Sustainability, Vol. 11, Pages 5178: How Does Entrepreneurial Orientation Influence the Sustainable Growth of SMEs? The Role of Relative Performance (Sustainability)

The answer to the question, “Which factors determine the sustainable growth of small- and medium-sized enterprises (SMEs)?” is still fragmented. While previous studies have paid attention to a firm’s entrepreneurial orientation (EO) as a key driver of SME growth, it is often overlooked that contextual factors can be crucial in order for EO to be effective in yielding sustainable growth in SMEs. This paper focuses on the role of relative performance as a boundary condition in the relationship between EO and sustainable growth of SMEs. We predict that the effect of EO on SMEs’ sustainable growth would differ depending on performance feedback based on their past performance. Our empirical analysis based on panel analysis shows that SMEs strongly pursue sales growth immediately after they achieve lower levels of performance than historical aspiration. However, when their performance goes beyond the historical aspiration level, their growth patterns appear to show a different pattern depending on their level of EO. SMEs with greater EO are more likely to pursue firm growth when performance is above historical aspirations while those with lesser EO are not. Our findings suggest that relative performance is an important boundary condition in the relationship between EO and SMEs’ sustainable growth.