JBR-08650; No of Pages 5

Journal of Business Research xxx (2015) xxx–xxx

Contents lists available at ScienceDirect

Journal of Business Research

Entrepreneurial orientation and SME performance across societal cultures:

An international study☆
Thorsten Semrau a,⁎, Tina Ambos b, Sascha Kraus c
a
University of Cologne, Albertus-Magnus-Platz, 50923 Köln, Germany
b
Geneva School of Economics and Management (GSEM), University of Geneva, 40 Blvd. du Pont-d’Arve, CH-1211 Geneva 4
c
University of Liechtenstein, Fürst-Franz-Josef-Strasse, 9490 Vaduz, Liechtenstein

a r t i c l e i n f o a b s t r a c t

Article history: The concept of entrepreneurial orientation (EO) is universally applicable, and many empirical studies report a
Received 1 January 2015 positive relationship between EO and performance in different national contexts. Empirical research, however,
Received in revised form 1 July 2015 scarcely addresses which country-level contingencies affect the EO–performance link. Building on two second-
Accepted 1 September 2015
order factors of societal culture—performance-based culture (PBC) and socially supportive culture (SSC)—the
Available online xxxx
present study proposes and tests such a contingency framework. Using a data set of 1248 SMEs from seven
Keywords:
national contexts, multilevel analyses show that PBC positively moderates the relationship between EO and
Entrepreneurial orientation performance, whereas SSC has no moderation effect.
Performance © 2015 Published by Elsevier Inc.
National context
Societal culture
Multilevel analysis

1. Introduction because recent meta-analyses that address national-context differences

Entrepreneurial orientation (EO) is a firm-level phenomenon and a
central concept of strategy-making (Covin & Slevin, 1991). In an envi-
ronment where businesses must constantly seek new opportunities,
EO—the extent to which a firm is entrepreneurial (as opposed to conser-
vative) with respect to strategy-making and resource orchestration—is
one of the few qualities that firms can sustainably rely on. Thus, decision
makers in different contexts need to foster EO to create competitive
advantage (Miller, 1983). Following this line of thinking, the association
between EO and firm performance is the subject of several recent
empirical studies (Rauch, Wiklund, Lumpkin, & Frese, 2009; Wales,
Gupta, & Mousa, 2013).
Understanding the performance implications of EO in a cross-
national context is becoming more important than ever as firms inter-
nationalize and select acquisition targets or alliance partners globally
rather than locally (Andersen & Buvik, 2002). Accordingly, several re-
searchers stress the research potential of examining cultural differences
as possible contingencies for the EO–performance link (e.g., Wales et al.,
2013). Unfortunately, however, knowledge in this area remains scarce
☆ The authors thank Salem Samhoud and Jeroen Geelhoed from &samhoud for their
great effort in the data collection and for their outstanding cooperation.
⁎ Corresponding author.
E-mail addresses: semrau@wiso.uni-koeln.de (T. Semrau), T.Ambos@sussex.ac.uk
(T. Ambos), sascha.kraus@unisg.ch (Sascha Kraus).
as a potential moderator of the EO–performance link (Rauch et al.,
2009; Saeed, Yousafzai, & Engelen, 2014) are inconclusive. Additionally,
the only primary study that addresses the relevance of cultural
differences in the EO–performance link (Kreiser, Marino, Kuratko, &
Weaver, 2013) focuses on just one dimension of societal culture.
By focusing on small and medium-sized enterprises (SMEs), using a
second-order conceptualization of societal culture (Stephan & Uhlaner,
2010), and employing a multilevel model (Klein & Kozlowski, 2000),
this study seeks to contribute to expanding the knowledge on how cul-
ture may affect the EO–performance link. Addressing the relationship
between EO and performance among SMEs seems useful because
SMEs are particularly important for countries' economic development
(Javalgi & Todd, 2011) and play an increasingly active role within the
broader trend of internationalization (Kraus, Ambos, Eggers, &
Cesinger, 2015; Lu & Beamish, 2001). Employing a second-order
conceptualization of societal culture seems advisable because such an
approach represents culture more completely than an approach focus-
ing on particular primary dimensions (Stephan & Uhlaner, 2010).
Finally, because EO resides at firm level and societal culture is a
higher-level concept, an analytical technique accounting for a nested
data structure may be necessary to capture the interaction between
EO and societal culture (Autio, Pathak, & Wennberg, 2013).
The present study posits a positive relationship between EO and
SME performance across national contexts. Theoretical arguments fur-
ther suggest that differences in the extent to which national societal cul-
tures are a) performance-based and b) socially supportive explain

http://dx.doi.org/10.1016/j.jbusres.2015.10.082
0148-2963/© 2015 Published by Elsevier Inc.

Please cite this article as: Semrau, T., et al., Entrepreneurial orientation and SME performance across societal cultures: An international study, Jour-
nal of Business Research (2015), http://dx.doi.org/10.1016/j.jbusres.2015.10.082
2 T. Semrau et al. / Journal of Business Research xxx (2015) xxx–xxx
differences in the magnitude of the EO–performance link among SMEs
across national contexts. Multilevel analyses using data on 1248 SMEs
from seven countries test these lines of reasoning.
2. Theory and hypotheses
2.1. EO and SME performance
According to Miller's (1983) as well as Covin and Slevin's (1991)
original conceptualization, EO is a firm-level attribute that exists to
the extent that innovativeness, risk-taking, and proactiveness are features
of a firm's strategic posture. Jointly, the three sub-dimensions reflect the
extent to which a firm is entrepreneurial (as opposed to conservative)
in its decision-making styles and methods, products, services, and
business practices (Covin & Lumpkin, 2011).
The concept of EO seems universal in terms of applicability and va-
lidity across different types of firms and national contexts. Specifically,
empirical studies using data from different types of firms and countries
examine the effect of EO on various outcomes, finding the concept
itself—as well as the measures to capture EO—valid and robust (Wales
et al., 2013).
As with previous findings regarding the cultural universality of EO as
a concept, the literature contains considerable evidence that the
relationship between EO and performance is universally positive. Spe-
cifically, recent meta-analyses (Rauch et al., 2009; Saeed et al., 2014)
provide clear evidence that, regardless of firm characteristics and na-
tional context, firm performance profits from EO. The main argument
underlying this observation is that firms adopting an entrepreneurial
strategic posture (i.e., pursue new solutions and take risks because of
their orientation toward innovation) will more likely generate and
exploit new business opportunities and thus achieve superior perfor-
mance (Covin & Lumpkin, 2011; Wiklund & Shepherd, 2005). Firms
take considerable risk by exploring the unknown, move beyond tried-
and-true procedures and strategies, anticipate future demands, and ag-
gressively position new products and services (Bouncken, Plüschke,
Pesch, & Kraus, 2014). However, firms also establish the basis for staying
ahead of competitors, creating first-mover advantages, and enjoying
high-profit margins that derive from temporary monopoly-like status
(Zahra & Covin, 1995). Consistent with these insights, the first
hypothesis is as follows:
H1. Across national contexts, EO relates positively to SME performance.
2.2. Societal culture as a contingency factor
Despite their tendency to agree on a universally positive main effect
of EO on firm performance, researchers widely accept that a main-
effect-only perspective provides an incomplete picture (Wiklund
& Shepherd, 2005). In addition, researchers suggest that national-
context differences may potentially moderate the relationship
between EO and performance (Wales et al., 2013). Consistent with
this notion, this study posits that societal culture serves as a contin-
gency for the EO–performance link among SMEs.
Societal culture reflects what a society considers legitimate, thus
affecting economic actors' behavior and the outcomes of this behavior
(Hofstede, 1984). In line with this reasoning and building on established
second-order factors of societal culture (Stephan & Uhlaner, 2010), the
present study suggests that differences in the extent to which societies
have PBCs and SSCs explain differences in the magnitude of the EO–
performance link across national contexts.
2.2.1. Performance-based culture
Societies with strong PBCs have cultural norms and practices
that emphasize individualism, performance orientation, and future
orientation (Stephan & Uhlaner, 2010). As such, high-PBC societies
Please cite this article as: Semrau, T., et al., Entrepreneurial orientation and SME performance across societal cultures: An international study, Jour-
nal of Business Research (2015), http://dx.doi.org/10.1016/j.jbusres.2015.10.082
value individual achievements and performance, encourage competi-
tive behavior, and reward initiative-taking and innovation (House,
Hanges, Javidan, Dorfman, & Gupta, 2004). In addition, these societies
encourage and reward future orientation and endeavors for longer-
term success by providing an institutional framework that supports
stability and predictability, protects intellectual property, and facilitates
growth-oriented investments (Stephan & Uhlaner, 2010; Thai &
Turkina, 2014).
SMEs with an entrepreneurial strategic posture proactively pursue
new solutions and develop new products and services to stay ahead of
competitors (Kraus, Rigtering, Hughes, & Hosman, 2012). Generally,
such a strategic posture results in superior performance by creating a
first-mover advantage and temporary monopoly-like status (Zahra &
Covin, 1995). Performance benefits stemming from being first to market
and having a temporary monopoly-like status, however, are likely to
vary with PBC's prevalence in a national context.
The performance potential relating to a proactive and innovative
strategy varies with customers' appreciation of new and innovative
solutions (Rogers, 1983). Specifically, performance potential increases
with the number of early adopters willing to pay a premium for
purchasing a new product early in the product's life cycle (Sundqvist,
Frank, & Puumalainen, 2005). Adopting a strategic posture of
proactiveness and innovation will thus pay off, particularly in national
contexts with a high PBC, where customers value and appreciate
initiative-taking and innovative solutions. Additionally, studies show
that competitors and imitators that are second or even third to market
may outperform the initial innovator if these imitators can easily copy
the innovative product (Feeser & Willard, 1990). Thus, institutions
that guarantee the protection of intellectual property rights and enforce
legal claims are central to influencing innovators' ability to capture in-
novations' performance potential (López & Roberts, 2002). From this
perspective, societal PBCs whose accompanying rules and laws provide
a framework for effective protection of future-oriented investments and
property rights (Stephan & Uhlaner, 2010) should help firms reap the
performance potential that comes with an entrepreneurial strategic
posture.
These arguments suggest that PBC positively moderates the link
between an entrepreneurial strategic posture and SME performance,
such that EO has a more positive effect on SME performance in national
contexts with strong rather than weak PBCs:
H2a. PBC positively moderates the relationship between EO and SME
performance.
2.2.2. Socially supportive culture (SSC)
Characteristic for a society with an SSC are high levels of humane ori-
entation and low levels of assertiveness. Such societies have high levels
of national social capital—that is, they foster a positive social climate
whereby people support each other (Stephan & Uhlaner, 2010; Thai &
Turkina, 2014). People in this kind of culture have a collective identity
and tend to rely on informal networks and public morality, with such
a reliance leading to strong networks and a tolerance for failure
(House et al., 2004). With these characteristics in mind, the study sug-
gests that SSC also positively moderates the link between SMEs' EO
and SME performance.
Adopting an entrepreneurial strategic posture is resource intensive
(Covin & Slevin, 1991). Significant resources—financial and otherwise—
are necessary to proactively develop and market innovative ideas
(Wiklund & Shepherd, 2005). Consequently, highly entrepreneurial
firms should profit particularly from operating in a national context
with a societal culture that is socially supportive, because informal
networks and social capital provide access to external resources at
attractive terms (Stam & Elfring, 2008). Additionally, firms with high
EO will often face the adverse consequences of risk-taking and may
incur losses or have to change course quickly. Thus, firms with high
 T. Semrau et al. / Journal of Business Research xxx (2015) xxx–xxx 3

EO depend on stakeholders (e.g., collaborators, customers, and
employees) who are willing to forgive occasional downturns and failure
resulting from risky initiatives. Operating in a context with higher toler-
ance for failure—a characteristic of high-SSC societies—should thus in-
crease chances of receiving the enduring support necessary to succeed
with entrepreneurial endeavors.
In short, theoretical arguments suggest that SSC positively moder-
ates the relationship between EO and performance such that SME
performance benefits more from EO when firms are operating in
national contexts with high rather than low SSCs:
H2b. SSC positively moderates the relationship between EO and SME
performance.
coded scores for power distance and in-group collectivism represent
PBC. Similarly, mean sum scales of GLOBE cultural practices scores for
humane orientation and the reverse-coded scores for assertiveness rep-
resent SSC.
3.2.4. Control variables
At the firm level, analyses control for firm size in terms of number of
employees and industry according to Standard Industrial Classification
(SIC) codes. At the country level, this study follows Autio et al. (2013)
in controlling for GDP per capita at purchasing power parity.
3.3. Assessing common method variance

Several facts suggest that common method variance does not

3. Method
3.1. Sample
This research uses data from seven countries: the US, the Nether-
lands, China, Malaysia, India, Germany, and Spain. Data collection took
place through collaboration with local researchers and a large
multinational market research company. Following earlier research
(Carson, Madhok, & Wu, 2006; Ebers & Semrau, 2015), the present
study examines data from SME senior managers as knowledgeable in-
formation sources. 1248 of these key informants agreed to participate
and answered all questions. On average, respondents were 37 years
old and had worked for their companies for 7 years. 30% of respondents
were female.
3.2. Measures
The draft questionnaire was in English. Independent translators
translated the questionnaire into the appropriate language for each
country. A procedure of back-translation, comparison, and adjustments
where necessary ensured that questionnaires were equivalent across all
languages (Brislin, 1980).
3.2.1. Firm-level dependent variable
Performance research in international contexts indicates that in
emerging markets (e.g., China or India in the sample), subjective mea-
sures of firm performance are typically more reliable than archival
data (Hult et al., 2008), which firms in many countries do not have
the obligation to disclose publicly. The present study thus relied on
five items appearing in Wiklund and Shepherd (2005) to reflect the de-
pendent variable. Respondents estimated on Likert-type scales ranging
from 1 (“much better than competitors”) to 5 (“much worse than com-
petitors”) their firms' gross margins, profits, cash flow, and sales and
employment growth relative to competitors. Reverse-coding and
combining the five items yielded a performance index (Cronbach's
α = .83).
seriously affect our results. First, meta-analytical evidence on the rela-
tionship between EO and performance implies that analyzing the EO–
performance link using self-report or archival data does not lead to
significantly different results (Rauch et al., 2009). Additionally, common
method variance—in the absence of true effects—is unlikely to generate
significant effects in cross-level interaction analyses (Lai, Li, & Leung,
2013). Furthermore, results from Harman's one-factor test (Podsakoff
& Organ, 1986), as well as a more sophisticated procedure comparing
measurement models with and without a latent common method factor
(Podsakoff, MacKenzie, Lee, & Podsakoff, 2003), imply that common
method variance is not a serious issue in the present study.
3.4. Analytical approach
To reflect potential non-independence in the data, this study
employed a multilevel approach (Klein & Kozlowski, 2000) to test the
study hypotheses. Multilevel analyses let researchers unbiasedly test
for cross-level interactions (Hofmann, 1997). To eliminate between-
country variation in EO and enable a direct interpretation of cross-
level interaction effects, analyses centered EO within clusters (Aguinis,
Gottfredson, & Culpepper, 2013).
4. Results
Results from total and split sample analyses (Table 1) reveal positive
correlations between EO and SME performance across all countries,
which considerably vary across the national contexts in the study
sample.
Table 2 shows the results of multilevel analyses comprising the inde-
pendent variable, moderators, and control variables that have signifi-
cant relationships with either the independent or the dependent
variable in the correlation analysis. (Results from correlation analyses
are available from the authors upon request.)
Model 1 provides support for hypothesis 1, which posits a positive
link between EO and SME performance (γ = .37, p b .01). Model 2
shows significant variance in the EO–performance link across national

3.2.2. Firm-level independent variable

A nine-item scale by Covin and Slevin (1989) reflects SMEs' EO. The
Table 1
scale comprised forced-choice items, with opposite statements Means, standard deviations, and correlations across national contexts.**
anchoring a seven-point answering scale. A sample item is as follows:
PBC SSC EO Performance r N
“In general, the top managers of my business unit have…” 1 (“a strong
proclivity for low-risk projects”) to 7 (“a strong proclivity for high-risk Mean SD Mean SD
projects”). Items load onto a single factor and thus represent a single Spain 3.6 3.3 3.4 0.5 3.9 0.7 .23⁎⁎ 184
index (Cronbach's α = .75). India 3.8 4.4 3.4 0.7 4.2 0.6 .24⁎⁎ 206
China 3.9 4.3 3.5 0.6 4.0 0.6 .45⁎⁎ 202
US 3.9 3.8 3.2 0.7 3.7 0.7 .40⁎⁎ 166
3.2.3. Societal-level contingency variables Malaysia 4.0 4.5 3.5 0.6 4.1 0.6 .44⁎⁎ 215
To represent differences in PBC and SSC, the study follows Stephan Germany 4.1 3.3 3.3 0.5 3.7 0.6 .45⁎⁎ 140
and Uhlaner's (2010) measurement. Mean sum scales of GLOBE Netherlands 4.2 3.8 3.3 0.5 3.6 0.6 .39⁎⁎ 135
(House et al., 2004) cultural practice scores for performance orientation, Total 3.9 3.9 3.4 0.6 3.9 0.7 .38⁎⁎ 1248

future orientation, and uncertainty avoidance, together with reverse- ⁎⁎ p b .01 (two-tailed).

Please cite this article as: Semrau, T., et al., Entrepreneurial orientation and SME performance across societal cultures: An international study, Jour-
nal of Business Research (2015), http://dx.doi.org/10.1016/j.jbusres.2015.10.082
4 T. Semrau et al. / Journal of Business Research xxx (2015) xxx–xxx

Table 2
Results from multilevel analyses.

N(L1/L2) = 1248/7 Model 1 Model 2 Model 3 Model 4

Level 1 Firm size −0.00⁎⁎ (0.00) −0.00⁎⁎ (0.00) −0.00⁎⁎ (0.00) −0.00⁎⁎ (0.00)
Agriculture 0.35⁎⁎ (0.10) 0.34⁎⁎ (0.10) 0.34⁎⁎ (0.10) 0.35⁎⁎ (0.10)
Finance 0.09 (0.06) 0.09 (0.06) 0.09 (0.06) 0.09 (0.06)
Services −0.05 (0.04) −0.05 (0.04) −0.05 (0.04) −0.05 (0.04)
EO 0.37⁎⁎ (0.03) 0.38⁎⁎ (0.04) 0.38⁎⁎ (0.03) 0.38⁎⁎ (0.03)
Level 2 Intercept 3.90⁎⁎ (0.02) 3.90⁎⁎ (0.02) 3.90⁎⁎ (0.02) 3.90⁎⁎ (0.02)
GDP −0.00⁎ (0.00) −0.00⁎ (0.00) −0.00⁎ (0.00) −0.00⁎ (0.00)
PBC −0.29 (0.16) −0.30 (0.16) −0.29 (0.16) −0.30 (0.16)
SSC −0.09 (0.08) −0.09 (0.08) −0.09 (0.08) −0.09 (0.08)
Cross-level EO ⁎ PBC 0.44⁎ (.16)
EO ⁎ −0.08 (0.07)
SSC
Level 1—variance 0.33 0.33 0.33 0.33
Level 2—variance 0.00 0.00 0.00 0.00
Slope variance (EO) 0.00+ 0.00 0.00+
Deviance (FIML) 2154.18 2153.01 2143.74 2151.92

Notes: FIML, full information maximum likelihood estimation; table shows gamma coefficients; standard errors in parentheses.
+
p b .10 (two-tailed).
⁎ p b .05 (two-tailed).
⁎⁎ p b .01 (two-tailed).

contexts, which suggests the examination of cross-level interaction
effects (Aguinis et al., 2013).
Model 3 shows that the interaction between EO and PBC is positive
and significant (γ = .44, p b .05), thus lending support to hypothesis 2a.
Model 3 further reveals that the interaction between EO and PBC ex-
plains the majority of the variance in the EO–performance link across
national contexts. Consistent with this result, Model 4 provides no
confirming evidence for hypothesis 2b (γ = −.08, p N .10).
5. Discussion and conclusion
Consistent with previous research (Rauch et al., 2009), this study
finds a positive relationship between EO and performance across coun-
tries. This link thus appears to be one of the few universal ones in man-
agement research. The strength of this positive association, however,
varies considerably across national contexts, and cultural contingencies
can explain significant variance in the EO–performance link. Particular-
ly, analyses confirm that the relationship between EO and performance
is significantly more positive in high-PBC societies than in low-PBC soci-
eties. In contrast, results fail to confirm a moderating effect of SSC.
The positive effect of PBC on the EO–performance link supports two
arguments: first, societal norms and practices influence societies' views
on legitimate behavior, and second, societal acceptance and support is
necessary for better economic performance (Hofstede, 1984). As such,
this study complements previous work on how collective values
and beliefs may influence the performance implications of certain eco-
nomic actions (e.g., Batjargal, 2010). Because national contexts with
strong PBCs offer institutional support for entrepreneurial activities,
this finding is also consistent with the notion that in more institutionally
developed countries, variations in performance result from a firm's stra-
tegic posture to a much greater extent than they do in countries with
less developed institutional frameworks (Wan, 2005).
Results show that SSC does not significantly affect the EO–
performance link. Other studies find links between SSC and informal en-
trepreneurship (Thai & Turkina, 2014) and social entrepreneurship
(Estrin, Mickiewicz, & Stephan, 2013). Potentially, therefore, high-SSC
societies might be particularly supportive of entrepreneurial endeavors
that strive less strongly to achieve economic profit and growth.
Elaborating on how PBC and SSC affect the link between EO and per-
formance, the present study contributes to a more complete picture of
whether societal culture and EO interact in shaping firm performance.
As such, this study also complements previous studies demonstrating
that environmental characteristics, such as dynamism and munificence,
serve as contingencies for the relationship between EO and perfor-
mance (Covin & Lumpkin, 2011; Miller & Le Breton-Miller, 2011).
The study findings also have practical implications. Specifically, SME
managers should carefully consider the interplay of their firms' EO and
the extent to which a societal culture builds on performance when
seeking to internationalize. For policymakers who seek to motivate en-
trepreneurial-oriented firm behavior, developing the cultural and insti-
tutional aspects of PBC—appreciating and rewarding initiative-taking
and innovation and establishing property-rights protection and con-
tract enforcement—may be advisable. Such actions increase rewards
for adopting a strategic posture that entails proactive risk-taking and
innovativeness.
This study has some limitations that highlight opportunities for fu-
ture research. First, the study uses data for just seven national contexts.
Second, these data are cross-sectional. Third, this study only investi-
gates SMEs, and not large enterprises. Future research employing longi-
tudinal data from firms regardless of size from a larger number of
national contexts may thus provide further insight on the long-term
performance implications of EO across societal cultures.
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