The Effect of Entrepreneurial Orientation on SME Business Performance in Ethiopia: The Configurational Approach

Abstract

Entrepreneurial orientation (EO) is a firm-level equivalent of individual entrepreneurship, and its impact on business performance is widely debated in entrepreneurship literature. However, research findings have been inconclusive due to the influence of moderators such as market dynamism and access to capital. This study aims to address this gap by examining these factors and their configurational effects on the EO–performance relationship using data from Ethiopian manufacturing SMEs. The results signal a moderate EO implementation, suggesting a need for industry-tailored EO training that emphasises innovativeness, risk-taking, proactiveness, competitive aggressiveness, autonomy and networking. EO significantly affects business growth, highlighting the importance of enhancing EO practices to improve SME performance. Contrary to normative assumptions, the configuration of high market dynamism, greater access to finance and EO level is not required for superior performance. SMEs can excel in performance even in less volatile environments with reasonable access to finance and EO practices. Thus, maintaining market stability, enhancing finance access and implementing EO can effectively boost a firm’s business performance. The study contributes to understanding the EO–performance relationship by adopting networking as an additional EO dimension, pursuing a configurational approach and employing a blend of PROCESS macro-moderation models and hierarchical linear regression.