Journal of Small Business and Enterprise DevelopmentThe influence of an entrepreneur's socio‐cultural characteristics on the entrepreneurialorientation of small firmsLevent Altinay Catherine L. Wang

Article information:To cite this document:Levent Altinay Catherine L. Wang, (2011),"The influence of an entrepreneur's socio#cultural characteristicson the entrepreneurial orientation of small firms", Journal of Small Business and Enterprise Development,Vol. 18 Iss 4 pp. 673 - 694Permanent link to this document:http://dx.doi.org/10.1108/14626001111179749

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The influence of anentrepreneur’s socio-cultural

characteristics on theentrepreneurial orientation of

small firmsLevent Altinay

The Business School, Oxford Brookes University, Oxford, UK, and

Catherine L. WangSchool of Management, Royal Holloway, University of London, Egham, UK

Abstract

Purpose – This paper seeks to examine the relationship between Turkish ethnic entrepreneurs’socio-cultural characteristics (namely education, experience and religion) and the entrepreneurialorientation of their firms.

Design/methodology/approach – The study collected data through 139 face-to-face structuredinterviews with Turkish ethnic entrepreneurs in London, UK.

Findings – The study illustrates that educational attainment of an entrepreneur makes a positiveimpact on a firm’s entrepreneurial orientation. Educational attainment equips business owners withthe skills and reflective mindsets of understanding customers and responding to their needs. Previousbusiness experience of the entrepreneur also impacts positively upon a firm’s entrepreneurialorientation, while religion of the entrepreneur does not have a significant impact on the firm’sentrepreneurial orientation.

Research limitations/implications – This paper reports findings based on Turkish ethnicentrepreneurs in London. Therefore, care should be taken in making generalisations from the sample.

Practical implications – This paper identifies those socio-cultural attributes that entrepreneurs cancapitalise on in order to enhance the entrepreneurial orientation of their firms.

Originality/value – The paper fills in a glaring gap by providing empirical evidence about therelationship between socio-cultural characteristics of entrepreneurs and their small firms’entrepreneurial orientation.

Keywords Socio-cultural characteristics, Entrepreneurial orientation, Entrepreneurs, United Kingdom,Turkey, Ethnography

Paper type Research paper

IntroductionEntrepreneurial orientation (EO) is crucial in improving a firm’s competitiveadvantage and performance (Zahra, 1991; Zahra and Covin, 1995; Wiklund, 1999). Anentrepreneurial firm engages in product innovation, undertakes somewhat riskyventures and acts proactively by being the first to come up with new products,

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1462-6004.htm

The authors would like to acknowledge the support of the ESRC for the project “Socio-culturalfactors, ethnic minority entrepreneurial orientation and a firm’s growth: a comparative study ofTurkish and Chinese small firms in the UK” (Project Reference: RES-061-23-0051).

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Vol. 18 No. 4, 2011pp. 673-694

q Emerald Group Publishing Limited1462-6004

DOI 10.1108/14626001111179749

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technologies and administrative techniques (Lumpkin and Dess, 1996; Miller, 1983). Bysearching for product/service-market prospects, entrepreneurial firms tend toconcentrate on customer needs and competitors’ offerings, thereby becoming marketoriented (Miles and Arnold, 1991; Morris and Paul, 1987). Internally, EO contributes toorganisational transformation and strategic renewal through creation and combinationof organisational resources and competences (Dess et al., 1999; Zahra et al., 1999).

Scholars have also examined various contingency factors, such as the externalenvironment (Covin and Slevin, 1989), that influence the effect of EO on performance(Zahra and Covin, 1995). However, the question as to how characteristics internal to thefirm influence its EO remains under-researched, as rightly pointed out by Lumpkin andDess (1996). Covin et al. (2006) renew the call for EO research to focus on attributesrelated to internal management that are conducive to EO of a firm. In particular,recognising the critical role that socio-cultural characteristics play in determining theentrepreneurial behaviour of a firm, several scholars have called for future researchaddressing the impact of an entrepreneur’s culture on firm-level entrepreneurship(Hayton et al., 2002). In a small firm, EO is grounded in the values, intentions and actionsof the individual who is in charge; the values of a small firm are simply an extension ofthe values of the individual entrepreneur, and therefore influenced by the inherentcharacteristics of the entrepreneur (Carson and Gilmore, 2000; Lumpkin and Dess, 1996).However, in empirical terms, the relationships between the socio-cultural characteristicsof an entrepreneur and firm-level entrepreneurship, still need to be investigated. Thispaper therefore aims to fill this gap by investigating the relationship betweensocio-cultural characteristics of Turkish ethnic entrepreneurs and their firms’ EO.

Theoretical frameworkCulture is considered to have an influence on managerial practices and serves as amediator that can guide and shape behaviour (Smircich, 1983). What is consideredappropriate behaviour at work will heavily depend on culture (Hofstede, 1980).Although there are many other levels of culture, values are held to be a critical featureof culture and cultural distinctiveness (Kluckhohn and Strodbeck, 1961; England, 1976;Hofstede, 1980). Values can be considered to be the core of culture and the basic motivebehind human behaviour. As stated by Deresky (1997), many people in the worldunderstand and relate to others only in terms of their own cultural values.Interpretation of things, establishment of priorities, the making of choices and reachingdecisions are the issues which are given shape by values before the outcome of these isreflected in behaviour (Rokeach, 1979).

Among various socio-cultural characteristics, the prior experience, education andreligion of entrepreneurs have been highlighted as key factors that influenceentrepreneurs’ cultural values and thus the level of entrepreneurship (Hayton et al.,2002; Morrison, 2000). For example, the manner in which the young people areeducated from an early age and the transferable skills that people develop during theirhigher education play a significant role in the initiation of characteristics generallyassociated with entrepreneurial behaviour (Casson, 1982; Gibb, 1996; Ronstadt, 1985).In addition, the entrepreneur’s previous related work experience prior to opening a newventure is an important factor that influences how the entrepreneur handles thestart-up and the growth of the business (Hatch and Dyer, 2004). Previous experience inparticular creates a ‘cognitive framework’ that facilitates pattern recognition and

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contributes to the management of risks associated with entrepreneurial behaviour.Religion also shapes values and thus how the entrepreneurs manage theentrepreneurial activities of their firms. Highly religious entrepreneurs will tend touse religious criteria to inform their decision making, even if it harms their short-termcommercial interests (Dodd and Gotsis, 2007). To conclude, experience, education andreligion indicate the degree to which people consider entrepreneurial behaviours (suchas risk taking, innovativeness and proactiveness) to be desirable. Although previousstudies inform our understanding of the influence of socio-cultural characteristics on afirm’s entrepreneurial behaviour in general, none of these studies empirically examinedthe relationship between these socio-cultural characteristics and a firm’s EO.Therefore, three variables were included in the study’s framework to understand theirpotential influence on EO.

EO has emerged as a multi-dimensional firm-level construct within the strategicmanagement and entrepreneurship literatures. Originally proposed by Miller (1983)and later modified by Covin and Slevin (1991), EO describes certain firm-levelcharacteristics and management-related preferences and beliefs with regards to anorganisation’s overall business operations, its response to customers’ needs andproduct offerings and interactions with competitors (Covin et al., 2006). It consists ofthree main factors, namely innovativeness, proactiveness and risk taking (Lumpkinand Dess, 1996). Innovativeness is connected with seeking creative solutions toproblems and needs (Covin and Slevin, 1989). It involves promoting and supportingnovel ideas, experimentation and creative processes that may lead to new products.Proactiveness involves shaping the environment by introducing new products,technologies, administrative techniques rather than merely reacting to market change(Lumpkin and Dess, 1996). Risk taking involves the willingness to commit significantresources to opportunities that have a reasonable chance of success as well as costlyfailure (Lumpkin and Dess, 1996; Miller and Friesen, 1983). As a strategic choice, thesedimensions of EO are embedded in an organisation’s philosophy that drivesdecision-making and behaviour towards creating new goods, pursuing new methods ofproduction and/or offering services and entering new markets (Stevenson and Jarillo,1990). EO could therefore be an important indicator of the way in which anorganisation is structured and its potential ability to outperform the competition.

In both theoretical and empirical studies of entrepreneurship in small businesses,researchers highlight the significance of socio-cultural attributes such as the religion,education, and experience of the entrepreneur in explaining firm growth (Basu andAltinay, 2002; Smallbone and Wyer, 2000; Storey, 1994; Wiklund and Shepherd, 2003).However, these studies did not consider the EO construct in explaining firm-levelentrepreneurship. Specifically, although it is recognised that the owners of the smallbusinesses determine the strategic direction, few studies examined the relationshipbetween their socio-cultural attributes and the EO of their firms. The following sectionof the paper discusses the relationships between the socio-cultural characteristicsnamely education, experience and religion and the EO of a firm.

Socio-cultural characteristics and entrepreneurial orientationEducation and EOThe empirical evidence of the Global Entrepreneurship Monitor project shows that therelationship between education and entrepreneurial activities is not unclear (Bosma

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and Harding, 2007). However, in theory, prior knowledge is a crucial antecedent ofdifferent dimensions of EO including innovativeness (Carneiro, 2000; Dove, 1999;Nonaka and Takeuchi, 1995), proactiveness (Clercq and Arenius, 2006) and risk taking(Knight et al., 2003; Xia et al., 2001). More specifically, acquisition and exploitation ofknowledge, knowledge dissemination and responsiveness to knowledge have beenidentified as the components that have the most impact on a firm’s ability to innovate,act proactively and take risks (Day, 1994; Fahey and Prusak, 1998; Grant, 1996; Teece,1998). Following this line of argument, the educational background of the entrepreneurplays an important role in this endeavour.

In terms of expanding a business, recent research found a positive effect ofindividual educational level on the likelihood to perceive entrepreneurial opportunities(Clercq and Arenius, 2006). A higher level of education develops both the analyticalability and the computational skill of the entrepreneur as well as communication skills.Those who attain a higher level of education are better equipped to communicate withcustomers, gather market intelligence and develop proactive strategies which then leadto higher growth (Casson, 1982). Education could also enhance an individual’scapacities for creativity, flexibility, self-direction and the ability to respond to widelydifferent situations and thus contribute to innovative behaviour within a firm (Rauchand Frese, 2000; Collinson and Quinn, 2002; Shook et al., 2003; Llewellyn and Wilson,2003; Walton, 2003). Empirical studies also confirm these assertions (Peters, 2002;Walker, 1988). In his study of Greek owned businesses in Sydney, Walker (1988) foundthat the businesses underwent expansion when university educated sons joined thefirms. Similarly, Peters (2002) discovered that the Greek Kailis brothers attributed theirsuccess as exporters of lobster and other seafood to their educational attainments.Their qualifications equipped them with the skills and mindsets to remain flexible andopen to market forces and opportunities. Confirming these, Levent et al. (2003) andBachkaniwala et al. (2001) identified lack of education as an ethnic-based obstacle toentrepreneurship and argued that those entrepreneurs who are keen on breaking outinto the mainstream market will need to attain higher levels of education. In addition,there are studies that found a positive relationship between educational attainment andrisk taking propensities of entrepreneurs and business owners (Knight et al., 2003;Schwer and Yucelt, 1984; Xia et al., 2001). According to these researchers, educationleads to risk taking with confidence because critical thinking and reasoning skillsacquired through education helps these individuals improve their understanding ofwhat they know and more accurately predict the outcomes of their decisions. Based onthese arguments, we propose the following hypothesis:

H1. The level of educational attainment of an owner is positively associated withthe EO of a small firm.

Previous experience and EOPrevious experience can also assist owners in identifying new market opportunities(Perez and Pablos, 2003). In particular, such experience contributes towards buildingup the entrepreneur’s knowledge base, developing access to market information andbusiness networks, improving managerial capability and thus diversifying productsand services (Basu and Goswami, 1999; Westhead et al., 2001). Acquired experience bymanagement has been found to be crucial to overseas expansion by identifying trendsand exploiting the opportunities (Mughan et al., 2004; Williams, 1991; Treadgold, 1992).

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In addition, in circumstances where the context of the new business is similar to theone where the entrepreneur gained earlier, s/he might be able to capitalise on theprevious relationships with customers and suppliers in their operations (Haber andReichel, 2007).

In addition, it is emphasised that individual experience is paramount in generatingknowledge (Huber, 1996) and can itself engender and encourage innovativeness(Haynes, 2003). Previous business experience in particular gained through dealing withcustomers/suppliers and other stakeholders provides valuable feedback in the shapingand development of innovation strategies (Bakhru, 2004). Grant and Romanelli (2001)argue that the prior experience of the founder of a firm is the source of the knowledgeassets critical for the creation of new routines and capabilities to innovate newproducts. Prior business experience equips managers with the skills and knowledge ofcombining, organising and exploiting resources for innovation (Alvarez and Busenitz,2001).

An entrepreneur’s previous work experience in the field prior to opening a newventure is also an important factor that influences how the entrepreneur handles thestart up and the growth of the business (Hatch and Dyer, 2004; Goedhuys andSleuwaegan, 2000). Previous business experience often equips decision makers with apositive attitude towards business risks and entrepreneurship (Brockhaus, 1980;Goedhuys and Sleuwaegan, 2000; Jones-Evans, 1996). For example, in the case ofinternational business, prior exposure to or involvement in an internationalenvironment removes some of the fears and uncertainties inherently associated withthe ‘uncertain’ international market (Ibeh and Young, 2001). Decision makers thusfocus less on risks and more on the exploitation of opportunities. An added bonus ofbusiness experience is a much improved personal network that reduces the risk ofengaging in entrepreneurial activities (Basu and Goswami, 1999; Ibeh, 2004). Giventhese arguments, we have set our hypothesis as:

H2. The previous business experience of an owner is positively associated with asmall firm’s EO.

Religion and EOReligion shapes the society by giving meaning to a society’s ethical structures,encouraging or discouraging certain behaviours (Dodd and Seaman, 1998). In Muslimcountries, which are usually defined as high-context cultures, people tend to be fatalistmeaning that they do not believe that they have much control over events that affectthem (Raven and Welsh, 2004). They strongly believe in destiny and events beingcontrolled by fate. In Muslim culture, fatalism is characterised by the phrase“InshAllah2, which means “If God wills it” (Rice, 1999). This means that a Muslim willdo his/her best but the external outcome may not be under his/her control. No researchhas been found in the literature that attempts to test it but the extant discussion couldimply that we should expect a negative relationship between the Islamic religion of abusiness owner and a small firm’s EO. For example, there is a widespread belief thatstrongly religious countries are not receptive to innovation and proactiveness (Herbigand Dunphy, 1998; Slowikowski and Jarratt, 1997; Tansuhaj et al., 1991). This isexplained by the high fatalism shaped by the religion of these cultures. In Muslimcountries, fatalism is generally associated with less willingness to try new technicaland non-technical products and with higher levels of perceived product risk (Tansuhaj

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et al., 1991; Slowikowski and Jarratt, 1997). Confirming this, Farid (2007) advocates thatIslam religion encourages a conservative culture that leads to risk-averse attitudeamong Muslim business people. Added to these values, is the concept of “hellal” (whichcan be translated as accepted by the religion) might discourage retail and hospitalitybusiness owners to sell alcohol and pork which are considered to be “haram” (whichcan be translated as not accepted by the religion) (Basu and Altinay, 2002). Based onthese arguments, the following hypothesis has been set:

H3. The religious background (Muslim) of a business owner is negativelyassociated with a small firm’s EO.

Research designResearch sampleThis study investigated the relationship between the inherent socio-culturalcharacteristics of small business owners and their firms’ EO. The sample wasrandomly drawn from a database of 1,200 Turkish speaking ethnic entrepreneurs whoown micro (minimum two, maximum nine employees) and small businesses (minimumten, maximum 49 employees) in different boroughs of London. The database wasconstructed by the researchers through ethnic minority business directories andunpublished lists of names obtained from Turkish high commissions. The researchersalso managed to identify other businessmen via ethnic newspapers including KibrisGazette, Toplum Postasi and Olay Gazetesi and also from Turkish Cypriot Chamber ofCommerce in London. Turkish Business Guides (Londra Gazete, 2003, 2004, 2005, 2006)were also used to locate boroughs with a high concentration of Turkish speakingbusinesses for the study.

Data collectionIn total, 139 face-to-face structured interviews were conducted with Turkish ethnicentrepreneurs who were working in different sectors including retailing, services andmanufacturing. Turkish entrepreneurs were chosen as the focus of the study becausegrowing phenomenon of Turkish entrepreneurship remains insufficiently studied(Altinay and Altinay, 2008). Most of the interviews were conducted in English andlasted about one hour, on the basis of a detailed structured interview schedule (PleaseSee Figure 1, for a set of sample questions). Informants were asked closed endedquestions on a wide range of issues related to their previous experience, education andreligious background, and the entrepreneurial orientation of their firms. Close-endedquestions were used to collect quantitative data.

Socio-cultural attributes are operationalised as independent variables in terms of:religion; education; and experience, since they all shape values and beliefs (Haytonet al., 2002; Morrison, 2000). The firm’s behaviours related to the extent of risk-taking,in addition to being innovative and proactive, are regarded as indicators of EO (Brownet al., 2001; Covin et al., 2006; Lumpkin and Dess, 1996). Since the knowledgeaccumulation around the construct of EO has been substantial and studies mainly usedthe measure initially developed by Miller (1983) and later modified by Covin and Slevin(1989), this study has also adopted this widely used measure which is sometimesreferred to as the “Miller/Covin and Slevin scale” (Brown et al., 2001). In addition,following the suggestions of previous studies (see Wang, 2008), this study adapted twoitems from Miller and Friesen (1983) and one item from Hurt et al. (1977) in order to be

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Figure 1.Section I. Demographic

information

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Figure 1.

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Figure 1.

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able to measure a firm’s overall propensity of innovative behaviour. In total, 13 itemswere included in the interview questionnaire to measure the EO construct usingseven-point Likert scales. However, one item “When there is uncertainty, our businesstypically adopts a ‘wait and see’ posture in order to minimise the risk of making costlydecisions” was removed from the initial analysis because this item was insignificantlycorrelated to the other items on the scale.

An exploratory factor analysis of the EO scale including 12 items was conductedbased on the sample of 139. A principal components factor analysis together with avarimax rotation was used. The Kaiser-Meyer-Olkin (KMO) Measure of SamplingAdequacy index was 0.917 and the Bartlett’s Test of Sphericity was significant( p , 0.001), indicating the integrity of the resulting rotated components matrix. Onefactor was generated, explaining 59 per cent of variance. The factor loadings rangedfrom 0.422 to 1.00 (see Table I). The Cronbach’s alpha of the EO scale was 0.902.The findings are consistent with the single-factor solution in Frese et al. (2002) andCovin and Slevin (1986), but differ from existing studies that found severaldimensions of the EO construct (see Wiklund, 1998). One explanation of our

Item MeanStandarddeviation

Factorloading

1. Our business undertakes market research in order to identifymarket opportunities 3.65 2.46 0.909

2. In the past five years, our business has marketed a largevariety of new products or services 3.69 2.36 0.545

3. In the past five years, our business has introduced novelproducts or services (that did not exist in the market before) 3.49 2.33 0.465

4. Our business always looks for new businesses or markets toenter 3.63 2.42 0.482

5. Our business constantly introduces new products/services inorder to serve new customers/markets 3.69 2.44 0.563

6. Our business often leads the competition (that our competitorshave to follow) 3.37 2.28 0.589

7. Our business has a strong tendency to take on highly riskyprojects with chances of very high return 2.82 2.11 0.462

8. Because of the competition, our business must be veryproactive in the marketplace in order to achieve our businessobjectives 3.95 2.22 0.493

9. When our competitors develop a new product or a newbusiness method, our business quickly responds to it andadopts it 3.37 2.07 0.422

10. We are willing to try new ways of doing things and seekunusual, novel solutions 3.91 2.33 0.588

11. In our business, people are encouraged to think and behavedifferently 3.65 2.40 0.482

12. We constantly introduce new processes (e.g. technology,distribution, management systems, etc.) to improve ourbusiness 4.00 2.49 0.582

Notes: n ¼ 139. A principal components factor analysis together with a Varimax rotation was used.The KMO index was 0.917 and the Bartlett’s Test of Sphericity was significant ( p , 0.001)

Table I.The entrepreneurialorientation scale

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findings and those of Frese et al. (2002) is that in small firms (particularly microfirms) the founders and/or owners are often the managers of the firms, who areinvolved in the decision-making and implementation along all the dimensions of EO.Therefore, the 12 items were aggregated into an overall measure of EO whenperforming ANOVA analysis.

A mixed approach incorporating quantitative data and qualitative analysis wasnecessary to get closer to the world of entrepreneurs, their cultural characteristics andhow the socio-cultural characteristics of entrepreneurs influence their SMEs responseto changes in the dynamic environment (Lee and Jones, 2008). Therefore, open-endedquestions were included in the in the structured interview schedule in order to collectqualitative data on how education, experience and religion of the entrepreneurinfluence the EO of a firm. In particular, open-ended questions were used to collectqualitative data on a wide range of issues pertinent to how firms carry out marketresearch, types of market intelligence gathered and acted upon and how inherentsocio-cultural characteristics of business owners influence these activities.

Quantitative data analysis and findingsAnalysis of variance (ANOVA) tests were conducted in order to test the difference ofEO between groups by education (university degree or above vs. no degree), experience(with related experience vs. no related experience) and religion (those who practisereligion, namely praying five times a day and/or attending religious service on Fridaysand/or practising fast vs. those who do not practise religion). Types of industry whichhave previously shown to have an impact on EO (Huges et al., 2007; Stam and Elfring,2008) was also included as a control variable into the analysis.

The results of the ANOVA analysis are presented in Table II. The results of thestatistical analysis showed that the mean value of firms’ EO between was significantlyhigher for those firms whose owners had a university degree or above (mean ¼ 4.34)and those whose owners had no degree (mean ¼ 3.30) (F ¼ 10.077, p ¼ 0.002). Thissuggests that the educational attainment of entrepreneurs contributes to their firms’entrepreneurial orientation.

This study’s statistical analysis also demonstrated a positive relationship betweenthese previous experience of the entrepreneur and the EO of the firm (F ¼ 6.231,p ¼ 0.014). Specifically, the mean value of EO for firms whose owners had prior relatedexperience was 4.33 compared with the mean value of 3.40 for firms who owners hadno prior related experience.

Religion did not appear as significant in any of the models that explain EO.

Qualitative data analysis and findingsQualitative data was analysed by using the ‘coding analysis’ which allows for constantexamination of conceptual interactions and relationships, and the conditions underwhich they occur (Strauss and Corbin, 1990). A coding scheme was derived from theliterature, which reflected the research framework, highlighting key elements thatemerged. This coding scheme was a three-by-three matrix with education, experienceand religion as one axis, and proactiveness, innovativeness and risk-taking as the otheraxis. Much of the data analysis involved breaking down the answers to open-endedquestions manually into manageable blocks in order to classify them under eachcode/grouping. This approach helped to cross-classify logically the variables and

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illustrate interrelationships (Table III). The qualitative data of the study presentedfurther evidence to support quantitative data analysis. It provided insightfulunderstanding of cultural and behavioural aspects of small enterprises by capturingthe interface between the socio-cultural characteristics of the entrepreneurs and theeconomic, political and socio-cultural contexts in which their firms operate.

Educational attainment and different dimensions of entrepreneurial orientationQualitative data illustrated that the skills and knowledge with which managers havebeen equipped as a result of educational attainment help business owners to managetheir organisations with a strong strategic forward looking vision. In particular, theseskills enable them to systematically monitor customer needs and broader markettrends and act upon them. One of the textile manufacturers explained the importance ofeducational attainment:

Source of variationindependent variables(Constant) and meanvalues

Sum ofsquares DF

Meansquare F

Significanceof F

Practice religion ¼ 1Otherwise ¼ 0

Practice religion meanvalue ¼ 3.53No practice religionmean value ¼ 3.66 441.359 138 3.217 0.176 0.676

Graduate ¼ 1,Otherwise ¼ 0

University degree orabove meanvalue ¼ 4.34No degree meanvalue ¼ 3.30 441.359 138 3.001 10.077 0.002

Previous experience inthe same line ¼ 1,Otherwise ¼ 0

Prior relatedexperience meanvalue ¼ 4.33No prior relatedexperience ¼ meanvalue 3.40 441.359 138 3.081 6.231 0.014

Sector of operations(Manufacturing 1;Retailing 2; andServices 3)

Manufacturing meanvalue ¼ 4.84Retailing meanvalue ¼ 3.43Services meanvalue ¼ 3.57 441.359 138 3.158 1.874 0.158

Note: Dependent variable EO (R Square ¼ 0.294)

Table II.Socio-culturalcharacteristics andentrepreneurialorientation ANOVA testresults

Socio-cultural characteristicsEducation Experience Religion

Dimensions of entrepreneurial orientationProactivenessInnovativenessRisk taking

Table III.Analysis matrix: theinfluence of differentsocio-culturalcharacteristics ondifferent dimensions ofentrepreneurialorientation

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My university degree helped me to develop the skills of being able to carry out marketresearch and identify the customers’ needs and wants, evaluate my competitors’ offerings andset a long-term oriented direction for my business.

In addition, one of the food manufacturers explained the importance of educationalattainment in developing his ability to synthesise the market intelligence:

I read magazines, newspapers and watch TV programmes about the consumer eating habits.These give me an overall idea about what can work best but it is my educational background,being a university graduate which helps me to reflect on the information, think it through andtake proactive actions.

In contrast to these views, there was a widespread view among those business ownerswho were either primary or secondary school graduates that they always lacked theskills and confidence that a higher educational attainment would equip them with.This resulted in taking wrong strategic decisions about the market conditions. Oneretail shop owner illustrated:

We had done market research before we bought this place. We realised that there were manyTurkish people living around in this area. We interpreted this wrongly. We thought we wouldsucceed by solely depending on Turkish customer market. We never thought and evenrealised that in the long term Turkish customers’ shopping habits could change and theycould go and shop from big supermarkets. We could not identify the roots of the problembecause our skills did not help us to foresee these changes.

It was also found that the educational background could enable the owners tosynthesise the market information and develop new products. In illustrating this, oneuniversity graduate, owner of a meat manufacturer stated that market analysis and theuse of information helped him to introduce new products to the market on a regularbasis:

We respond to the customers’ needs. They demanded a ‘marinated product’ and now we sellmarinated chicken and meat. We are also responding to healthy eating habits, which is now atrend. I told everyone a long time ago that McDonald’s would lose its popularity because ofthe obesity and salt issues. I was able to do that because I could read the trends.

Another university graduate, fresh juice cafe owner, also explained how his universityeducation helped him to innovate new products:

Innovation is important, innovation in terms of introducing new products to themarket, changing your product range very often. My university degree equipped mewith the skills of identifying my learning needs and being able to identify those sourcesthat can help me to learn. I constantly do market research on the internet and identifynew natural juices, follow and observe other juice bars, their prices and actively followthem what they are doing. I learn from the others, combine my knowledge andinnovate new mixes with the natural juices. I am now adding vitamin tablets in some ofthe juices, and very much in demand.

In addition, another meat manufacturer highlighted the importance of identifyingniche markets with niche and innovative products and explained how his universitydegree contributed to this success:

My degree gave me the confidence and ability to foresee the opportunities in the market. Icame up with this idea of developing ‘hellal meat’ concept as a response to the market. Irealised that Muslim community, teachers, professionals, they were all going home late like

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people from other communities. However, they could not buy hellal fast food products fromthe supermarkets so that they could cook quickly. I wanted to respond to this need byintroducing ‘hellal’ packaged fast food to the supermarkets.

During the interviews informants who were university graduates and above alsostated that their ability and skills to analyse the market conditions gave them theprivilege to take what some of them called “calculated risks”. When explored further, itwas found that they all had the confidence to predict the outcomes of their strategicdecisions accurately such as decisions associated with investment, introducing newproducts to the market and targeting new market groups.

Previous experience and different dimensions of entrepreneurial orientationQualitative data provided further insights about the nature of this relationship. Thefindings revealed that those business owners who acquired experience in the same lineof business could exploit the accumulated knowledge in identifying customer needsand diagnosing market trends. Most of the informants who had experience in the sameline of business stated that they did not undertake a systematic market research inorder to identify the changing trends in the market. However, it was realised during theresearch process that they were well aware of broad issues and their likely impacts ontheir businesses. When they were asked how, it was found that most of them exploittheir accumulated experience by actively engaging with the customers and closelywatching their competitors’ moves. During the research process, it also becameapparent that previous experience contributed to firms’ ability to respond to theseneeds and market trends by entering into new product markets.

Those advocating the pivotal role of experience stated that their accumulatedexperience over the years equipped them with certain skills and gave them the courageto take certain decisions about the customers’ needs and competitors’ movesintuitively. One of a well established retail shop owners illustrated:

One day I saw David Beckham was wearing certain ear ring, the following week Iinvested a lot of money in David Beckham style ear rings and made good moneybecause of my alertness to the fashion. I seized the opportunity before everybody elsein the sector. I can sense the expectations of customers because I am in this business formany years.

Another one stated that accumulated experience can help them to interpret theglobal trends in the market:

I follow the global as well as local trends carefully. For example, because of theclimate change the weather was affected. We had flooding in the UK and the weatherwas very hot in Mediterranean countries. This meant that there would be no greenproducts in either regions or parts of the world. The day after flooding I told myemployees to store green products and groceries. I knew that the price for greenproducts would go up. Look at the prices now. They have gone up. This is how thetrends in the broader environment can affect your business and this is how you shouldtake your precaution.

Qualitative findings also revealed that although small business owners whoexploited their experience to identify market trends were willing to enter in newmarkets, they were not prepared to develop new products/services.

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Religion and different dimensions of entrepreneurial orientationDuring the interviews, informants stated that religion affected them very much at“personal values” level and it encouraged “honesty” and strong work ethics rather thaninfluencing their business practices. Even those business owners who practised theirreligion stated that their business practices should be in line with the realms of the UK.

Discussion and conclusionsThis paper aimed to investigate the relationship between entrepreneurs’ socio-culturalattributes and their firms’ EO. A number of conclusions can be drawn from the study.Firstly, the study responds to Hayton et al.’s (2002) and Lumpkin and Dess’s (1996) callfor research to investigate how an entrepreneur’s socio-cultural characteristicsinfluence firm-level entrepreneurship. In particular, it provides empirical evidenceabout the relationship between different elements of socio-cultural characteristics,namely education, experience and religion and the EO construct. Findingsdemonstrated that educational attainment of an entrepreneur influence a smallfirm’s EO. This finding supports the assertions made by Clercq and Arenius (2006) andPeters (2002) who state that the educational attainment of entrepreneurs contributes totheir firms’ entrepreneurial ability. The results of the statistical analysis also showedthat there is a positive relationship between the previous experience of the owner andthe entrepreneurial orientation of the firm. Previous literature also suggests that thereis a relationship between previous experience of an owner and the EO of their firms.Basu and Goswami (1999), Mughan et al. (2004) and Westhead et al. (2001) found thatthe previous experience of business owners contributes to the EO of a firm. Given theresults of the statistical analysis, it can be concluded that a small firm’s organisationaltransformation and strategic renewal through creation and combination oforganisational resources and competences are influenced by different inherentcharacteristics of an owner. The strategic posture of a small business reflects theinherent characteristics of a business owner.

Second, the analysis of the qualitative data offered insights into the interfacebetween different socio-cultural factors, namely education and previous experience andthe different dimensions of EO, namely proactiveness, innovativeness and risk taking(Please see Table IV).

It became apparent that educational attainment equips business owners with theskills and reflective mindsets of understanding customers and responding to their needs.Educational attainment also places market intelligence gathering and synthesising andacting proactively very high on a business owner’s agenda. These lead to both informaland formal approaches to environmental scanning and creative and flexible thinking ofmarket conditions. These findings support Casson’s (1982) and Carson and Gilmore’s(2000) arguments that educational attainment helps to develop the skills of gatheringmarket intelligence. Indeed, in the case of those entrepreneurs with higher educationalattainment, there was evidence of both formal and informal approaches to monitoringthe business environment. However, what was distinctive with these entrepreneurs wasthat educational attainment helped them to develop those skills that enable them notonly to gather market intelligence and but also to synthesise the information and actupon it. The findings also confirmed Levent et al.’s (2003) arguments that lack ofeducation hinders entrepreneurship and business owners need to achieve highereducational attainment if they are keen to break out into mainstream market.

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The qualitative findings of the study also demonstrated that acquisition andexploitation of knowledge play an important role in innovating new products. Previousliterature also indicates that there is a positive relationship between the educationalattainment of entrepreneurs and their firms’ ability to innovate (Collinson and Quinn,2002; Shook et al., 2003; Walton, 2003). More importantly, in line with the findings ofthe previous studies (Carneiro, 2000; Fahey and Prusak, 1998), our findings clearlyrevealed that the educational attainment of the business owners contributes to theirability to think creatively, be flexible and respond to widely different situations.However, the innovations identified by this study do not reflect the extent ofuniqueness and originality of technological innovations mentioned by the studies ofCollinson and Quinn (2002) and Llewellyn and Wilson (2003). In this study‘innovations’ are seen as ‘original and unique’ business concepts in the eyes of thebusiness owners of small ethnic minority firms and their development requires carefulmanagement of and responsiveness to knowledge associated with a capacity forcreativity and flexibility as identified by previous studies. In terms of the relationshipbetween educational attainment and risk taking, the findings of the study refute theargument of the earlier studies that education reduces curiosity, tolerance forambiguity and increases risk aversion (Fallows, 1985; Shapero, 1980). On the otherhand, the findings corroborate the more recent empirical evidence (Knight et al., 2003;Xia et al., 2001) that educational attainment makes a positive impact on risk takingpropensity.

Previous experience equips small business owners with the skills of identifying andresponding to customer needs and collecting market intelligence by intuition. Indeed,this study’s qualitative findings clearly showed that previous experience enablesbusiness owners to utilise market information by being in regular touch withcustomers. The findings of the study also went further and identified that previousexperience of an owner plays an important role in the firm’s ability to identify market

Socio-cultural characteristicsEducation Experience Religion

Dimensions of entrepreneurial orientationProactiveness Places market intelligence

gathering and synthesising andacting proactively very high on abusiness owner’s agendaIt helps to develop the skills ofgathering market intelligence andthe synthesis of marketintelligence

Plays an important role inthe firm’s ability to identifymarket trends and actproactively

No influence

Innovativeness Contributes to entrepreneurs’ability to think creatively, beflexible and respond to widelydifferent situations and thusenhances their firms’innovativeness

Does not appear tocontribute to thedevelopment of newproducts

No influence

Risk taking Positive influence on risk takingpropensity

No influence No influence

Table IV.The influence of differentsocio-culturalcharacteristics ondifferent dimensions ofentrepreneurialorientation

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trends and act proactively. These findings are in line with the arguments of Mughanet al. (2004) and Westhead et al. (2001) who also argued that the previous experience ofowners gives small firms the privileged access to an accumulated knowledge base andmarket information and thus would allow firms to act proactively. However, whatemerged from the findings is that previous experience does not seem to contribute to abusiness owner’s ability to reflect on and synthesise market intelligence. Moreimportantly, it does not appear to contribute to creative and flexible thinking andtherefore to the development of innovative products. This finding contradicts with thearguments of Haynes (2003), Bakhru (2004) and Grant and Romanelli (2001) whoadvocate that previous experience stimulates innovation.

Finally, although limited, those studies (Carson and Gilmore, 2000; Lumpkin andDess, 1996), which acknowledged the relationship between the socio-culturalbackgrounds of SME business owners and their firms’ EOs did not consider theethnicity dimension. Therefore, they avoided the serious linkage between ethnicsocio-cultural embeddedness and a firm’s EO. Accordingly, this paper initiates somepoints of discussion in seeking to provide a systematic body of knowledge relating to EOof ethnic firms. Our study did not find a relationship between the religion of Turkishbusiness owners and EO of their firms. This can be interpreted as Turkish businessowners’ ability to break out of their ethnic enclaves and integrate to the social andeconomic realms of the UK. The contribution of previous experience to a firm’sproactiveness, but not to innovativeness, could be explained by the depth of ethnicnetworks that Turkish businesses created or were drawn into. Turkish business ownerswere traditionally pushed to self-employment because of their lack of skills andeducation (Basu and Altinay, 2002). Before they started up their own businesses, most ofthem worked for someone else in the same line of business in order to develop the skillsand understanding of running a business in a particular sector. However, most of thesebusinesses were the businesses of co-ethnic business owners targeting co-ethnicTurkish customers without considering wider issues in broader environment such asresponding to the needs of mainstream customers (Altinay and Altinay, 2008).Therefore, although previous experience in the same line of business equipped themwith the skills and intuition of gathering market intelligence and responding to customerneeds and other market trends, it did not seem to equip them with the skills of flexibilityand creativity to innovate new products and services and thus achieve sustainablegrowth. It is educational attainment that plays an important role in this endeavour.Given this, first generation Turkish immigrants’, in particular business men’s, growingpositive attitudes towards their children’s education should not be seen as a surprise.

The paper also provides several practical implications. First, it is important thatbusiness owners assess how their different inherent socio-cultural characteristicscontribute to different dimensions of their firms’ EOs. Such an assessment could helpthem to identify their learning and training needs and attend relevant courses offeredby the local councils and business support associations. Second, if they are reluctant orunable to learn because of their age and/or time constraints, they should move awayfrom an autocratic centralised management style and delegate more responsibilities tothose individuals who possess the experience and educational background. Finally,when it comes to developing succession plans, emphasis should be placed both onexperience and educational attainment in terms of the development of their children’sskills and competences.

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Further reading

Chaston, I., Badger, B. and Sadler-Smith, E. (2001), “Organizational learning: an empiricalassessment of process in small UK manufacturing firms”, Journal of Small BusinessManagement, Vol. 39, pp. 139-51.

Gilmore, A., Carson, D., O’Donnell, A. and Cummins, D. (1999), “Added value: a qualitativeassessment of SME marketing”, Irish Marketing Review, Vol. 12 No. 2, pp. 27-35.

About the authorsLevent Altinay is a Professor of Strategy and Entrepreneurship at the Oxford BrookesUniversity Business School. His research interests include internationalisation, internationalfranchising, intrapreneurship and ethnic minority entrepreneurship. Levent Altinay is thecorresponding author and can be contacted at: laltinay@brookes.ac.uk

Catherine L. Wang is a Professor of Entrepreneurship and Innovation at the School ofManagement, Royal Holloway, University of London. Her research interests includeentrepreneurship, strategy, knowledge management and organisational learning.

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