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DISCUSSION AND IMPLICATIONS

This research explored the dimensionality of proactiveness and competitive aggressiveness and how these dimensions might be related to each other and to performance.  The results from the factor analysis suggest that competitive aggressiveness and proactiveness are distinct dimensions of an entrepreneurial orientation.  We feel that this is so because these terms represent two different modes by which firms view and act on the business environment.  Proactiveness refers to a firm's response to marketplace opportunities.  A strong proactive tendency gives a firm the ability to anticipate change or needs in the marketplace and be among the first to act on them.  Competitive aggressiveness, by contrast, refers to a firm's response to competitive threats.  A strong competitively aggressive stance gives a firm the ability to be a decisive player in a field of rivals and to act forcefully to secure or improve its position.

Although proactiveness and competitive aggressiveness may both be important to firm success, the correlational analysis suggests that these two dimensions make unique contributions to firm performance.  Proactiveness shows a strong positive relationship to all measures of performance.  Competitive aggressiveness was negatively related to sales growth and positively related to profitability, financial strength, and overall performance, but not at a statistically significant level.  Finally, although the two dimensions are correlated at a p < .10 level of significance, there is a large percentage of variance—74%—that they do not share suggesting that these dimensions may vary independently.

Future research should consider the factors that help explain why these EO dimensions are differentially related to performance.  Because the distinction between proactiveness and competitive aggressiveness that we argue for relates to exogenous factors (opportunities and threats), we suggest that industry conditions or the competitive environment might impact on the relationship between these dimensions and performance.  For example, in a munificent environment characterized by market growth and abundant resources, competitive aggressiveness may not bestow any special benefit on a firm because the market is open to new entrants.  In a mature industry, by contrast, where few opportunities remain to be exploited and rivalry has become especially intense, proactiveness within the industry may not aid a firm's efforts to maintain a strong position relative to its competitors.

Other factors might also illuminate how these two dimensions vary independently and contribute to performance.  Another source of variance, for example, may be the organizational structure in which these processes function.  A mechanistic firm may be necessary for effective application of a competitively aggressive process by focusing firm members on organization–wide competitive tactics such as controlling costs.  Proactiveness, in contrast, may require an organic structure which allows for flexibility and idea–sharing to anticipate market opportunities.  Future research is needed to sort out such suggestions and investigate how unique configurations of EO, organizational factors and environmental factors combine to produce strong firm performance.

Let’s consider two examples from business practice to provide some anecdotal evidence of both the independence and covariation of these two EO dimensional constructs.  First, consider the case of Mason & Hangar, a Lexington, Kentucky headquartered, privately–owned corporation with approximately $500 million in annual revenues (Berman, 1996).  As the prime contractor for U.S. nuclear weapons and with the bulk of their revenues tied to military procurement, management sensed the need to drastically change their mission.  By redefining their mission to emphasize “high consequence activities,” the firm was able to successfully diversify into the dismantling of weapons, and commercial activities such as the development of high–technology sensors to be used in plant security operations and the installation of security systems for Saudi oil fields.  Clearly, here’s a firm that was very proactive in exploiting new areas by leveraging their core competence.  But at the same time, given their capabilities, Mason & Hangar did not appear to have to bid aggressively or  “undo–the–competitors” by aggressive pricing and cost cutting.  Drawing on our earlier theoretical development, Mason & Hangar was seeking new opportunities, not responding to a competitive threat (although clearly the declining demand in their core business represented an environmental threat).

The second example refers to the recent history of Shaw Industries, a dominant manufacture of carpeting products (Server, 1994).  While carpet prices in the United States have dropped 10 percent over a recent 5–year period, Shaw’s sales and profits have more than doubled to $2.3 billion and $100 million, respectively.  Shaw has earned this enviable performance by aggressively striving to dominate the market including acquiring competing companies that were unable to match Shaw’s cost structure and pricing strategies. But Shaw also acted proactively by seizing opportunities to increase operating margins by installing state of the art looms and design computers that had recently strengthened the productivity of the carpet industry.  Shaw’s success can be attributed, in the present context, to both proactive strategic activity, i.e., adopting modern technology and efficient manufacturing processes, as well as competitively aggressive behavior.

Our point is straightforward:  we are not suggesting that the dimensions of EO are always independent and consistently have differential effects on performance.  Rather, we believe that this is an empirical question that has important normative and descriptive implications.  Future research may benefit, therefore, from considering a  multidimensional approach to these complex issues. Regarding this particular study, our conclusions suggest a somewhat finer–grained understanding of an entrepreneurial orientation that may be useful to scholars investigating entrepreneurial processes.  For owners and managers, it suggests that responding to marketplace opportunities and responding to competitive threats are distinctly different avenues to entrepreneurial success that may require unique entrepreneurial processes.
 

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