Modelling the relationships between the business environment, entrepreneurial orientation and employment growth amongst small, medium and micro-enterprises in South Africa

Abstract

Purpose: This study seeks to model the nexus between environmental dynamism, environmental hostility, five sub-dimensions of entrepreneurial orientation (EO) (innovativeness, pro-activeness, risk-taking, competitive aggressiveness and autonomy) and employment growth.

Design/methodology/approach: Based on a positivist research philosophy, this study adopts a quantitative methodological approach, which entails an online survey. Data is obtained through probability sampling of 1031 small, medium and micro enterprise businesses (SMMEs) and analysed using structural equation modelling (SEM).

Findings/results: The findings reveal only four dimensions namely proactive-innovation, risk-taking, competitive aggressiveness, and autonomy as statistically visible, which is contrary to five as postulated in theory. In addition, it was found that the relationships between environmental hostility, environmental dynamism and the dimensions of EO were statistically significant. Conversely, the relationships between the dimensions of EO and employment growth were statistically insignificant except within the category of medium-sized businesses (MSBs) in which proactive-innovation and competitive aggressiveness indicated a statistically significant negative association with employment growth.

Practical implications: A dynamic and hostile environment is essential to increased entrepreneurial intensity among SMMEs, but the size of the firm can be a determinant in their capacity for employment generation.

Originality/value: The association between EO and employment growth has attracted less attention in research despite its theoretical and practical significance. Furthermore, studies on the antecedents of EO such as its relationship with environmental dynamism and hostility are limited. Following a multidimensional approach to EO, this empirical study illustrates its relationship with employment growth incorporating the component of the business environment. Regarding the plausibility of these associations, it distinguishes MSBs from the other categories of businesses within the SMME cohort.