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The moderating role of country institutional profile on the entrepreneurial orientation--performance relationships in the service industry.


Traditionally, the term "entrepreneurship" has been identified with the personality trait that conveys the image of self-made, risk-talking, and creative individuals who seize opportunity and become successful (Ouche, 1989). Another approach to entrepreneurship is the social trait focused on the impact of the socialization processes of certain categories of individuals to make a career as an entrepreneur (Bygrave & Minniti, 2000; Rauch, et. Al., 2009; Real et al., 2014). In today's intensifying global competition, increasing interdependence, rapid technology development, unstable environments, and many other factors have highlighted the need for organizations to become more entrepreneurial in order to survive and prosper (Dess, Lumpkin, & McGee, 1999; Alarape, 2013). Many observers, both executives and academicians, believe that an organization's survival and success require continuous organizational renewal, innovation, and risk taking, which in turn require the conceptualization and pursuit of new opportunities (Hult & Ferrell, 1997; Yener & Aykol, 2008). Whereas personality traits and social traits approaches focus on individual entrepreneurs, the organizational traits approach focuses on identifying the entrepreneur's role and behavior in organizations to explain the organization entrepreneurship phenomenon.

According to the organizational approach, entrepreneurs can organize windows of opportunity, mobilize resources, organize systems, and implement strategies to exploit opportunities. In this sense, an organization's entrepreneurial role can be and often performed by mobilizing the entire organization's capabilities, which exceed the abilities of any one key individual (Lumpkin & Dess, 1996a; Covin & Miles, 1999). Accordingly, entrepreneurship becomes applicable and relevant to organizations of all types and sizes. The challenge in describing organizational entrepreneurship that translates to organizational entrepreneurship (Barrett & Weinstein, 1998).

Although many dimensions of entrepreneurial orientation have cited in the literature, there is no agreement among researchers as to the most acceptable definition or approach of entrepreneurial orientation. While the debate continues over what constitutes an entrepreneurship (Covin & Slevin's, 1991) explanation that entrepreneurial orientation is based on innovativeness, proactiveness, and risk-talking propensity (Barrett & Weinstein, 1998; Boso, Story, & Cadogan , 2013).

In this manner, researches have recognized that entrepreneurial orientation as an organizational capability involves innovativeness, proactiveness, risk-taking (Hult & Ketchen, 2001). This view of entrepreneurial orientation will be applied in this study. More specifically, the bank's degree of entrepreneurial orientation will depend on the extent to which they innovate, act proactively, and take risks. Because of the extensive body of research on entrepreneurial orientation (Covin & Miles, 1999; Zahra, Jenning, & Kuratko, 1999), and abbreviated discussion of entrepreneurial orientation dimensions, namely, innovativeness, proactiveness, and risk taking will be presented.

Entrepreneurial Orientation Dimensions

The first dimension, innovations, refers to the development and introduction of novel goods, services, or technology and new market (Phillips, 1993). In this manner, innovativeness entails three distinct points: 1) Regularly and consciously engaging an and supporting new ideas, experimentations, creative process that may result I new products, services, technological processes, or new markets to create new value or enhance current value for customers; 2) Acquiring, developing, and deploying the latest technologies and production methods in the development and advancement of manufacturing processes; 3) and Being willing to depart from an existing process, technology, system, technique, or endeavor beyond the current state of the art.

The second dimension, proactiveness, is characterized by actively seeking unusual or novel ways to bring an entrepreneurial concept to fruition and achieving organizational objectives (Mintzberg, 1979). Proactiveness entails five distinct points (Covin & Slevin, 1989; Lumpkin & Dess, 1996a; Madichie, Hinson, & Masud., 2013): 1) emphasizing the importance of entrepreneurial managers to provide the vision and imagination necessary to engage in opportunistic expansion; 2) Emphasizing the importance of first-mover strategy for capitalizing on market opportunities; 3) Establishing brand recognition by exploiting asymmetries and participating in emerging markets; 4) Taking initiative by anticipation and pursing new opportunities and participating in emerging markets; and 5) Developing an aggressive competition orientation and the ability to identify and seize opportunities ahead of competitors.

The third dimension, Risk-taking, means the propensity to devote resources to projects that entail a substantial possibility of failure, along with chance of high returns (Lumpkin & Dess, 1996a). It involves: 1) Analyzing opportunities/threats to identify risk factors towards pursuing a perceived opportunity; 2) Scanning organization strengths and weaknesses to make reasonable decisions; and 3) Systematically reviewing risk-taking decisions to ease mitigate objective risks when faced with environmental uncertainties.


Entrepreneurial Orientation-Performance Relationship

Theoretical, and to a lesser degree empirical, research suggests that there are positive relationship between entrepreneurial orientation and performance (Runyan, Droge, & Swaney, 2008; Li & Tsai, 2009). However, some studies have proposed that, while theoretical research supports EO-performance linkages, systematic empirical evidence is lacking (Zahra & Dess, 2001). Despite the different views among researchers, they seem to agree that an organization's level of EO will improve its performance, competitive advantages, and, ultimately, its profitability (Zahra & Covin, 1995; Covin & Miles, 1999).

Unfortunately, the entrepreneurial literature related to developing countries is scare, and the entrepreneur's role in these countries has been largely neglected (Lazer & Hardin, 1994). From the literature search, this research found few studies that have explored entrepreneurial orientation-performance relationship in Middle East. The pioneering empirical work on entrepreneurial orientation-performance linkage in the Middle East is of (1998) study in Saudi Arabia and Dwairi's (2007) study in Jordan. Both Bhuian's (1998) and Dwairi (2007) used subjective measures and found a positive relationship between the degree of entrepreneurial orientation and Saudi and Jordanian organizations' performance. Based upon this reasoning, this study will use subjective performance to evaluate banks' performance in Jordan. Following the reasoning in past research, the authors expect that a bank' performance reports are a reflection of its degree of entrepreneurial orientation in Jordan. Thus, this study poses the following hypothesis:

Hypothesis 1: In Jordan, the greater the degree of a bank's entrepreneurial orientation, the higher the business performance of the bank.

Entrepreneurial Orientation in the Banking Industry in Jordan

As shown in Figure 1 and indicated previously, the dimensions of entrepreneurial oriented organizations are (1) innovativeness in problem solving, especially when it comes to market-oriented applications of technology; (2) adopting by the organization of a proactive posture toward its environment, and (3) a willingness to accept risks as necessary antecedents for goal achievement (Covin & Miles, 1999). Researchers have demonstrated that these dimensions increase an organization's flexibility and adaptability to changing environmental conditions, which are key elements in the organization's performance (Barrett & Weinstein, 1998). It is the underlying assumption of this proposed study that innovativeness, proactiveness; risk-taking dimensions constitute the core entrepreneurial orientation in banking organizations as well. Similarly, another underlying assumption of this proposed research is that entrepreneurial orientation will improve Jordanian bank's performance.

Furthermore, research has generally supported the argument that entrepreneurial organizations perform well (Arunachalamet, Ramaswami, Pol, & Walker, 2013). Nevertheless, evidence has also emerged to contradict the direct positive entrepreneurship-performance relationship (Hart, 1992). Research also suggests that entrepreneurial organizations perform well in dynamic environments (Brazel & Herbert, 1999), and predicts that entrepreneurial organizations perform poorly in regulated or sable environments (Schenkel & Garrison, 2009).

Thus, the positive entrepreneurship-performance linkage may not be monotonic across different environments or contexts. Although past research has investigated different environmental and contextual factors as moderators of the entrepreneurship performance relationship, none has looked at the potential contingency roles of country institutional profiles on the performance effect of entrepreneurship. Because organizations at this time of globalization increasingly confront different country institutional profiles, as dominant environmental and contextual factor in diverse international markets, the time is ripe to investigate CIP moderating role on the entrepreneurship-performance relationship.

Country Institutional Profiles and Entrepreneurial Orientation-Performance Relationship

The underlying meanings of country institutional profiles dimensions are in harmony with the essence of entrepreneurship, innovation, proactiveness, and risk talking. By focusing on supporting new businesses, reducing risks inherent in new businesses, and allowing entrepreneurship. Likewise, the cognitive and normative dimensions, which relate to shared knowledge and appreciation of new business, respectively, appear to resonate with innovativeness, proactiveness, and risk taking, the essentials entrepreneurship. Not surprisingly, Busenitz, Gomez, and Spencer (2000) posit that entrepreneurship flourishes in favorable country institutional profiles.

Further, Nelson (1993) argued that the effectiveness of entrepreneurial activities that take place within a country's boundary is dependent on the unique institutional arrangement of the country. Additionally, researchers have linked country institutional profiles and infrastructure to innovative entrepreneurial activities (Bartholomew, 1997; Parboteeah et al., 2009). The country's tangible and intangible infrastructures are critical to support entrepreneurship (Krueger, 2000). Further, Krueger (2000; Orlando, Ping, & Chadwick (2009) pointed out the need for cognitive-based models to orient individuals not only reacting to viable opportunities, but also perceiving them as viable.

This growing body of research implies that entrepreneurship is more effectual in higher (more favorable) country institutional profiles. In other words, country institutional profiles will moderate the performance influence of entrepreneurship. Although Jordan is a developing country, recently its general policies, including those related to the banking industry, have begun to realize the importance of entrepreneurship to economic growth (Kostova, 1997; 1999; Hosoe, 2001).

As noted earlier, Jordanian managers' (traditional managers, Western educated managers, and foreign managers of joint venture and foreign banks) perception of the role of the country institutional profiles has influenced Jordanian bank to exhibits different levels of market orientations (Shahadah, 2002; Parboteeah et al., 2008). The same reasons are also likely to manifest in a wide variation in the extent to which Jordanian banks are being entrepreneurially oriented. For instance, traditional managers of banks associated with the government have more access to resource and favorable treatment from the enforcement agencies and have positive perceptions of the country institutional profiles' impacts on their entrepreneurial activities (Kostova, 1999).

Other banks' managers exposed to Western financial markets feel that country institutional profiles (regulations, cognitive, and normative) have not yet lent the needed support for their banking industry. Thus, it is expected that EO will be more effective in banks with CIP more favorable entrepreneurial activities (Zulkafly, 2000). Likewise, foreign managers of joint venture banks who have trained and practiced in different country institutional profiles feel those Jordanian institutional profiles do not favor them. Overall, banks' managers fully understand that favorable regulation, cognitive, and normative dimensions positively affect the entrepreneurial orientation-performance relationships (Lumpkin & Dess, 2001).

Further, there is a seeming similarity between under values of EO and the essence of cognitive and normative dimensions of CIP (Mitchell, et al., 2000). Scholars argue that EO primarily refers to tracking and responding to changing market forces within the primary objective of attaining sustained customer satisfaction (Jaworski & Kohli, 1993) which in turn will ensure business success. In essence, achieving EO requires knowledge and appreciation of new business opportunities (Slater & Narver, 1995), which are the fundamental of cognitive and normative dimensions of CIP (Mitchell et al., 2000). However, in Jordan there might be a strong link of value-congruence between EO and CIP in the banking industry. Thus, the following hypotheses were posed:

Hypothesis 2: In Jordan, the more regulatory dimension is favorable to Jordanian banks, the greater the positive impact of entrepreneurial orientation of a bank on its performance.

Hypothesis 3: In Jordan, the more cognitive dimension is favorable to Jordanian banks, the greater the positive impact of entrepreneurial orientation of a bank on its performance.

Hypothesis 4: In Jordan, the more normative dimension is favorable to Jordanian banks, the greater the positive impact of entrepreneurial orientation of a bank on its performance.


Sample and Data Collection

Data acquired from branch managers and other senior management employees of banks in Jordan who are members of the Jordanian Banks Association. Of the 620 branches listed in The 2008 Banks and Finance Institutions Directory in Jordan, 475 branches participated in this study. Drop-off and pick-up techniques were employed in order to increase the chances of reaching the target population of the study. Each of the 475 branches was hand-delivered two copies of the questionnaire (total 950). Five hundred and seven completed questionnaires were returned resulting in a response rate of 53%. This response rate compares favorably with other studies on orientation (Jaworski & Kohli, 1993).

The branches were considered as strategic business unit (SBU) and served as the unit of analysis in this study. Respondents have requested to respond based on the information of the branch in which he or she works. The purpose of the sampling plan was to ensure that a large number of branches from different banks were included in the sample. Pre-selected bank classifications used to ensure that the selections of banks include public banks, private banks, and foreign or joint venture banks. The sample profile also showed that all Jordanian regions are represented. 100% of the respondents were at the levels of functional managers and above. In short, the characteristics of the sample indicate that an overwhelming majority (100 %) of the respondents were in managerial positions. Of the respondents, 52% were branch managers, while 48% were members of the senior management team. The majority of the respondents (86%) had majored in business, and over 90% had bachelor or higher degrees. Two-third of the respondents had six or more years of experience in their current positions. In general, the profile of the respondents indicates that they are responsible persons and have answers to questions asked in this study.

Measures of the Constructs

Covin and Slevin's (1989) nine item scales of entrepreneurial orientation have adopted. While Busenitz, Gomez, & Spencer's (2000) 13-item scale assessed CIP scale. The regulatory, cognitive, and normative components had three, five, and five items, respectively. The response categories were 1=strongly disagree, 2=disagree, 3=neutral, 4=agree, and 5=strongly agree. For all scales, respondents were instructed to respond to Likert type statements on a 5-point format ranging from 1, strongly disagree, to 5, strongly agree. From Narver and Slater (1990) and Jaworski and Kohli (1993), we adopted a 3-item scale to measure banks' performance, judgmentally. Lack of access and resistance surfaced during pre-testing precluded the researcher from pursuing the collection of objective performance data. The anchors were 1=far below average, 2=slightly below average, 3= average, 4=slightly above average, and 5=far above average. Given our sample was from Jordon, an emerging economy, the three scales entrepreneurial measuring orientation, country institutional profiles, and performance, were deemed appropriate.

Validation of the Measures

Exploratory factor analysis, coefficient alpha, and item-to-total-correlation were estimated to assess the psychometric proprieties of the scales (Hair, Ralph, & Tatham, 1987). All scales (Covin & Slevin, 1989; Jaworski & Kohli, 1993; Busenitz, Gomez, & Spencer, 2000) have moderate to high reliability coefficients that exceed the level recommended by Nunnally (1978). Items with low reliability scores were deleted. Cronbach alphas ranged from 0.55 to 0.80.

Next, items tentatively selected for each scale were once again factor analyzed. Based on the results of the factor analysis, only 3-items from Country institutional profiles scale were deleted because of their loadings below 0.40, the cut-off level for this study. Table 1 includes information related to the scales including alpha, means, and standard deviations. The questionnaire was administered in English. Since the target respondents were top-level executives, it was expected that this group of respondents would know English well.


The data obtained from the sample used to test all the hypotheses in this study (see Table 2). The regression models analyzed and discussed next. A series of regression models were undertaken to test for the impact of the independent variables on the dependent variable, bank's performance. The results of the egression models 1-4 are shown in Table 2. Model 1 used to test hypothesis 1 whereby bank performance was regressed on EO. The results show that EO is significantly related to business performance ([beta] =.363, P=.000). This finding indicates that EO has a significant positive effect on Jordanian bank performance. Thus, hypothesis 1 is supported.

In model 2, and model 3, the country institutional profiles dimensions were tested collectively and independently. The results of model 2, showed that country institutional profiles has a significant positive ([beta] =. 127, P=.074) impact on the variance of the independent variable, bank's performance (PF). While in model 3, the country institutional profile dimensions CIPR (regulatory), CIPC (cognitive), and CIPN (normative) were tested separately. The results showed that the standardized coefficient for the independent EO variable decreased ([beta] =.205, P=.030), meaning that the CIP of Jordan affects the importance of EO in influencing bank performance. Specifically, results showed that CIPR (regulatory) ([beta] =.09, P=.021) and CIPC (cognitive) ([beta] =.251, P=. 000) had positive significant impact on the dependent variable, banks' performance in Jordan. Surprisingly, CIRN (normative) ([beta]=-.129, P=.000) had significant negative impact on the variation of the dependent variable.

Finally, in model 4, the interaction terms between the main construct EO and the CIPs dimensions were regressed to determine the role of moderating variables in moderating the effect of EO on the banks' performance. The regression results in Table 4 showed a slight decline in the importance of EO ([beta] =.210, P=.000) in determining the performance of the banks. The statistical analysis demonstrated that among the independent interactions variables, EO* CIPR (regulative) ([beta] =. 142, P=. 014) and EO*CIPC ([beta] =.021, P=. 041) had a significant positive moderating effect on the EO-performance linkages in Jordan. Thus, Hypothesis 2 and 3 supported. However, the product of EO*CIPN (normative) interaction ([beta] =.125, P=. 062) had a significant negative moderating effect on the performance of EO. Thus, Hypothesis 4 not supported.


The implications of this study are several. The study findings strongly suggest that country institutional environment moderates the relationship between an important strategic variable, entrepreneurial orientation, and firm performance. Studies of entrepreneurial orientation in international contexts led to discrepant findings, and we believe that a country's institutional profile plays a major role in the degree to which entrepreneurial orientation is successful. The study findings demonstrated that organizations operating in developing or emerging economies, such as Jordan, could achieve superior performance by implementing entrepreneurial orientation like their counterparts in other developed countries. The study found that Jordanian-banking industry has a long way to go to adopting entrepreneurial orientation as a strategy to enhance banks performance. Thus, Jordanian managers and policy makers should continue their support to make entrepreneurial orientation an organizational value by creating an entrepreneurship culture.

Furthermore, Jordanian mangers and policy makers have to cooperate to enhance organizations' capabilities in adapting to their CIP. The study showed that Jordanian banks have been positively responding to recent financial turbulence, but have not been able to adapt to conversion of Jordanian business environment from mixed economy to free market oriented economy. For instance, lack of understanding or coping with conversion of economic policy, the CIP-normative dimension was negatively moderating the entrepreneurial orientation-performance relationships. Although, CIP profiles will be influence by, not only internal events, but, it will also impacted by international changes and events. Thus, Jordanian managers and policy makers have to continue their traditional efforts in promoting regional social, political and economical stability and integration.

However, the regulatory and cognitive dimensions are positively moderates the association of entrepreneurial orientation and performance. Ironically, the findings revealed that normative dimension has a negative significant moderating in the entrepreneurial orientation-performance linkage. This result may be explained by the fact there is a surge in number of businesspeople who may have only the resources, but lacking the necessary knowledge about business environment in Jordan, This is another indication that Jordan, as other developing or emerging market lacks the professional class of entrepreneurs (Ginsberg, 1985; El-Namaki, 1988; Ali, 1999). Jordanian, are much concern about the price hiking and the growing power of businesspeople. Finally, while it may be safe to conclude that entrepreneurial orientation is likely to enhance performance of organizations operating in emerging market economy, it is important to consider the differences and uniqueness of the country's specific environmental factors when implementing the entrepreneurship concept.

Furthermore, Firms expanding globally must take into account the fact that countries vary in terms of the institutional characteristics of their national environment. Managers and decision-makers of international firms might want to pay more attention to the business environmental factors when planning to initiate entrepreneurial orientation program in non-Western business environments. Such environments are in a transitional stage or moving toward becoming fully free market economies.


Entrepreneurial orientation studies in Jordan are limited to few studies. Gathering data from that part of the world is still problematic. This study represents an attempt to empirically investigate the moderating role of the Jordanian institutional profiles in effects of entrepreneurial orientation on performance of the banking industry in Jordan. The results might serve as a benchmark to stimulate additional research in this area in emerging market economies. One suggested direction for future research is to replicate this study in other industries and another country institutional profile. Another avenue for future research is to duplicate this study at a future date to explore whether managers' and policy makers' perceptions of entrepreneurial orientation change over time with the development of the country institutional profiles environment.


This study investigated the moderating roles of country institutional profiles on the relationship between EO--performance within a highly growth oriented regulated industry in an emerging Middle-Eastern economy. Not only entrepreneurial orientation research is rare in such a context, but also the context has the characteristics that allow for a robust test for the complete entrepreneurial orientation model. In This study, out of four hypotheses, three were supported, and one was not supported. However, a closer look into the results reveals some interesting insights.

First, the relationship between EO--performance is fairly fluctuating across diverse contexts, but never be a negative. Second, even though it seems that country institutional profile factors play a role in the entrepreneurial orientation model, the nature of that role is still unclear. Similar to the results of previous studies, this study also found some inconsistencies on how CIP factors correlate with entrepreneurial orientation. Perhaps the nature of the correlations of CIP factors and EO is much more complex. Third, the study may have proved that a within-country variation in Hofstede's cultural typology is possible.

Hofstede identified Jordan as having a fixed set of cultural traits that are not conducive for entrepreneurial orientation (Hofstede, 1997). However, a successful test of the model shows that adequate variations exist in entrepreneurial orientation and in other constructs in the model within Jordan. Thus, entrepreneurial orientation model may not be culture-bound.

Finally, even if entrepreneurial orientation not culture bound the nature of the scales may have to be reformulated to fit the developing cultures. For instance, this study confirms that further attention to most scales in the entrepreneurial orientation model and a country institutional profile is essential. Most scales including that of entrepreneurial orientation and country institutional profiles did not remain intact. Hypotheses tests were pursued with respecified scales and this is pervasive across entrepreneurial orientation and country institutional profiles research. Much more attention is needed in refining these scales. The findings have a number of implications for decision makers, policy makers, and researchers.


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Musa Dwairi

Iman Akour

Wiley College

Musa Dwairi is Professor of marketing and management at Wiley College, Texas. Dr. Dwairi has two terminal degrees: Ph.D. in Public Administration and a DBA in Business Administration. His teaching areas include courses in both disciplines. His research focused on market orientation, cultural diversity, Ethical and Social responsibility, and Information technology.

Iman Akour is Associate Professor of Computer Information Systems at Wiley College, Texas. Her current research areas include applications of Technology Acceptance Model into Arab cultures as well as other emerging economies, and E-Learning. Dr. Akour holds a Doctorate degree in Business Administration from Louisiana Tech University, USA.

Table 1
Alpha, Means, and Standard Deviation

Constructs                         [[alpha].bar]   Mean   SD

Entrepreneurial Orientation (EO)       .834        4.32   1.60
Banks' Performance (PF)                 .74        3.47   .78
Country Institutional
  Profiles-Regulatory (CIPR)            .74        3.63   .63
Country Institutional
  Profiles-cognitive (CIPC)             .67        3.39   .56
Country Institutional
  Profiles-Normative (CIPN)             .71        3.42   .75

Table 2
Regression Results

Regression   Dept.   [R.sup.2]   P
Model         V.                 Value

Model 1      PF      .19         .000

Model 2      PF      .24         .000

Model 3      PF      .42         .000

Model 4      PF      .44         .000

Regression                   Independent Variables

Model 1         EO
             (.000) *
Model 2      EO .272      CIP
              .272        .127
             (.000) *   (074) *
Model 3         EO        CIP        CIPR       CIPC        CIPN
               .205       167         .09       .251       .-129
             (030) *    (079) **   (.021) *    (000) *   (.000) **
Model 4         EO       EO*CIP     EO*CIPR    EO*CIPC    EO*CIPN
               .210      -.231       .142       .021        125
             .000) *    (.106) *   (.014) **   (.041)    (.062) ***

Values in parentheses represent the P-values: * P < 0.01, ** P < 0.05,
***P < 0.10.


PF = Banks' Performance

EO = market orientation

CIPR = CIP-Regulatory

CIPC = CIP-Cognitive

CIPN = CIP- Normative

EO*CIPR = Entrepreneurial orientation* CIP-Regulatory

EO*CIPC = Entrepreneurial orientation* CIP-Cognitive

EO*CIPN = Entrepreneurial orientation* CIP-Normative
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Author:Dwairi, Musa; Akour, Iman
Publication:International Journal of Business, Marketing, and Decision Sciences (IJBMDS)
Article Type:Report
Geographic Code:7JORD
Date:Jun 22, 2014
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