Chapter 4

The Influence of Entrepreneurship

Orientation on Firm Performance:
A Case Study of the Salatiga Food
Industry, Indonesia
Innaka Fahrunnisak Swasti Erista, Roos Kities Andadari,
Petrus A. Usmanij and Vanessa Ratten

Abstract
Entrepreneurship has an important role in the economic development of
a country. One element that represents the entrepreneurship quality is its
orientation. The orientation of entrepreneurship includes several dimen-
sions which are needed for achievement, an internal locus of control, self-
reliance, extroversion, being proactive, risk-taking, and innovation. These
dimensions are believed to be able to improve the company’s performance.
The purpose of this study is to find out how the entrepreneurship orienta-
tion influences the firm performance. This study aims to discover which
dimensions of entrepreneurship orientation are the most influential toward
the firm performance. The samples were comprised 40 entrepreneurs. The
primary data were collected from the respondents by distributing question-
naires to the entrepreneurs of food firms in Salatiga, Indonesia. A multi-
ple regression analysis method was applied in this study. The results show
that among the dimensions in entrepreneurship orientation, only the risk-
taking and innovative dimensions influence the company’s performance.
Innovativeness has a higher effect on firm performance.

Keywords: Entrepreneurship orientation; need for achievement; internal

locus of control; self-reliance; extroversion; proactive; risk-taking;
innovativeness; company performance

Entrepreneurship as Empowerment:
Knowledge Spillovers and Entrepreneurial Ecosystems, 45–61
Copyright © 2020 by Emerald Publishing Limited
All rights of reproduction in any form reserved
doi:10.1108/978-1-83982-550-720201005
46    Innaka Fahrunnisak Swasti Erista et al.

Introduction
According to Alma (2011), an entrepreneur, in terms of quantity and quality, is
an important factor for the development of a country. In Indonesia, the num-
ber of entrepreneurs is still very few, whereas the quality also cannot be said to
be great. Ruswandi (2012) said that entrepreneurs are the main factors in the
economic development, and they function to generate innovation. However, the
availability of capital is perceived as one of the reasons that hinder the devel-
opment of entrepreneurs in Indonesia. They assume that capital is in the form
of financial capital; if no capital is available, they do not dare to start a busi-
ness. Capital basically can be a skill, knowledge, or networks, which in turn bring
financial benefits. There is the opinion that becoming an entrepreneur should
come from a particular ethnic group, which limits the development of entrepre-
neurs to flourish. Nishantha (2009) describes that one’s family background and
experience in entrepreneurship contribute to shape a positive attitude toward
entrepreneurship.
Some people view being an entrepreneur as having high risks, long working
hours, and an uncertain income, which causes them to be reluctant to be involved
in a business. Furthermore, Ruswandi (2012) suggested that the idea that entre-
preneurs should be successful and never fail is a myth. An entrepreneur becomes
successful as he/she learns from the experience of failure, by having a perseverant
attitude and being willing to change to reach success even if the individual does
not have an entrepreneurial ancestry. According to Mahesa and Rahardja (2012),
freedom of work is the style of an entrepreneur. They work without being tied to
rules and time. They are tolerant of risks and have creativity in handling risks to
obtain the expected income.
An entrepreneur is distinguished from a merchant or a businessperson. Some-
one who is in need of additional income or who is unemployed due to r­ etirement/
dismissal and decides to open a business in order to obtain instant profit by
becoming a businessperson is not an entrepreneur. They tend to be more short-
term oriented. A businessperson is different from an entrepreneur who is able to
seek and take advantage of opportunities and bare risks. An entrepreneur not
only focus on a short-term profit strategy but also thinks about medium-term and
long-term strategies. They avoid actions to get instant profit, focus on achieving
the vision and mission, and leave their comfort zone by creating innovation in
terms of products, production processes, and marketing.
An entrepreneur is certainly a businessperson, but a businessperson is not
necessarily an entrepreneur. According to Santosa and Natsir (2014), one of
the elements that represent entrepreneurial skills is entrepreneurial orientation.
Lumpkin and Dess (1996) suggest that entrepreneurial orientation refers to the
processes, practices, and decision-making that lead to new input. It has three
dimensions of entrepreneurship, which are always be innovative, act proactively,
and take risks. Meanwhile, Sinarasri (2013) states that an entrepreneur who has
a good entrepreneurial orientation will reengineer the system, resulting in com-
bined new productive resources capable of designing business strategies to pro-
actively respond to the business environment. Thus, businesspeople who have an
 Influence of Entrepreneurship Orientation on Firm Performance    47

entrepreneurial orientation can become entrepreneurs with new innovations, who

are able to see and take advantage of opportunities and are willing to take risks
for the success of the business.
A firm’s performance is one of the indicators of business success. According
to Purnama and Suyanto (2010), positive firm performance is the goal of every
entrepreneur, the level of success in achieving the purpose. Sumiati (2015) states
that the entrepreneurial orientation and market orientation significantly influence
the firm performance. Mahmud (2011) found that the entrepreneurial orientation
has a positive and significant impact on the ability of management, business strat-
egy, and firm performance. Hanifah (2011) concluded that entrepreneurial orien-
tation, organizational culture, and business strategy affect the firm performance
either simultaneously or partially. Meanwhile, Priyanto (2009, p. 59) claims that
someone who has a high entrepreneurial capacity and combined with adequate
management ability will become a success. This opinion supports Suci (2009),
who found that entrepreneurial orientation has a positive and significant impact
on the ability of management, and management capabilities have significant posi-
tive effects on firm performance. In contrast, a study by Zahra and Naubaum
(1998), in Nurhajatie (2009), shows that entrepreneurial orientation is not related
with firm performance. Some dimensions like innovativeness, proactiveness, and
risk-taking have no connection with performance.
This research is interested in studying food entrepreneurs in Salatiga. At food-
processing firms, a low level of technology is used, but they face tight competition
in the future, especially with the implementation of the ASEAN Economic Com-
munity (AEC). As in the era of AEC, processed foods face the highest threat. This
research intends to examine how entrepreneurship orientation influences firm
performance. This chapter strives to answer the following questions: (1) How do
the need for achievement, an internal locus of control, self-reliance, extroversion,
proactiveness, risk-taking, and innovativeness affect the performance of a firm?
(2) Among the above dimensions of entrepreneurial orientation, which one has
the most powerful influence on firm performance?

Theoretical Framework
Orientation of Entrepreneurship
Ruswandi (2012) defines entrepreneurship as a creative and innovative capabil-
ity as the basis, using tips and resources to find opportunities that lead to suc-
cess. According to Liao and Sohmen (2001), the entrepreneurial orientation
adopted as the characteristics and values followed by entrepreneurs is to have a
perseverant nature, be a risk-taker, act quickly, and be flexible. Zhou et al. (2005)
defines entrepreneurship orientation as emphasizing the spirit of innovation as a
refresher of congestion of effort that often happens in the initial steps of innova-
tion. Meanwhile, Avlonitis and Salavou (2007) stress that entrepreneurial orien-
tation is an organizational phenomenon that reflects the organization of their
managerial skills, as companies begin to take an initiative and change their com-
petitive action, so as to benefit the business they are engaged in.
48    Innaka Fahrunnisak Swasti Erista et al.

Entrepreneurial orientation is owned by people who are creative and have

innovative thinking. Reswanda (2012, p. 70) describes entrepreneurial orientation
as a trait, characteristic, and mindset of an individual who has a will to turn inno-
vative ideas into real action. Sinarasri (2013, p. 45) argues that entrepreneurial
orientation is reflected in the attitude of innovation. Being proactive and willing
to risk-taking is believed to be able to boost the company’s performance. Entre-
preneurial orientation has been described by some researchers as the ability of
entrepreneurs to innovate, be courageous to take risks, never give up, as well as be
creative. Thus, it can be concluded that entrepreneurial orientation is a character-
istic that is owned by a businessperson who never gives up, engages in risk-taking,
has the ability to innovate, and uses creativity as an effort to improve.
Suci (2009) and Mahmud (2011) in discussing entrepreneurial orientation
used the same dimensions, which were a need of achievement, a locus of control,
self-reliance, and extroversion. Meanwhile, Reswanda (2012), Sumiati (2015),
Quantananda and Haryadi (2015), and Setiawan (2015) used innovative, proactive,
and risk-taking dimensions. The belief that the business can become successful
is due to their own effort, high self-confidence and high openness, an increase in
sales, improved asset growth, and increased profit (Mahmud, 2011; Suci, 2009).
Entrepreneurial orientation is indicated by the need for achievement, a locus of
control, self-reliance, and extroversion, which are factors that can increase the
performance of the firm (Sinarasri, 2013, p. 50). A business can also be developed
by constantly innovating the product development, being bolder in the business
development, and not being afraid of the risks (Sumiati, 2015).
Individuals with a high need for achievement have a strong desire to be suc-
cessful (Nishantha, 2009) and tend to have a high intention to establish their
careers as entrepreneurs (Jati, 2012). The internal locus of control is the belief
that they can control their lives (Nishantha, 2009). Here, people believe that the
events, incidents, and destiny are due to the ability of people to control them-
selves (Purnomo & Lestari, 2010). People who have self-reliance are able to meet
the challenge. Many successful entrepreneurs are people who have self-confidence
(Purwanti, 2012). Purnomo and Lestari (2010) explain that extroversion or open-
ness toward others actually deals with personalities, enthusiasm, friendliness, and
gregariousness. Disclosure describes the attitude of someone who is warm and
friendly in dealing with others (Jati, 2012).
Being innovative is the tendency of an entrepreneur to support creativity like
by trying to introduce a new product/service, develop new processes, and imple-
ment these innovations in their business operations (Lumpkin & Dess, 2001).
Having a proactive attitude is shown with aggressive competitiveness, which is
the tendency to compete closely and directly in the face of all the competitors to
be the best (Lumpkin & Dess, 1996). By being proactive, businesspeople are able
to identify opportunities, anticipate changes in demand, develop strategic actions
in order to achieve goals, and follow-up business executions (Lumpkin & Dess,
2001). Being proactive is taking the initiative to create something new to add
value for customer satisfaction (Sumiati, 2015).
Risk-taking is taking an action to utilize its resources, even though there is
no certainty about the results obtained (Lumpkin & Dess, 2001). Daring to take
 Influence of Entrepreneurship Orientation on Firm Performance    49

risks is a factor that distinguishes entrepreneurs who have an entrepreneur-

ial spirit from others. Possessing high entrepreneurial orientation is how to
be involved in measuring risk and optimal risk-taking (Looy et al., 2003, in
Suryanita, 2006).

Company’s Performance
Performance refers to the level of achievement of a company within a certain
time period. It will determine the development of the company. Firms will sur-
vive, generate profit, and develop if they have good performance (Suci, 2009).
A company’s performance is the result of the company’s overall success rate dur-
ing a certain period of the business process (Quantananda & Haryadi, 2015). A
company’s performance is an indicator to determine the extent of the business
activities in reaching the target or goal (Lin & Kuo, 2007). In other words, the
company’s performance is the result of the company’s overall success during a
certain period of the business process.
The dimensions of entrepreneurial orientation affect the performance of the
company through good management skills, in which the businessperson has a
desire to achieve a goal with hard work, high self-confidence in every decision
taken, and transparency, especially with the social environment (Suci, 2009).
The measurement of a company’s performance, according to Suci (2009) and
Mahmud (2011), was developed from research by Lee and Tsang (2001), as
represented by the venture growth that consists of growth in sales and profit.
Brahmasari and Suprayetno (2008, p. 130) measured company’s performance
by the company’s ability to: (1) improve the efficient use of human resources,
(2) improve the efficiency of the use of time, (3) to adapt to change, and
(4) achieve the set targets. According to Reswanda (2012), the company’s per-
formance is measured by the relative market share, the success of new products,
market and customer growth, and the aggregative performance. Setiawan (2015,
p. 156) argues the company’s performance is measured by sales turnover, sales
return, the coverage area of marketing, and increased sales. Meanwhile, Quan-
tananda and Haryadi (2015, p. 708) measured company’s performance through
finance (profit and assets), human resources (the number of employees and
employee productivity), and marketing (the sales and the frequency of product
changes).

The Formulation of the Hypothesis

Need for Achievement and Firm Performance.  Individuals with a high need
for achievement tend to have a high intention to have a career as an entrepreneur
(Jati, 2012). Suci (2009) and Mahmud (2011) found that entrepreneurial orienta-
tion has a positive and significant effect on the performance. For example, with
a desire for success, entrepreneurs are willing to accept a larger amount of work
than the regular amount done. Thus, the hypothesis is formulated as follows:

H1: The need for achievement affects the performance of the company.
50    Innaka Fahrunnisak Swasti Erista et al.

Internal Locus of Control and Firm Performance.  Suci (2009) and Mahmud
(2011) propose that success is achieved because of the effort taken by a busi-
nessperson (internal locus of control), which increases the sales, assets, and growth
of profit. But Purnomo and Lestari (2010) indicate the opposite, in that the locus
of control does not have a significant effect on the performance of the company.
Based on the above research, a hypothesis is formulated as follows:

H2: The internal locus of control affects the company performance.

Self-reliance and Firm Performance.  Self-reliance (confidence) is a belief in

oneself, feeling able to meet a challenge. The majority of successful entrepreneurs
are those who have confidence, acknowledge a problem but have trust in one’s
ability to cope with the problem (Purwanti, 2012). Suci (2009) reveals that the
entrepreneurial orientation has a positive and significant impact on the ability
of management, as they will have high confidence in the actions and decisions
taken. Management capabilities also have a positive and significant impact on the
performance of the company. Based on the results of the study, a hypothesis is
formulated as follows:

H3: Self-reliance affects the performance of the company.

Extroversion and Firm Performance.  Mahmud (2011) shows that entrepre-

neurial orientation has a positive and significant impact on the ability of manage-
ment, of which one of aspects is by having openness (extroversion), especially
with regard to the surrounding environment. Meanwhile, Purnomo and Lestari
(2010) show that extroversion does not affect the performance of the company.
Based on the results of the study, a hypothesis is formulated as follows:

H4: Extroversion affects the performance of the company.

Proactiveness and Firm Performance.  Entrepreneurs with a proactive attitude

are able to identify opportunities to anticipate changes in demand and are able
to develop strategies to achieve business goals (Mustikowati & Tysari, 2014). In
their research, Quantananda and Haryadi (2015) show that the proactive dimen-
sion has no significant association with the company’s performance. Based on the
results of the study, a hypothesis is formulated as follows:

H5: Proactiveness affects the performance of the company.

Risk-taking and Firm Performance.  Marthavita (2013) states that daring to

take risks has a positive influence on the firm’s performance, which means the
higher the courage to take a risk, the higher the performance. In their research,
Quantananda and Haryadi (2015) reveal that the dimension of risk-taking has no
significant association with the company’s performance. Based on the results of
the study, a hypothesis is formulated as follows:

H6: Risk-taking affects company performance.

 Influence of Entrepreneurship Orientation on Firm Performance    51

Innovativeness and Firm Performance.  Marthavita (2013), in her research,

states that innovativeness has a positive influence on the performance of the
company. It shows that innovation has an impact on the company’s ability
to improve company performance. In contrast to the finding of Marthavita,
Quantananda and Haryadi (2015) shows that the company’s innovativeness
has no significant effect. Based on the results of the study, a hypothesis is for-
mulated as follows:

H7: Innovativeness affects the performance of the company.

From the hypotheses above, a theoretical model is developed as described in

Fig. 4.1.

Fig. 4.1.  Theoretical Model. Source: Quantananda and Haryadi (2015).

Research Methodology
Types and Sources of Data
This is a quantitative descriptive research, aimed to analyze the relevance of
entrepreneurship orientation with firm performance. Primary data were used,
obtained directly from the respondents through interviews based on question-
naires. Respondents’ answers were measured on a Likert scale of 1–5.
52    Innaka Fahrunnisak Swasti Erista et al.

Population and Sample

The population in this study was small entrepreneurs engaged in the processed
food industry in Salatiga with 273 units (Cemsed, 2013). Sampling was done
through a non-probability sampling method. The criteria of the sample were the
business had to have been established for at least five years, the business should
be the main business not a side job and should be located in the Salatiga area.
The sample comprised 15% the total number of small entrepreneurs in the pro-
cessed food industry. According to Uma Sekaran (2008), a sample can be taken
of 10%–30%, so that the number of samples in this study was 40 units.

The Analysis
A validity test was conducted by comparing the r value with the r table with a
provision for a degree of freedom (df) = n − 2. If the r value > r table, it means
the statement is valid. A reliability test was used to measure the reliability of a
variable in the study. A reliability test can be seen in the Cronbach’s alpha value.
If Cronbach’s alpha > 0.6, it is said to be reliable. It can be considered reliable if
the answer to the question is consistent (Ghozali, in Wisnubroto & Freitas, 2013).
An F test is used to determine the effect of independent variables simultaneously
and their significance to the dependent variable. A coefficient of the determina-
tion test (R2) is used to measure how far the model can explain the variation of
the dependent variable. The coefficient of the determination is 0 <R2 <1. A small
R2 means the ability of independent variables to explain the variation of the
dependent variable is very limited. A t-test is done by comparing the significance
level (Sig. t) of each independent variable with the Sig. a = 0.05 level. If the signifi-
cance level (Sig. t) is smaller than a = 0.05, then the hypothesis is accepted, which
means that the independent variables significantly influence the dependent variable.

Classic Assumption Test

1. A normality test aims to test whether in the regression model, the dependent
and independent variables have a normal distribution.
2. A multicollinearity test strives to test the assumption in the multiple regression
analysis. Multicollinearity is tested by calculating the variant inflating factor
(VIF). If the VIF value is less than 5, then there is no multicollinearity.
3. A heteroscedasticity test is a tool to test whether there is an inequality of vari-
ance from one residual observation to another observation in the regression
model. If the variance of the remaining residuals of another observation is
fixed, it is called homoscedasticity and if it is different it is called heteroscedas-
ticity (Edbert et al., 2014).

Multiple Linear Regression

The analysis used multiple regression as formulated as follows:
Y = α + β1 X1 + β2 X2 + β3 X3 + β4 X4 + β5 X5 + β6 X6 + β7 X7

Table 4.1 discusses the list of variables.

 Influence of Entrepreneurship Orientation on Firm Performance    53

Table 4.1.  List of variables.

Y = Company performance X4 = Extroversion
α = Constants X5 = Proactive
β1, β2, ... = Regression coefficients X6 = Risk-taking
X1 = Need for achievement X7 = Innovative
X2 = Internal locus of control
X3 = Self-reliance

Operational Definitions of the Research Variables

Some empirical indicators on the operationalization of the concept were deter-
mined. The entrepreneurship orientation dimension and firm performance
dimension had 42 indicators.

Research Results and Discussions

Results
Test of Validity, Test of Reliability, and Classic Assumption Test.  The entre-
preneurship orientation dimension and firm performance dimension originally
had 42 indicators. After the validity test, it turned out that 17 indicators were
invalid, so that only 25 indicators were used (the indicators had an r value in the
range of 0.328 to 0.751 > r table (0.312). Table 4.2 shows the results of the dimension/
variable validity test.
A reliability test was conducted on seven dimensions of entrepreneurship
orientation and company performance. The results were > 0.6, that is, in
the range of 0.601 to 0.758, which means the instruments are reliable
(Table 4.3).

Classic Assumption Test

The results of the normality test with a one-sample Kolmogorov–Smirnov test
resulted in a significance value of 0.902, meaning that the residual data were nor-
mally distributed because it had a significance value above 0.05. The multicol-
linearity test results show that the dimensions in the entrepreneurship orientation
do not show symptoms of multicollinearity, as seen from the absence of a toler-
ance value less than 0.05 and a VIF value greater than 10. The heteroscedasticity
test results show the dimensions in the entrepreneurship orientation had a signifi-
cance value more than alpha.

Description of Respondents and Enterprises

A description of the respondents can be seen in Table 4.4 .
54    Innaka Fahrunnisak Swasti Erista et al.

Table 4.2.  Validity Test Results.

No. Dimension/Variable Indicator r Table r Value Information

1 Need for achievement 2 0.312 0.501 Valid
4 0.312 0.419 Valid
2 Internal locus of control 1 0.312 0.569 Valid
2 0.312 0.462 Valid
3 0.312 0.402 Valid
3 Self-reliance 3 0.312 0.574 Valid
4 0.312 0.490 Valid
4 Extroversion 1 0.312 0.455 Valid
3 0.312 0.462 Valid
4 0.312 0.373 Valid
5 Proactiveness 1 0.312 0.538 Valid
2 0.312 0.538 Valid
3 0.312 0.397 Valid
4 0.312 0.333 Valid
6 Risk-taking 3 0.312 0.685 Valid
4 0.312 0.653 Valid
5 0.312 0.751 Valid
7 Innovativeness 1 0.312 0.678 Valid
2 0.312 0.743 Valid
3 0.312 0.671 Valid
8 Firm performance 1 0.312 0.633 Valid
2 0.312 0.705 Valid
3 0.312 0.670 Valid
5 0.312 0.328 Valid
7 0.312 0.410 Valid
Source: Processed primary data, 2016.

Both male and female respondents had the same percentage. Male and female
entrepreneurs running a business involved the wives/husbands or their children,
so as to save a lot of expenditures such as for salary.
By age, more than 50% of the respondents were 30–50 years old and when
associated with the length of the business, more than 70% of businesses had
been established since 10 years ago. This means that the respondents started
a business from the age of 20–40 years old. As young entrepreneurs, they
 Influence of Entrepreneurship Orientation on Firm Performance    55

Table 4.3.  Reliability Test Results.

No. Dimensions Cronbach’s Standard Information

Alpha
1 Need for achievement 0.609 0.6 Reliable
2 Internal locus of control 0.613 0.6 Reliable
3 Self-reliance 0.607 0.6 Reliable
4 Extroversion 0.601 0.6 Reliable
5 Proactive 0.650 0.6 Reliable
6 Risk-taking 0.605 0.6 Reliable
7 Innovative 0.758 0.6 Reliable
8 Firm performance 0.750 0.6 Reliable
Source: Processed primary data, 2016.

had high enthusiasm and spirit, so that it would be easier for them to face
many failures in starting a business. Most entrepreneurs started their business
from scratch, and they agreed that 10 years was not enough to be a successful
entrepreneur.
Based on the education level, 60% of the respondents had a high school edu-
cation. This was influenced by several reasons. Some respondents assumed that
a higher education was not much needed. For them, a senior high school edu-
cation was enough to find a job, so it did not require them to obtain a higher
education. Another reason was the costs. Some respondents claimed to desire to
continue their education, but they were constrained by the costs. In conducting
their businesses, they also followed training programs that were organized by
official institutions, as they perceived the training as one of the medias of busi-
ness development.
Most respondents employed 2–6 employees or they were considered as micro
firms. They did not recruit many employees because all business activities were
done by their own family members. Temporary workers were employed in certain
seasons like before the holiday. Moreover, some employers claimed that they did
not want to hire too many employees for reasons of trust and wanting to main-
tain the product quality.

Description of the Orientation of Entrepreneurship

A description of the entrepreneurship orientation and company performance can
be seen in Table 4.5.
On average, entrepreneurs agreed that they had a relatively high need for
achievement, inner self-control, self-confidence, and proactiveness (> 4). They
had a medium need for an open attitude and the courage to take a risk. Then
they had a relatively lower need for innovation and the company’s performance.
56    Innaka Fahrunnisak Swasti Erista et al.

Table 4.4.  Respondents and Business Characteristics.

Characteristic Number Percentage (%)

Gender Male 20 50
Female 20 50
Total 40 100
Age < 30 years 0 0
30–50 years 23 57.5
> 50 years 17 42.5
Total 40 100
Education Elementary School 2 5
Middle School 10 25
High School 24 60
Diploma 2 5
Undergraduate 2 5
Total 40 100
Length of <5 years 0 0
Operation
5–10 years 11 27.5
> 10 years 29 72.5
Total 40 100
Number of <2 0 0
Permanent
2–6 33 82.5
Workers
7–11 6 15
12–16 1 2.5
>16 0 0
Total 40 100
Source: Processed primary data, 2016.

However, among the dimensions of entrepreneurship orientation, the innova-

tiveness dimension was the lowest compared to other dimensions. That is, in
improving business performance, entrepreneurs did not maximally apply inno-
vation, especially in the product creation, package design, and production
process.
The company’s performance had an average value of 2.81. Compared with the
other dimensions, this figure is relatively low. This means that not many entre-
preneurs had an increase in profit, turnovers, and assets in the past five years.
Likewise, an increase in the quantity of production and sales was about the same
along with employee productivity.
 Influence of Entrepreneurship Orientation on Firm Performance    57

Table 4.5.  Description of Entrepreneurship Orientation and Company

Performance.

Dimension N Min Max Mean Std. Dev.

Need for achievement 40 3 5 4.17 0.452
Internal locus of control 40 3 5 4.07 0.452
Self-reliance 40 3 5 4.02 0.373
Extroversion 40 2 4 3.43 0.511
Proactiveness 40 3 5 4.02 0.595
Risk-taking 40 3 5 3.75 0.404
Innovativeness 40 1 4 2.98 0.597
Firm performance 40 1 4 2.81 0.566
Valid N (list wise) 40

Results of the Multiple Regression Analysis

Based on the results of tests conducted on the dimensions of entrepreneurship
orientation, the regression equation can be formulated as follows:

Y = 0.544 + 0.210X1 + 0.013X2 + 0.274X3 – 0.215X4 – 0.049X5

+ 0.287X6 + 1.215X7

Among the seven dimensions of entrepreneurship orientation, only two dimen-

sions (risk-taking and innovativeness) significantly affected the firm performance.
Judging from the regression coefficient value, both dimensions had a high value com-
pared to other dimensions. The higher the regression coefficient value of an inde-
pendent variable was, the higher the potential it had to affect the dependent variable.
An F test was carried out to know the effects of the dimension of entrepreneur-
ship orientation simultaneously on company’s performance. The F test showed a
significance value of 0.000 < 0.05, with the result that the simultaneous effect
of the dimension of the entrepreneurship orientation variable significantly influ-
enced the firm performance.
The value of the adjusted R2 = 0.850 or 85%, which means that the changes in
company’s performance are explained by changes in the dimension of entrepre-
neurship orientation.
The test results are presented in Table 4.6.
This means that hypotheses H1, H2, H3, H4, and H5 are rejected, while H6
and H7 are accepted.

Discussion
From the above analysis, it reveals that among the dimensions of entrepreneurship
orientation, only risk-taking and innovativeness affect company’s performance.
58    Innaka Fahrunnisak Swasti Erista et al.

Table 4.6.  Hypothesis Test Results.

Variable Coef. β Standard T Sig Results

Error (t-value) (p-value)
Constant 0.544 2.641 0.206 0.838 Rejected
Need for 0.210 0.255 0.823 0.416 Rejected
achievement (X1)
Internal locus of 0.013 0.164 0.76 0.940 Rejected
control (X2)
Self-reliance (X3) 0.274 0.240 1.139 0.263 Rejected
Extroversion (X4) −0.215 0.155 −1.389 0.174 Rejected
Proactiveness (X5) −0.049 0.099 −0.492 0.626 Rejected
Risk-taking (X6) 0.287 0.136 2.121 0.042 Accepted
Innovation (X7) 1.215 0.094 12.897 0.000 Accepted

This can be understood because the processed food business industry in general
has low entry barriers, because the capital required is not too high and it does not
necessitate high technology. The intensity of competition is so high that creative
ideas are needed to make the uniqueness of the products. Furthermore, in creat-
ing unique products, it requires courage to decide to do so.
The needs for achievement, inner self-control, confidence, and proactiveness
have relatively high averages but have no effect on company’s performance. This
means that whether the entrepreneurs achieve or lack in this dimension, they have
a high level in that dimension. As is known, a lot of efforts are made to increase
the motivation of people in careers included in the business. Since they are often
involved in motivational seminars, people know about the various characteristics
that need to be developed, but it does not necessarily improve the performance
of their businesses.
For the need of achievement, it is logical if people have dreams to achieve their
desires. From a psychological aspect, humans have the nature of never being satis-
fied with what they already own. The average entrepreneur has a desire to advance
one’s business, increase sales, and improve growth. No entrepreneur wants to
have a static business. Even relatively unmotivated individuals basically want to
realize their desires; the difference is they have no effort to achieve them.
Crosstabs between the dimensions of need for achievement and gender reveal
that between men and women, they have the same achievement level. In other
words, the drive to reach achievements between men and women makes no dif-
ference. If the need for achievement is associated with education, it indicates that
most entrepreneurs with a high school education relatively have high average
scores for the need of achievement. With regard to the internal dimension of
locus of control, men and women have the same inner control.
Associated with confidence, respondents have high confidence by declaring
their businesses have grown. With confidence, it is possible for businesspeople
 Influence of Entrepreneurship Orientation on Firm Performance    59

to assess their current performance with previous performance. Meanwhile, the

assumption developed by each entrepreneur can achieve different results. There-
fore, the judgment is subjective.
With regard to the extroversion dimension, the crosstab results reveal that
male entrepreneurs are more open than female ones. When interviewed, female
entrepreneurs only answered short questions compared to their male counter-
parts, who were more open. In addition, highly educated entrepreneurs had high
extroversion values.
A crosstab analysis between the proactive variable dimension and the gender
variable dimension shows more proactive attitudes of women than men. Between
proactiveness and education, it shows that higher educated entrepreneurs have a
tendency to possess a higher proactive value.
With regard to the performance variable, the increase in the number of employ-
ees in small and medium enterprises (SMEs) cannot be used as a measuring tool
because employers usually hire relatives who look for a job or because of pity.
This means that the number of employees does not reflect the growth of the busi-
ness. Meanwhile, employee productivity better reflects the improvement of the
performance. High employee productivity makes the business more efficient in
cost expenditures, thereby lowering production costs.

Conclusion and Recommendation

Conclusion

1. The need for achievement, internal locus of control, self-reliance, extroversion,

and proactiveness do not have an effect on company’s performance, whereas
risk-taking and innovation affect company’s performance.
2. The hypothesis tests show that the innovation dimension is more influential on
company’s performance than the risk-taking dimension.

This study is limited to examining the direct effects of entrepreneurship orienta-

tion on company performance and did not consider other variables as moderating
factors.

Recommendation

1. There is a need to improve the creativity of businesspeople to be able to gener-

ate innovative ideas. Furthermore, there is a need to support small entrepre-
neurs who have innovative ideas to put them into action.
2. It is necessary to consider some individual characteristics that might moderate
the effects of the dimensions of entrepreneurship orientation on company’s
performance.
3. There is a need to consider the ability of management, business strategies,
work motivation, leadership, and organizational culture on company’s
performance.
60    Innaka Fahrunnisak Swasti Erista et al.

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