ENTREPRENEURIAL ORIENTATION: THE ROLE OF INSTITUTIONAL
ENVIRONMENT AND FIRM ATTRIBUTES IN SHAPING INNOVATION AND
PROACTIVENESS
Pat H. Dickson
College of Management
Georgia Institute of Technology
800 West Peachtree Street NW
Atlanta, Georgia 30332
(404) 894-4372
[email protected]
Presented at the
Strategic Management Society Conference
San Juan, Puerto Rico
November 1, 2004
Working Paper—not for citation
Entrepreneurial Orientation: The role of institutional environment and firm
attributes in shaping innovation and proactiveness
Abstract
In this research I suggest that an entrepreneurial orientation (E/O) is to an extent a
strategic response to a complex set of institutional environment and firm factors.
Utilizing survey responses from 1,691 small to medium-sized manufacturing and service
enterprises (SMEs) from seven countries and a wide range of macroeconomic, legal,
cultural and risk measures I test the study assumptions. The results suggest that
entrepreneurial behavior, behavior that is more innovative, proactive and risk taking, is
significantly associated with specific attributes of the institutional environment of the
firm as well as the perceptions that firm leaders have of that environment and the
resources available to the firm for responding to environmental conditions.
Introduction
The proclivity of SMEs towards more innovative, proactive and risky behaviors
has been labeled as an entrepreneurial orientation (E/O) (Khandwalla, 1977; Mintzberg,
1973, Miller and Friesen, 1982). Although often characterized as one form of strategic
response to uncertain environments in the strategy literature in practice E/O has more
often been operationalized as either a firm (Brown, Davidsson, Wiklund, 2001) or
individual proclivity and related to the individual characteristics of firm leaders (Dickson
and Weaver, 1997; Mueller and Thomas, 2000). Too often the institutional environment
has not been considered or when considered only a limited view of the institutional
environment, such as the cultural backgrounds of firm managers (Ahlstrom and Bruton,
2002; Mueller and Thomas, 2000) has been included. Also rarely included are the
specific attributes of the firm that might influence the strategic choices that firm leader
2
have in responding to environmental uncertainty and complexity. This somewhat limited
approach to understanding firm level behaviors that are labeled as “entrepreneurial” has
left a very important question unanswered. To what extent is the proclivity towards
innovative, proactive and risky behavior related to a particular “orientation” held by firm
leaders or to the institutional environment of the firm and the resources available to the
firm in responding to the environment?
Although in this research we do not provide a direct test between individual
orientations and attributes and environmental attributes we do focus on a broad range of
institutional environment attributes, managerial perceptions and firm attributes and their
relationship to innovative, proactive and risk taking behaviors at the firm level. Unlike
prior research which primarily has focused on limited attributes of the institutional
environment, I focus on a more complex interplay between the institutional
environments, how key managers view the environment and the resources that the firm
has in support of the choice of specific strategic behaviors. Testing of the hypotheses
proposed in this study was accomplished through survey responses from 1,691 small- to
medium-sized manufacturing and service firms in seven countries combined with a wide
range of macroeconomic and institutional environment measures.
Theoretical Foundations
Entrepreneurial Orientation and Firm Attributes
The specific resource capabilities of the firm are considered since it is hypothesized that
firm capabilities impact the range of strategic responses available to the SME (Eisenhardt
and Schoonhoven, 1996). In general, for SMEs resource dependency rather than
sufficiency is often the norm. Particularly for smaller, resource-constrained SMEs the
3
range of strategies available in responding to environmental opportunities or challenges is
limited. Firm resource capabilities are assumed to be reflected by firm size, financial
performance, level of and internationalization. In specific it is hypothesized that the
greater the level of resources available to the SME the more likely the SME is to respond
to specific environmental conditions in an innovative, proactive and risk taking fashion
since the level of risk, given higher resource capabilities is assumed to be less for the
SME. It is assumed that higher levels of entrepreneurial orientation will be positively
associated with an SME’s resources. Specifically:
H1: Larger SMEs will be more entrepreneurially oriented than smaller SMEs.
H2: Stronger financial performing SMEs will be more entrepreneurially oriented than
SMEs with weaker financial performance.
H3: SMEs with greater export intensity will be more entrepreneurially oriented than
SMEs with less export intensity.
Entrepreneurial Orientation and the Perceived Environment
Although it is hypothesized that factors in the objective environment will have a
significant impact on firm level behaviors it is also important to consider how firm
leaders perceive the environment in order to get a complete picture the factors associated
with the choice of strategic responses exhibited by SMEs. In this study I focus on three
specific environmental perceptions and the relationship of those perceptions to E/O.
These include perceptions relating to the attractiveness of the industry or the perceived
potential for growth and profitability (Dickson and Weaver, 1997; Eisenhardt and
Schoonhoven, 1990), perceptions about general market conditions and the uncertainty
relating to those conditions (Poppo and Zenger, 1998) and the technological complexity
and volatility in the environment (Hagedoorn, 1993; Hladik, 1998). It is hypothesized
4
that the more uncertain and risky the environment is seen to be, the more likely the SME
is to respond in an entrepreneurial fashion as long as the industry is seen as attractive-holding promise for growth and profitability. If there is little risk or uncertainty in the
environment the SME is less likely to feel the necessity to take more innovative and risky
actions. It is therefore concluded that an SME’s entrepreneurial orientation will be
significantly associated with the SME owner/manager’s perceptions regarding the
environment of the SME. Specifically:
H4: SMEs in markets that are perceived to be more attractive will be more
entrepreneurially oriented than those SMEs who perceive their environments to be less
attractive.
H5: SMEs in markets that are perceived to be more risky and unpredictable will be more
entrepreneurially oriented than those SMEs who perceive their environments to be more
stable and predictable.
H6: SMEs in markets that are perceived to have higher levels of technological
uncertainty will be more entrepreneurially oriented than those SMEs who perceive their
markets that have lower technological uncertainty.
Entrepreneurial Orientation and the Institutional Environment
The institutional environment has been defined as the set of political, economic,
social and legal conventions that establish the foundational basis for production and
exchange (Oxley, 1999). Resource dependency theory, in which the unit of analysis is
the firm and its relationship to the environment, assumes that the institutional
environment plays a central role in the process in which organizations must effectively
manage dependencies in order to acquire and maintain critical resources (Steensma,
Marino, Weaver and Dickson, 2000). Resource dependency theory suggests several
attributes of the institutional environment of the small- to medium-sized enterprise
(SME) as being particularly relevant in understanding why firm leaders might react
5
differentially to environmental conditions and in particular might exhibit behaviors that
are more innovative, proactive and risky. These institutional environment attributes
include the specific environment of the SME (Ghoshal, 1987; Hagedoorn, van
Kranenburg and Osborn, 2003; Osborn and Baughn, 1990), the growth rate of the
economy (Oxley, 1999), the culture attributes of the nation of origin of the firm (Shane,
1994), and the origin of the legal system (la Porta, Lopez-de-Silanes, Shleifer and
Vishny, 1997, 1999). It is hypothesized in this study that each of these institutional
environment attributes will impact the level of E/O exhibited by SMEs. An SME’s
entrepreneurial orientation will be significantly associated with the institutional
environment of the SME.
Innovative, proactive and risky behavior carries with many potential hazards.
Many of those hazards are assumed to be either intensified or averted based on the
strength of the legal system to addressed threats posed to resource investments. La Porta
et al., (1997, 1999) have argues that the cores issue in regards to enforcement of property
rights and contracts is the originals of the laws of a country. Their research, which has
been broadly supported by scholars of global finance, suggests that the legal systems of
countries can be grouped into four primary groups based on origin: 1) French Civil Law,
2) English Common Law, 3) German Civil Law and 4) Scandinavian Civil Law (La
Porta, et al., 1997). The suggest that although richer countries tend to enforce laws better
than poorer countries that in general the French Civil Law countries have the lowest
quality of law enforcement. This would suggest that those countries whose laws are
derived from French Civil Law would have greater concerns regarding innovative and
risky strategies. Since the sample being used for this study does not contain German
6
Civil Law countries, specific hypotheses regarding those countries are omitted. It is
proposed that:
H7: SMEs located in English Common Law countries and those located in Scandinavian
Civil Law countries will be more entrepreneurially oriented than those SMEs located in
French Civil Law countries.
The second component of the institutional environment considered in this study is
the predominant culture of the country of origin of the SME. The predominant cultural
foundation of the country of the SME and its leaders is assumed to impact the balance
between behavior and perceived risk and rewards for that behavior. Two particular
cultural dimensions, originally proposed by Hofstede (1980, 2001) and more recently
revised and refined by House, Hanges, Javidan, Dorfman and Gupta (2004), are
“institutional collectivism” and “uncertainty avoidance.” House, et al (2004) defines
institutional collectivism as the degree to which institutional practices encourage and
reward collective action and collective distribution of rewards. Uncertainty avoidance is
defined as the extent to which members of a society work to avoid uncertainty by relying
on established social norms and bureaucratic practices. It is assumed that the more
collectivist in orientation and uncertainty avoiding in practice the culture of the SME the
less likely the SME is to engage in innovative, proactive and risk taking behaviors. It is
therefore hypothesized:
H8: SMEs located in more collectivist and uncertainty avoidance cultures will be less
entrepreneurially oriented than those located in less collectivist and less uncertainty
avoidance cultures.
SMEs from smaller slower growth economies are at a distinct disadvantage due to
limited pools of resources. These limitations include limited national technology
infrastructures and limited market capacity for the development of new technologies and
7
markets. These limitations force SMEs from slower growth economies to focus on fewer
sectors that while raising the level of risk provide limited opportunities for growth and
profitability. These limitations can lead to higher perceived hazards relating to
innovative and risky behavior. On the other hand SMEs located in extremely high
growth economies may see little value in innovative and risky behavior since the
opportunities for growth are significant for all firms no matter the specific strategic
approach chosen. It is therefore assumed that there will be a curvilinear relationship
between the rate of growth of the economy in which and SME is located and the level of
E/O with lower E/O being associated with both extremely slow growth and extremely
high growth economies.
H9: SMEs located in moderate growth economies will be more entrepreneurially
oriented than those SMEs located in either low growth or high economies.
Methodology
Data Collection
Testing began with the collection of survey data from independently owned SME
manufacturing and service firms in seven countries that included Australia, Finland,
Greece, Indonesia, Mexico, the Netherlands, and Sweden. SMEs were defined as firms
ranging in size from 6 to 500 employees and utilized specifically in this study since the
owners or general managers of firms of the size are considered by classical economic
theory as synonymous with the firm (Lumpkin and Dess, 1996) and most closely
associated with the strategic orientation of the firm (Wiklund and Shepherd, 2003).
Countries were selected for inclusion in order to maximize institutional environment
conditions with countries representing both emerging and developed markets as well as
countries with differing legal systems.
8
Every attempt was made to make the survey process equivalent. Data base
listings and organizational affiliation roles of commercial firms in each country were
used to randomly select SMEs from ten different industry classifications. Survey items,
developed originally in English, were translated with care and a back-translation process
was utilized.
Measures
All measures and the items comprising those measures were drawn from existing
research, had been utilized in cross-national research and were checked for both validity
and reliability in this study. The study outcome measure, entrepreneurial orientation (α =
.77), was drawn form the work of Covin and Slevin (1989), and is based on earlier work
done by Khandwalla (1977) and Miller and Friesen (1982. 1983). The specific items are
included in the Appendix.
All of the predictor variables, with the exception of the level of perceived
uncertainty, and financial performance were assessed utilizing objective-type response
measures. The firm’s industry and country of origin was recorded. The size of the firm
was assessed based on the total number of employees because past experience has shown
that firms of this size are reluctant to report sales or earnings (Dickson and Weaver,
1997). Perceived market attractiveness, general market conditions and technological
uncertainty and firm financial performance were measured utilizing items drawn from
Coven and Slevin (1989). These particular items and the uniqueness of each measure
have been verified by Dickson and Weaver (1997). The items for each scale are provided
in the Appendix along with their reliability estimates. The reliability estimates for these
measures ranged from .63 to .91 across the full sample. In order to ascertain that the
9
uncertainty items and the confidence items were in fact measuring different constructs a
factor analysis was completed. Multiple factors, consistent with the constructs, emerged
with no cross loading of items.
The institutional environment data was collected from a wide range of sources.
Macroeconomic data was drawn from the United Nations Department of economic and
Social Affairs (UNESCO) Statistical Yearbook (2002). The origin of the legal system of
each of the countries was drawn from La Porta, et al. (1997; 1998; 1999; 2002). Based
on the earlier theoretical discussion regarding legal systems and E/O, the “French Civil
Law Country” category was utilized as the comparison group. Cultural measures were
drawn from the Globe Project (House, et al., 2004) and both the measures and their
reliability estimates and validity claims are provided by the Globe authors.
A number of controls were included in the study. Because I am seeking to
understand the role of SME owner/manager perceptions of the environment and the
entrepreneurial orientation of the SME it seems prudent to provide controls for individual
differences. Therefore both the respondent’s age and gender are included as controls.
Additionally since the primary goals is to understand the relationship of the institutional
environment and the SME’s entrepreneurial orientation controls are provided for
differences attributable at the industry rather than institutional environment level. Eleven
industry groups were included in the study. These were collapsed into four groups based
on the level of technological intensity in the industry and based on OECD categories.
These included 1) high tech industries, 2) medium high tech industries, 3) medium low
tech industries and 4) low tech industries. In this analysis the “medium high tech
10
industry” category, because it was closest to the overall mean on E/O was utilized as the
comparison group.
Model Testing
The statistical model was tested using hierarchical linear regression analysis.
Although the hypothesized model includes both firm and environment level predictors
and a firm level outcome an analysis of covariance model was utilized. Snijders and
Bosker (2003) suggest that when the number of groups in the data is less than 10 and the
number of observations in each group greater than 100 that the results of an analysis of
covariance approach is acceptable although care should be taken in generalizing findings
to a larger population. Because our purpose is to draw conclusions regarding the unique
nature of the individual groups rather than to some larger “global” population of firms we
deemed this approach reasonable.
Results
Table 1 provides the summary results by hypothesis tested. Table 2 provides the
Globe institutional collectivism and uncertainty avoidance measures utilized in the study
and Table 3 provides the regression results. The correlation matrix for the study is
available upon request from the authors.
The findings suggest that the resource capacity of the firm is significantly related
to the level of entrepreneurial orientation. SME size and financial performance are
positively related to the entrepreneurial orientation of the SME. Larger SMEs with
stronger financial performance tend to have higher levels of E/O than their smaller and
counterparts with lower financial performance. The extent of the SMEs income that was
attributable to sales outside the international borders of their country was not significantly
11
related to E/O. As a group these variables accounted for roughly 3% of the variance
beyond the control variables.
As predict the perceptions of the SME owner/manager regarding the environment
of the SME was significantly related to the SME’s E/O. Specifically, the higher the
perceived attractiveness of the environment the greater was the entrepreneurial
orientation of the SME. The riskier and more competitive the perceived environment the
greater was the entrepreneurial orientation. Finally the level of perceived technological
risk was associated with E/O such that the greater the level of perceived uncertainty the
greater the level of E/O. Even after the variance attributable to the control and firm
variables was partialed out the environmental perception variables accounted for just over
an additional 18% of the variance in E/O levels.
This research provided a conservative test of the relationship of the attributes of
the institutional environment and the E/O levels of SMEs. The three categories factors,
legal, cultural and economic growth were entered into the model last. The results suggest
as predicted that SMEs in both English Common Law and Scandinavian Civil Law
countries tend to have higher levels of E/O that SMEs in French Civil Law countries.
National culture does appear to have a relationship to levels of E/O with both higher
levels of institutional collectivism and higher levels of uncertainty avoidance being
inversely associated with higher levels of E/O. Finally, there is a significant relationship
between the rate of economic growth in the SME’s primary market of operation and the
SME’s level of E/O. As predicted this relationship takes and inverted “U” shape with the
highest levels of E/O being associated with moderate economic growth. Both low
economic growth and extremely high economic growth environments are associated with
12
lower levels of E/O than moderate growth environments. Although a conservative test,
the results suggest that the variance in E/O attributable to the attributes of institutional
environment is significant explaining just over 5% of the variance after both the firm
attributes and the owner/manager environmental perceptions are taken into account.
The test of the control variables also provided some interesting results. There
does appear to be differences in levels of E/O attributable to industry differences. “Low
Tech Industries” in comparison to “Medium High Tech Industries” tend to have lower
levels of E/O. Although inclusive in this test, “High Tech Industries” appear to have
higher levels of E/O when compared to “Medium High Tech Industries.” There is no
difference between the “Medium High Tech” and “Medium Low Tech” industries.
Again, although inclusive in this test the age of the owner/manager of the SME may
associated with the level of E/O such that the older the owner/manager the lower the level
of E/O. There are no differences based on gender.
Discussion and Conclusions
Taken collectively the results of this study suggest that the entrepreneurial
orientation of an SME is significantly related to the resource capacity of the SME and
both the perceived environment and objective institutional environment of the SME. In
summary, larger SMEs with stronger financial performance tend to be more
entrepreneurially oriented than SME’s with greater resource constraints. Environments
perceived to be attractive but with high uncertainty relating to general market conditions
and technology tend to be related to higher levels of E/O. SMEs located in English
Common Law and Scandinavian Civil Law countries tend to have higher levels of E/O
while those located in cultures with greater institutional collectivism and uncertainty
13
avoidance tend to have lower levels of E/O. The growth rate of the economy in which
the SME is located is important with higher levels of E/O being associated with moderate
growth economies.
Although this research does not in anyway discount the role of the attributes of
the individual entrepreneurs in determining the level of E/O the research does provide a
unique test of the complex relationship between firm resources, environmental
perceptions and realities and the entrepreneurial orientation of an SME. In total the
findings suggest that an entrepreneurial orientation is significantly related to the
institutional environment of the firm, the perceptions that firm leaders have of the
environment and the resource capabilities that the SME has available to frame the a
response.
14
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Table 1
17
Summary of Hypotheses and Findings Relating to Entrepreneurial Orientation (E/O)
Hypothesis
1. SME size
2. SME financial performance
3. SME export intensity
4. Perceived market attractiveness
5. Perceived riskier and uncertainty markets
6. Perceived technological uncertainty
7. Legal system (English and Scandinavian in
comparison to French)
8. Culture
Institutional collectivism (Globe)
Uncertainty avoidance (Globe)
9. Economic growth
Table 2
18
Hypothesized
Relationship
+
+
+
+
+
+
Empirical
Support
Yes
Yes
No
Yes
Yes
Yes
+
Yes
Inverted U
Yes
Yes
Yes
Globe Cultural Dimensions1
Country
Institutional
Collectivism
4.29
4.63
5.40
4.54
4.06
4.46
5.22
Uncertainty
Avoidance
4.39
5.02
3.39
4.17
4.18
4.70
5.32
Australia
Finland
Greece
Indonesia
Mexico
Netherlands
Sweden
1
House, et al. 2004
All Globe scales are unidimensional. A 7-point Likert-type response scale was utilized
for items. The generalizability coefficient was above .85 for all scales.
Table 3
19
Sample Statistics by Country
Average
Total
Firm
Percent
Number
Firms
Size
Responding
Responding
Surveyed
29.72
25.7
353
1373
Australia
55.01
30.3
121
400
Finland
35.28
63.7
255
400
Greece
69.28
32.0
285
890
Indonesia
120.84
56.3
366
650
Mexico
36.42
43.6
131
300
Netherlands
65.32
30.0
180
600
Sweden
62.13
36.7
1691
4613
Totals:
Total sample size is 1691. Due to missing data 50 surveys were not useable thus N =
1621 for the regression analysis.
Country
Table 4
20
Hierarchical Linear Regression Analysis for Entrepreneurial Orientation
Constant
Controls
Age
Gender
High Tech Industry1
Medium Low Tech Industry1
Low Tech Industry1
Firm Attributes
Size (Log of number of employees)
Financial Performance
Export Intensity
Perceived Environmental Conditions
Industry Attractiveness
General Industry Conditions
Technological Uncertainty
Institutional Environment
English Common Law Country2
Scandinavian Civil Law Country2
Institutional Collectivism (Globe)
Uncertainty Avoidance (Globe)
GDP Growth
GDP Growth Squared
Model 1
3.170***
Model 2
2.612***
Model 3
1.078***
Model 4
2.587***
-.003†
.016
.211**
-.001
-.195***
-.003
-.002
.201**
-.009
-.202***
.000
-.001
-.090
.011
-.136**
-.003†
-.019
-.146
.019
-.139**
.077***
.021***
.001
.054***
.011**
.001
.060***
.012**
.001
.235***
.085***
.246***
.209***
.051**
.253***
.146†
.745***
-.265***
-.308***
.742***
-.107***
.057
.025
R2
.052
.022
Adjusted R2
.032
.025
∆R2
18.378***
8.195***
F Change
†
p<.10, *p<.05, **p<.01, ***p<.001; N = 1621
1
Comparison group is “Medium High Tech Industry”
2
Comparison group is “French Civil Law Country”
Values reported in Table 4 are unstandardized regression coefficients
.240
.297
.234
.290
.183
.057
128.784*** 21.802***
Correlation Matrix omitted due to space. Available upon request from the authors.
Appendix
Measurement Items
21
Entrepreneurial Orientation Items (α = .77, mean = 2.992)
1. In general the top managers of my company favor…
A strong emphasis on the
marketing of tried and true
products or services
1
2
3
4
5
A strong emphasis on R&D
technological leadership,
and innovations
2. How many new lines of products or services has your company marketed during the
past 3 years?
No new lines of products
or services
1
2
3
4
5
Very many new lines of
products or services
Changes in product or
service lines have been
mostly of a minor nature
1
2
3
4
5
Changes in product or
service lines have usually
been quite dramatic
3. In dealing with its competitors, my company…
Typically responds to
actions which competitors
initiate
1
2
3
4 5
Typically initiates actions
to which competitors then
respond
Is very seldom the first
business to introduce new
products or services,
administrative techniques
operating technologies, etc.
1
2
3
4
5
Is very often the first
business to introduce new
products or services,
administrative techniques,
operating technologies, etc.
Typically seeks to avoid
competitive clashes,
preferring a “live-and-let
live posture
1
2
3
4
5
Typically adopts a very
competitive, “undo-thecompetitors” posture
5
A strong proclivity for high
risk projects (with chances
of very high returns)
4. In general, the top managers of my company…
A strong proclivity for low
risk projects (with normal
and certain rates of return)
1
2
3
4
5. In general, the top managers of my company believe that…
22
Owing to the nature of the
environment, it is best to
explore it gradually via
cautious, incremental
behavior
1
2
3
4
5
Owing to the nature of the
environment, bold, wideranging acts are necessary
to achieve the firm’s
objectives
Perceived General Market Condition Items (α = .63, mean = 3.0226)
1. With respect to our industry…
Our company must
rarely change its marketing
practices to keep up with the
market and competitors
1
2
3
4
5
Our company must change its
marketing practices
extremely frequently (e.g.,
semi-annually)
2. How would you characterize the external environment within which your company
functions?
Very safe, little threat
to the survival and wellbeing of my company
1
2
3
4
5
Very risky, one false step
can mean my company’s
undoing
Rich in investment and
marketing opportunities
1
2
3
4
5
Very stressful, exacting,
hostile; very hard to keep
Afloat
An environment that my
company can control and
manipulate to its own
advantage, such as a
dominant firm has in an
industry with little competition
and few hindrances
1
2
3
4
5
A dominating environment
in which my company’s
initiatives count for very
little against the tremendous
political, technological or
competitive forces
4
5
Extremely competitive
3. Competitive intensity within your industry is
Minimally competitive
1
2
3
23
Perceived Technological Uncertainty items (α = .72, mean = 2.8607)
1. With respect to our industry
The rate at which products/
services are getting obsolete
in the industry is very slow
(e.g. basic metal like copper)
1
2
3
4
5
The rate of obsolescence
is very high (as in some
fashion goods and semiconductors)
The production/service
technology is not subject
to very much change and
is well establish
(e.g. in steel production)
1
2
3
4
5
The modes of production/
service change often and in a
major way (e.g. advanced
electronic components)
2. How would you characterize the external environment within which your company
functions?
An environment demanding
little in the way of
of technological sophistication
1
2
3
4
5
Technologically, very
sophisticated and complex
environment
3. How much research and development activity takes place within your company’s
principal industry?
Virtually no R&D
in industry (e.g. bakery,
publishing, real estate)
1
2
3
4
5
Extremely R&D oriented
industry (e.g., telecommunications, pharmaceuticals
Industry Attractiveness Items (α= .78, mean = 2.8744)
1. Please circle the numbers in the following scale which best describe the attributes of
your company’s principal industry.
*Average industry pretax profits
Very low
1
2
3
4
5
Very high
*Projected long-term (5 years or more) industry profits
Very low returns are probable
1
2
3
4
5
Very high returns probable
*Market growth rate for last 3 years
Very slow
1
2
3
4
5
Very rapid
*Projected long-term (5 years or more) market growth rate
Very slow
1 2 3 4 5 Very large
24
Firm Performance Items
Please indicate the degree of importance your company’s top manager attaches to each of
the following performance criteria. (α = .80)
Of little
Moderately
Extremely
Importance
Important
Important
1.
2.
3.
4.
5.
6.
7.
Sales level ($)
Sales growth rate
Cash Flow
Gross Profit
Net profit from operations
Return on investment
Ability to fund business
growth from profits
1
1
1
1
1
1
2
2
2
2
2
2
3
3
3
3
3
3
4
4
4
4
4
4
5
5
5
5
5
5
1
2
3
4
5
Please indicate the extent to which your company’s top managers are currently satisfied
with your business unit’s performance on each of the following criteria. (α = .92)
1.
2.
3.
4.
5.
6.
7.
Sales level ($)
Sales growth rate
Cash flow
Gross profit margin
Net profit from operations
Return on investment
Ability to fund business
growth from profits
1
1
1
1
1
1
2
2
2
2
2
2
3
3
3
3
3
3
4
4
4
4
4
4
5
5
5
5
5
5
1
2
3
4
5
25