Year

2013

Degree Name

Doctor of Philosophy

Department

Sydney Business School

Abstract

Indonesian SMEs in the furniture industry in Central Java play an important role in economic development and income growth. However, increasing business competition has placed SMEs in a vulnerable position due to their limited resources. Undoubtedly, their success in responding to the challenges of the business environment depends, in great part, on their strategy for engaging in entrepreneurial behaviours.

Entrepreneurial orientation (EO) - in other words, organisational-level entrepreneurial behaviour - has been identified in previous studies as influencing firm performance. However, other research has been unable to confirm a positive relationship between EO and firm performance that indicates that EO may, at least sometimes, lead to superior performance. To date, there is no significant study of EO and its association with performance within the context of Indonesian SMEs, particularly in the furniture industry in Central Java. Hence, the main objective of this thesis is to investigate empirically the relationship between the EO and firm performance of Indonesian SMEs in the furniture industry in Central Java. This thesis attempts to address three research questions: (1) Which EO dimensions, as identified in the literature, have been demonstrated by Indonesian SMEs in the furniture industry in Central Java? (2) How are EO dimensions expressed by Indonesian SMEs in the furniture industry in Central Java? and (3) Which EO dimensions influence the performance of Indonesian SMEs in the furniture industry in Central Java?

This study used a quantitative approach in Phase One and a qualitative approach in Phase Two. The sample used in this thesis was Indonesian SMEs in the furniture industry in Central Java, selected for its significant contribution to regional economies, as well as the national economy. The respondents were the owners/managers of SMEs; these individuals are considered to have the most comprehensive knowledge about their organisation’s characteristics and strategy, including EO adoption in their firms.

In Phase One, a face-to-face questionnaire survey was conducted using 150 respondents. Exploratory factor analysis, confirmatory factor analysis and structural equation modeling were used to analyse the quantitative data. In Phase Two, in-depth, face-to-face interviews were carried out with thirteen of the respondents who had participated in Phase One. Interviews were also carried out with advisors from government agencies and organisations related to the furniture industry in Central Java. Content analysis was applied in analysing the resulting qualitative data.

This study confirms that a sample of Indonesian SMEs from the furniture industry in Central Java has adopted the five EO dimensions identified in the literature: autonomy, innovativeness, risk-taking, proactiveness and competitive aggressiveness. This study supports the concept that EO has a multidimensional nature, implying that each dimension of EO can vary independently. These findings also support the arguments of entrepreneurship scholars that the EO scale might be applied in non-western countries as well as in SMEs contexts, even though these contexts differ from where much of the original research was carried out. This study suggests that entrepreneurial firms could seek to develop various combinations of the EO dimensions to increase their performance in a given context.

This study reveals that the implementation of EO dimensions within a sample of Indonesian SMEs in the furniture industry in Central Java is influenced by several factors: the nature of SMEs (e.g., dominant position of owner/manager, lack of resources); the culture of Indonesia, particularly Java (e.g., low uncertainty-avoidance, conflict avoidance and maintaining harmony); the characteristics of the furniture industry (e.g., subcontracting, relatively less dynamic); and the nature of the external business environment (e.g., lack of government support). The contributions of these factors may be responsible for the behaviour of the SMEs sample in implementing some EO dimensions, such as autonomy, innovativeness and competitive aggressiveness, which differ from those that have been reported in the literature. This supports Lumpkin and Dess’s argument (1996) that the relationship between EO and firm performance may be context-specific.

This study shows that proactiveness is the only EO dimension to have a positive and significant relationship with firm performance. This finding is in line with several studies that also used SMEs as samples such as in Australia (Lin 2007), Sweden (Frishammar & Andersson 2009; Andersén 2010) and Thailand (Pansuwong 2009). This supports the argument that the essence of entrepreneurship is the ability to detect an opportunity in the marketplace and the willingness to pursue and exploit it.

This thesis strengthens understanding of the EO concept and its relation to SME performance within a context different to those reported in the past. Furthermore, this is the first EO study, at least in Indonesia, to combine qualitative and quantitative research methods. By integrating both quantitative and qualitative methods, this study allows the researcher to provide a rich, deep and comprehensive explanation to address its research questions. The study’s empirical findings provide the basis for recommendations for SMEs in enhancing their EO, and for policy-makers to design entrepreneurship support programs and initiatives for SMEs.

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