Muzammil

Arslan
Literature
Shinza Khakwani

Review

Topic
Entrepreneurial Orientation, Firm Strategy and
Small Firm Performance
Introduction:
Small and medium sized enterprises are business whose
personnel number falls between certain limits. Small enterprises outnumber large
companies by a wide margin and also employ many more people. SMEs are also
said to be responsible for driving innovation and competition in many economic
sectors. Different perspectives of small and medium size enterprises are discussed
in this review. Small business credit availability and relationship lending, socioculture factors and entrepreneurial activities, entrepreneurial orientation and
business performance, determinants of product innovation in small firms and many
more journals have been discussed in this literature review. Growth of small and
medium-sized enterprises is recognized as crucial to a nation's economic
development and future wellbeing. As part of growth, the need for successful
international market development is particularly acute for smaller firms pursuing
niche strategies from a limited domestic market.

Literature Review:
Berger and Udell (1998) and Boot (2000): The issue of credit
availability to small firms has garnered worldwide concern recently. Models of
equilibrium credit rationing that point to moral hazard and adverse selection
problems suggest that small firms may be particularly vulnerable because they are
often so informationally opaque. That is, the informational wedge between
insiders and outsiders tends to be more acute for small companies, which makes
the provision of external finance particularly challenging. Small firms with

opportunities to invest in positive net present value projects may be blocked from
doing so because potential providers of external finance cannot readily verify that
the firm has access to a quality project or ensure that the funds will not be diverted
to fund an alternative project.
Patricia H. Thornton Duke University: Scholars who study entrepreneurship have
lent great value by exploring the factors that explain how entrepreneurs create new
businesses and thus, how societies and economies grow and prosper. Although
there has considerable research based on psychological and economic approaches
to entrepreneurship, the influence of socio-cultural factors on enterprise
development remains under studied.
Andreas Rauch: Entrepreneurial orientation (EO) has received substantial
conceptual and empirical attention, representing one of the few areas in
entrepreneurship research where a cumulative body of knowledge is developing.
The time is therefore ripe to document, review, and evaluate the cumulative
knowledge on the relationship between EO and business performance.
Patrick . A . M Vermeulen: Firms need to develop new products, at least on
occasion, to gain competitive advantage. The rate at which they are capable of
developing these new products has been linked to performance and long-term
survival. This article explores if major differences arise when the determinants of
product innovation are compared across industries, Sect oral patterns relating to
innovation are fairly well established.
Bruce C. Petersen: The paper examines the long-standing theory that small firm
growth is often constrained by the quantity of internal finance. Under plausible
assumptions, when financing constraints are binding, an additional dollar of
internal finance should generate slightly more than an additional dollar of growth
in assets. This quantitative prediction should not hold for the relatively small
number of firms with access to external equity.
IAN FILLIS AND BEVERLY WAGNER: Two decades ago, the benet of
embracing technology as competitive advantage and the opportunities resulting
from globalization were identied by Levitt (1983). Today technology offers vast
opportunities for instant international market access, as well as improved domestic
market performance for small rms . However, recent research has shown that,

despite e-business technology facilitating improved business practice (Whitely,

2000), a number of small rms have not capitalized on this approach.
Nicole Covelo* and Hugh Munro: This paper examines the influence of network
relationships on the international process of small firms, using multi-site case
research on the software industry. The study empirically integrates the traditional
models of incremental internationalization with the network perspective. The
findings show that the internationalization process of small software firms reflects
an accelerated version of the stage model perspective, and is driven, facilitated, and
inhibited by a set of formal and informal network relationships.
Hugh J. Munro: Growth of small and medium-sized enterprises is recognized as
crucial to a nation's economic development and future wellbeing. As part of
growth, the need for successful international market development is particularly
acute for smaller firms pursuing niche strategies from a limited domestic market.
Zulia Fernandez, Mariah J. Nieto: Internationalization is the most complex strategy
that any rm can undertake. This strategy is likely to become increasingly
necessary. Owing to the growing market globalization, even family SMEs
traditionally focused on their domestic marketsmay have to face this strategy.
Therefore, it seems advisable that more effort should be devoted to studying forms
of international expansion for family rms and how to improve them.
William B. Gartner Clemson University, USA: The limitations of the paradigmatic
mode of thought as an approach for describing and understanding the nature of
entrepreneurial intentions and actions and their interrelationships with
circumstance is explored by showing how the authors previous empirical
scholarship often fails to offer insights into the intention/action/circumstance
condition (IACC) in entrepreneurship. As a way to understand and describe the
IACC in entrepreneurship, the rubric narrative is offered as a solution. The
author suggests a particular narrative gambit (the new path) for studying
entrepreneurship
Christian Lechner and Sveinn Vidar Gudmundsson: This article explores how
individual entrepreneurial orientation dimensions influence the relationship
between competitive strategy and firm performance. The findings show the
different impacts of individual entrepreneurial orientation dimensions on

competitive strategy and the effects of cost leadership and differentiation on

performance. Innovativeness is related most highly to differentiation strategy.
Risk-taking and competitive aggressiveness are negatively associated with both
differentiation and cost leadership strategies. Both differentiation and cost
leadership strategies are positively related to performance. This study refines our
understanding of the effects of entrepreneurial orientation on small firm
performance.
Maura Sheehan University of Brighton, UK: This article examines human resource
management (HRM) practices in small and medium-sized enterprises (SMEs). In
particular, by examining the issue of causal order, it addresses a significant gap in
the extant HRMperformance literature within the context of such firms.
Significant simultaneous and longitudinal relationships between HRM practices
and specific performance indicators are found. Controlling for past performance
and thus, testing for the potential for reverse causality does not eliminate the
significant relationship between human resource practices and performance. In
sum, the use of human resource practices is found to positively enhance sustained
competitive advantage. By explicitly examining the issue of causality in the human
resources performance relationship, this article makes a contribution to both the
human resource and SME literatures.
Tage Koed Madsen and Per Servos: For two decades internationalization processes
of firms has been the topic of much research in the field of international marketing.
Two quite similar streams of research have emerged in Europe and the in the US.
In a recent review article Andersen (1993) labels these original models "The
Uppsala Internationalization Model, and "The Innovation-Related
Internationalization Models. Both streams of research contend that firms become
international in a slow and incremental manner which may be due to lack of
knowledge about foreign markets, high risk aversion, high perceived uncertainty,
or similar factors. The U-M sees internationalization processes as involving time
consuming organizational learning processes; the I-M tends to analyze the process
as an innovative course of action and hence a question of adoption of new ways of
doing business.
Christopher T. Street and Ann-Frances Cameron: In order to thrive, small
businesses are often advised to develop relationships with external organizations

that have the potential to assist business development, survival, and growth. A
focus on the external relationships of the small business underlines the vital
importance of external resources in moving a small business toward increased
success and portability. Covering the period from 1990 to 2002, this paper reviews
the small business literature as it relates to the use of these external relationships
(such as organizational partnerships, networks, and alliances). In response to both
academic and practitioner demand for further research in this area, an exhaustive
analysis of the relevant literature was conducted and three meta research
questions representing the connections within this literature were formed. The
resource-based view of the rm, resource dependency theory, and punctuated
equilibrium theory are proposed as useful starting points for exploring these
research questions and can give direction for moving forward in this research area.
Haled Jenkins: small- and medium-sized enterprises (SMEs) have traditionally
been presented as non entrepreneurial in this area, this paper demonstrates how
SMEs can take advantage of the opportunities presented by CSR. Using data from
24 detailed case studies of UK SMEs from a range of sectors, the paper explores
the numerous CSR opportunities that present themselves to SMEs, such as
developing innovative products and services and exploiting niche markets. There
are inevitable challenges for SMEs undertaking CSR, but by their very nature they
have many characteristics that can aid the adoption of CSR; the paper explores
these characteristics and how the utilization of positive qualities will help SMEs
make the most of CSOs. Integrating CSR into the core of a company is crucial to
its success. Using the case studies to illustrate key points, the paper suggests how
CSR can be built into a companys systems and become just the way we do
things. There are a number of factors that characterize the CSO mentality in an
organization, and Grayson and Hodgess book describes seven steps that will move
a company in the direction of a want to do CSO mentality. This paper adapts
these steps for SMEs, and by transferring and building on knowledge from the 24
detailed case studies, it develops a business opportunity model of CSR for SMEs.
Robert T. Hamilton: Most small firms will never be able to raise all the funding
they would like from banks and other institutions. In this crude sense there will
always be a deficiency in the funding of the sector equal to the difference between
the total demand for funding and that part of this demand which qualifies for
funding support. This paper focuses more narrowly on the debt versus equity

preferences revealed in the initial and ongoing financing of small firms drawn from
a cross-section of the New Zealand economy[1]. While pointing to a gap in the
supply of funds, particularly institutional equity capital, previous local research
(Coopers and Lybrand, 1993) attributed most failings in the capital market to small
firm owners rather than the suppliers of funds. Owners were portrayed as unable to
understand the appropriate form of capital (debt versus equity) and to have
unrealistic expectations of deals involving the introduction of new equity. It is the
consequent restriction of choice that leads small firms to become burdened with
excessive levels of debt. We begin the paper by outlining our research objective
and the methodology used to pursue this. The sample of small firms used in the
study is then profiled. This sets the scene for a discussion of the initial and ongoing
financing preferences revealed by small firm owners. The paper concludes that
supposed gaps in the supply of finance to small firms might be in part the
consequence rather than the cause of financing decisions of the business owners.
Thierry Valerie: This article analyses the evolution of the small business
management and entrepreneurship fields as reflected in articles published in its
premier journal, the International Small Business Journal. It investigates the
evolution of the fields through bibliometric examination of all 660 articles
published between 1982 and 2012. While small business management has
remained the main focus of the journal, there has been a significant growth in the
number of articles focusing specifically on entrepreneurship. Also identified in this
analysis are the rise of theoretical studies and the relative decline of descriptive
work. Parallel to a clear improvement in the rigour of the articles published, the
field of small business and entrepreneurship has relied on a multidisciplinary
foundation which offers a diverse and multifaceted engagement. Despite this
increasing diversity, it appears that small business and entrepreneurship have
unique characteristics that distinguish this field from the broader economics and or
management discipline.

Conclusion:
The above summary defines the overall view of
different international journals related to small and medium size enterprises by
different research journals authors. The analysis has shown that there are

significant positive returns in terms of increased profitability, innovation and lower

labor turnover associated with human resource investment. The research has shown
the positive influences of both generic strategies on firm performance. In other
words, competitive strategy does matter. The findings confirm assumptions that
entrepreneurial behavior acts through the development of a competitive strategy. In
addition, it sustains the importance of pursuing one type of competitive strategy to
avoid the risk of being stuck in the middle. Looking ahead, cross-border
consolidation may be of greatest concern, particularly in the EU, where legal
restrictions on cross-border ownership have been virtually eliminated. Crossborder ownership may exacerbate the challenges associated with delivering
relationship lending because foreign-owned banks may come from a very different
market environment, with a different language, culture, and so forth. The only
direct study of which we are aware of the effects of foreign ownership on small
business lending found that foreign-owned banks headquartered in the U.S. and EU
were much less likely than other banks to lend to small businesses in Argentina.
Unfortunately, there is no direct empirical evidence on the impact of cross-border
banking consolidation in the EU on relationship lending. However, studies of
data on cross-border bank ownership in both the U.S. and EU found that foreignowned banks tend to be less efficient than domestically-owned banks in these
nations. It seems likely that these general inefficiencies associated with crossborder ownership may reflect in part inefficiencies in delivering relationship
lending services, but it is difficult to extrapolate from this limited information.
Clearly, additional research is needed on the direct effects of cross-border
ownership on small business lending and any related external effects, particularly
in the EU, where 25 substantial cross-border consolidations is most likely to occur.
A final point needs to be made. Smallness of factory or plant size is not in and of itself
a virtue. The development of SMEs must be a coherent part of a development
programmed aimed at the achievement of explicit socio-economic objectives which
vary both overtime and between countries. Appropriate and effective policy packages
for SME development will similarly vary and it cannot be assumed that there will
exist a standard policy package. The conditions under which SMEs can realize their
employment and growth potential have to be identified and the links with poverty
alleviation and other development objectives clearly established.

References:
Allen N. Berger and Wharton: Small Business Credit Availability and Relationship Lending: The
Importance of Bank Organizational Structure
Patricia H. Domingo Ribeiro-Soriano and David Urbano: Socio-cultural factors and entrepreneurial
activity
Andreas Rauch, Johan Wiklund and Michael Frese: ENTREPRENEURIAL ORIENTATION AND
BUSINESS PERFORMANCE: AN ASSESSMENT OF PAST RESARCH AND SUGGESTIONS FOR
THE FUTURE
Patrick. A. M Vermilion: Determinants of product innovation in small firms
Robert E. Carpenter and Bruce C. Petersen: Is the Growth of Small Firms Constrained by Internal
Finance
IAN FILLIS AND BEVERLY WAGNER: E-business Development An Exploratory Investigation of the
Small Firm
Nicole Covelo and Hugh Munro: Network Relationships and the Internationalization Process of Small
Software Firms
Nicole E. Coviello and Hugh J. Munro: Growing the entrepreneurial firm Networking for international
market development
Ken Matsuno, John T Mentzer and Ayesigul Ozesomer: Effects of entrepreneurial proclivity and market
orientation on business performance
Zulima Fernndez, Mara J. Nieto: Internationalization Strategy of Small and Medium-Sized Family
Businesses: Some Inuential Factors
William B. Gartner: A new path to the waterfall: A narrative on a use of entrepreneurial narrative
Christian Lechner and Sveinn Vidar Gudmundsson: Entrepreneurial orientation, firm strategy and small
firm performance
Maura Sheehan: Human resource management and performance: Evidence from small and medium-sized
firms
Christian Lechner and Sveinn Vidar Gudmundsson: Entrepreneurial orientation, firm strategy and small
firm performance
Tage Koed Madsen and Per Servais: The Internationalization of Born Globals: an Evolutionary Process?
Christopher T. Street and Ann-Frances Cameron: External Relationships and the Small Business: A
Review of Small Business Alliance and Network Research

HeleddJenkinsn: A business opportunity model of corporate social responsibility for small- and mediumsized enterprises
Robert T. Hamilton and Mark A. Fox: The financing preferences of small firm owners
Thierry Volery and Tim Mazzarol: The evolution of the small business and entrepreneurship field: A
bibliometric investigation of articles published in the International Small Business Journal*
What do Investors Look for in a Business Plan: COLIN MASON and MATTHEW STARK