Franc Vidic
franc.vidic@gea-college.si
Abstract
This paper develops a conceptual model to explain the correlation between entrepreneurial
orientation (EO) and knowledge creation (KC). Using a sample of 195 Slovenian SME’s firms,
this paper empirically examines this model. Consequently, entrepreneurial orientation is
corelated with knowledge creation.
Keywords: SME’s, entreprenurial orientation, knowledge creation.
Introduction
More and more studies have paid attention to the relationship between knowledge, and
entrepreneurship (Moller, 2007; Miller et al., 2007). We believe that a better understanding
of the interaction between entrepreneurial orientation and knowledge creation processes
impact on the company performance. With better knowledge individuals, companies and the
economy can develop better skills that will contribute to higher competitiveness. Based on a
study of links between entrepreneurial orientation and creating new knowledge, we
determined how individual factors are interconnected.
This paper is structured as follows, first theoretical background and discussion EO and KC, in
the second part we make empirical test of correlation between EO and KC. Empirically test
based on 195 samples collected through questionaire send to entrepreneurs and executives
in Slovenian firms.
2. Research background and hypotesis
Knowledge has to become the key economic resource and the dominant – and perhaps even
the only –source of competitive advantage” (Drucker, 2009). Knowledge economy based on
creating, evaluating, and trading knowledge. Labour cost, become progressive less important
and traditional economic concepts such as scarcity to resources and economies of scale case
to apply. Of all factors of production knowledge capital creates the longest lasting
competitive
advantage.
It’s
based
on
Knowledge-based
theory,
which
considers knowledge as the most strategically significant resource of a firm. Teece, Pisano
and Shuen (1997) and others (Morgan, Vorhies, Mason, 2009) upgraded Knowledge based
theory with Theory of dynamic firms capatibility. The theory assumes that the market
environment is dynamic, heterogeneous sources that are not sufficient (Morgan, Vorhies,
Mason, 2009, Teece, Pisano, Shuen, 1997). Trends, perspectives and market informations
must be dynamic (Busenitz, Barney, 1997 in Holcomb, Ireland, Holmes; Hitt, 2009), thinking
along established routes is not sufficient (Nonaka, 1991).
The environment is changing constantly and rapidly as well as the market and customers’
needs (Prajogo, Ahmed, 2006). Constant and rapid changes in present networked,
knowledge society give rise to new challenges to human competences (Paavaola,
1
Hakkarainen, 2005). Audretsch (2010) builds on the knowledge society to an entrepreneurial
society. The entrepreneurial society assumes the role of physical capital and entrepreneurial
capital upgraded with a knowledge capital, economic growth, job creation and
competitiveness in a complex environment (Audretsch, 2010). Enterprise must know what to
do, how to do it, when and where to do it to compete succesefuly. Without knowledge it is
impossible (Korposh, Lee, Wei, Wei, 2011). Productive participation in knowledge intensive
work requires that individual professional, their communities, and organizations continiusly
surpass themselves they develop new competencies, advance their knowledge and
understanding as well as produce innovations and create new knowledge (Paavola,
Hakkarainen, 2005). Human work is more and more focused on deliberate advancement of
knowledge than joust production of material things (Bereiter, 2002 in Paavola, Hakkarainen,
2005). Knowledge and innovation is widely considered a key prequisite for achiving
organizational competitiveness and sustained long term wealth in an increasingly volatile
business environment (Esterhuizen, Schutte, Toit, 2011). Organization learning improve
innovation process and their effectiveness (Huang, Wang, 2011), and competitive advantage
(Barsh, 2007).
Entrepreneurial orientation
Entrepreneurial orientation (EO) refers to a firm’s strategic orientation and entrepreneurial
activities, which captures specific entrepreneurial decision-making, such as taking calculated
risks, being innovative and proactive (Covin and Slevin, 1989; Lumpkin and Dess, 1996).
Entrepreneurial orientation reflects how a firm operates rather than what it does (Lumpkin
& Dess, 1996). EO is reflected in the leadership skills, the integration of proactive and
aggressive initiative and turning competitive environment to their advantage (AtuatheneGima, 2001). EO companies have competences to respond quickly and take advantage in
niche market (Zahra, Covina, 1995), they innovate and take risks on positioning new product
strategy (Miller, Friesen, 1982).
EO is composed of processes, structures and habits (Lumpkin, Dess, 1996), contains the
following dimensions: innovation, risk taking, proactiveness, competitive aggressiveness and
autonomy (Miller, 1983; Covina, Slevin, 1991; Lumpkin, Dess, 1996). Each of these
dimensions can be studied independently expressed differently (Kreiser, Marino, Weaver,
2002; Lamadrid, et al., 2008; Lumpkin, Dess, 1996, 2001 Rauch et al., 2009). Each dimension
can be reflected complementary to the other, or in conjunction with them (Lyon et al.,
2000).
Innovation is defines innovation as: the successful generation, development and
implementation of new and novel ideas , which introduce new products, processes and / or
strategies to a company oe enhance current products, processes and/or strategies leading
to commercial success and possible marketing leadership and creating value for
shareholders, driving economic growth and improving standard of living (Katz, 2007).
Risk-taking (Cantillon, 1730 in Jun, Deshoolmeester, 2006) is associated with entering in
unknown field, with the involvement of their own and other resources to operate in an
uncertain environment. It is important to reduce and manage risks.
2
Proactiveness is response and explore opportunities for products and services, to achieve
advantages over its competitors and offers adjustments for future demand. Proactivity is
reflected in relation to market opportunities.
Competitive aggressiveness (Lumpkin, Dess, 2001, p. 431) is reflected in the intensity of
response to competitors. Monitored by organizations such as the intensity of response to
other bidders rivals. The activities of competitors can be sharp and decisive response, or
lukewarm. Competitive aggressiveness is reflected as a challenge to enter the market and
improve market position.
Autonomy is reflected in the self-initiative to exploit opportunities (Lumpkin, Dess, 1996).
Autonomy (Burgelman, 1984; Hart, 1992) is inherently a creative entrepreneur, creative and
wants to be independent, autonomous independence so important for entrepreneurs and
entrepreneurial teams in the establishment and management of new business. Autonomy is
an independent function performed by managers or teams who make decisions (Rauch et
al., 2004). Autonomy (Lumpkin, Dess, 2001, p. 431) is defined as an independent individual
or team activity, which combines the design of the vision and its implementation.
Hypothesis H1. Entrepreneurial orientation is five dimensoin process.
Knowledge creation
Knowledge is the fundamental source of competitiveness and success of the company.
Knowledge is formed and exist in the minds of the people, for the creation of new ideas is an
important interaction between individuals (Davenport, Prusak,2000; Nonaka, 1994). Nonaka,
Toyama and Konno (2000) note that knowledge creation is necessarily context depend in
terms of who participate and how they participate. From the perspective of resourceadvantage theory, knowledge is not easily transferred and dispersed due to its
characteristics of tacitness and immobility (Grant, 1996; Hunt, Arnett, 2006; Hunt, Morgan,
1996). Knowledge creation (KC) process allows firms to amplify knowledge embedded
internally and transfer knowledge into operational activities to improve efficiency and create
business value (Nonaka, Konno, 1998; Nonaka, Takeuchi, 1995; Nonaka, Toyama, Nagata,
2000). KC include elements of EO and market orientation, which is further converted into
knowledge capital, which can be transmitted between other employees (Li, Huang, Tsai,
2008).
Corporate culture and leadership encourage people to communication, collaboration and
social interaction (Chen, Huang, Li 2007, Huang, Tsai, 2009). Social cohesion provides an
effective combination of knowledge from different areas of expertise (De Luca, AtuaheneGima, 2007). Interacting with a combination of knowledge comes to the extent that good
interpersonal relationships (Floyd, Lane, 2000, in De Clecq et al., 2009), provided that
atmosphere of honesty, trust and support organization (Kuratko et al., 2005). New insights
affecting entrepreneurial behavior and allow the ability to successfully exploit opportunities
(De Clecq et al., 2009). Important as the quantity and quality of information to be exchanged
(Birckshaw, 2000 in Williams, Lee, 2009). Entrepreneurs need to replace the existing
knowledge with the new, to recognize what is no longer optimal positioning for the
organization, and develop an organization's ability to operate on tomorrow's market (Hamel,
3
Prahalad, 1994). It is necessary to balance between research and development
eksploativnim (March, 1991 Renko, Carsrud, Brännback, 2009).
Based on the Theory of knowledge creation, knowledge is created through a spiral process
of socialization, externalization, combination, According to Nonaka’s knowledge creation
(SECI) model an organization create knowledge through dynamic process through
interactions amongst individuals and organizations, interaction between tacit and explicit
knowledge (Nonaka, 1991, 1994, Nonaka, Takeuchi, 1995; Nonaka, Toyama, Konno, 2000;
Lin, Lin, Huang, 2008). We call the interaction between the two types of knowledge
`knowledge conversion'. Through the conversion process, tacit and explicit knowledge
expands in both quality and quantity. In the organization, knowledge ‘becomes’ or ‘expands’
through a four-stage conversion process (SECI) (Nonaka, von Krogh, Voepl, 2006): (1)
socialization (from tacit knowledge to tacit knowledge); (2) externalization (from tacit
knowledge to explicit knowledge); (3) combination (from explicit knowledge to explicit
knowledge); and (4) internalisation (from explicit knowledge to tacit knowledge).
Socialisation is the process of converting new tacit knowledge through shared experiences.
Since tacit knowledge is difficult to formalise and often time- and space-specific, tacit
knowledge can be acquired only through shared experience, such as spending time together
or living in the same environment. Socialisation typically occurs in a traditional
apprenticeship, where apprentices learn the tacit knowledge needed in their craft through
hands-on experience, rather than from written manuals or textbooks. Socialisation may also
occur in informal social meetings outside of the workplace, where tacit knowledge such as
world views, mental models and mutual trust can be created and shared socialisation also
occurs beyond organizational boundaries. Firms often acquire and take advantage of the
tacit knowledge embedded in customers or suppliers by interacting with them.
Externalisation is the process of articulating tacit knowledge into explicit knowledge. When
tacit knowledge is made explicit, knowledge is crystallised, thus allowing it to be shared by
others, and it becomes the basis of new knowledge. Concept creation in new product
development is an example of this conversion process. The successful conversion of tacit
knowledge into explicit knowledge depends on the sequential use of metaphor, analogy and
model.
Combination is the process of converting explicit knowledge into more complex and
systematic sets of explicit knowledge. Explicit knowledge is collected from inside or outside
the organization and then combined, edited or processed to form new knowledge. The new
explicit knowledge is then disseminated among the members of the organisation. Creative
use of computerised communication networks and large-scale databases can facilitate this
mode of knowledge conversion. The combination mode of knowledge conversion can also
include the `breakdown' of concepts. Breaking down a concept such as a corporate vision
into operational business or product concepts also creates systemic, explicit knowledge.
Internalisation is the process of embodying explicit knowledge into tacit knowledge. Through
internalisation, explicit knowledge created is shared throughout an organisation and
converted into tacit knowledge by individuals. Internalisation is closely related to `learning
by doing'. Explicit knowledge, such as the product concepts or the manufacturing
4
procedures, has to be actualised through action and practice. By reading documents or
manuals about their jobs and the organisation, and by rejecting upon them, trainees can
internalise the explicit knowledge written in such documents to enrich their tacit knowledge
base. Explicit knowledge can be also embodied through simulations or experiments that
trigger learning by doing. When knowledge is internalised to become part of individuals' tacit
knowledge bases in the form of shared mental models or technical know-how, it becomes a
valuable asset. This tacit knowledge accumulated at the individual level can then set off a
new spiral of knowledge creation when it is shared with others through socialisation.
In knowledge conversion, personal subjective knowledge is validated, connected to and
synthesized with others’ knowledge (Nonaka, Takeuchi, 1995).
Hypothesis H2. Knowledge creation process iz four dimension process
Entrepreneurial orientation and knowledge creation process
Entrepreneurial attitudes and behaviors are critical for new ventures to facilitate the
utilization of new and existing knowledge to discover market opportunities (Wiklund,
Shepherd, 2003). KC processes such as socialization, externalization, combination, and
internalization (SECI) describe a spiral of interactions between explicit and tacit knowledge
(Nonaka, 1994; Nonaka, Konno, 1998). Firms exchange and transform knowledge
continuously through dynamic self-transcendental processes (Nonaka, Konno, 1998; Nonaka
et al., 2000). When developing EO, ventures can exploit the dynamic SECI spiral to create
and share knowledge dispersed among individual members. Firms with innovativeness may
have a tendency to support new ideas and novelty, and further increase the engagement in
developing new products, services, or processes (Lumpkin, Dess, 1996). The development of
new products and services involves extensive and intensive knowledge activities. The
knowledge conversion provides value to their customers and help to make competitive
position in the market (Griffith et al., 2006). The organization creates a new combination of
resources and products, intended to upcoming changes, opportunities and entry to market and take
advantege to exploit opportunities (Lumpkin, Dess, 2001).
The SECI spiral can facilitate knowledge conversion and transformation into new types of
knowledge (Nonaka, Takeuchi, 1995). In knowledge conversion, new product development
or marketing activities starts with socialization (Nonaka & Toyama, 2005). Socialization
processes such as direct interaction, brainstorming, and informal meetings help employees
to share and exchange valuable knowledge (Zhang, Lim, & Cao, 2004).
Entrepreneurs explore business opportunities and promote innovation (Lumpkin, Dess,
1996), and they should motivate employees to take risks to deal with the challenging and
creative activities. Employees need socialization process to build more interaction to
exchange tacit knowledge, solve problems, and avoid mistakes (Nonaka, Takeuchi,
Umemoto, 1996; Quinn, 1992).
Externalization activities articulate tacit knowledge into explicit forms. Through
externalization, employees can understand new product development and increase their
involvement in the activities of articulating tacit knowledge into substantial concepts and
5
notions (Nonaka, Konno, 1998; Nonaka, Takeuchi, 1995; Nonaka, Toyama, 2005).
Combination process can make innovative ideas more usable, thereby crystallizing
knowledge into new products or services. Internalization process promotes the actualization
of new product innovation or improvement within the organization.
The newly created knowledge and existing knowledge are then combined, edited, or
processed to form more complex and explicit knowledge through the combination process
(Nonaka, Konno, 1998). The use of documents, meetings, and computerized communication
networks facilitates this mode of knowledge conversion. Internalization activities accumulate
and systemize the experiences and concepts of employees to the organizational tacit
knowledge.
Autonomous orientation reflects the ability to be self-directed in the pursuit of market
opportunities (Lumpkin & Dess, 1996). Employees need autonomy and the independent
assortment and selection activities to achieve the goals (Li, Huang, Tsai, 2009). Socialization
process makes employees build interaction to freely exchange highly personal or
professional knowledge. To translate tacit knowledge into understandable forms, the firm
engages in externalization activities such as action, experimentation, and observation. The
combination activities edit and integrate knowledge by using documents or databases to
generate new knowledge application. Through internalization activities, employees learn by
doing autonomously to enrich their experiences and accumulate valuable know_how in an
organization (Nonaka et al., 1996).
The acquisition of knowledge is associated with learning at work, learning from work or
learning by doing. In entrepreneurial firms sharing knowledge within the company led to the
creation of new knowledge and its diffusion across an enterprise (Cohen, Levinthal, 1990).
This is reflected in the use of knowledge (Li et al., 2009). Wiklund and Shepherd (2003) note
a positive relationship between resources, knowledge-based, and performance of the
organization. Hoegl and Schultze (2008) compared the creation of knowledge through the
processes of creating knowledge - which are defined by Nonaka and Takeuchi (1995):
socialization, externalization, internalisation and socialization - through the generation of
ideas for new products. They found a positive correlation between idea creation to the
processes of socialization and internalisation and externalization of negative correlation and
the combination.
Grant (1996), Spender (1996), Teece (2000), Watson and Helvet (2006, Li et al., 2009)
observed correlation with innovation and creating knowledge through the collection and its
use in the enterprise. Business-oriented reorganization often directly supports generative
learning by focusing management to identify and exploit new opportunities and motivates
employees to move from the pressure armor routine work (Cui, Zheng, 2007). A high degree
of entrepreneurial orientation involves long-term development guidelines vision, mission,
work with customers, setting up new capacities. Realizing the vision of entrepreneurs is
related to the double loop learning (Cui, Zheng, 2007).
According to the above, SME's with entrepreneurial orientation are more prone to focus
attention and effort towards knowledge creation process. The SECI spiral can utilize the full
potential of knowledge and further facilitate its creation and utilization within the firm,
6
which facilitates the transformation and activation of entrepreneurial orientation. We can
reasonably expect the positive relationship between entrepreneurial orientation and
knowledge creation process.
Hypothesis 3. Entrepreneurial orientation will be in correlation with knowledge creation
process.
Research methods
3.1. Sample and data collection
We employed a questionnaire survey approach to collect data, and all items required fivepoint Likert-style responses ranged from 1=“strongly disagree,” through 3=“neutral,” to
5=“strongly agree.”
Explain sample
2500 questionnaires were mailed to executive managers SME's in Slovenia. We selected the
firms with more than 6 and less than 250 employees. We asked respondents (entrepreneurs
or executives) to evaluate their level of agreement with each of questions. 203 responses
were received and eight of them were incomplete. The remaining 195 valid and complete
questionnaires were used for the quantitative analysis. It represented a useable response
rate of 7,8% Table 1.
Within each company, we collected the measures of knowledge creation process,
innovativeness and company performance. A principal component factor analysis on the
questionnaire measurement items yielded seven factors with eigenvalues greater than 1.0
that accounted for 69.67% of the total variance, and factor 1 accounted for 16.46% for the
variance. Since several factors, as opposed to one single factor, were identified and the first
factor did not account for most of the variance, common method bias is unlikely to be a
serious problem in the data (Podsakoff , Organ, 1986).
Table: Comparison between sent and returned questionnaires according to the number of
full and part-time employees
Sent questionnaires
Returned questionnaires
Percentage
Percentage
No. of employees Frequency
(%)
Frekvenca
(%)
57
6–9
968
38,72
28,64
62
10–19
853
34,12
31,16
46
20–49
480
19,20
23,12
24
50–99
129
5,16
12,06
10
100–250
70
2,80
5,02
4
No answer
203
Cumulative
2500
3.2. Measures
7
3.2.1. Knowledge creation process
This study used a five-point scale, adapted from Sabherwal and Becerra-Fernandez (2003), to
measure knowledge creation process variable. The four dimensions of knowledge creation
process were socialization, externalization, combination, and internalization (Nonaka, 1994;
Nonaka et al., 2000; Sabherwal & Becerra-Fernandez, 2003). Four items measured
socialization: cooperative projects across directorates, the use of apprentices and mentors
to transfer knowledge, brainstorming retreats or camps, and employee rotation across
areas. Five items measured externalization: a problem-solving system based on a technology
like case-based reasoning, groupware and other collaboration learning tools, pointers to
expertise, modeling based on analogies and metaphors, and capture and transfer of experts'
knowledge. Four items measured combination: web-based access to data, web pages,
databases, and repositories of information, best practices, and lessons learned. Three items
measured internalization: on-the-job training, learning by doing, and learning by
observation.
3.2.2. Entrepreneurial orientation
Drawing upon previous studies (e.g. Lumpkin & Dess, 1996, 2001; Miller, 1983),
entrepreneurial orientation was measured with five dimensions: innovativeness, risk-taking,
proactiveness, competitive aggressiveness, and autonomy. Innovativeness refers to a
willingness to support creativity and experimentation in introducing new products/services,
and novelty, technological leadership and R&D in developing new processes. Risk-taking
means a tendency to take bold actions such as venturing into unknown new markets,
committing a large portion of resources to ventures with uncertain outcomes, and/ or
borrowing heavily. Proactiveness refers to how firms relate to market opportunities by
seizing initiative in the marketplace. Competitive aggressiveness refers to how firms react to
competitive trends and demands that already exist in the marketplace. Autonomy is defined
as independent action by an individual or team aimed at bringing forth a business concept or
vision and carrying it through to completion.
Innovativeness refers to a willingness to support creativity and experimentation in
introducing new products/services, and novelty, technological leadership and R&D in
developing new processes. Drawing upon previous studies (e.g. Lumpkin & Dess, 1996, 2001;
Miller, 1983), innovativenss as one of five dimensions etrepreneurial orientation was
measured with: three questions.
3.Analysis and results
We first performed for all variables descriptive analysis and to establish their
suitability for statistical analysis using factor analysis. Then we performed
ekplorativno and then continue konfirmativno factor analysis, and in the end we are
structured modeling method to check the validity of the model equations. Exploratory
factor analysis was performed with the software package SPSS 18. This analysis
provided an answer on what the basic explanatory variables. Each theoretical
construct, we specifically checked and, where necessary, reduce the number of
8
variables. For further analysis of the construct of entrepreneurial orientation, we keep
five sub-dimensions. Two of them are explained by two variables, the rest with three
variables. To analyze the construct of market orientation we kept seven subdimensions, one is explained by two variables, three by three variables, one has four,
six and seven variables. For further analysis of the construct dimensions of
knowledge creation, we keep the four sub-dimensions, one is explained by the three
variables and other variables of five. Because we were interested in business performance,
was included in the integrated model, the dimensions of business performance. Just-what
we in accordance with theoretical standards developed with three sub-dimensions, which
we call the profitability, growth and efficiency. Each of these three variables explain
All the set constructs were verified by factor analysis and konfirmativno with structured
equation modeling with EQS software package 6.1. We confirmed the validity of the results
of the exploratory analysis demonstrated the reliability of the measurement model and its
convergent and discriminatory validity. Thus we have proved Multidimensionality model and
its comparability, as most indices suitability of the integrated model of excellent value.
Calculations and exploratory factor analysis konfirmativne and structural equation modeling,
we examined the control variables, namely, we checked the calculations for the case of
companies with more or fewer than 20 employees and with more or less than 2 million
euros. Calculations of the control variables confirmed the number of sub-dimensions and
variables as well as the validity of the constructs of the structural model, the validity of
hypotheses related to the exogenous part of the construct
The results of the study are closing the gap in research theory, based on the resources and
on the theory and complementary mosaic of research conducted in different countries, a
survey among Slovenian companies. The results of empirical analysis, an additional doctoral
dissertation, which includes different dimensions of attitudes, their inter-relations and
contribution to the success of the organization. From the results of research showing the
relationship of entrepreneurial orientation, market orientation and knowledge creation
process between Slovenian small and medium-sized enterprises. The results allow a better
understanding of the dynamic internal processes within the company, the development
offers proactive, knowledge creation and performance in a dynamic and competitive
environment
and the correlation matrix of the variables. To test the hypothesized
relationships in our path-analytic framework, we employed LISREL
(Anderson & Gerbing, 1988; Joreskog & Sorbom, 1986). Calculating
parameter estimates and standard errors that can be used to test
statistical significance, LISREL also analyzes hypothesized relationships.
The hypotheses were examined using LISREL 8.52. Paths between
constructs represent individual hypotheses, and each was assessed for
statistical significance of the path coefficient. This study tested
hypothesized relationships with a full model, and the LISREL analysis
of this model produced a chi-square of 72.05 (df=40). In addition to
this chi-square value, the various goodness-of-fit indices also
suggested a very good fit (GFI=0.932, AGFI=0.867, NFI =0.975,
CFI=0.989, RMSR=0.0124). The analysis also provided support for
the first three study's hypotheses. The results were reported in Table 4
and Fig. 1 showing the path coefficients, t-values, and construct
relationships.
9
As hypothesized, there is a positive relationship between entrepreneurial
orientation and firm performance (γ11=0.47, t=7.32).
Therefore, H1 is supported. Results uphold the proposition that the
two concepts are indeed related and, therefore, support the conclusions,
which postulate that entrepreneurial orientation is important to
enhance firm performance. A positive relationship between entrepreneurial
orientation and knowledge creation process is established
(γ21=1.19, t=11.70). Therefore, H2 is supported. As scholars have
postulated, perhaps the firms in newventures may be better served by
adopting appropriate entrepreneurial orientation and knowledge
creation process. As predicted, there is a significantly positive
relationship between knowledge creation process and firm performance
(β12=0.52, t=8.26). Therefore, H3 is supported. The finding
may add to the understanding that every knowledge creation process
is indeed necessary and may be linked to performance, which adds
further credence to the knowledge creation theory.
An empirical study with mediator must propose that (1) the
independent variable significantly influence the mediating variable,
(2) the independent variable significantly influence the dependent
variable without the mediator, and (3) the inclusion of the mediator
attenuates the relationships between the independent and the
dependent variables while showing a significant relationship between
the mediator and the dependent variable (Baron & Kenny, 1986). The
independent variable was entrepreneurial orientation, and the
proposed mediating variable was knowledge creation process. The
dependent variable was firm performance.
We tested the three conditions by using LISREL analysis. First, we
examined the relationship between entrepreneurial orientation and
knowledge creation process to determine if they had significant
relationship. Results show that entrepreneurial orientation has
significantly positive relationship with knowledge creation process
(γ21=1.08, t=13.13). Thus, the first condition for mediating effect is
met. Then, the relationship between the independent and the
dependent variable show that entrepreneurial orientation has
significantly positive relationship with firm performance (γ11=1.31,
t=11.91), also supporting the second condition. In the third condition,
entrepreneurial orientation has significantly positive relationship
Napaka! Predmetov ne morete ustvariti z urejanjem kod polj.
10
0.67
PNPT
0.74
E132*
PNKA
0.85
E133*
PNA
0.88
E134*
PNI
0.58
E135*
PNP
0.52
E136*
KZS
0.65
E144*
KZE
0.61
E145*
KZK
0.54
E146*
KZI
0.70
E147*
0.53*
F1*
0.48*
0.82*
0.86*
0.78*
0.76
0.79*
F2*
0.84*
0.72*
Figure X: EQS 6 kor Chi Sq.=48.94 P=0.00 CFI=0.96 RMSEA=0.11
Figure EQS12 korel Chi Sq.=45,58; P=0,06; CFI=0,97; RMSEA=0,08;
Table 4
Standardized path estimates a.
Hypothesized relationships
Hypothesis Variables Path
coefficient
tvalue
Result
H1 Entrepreneurial orientation will be
positively related to firm performance.
0.47⁎ 7.32 Supported
H2 Entrepreneurial orientation will be
positively related to knowledge creation
process.
1.19⁎ ⁎ 11.70 Supported
H3 Knowledge creation process will be
positively related to firm performance.
0.52⁎ ⁎ 8.26 Supported
*pb0.05, **pb0.01.
a
n=165
(two-tailed
test).
3.3. Reliability and validility
Reliability of the multi-item scale for each dimension was measured using Cronbach alphas
and composite reliabilities measures.
Both measures of reliability were above the recommended minimum standard of 0.60
(Bagozzi & Yi, 1988; Baker, Parasuraman,
Grewal, & Voss, 2002; Nunnally, 1978). For all twelve dimensions, both measures of
reliability are above 0.70. Table 2 summarizes all
measurement items, Cronbach alphas, composite reliability, and their scales for all the items.
EQS 12 provides a chi-square value and five additional indices that assess the fit of path
models, the goodness-of-fit index (GFI), the adjusted goodness-of-fit index (AGFI), the
normed fit index (NFI), the comparative fit index (CFI), and the root mean square residual
(RMSR).
11
The fit indexes of confirmatory factor analysis for the measurement models ranged from
adequate to excellent (entrepreneurial orientation:
GFI=0.98, AGFI=0.92, NFI=0.93, CFI=0.96, RMSR=0.02; knowledge creation process:
GFI=0.96, AGFI=0.81, NFI=0.93, CFI=0.96,
RMSR=0.01; firm performance: GFI=0.92, AGFI=0.85, NFI=0.93, CFI=0.95, RMSR=0.04).
Additionally, three models had chi-squares
less than three times their degrees of freedom (entrepreneurial orientation, 139.63/60=2.33;
knowledge creation process, 219.98/
100=2.12; firm performance, 63.27/24=2.64). Overall, the CFA results suggested that the
models of entrepreneurial orientation, knowledge
creation process, and firm performance provided a good fit for the data.
According to Anderson and Gerbing (1988), convergent validity can be assessed from the
measurement model by determining whether
each indicator's estimated pattern coefficient on its posited underlying construct factor is
significant (greater than twice its standard
error). Convergent validity was assessed using the t-statistics for the path coefficients from
the latent constructs to the corresponding
items. As mentioned above, all the path coefficients from the three constructs to the twelve
measures are statistically significant, with the
highest t-value for the items measuring entrepreneurial orientation being 9.33 and the lowest
t-value for the items measuring firm
performance being 2.02. That all the t-values exceed the standard of 2.00 (Anderson &
Gerbing, 1988) indicates satisfactory convergent
validity for all twelve dimensions.
Discriminant validity was assessed in three ways (Baker et al., 2002). First, the confidence
interval for each pairwise correlation
estimate (i.e., ±two standard errors) should not include 1 (Anderson & Gerbing, 1988). This
condition was satisfied for all pairwise correlations in three measurement models. Second, for
every construct, the percentage of variance extracted should exceed the construct's shared
variance with every other construct (i.e., the square of the correlation) (Fornell & Larcker,
1981; Hult, Hurley, Giunipero, & Nichols, 2000). As may be seen from Table 3, this
condition is also satisfied for all the constructs. For example, the extracted variance for
innovativeness is
5. Discusion and conclusion
Literature on knowledge management pertaining to the capturing, locating, transferring, and
sharing of primarily existing knowledge (von Krogh, Ichijo, Nonaka, 2000).
This study develops a conceptual model to examine the mediating role of knowledge
creation process in the relationship between entrepreneurial orientation and firm
performance. The results show that entrepreneurial orientation can positively enhance firm
performance; however, if we add knowledge creation process as a mediator, the directly
positive relationship between entrepreneurial orientation and firm performance will
attenuate. It specifically implies that entrepreneurial orientation indirectly influences firm
performance by influencing knowledge creation process. Thus, knowledge creation process
plays a mediating role through which entrepreneurial orientation benefits firm performance.
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Our findings contribute to theoretical development in several ways. First, while the
importance of entrepreneurial orientation in
firm performance has been recognized, the link between entrepreneurial orientation and
firm performance has remained inconsistent (Lumpkin & Dess, 1996). This study reveals that
entrepreneurial orientation is critical to business ventures and has positive impact on
firm performance, which gives additional grounding for statements about the positive effect
of entrepreneurial orientation on firm performance (e.g. Barringer & Bluedorn, 1999;
Lumpkin & Dess, 2001; Wiklund & Shepherd, 2003; Zahra & Covin, 1995). The inclusion
of knowledge creation process as a mediating variable may help to enhance our
understanding of howentrepreneurial orientation affects firm performance. Our findings
support recent arguments for a contingency perspective on the entrepreneurial orientation
— firm performance link (Lumpkin & Dess, 2001) and make a contribution to the
entrepreneurship literature by clarifying the role that knowledge creation process plays.
Second, the emergent model provides empirical support of Nonaka's (1994) theory of
knowledge creation.
The findings demonstrate the mediating effect of knowledge creation process when new
ventures want to execute entrepreneurial orientation to achieve firm performance. We
place primary emphasis on the dynamic processes rather than the outcomes of knowledge
creation (Nonaka,1994; Nonaka & Konno,1998; Nonaka et al., 2000a). Tacit and explicit
knowledge is connected and converted by the interactive spiral process of socialization,
externalization, combination, and internalization. The dynamic SECI model enables the firm
to create new knowledge or combine existing knowledge to form new insights and become
valuable knowledge assets for the use of firms. New ventures can amplify the mobilization of
knowledge and trigger new spirals of knowledge creation continuously to transform
entrepreneurial orientation into better business value and performance.
Furthermore, the consideration of knowledge creation process makes a related support of
the resource-advantage theory. According to the resource-advantage theory, knowledge
embedded internally is a valuable resource because it is unique to create and difficult to
imitate (Barney, 1991; Grant, 1996; Hunt & Morgan, 1996; Zack, 1999). The findings reveal
that SECI spiral enhances the capabilities of new ventures to transform tacit knowledge into
the organizational memory and thereby leads to improved efficiency, growth, and profit.
This result joins other studies to highlight the strategic value of knowledge creation for firms
to sustain competitive advantages (Chia, 2003; Grant, 1996; Lee & Choi, 2003; Matusik &
Hill, 1998; Nonaka & Takeuchi, 1995). Finally, this study contributes to integrate the
domains of entrepreneurial orientation and knowledge management research.
Entrepreneurship literature (e.g. Lee et al., 2001; Lumpkin & Dess, 1996; Shane &
Venkataraman, 2000) suggests that entrepreneurial orientation of new ventures is critical for
their success because entrepreneurial orientation represents an important means to
discover and exploit profitable business opportunities. Knowledge management literature
(e.g. Grant, 1996; Nonaka et al., 2000a,b; Zack, 1999) emphasizes the value of leveraging
knowledge and creating newcombinations.We showhere that the conversion process of
knowledge creation appears to be a key mechanism through which entrepreneurial
orientation is developed and implemented to accomplish favorable firm performance.
From a practical point of view, our study suggests that managers should be aware of the
importance of knowledge creation process in the link of entrepreneurial orientation and firm
performance.
13
Managers have to facilitate dynamics and spiral of knowledge creation by taking a leading
role in managing the SECI process. Firms can amplify and enlarge knowledge through the
dynamic conversion between tacit and explicit knowledge. Managers need to nurture an
enabling environment that allows employees to share and exchange tacit knowledge to
create new knowledge. Each mode of knowledge conversion requires different approaches
for knowledge to be created and shared effectively (Nonaka & Konno, 1998; Nonaka et al.,
2000b).
For example, employees rely on shared experiences such as apprenticeship or practice to
build mutual understanding and trust in the socialization process. In externalization, the use
of metaphors in dialogue is essential for concept creation. Combination process can
disseminate knowledge by utilizing information technology such as on-line network,
groupware, and database. Knowledge is articulated and embodied through simulations or
experiments in the internalization process. Thus, managers should carefully choose and
design appropriate methods according to the SECI process to facilitate knowledge creation.
Furthermore, firms need to enhance employees' involvement and participation in SECI
activities. Managers should provide incentive and support to reinforce the desired behaviors
of knowledge creation. Employees will be motivated to exchange, learn, and create
knowledge and further transform knowledge to fulfill strategic objectives and execution.
This study has some inherent limitations. First, our cross-sectional design prevents us from
studying causal relationships among our variables. A longitudinal investigation would
provide further insights into the dynamic nature of knowledge creation and different
organizational levels. Future researches might use longitudinal design to drawcausal
inferences of our model. Second, this study goes further than other studies in examining a
potential mediator in the relationship between entrepreneurial orientation and firm
performance.
However, we do not consider the roles played by organizational routines, cultures, and other
possible knowledge management processes such as knowledge accumulation and
knowledge integration. In addition, we also know that often the firm's orientation looks
like its manager. If the manager is changed or changes, entrepreneurial orientation and firm
performance may be influenced. Future studies might gain additional insights by exploring
other potential mediators such as organizational factors, other knowledge management
processes, or the change of manager. Third, the firm age of this study is restricted within ten
years and the majority of our response samples are small and medium enterprises. Larger
firms tend to have sufficient resources or money to invest in knowledge management
process.
Future research could overcome this limitation by expanding the scope of studies to include
larger and elder firms. Fourth, the study is based on self-report data incurring the possibility
of common method bias. However, our tests of common method variance do not find it to
be a significant problem in this study. We also use multiple assessments including Cronbach
alphas, composite reliability, convergent validity, and discriminant validity to support the
accuracy of the data and the results. Future studies might use objective measures for firm
performance to strengthen the research design.
In summary, entrepreneurial orientation is critical for enhancing firm performance. Our
study highlights the crucial importance of the mediating role of knowledge creation process
when examining the relationship between entrepreneurial orientation and firm
14
performance. The viewpoints proposed in this study have important implication for new
ventures in today's dynamic and competitive environment.
The first responsibility of management is to unleash the potential of an organizational
knowledge into value creating activities (von Krogh, Ichijo, Nonaka, 2000). Knowledge capital
can be dynamically deployed and redeployed to form the basis for competitive advantage
(Teece, 2000).
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Franc Vidic
Ph D Franc Vidic is Professor in the GEA College faculty for entrepreneurship. He is lecturer
on marketing, and has published numerous articles and books on marketing,
entrepreneurship and knowledge creation.
Address: GEA College, faculty for entrepreneurship, Dunajska cesta 156,1000 Ljubljana,
Slovenia.
Email: franc.vidic@gea-college.si
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1.
2.
3.
4.
Entrepreneurial Orientation, Organizational Learning, and Performance: Evidence
From China
Yongbin Zhao1,
Yuan Li1,
Soo Hoon Lee2,*,
Long Bo Chen1
Article first published online: 16 MAR 2011
DOI: 10.1111/j.1540-6520.2009.00359.x
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