can be beneficial for the success of change of a company, indicating that SMEs should focus on innovation, be proactive and take risks to be more successful in change projects. Some additional analyses revealed, however, that only innovativeness and proactiveness correlated significantly with change effectiveness. Therefore, viewing EO as a formative construct, we conclude that SMEs should particularly focus on being innovative and proactive, without taking a large amount of risks. A direct significant effect of risk taking behavior on change effectiveness is not proven by our results. Secondly, contrary to our expectations, the POCO strategy was found to directly and significantly predict change effectiveness, indicating that applying power and enforcing recipients in change projects could be beneficial for the success of the change.
Limitations and further research
As with each research, this study should be considered in light of its limitations. First, by focusing on the gap of researching change in SMEs, this study is not generalizable to larger companies. Moreover, as the sample only included companies in the Netherlands, the results may not be generalizable to other countries and cultures. Further research could focus on researching these relationships in large companies and/or in other countries and cultures.
24 that is used in this study is a better measure for EO in the Netherlands, by comparing the results of this scale with the results of the standard EO-C&S scale in the USA. This can be done if both scales are adopted in the same survey. Moreover, further research could compare different scales of EO with each other, for instance by including three simple items, asking the respondent to indicate to what extent they view their company as being innovative, proactive, and risk taking as control questions, to compare these with the EO scales. Finally, the results of this study suggested EO to be of a formative nature. Following this, only innovativeness and proactiveness were shown to be positively related to change effectiveness. However, these results also differed among the two EO-measures. Future research on EO should assess the nature of their EO measurements in their databases by measuring the correlation between these dimensions, to see if they are able to vary independently. If other studies also will find that they can, this then confirms the formative nature of the construct and ends the ongoing discussion on this subject (e.g. George, 2011; George and Marino, 2011; Kreiser and Davis, 2010).
25
Conclusion
26
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46
Appendix A – Items in questionnaire
Item nr. Change effectiveness: (1) Very dissatisfied, (7) Very satisfied
1 Regarding the company’s performance after and as result of the change, I am… 2 Regarding the achievement of the goals we set for this change, I am...
3 On the whole, regarding the change results, I am…
4 Changes take resources (such as money and manpower), but regarding the costs of the resources for this change, I am…
5 Regarding how we involved the people concerned during the change, I am…
6 Changes take time, but regarding the time we spent to realize this change I am…
Item nr. Empirical-Rational strategy (1) Strongly disagree, (7) Strongly agree
1 As change agent I established close links between the employees responsible for carrying out this change and myself.
2 As change agent I focused on the facts and was promoting the benefits of the change. 3 The need for this change was justified by experts who are knowledgeable about this change. 4 To get employees to change, I used logical arguments and factual evidence.
5 Decisions about this change were being made by experts who are highly knowledgeable about this change.
Item nr. Normative-Re-educative strategy (1) Strongly disagree, (7) Strongly agree
1 Employees had a lot of authority to make decisions about the change.
2 As change agent I spent a lot of time dealing with how the change was being accepted by employees.
3 Decisions about this change were being made by employees from various levels of the company.
4 To get employees to change, I involved employees from various levels of the company in how to approach the change.
5 The relationship between me, as change agent, and those responsible for carrying out this change was highly collaborative.
Item nr. Power-Coercive strategy (1) Strongly disagree, (7) Strongly agree
1 The need for this change was justified by members of top management only. 2 To get employees to change, I used my position of power to implement the change. 3 As change agent I played the role of order giver.
4 As change agent I did not focus on how employees would accept the change.
5 As change agent I created a clear division between myself and those responsible for carrying out the change.
Item nr. Emergent strategy (1) Strongly disagree, (7) Strongly agree
1 The change was accomplished without making a plan before realizing the change.
1
the company.
3 As change agent I particularly encouraged people
4 It was my intention that employees would create a change that would make them enthusiastic. 5 This change evolved naturally, as change agent I did not need to do much.
Item nr. Achievement orientation (1) Strongly disagree, (7) Strongly agree
1 For the change process I have explicitly drawn targets.
2 During the change process I evaluated the progress of the process on the basis of the targets that were drawn beforehand.
3 During the change process I often tried to proceed the change better.
Item nr. EO-Eclectic (1) Strongly disagree, (7) Strongly agree
1 I consider innovation as the most important pillar of our company’s strategy. 2 It is particularly through innovation that my company gains competitive advantage. 3 I am always looking for new and better ways to increase the performance of the company 4 The innovations within the company are based on what we see at our competitors and
colleagues.
5 One of the most important goals of our company is to generate profit. 6 One of the most important goals of our company is to grow
7 I consider the company to be proactive, we are trying to create opportunities in the market in which we operate.
8 The company waits for opportunities and changes in the market and reacts on these. 9 The company strives to achieve a competitive advantage as a ‘first-mover’ in its market. 10 Having the final responsibility in changes (generally) I am open to new ideas of others (such
as employees).
11 Taking risks is an absolute prerequisite for the company to survive.
12 It happens often in our company that risks are taken without thorough analysis.
13 The decisions that I take for changes having the final responsibility are generally intuitive. 14 To ensure success of change I am willing to take high risks.
Item nr. EO-(C&S)
1 Our company’s focus is primarily on…
(1) bringing tried and true products and services to the market (7) creating innovative products and services
2 In the previous three years, in comparison with our competitors, we have marketed… (1) only few new products or services
(7) many new products or services
3 In the previous years, changes in our products and services have been mostly… (1) of a minor nature
2
4 In its market, our company …
(1) typically responds to actions which competitors initiate. (7) typically initiates actions to which competitors then respond.
5 In its market, our company …
(1) is very seldom the first business to introduce new products/services, techniques, etc (7) is very often the first business to introduce new products/services, techniques, etc.
6 In its market, our company …
(1) a strong tendency to follow the market leader in introducing new products or ideas (7) a strong tendency to be ahead of other competitiors in introducing new products and services
7 The leaders of our company have a strong tendency to choose… (1 low risk projects, with normal and certain rates of return (7) high risk projects, with chances of very high return
8 In general, the leaders of our company believe that owing to the nature of its market… (1) it is best to explore it gradually via cautious, incremental behavior
(7) bold, wide-ranging acts are necessary to achieve the firm’s objectives.
9 When confronted with decision making involving uncertainty, we…
(1) typically adopt a cautious “wait-and-see” posture in order to minimize the probability of making costly mistakes.
