FIRM GROWTH, ADAPTIVE CAPABILITY, AND ENTREPRENEURIAL ORIENTATION

Research summary: This paper posits adaptive capability as a mechanism through which a firm's prior growth influences the exhibition of future entrepreneurial action. Defined as the firm's proficiency in altering its understanding of market expectations, increased adaptive capability is a...

Full description

Saved in:
Bibliographic Details
Published inStrategic management journal Vol. 38; no. 3; pp. 770 - 779
Main Authors ESHIMA, YOSHIHIRO, ANDERSON, BRIAN S.
Format Journal Article
LanguageEnglish
Published Chichester, UK Wiley Blackwell 01.03.2017
John Wiley & Sons, Ltd
Wiley Periodicals Inc
Subjects
adaptive capability
Business growth
Companies
Competence
endogeneity
entrepreneurial orientation
Entrepreneurs
Entrepreneurship
firm growth
Growth rate
Markets
Structural equation modeling
United Kingdom > UK
South Korea
Online AccessGet full text

Cover

More Information
Summary:Research summary: This paper posits adaptive capability as a mechanism through which a firm's prior growth influences the exhibition of future entrepreneurial action. Defined as the firm's proficiency in altering its understanding of market expectations, increased adaptive capability is a consequence of the new resource combinations that result from expanding organizational boundaries. Increased adaptive capability in turn corresponds to expansion of entrepreneurial activity, as firms increase their entrepreneurial orientation as the strategic mechanism to capitalize on their improved understanding of market conditions. We find support for our research model in a two-study series conducted in South Korea and the United Kingdom. Managerial summary: Most would agree that entrepreneurially oriented firms—being innovative, entering new markets, and taking risk—grow faster. But how a firm becomes entrepreneurial is a complicated question. In this study, we flipped the growth relationship around and found support for growth contributing to a firm's entrepreneurial orientation. But between growth and being more entrepreneurial is the firm's ability to recognize changes in market expectations. We argue that as a firm grows, it acquires new resources and new knowledge of how to use those resources. These new resource combinations increase its ability to recognize changes in market expectations—its adaptive capability. This capability uncovers new entrepreneurial opportunities for value creation. To capture this potential value, firms expand their entrepreneurial orientation.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.2532