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THEORY DEVELOPMENT AND HYPOTHESES

The concept of an entrepreneurial orientation (EO) to explain the mind set of firms engaged in pursuing new ventures or undertaking organizational renewal provides a useful framework for researching entrepreneurial endeavors.  Recently, Lumpkin and Dess (1996) noted a distinction between entrepreneurial orientation and entrepreneurship by suggesting that EO represents key entrepreneurial processes that answer the question of how new ventures are undertaken, whereas the term entrepreneurship refers to the content of entrepreneurial decisions by addressing what is undertaken.

The salient dimensions of an EO emerge from a review of the entrepreneurship literature (e.g., Kanter, 1983; Miller, 1983; MacMillan & Day, 1987).  These attributes and activities are captured in a definition proposed by Miller (1983) which states that an entrepreneurial firm is one that "engages in product market innovation, undertakes somewhat risky ventures and is first to come up with `proactive' innovations, beating competitors to the punch" (1983: 770).  Building on prior literature and Miller's definition, numerous scholars have used the term "entrepreneurial orientation" to describe a fairly consistent set of related activities or processes (e.g., Ginsberg, 1985; Miles & Arnold, 1991; Morris & Paul, 1987; Smart & Conant, 1994).  Although Miller's (1983) definition can be broken down into four dimensions—innovativeness, risk taking, proactiveness, and competitive aggressiveness—many researchers have identified and tested only three of the dimensions of EO: innovativeness, risk taking, proactiveness.  In some entrepreneurial orientation studies, the notion of competitive aggressiveness has been overlooked; other research has placed primary emphasis on the competitive aggressiveness dimension of EO (e.g., Dean, Thibodeaux, Beyerlein, Ebrahimi & Molina, 1993).

A few studies have addressed competitive aggressiveness by equating it with proactiveness.  For example, Covin and Slevin (1989, 1991) suggested that proactive firms compete aggressively with other firms.   In describing their entrepreneurial strategic posture scale (1989) these authors cite three of Miller's (1983) factors—innovativeness, proactiveness and risk taking—and describe them as follows:

an entrepreneurial strategic posture is characterized by frequent and extensive technological and product innovation, an aggressive competitive orientation, and a strong risk–taking propensity by top management (1989: 79, emphasis added)

A similar trend is evident in their 1991 paper which describes an entrepreneurial posture as a firm's "propensity to aggres-sively and proactively compete with industry rivals" (1991: 10).  In fact, the 3–item proactiveness scale used in the Covin and Slevin (1989) study is identical to the"competi-tive aggressiveness" scale used in a 1990 study by Covin and Covin.  Although a proactive stance relative to competitors may be vital to entrepreneurial success, Covin and Slevin's approach seems to have minimized important differences between competitive aggressiveness and proactiveness.

We suggest that proactiveness and competitive aggressiveness are distinct concepts with unique definitions.  Proactiveness suggests a forward–looking perspective characteristic of a marketplace leader that has the foresight to act in anticipation of future demand.  This is consistent with Miller and Friesen's (1978) view of proactiveness as shaping the environment by introducing new products and technologies, and with Venkatraman's (1989) definition of proactiveness as "seeking new opportunities which may or may not be related to the present line of operations, introduction of new products and brands ahead of competition, strategically eliminating operations which are in the mature or declining stages of life cycle" (Venkatraman, 1989: 949).

Competitive aggressiveness, in contrast, refers to the intensity of a firm's efforts to outperform industry rivals.  It is characterized by a strong offensive posture directed at overcoming competitors and may be quite reactive as when a firm aggressively enters a market that a rival has identified.  This is accomplished by, for example, setting ambitious market share goals and taking bold steps to achieve them such as cutting prices and sacrificing profitability (Venkatraman, 1989), or spending aggressively compared to competitors on marketing, product service and quality, or manufacturing capacity (MacMillan & Day, 1987).

Because of these distinctions, we suggest that proactiveness is a response to opportunities whereas competitive aggressiveness is a response to threats.  That is, proactiveness refers to how firms relate to market opportunities by seizing initiative and leading in the marketplace; competitive aggressiveness refers to how firms react to competitive trends and demands that already exist in the marketplace.  These distinct roles are noted by Chen and Hambrick who suggest that "a firm should be both proactive and responsive in its environment in terms of technology and innovation, competition, customers and so forth.  Proactiveness involves taking the initiative in an effort to shape the environment to one's own advantage; responsiveness involves being adaptive to competitors' challenges" (1995: 457).  Proactiveness and competitive aggressiveness are thus separate dimensions of an entrepreneurial orientation that may each contribute uniquely to entrepreneurial success.  Therefore, we suggest:

Hypothesis 1:  Proactiveness and competitive aggressiveness are discrete dimensions of an entrepreneurial orientation.

Chen and Hambrick's (1995) description suggests that successful firms need to be both proactive and competitively aggressive.  Numerous entrepreneurship scholars have suggested that all the dimensions of an EO are present simultaneously in an entrepreneurial firm.  That is, prior researchers have argued that the dimensions of an entrepreneurial orientation co–vary, and that the EO construct is unidimensional (e.g., Covin & Slevin, 1989).  Although it is quite possible that a firm would exhibit both competitive aggressiveness and proactiveness, we suggest that these two dimensions may vary independently of each other in a given context.  In other words, a firm may exhibit both competitive aggressiveness and proactiveness, but their presence may vary in strength or change over time.  This suggests that firms do not necessarily need to be both competitively aggressive and proactive in order to be successful.  Thus, the extent to which competitive aggressiveness is related to performance will be independent of the extent to which proactiveness is related to performance.  Therefore:

Hypothesis 2:  Proactiveness and competitive aggressiveness are differentially related to performance.

The next section reports the research methodology.  Here, the research instrumentation, sample, and data analysis will be addressed.

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