Journal of Business Research 60 (2007) 566 – 575

Entrepreneurial orientation of SMEs, product

innovativeness, and performance ☆
George J. Avlonitis a,⁎, Helen E. Salavou b
a
Athens University of Economics and Business, 76 Patission Str., 104 34 Athens, Greece
b
Athens University of Economics and Business, 12 Kodrigtonos Str., 4th floor, 112 57 Athens, Greece
Received 1 November 2003; received in revised form 1 November 2006; accepted 1 January 2007

Abstract

This paper looks beyond the entrepreneurial orientation (EO)-performance link and focuses on identifying EO profiles of SMEs to suggest
variations in product innovativeness dimensions of different performance potential. Based upon a sample of 149 manufacturing companies, the
study identifies two opposite groups with the help of a cluster analysis, namely the active entrepreneurs and the passive entrepreneurs. The
particular results verify the viewpoints stated by industry experts in Greece, but also facilitate further understanding of firms following a similar
duality observed in other studies. Taking a step further, subsequent analysis of variance demonstrates that these groups consist of product
innovators, who take equal care of reducing customers' burden (e.g. time, effort, purchase risk) in adopting new products. However, the
entrepreneurial attitude instilled in active entrepreneurs as compared with passive entrepreneurs is primarily mirrored in new products, which
embody in their characteristics higher uniqueness; an ingredient found to act as an important contributor to product performance. This article, apart
from its contribution to the entrepreneurship research, has meaningful implications for managers and policy-makers.
© 2007 Elsevier Inc. All rights reserved.

Keywords: Entrepreneurial orientation; Product innovativeness; Product performance; SMEs; Cluster analysis

1. Introduction
The concept of an entrepreneurial orientation (EO) to explain
the mindset of firms engaged in pursuing new ventures provides
a useful framework for researching entrepreneurial activity
(Lumpkin and Dess, 2001). Based on the extant literature,
organizations can show divergent EOs, which array on opposite
ends of a spectrum. Since innovation is a condition inherent in
the domain of entrepreneurship, a company's ability to launch
successful product innovations should be considered in parallel.
Hence, EO profiles of firms suggesting variations in product
innovativeness dimensions of different performance potential
may be crucial to become subject of investigation, in order to
provide additional explanations of how the firms adapt to a state
☆
The authors thank Hans Mühlbacher and the anonymous reviewers of the
JBR for their constructive comments and helpful suggestions.
⁎ Corresponding author.
E-mail addresses: avlon@aueb.gr (G.J. Avlonitis), esalav@aueb.gr
(H.E. Salavou).
0148-2963/$ - see front matter © 2007 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2007.01.001
of flux where the very basis of competition within the corporate
environment is constantly and globally redefined. Adaptation to
shifting landscapes through aspects of entrepreneurship and
successful product innovation is of major concern for all
enterprises, especially for small and medium-sized (SMEs) that
are dominant in most European economies.
This paper explores two research questions in the area of
SMEs: Are EO profiles of SMEs identifiable? Do these profiles
differ in product innovativeness, and if yes how and what this
would possibly suggest in terms of performance? To answer
these questions, SMEs are clustered on the basis of the EO
construct. After validating the clusters, an analysis of variance is
performed to detect differences, if any, across product
innovativeness dimensions on EO profiles of SMEs. In a rather
supportive way, multiple linear regression analysis is run to
detect possible effects of product innovativeness dimensions on
product performance.
This study contributes to entrepreneurship research in three
respects. First, unlike the numerous studies, which place a major
emphasis on explaining the complexity in the EO-performance
link (Wiklund and Shepherd, 2005), this study focuses
 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575
exclusively on EO by classifying firms according to its
dimensions. Such a focus follows the suggestion of Lumpkin
and Dess (2001) to direct further empirical research at this
important construct. Second, this study attempts to provide
more in-depth understanding of how specific dimensions of
product innovativeness along with performance potential
connect to EO profiles of firms. The evidence reported here
goes beyond the knowledge base built primarily around either
the effect of EO on product innovativeness (e.g., Salavou and
Lioukas, 2003; Zhou et al., 2005) or the effect of product
innovativeness on product performance (e.g., Danneels and
Kleinschmidt, 2001). Third, this study focuses on SMEs.
Despite the widely acknowledged importance of EO in small
business research (e.g., Naman and Slevin, 1993; Wiklund and
Shepherd, 2005), the empirical literature lacks evidence
regarding the way SMEs are classified according to EO and
approach product innovativeness for responding to expectations
of better performance. The present study could serve as a
starting point to this important issue, drawing data from two
traditional industries of a country, such as Greece, endued with
unique capabilities in the entrepreneurial act. This country
represents an interesting case given the dominance of SMEs
under the integration processes within the Euro Zone, which are
underway.
The article has the following structure. After this introduc-
tory section, the article presents the research framework taking
into consideration the specific Greek context. Section 3 is a brief
presentation of the research method and the empirical findings.
Finally, a Concluding section summarizes the results along with
their implications.
2. Research framework
The focal point of this research is on SMEs, which constitute
the vast majority of enterprises in Greece, as in most European
countries. In particular, the SMEs under analysis come from two
traditional, though dynamic, manufacturing industries, those of
food and beverages and textile. Both industries account for the
39% of the total sales and 35% of the total net profits in the
Greek manufacturing sector while constituting approximately
44% of the total number of manufacturing enterprises (ICAP,
1997). The following points also dictate their choice: (1) the
importance of these industries for the Greek economy in terms
of (a) manufacturing employment (51%), (b) manufacturing
production (50%), and (c) contribution to GDP (39%); and, (2)
the opportunity they provide for studying how SMEs, faced
with heightened global competition, shape EO profiles along
with aspects of product innovativeness and performance.
Qualitative data were also collected through semi-structured
interviews with industry experts in order to help the
development of the research framework and explain the
empirical results of this study. In particular, experts from two
industry-specific, research and technological development
support organizations of the Ministry of Development, that is
ETAT S.A. for food and beverages and CLOTEFI S.A. for
textile, were asked to express their opinions concerning Greek
SMEs' EO, product-related innovative activity and performance
567
expectations. Although these viewpoints are confined to the
context of Greece, they nevertheless are useful in understanding
the prevailing conditions concerning SMEs' behavior.
2.1. Entrepreneurial orientation profiles
The expectation is that as the entrepreneurship paradigm
expands, organizations, per se, behave in entrepreneurial
manners (Jennings and Lumpkin, 1989). EO reflects these
manners (Lumpkin and Dess, 1996), which is a salient strategy-
making and decision-making process (Dess et al., 1997; Lyon et
al., 2000). EO constitutes an organizational phenomenon that
reflects a managerial capability by which firms embark on
proactive and aggressive initiatives to alter the competitive
scene to their advantage (Atuahene-Gima and Ko, 2001).
However, the extant literature suggests that organizations can
display divergent EOs, which array on opposite ends of a
spectrum. For example, firms with a more defensive orientation
in terms of risk-taking, experimentation, opportunity seeking,
initiating actions are labeled as defenders, conservative firms,
followers and reactive entrepreneurial firms whereas firms with
an opposite orientation (i.e., more aggressive) as prospectors,
entrepreneurial/entrepreneurship firms, pioneers and proactive
entrepreneurial firms (Atuahene-Gima and Ko, 2001; Covin
et al., 1999; Miles and Snow, 1978; Miller and Friesen, 1982;
Mintzberg, 1973).
Qualitative information concerning the viewpoints of
industry experts in the context of Greece is indicative of a
similar duality in the EO of SMEs that helps to highlight the
focus of this investigation. When interviewed, they argued that
entrepreneurial flair is salient in Greek SMEs. Nevertheless,
they believe that top management displays opposite EOs. At the
one end lie SMEs characterized by “traditional cultures”, where
top management lacks the will to undertake activities either of
high risk or before competition. This posture is indicative
of the large extent to which these firms a) rely on government
protectionism to ensure subsidies for business growth; and,
b) engage in defensive actions, such as selectively imitating
competitors' moves.
At the opposite end lie SMEs with intrapreneurial cultures,
where top management is keen on implementing advanced
management practices and sets a high value on risk-taking and
proactive behavior. These firms are most probably placed
among those that underwent significant changes in their
management practices during 1980s and 1990s and moved
towards managerial modernization and professionalism (Bour-
antas and Papadakis, 1997), especially as a new generation of
well-educated owners-managers took responsibility (Makrida-
kis et al., 1997; Spanos et al., 2001). Consequently, the first
question we address attempts to identify EO profiles of SMEs,
thus verifying or otherwise the input from industry experts.
2.2. Entrepreneurial orientation and product innovativeness
Moving a step further from the previous research question,
great importance has also been assigned to entrepreneurship
research on innovation. Since innovation is an inherent
568 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575
condition in the domain of entrepreneurship, a company's
ability to introduce new products, which are also successful,
should be considered in parallel. The importance of new
products has recently been overemphasized, given the large
extent to which companies focus their efforts on them for
survival (Dyer and Song, 1998), profitability (Ali et al., 1993),
growth and expansion into new areas (Danneels and Kleinsch-
midt, 2001). Product innovativeness is a concept of emerging
attention to both researchers and practitioners, since it refers to
the level of innovativeness embodied in each new product
(Balachandra and Friar, 1997). A significant part of research
uses product innovativeness to explore its relationship with
product performance. Existing empirical evidence, although
inconsistent (Song and Montoya-Weiss, 1998), concludes in
part that both high and low levels of product innovativeness are
characterized by higher product performance (e.g., Kleinsch-
midt and Cooper, 1991).
Surprisingly, few entrepreneurship research studies focus on
combining the key concepts of EO and product innovativeness.
For example, Miller and Friesen (1982) argue that entrepre-
neurial firms, unlike conservative firms, innovate boldly and
regularly while taking considerable risks in their product-
market strategies. In a similar vein, Miller, Kets de Vries, and
Toulouse (1982) suggest that substantial product innovations
require greater amount of risk-taking and proactiveness from
companies. Likewise, Khan and Manopichetwattana (1989)
empirically support that innovative group of firms, labeled as
Young Turks and Blue Chips, demonstrate a far greater
willingness for risk-taking and proactive market leadership
than non-innovative groups. A Greek study focusing on SMEs
to investigate strategic drivers of radical product innovation
adoptions provides support of a positive effect of EO on
product innovativeness (Salavou and Lioukas, 2003). Further to
this line of evidence, Zhou, Yim, and Tse (2005) find that EO
positively affects breakthrough innovations, which is in line
with the work of Hamel and Prahalad (1994) posing a high
priority on entrepreneurial foresight in competing in the future,
and with the work of Tellis and Golder (2001) emphasizing the
role of vision in generating breakthroughs.
Nevertheless, explicit research evidence that could verify or
otherwise the viewpoints of industry experts is what is still
missing. When interviewed, they argued that duality in SMEs'
EO (as already mentioned) most probably accounts for
inclination to new product introductions featuring different
degrees of innovativeness. More specifically, they claim that
new products of a lower degree of innovativeness – the majority
of which are me too products (i.e., products already introduced
by competitors) – are launched by SMEs characterized by old-
fashioned cultures, and vice versa. Stated differently, industry
experts imply that lower product innovativeness comes from
weaker EO, whereas higher product innovativeness from
stronger EO. Additionally, they believe that less innovative
products are less successful while the opposite holds true for
more innovative products. To the best of our knowledge, there is
no study addressing specifically the question of how product
innovativeness dimensions may vary among divergent entre-
preneurial postures of SMEs and how they may be related to
product performance. This paper attempts to narrow this gap, at
least partially, by extending the first research question to include
this investigation.
Taken overall, the present study would make a worthy
contribution especially to smaller firms, which are generally
considered to have a strong potential in entrepreneurship and
innovation based on their areas of strength (e.g., flexibility,
nimbleness, adaptability). Thus, identifying EO profiles of
SMEs to suggest variations in product innovativeness dimen-
sions of different performance potential, could help top
managers to calibrate the overall strategic philosophy that
clarifies how existing firms should operate on particular tactical
manifestations, including the basis on which they compete (e.g.,
proactive vs. reactive, risk-taking vs. risk-aversion, me-too-ism
vs. product differentiation). At a national level, this identifica-
tion could also direct the efforts of policy-makers in providing
support to SMEs that lag behind in exploiting future prospects.
Supportive actions would be in line with the wider EU
entrepreneurship programs (see sources of relative information,
such as www.europa.eu.int/comm/enterprise/enterprise_policy/
mult_entr_programme/overview.htm, www.europa.eu.int/
comm/enterprise/index_en.htm, www.oecd.org/department/
0,2688,en_2649_34197_1_1_1_1_1,00.html) and innovation
policy initiatives (see sources of relative information, such as
www.cordis.lu/innovation-smes and www.eubusiness.com/
topics/SMEs), attempting to advance the standing of these
firms in all European regions.
3. Research method
3.1. Sample and data collection
The relevant population in this study is all independent firms
with 10 to 250 employees and with less than 40 million Euro
annual turnover, thus being in accordance with the widely
accepted guidelines stipulated by the EU (published by the
Official Newspaper of the European Communities on 30 April,
1996). More specially, according to the ICAP database
(Gallup's subsidiary), this population consists of 1614 Greek
SMEs, from which a random sample of 143 firms suffices (see
Appendix A).
All firms in the sample fulfill an additional criterion, which is
necessary for measuring the main constructs, namely EO,
product innovativeness and product performance. They should
have introduced at least one new product or new product
category during the last 3 years. Since this kind of information
requires the direct contact of all firms in the population and the
cost of this process is very high, we initially extracted a random
sample of 300 firms. These firms were contacted through phone
calls in order to confirm whether the criterion in question was
met. After confirming that 223 firms met this criterion, letters
referring to the scope of the research study were sent, asking for
participation. Finally, 150 firms agreed to cooperate (67%
response rate), which is close to the required sample of 143
firms. Data were collected by a structured questionnaire through
in depth personal interviews with the top management
(managing directors 58%, marketing and sales managers 17%,
 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575
financial managers 15%, others 10%). Only 1 questionnaire was
deemed unusable due to missing data on key constructs.
All questions relating to the product innovativeness and
product performance measures are based on the most important
single new product or new product category that each SME
considered in terms of sales turnover. Respondents (top
managers) were asked to identify the new product or new
product category introduced by their firms in the last 3 years
with the highest contribution to their overall sales turnover. Of
the 149 SMEs under analysis, 128 refer to new product
categories whereas 21 to single new products. However, the
contribution of the new products or new product categories to
the sales turnover of SMEs is on average 22%.
With reference to the industries under examination, 68 SMEs
belong to the food while beverages industry while 81 SMEs to
the textile industry. On average, these firms are in operation for
24 years. However, some of them are newly established (e.g.,
1996) while others are far older (e.g., 1861). In addition,
the sampled firms, which can be characterized as labor in-
tensive, employ on average 66 people, from which about 19
are administrative while 47 are production or technical em-
ployees. These firms report an average return on assets and
an average sales growth of 8% and 12% respectively during
the last 3 years.
The choice to use the single respondent approach is based on
both the size of the firms as well as the respondent's familiarity
with the research topic and the information sought. More
specifically, in the case of SMEs the views of a single
respondent may, in fact, reflect those of the firm (Lyon et al.,
2000). In addition, data were collected by personal interviews
to secure that the single respondent, who was appointed by
each SME, would be the most knowledgeable top manager. The
Harman's one-factor test is used, to test for evidence suggesting
the presence or absence of common method bias in this dataset
(Podsakoff and Organ, 1986). Results of the Exploratory Factor
Analysis (EFA) using all the items of EO and product
innovativeness variables do not indicate a single-factor structure
that accounts for most of the covariance in these variables.
These results suggest that common method bias is not a cause of
major concern in this sample.
In addition, ANOVA is employed to test whether or not it is
acceptable to combine questionnaires from different types of
respondents. More specifically, the four types of respondents
are used as independent variables, whereas all variables under
analysis as dependent ones. As no significant differences across
the four types of respondents on all variables are found, the
sample is pooled for analysis.
3.2. Measurement of variables
Three dimensions measure product innovativeness in the
present study. These dimensions are based on the perceived
assessments of the respondents that capture both the firm's and
the customer's perspective (Danneels and Kleinschmidt, 2001;
De Brentani, 2001; Olson et al., 1995). More specifically, the
first dimension (i.e., product newness to customers) is measured
in this study by a four-item, 7-point Likert-type scale adapted
569
from Atuahene-Gima (1995). According to this dimension, the
innovativeness level of a new product is reflected in a
continuum from less to more innovative for the customers,
who either use or consume it. The second dimension (i.e., new
product uniqueness) is measured in this study by a six-item, 7-
point Likert-type scale adapted from Cooper (1979). As such, it
depicts the innovativeness level of a new product on a
continuum from less to more unique for the market in terms
of characteristics as compared to similar products. Finally, the
third dimension (i.e., product newness to the firm) is measured
by a continuous variable derived from the transformation of a
dichotomous variable following the guidelines Dellaportas
(1998) suggests. In this binary construct, which is adopted from
Song and Montoya-Weiss (1998), 1 represents radical product
innovations (see Appendix B) while 0 refers to incremental
product innovations. This dimension ascribes the innovative-
ness level of a new product to a continuum from less to
more innovative in terms of radicalness for the firm, which
produces it.
EO is measured by a nine-item, 7-point semantic differential-
type scale developed by Covin and Slevin (1986, 1988), based
on the work of Miller and Friesen (1982), and Khandwalla
(1976/77). In the present study, this variable reflects top
management's behavior in taking strategic decisions and
operating management philosophies, that two dimensions
capture, namely proactiveness and risk-taking.
A seven-item, 7-point Likert-type scale that the authors
developed measures product performance. This measure is
based on perceived assessments of the respondents. More
specifically, they were asked to assess the performance of the
new product or new product category under analysis on a three-
year basis as compared with main competitors in terms of sales
volume, growth in revenues, gross profit margin, net income,
market share, change in market share, entry to new markets
(from − 3: much weaker to 3: much stronger).
3.3. Construct validation results
To test the construct validity of the measures, this study
employs confirmatory factor analysis (CFA) using EQS
(Bentler and Wu, 1995). Unlike the traditional and more
commonly used EFA, CFA contains inferential statistics that
allow for a stricter and more objective interpretation of validity
(Gerbing and Anderson, 1988). More specifically, unidimen-
sionality, convergent and discriminant validity tests are
assessed. Two sets of statistics are used for the verification of
unidimensionality and convergent validity (Venkatraman,
1989): i) the significance of the factor loadings (z-values N ±
1.96 and p b 0.05), that is the estimated correlation between a
particular item and the latent construct it represents; and, ii) the
overall acceptability of the measurement model in terms of its fit
to the data using a χ2 test and adjunct fit indexes (CFI and
Robust CFI) which should exceed the cut-off point of 0.90.
Tables 1–3 report the results in support of unidimensionality
and convergent validity of the EO, product innovativeness and
product performance measures respectively. Discriminant
validity is assessed by comparing two models: one in which
570 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575
Table 1
Entrepreneurial orientation: unidimensionality and convergent validity tests
Factor
loadings
Proactiveness
More new products as compared with main competitors. 0.57a
Changes in products have usually been radical as compared with 0.72
main competitors.
There exists a very strong emphasis on the development of new and 0.65
innovative products.
Typically we initiate actions to which competitors then respond. 0.61
We are very often the first business to introduce new products. 0.74
We typically adopt a very competitive, undo-the-competitors posture. 0.48
Risk-taking
There is a strong proclivity for high-risk projects (with chances of 0.56a
very high return).
Owning to the nature of the environment, bold, wide-ranging acts are 0.64
necessary to achieve the firm's objectives.
Typically we adopt a bold, aggressive posture in order to maximize 0.54
the probability of exploiting potential opportunities.
Model summary statistics: χ2(26) = 46.89, p = 0.01, CFI = 0.93, robust
CFI = 0.96. All factor loadings are significant at p b 0.05. aLoading fixed to 1
for identification purposes.
the correlation between two constructs pertaining to the same
conceptual domain is constrained to equal one, and another in
which the correlation is free to vary. A significantly lower χ2
value for the unconstrained model provides support for discrim-
inant validity (Venkatraman, 1989). As shown in Tables 4 and 5
model comparisons confirm discriminant validity of the EO and
product innovativeness measures respectively.
Finally, the inter-item reliability coefficients of the multi-
item scales measuring EO, product newness to customers, new
product uniqueness and product performance are 0.78, 0.73,
0.86 and 0.90 respectively, which are acceptable according to
the organizational attribute reliability standards Van de Ven and
Ferry (1980) suggest. Thus, all analyses provide reasonable
Table 2
Product innovativeness: unidimensionality and convergent validity tests
Factor
loadings
Product newness to customers
It required a major learning effort by customers 0.76a
It took a long time before customers could understand its full 0.89
advantages
The product concept was difficult for customers to understand 0.68
The product was not known and tried in the marketb 0.19
New product uniqueness
The product offers more possibilities to customers 0.60a
The product offers unique, innovative features to customers 0.80
The product covers more customer needs 0.81
The product has more uses 0.78
The product is of higher quality 0.59
The product is superior in technology 0.68
Model summary statistics: χ2(34) = 54.39, p = 0.02, CFI = 0.96, robust
CFI = 0.97. All factor loadings are significant at p b 0.05. aLoading fixed to 1
for identification purposes. bReverse item.
Table 3
Product performance: unidimensionality and convergent validity tests
Factor loadings
Sales volume 0.62a
Growth in revenues 0.77
Gross profit margin 0.66
Net income 0.74
Market share 0.82
Change in market share 0.90
Entry to new markets 0.64
Model summary statistics: χ2 (13) = 66.69, p = 0.01, CFI = 0.91, robust
CFI = 0.90. All factor loadings are significant at p b 0.05. aLoading fixed to 1
for identification purposes.
confidence that the measures of this study are both valid and
reliable.
4. Analysis and results
Following the confirmation of the construct validity of the
measures, averages of items pertaining to factors extracted are
used to form the variables for further statistical analysis. Table 6
presents descriptive statistics together with the correlation
coefficients among all variables.
In order to explore the possibility that SMEs adopt divergent
EO profiles, a cluster analysis is performed using the two EO
dimensions as independent variables. To eliminate the potential
effects of scale differences among variables and allow them to
contribute equally to the definition of clusters (Ketchen and
Shook, 1996), the two composite variables measuring the EO
dimensions are standardized. The K-Means cluster analysis,
which adopts the quick cluster routine of SPSS for Windows/
Release 12, is used for the clustering of the data. Quick cluster is
an alternative to the more common hierarchical clustering that
offers efficient use of computer resources while identifying
clear and distinct clusters (Avlonitis and Gounaris, 1999). After
examining the two-, three- and four-cluster solution, the choice
of the two-cluster solution is considered as the most acceptable
one based on i) maximum external isolation and internal
cohesion, and parsimony of explanation (Klastorin, 1983); and,
ii) comparison with prior theory-based typologies (Ketchen
et al., 1993). Note that the same clusters are found within each
of the two industries after conducting separate analysis. To
further assure that this is a meaningful and useful set of clusters,
reliability and validity are evaluated. First, the sample is
randomly split and the two halves are independently analyzed
(Hambrick, 1983). Consistency across sample halves indicates
reliability, as Hair et al. (1992) suggest. Second, criterion-
related validity is assessed through significance tests (i.e., one-
Table 4
Entrepreneurial orientation: discriminant validity test
Entrepreneurial orientation χ2(df = 27)
Proactiveness vs. risk-takinga 70.69, pb b 0.01
Base model (unconstrained) 46.89 (26)
Notes: a(Φ = 0.53). bDenotes the significance of χ2 difference between the
constrained and the unconstrained model.
 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575 571

Table 5 Table 7
Product innovativeness: discriminant validity test SMEs profiles based on entrepreneurial orientation — analysis of variance
Product innovativeness χ2(df = 35) Items measuring entrepreneurial Passive Active F p-
a orientation dimensions entrepreneursa entrepreneursa valueb
Product newness to customers vs. new product uniqueness 197.68, pb b 0.01
Base Model (unconstrained) 54.39 (34) % of companies, n = 149 48% 52%
More new products as 4.6 5.6 30.98 0.00
Notes: a(Φ = 0.16). bDenotes the significance of χ2 difference between the
compared with main
constrained and the unconstrained model.
competitors
Changes in products have 4.5 5.6 44.18 0.00
way ANOVAs), relating cluster membership to external usually been radical as
variables, which are theoretically related to the clusters, but compared with main
not used in defining them, as Ketchen and Shook (1996) competitors
There exists a very strong 3.6 5.3 55.67 0.00
suggest. In particular, the measures of product performance and
emphasis on the
average return on assets are used, since the external variables in development of new
strategy research are often performance measures (e.g., Miller, and innovative products
1988; Robinson and Pearce, 1988). The F-statistic of the Typically we initiate actions 4.3 5.4 24.61 0.00
nonclustering variables confirms the validity of this cluster to which competitors then
respond
solution (i.e., average return on assets: F = 3.63, p = 0.05;
We are very often the first 4.1 5.5 40.21 0.00
product performance: F = 10.27, p = 0.00). In addition, a business to introduce new
multiple discriminant analysis (Klastorin, 1983) is used with products
cluster membership as the grouping variable and the two We typically adopt a very 4.0 5.4 30.63 0.00
dimensions of EO as the independent variables. This analysis competitive, undo-the-
competitors posture
reveals that 100% of the cases are correctly classified, lending
There is a strong proclivity for 2.7 4.4 52.25 0.00
further support to the appropriateness of the two-cluster high-risk projects (with
solution. chances of very high return)
Table 7 reports the results of significant tests (i.e., one-way Owning to the nature of the 2.7 4.5 72.16 0.00
ANOVAs) relating cluster membership to the original nine EO environment, bold, wide-
ranging acts are necessary to
items (i.e., the items comprising the two EO variables). Cluster
achieve the firm's objectives
means are significantly different on all the original EO items at Typically we adopt a bold, 3.8 5.5 54.75 0.00
the 0.00 level. Note that this analysis provides the basis for the aggressive posture in order
interpretation of each cluster. As such, the two clusters of SMEs to maximize the probability
verify the viewpoints of industry experts and can be described of exploiting potential
opportunities
in detail as follows:
Notes: a Figures represent mean values in each cluster, b
Significance level
(p-value) is based on one-way analysis of variance.
4.1. Passive entrepreneurs

These 71 SMEs do not encourage actions before competitors passive or reactive and decidedly risk-averse. They most
neither projects of high-risk. Although entrepreneurial in their probably approach business matters by playing it safe [do not
business pursuits, they appear not to endorse the components of use air quotes], since they appear more reluctant to experiment
the contemporary entrepreneurial identity, such as the spirit of and exploit potential opportunities. Characteristics of this group
proactive initiative and the risk-propensity (Ray, 1993). could facilitate further understanding of firms labeled in the
Conservative top managers running these firms are rather extant literature as defenders, conservative firms, followers, or
reactive entrepreneurial firms (Atuahene-Gima and Ko, 2001;
Miles and Snow, 1978; Miller and Friesen, 1982; Mintzberg,
Table 6 1973).
Descriptive statistics and Pearson correlations among variables
Mean S.D. Variable 4.2. Active entrepreneurs
1. 2. 3. 4. 5.
1. Proactiveness 4.8 1.00 This group of 78 SMEs is first to initiate actions in the
2. Risk-taking 4.0 1.21 0.41⁎⁎ market and is inclined to projects of higher levels of risk. Strong
3. Product newness to 3.3 1.37 0.19⁎ − 0.00 entrepreneurial firm-level behavior is demonstrated through
customers experimentation and inclination to take both proactive and bold
4. New product 4.8 1.07 0.33⁎⁎ 0.37⁎⁎ 0.11
actions in pursuing opportunities. Top management style of
uniqueness
5. Product newness to 0.3a 0.93 0.19⁎ 0.03 0.04 0.15 these firms appears to engage in pioneering by virtue of the fact
the firm that it exploits market opportunities in a pre-emptive and
6. Product Performance 1.0 0.96 0.39⁎⁎ 0.16 0.09 0.28⁎⁎ 0.11 aggressive fashion, redefining where and how the competitive
Notes: Values range from − 2.45 to +2.21, ⁎⁎ Correlation is significant at the
a game is played in the process. Characteristics of this group
0.01 level (2-tailed), ⁎ Correlation is significant at the 0.05 level (2-tailed). could facilitate further understanding of firms labeled in the
572 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575

Table 8 Table 10
Characteristics of passive and active entrepreneurs Results of multiple linear regression analysis (n = 117)
Passive Active Variables Product Product
entrepreneurs entrepreneurs performance (1st performance (2nd
model) model)
Mean S.D. Mean S.D.
value value b S.E. b S.E.
Age in years 25 22 23 22 Constant − 0.28 0.42 − 0.91⁎ 0.51
Number of employees 65 48 66 49 New product uniqueness 0.15⁎⁎ 0.08 0.14⁎⁎ 0.08
Number of administrative employees 18 21 19 21 Product newness to customers 0.01 0.06 −0.01 0.06
Number of production or technical employees 47 36 47 39 Product newness to the firm 0.08 0.09 0.07 0.08
Number of new products (or new product 4 4 10 12 Proactiveness 0.29⁎⁎⁎ 0.10
categories) introduced in the last 3 years Risk-taking − 0.01 0.10
Average return on assets (on a three-year basis) 6% 6% 10% 14% Cluster membership 0.33⁎⁎ 0.18 0.17⁎⁎ 0.27
Average sales growth (on a three-year basis) 12% 26% 12% 22% Model F 3.47 (p = 0.01) 4.05 (p = 0.00)
Number of firms in the food and beverages 32 36 R2 11% 14%
industry
Notes: Unstandardized regression coefficients are displayed in the table. Cluster
Number of firms in the textile industry 39 42
membership is a binary construct, where 1 refers to the cluster of active
entrepreneurs while 2 to the cluster of passive entrepreneurs. ⁎p b 0.10,
⁎⁎p b 0.05, ⁎⁎⁎p b 0.01.
extant literature as prospectors entrepreneurial/entrepreneurship
firms, pioneers or proactive entrepreneurial firms (Atuahene-
Gima and Ko, 2001; Covin et al., 1999; Miles and Snow, 1978; dimensions of product innovativeness. In a rather supportive way,
Miller and Friesen, 1982; Mintzberg, 1973). two multiple linear regression models are run (see Table 10), one
To provide further understanding of which type of firms are investigating the effect of product innovativeness dimensions on
within each group, additional characteristics are presented in product performance (1st model) and the other the effect of all
Table 8. Overall, demographics, such as age, size and personnel product innovativeness and EO dimensions on product perfor-
structure, are similar in both groups. Likewise, passive and mance (2nd model). In both models, the effects are examined
active entrepreneurs do not differ in their growth potential while controlling for cluster membership. This supplementary
according to the average sales growth indicator. Recent analysis confirms that the conclusions and implications derived
empirical evidence from the Greek context shows that high- from the main analysis are sound. Since the results of both models
and low-growth SMEs do not differ in their EO consisting are the same regarding the impact of product innovativeness
of two opposite postures, active and passive (Salavou et al., dimensions on product performance, comments on the results of
2005). As such, the growth level of an SME does not indicate its the second model follow. More specifically, one product inno-
choice of an EO. On the contrary, characteristics more vativeness dimension (i.e., new product uniqueness) and one EO
indicative of the firm’s entrepreneurial identity, such as new dimension (i.e., proactivness) have statistically significant
product activities and return on assets, make the difference. In relationships to product performance. The positive sign of the
particular, firms labeled as active entrepreneurs are more active cluster dummy suggests that active entrepreneurs tend to have a
in product innovation introductions and more efficient in asset better new product performance than passive entrepreneurs.
exploitation according to the average ROA indicator. Tables 9 and 10 in combination reveal interesting results.
The analysis includes investigating potential relationships First, active entrepreneurs differ significantly from passive
between EO and product innovativeness. For this purpose, one- entrepreneurs in the new product uniqueness dimension,
way ANOVA is performed using the two EO profiles of SMEs suggesting that the proactive and risk-seeking orientation of
derived from the previous stage of the analysis as independent active entrepreneurs is demonstrated by product innovations
variables and the dimensions of product innovativeness as featuring more unique characteristics for the market and leading
dependent ones. Table 9 reports the findings, which indicate to higher performance. This finding is in line with existing
statistically significant differences across the clusters on two evidence that delivering a differentiated product with unique
customer benefits and superior value for the user is one of the
Table 9 most critical success factors (e.g. Cooper, 1999; Cooper and
Differences between product innovativeness and entrepreneurial orientation Kleinschmidt, 1987; Song and Parry, 1996) while offers greater
profiles-analysis of variance
potential for customer satisfaction and loyalty (Day and
Passive Active F p-valueb Wensley, 1988). The apparent emphasis of active entrepreneurs
entrepreneursa entrepreneursa
in pursuing this vital ingredient, unlike passive entrepreneurs,
New product 4.3 5.1 21.70 0.00 could be seen as the right thing to do, based also on higher
uniqueness
product performance. In this context, SMEs labeled as active
Product newness to 3.3 3.4 0.25 0.62
customers entrepreneurs follow at least partially the track of hidden
Product newness 0.1 0.5 7.51 0.07 champions Simon (1996) mentions while consider innovation
to the firm as the specific instrument of entrepreneurship, which the
Notes: a Figures represent mean values in each cluster. b
Significance level literature suggests characterize the really innovating entrepre-
(p-value) is based on one-way analysis of variance. neurs (Drucker, 1985). Second, active entrepreneurs differ
 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575
only marginally (at the 7% significance level) from passive
entrepreneurs in the product newness to the firm dimension,
which does not affect product performance. Additionally, new
products of both groups are on average of medium radicalness
for the firm (see mean value on Table 6). Third, the results also
suggest the apparent lack of statistically significant difference in
the product newness to customers dimension between passive
entrepreneurs and active entrepreneurs. One possible explana-
tion is that, both groups put the same emphasis on how new
products are perceived in the eyes of customers, in the sense that
they try to reduce their burden (e.g. effort, time, purchase risk)
in adopting them. No matter how much emphasis is put on this
activity, product newness to the customers has no impact on
product performance. Finally, proactiveness, as opposed to risk-
taking, is an important product performance contributor. In this
context, the more SMEs enhance this EO component, the higher
the performance of their new products is.
5. Conclusions and implications
This paper explores two research questions focusing on the
identification of SMEs' EO profiles to suggest variations in
product innovativeness dimensions of different performance
potential. Regarding the first research question pertaining to EO
profiles, the evidence shows two opposite groups of SMEs
according to the EO construct, namely the active and the
passive entrepreneurs, verifying the viewpoints stated by
industry experts in the context of Greece. The findings suggest
that active entrepreneurs unlike passive entrepreneurs adopt a
more aggressive orientation characterized by willingness to
undertake action of high risk and before that of competition.
Nonetheless, proactiveness contrary to risk-taking is found to be
an important contributor to the performance of new products
introduced by both groups. Regarding the second research
question pertaining to differences across product innovativeness
dimensions on EO profiles, the evidence shows that active and
passive entrepreneurs differ significantly in one dimension of
product innovativeness, namely new product uniqueness. In
particular, entrepreneurial attitude instilled in active entrepre-
neurs as compared with passive entrepreneurs is mirrored in
new product introductions, which embody in their character-
istics higher uniqueness; an ingredient found to act as an
important contributor to product performance. Given the lack of
evidence on the second research question, the specific re-
sults help to streamline the viewpoints of industry experts
posing a simple positive relationship between EO and product
innovativeness in the case of Greek SMEs.
The findings of this study make three worthy contributions to
the entrepreneurship research. First, the evidence based on the
approach to classify firms in terms of EO allows for a deeper
understanding of this important construct and contributes to
the enhancement of empirical literature, beyond that stemming
from the intensively explored EO-performance link. Second, the
specific results build on previous work related to either the
effect of EO on product innovativeness or the effect of
product innovativeness on product performance, advancing
thus the knowledge base concerning EO, product innovative-
573
ness and product performance. By combining these concepts,
this study sheds some new light on how specific dimensions of
product innovativeness with different performance potential are
pursued by divergent EO profiles of firms. Third, by focusing
on SMEs, the findings of this study provide new insights in
small business research concerning the widely acknowledged
value of EO. Indeed, these findings could serve as a starting
point to build evidence regarding the way SMEs are classified
according to EO and approach product innovativeness to pursue
better performance.
From a practical perspective, this study provides meaningful
implications for top managers, who are most often identical
with family ownership in Greek SMEs (Lioukas and Makrida-
kis, 1999). These firms seem to acknowledge the importance of
incorporating both entrepreneurial values and product innova-
tion in the way of doing business (e.g., Salavou and Lioukas,
2003). No matter in which entrepreneurial end they are
positioned (based on the duality observed), they are product
innovators taking equal care of reducing customers' burden
(e.g. effort, time, purchase risk) in adopting new products.
However, only active entrepreneurs share a common philoso-
phy with hidden champions (Simon, 1996) and really in-
novative entrepreneurs (Drucker, 1985). Characterized by the
potential to introduce new products featuring more differenti-
ated characteristics for the market, these firms seem to take full
advantage of their areas of strength (e.g., flexibility, nimbleness,
adaptability) in responding to customers constantly calling for
unique benefits and superior value. This rather up-to-dated
entrepreneurial attitude enables SMEs to escape the myopia of
me-too-ism (just imitating product recipes of competitors), and
instead deliver new products of higher uniqueness, that allows
for better performance. The ingredient of uniqueness in new
products is also evident in previous studies as one of the most
critical success factors (e.g., Cooper, 1999; Cooper and
Kleinschmidt, 1987; Song and Parry, 1996) offering greater
customer satisfaction and loyalty (Day and Wensley, 1988).
Overall, the adoption of this EO profile could be not only a
challenge but also an appropriate opportunity-focused response
by firms facing fierce competition by larger competitors
(domestic or from distant parts of the world).
Apart from its managerial implications, the empirical evidence
reported here, could be used nationwide by policy-makers to
design support programs and initiatives of entrepreneurship and
innovation for SMEs that widen these key concepts beyond the
notions of R&D and Hi-tech. In addition, mechanisms that
equip more and more Greek SMEs to sustain a more proactive
orientation along with relevant training on enhancing uniqueness
in new product offerings could be set up. Except for performance
benefits, these mechanisms may be pivotal for SMEs not only as
a powerful protection shield from established giants but also as
a means to advance their standing within the European region.
Taking it further, they would lend support to paving the road for
establishing a more knowledge-based society, where entrepre-
neurship is seen as a key intellectual capital element in any firm
(Granstrand, 1999).
Within the international literature, the present study helps to
project a view from a national context other than those of large
574 G.J. Avlonitis, H.E. Salavou / Journal of Business Research 60 (2007) 566–575

countries (such as United States, UK, Japan, Germany, etc.), Appendix B (continued )
which dominate the literature. Any generalizations drawn from Examples of radical product innovations
this study should, however, be regarded as tentative, pending Food and beverages industry Textile industry
further confirmation. 2. A Greek firm producing fresh 2. A Greek firm producing
mushrooms has exclusively woolen socks has introduced a
Drawing a sample of SMEs from a single national context,
introduced a radical product radical product innovation into
notably Greece, has its limitations. Further empirical evidence on innovation into the market, namely the market, namely
how EO profiles of SMEs are related to product innovativeness frozen mushroom nuggets. These SUPERWASH socks. These
dimensions of different performance potential in similar national are small pieces of mushroom that socks are unique because they
settings would help to confirm and generalize the conclusions. can be fried (i.e., cooked in hot fat or oil). are composed of fibers that are
moth protection-free.
Finally, the sample is confined to the manufacturing sector. Future
3. A Greek firm producing pasta has 3. A Greek firm producing
studies should consider the relationships that this study explores introduced a radical product innovation cotton material has introduced
in industries beyond the manufacturing sector. into the market, namely KONKAROTI. a radical product innovation
This is a unique kind of pasta into the market, namely net
Appendix A with carrot ingredients. material. This material is
composed of net and can be
used to produce unique designs
To determine the size of the random sample, this study uses of clothing, for example pants,
the following equation (Newbold, 1995): blouses, underwear.

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