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Understanding
Understanding the role of the role of
entrepreneurial orientation in entrepreneurial
orientation
creating ambidextrous competitive
advantage: a comparative-design, 89

longitudinal study Received 31 August 2021

Revised 4 April 2022
12 September 2022
Yen-Chun Chen 20 October 2022
Accepted 29 October 2022
Department of International Business Administration,
College of Business, Chinese Culture University, Taipei, Taiwan
Todd Arnold
School of Marketing and International Business, Oklahoma State University,
Stillwater, Oklahoma, USA
Ping-Yu Liu
Department of International Business Administration,
College of Business, Chinese Culture University, Taipei, Taiwan, and
Chun-Yao Huang
Department of Business Administration, College of Management,
National Taiwan University, Taipei, Taiwan

Abstract
Purpose – This research aims to investigate how entrepreneurial orientation influences a firm’s
differentiation–cost advantage ambidexterity (DCAA) and performance indirectly through dynamic
capabilities, while also investigating the impact of the interactive effect of the level and consistency of
entrepreneurial orientation on dynamic capabilities. The goal of this study is to better understand the
importance of consistently following an entrepreneurial orientation, as well as the linkage of such a
consistently implemented strategy upon gaining both a cost and differentiation positioning enhancement.
Design/methodology/approach – Two empirical studies are conducted to test the proposed hypotheses –
one longitudinal with multiple forms of data (i.e. text data, survey data and archival data) from 100 Taiwanese
electronics firms and the other using primary data from a survey of senior managers.
Findings – Entrepreneurial orientation improves dynamic capabilities, which in turn promote superior
DCAA and enhanced firm performance. In addition, as captured through a unique measure of consistency
allowed through computer-aided text analysis, the results indicate that the effect of entrepreneurial orientation
on dynamic capabilities is amplified when a firm consistently adopts entrepreneurial decisions and actions.
Research limitations/implications – The specific context was a sample of electronics firms in Taiwan.
This limits the generalization of findings, as would be possible with assessing the hypotheses in other
industries.

The authors are grateful to Robert W. Palmatier, Hauke Wetzel and Hsien-Tung Tsai for their European Journal of Marketing
Vol. 57 No. 1, 2023
valuable comments on an earlier version of the manuscript. In addition, this work was supported by pp. 89-124
the Ministry of Science and Technology of Taiwan [grant numbers 105-2410-H-034-016-] and [grant © Emerald Publishing Limited
0309-0566
numbers 106-2410-H-034-008-MY2]. DOI 10.1108/EJM-08-2021-0661
EJM Practical implications – This research clearly demonstrates the significance of consistency in pursuing
a strategic orientation. The consistent support and deployment of resources facilitates an organization’s
57,1 achieving positive outcomes associated with an entrepreneurial orientation.
Originality/value – While entrepreneurial orientation contributes to firm performance, extant knowledge
on the internal process through which entrepreneurial orientation affects performance is relatively limited.
The findings not only highlight the full mediating role of dynamic capabilities and DCAA, but also shed light
on the importance of consistency in entrepreneurial orientation over time.
90 Keywords Entrepreneurial orientation, Dynamic capabilities, Ambidextrous competitive advantage,
Longitudinal design, Computer-aided text analysis
Paper type Research paper

Introduction
When confronting fierce competition and fast changing environments, firms are becoming
more and more motivated to simultaneously pursing differentiation and cost advantages for
achieving long-term success (Hill, 1988; Pertusa-Ortega et al., 2009; Liu et al., 2020). Even
though the paradox of “stuck in the middle” (i.e. difficulties in simultaneous pursuit of
differentiation and low cost) is noted in Porter’s early work (1980), since the 1990s, Porter
and other scholars have refined this notion and further articulated that, despite difficulty,
it is possible for firms to achieve differentiation–cost advantage ambidexterity (DCAA)
through appropriate strategic choices and development (Flynn and Flynn, 1996; Magretta,
2011). In this regard, scholars suggest that firms may possess such an ambidextrous
competitive advantage by taking a market-driving approach (Jaworski et al., 2000; Kumar
et al., 2000; Carrillat et al., 2004; Kim and Mauborgne, 2009). Despite this, the question of
whether and how “market-driving strategies” influence DCAA is still not clearly answered.
Given the goal of active industry change and the enhancement of customer value as a
primary focus of being market driving (Jaworski et al., 2000; Hills and Sarin, 2003), research
indicates that a firm’s entrepreneurial orientation, where the proactive and innovative
pursuit of business opportunities through the creation of new markets is possible, may help
to achieve such goals (Chen et al., 2012; Sundqvist et al., 2012). Even though the importance
of entrepreneurial orientation in providing organizational advantage and performance has
been widely investigated (Boso et al., 2013; Wales et al., 2013; Rauch et al., 2009), its
performance implications for DCAA are still uncharted and have yet to be empirically
assessed. Specifically, as reported in Table 1, extant research in marketing mainly explores
how entrepreneurial orientation influences firm performance via the mediating mechanisms
of specific operating/functional capabilities and innovation. Some research focuses upon
investigating the mediating roles of operating capabilities and/or routines, such as product
development capabilities (Lisboa et al., 2011, 2016), customer management capabilities
(Mehrabi et al., 2019) and marketing capabilities (Martin and Javalgi, 2016). Other studies
concentrate on identifying the intervening effects of innovation capabilities and/or outputs,
such as a variety of innovation outputs (Arunachalam et al., 2018; Zhou et al., 2005) and
innovation ambidexterity (Zhang et al., 2016). There is very limited understanding of the
capability sources of ambidextrous competitive advantage, especially for developing
capabilities in a dynamic sense. Given this, this study attempts to answer a key question
regarding market driving strategies and ambidextrous competitive advantage – whether
and how entrepreneurial orientation influences the achievement of DCAA.
In addition, while the importance of strategic consistency in long-term organizational
survival has been noted (Lamberg et al., 2009), it is intriguing that limited attention has been
paid to the issue of consistency in terms of a firm’s entrepreneurial orientation.
Entrepreneurial orientation arises from a strategic-choice perspective and represents the
 Dependent
Authors (year) Journal Research design Mediator(s) metric(s) Key findings

Zhou et al. (2005) Journal of Marketing Cross-sectional Breakthrough Firm and product EO affects financial and product
design innovation performance performance indirectly through technology-
(technology- and and market-based innovation
market-based
innovation)
Griffith et al. Journal of Retailing Cross-sectional A retailer’s Subjective firm A retailers’ knowledge resources of
(2006) design knowledge resources performance customers, competitors and suppliers
and market mediate the entrepreneurial proclivity–
responsiveness market responsiveness relationship, while
market responsiveness mediates the
knowledge resources–performance
relationship
Lisboa et al. Industrial Marketing Cross-sectional Exploitative and Perceived market Product development and overseas market-
(2011) Management design explorative product effectiveness related capabilities mediate the EO–new
development and product differentiation relationships, while
overseas market- new product differentiation mediates the
related capabilities, product development and overseas market-
and new product related capabilities–market effectiveness
differentiation relationships
Martin et al. Journal of Business Cross-sectional Marketing Subjective firm EO influences firm performance directly
(2016) Research design capabilities performance and indirectly through marketing
capabilities
Lisboa et al. Journal of Business Cross-sectional Product development Profitability Product development capabilities mediate
(2016) Research design capabilities and new- the EO dimensions–new-product advantage
product advantage relationships, while new-product advantage
mediates the product development
capabilities–profitability relationships
Zhang et al. Industrial Marketing Cross-sectional Innovation Subjective firm The relationship of the interplay between
(2016) Management design ambidexterity performance EO and capability-based HRM influences
innovation ambidexterity, which in turn
enhances firm performance
(continued)

relationship between
research in

outcomes
Table 1.

orientation (EO) and

marketing on the
Representative
orientation
Understanding

91
entrepreneurial
the role of

firm performance
entrepreneurial
 92
57,1
EJM

Table 1.
Dependent
Authors (year) Journal Research design Mediator(s) metric(s) Key findings

Arunachalam Journal of the Half-longitudinal Innovation output Objective firm Innovation output mediates the relationship
et al. (2018) Academy of design performance between EO and firm performance, while
Marketing Science marketing capabilities moderate the
relationship
Mehrabi et al. Industrial Marketing Cross-sectional Ambidexterity in new Perceived new EO influences new product performance
(2019) Management design product development product indirectly through ambidexterity in new
and customer performance and product development capabilities, while EO
management customer affects customer relationship indirectly
capabilities relationship through ambidexterity in customer
performance management capabilities
Current study Under review at Longitudinal and DCs and DCAA Objective and Dynamic capabilities (DCs) mediate the
European Journal of cross-sectional subjective firm EO–DCAA relationship, while DCAA
Marketing design performance mediates the DCs–performance
relationship. In addition, the consistency in
EO moderates the relationship between EO
and DCs
mindset of pursuing new business opportunities (Lumpkin and Dess, 1996). As such, Understanding
entrepreneurial orientation needs consistent investment to be used successfully over time the role of
(Wiklund and Shepherd, 2005). To date, however, research in this area is underdeveloped
without sufficient conceptual elaboration or empirical investigation related to consistency.
entrepreneurial
The impact of a consistent, prolonged employment of entrepreneurial orientation on the orientation
longer term performance of a firm remains unstudied.
To fill this gap, we develop a conceptual model based upon a resource-based view (RBV)
of the firm (Day, 2014; Kozlenkova et al., 2014). Based on the model, we conduct a
93
longitudinal study with multiple forms of data. As such, this study aims to make both
theoretical and methodological contributions.
In relation to theory, relying on RBV [1], we contribute to the extant literature through
empirically highlighting the underlying mechanism through which entrepreneurial
orientation affects firm performance, which previous research has demonstrated as follows:
strategic resources ! strategic actions (organizational responsiveness) ! competitive
advantage ! firm performance (Ketchen et al., 2007). In application of this, our theoretical
rationale is that entrepreneurial orientation acts as an important strategic resource,
contributing to firm performance through a sequential link of entrepreneurial orientation !
dynamic capabilities ! DCAA ! firm performance. Only if a firm engages in proper
strategic actions to capitalize on entrepreneurial orientation can it generate DCAA in
achieving superior firm performance.
Empirically, we evaluate the underlying mechanism through which entrepreneurial
orientation influences DCAA and firm performance in two studies. In Study 1, we examine
our research model and hypotheses using a longitudinal study with multiple types of data,
thereby addressing the validity concerns of common method variance and enhancing causal
inference of our proposed mediating mechanism (Rindfleisch et al., 2008), while in Study 2,
we use a survey of senior managers to test research hypotheses through a cross-sectional
design with multiple-item measures of all focal constructs, enhancing confidence in the
theoretical rationale of our elaborations and predictions (and allowing a comparison of
model relationships between Study 1 and Study 2).
This research also contributes to the corporate entrepreneurship literature by
theoretically developing and empirically demonstrating a new construct of “consistency in
entrepreneurial orientation.” Specifically, research in strategic consistency suggests that
competitive behavior cannot effectively achieve desirable performance outcomes without
being consistent with the firm’s own history (Moss et al., 2014). Companies that exhibit
higher strategic consistency in their competitive behavior are more likely to achieve superior
performance than competitors with lower strategic consistency. Whether entrepreneurial
orientation can reach its expected benefits and values without having high entrepreneurial
orientation consistency over time has not yet been addressed.

Theoretical background
From a RBV perspective, performance is enhanced either through a firm’s product(s)
distinctiveness or through the firm offering an identical product to competitors but for a
lower price (Conner, 1991). Thus, a firm’s goal is to maintain such competitive positions,
while not investing so much as to destroy profitability (Conner, 1991). Consistent with this,
RBV highlights the critical nature of a firm’s resource heterogeneity to accomplish positions
of competitive advantage (Barney, 1991). Yet, this view has been criticized for its inability to
demonstrate how firm resources are developed/deployed to create competitive advantage, as
well as overlooking the influence of dynamic business environments (Morgan et al., 2009).
EJM To address these critiques, the advocates of RBV indicate that the origin of competitive
57,1 advantage results from firm resources that can be deployed in generating inimitable and
idiosyncratic capabilities (Atuahene-Gima, 2005; Murray et al., 2011; Kozlenkova et al.,
2014), and argues that a firm’s ability to deploy resources through unique capabilities is
more crucial than firm resources themselves in reaching positional advantage and superior
performance (DeSarbo et al., 2007).
94 In terms of a firm’s core capability development, advocates of the RBV contend that
dynamic capabilities are core value-creating capabilities for achieving positional advantage,
especially in rapidly changing and unpredictable business environments, because of their
important role in developing new knowledge resources (Peteraf and Barney, 2003;
Kozlenkova et al., 2014). Such new knowledge resources allow firms to seize new
opportunities and undertake challenging market entry (Eisenhardt and Martin, 2000). These
capabilities, which involve complicated coordination of knowledge and skills, reside in
organizational routines, and are difficult to imitate (Morgan et al., 2009). Building on RBV
(with a market driving focus), our proposed conceptual framework features a causal chain of
entrepreneurial orientation ! dynamic capabilities ! DCAA ! firm performance, as
presented in Figure 1. Consistent with core theory, we propose that entrepreneurial
orientation affects firm performance through the enhancement of dynamic capabilities and
the creation of DCAA.
Entrepreneurial orientation represents a firm’s strategic orientation, capturing specific
entrepreneurial aspects of decisions, actions and practices (Rauch et al., 2009; Wang et al.,
2020). An entrepreneurial firm is generally described as one that engages in product market

Level of EO Dynamic Ambidextrous Firm

(Study 1) capabilities advantage performance
(Study 1 & 2) (Study 1 & 2) (Study 1 & 2)
Proactiveness
Internal focused
Objective
learning
performance
H1 H3 H4 (Study 1: ROA)
Innovativeness DCAA
Network learning
Subjective
Level of EO performance
(Study 2) Marketing (Study 2)
H2
capability
Proactiveness
Market focused
learning Control variables
(Study 1 & 2)
Innovativeness A second-order
construct Firm size
Firm age

Organizational slack Marketing intensity

Consistency of EO (Control variables: Study 1 & 2)
R&D intensity
(Study 1)
Available slack Potential slack Market turbulence
(current ratio) (debt-to-equity ratio) Competitive intensity

Data sources

Perceptual data obtained

CATA data Archival data
Figure 1. from senior managers
Conceptual model
innovation and adopts a forward-looking perspective to come up with proactive innovations Understanding
ahead of its competition (Dai et al., 2016; Arunachalam et al., 2018). Drawing from a the role of
behavioral perspective, researchers suggest that entrepreneurial orientation is a composition
of two dimensions: proactiveness and innovativeness (Anderson et al., 2015; Russell Merz
entrepreneurial
and Sauber, 1995). Here, proactiveness represents the extent to which a company acts in orientation
anticipation of future market needs and changes (Mehrabi et al., 2019), as well as acts
aggressively to be a technological leader and to be first to move in a new market
(Venkatraman, 1989; Chen et al., 2012). Innovativeness refers to the extent to which a firm 95
engages in and undertakes new ideas, experimentation and creativity that may result in new
products, services or processes (Wang, 2008; Chen et al., 2012). Based on this
conceptualization, a firm with greater entrepreneurial orientation is more willing to make
large and risky resource commitments to innovative and entrepreneurial activities (Lisboa
et al., 2011; Zhang et al., 2016).
From a theoretical point of view, entrepreneurial orientation with a market-driving
approach focuses on “creating” a new market(s) by changing the landscape of the industry
(Jaworski et al., 2000; Chen et al., 2012) and developing unique business systems (Kumar
et al., 2000; Sundqvist et al., 2012), contrary to the traditional wisdom of market orientation
that focuses upon effectively satisfying customers’ expressed needs (customer-led) and
latent needs (lead-the-customer) and generating superior customer value in current markets
(Narver et al., 2004; Atuahene-Gima et al., 2005; Jaeger et al., 2016). In other words,
entrepreneurial orientation emphasizes the creation of new markets, whereas market
orientation highlights the effective responses to customers’ current and future needs in the
existing markets (Baker and Sinkula, 2009; Schindehutte et al., 2008). In addition,
entrepreneurial orientation and the well-noted innovation orientation construct (Berthon
et al., 2004; Siguaw et al., 2006; Stock and Zacharias, 2011) are relevant but have different
emphases. Specifically, entrepreneurial orientation highlights the adoption of proactiveness
and innovativeness to make a firm’s entrepreneurial decisions and processes, such as
opportunity recognition and exploitation (Chen et al., 2012; Arunachalam et al., 2018), while
innovation orientation has a goal of enhancing a firm’s focus upon innovation to achieve
new product creativity within a firm and is not necessarily linked to market-sensing
proactiveness (Stock and Zacharias, 2011).
In accordance with the basic rationale of RBV, entrepreneurial orientation can be
consequently viewed as a firm-level strategic resource, meeting the criteria of potential
valuableness, rareness, inimitability and non-substitutability (i.e. so-called VRIN) (Zhou
et al., 2005). Therefore, we propose that entrepreneurial orientation contributes to a firm’s
dynamic capabilities, which will generate DCAA. Table 1 summarizes the present study
relative to previous entrepreneurial orientation studies in marketing.
Realizing entrepreneurial orientation’s potential in developing dynamic capabilities
requires alignment with other critical organizational elements. This study posits that the
consistency of entrepreneurial orientation moderates the relationship between the level of
entrepreneurial orientation and dynamic capabilities. Specifically, the level of
entrepreneurial orientation refers to the magnitude of the firm’s emphasis on entrepreneurial
activities, as reflected in proactiveness and innovativeness, while the consistency of
entrepreneurial orientation refers to the persistence of a firm’s engagement in such
entrepreneurial activities over time. Without persistently implementing entrepreneurial
activities, it is difficult for firms to effectively use resources and develop dynamic
capabilities (Zahra et al., 2006). Therefore, this study proposes that the consistency of
entrepreneurial orientation enhances the impact of the level of entrepreneurial orientation on
dynamic capabilities.
EJM While the conceptualizations of dynamic capabilities are diverse in extant studies, the
57,1 core notion behind dynamic capabilities is the firm’s ability to respond to external market
environments efficiently and promptly (Barreto, 2010; Zahra et al., 2006). Consistent with
this notion, in today’s business environments that emphasize innovation and globalization,
this study defines dynamic capabilities as the organizational routines by which firms
develop, integrate and reconfigure technical (e.g. intellectual property and R&D activities)
96 and non-technical (e.g. administrative know-how and skills) knowledge created through a
variety of internal and external sources to address market opportunities (Weerawardena
et al., 2015). Consistent with Weerawardena et al. (2015), we conceptualize dynamic
capabilities as a composite construct with four dimensions: internally focused learning,
network learning, market learning and marketing capabilities, while the conjunctive
aggregation of these four capabilities generates a critical combination of internal- and
market-focused capabilities that lead to a competitive advantage for the firm. Following this,
the advocates of RBV indicate that organizational capabilities reflect a company’s capacity
to deploy resources (Murray et al., 2011; Chen et al., 2017), while dynamic capabilities are
based on coordinating knowledge and skills which reside in organizational routines (Zahra
et al., 2006). Given that a firm’s competitive advantage results from the transformation of
resources into capabilities (Day, 1994), we posit that entrepreneurial orientation enhances
the development of dynamic capabilities, which in turn improves DCAA.
While research indicates that differentiation and cost advantages are directly analogous
to competitive mobility barriers, which prevent firms from moving their strategic positions
(Day and Wensley, 1988), DCAA captures a firm’s simultaneous achievement of these two
advantages. In this respect, differentiation and cost advantages are not viewed as opposite
ends of a single continuum. DCAA reflects a firm’s superiority in both price premium and
higher margins of product offerings than competitors, simultaneously. For example, in 1987,
Taiwan Semiconductor Manufacturing Company (TSMC) created the pure-play foundry
business model with an exclusive focus on manufacturing clients’ chips to fundamentally
modify the market, thereby achieving simultaneously lower relative costs and higher
product prices than those of rival integrated device manufacturers (Magretta, 2011).
Therefore, in line with the RBV theory, in the final stage of our proposed model (c.f.
Figure 1), DCAA connects with firm performance, which we capture as return of assets
(ROAs). Specifically, ROA represents the firm’s capacity to effectively leverage its resources
to create a profit and is viewed as one of the most representative indicators of accounting
performance, explaining it wide adoption in prior marketing strategy and strategic
management research (Feng et al., 2015; Morgan et al., 2009; Powell et al., 2006; Zhang, 2006;
Noble et al., 2002). The literature also suggests that ROA is influenced by a firm’s
competitive advantage (Vorhies and Morgan, 2005) and highly relevant for the financial-
market performance of a firm (e.g. Tobin’s Q and total shareholder return) (Katsikeas et al.,
2016; Lee and Grewal, 2004). Hence, this research adopts this measure as firm performance
and proposes it as a consequence of DCAA.

Hypotheses
Effect of the level of entrepreneurial orientation on dynamic capabilities
The formation of dynamic capabilities is rooted in a firm’s learning mechanisms, such as
repeated practices, past experience and past mistakes (Eisenhardt and Martin, 2000).
Research indicates that deliberate learning behaviors and processes such as adaptive
learning (i.e. refining extant knowledge and routines) and generative learning (i.e. criticizing
long-standing assumptions and developing new ways of thinking) spark effectiveness in the
development of dynamic capabilities (Barreto, 2010; Zahra et al., 2006). In this regard, it
appears that entrepreneurial orientation eliminates the organizational bureaucracy Understanding
(formalization, centralization and departmentalization) that inhibits organization-wide the role of
communication and organizational learning within a firm (Matsuno et al., 2002) and
generates a fertile internal environment for organizational learning to occur (Wang, 2008).
entrepreneurial
Specifically, entrepreneurial orientation is considered especially relevant to generative orientation
learning and knowledge acquisition through exploration (Slater and Narver, 1995).
Therefore, while organizational learning acts as an important impetus for dynamic
capabilities, entrepreneurial orientation combined with effective organizational learning 97
behaviors and processes is more likely to promote the development of dynamic capabilities.
On the other hand, given knowledge as the basis for organizational capability building
(Grant, 1996), it is very difficult for firms to successfully cultivate dynamic capabilities
without having a knowledge advantage. For example, possessing insufficient market
knowledge limits managers’ understanding of the current resource deficiencies; such a lack
of understanding also prevents a firm from exploiting emerging market opportunities that
require extant resource integration or new resource configurations to attain – that is, an
organization must be positioned through dynamic capabilities to take advantage of
information that is generated through entrepreneurial orientation (Atuahene-Gima, 2005;
Chen et al., 2012). While the nature of entrepreneurial orientation emphasizes proactive and
aggressive actions against competitors in the marketplace, firms with higher
entrepreneurial orientation are motivated to engage in constant and extensive
environmental monitoring and scanning (Wang, 2008). It is suggested that entrepreneurial
orientation helps the firm to recognize and seize market opportunities as well as effectively
improve the utilization of extant and new knowledge (Keh et al., 2007; Li et al., 2010), thereby
enhancing the firm’s abilities to integrate, reconfigure, obtain and release resources to
address external changing environments:

H1. The level of entrepreneurial orientation positively relates to dynamic capabilities.

Effect of consistency in entrepreneurial orientation on the level of entrepreneurial

orientation–dynamic capabilities link
While entrepreneurial orientation reflects the strategy-making processes of firms that
engage in entrepreneurial activities (Lumpkin and Dess, 2001), research points out that such
processes need considerable financial resources to be successful (Wiklund and Shepherd,
2005). In addition, scholars also suggest that entrepreneurial orientation with a market-
driving approach helps firms to achieve superior market performance with supra-normal
profits in the long term (Schindehutte et al., 2008). Thus, without having stable and lasting
investments in entrepreneurial activities of firms, it is difficult for firms to reach persistent
superior performance by capitalizing upon entrepreneurial orientation. The consistent
devotion to entrepreneurial orientation allows managers to feel more comfortable in
allocating resources in risky and long-run programs because entrepreneurial orientation
arises from upper management support (Chen et al., 2012). Importantly, given resource
allocation as an outcropping of strategic consistency (Harrison et al., 1993), consistency in
entrepreneurial orientation acts an important role in the effectiveness of resource allocation
and investments in entrepreneurial activities.
Furthermore, drawing from the evolutionary perspective, strategic consistency over time
is viewed as a necessary condition for long-term organizational survival (Madsen, 2007;
Moss et al., 2014). In this regard, as entrepreneurial orientation is consistently adopted over
time (i.e. firms continually engage in product market innovation and adopt proactive
innovations ahead of competition), the value of entrepreneurial orientation in developing
EJM dynamic capabilities is magnified, especially for its long-term effects. Contrary to this, the
57,1 inconsistency of entrepreneurial orientation over time may mitigate the advantage of
organizational learning obtained from entrepreneurial orientation. As a result, we expect the
consistency in entrepreneurial orientation over time to enhance the effectiveness of the level
of entrepreneurial orientation in improving dynamic capabilities:

H2. Consistency in entrepreneurial orientation over time strengthens the positive

98 relationship between the level of entrepreneurial orientation and dynamic capabilities.

Effects of dynamic capabilities on differentiation–cost advantage ambidexterity

Despite the potentially contradictory focus/resource allocation between differentiation and
low cost, scholars point out that firms may overcome the trade-off between them by the
continuous improvements of operating routines or/and the reconstruction of value creation
activities (Hill, 1988; Flynn and Flynn, 1996; Kim and Mauborgne, 2005). Given dynamic
capabilities as organizational processes and strategic routines to integrate, reconfigure and
use resources to respond to market changes in pursuit of improved effectiveness (Eisenhardt
and Martin, 2000; Barreto, 2010), we expect that dynamic capabilities positively affect
DCAA, achieving superior customer value and cost saving, simultaneously.
Advocates of the dynamic capabilities perspective stress that dynamic capabilities are
fundamental to the firm’s success in the development of competitive advantage, because
dynamic capabilties are strategic routines by which resources are integrated, reconfigured
and transformed into value offerings for seizing opportunities (Teece, 2007). Research
demonstrates that dynamic capabilities not only enable firms to achieve enduring
competitive advantage by improving extant resource configurations, but also help firms
enjoy temporary advantages by building new resource configurations (Fainshmidt et al.,
2019; Zahra et al., 2006). More specifically, such capabilities enable firms to achieve
superiority in innovation and supply chain activities (Schilke et al., 2018), thereby obtaining
both differentiation and low-cost advantages at the same time. Hence, despite the potentially
opposite nature of differentiation and low-cost strategies, firms with more effective dynamic
capabilities, such as internally and externally (market) focused learning, are likely to achieve
these opposite competitive advantages simultaneously over firms that possess less effective
capabilities (Day, 1994; Fang and Zou, 2009).
In addition, research suggests that dynamic capabilities support a firm’s ability to
facilitate innovation in varied forms, such as product, process, administrative and technical
(Weerawardena et al., 2015). These different forms of innovation further provide firms with
positional advantages in terms of differentiation and low cost (Un and Asakawa, 2015).
Importantly, strong dynamic capabilities help firms to achieve superior value innovation by
eliminating and reducing elements a marketplace has traditionally competed on while
raising and creating elements the marketplace has never provided (Teece, 2014), thereby
creating a leap in value for both customers and the firm, thereby offering differentiation and
low cost, simultaneously (Kim and Mauborgne, 2005). Taken together, we predict:

H3. Dynamic capabilities positively relate to the differentiation–cost advantage

ambidexterity of a firm.

Effect of differentiation–cost advantage ambidexterity on firm performance

In line with the framework of strategic resources ! strategic actions ! competitive
advantage ! firm performance (Ketchen et al., 2007), in the final stage of our proposed
model, we expect that DCAA is effective for improving firm performance. As discussed Understanding
earlier, differentiation and low-cost advantages of a firm are akin to competitive mobility the role of
barriers that may deter rivals from shifting their strategic positions. Ambidextrous
competitive advantages thereby help firms achieve superior profitability and returns (Hill,
entrepreneurial
1988). For example, in the recent decades, Amazon has created superior growth and orientation
profitability in the digital industry through differentiation and low-cost advantages (Kotha,
1998). Specifically, the combination of differentiation and lost-cost positions not only isolates
a firm from competitive confrontation and further prevents it from competitive forces that
99
harm margins, but also helps a firm to generate higher margins than rivals (Magretta, 2011).
Therefore, we hypothesize that:

H4. The differentiation–cost advantage ambidexterity of a firm positively relates to firm

performance.

Methodology
Research design
To understand how entrepreneurial orientation contributes to DCAA and firm performance,
this study examines the proposed conceptual model and research hypotheses in two
complementary studies. Following Fang et al.’s (2011) research design, the first study uses a
longitudinal survey with multiple types of data, while the second study adopts a cross-
sectional design with primary data from a survey of senior managers. Specifically, the data
sources for Study 1 include a survey of senior managers to acquire primary data for the
capabilities and competitive advantage constructs, the Market Observation Post System
(MOPS) database to obtain archival data and computer-aided text analysis (CATA) to
capture the level and consistency of entrepreneurial orientation [i.e. text data from letters to
stockholders and the Management’s Discussion and Analysis (MD&A) section of annual
reports].
Compared to Study 1, Study 2 measures focal constructs relying on senior managers’
perceptions and tests the same conceptual model and hypotheses, with the exception of
investigating the moderating effect of the consistency of entrepreneurial orientation (H2).
Because the conceptualization of the consistency of entrepreneurial orientation in our study
involves changes of phenomena (construct) over time, it is less appropriate to measure it by
senior managers’ perceptions at one point (i.e. a cross-sectional design). However, both
studies examine our proposed sequential link of entrepreneurial orientation ! dynamic
capabilities ! DCAA ! firm performance (c.f. Figure 1). Collectively, Study 1’s
longitudinal design with multiple forms of data strengthens the external validity of our
findings, while Study 2’s cross-sectional design with primary data from senior managers to
measure focal constructs enhances the internal validity of our results. Table 2 summarizes
the constructs, measures and data sources for both studies.

Research context and data collection

The primary and secondary data for this research come from electronics companies in
Taiwan. Over the past decades, members of the Taiwanese electronics industry, such as
Taiwan Semiconductor Manufacturing Company (TSMC) and Foxconn, have played critical
roles in the development of the global electronics industry (Jean et al., 2010). Given the high
level of competition and rapid technological changes in the global electronics market and the
important role of the Taiwanese electronics industry in this market, the empirical context is
an ideal setting to evaluate our proposed model and hypotheses.
EJM Constructs Study 1 measures (data sources)
57,1
Proactiveness Average frequency of words relevant to
(Level of entrepreneurial “proactiveness” divided by the total
orientation) number of words in letters to
shareholders and MD&A section of
annual reports during the period from
100 2013 to 2015
Innovativeness Average frequency of words relevant to
(Level of Entrepreneurial “innovativeness” divided by the total
Orientation) number of words in letters to
shareholders and MD&A section of
annual reports during the period from
2013 to 2015
Consistency of Variation (variance) of average
Entrepreneurial frequency of words relevant to
Orientation “proactiveness” and “innovativeness”
divided by the total number of words in
letters to shareholders and MD&A
section of annual reports during the
period from 2013 to 2015
Internally focused Five-item measure of internally focused
learning capability learning (Manager survey)
Network learning Five-item measure of network learning
capability (Manager survey)
Marketing capability Five-item measure of marketing
capability (Manager survey)
Market-focused learning Five-item measure of market-focused
capability learning (Manager survey)
Differentiation advantage Two-item measure of differentiation
advantage (Manager survey)
Lower-cost advantage Two-item measure of lower-cost
advantage (Manager survey)
Firm performance ROA (MOPS database)
Available slack Average current ratio of the period
from 2013 to 2015 (MOPS database)
Potential slack Average debt-to-equity ratio of the
period from 2013 to 2015 (MOPS
database)
Firm size Log-transformation of the amount of
capital used (MOPS database)
Firm age Log-transformation of the number of
years since the firm’s inception (MOPS
database)
Marketing intensity Marketing/sales expenditure divided
by the total assets (MOPS database)
R&D intensity R&D expenditure divided by the total
assets (MOPS database)
Table 2. Market turbulence Four-item measure of market
Constructs, turbulence (Manager survey)
measurements and Competitive intensity Four-item measure of competitive
data sources intensity (Manager survey)
Study 2 measures (data sources)
Four-item measure of
proactiveness (Manager survey)
Three-item measure of
innovativeness (Manager survey)
Not measured in Study 2
Five-item measure of internally
focused learning (Manager survey)
Five-item measure of network
learning (Manager survey)
Five-item measure of marketing
capability (Manager survey)
Five-item measure of market-
focused learning (Manager survey)
Two-item measure of
differentiation advantage
(Manager survey)
Two-item measure of lower-cost
advantage (Manager survey)
Four-item measure of firm
performance (Manager survey)
Average current ratio of the period
from 2013 to 2015 (MOPS
database)
Average debt-to-equity ratio of the
period from 2013 to 2015 (MOPS
database)
Log-transformation of the amount
of capital used (MOPS database)
Log-transformation of the number
of years since the firm’s inception
(MOPS database)
Marketing/sales expenditure
divided by the total assets (MOPS
database)
R&D expenditure divided by the
total assets (MOPS database)
Four-item measure of market
turbulence (Manager survey)
Four-item measure of competitive
intensity (Manager survey)
Our data set is structured from 2013 to 2016. Specifically, we collected primary data from Understanding
100 senior managers of Taiwanese electronics firms in the second quarter (three-month the role of
period) of 2016. All these firms are publicly listed companies during the 2013–2016 period.
These companies are requested (by government laws and regulations) to make public
entrepreneurial
disclosure of strategic, operational and financial information through annual reports. As orientation
such, we collected text data in terms of strategic-level information (e.g. a firm’s management
belief and philosophy) from letters to shareholders and MD&A section of these Taiwanese
101
electronics firms’ annual reports during the period from 2013 to 2015. Specifically, for a
publicly listed service firm, these two sections of annual reports provide narrative
information for investors and other interested third parties (Yuthas et al., 2002), and
therefore represent a rhetorical genre that both reveals managerial cognition (Duriau et al.,
2007) and communicates corporate culture by top management (Suzuki, 2013). Although the
intention of impression management is natural in such public disclosure (Li and Hitt, 2008;
Vuontisjärvi, 2013; White and Hanson, 2002), letters to shareholders and MD&A are critical
non-financial, strategy-related information sources to financial analysts. It is widely
accepted in practice that such public disclosure provides almost twice as much information
as basic financial statements (Rogers and Grant, 1997). More specifically, 86% of surveyed
financial analysts indicated that management’s discussion of corporate performance was an
“extremely” or “very” important factor in assessing firm value (Balakrishnan et al., 2010).
Marketing strategy scholars also point out that letters to shareholders and MD&A offer
unique glimpses into the minds of top management teams in a way that is less likely to be
acquired through other means, and their historical records are available over time (Yadav
et al., 2007). Though the technique of CATA, coupled with text data from a firm’s annual
reports, is far less popular than the traditional survey methods, it is less likely to suffer from
individual bias owing to recall and demand factors (Wang et al., 2020). Therefore, over
recent decades, text data from a company’s public disclosures has been well applied to
measure strategic orientations (Noble et al., 2002; Saboo and Grewal, 2013; Wang et al.,
2020). In addition to these data, the firms’ annual operational and financial information from
2013 to 2016 was gathered from the MOPS database.

Procedures of primary and secondary data collection

The sampling population for our survey data includes all electronic firms from the
dictionary of the “5,000 Largest Firms in Taiwan,” published by China Credit Information
Service Ltd. Senior managers, such as vice presidents and directors, were selected as the key
informants of this study. Several steps for data collection were adopted.
First, we ruled out firms not operating in the electronics industry, yielding a total of 1,088
firms. Of the initial list, all these firms were then contacted by telephone to pre-notify them
of the objectives and value of this survey, and to locate proper informants. Firms that
disagreed to join were excluded from our sample and were not further contacted. This
generated a list of 502 firms eligible for the research. We mailed our survey to target
informants in the 502 firms. A total of 141 questionnaires were returned. Out of these 141
firms, two types of firms were further excluded, namely, firms not belonging to listed
companies at Taiwan’s stock exchange and firms not publicly listed for the entire period
from 2013 to 2016 (e.g. firms that went public after 2013 and firms that did not entirely exit
the stock market during the period from 2013 to 2016). As a consequence, we obtained 100
usable responses and used it as a basis for developing our data set.
Second, we collected text data from letters to shareholders and MD&A section of these
100 firms’ annual reports from 2013 to 2015. Specifically, we conducted CATA to determine
EJM entrepreneurial orientation of each firm. We counted related words for entrepreneurial
57,1 orientation in these documents.
We followed Short et al.’s recommendation (2010) to designate single words as the unit of
analysis and began with a deductive approach to design a coding scheme (i.e. deductively
derived word lists). Based on the conceptualization of entrepreneurial orientation and the
definitions of its two dimensions in our study (i.e. proactiveness and innovativeness), we
102 developed multiple word lists for each subdimension. Considering the possible impact of
contextual specificity in terms of language and industry on the validation of word lists for
these two dimensions (i.e. the synonyms of proactiveness and innovativeness), two academic
experts who are knowledgeable in the topic of entrepreneurial orientation created the word
lists by not only reviewing previous scales and synonyms in Chinese, but also by reading a
dozen of annual reports of Taiwanese electronics firms.
Specifically, these two experts individually developed the initial set of word lists for
proactiveness and innovativeness. Then, we integrated the word lists from these two
experts and compared the similarities and differences between them. To ensure validity, this
study adopted a more rigorous approach to exclude words that were merely proposed by
either one of the experts. In other words, this study only retained words that were identified
by both of the experts in the set of word lists. To further strengthen validity, we requested
another scholar who is familiar with relevant theoretical and methodological literature to
assess the seed words in our lists and to eliminate words that did not expressly capture our
desired constructs. Following this, we present the final word lists for entrepreneurial
orientation dimensions, proactiveness and innovativeness in Appendix 1. The validity of
CATA (as we applied) in lieu of the conventional survey method has been empirically
demonstrated in the literature by, for example, Short et al. (2010) and Wang et al. (2020) upon
studying entrepreneurial orientation. Specifically, the words used for our entrepreneurial
orientation measurement were determined by first referring to the word list developed by
Short et al. (2010) as the starting point, taking the differences in word connotation between
English and Chinese into account, and then closely following the steps outlined by Short
et al. (2010) to ensure validity. Further, the procedure of sequentially involving a total of
three experts in finalizing the word list also closely follows the example set by Saboo and
Grewal (2013) to ensure construct reliability.
We gathered the 100 firms’ archival data of annual operational and financial
performance from the MOPS database. We completed the archival data collection in the
second quarter of 2017 because Taiwan’s Stock Exchange Corporation (similar to the role of
Securities and Exchange Commission in the United States) requests firms to publicly
disclose formal annual financial information before the second quarter of the next year.

Measures
Level and consistency of entrepreneurial orientation. We relied on CATA to measure two
subdimensions of entrepreneurial orientation, proactiveness and innovativeness, in our
Study 1. Specifically, we measured the level of entrepreneurial orientation by individually
assessing average frequency of words denoting proactiveness and innovativeness (see
Appendix 1) divided by the total number of words in letters to shareholders and the MD&A
section of annual reports from 2013 to 2015. Further, given the fact that examining the texts
of corporate annual reports allows us to track over-time changes of organizational cultures
in a reliable manner (Suzuki, 2013), coupled with our interest in investigating within-
orientation consistency, we look at the consistency of a firm’s entrepreneurial orientation – a
construct that is difficult to measure outside of our multiple-year data, CATA context.
 Specifically, the consistency of entrepreneurial orientation is measured by the variance of Understanding
a ratio – the ratio of entrepreneurial orientation–relevant word counts to total word counts in the role of
the company’s documents under analysis – within a company, across time. Empirically, a
company’s consistency of entrepreneurial orientation is calculated as the statistical variance
entrepreneurial
of word counts relevant to “proactiveness” and “innovativeness” divided by the total orientation
number of words in letters to shareholders and the MD&A section of annual reports across
the three years (from 2013 to 2015). This is a direct operationalization of “consistency,” and
also is consistent with our conceptualization [2]. 103
On the other hand, in Study 2, we adopted the Kreiser et al. (2002) scale with four items to
assess proactiveness. To assess innovativeness, we used three items from Kreiser et al.
(2002) and Wang (2008). A complete list of measurement items of Study 2 is presented in
Appendix 2. In addition, as noted, we did not measure the consistency of entrepreneurial
orientation in Study 2.
Dynamic capabilities and differentiation–cost advantage ambidexterity. In both Study 1
and Study 2, we relied on primary survey data to measure constructs relevant to dynamic
capabilities and competitive advantage. As to the measures of dynamic capabilities, this
study conceptualizes it as a second-order construct with four first-order dimensions:
internally focused learning, market-focused learning, network learning, and marketing
capabilities. We adopted the Wilden and Gudergan (2015) scale to assess all four dimensions.
In addition, DCAA is an integrative construct of differentiation and low-cost advantages, and
thus it is measured based on the two types of competitive advantages. In terms of assessing
the two types of competitive advantage, the measures for differentiation and lower-cost
advantages, respectively, consisted of 2 items adapted from Murray et al. (2011) and Reimann
et al. (2010). Following the previous treatments of measuring the concept of ambidexterity
adopted by He and Wong (2004) and Lin et al. (2013), differentiation and low-cost advantages
were multiplied to derive the overall measure of DCAA.
Firm performance. We measured firm performance by using archival data, ROA in the
Year 2016 in Study 1, while a 4-item measure of firm performance adapted from Moorman
and Rust (1999) and Reimann et al. (2010) was used in Study 2.
Control variables. We included two sets of control variables in our model. The first set
controlled for other variables that might affect dynamic capabilities and DCAA. From the
organizational slack perspective, slack resources are excess resources that can be used to
develop organizational capabilities and advantages (Atuahene-Gima, 2005). Thus, we
controlled for available and potential slack, which can affect organizational capability
building and strategic advantage (Nohria and Gulati, 1996; Voss et al., 2008). The former
means a firm’s resources not yet committed to any specific goal, while the latter refers to a
firm’s future resources that can be yielded externally through debt or equity financing (Iyer
and Miller, 2008). They reflect a firm’s availability of internal financial resources and future
external capital in the development of value creation activities, respectively (Yang et al.,
2014). In this regard, using data from the MOPS database, we measured available slack by
calculating the average current ratio of the period from 2013 to 2015 and captured potential
slack by assessing the average debt-to-equity ratio of the period from 2013 to 2015 (Yang
et al., 2014).
As to the second set of control variables, we included industry and firm heterogeneity
controls that might influence firm performance. At the industry level, we controlled for market
turbulence and competitive intensity relying on senior managers’ reporting of their own
perceptions of these conditions. We adopted a four-item scale from Wilden and Gudergan (2015)
to measure market turbulence. For competitive intensity, a four-item scale of competitive
intensity was adapted from Jaworski and Kohli (1993) and Wilden and Gudergan (2015). At the
EJM firm level, we measured marketing and R&D intensity, firm size and age (Saboo et al., 2017).
57,1 Specifically, we controlled for marketing intensity and R&D intensity to account for firms’
emphasis on building market-based resources (e.g. brand and customer equity) to appropriate
greater customer value and firms’ emphasis on developing new sources of economic rents
through activities that generate value for customers, respectively (Han et al., 2017). Both of them
are critical factors of influencing overall firm performance (Fang et al., 2011; Saboo and Grewal,
104 2013; Saboo et al., 2017). In addition, we also measured firm size as the logarithm of the amount of
capital used to account for the scale economies (Borrington and Stimpson, 2015), while firm age
was assessed as the logarithm of the number of years since the firm’s inception to account for the
maturity of the firm (Saboo et al., 2017). Both of these firm-level variables were collected from the
MOPS database. Collectively, we adopted the same measures for the control variables in both
Study 1 and Study 2.

Study 1’s results

To examine structural equation models, considering the relatively small sample size and the
model complexity adopted in this study, partial least squares structural equation modeling
(PLS-SEM) was conducted for testing the measurement properties, the structural model and
hypotheses (Hair et al., 2014).

Measurement properties
Because we measured the focal constructs of dynamic capabilities and competitive
advantage using multi-item scales, item–total correlations were used to purify these
measurement items. Using the analysis of item–total correlation, four items with low
correlations were excluded (see Appendix 2). After the purification process, we checked
composite reliability (CR) and average variance extracted (AVE) to assess the internal
consistency and convergent validity of the constructs. As shown in Table 3, the CR values
ranged from 0.78 to 0.92, and the AVE values ranged from 0.62 to 0.80, above the suggested
levels of 0.60 and 0.50 (Hair et al., 2014), respectively. Overall, the constructs measured by
multi-item scales in our model exhibit good internal consistency and convergent validity. In
addition, we examined the discriminant validity of the measures using the square roots of the
AVE. Table 3 shows that all the square roots of the AVE were greater than correlations with
other constructs, indicating satisfactory discriminant validity (Fornell and Larcker, 1981).

Hypothesis testing
We summarize the results for Study 1 in Table 4. First, entrepreneurial orientation has a
significant impact on dynamic capabilities (g = 0.20, p < 0.01), which supports H1. We also
find support for H3, given that the observed effect of dynamic capabilities on DCAA is
positive and significant (b = 0.34, p < 0.01). In addition, H4 proposes that firm performance
is driven by DCAA. As expected, our findings show that DCAA positively relates to firm
performance (b = 0.33, p < 0.01).
Furthermore, the moderating effect of the consistency of entrepreneurial orientation was
assessed using the PLS-multi-group analysis (MGA) method. As shown in Table 4, we find
that the effect of the level of entrepreneurial orientation on dynamic capabilities is
significantly stronger for the high entrepreneurial orientation consistency group of firms
than for low consistency group (high consistency group: g = 0.27, p < 0.01; low consistency
group: g = 0.55, p < 0.05). The PLS-MGA test further indicates that the moderating effect
of the consistency of entrepreneurial orientation on the link between the level of
entrepreneurial orientation and dynamic capabilities is significant (4g = 0.82, p < 0.05),
supporting H2. Taken together, all hypotheses in Study 1 are supported.
Variables 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1. Entrepreneurial Orientation 0.82/76 0.65 0.60 0.46 0.54 0.12 0.06 0.01 0.17 0.02 0.17 0.06 0.18 0.01 0.06
2. Internally focused learning 0.25 0.83/0.83 0.53 0.56 0.52 0.32 0.08 0.14 0.22 0.06 0.17 0.11 0.20 0.08 0.15
3. Market-focused learning 0.10 0.53 0.83/0.83 0.42 0.53 0.20 0.06 0.06 0.19 0.09 0.15 0.04 0.02 0.01 0.02
4. Network learning 0.15 0.56 0.42 0.83/0.83 0.49 0.23 0.05 0.12 0.01 0.02 0.11 0.16 0.10 0.18 0.02
5. Marketing capabilities 0.12 0.52 0.53 0.49 0.79/0.79 0.31 0.07 0.08 0.11 0.22 0.09 0.14 0.20 0.06 0.00
6. DCAA 0.34 0.32 0.20 0.23 0.31 0.89/0.89 0.03 0.08 0.33 0.28 0.10 0.18 0.13 0.30 0.01
7. Available slack 0.07 0.08 0.06 0.05 0.07 0.03 – 0.42 0.12 0.12 0.13 0.12 0.05 0.05 0.01
8. Potential slack 0.02 0.14 0.06 0.12 0.08 0.08 0.42 – 0.02 0.05 0.13 0.29 0.13 0.06 0.11
9. Firm performance 0.10 0.21 0.22 0.00 0.08 0.55 0.11 0.02 0.89 0.36 0.15 0.02 0.05 0.06 0.05
10. Market turbulence 0.23 0.06 0.06 0.02 0.19 0.27 0.12 0.05 0.36 0.81/0.83 0.34 0.00 0.07 0.03 0.07
11. Competitive intensity 0.11 0.13 0.12 0.05 0.07 0.09 0.13 0.13 0.15 0.34 0.82/0.81 0.07 0.13 0.03 0.04
12. Firm size (log) 0.33 0.11 0.04 0.16 0.14 0.17 0.12 0.29 0.02 0.00 0.07 – 0.13 0.26 0.06
13. Firm age (log) 0.01 0.20 0.02 0.10 0.20 0.13 0.05 0.13 0.06 0.07 0.13 0.13 – 0.06 0.23
14. Marketing intensity 0.10 0.08 0.01 0.18 0.06 0.30 0.05 0.05 0.06 0.03 0.03 0.26 0.06 – 0.17
15. R&D intensity 0.24 0.15 0.02 0.02 0.00 0.01 0.01 0.11 0.05 0.07 0.04 0.06 0.23 0.17 –
Mean Study 1 0.001 3.71 3.85 3.51 3.47 14.96 209.90 91.11 4.33 3.11 4.00 9.44 1.40 0.04 0.04
Study 2 3.59 3.99
SD Study 1 0.001 0.62 0.55 0.60 0.60 6.40 134.33 62.01 6.41 0.72 0.71 0.61 0.19 0.04 0.06
Study 2 0.71 0.88
CR Study 1 0.78 0.92 0.90 0.92 0.89 0.94 – – 1 0.85 0.89 – – – –
Study 2 0.88 0.92 0.90 0.92 0.89 0.94 0.94 0.87 0.88
AVE Study 1 0.65 0.68 0.68 0.69 0.62 0.80 – – 1 0.65 0.67 – – – –
Study 2 0.58 0.68 0.68 0.69 0.62 0.80 0.80 0.68 0.65

Notes: Correlations for Study 1 (2) are reported below (above) the diagonal. Values on the diagonal are the square-root of the AVE for each construct. Vales for
Study 1 (2) are reported left (right). All the values in Table 3 are reported after decimal places, except the mean and SD of EO in Study 1. Because the EO is
measured by assessing average frequency of words relevant to “innovativeness” and “innovativeness” divided by the total number of words in letters to
shareholders and MD&A section of annual reports in Study 1, its values in mean and SD are relatively small. For this, the two sets of values are reported after
three decimal places in Table 3

Descriptive statistics
Table 3.
Understanding

105
orientation
entrepreneurial
the role of

and correlations
EJM EO ! DCs ! DCAA ! Firm performance
57,1 (objective performance)
Constructs Hypotheses Proposed model Partial mediation model

DV: DCs (R2 = 0.04)

Available slack 0.01 (0.13) 0.02 (0.14)
Potential slack 0.01 (0.14) 0.02 (0.17)
106 EO H1 (þ) 0.20 (2.65)*** 0.21 (2.34)***
2
DV: DCAA (R = 0.12)
Available slack 0.07 (0.66) 0.07 (0.69)
Potential slack 0.11 (0.70) 0.11 (0.73)
DCs H3 (þ) 0.34 (3.96)*** 0.33 (3.78)***
EO 0.05 (0.34)
DV: Firm performance (R2 = 0.20)
Firm size 0.12 (1.16) 0.14 (1.31)
Firm age 0.19 (1.56)* 0.20 (1.78)**
Marketing intensity 0.05 (0.43) 0.05 (0.54)
R&D intensity 0.17 (1.90)** 0.17 (1.88)**
Market turbulence 0.06 (0.64) 0.06 (0.55)
Competitive intensity 0.13 (1.45)* 0.15 (1.66)**
DCAA H4 (þ) 0.33 (3.17)*** 0.30 (2.67)***
DCs 0.11 (1.07)

Table 4. PLS-MGA for testing H2

PLS-SEM model Low consistency High consistency Difference test
of EO group of EO group
results (Study 1: a
EO ! DCs 0.55 (1.98)** 0.27 (3.08)*** 4g = 0.82, p = 0.02 **
longitudinal study
with multiple forms Notes: EO: entrepreneurial orientation; DCs: dynamic capabilities; DV: dependent variable; standardized
of data) coefficients are reported with t-values; *p < 0.1, **p < 0.05, ***p < 0.01

To test the robustness of the meditating effect of dynamic capabilities and DCAA on the
entrepreneurial orientation–firm performance link, the proposed structural model was
estimated. In addition, we fitted an alternative structural model that assessed the direct path
between entrepreneurial orientation and DCAA, as well as the direct path between dynamic
capabilities and firm performance (i.e. partial mediation model) (Morgan et al., 2012). As
presented in Table 4, of the two additional direct paths assessed in the partial mediation model,
none is significant, in support for the sequential link of entrepreneurial orientation ! dynamic
capabilities ! DCAA ! firm performance. Considering a recursive system of structural
equations in our research model, endogeneity might be a potential threat. To check for possible
endogeneity in our model, we adopted a range of a priori remedies and an ex post assessment
to address possible endogeneity both a priori and to evaluate the potential for endogeneity to
confound the empirical results [3]. These results, summarized in footnote 3, provide strong
evidence of the absence of endogeneity in this study and enhance causal inference.

Study 2’s results

A cross-sectional study with primary data collection for focal constructs
As Study 1 adopted a longitudinal design with multiple forms of data to test our research
model and hypotheses, Study 2 serves as a complement and uses a cross-sectional design
with primary data to assess the validity of our results. Specifically, rather than adopting
CATA to measure the dimensions of entrepreneurial orientation (proactiveness and Understanding
innovativeness) and using archival data as proxies for firm performance, we measure all the the role of
focal constructs relying on multi-item measures in a survey of senior managers. In Study 2,
to measure entrepreneurial orientation, we used the four-item measure of proactiveness and
entrepreneurial
the three-item measure of innovativeness, adapted from Kreiser et al. (2002) and Wang orientation
(2008). In addition, firm performance was measured using the four-item measure adapted
from Moorman and Rust (1999). Apart from these constructs, the measures of the remaining
model constructs in Study 2 are identical with Study 1 (c.f., Table 2). Collectively, all the key 107
constructs were measured by primary data from a survey of senior managers.
The analytical procedures of Study 1 and 2 are almost the same, with the only exception
for H2. As noted earlier, the assessment on the moderating effect of the consistency of
entrepreneurial orientation is excluded in Study 2 because of the measurement difficulties in
capturing consistency of entrepreneurial orientation by cross-sectional design.
Measurement properties. To ensure the measurement quality of Study 2, Study 1’s
procedures on item–total correlations and PLS-SEM were adopted. As shown in Appendix 2,
six items with low correlations were eliminated by conducting the analysis of item–total
correlation. After the purification process, we calculated AVE to assess convergent and
discriminant validity. As shown in Table 3, all the AVE values exceed the conventional
threshold of 0.5, indicating adequate convergent validity. In addition, all the square roots of
the AVE were greater than correlations with other constructs, which suggests that our
measures have satisfactory discriminant validity. Furthermore, all the CR values exceeded
the level of 0.6, representing a good level of internal consistency and reliability of the
constructs.
Hypothesis testing. We summarize the results from Study 2 in Table 5. The results
demonstrate that entrepreneurial orientation positively relates to dynamic capabilities (g =
0.71, p < 0.01), in support of H1. In addition, we found support for H3: dynamic capabilities
positively relate to DCAA (b = 0.34, p < 0.01). The results also reveal that DCAA positively
and significantly relates to firm performance (b = 0.53, p < 0.01).
An alternative structural model (i.e. partial mediation model) was also examined to
assess the meditating effects of dynamic capabilities and DCAA. As shown in Table 5, of the
two additional direct paths assessed in the partial mediation model, none is significant, in
support for the sequential link of entrepreneurial orientation ! dynamic capabilities !
DCAA ! firm performance. These are consistent with the findings from Study 1 that
dynamic capabilities and DCAA fully mediate the entrepreneurial orientation–
differentiation advantage link and the dynamic capabilities–firm performance link,
respectively. Overall, the results are consistent with Study 1, confirming the stability of our
findings.

Discussion and implications

The combination of entrepreneurial orientation and marketing driving strategy has
attracted increasing attention in recent marketing research (c.f. Table 1). Despite a large
body of evidence showing the importance of entrepreneurial orientation in sustaining
competitive advantage of a firm, we have a limited understanding of the process through
which entrepreneurial orientation contributes to DCAA. Therefore, we investigate how
entrepreneurial orientation helps a firm’s development of an organization’s dynamic
capabilities and ultimately affects its DCAA and firm performance. Even more significantly,
this study also explores how implementation consistency of entrepreneurial orientation over
time amplifies these relationships. We examine the impact of entrepreneurial orientation in
two studies: a longitudinal study based on multiple forms of data (Study 1) and a cross-
EJM EO ! DCs ! DCAA ! Firm performance
57,1 (subjective performance)
Constructs Hypotheses Proposed model Partial mediation model

DV: DCs (R2 = 0.51)

Available slack 0.05 (0.62) 0.05 (0.62)
Potential slack 0.02 (0.37) 0.02 (0.36)
108 EO H1 (þ) 0.71 (14.10)*** 0.71 (13.78)***
2
DV: DCAA (R = 0.13)
Available slack 0.07 (0.79) 0.06 (0.57)
Potential slack 0.11 (0.74) 0.10 (0.74)
DCs H3 (þ) 0.34 (4.27)*** 0.20 (1.53)*
EO 0.20 (1.25)
DV: Firm performance (R2 = 0.37)
Firm size 0.10 (1.17) 0.10 (1.16)
Firm age 0.04 (0.49) 0.04 (0.45)
Marketing intensity 0.06 (0.67) 0.06 (0.68)
R&D intensity 0.02 (0.38) 0.02 (0.37)
Table 5. Market turbulence 0.21 (2.67)*** 0.22 (2.51)***
PLS-SEM model Competitive intensity 0.02 (0.19) 0.02 (0.16)
results (Study 2: a DCAA H5 (þ) 0.53 (6.66)*** 0.53 (6.38)***
DCs 0.02 (0.23)
cross-sectional study
with a survey of
senior managers’ Notes: EO: entrepreneurial orientation; DCs: dynamic capabilities; DV: dependent variable; standardized
perception) coefficients are reported with t-values; *p < 0.1, **p < 0.05, ***p < 0.01

sectional study that adopts primary data (Study 2). In this section, we compare the results
from these two studies, provide several important theoretical and managerial implications,
discuss the limitations of our research as well as highlight possible future research.

Overview and comparison of empirical results from Study 1 and Study 2

We develop four hypotheses, three that focus on the process through which entrepreneurial
orientation influences DCAA and firm performance (H1, H3–H4) and one that centers on the
moderating effect of the consistency of entrepreneurial orientation (H2). Beyond H2, which is
only tested in Study 1, all other hypotheses are supported in both studies conducted for this
research. In addition, the full mediating effects of dynamic capabilities and DCAA on the
entrepreneurial orientation–DCAA link and the dynamic capabilities–firm performance link
are also supported in both studies, respectively. Despite differences in the way data were
collected, reassuringly, the empirical results of our hypothesized causal relationships and
proposed mediating mechanisms are consistent and stable.
Specifically, Studies 1 and 2 are complementary, proving the robustness of our findings.
Our research design of Study 1, with longitudinal investigation and multiple data sources,
helps provide greater confidence in causal inference and avoid common method bias, while
Study 2, with cross-sectional survey and senior managers’ perceptual data, allows for
effectively measuring focal constructs that are more subjective in nature, such as
entrepreneurial orientation (Rindfleisch et al., 2008; Maxwell et al., 2011; Spector, 2019). As
noted earlier, compared to Study 1, Study 2 is prone to common method and causal inference
concerns. In causal inference, Rindfleisch et al. (2008) suggest that a longitudinal study helps
researchers achieve greater confidence in the cause–effect relationships in the condition of
weak correlations between predictors and outcomes, whereas a cross-sectional study may be Understanding
sufficient to explain the causality when the relationships among constructs of interest are the role of
fairly strong (e.g. correlation coefficient > 0.5). In this regard, most of the relationships
among our model constructs are weakly correlated (c.f., Table 3). Hence, the results from
entrepreneurial
Study 1 are helpful to explain the sequential link of entrepreneurial orientation ! dynamic orientation
capabilities ! DCAA ! firm performance in our proposed model. In addition to enhancing
the validity of empirical findings from Study 1, Study 2 also provides additional evidence on
the appropriateness of using CATA to measure entrepreneurial orientation. Despite the 109
predominance of adopting survey approaches to measure entrepreneurial orientation in the
extant literature, the identical empirical findings on the effect of entrepreneurial orientation
on dynamic capabilities from Study 1 and 2 partly prove the validity of our new developed
CATA measures of entrepreneurial orientation (c.f. Appendix 1). Further, we conducted
additional analysis to assess the validity of using CATA to measure entrepreneurial
orientation by comparing the correlation between measures of entrepreneurial orientation
from CATA and survey techniques. The correlation between these two measures is
statistically significant (correlation coefficient = 0.32, p < 0.01), offering further evidence on
the concurrent validity of the measurement of entrepreneurial orientation with CATA.
Given the same results of our hypothesis testing and mediation effect assessment, as noted
earlier, we further assessed whether different research designs and data sources of Study 1
and 2 lead to the difference in evaluating the effect magnitude of entrepreneurial orientation
on DCAA by comparing the direct, indirect and total effects of entrepreneurial orientation on
DCAA of the two studies. In Study 1, the total effect of entrepreneurial orientation on DCAA is
0.12 with an indirect effect of 0.07 (0.21  0.33) and a direct effect of 0.05, while, in Study 2, the
total effect is 0.34 with an indirect effect of 0.14 (0.71  0.20) and a direct effect of 0.20. These
results show a higher magnitude impact of entrepreneurial orientation on DCAA in Study 2
(single-source cross-sectional design) than Study 1 (multiple-source longitudinal design). This is
congruent with the methodological argument that the impact of predictors on their response
variables is inflated by samples based on subjective measures, especially from a single source
(Rindfleisch et al., 2008).

Theoretical implications
First, despite the importance of market driving in developing DCAA, noted in the extant
literature, empirical evidence on this issue is scarce. Drawing from the RBV and its dynamic
capabilities extension, this research advances knowledge by demonstrating and providing
evidence on the internal process of entrepreneurial orientation ! dynamic capabilities !
DCAA ! firm performance, in which firms take actions to make use of entrepreneurial
orientation, cultivate, in this case, dynamic capabilities, and further generate DCAA to improve
firm performance. These results echo the notion of market driving approaches as an effective
means of achieving both differentiation and cost advantages, simultaneously (Carrillat et al.,
2004; Kim and Mauborgne, 2009; Magretta, 2011). In addition, by integrating Study 1 and 2, we
provide evidence in support of the full mediating effects of dynamic capabilities and DCAA on
the entrepreneurial orientation–DCAA link and the dynamic capabilities–firm performance link,
respectively. These reveal that entrepreneurial orientation in itself cannot result in companies
achieving both differentiation and cost advantages, simultaneously, unless they successfully
convert entrepreneurial orientation into core value-creating capabilities. On the other hand,
recent research in entrepreneurial orientation cautions that relying on cross-sectional data
fails to capture the dynamic interplay between entrepreneurial orientation and organizational
practices (Stam and Elfring, 2008). Our empirical results regarding the mediating roles of
dynamic capabilities and DCAA not only support the argument that RBV is not tautological
EJM (Ketchen et al., 2007) but also reinforce the dynamic capabilities perspective that the origin of
57,1 competitive advantage results from firm resources that can be deployed in dynamic capabilities
(Barreto, 2010).
Second, this study contributes to the literature by being perhaps the first, to the best of
the authors’ knowledge, to conceptualize and empirically examine the construct of
consistency in entrepreneurial orientation. Specifically, only very few scholars have
110 mentioned the importance of the within-orientation consistency (c.f., Arnold et al., 2011), not
to mention a paucity of research on the effect of time-varying consistency in entrepreneurial
orientation (Grühn et al., 2017). In this regard, we demonstrate that researchers should
assess entrepreneurial orientation in terms of both level and consistency. Extending from
the evolutionary view, we find that the consistency in entrepreneurial orientation over time
amplifies the relationship between the level of entrepreneurial orientation and dynamic
capabilities, highlighting the synergistic effect of the level and consistency of
entrepreneurial orientation. This suggests that a heightened and consistent focus upon
entrepreneurial orientation significantly strengthens dynamic capabilities, which in turn
create superior competitive advantage and performance. More importantly, our findings
from the PLS-MGA test indicate that the level of entrepreneurial orientation significantly
and negatively relates to dynamic capabilities among the low entrepreneurial orientation
consistency group of firms (g = 0.55, p < 0.05). This sheds new light on the necessity of
consistently adopting entrepreneurial orientation.
Third, from a methodological point of view, this research demonstrates that upon facing
certain issues that cross-sectional survey methods may not satisfactorily address, CATA
may serve as a realistic backup approach to complementing surveys. Such a method of
investigation is consistent with a recent call from Covin and Wales (2019) and Wales (2016).
As we report in Study 1, CATA coupled with survey (especially because of the possibility of
measuring stability in firms’ entrepreneurial orientation) together renders insights
unavailable by CATA or survey alone.
Finally, in terms of the application of CATA, even though word lists for entrepreneurial
orientation in the context of English language have been established in recent studies (Short
et al., 2010), this study contributes to the entrepreneurial orientation literature by using
CATA and creating word lists for the two dimensions of entrepreneurial orientation in the
context of Chinese language. By comparing the results of Study 1 and 2, the validity of
our new developed measurement of entrepreneurial orientation with CATA is also
demonstrated.

Managerial implications
From a managerial point of view, this study offers several important implications. First, this
research provides a comprehensive picture of how firms may use entrepreneurial orientation
to achieve superior performance, thereby offering some guidance in achieving DCAA. Top
managers are advised to not only be entrepreneurially oriented but also to avoid simply
centering on the efforts of entrepreneurial activities, because it is not entrepreneurial
orientation in itself that directly enhances firm performance. Specifically, entrepreneurial
orientation acts as a catalyst that drives a firm’s dynamic capabilities and DCAA, which
ultimately enhances firm performance. In addition, while entrepreneurial orientation can be
regarded as a core strategic resource, dynamic capabilities represent deployment
capabilities. Senior managers should not value the resource over the deployment
capabilities, as our results suggest that both elements need to work in unison. Therefore, top
managers need to engage in converting entrepreneurial orientation into dynamic capabilities
and then further into DCAA, but also continually monitor and assess whether the inputs of
entrepreneurial orientation lead to desirable organizational capability building and Understanding
ambidextrous advantages. the role of
Second, top managers should be aware of the synergy between the level and consistency
of entrepreneurial orientation in developing dynamic capabilities. Lacking continuous
entrepreneurial
support for the adoption of entrepreneurial orientation leads to deficiencies in building orientation
dynamic capabilities and undermines ambidextrous competitive advantage and
performance. This cautions top managers that doing nothing on entrepreneurial orientation
is possibly better than having short-term and unstable entrepreneurial decisions and 111
actions. Importantly, entrepreneurial orientation, as such, brings in superior competitive
advantage and performance in the long term, and its resource commitment may detract
from short-term profitability (Lumpkin and Dess, 1996). It is very dangerous for firms to
abruptly change resource allocation and investment decisions in terms of entrepreneurial
actions, especially in the conditions of poor firm performance. Moreover, the results of PLS-
MGM show that the effect of dynamic capabilities on DCAA is positive and significant for
the high entrepreneurial orientation consistency group of firms (b = 0.39, p < 0.01), whereas
the effect for the low entrepreneurial orientation consistency group of firms is not significant
(b = 0.14, p > 0.1). These further shed lights on the importance of long-term and consistent
investments in terms of entrepreneurial activities. As a result, top managers need to adopt a
more comprehensive and long-term plan for the implementation of entrepreneurial
orientation, preventing firms from having significant changes/variations in the directions
and inputs of entrepreneurial orientation when encountering profitability loss in the short
term.
Third, given the full mediating effect of dynamic capabilities, further insights are offered
by assessing the comparative strength of the indirect impact of entrepreneurial orientation
on DCAA for the high and low entrepreneurial orientation consistency groups of firms.
Results indicate that the effect of entrepreneurial orientation on DCAA for the high
consistency group of firms (indirect effect: 0.11, p < 0.01) is significant, while the effect for
the low consistency group of firms is not significant (indirect effect: 0.08, p > 0.1). This
reveals that the effectiveness of entrepreneurial orientation in enhancing DCAA only exists
in the condition of consistently adopting entrepreneurial decisions and actions over time (at
least within electronics industry). The temporal and/or discontinuous investments in
entrepreneurial activities cannot effectively support the dynamic capabilities development
mechanism through which entrepreneurial orientation influences DCAA. Thus, top
managers should be aware of this and develop appropriate management and monitoring
systems for overseeing and strengthening the consistency of entrepreneurial orientation in
their firms over time. In addition, drawing from the upper echelon perspective, research
indicates that chief executive officer successions are not only related to the consistency of
entrepreneurial orientation but also associated with an increase in the level of
entrepreneurial orientation (Grühn et al., 2017). In this regard, firms consider strategic
ramifications related to the frequent replacement of a chief executive officer, which can, of
course, disrupt the stable and consistent investments in entrepreneurial activities that
support the underlying dynamic capabilities development mechanism.
Finally, how to effectively gather and use competitive intelligence is a critical
management issue for firms, especially in the current data-rich business environments.
Our research design and data collection process in Study 1 offer guidelines for the
gathering of competitive intelligence through the adoption of the CATA method.
Specifically, most authorities who are responsible for managing stock exchange markets
in different countries (e.g. Securities and Exchange Commission in the United States)
have strict guidelines for firms to publish strategic, operational and financial information
EJM in their annual reports. For example, letters to shareholders offer a unique glance into the
57,1 minds of CEOs (Yadav et al., 2007), while the MD&A section of annual reports reflects
management’s philosophy and business operations. More importantly, all this
information is free and easy to access. Therefore, by gathering firm data from the
documents and further analyzing them through CATA, competitive intelligence can be
effectively generated and deployed.
112
Limitations and future research directions
Though we conducted two studies with different research designs to enhance confidence in
our results, several limitations still exist. First, owing to the need for a parsimonious model,
this study mainly focuses on the role of entrepreneurial orientation with market driving in
influencing dynamic capabilities and DCAA. We acknowledge that including more strategic
orientations linked with market drive might potentially yield more insights into the
establishment of ambidextrous competitive advantage. Future studies can investigate other
strategic orientation types, such as market orientation. In addition, future research can also
follow the research design of our Study 1 to reexamine the extant knowledge about strategic
orientation (e.g. entrepreneurial orientation and market orientation) which is developed from
subjective measures. By comparing the results from a longitudinal design with multiple
types of data and the cross-sectional survey of senior managers, a more precise picture of the
values of different types of strategic orientations in influencing organizational capability
building and positional advantages may be developed.
Second, even though this study used a longitudinal design to provide empirical
support for the mediating role of dynamic capabilities (consistent with RBV and dynamic
capabilities perspective), continually deepening knowledge on the relationships among
entrepreneurial orientation, capabilities and advantages provides an interesting
opportunity for future studies because different theoretical perspectives might lead to
different viewpoints on the relationships. For example, contrary to RBV, recent studies
have debated whether the mediating effect of entrepreneurial orientation in the
capabilities–performance relationship exists (i.e. capabilities as an antecedent of
entrepreneurial orientation) (Altinay et al., 2016; Swoboda and Olejnik, 2016; Eshima and
Anderson, 2017). Future research could draw on other theoretical perspectives and adopt
a longitudinal research design to further assess whether entrepreneurial orientation
mediates the relationship between dynamic capabilities and DCAA (or firm
performance). This would help us identify the existence of the reciprocal effect of
entrepreneurial orientation and dynamic capabilities, thereby enhancing theory
development on entrepreneurial orientation.
Third, even though the Study 1 of this research adopted a longitudinal design with
different sources and times (i.e. temporal separation) (Jean et al., 2016) and we conducted the
Gaussian copula approach (Hult et al., 2018) to address possible endogeneity and further
enhance the validity in the causal connections in our proposed model, we cannot entirely
rule out alternative explanations owing to our empirical results from non-experimental
research. Randomized controlled experiments can be conducted in future research to more
precisely evaluate and understand our proposed causal relations.
Finally, the specific context was a sample of electronics firms in Taiwan. The results of
this study should be compared with other countries or industrial contexts. As a result, future
studies could follow the methodological approach of this research to assess the hypotheses
in other industries (e.g. service industries), further helping to generalize the findings.
Notes Understanding
1. Despite the application of the construct of dynamic capabilities in the proposed model, we adopt the role of
the Peteraf and Barney (2003) perspective that dynamic capabilities literature is completely entrepreneurial
consistent with RBV and, therefore, that dynamic capabilities should not be regarded as a stand-
alone theory. Specifically, RBV is able to cope with resources and capabilities that are valuable in orientation
specific circumstances (e.g. business environments with fast and largely unpredictable change) to
demonstrate their impact on competitive advantage (Kozlenkova et al., 2014). Therefore, this
research views dynamic capabilities as another type of resource which can be assessed within the 113
RBV framework.
2. Merriam Webster defines “consistency” as “the quality or fact of staying the same at different
times”, whereas Cambridge dictionary has it that consistency means “the quality of always
behaving or performing in a similar way, or of always happening in a similar way”. Such
definitions imply that a firm with a high entrepreneurial orientation consistency is one whose
entrepreneurial orientation measure “stays the same” or “looks similar” over time. Statistically
speaking, the variance of a measure is the most common indication of whether the measure
“stays the same” or “looks similar” over time. Since we measure entrepreneurial orientation by
assessing average frequency of words denoting proactiveness and innovativeness divided by the
total number of words in letters to shareholders and the MD&A section of annual reports, the
consistency of entrepreneurial orientation would be measured by the variance of this ratio. Such
a variance-focused approach is popular in academic research whenever “consistency” is of
interest. For example, the area of stylometry research applies variance in analyzing the
consistency of authorial style (Neal et al., 2017).
3. We controlled and tested for possible endogeneity in the study design and data analysis stages,
respectively. First, we used the control variable approach to correct for endogeneity in our model
(Hult et al., 2018). Specifically, our proposed model is driven by theory and contains firm- and
industry-level control variables such as age, size, marketing and R&D intensity, market
turbulence and competitive intensity. Second, as shown in Figure 1, we collected data on
independent, mediation and dependent variables from different sources and times to address
simultaneity (Jean et al., 2016). Specifically, we measured an independent variable
(entrepreneurial orientation), mediation variables (dynamic capabilities and DCAA) and a
dependent variable (firm performance) from CATA, perceptual and archival data, respectively,
and further adopted a one-year time lag between measures. Finally, the Gaussian copula
approach in PLS-SEM was conducted to assess endogeneity (Rutz and Watson, 2019).
Specifically, we followed Hult et al.’s (2018) procedure to identify whether the variables that
potentially display endogeneity are normally distributed. Empirical results indicate that none of
the focal constructs has normally distributed scores. Further, the results show that none of the
Gaussian copula terms is significant. Although, given that the credibility of the Gaussian copula
approach has been questioned (Becker et al., 2022), we do note the limitation of this method.
Overall, though, we believe the steps we have taken are helpful in assessing endogeneity
concerns, especially with the robustness of the PLS-SEM model results.

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Appendix 1 Understanding
the role of
entrepreneurial
EO dimensions (Chinese) Translated terms (Chinese) Example phrases translated from Chinese orientation
Proactiveness The first (創始) Being the first XXX company
(前瞻性) Leader (領導) Being a market leader in product
development 121
Pioneering (領先) Pioneering in the area of XXX
Frontier (前端) At the frontier of XXX development in the
industry
Forward-looking (前瞻) Collaborating with top partners in forward-
looking R&D
Preempting (搶先) Grasping the growth and preempting
opportunities
Foreseeing (先機) Foreseeing the market opportunity
First-mover (先佔) Having the first-mover advantage
New era (新時代) Leading the XXX industry into a new era
New generation (新世代) A total solution for the new generation
New wave (新一波) A new wave of growth
Guiding (引領) Guiding the route for market evolution
Innovativeness Innovative (創新) The open platform accommodating the
(創新性) most innovative products
Creativity (創意) Transforming creativity to create immense
business value
Unique (獨創) Keeping on investing in unique XXX
technology
Distinctive (獨一無二) Our distinctive manufacturing process for
customization
Milestone (里程碑) Setting several milestones in XXX
technology
Radically new (全新) Introducing radically new XXX series for
different segments of customers
Advanced (先進) Our advanced XXX technology
New program (新方案) Engaging in new programs for our
customers
New technology (新技術) Our continuous development of products
using new technology
Emerging (新興) Extend the brand to various emerging
markets
New application (新應用) Keeping on exploring new applications and
enlarging market share
Novelty (新穎) The novelty of new products
New process (新製程) The ongoing development of new process to
follow the customer demand Table A1.
Terms and example
Notes: Because all participants are ensured anonymity, some specific information such as company names phrases for the
and specific product names that may reveal our participating firms is replaced by the sign “XXX” in the
column of example coded Chinese sentence. This table translates the EO-related terms and phrases from entrepreneurial
Chinese into English. Because of the language differences between English and Chinese, however, there is orientation (EO)
no strict one-to-one mapping relationship between Chinese and English terms dimensions
EJM Appendix 2. Measurement scales
57,1 Items
Entrepreneurial orientation
Dimension 1: Proactiveness (1 = “strongly disagree”; 5 = “strongly agree”)
 Our firm is often the first business to introduce new products and services
 Our firm favors a strong emphasis on technological leadership
122  Our firm typically initiates actions to which competitors then respond
 Our firm typically seeks to avoid competitive clashes, preferring a “live-and-let live” posture (R)*
Dimension 2: Innovativeness (1 = “strongly disagree”; 5 = “strongly agree”)
 Our firm encourages people to think and behave in original and novel ways*
 Our firm is willing to try new ways of doing things and seek unusual, novel solutions
 Our firm actively responds to the adoption of “new ways of doing things” compared with
our main competitors
Market turbulence (1 = “strongly disagree”; 5 = “strongly agree”)
 In our kind of business, customers’ product preferences change quite a bit over time*
 We are witnessing demand for our products and services from customers who have
never bought them before
 We cater to many of the same customers that we used to in the past
 It is very difficult to predict any changes in this marketplace
Competitive intensity (1 = “strongly disagree”; 5 = “strongly agree”)
 Competition in our industry is cutthroat
 There are many “promotion wars” in our industry
 Price competition is a hallmark of our industry
 One hears of a new competitive move almost every day
Differentiation advantage (1 = “much worse than our top three competitors”; 6 = “much better than
our top three competitors”)
 Differentiation of products/services
 Price premium (i.e. customers are more willing to pay more to purchase products)
Low-cost advantage (1 = “much worse than our top three competitors”; 6 = “much better than our top
three competitors”)
 Manufacturing costs
 Economy of scale
Subjective firm performance (1 = “much worse than our top three competitors”; 6 = “much better than
our top three competitors”)
 Business unit profitability
 Return on investment (ROI)
 Gross margin
 Reaching financial goals
Dynamic capabilities
Dimension 1: Internally focused learning capability (1 = “strongly disagree”; 5 = “strongly agree”)
 Made substantial investments in equipment needed for research and experimental
activities
  Used new knowledge from research and experimental activities to resolve technological Understanding
problems the role of
 Used new knowledge from research and experimental activities to improve the entrepreneurial
enterprise

orientation
Recombined knowledge from research and experimental activities in new ways to
develop innovative products and services
 Transferred knowledge from research and experimental activities to new projects and 123
activities
Dimension 2: Network learning capability (1 = “strongly disagree”; 5 = “strongly agree”)
 Undertook extensive networking with external research institutions to acquire technical
or non-technical knowledge
 Acquired technical or non-technical knowledge through attendance at industry
gatherings and international conferences
 Combined new knowledge generated through networks with existing technical or
nontechnical knowledge
 Used new knowledge gained through networks to resolve customer focused problems
 Transferred knowledge generated through networks to new projects and activities
Dimension 3: Marketing capability (1 = “strongly disagree”; 5 = “strongly agree”)
 Invested in developing products or services having a global appeal
 Used promotional activities (e.g. advertising) of the firm to rapidly gain international
market share/sales growth
 Used its marketing resources and skills to effectively meet the value expectations of the
targeted customers
 Combined its marketing resources and skills more effectively to meet the customer needs
 Recombined its marketing resources to meet changing customer expectations and
competitor activity
Dimension 4: Market-focused learning capability (1 = “strongly disagree”; 5 = “strongly agree”)
 Gathered extensive information on customer needs
 Proactively worked with lead customers to understand market needs
 Combined new knowledge generated from customers and competitors with existing
market knowledge*
 Used the new knowledge generated from markets to develop and refine the product or
service concepts
 Transformed knowledge generated from markets and applied this to new projects and
activities
Note: *The item was deleted. (R) was a reversed item.

About the authors

Yen-Chun Chen is Professor of Marketing in the College of Business at Chinese Culture University. Dr
Chen has published in relation to strategic marketing and innovation management in a number of
prominent journals, including the Journal of Product Innovation Management, Industrial Marketing
Management, European Journal of Marketing, Management International Review, Technological
Forecasting and Social Change and Asia Pacific Journal of Management.
Todd Arnold is Gary L. Trennepohl Chair and Professor of Marketing at Oklahoma State
University. Dr Arnold has published in relation to innovation, retail management and service
EJM marketing for the past two decades across a variety of top journals, including Journal of the Academy
of Marketing Science, Journal of Consumer Research, Journal of Applied Psychology, Journal of
57,1 Retailing, Journal of Product Innovation Management, European Journal of Marketing and Journal of
Service Research. Todd Arnold is the corresponding author and can be contacted at: todd.arnold@
okstate.edu
Ping-Yu Liu is Assistant Professor of Marketing in the College of Business at Chinese Culture
University. Dr Liu’s research focuses on quantitative marketing models and analysis of consumer
124 online reviews. His research paper has been published in International Journal of Market Research,
Applied Research in Quality of Life and NTU Management Review.
Chun-Yao Huang is Professor of Marketing in the Department of Business Administration, College
of Management, National Taiwan University, Taiwan. Dr Huang has published in relation to
quantitative marketing models and customer base analysis in a number of prominent journals,
including the Marketing Science, European Journal of Marketing, Journal of Advertising, International
Journal of Electronic Commerce and Journal of Advertising Research.

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