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The availability of capital has been found to be positively related to firm formation (e.g., Cross, 1981; Gartner, 1985) and to firm growth (Castrogiovanni, 1991; Covin & Slevin, 1991; Vesper, 1980). Furthermore, the firm's range of strategic options are broader if resources are available (Romanelli, 1987). By having access to resources, a firm's ability to take risks, to innovate and to be proactive is enhanced. As a result, the abundance of resources in the environment (i.e., environmental munificence) would seem to have an impact on the firm's entrepreneurial orientation. However, if Weick (1969) is correct and a manager can only know his or her environment via his or her perception, then the manager's or owner's perception of environmental munificence may be a key determinant of entrepreneurial orientation (Chandler & Hanks, 1994; Miskin & Rose, 1989).

Perception of resource availability should also be related to the extent to which small business owners or entrepreneurs believe they can acquire the resources (Chandler & Hanks, 1994). This "belief-in-self" can be termed self-efficacy (Bandura, 1977). Self-efficacy is the self-perception an individual has about his or her ability to accomplish a specific task. Given that resources are important to firm survival and growth (Kirchhoff, 1994) and given that being innovative (Kirchhoff, 1994), proactive, and risk oriented are resource consuming behaviors (Romanelli, 1985), self-efficacy, with respect to acquiring resources, should be important to the entrepreneurial activity of the firm. Therefore, a firm's entrepreneurial activity should be determined by the decision-makers: 1) perceived environmental munificence and 2) what can be called resource acquisition self-efficacy (Brown, 1996; Brown & Kirchhoff, 1997).

Perception of Environmental Munificence

Environmental munificence refers to the extent to which critical resources exist in the environment. The degree of resource abundance in the firm's environment (i.e., munificence) should have a significant impact on the firm's entrepreneurial orientation and subsequent growth (Castrogiovanni, 1991). The more munificent the environment, the greater the firm's opportunity to acquire those resources (Bruno & Tyebjee, 1982).

Furthermore, the perception (Weick, 1969) of resource abundance in the environment (i.e., munificence) by the small business owner will impact on the opportunity set available to the owner (Romanelli, 1987). When the owner behaves in an innovative (Kirchhoff, 1994; Mohr, 1969; Rogers, 1983), proactive, and risk oriented manner, s/he exhibits resource consuming behaviors (Romanelli, 1985). Thus, it should be expected that the more resource munificent the owner perceives the environment to be, the more likely the owner's firm is to engage in entrepreneurial activity. This logic suggests the following hypothesis:

H3: The small business owner's perception of environmental munificence will have a positive influence on his or her entrepreneurial orientation.

Resource Acquisition Self-Efficacy

Although there are many roles and tasks at which a small business owner should be proficient, if the small business owner desires to engage in entrepreneurial activities, his or her ability to mobilize the required resources becomes vital. Part of the entrepreneurial process involves evaluating opportunities given the resources required (Birley, 1985). These decisions are not only based on the resources he currently has, but are also based on whether or not he or she has a high level of self-efficacy with respect to his or her ability to gather the required resources. We call this self-belief or perception about a person's ability to raise or gather the required resources or "RAS-E"(for a more detailed discussion see, Brown, 1996; Brown & Kirchhoff, 1997). Therefore, it should be expected that:

H4: A small business owner's resource acquisition self-efficacy will have a positive influence on his or her entrepreneurial orientation.

Furthermore, self-efficacy is the process by which people weigh, integrate and evaluate information about their capabilities and then regulate their choice and behavior accordingly (Bandura, Adams, Hardy & Howell, 1980). The information considered by the small business owner comes directly from the small business owner's environment. As a result, the small business owner's resource acquisition self-efficacy should be related to his or her perception of abundance of the resources in the environment. More specifically, the more the small business owner believes that resources are abundant and available in the environment, the more secure the owner should be about his or her ability to acquire resources. Therefore, it should be expected that:

H5: A small business owner's resource acquisition self-efficacy will be positively associated with his or her perception of environmental munificence.


In order to study the impact of perceived environmental munificence and RAS-E on afirm's entrepreneurial orientation, growth, environmental turbulence, environmental munificence, and RAS-E must be operationalized in a survey instrument.

Operationalizing Entrepreneurial Orientation

In this current study, entrepreneurial orientation was measured by a slightly modified version of Covin and Slevin's (1986, 1988) nine item, seven point Likert scale. Entrepreneurial orientation can range from not very entrepreneurial to very entrepreneurial. While this measure has been used in the literature as an objective measure of entrepreneurial behavior, it is a perceptual measure that is self-reported by the respondent.

Operationalizing Firm Growth

Although performance can be viewed and measured in a variety of ways, in this study it is narrowly defined as growth, specifically changes in sales and employment over the period 1991-1994. This is consistent with the majority of research in this area (Brush & Vanderwerf, 1992).

Operationalizing Environmental Turbulence

Environmental turbulence was operationalized using a seven item, seven point Likert scale. The first four items were taken from Miller and Freisen's (1983) five-point environmental dynamism index, and the final three items were Khandwalla's (1976/77) hostility index. This turbulence measure is identical to the one used by Naman and Slevin (1993) in their examination of entrepreneurial orientation.

Operationalizing Environmental Munificence

Drawing from the literature, perceived environmental munificence is operationalized as a two-item instrument using a five point Likert scale response measure. It measures the small business owner's perception about how receptive the environment seems. The first item measures the owner's perception of industry growth rate (e.g., Dess & Beard, 1984; Yasai-Ardenkani, 1989). The second item measures the owner's perception of the extent to which the providers of financial capital are interested in businesses like the respondents. The two environmental munificence items were answered and analyzed by five experts who agreed that the items have face and content validity.

Operationalizing Resource Acquisition Self-Efficacy

RAS-E was operationalized using an instrument based on the work of Lee and Bobko (1994) and Scherer, Maddux, Merchante, Prentice-Dunn and Rogers (1982). The instrument was developed, tested and validated in Brown (1996) and Brown and Kirchhoff (1997). The instrument measures the magnitude and strength of the each respondent's self-efficacy with respect to his/her ability to raise financial resources from fourteen different financial sources.

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