Theory suggests that firms may derive the greatest benefits from an entrepreneurial orientation (EO) when they concurrently exhibit a high degree of strategic reactiveness. This paper explores the relationship between strategic reactiveness and EO as well as the moderating effect of structure–style fit on this relationship. Data collected from 110 manufacturing firms indicate that strategic reactiveness is not significantly related to EO. However, firms that exhibit theoretically-congruent alignments between their organization structures and top management decision-making styles tend to have positive strategic reactiveness–EO relationships.
The strength of a firm's entrepreneurial orientation (EO) can have a strong, positive effect on performance (Morris and Sexton, 1996, Wiklund and Shepherd, 2005 and Zahra and Covin, 1995). Nonetheless, much can go wrong as firms engage in entrepreneurial activity. This is because entrepreneurial activity is inherently speculative (Bhidé, 2000 and McGrath and MacMillan, 1995). Through the exhibition of a strong EO, firms position themselves in novel and often poorly understood business domains where trial and error strategic actions are commonplace. When the hoped-for results of entrepreneurial activity are not achieved, firms must re-think their actions in order to cut their losses and redirect their efforts through the exhibition of strategic reactiveness, herein defined as a firm's ability to adjust its business practices and competitive tactics in response to the perceived efficacy of its strategic actions. Thus, strategic reactiveness is useful for correcting the missteps that inevitably occur as entrepreneurial firms navigate novel business domains.
The preceding observations imply that strategic reactiveness should be an effective complement to EO and firms should realize performance benefits from being able to exhibit both strategic reactiveness and an EO. The current paper investigates the relationship between strategic reactiveness and a firm's EO level. The purposes of this paper are to explore the extent to which these two phenomena are related in practice and to investigate the organizational qualities that enable established firms to be simultaneously strategically reactive and entrepreneurial. A central argument of this research is that both strategically reactive and entrepreneurial behaviors are enabled by a common organizational capability that facilitates rapid and informed action. Specifically, both strategic reactiveness and an EO are behavioral tendencies rooted in a firm's organizational response capability — that is, its ability to quickly sense, process, and act on information relevant to new or currently pursued business opportunities. Firms that possess this capability will likely exhibit a stronger relationship between strategic reactiveness and EO than firms lacking in this ability.
The premise of this research is that the capacity for rapid and informed action is a function of the goodness-of-fit that exists between a firm's organizational structure attributes and the decision-making style employed by that firm's top managers. That is, certain organization structure and decision-making style combinations will likely facilitate a firm's organizational response capability, thus enabling those firms to be both strategically reactive and entrepreneurial. Other structure–style combinations, on the other hand, are expected to be less facilitative of this capability. These theoretically less congruent structure–style combinations are, therefore, expected to be associated with firms that exhibit weaker strategic reactiveness–EO linkages.
The organization structure attribute of interest in the current research is the firm's position on the organicity dimension. Lower positions on this dimension imply the existence of a more mechanistic structure, whereas higher positions imply a more organic structure. The top management decision-making style dimension herein described as helping link EO to strategic reactiveness is the firm's position on the decision-making technocracy dimension.4 Lower positions on this dimension imply that a firm's top managers generally employ an intuitive/experience-based decision-making style. Higher positions imply that top management's decision-making style is more technocratic — that is, a formal, data-driven process that relies extensively on explicit, quantitative analysis and carefully-planned methods. As will be argued below, a firm's organizational response capability is expected to be facilitated by either the combination of organic structures and intuitive/experience-based decision-making styles or the combination of mechanistic structures and technocratic decision-making styles. In short, these theoretically-congruent combinations are expected to create the capacity for rapid and informed action that enables firms to be concurrently strategically reactive and entrepreneurial. In summary, the research questions addressed in this study are:
1.)
What is the relationship between strategic reactiveness and EO?
2.)
Are there particular combinations of organization structure and top management decision-making style attributes that exist in organizations that are able to exhibit both strategically reactive and entrepreneurial behavior and, if so, what are these combinations?
The research model is depicted in Fig. 1.
In conclusion, strategic reactiveness and EO are often described as useful if not absolute requirements for competitive success in the 21st century (e.g., Nadler and Tushman, 1999). Firms that learn how to manifest both reactive and entrepreneurial behavior patterns will be the top competitors in their operating domains over the long-term. The current research suggests that the joint manifestation of both behavior patterns is not environmentally determined. Rather, it is determined by the existence of deep organizational capabilities that enable firms to react and proact as necessary. In short, the path to sustained competitiveness seems to start within the firm.
