Entrepreneurial Orientation, External Environment, Business Model Innovation and Performance of Annual Top 100 Medium Sized Enterprises in Kenya

Abstract

While entrepreneurial orientation is often portrayed as an important factor contributing to enhanced enterprise performance, evidence suggests that the role of entrepreneurial orientation on enterprise performance is still a puzzle requiring to be disentangled. This study attempted to provide a better understanding of how and when entrepreneurial orientation influences enterprise performance by considering the moderating and mediating role of the external and Business Model Innovation (BMI), respectively, on the effect of entrepreneurial orientation on enterprise performance. The study had four precise objectives: to determine the direct effect of entrepreneurial orientation on enterprise performance, to investigate the moderating role of the external environment on the effect of entrepreneurial orientation on enterprise performance, to examine the mediating role of BMI on the effect of entrepreneurial orientation on enterprise performance, and to explore the moderating role of the external environment on the indirect effect of entrepreneurial orientation on enterprise performance through BMI. The study was based on Schumpeter's entrepreneurship theory, resource-based view, and organisational learning theory. The research design was descriptive cross-sectional and targeted 517 enterprises ranked among Klynveld Peat Marwick Goerdeler (KPMG) and Nation Media Group's annual Top 100 medium sized enterprises in Kenya. Out of the 221 enterprises selected through stratified simple random sampling, 144 responded to the self-administered questionnaire, and 134 were used for data analysis. The hypotheses were tested using regression analysis employing Hayes's PROCESS Macro. The findings indicate that entrepreneurial orientation has a direct positive effect on enterprise performance. However, the external environment's moderating effect on entrepreneurial orientation's influence on enterprise performance was not significant. The mediating effect of BMI on the influence of entrepreneurial orientation on enterprise performance was found to be positive and significant meaning that entrepreneurial orientation influenced enterprise performance through its positive effect on BMI. The study further established that the indirect effect of entrepreneurial orientation on enterprise performance through BMI was not moderated by the external environment, indicating that there was no moderated mediation relationship among the study variables. Overall, the study concluded that entrepreneurial orientation on its own does not influence enterprise performance. Instead, entrepreneurial orientation influences enterprise performance through its positive effect on BMI. The study advocates for the adoption of entrepreneurial behaviour and BMI practices by managers of medium sized enterprises to improve the performance of their firms. The study implies that policymakers and practitioners should focus on both entrepreneurial orientation and BMI to improve the performance of medium sized enterprises, which in turn will contribute positively to economic development, job creation, and poverty eradication. In summary, this study contributes to a better understanding of the relationship between entrepreneurial orientation and enterprise performance. It provides evidence that the effect of entrepreneurial orientation on enterprise performance is fully mediated through BMI and establishes BMI as an immediate outcome of entrepreneurial orientation. The study suggests further research in this area.