Firm-level entrepreneurship in the Second Great Depression : A quantitative study on the influence of EO on performance in the economic crisis

Abstract: Anno 2013 Europe resides in a severe economic crisis that has been lasting for five years. Companies are struggling to deal with the influences of this crisis and require strategic insights to maintain performance. According to theory entrepreneurship and innovation are central mechanisms in the creation of wealth in the capitalist system and an entrepreneurial strategy could provide relatively much benefit in a crisis period. This study focuses on the central question:  How does an entrepreneurial orientation affect the performance of companies in the economic crisis? To answer this question a variety of theories on entrepreneurship, innovation and the creation of wealth in capitalism were examined. On many occasions quantitative research has been performed to measure the relationship between an entrepreneurial orientation and performance. This study provides an extra dimension by using archival financial data of companies during and before the crisis to draw comparisons and examine developments in performance in relation to an entrepreneurial orientation. Data on the entrepreneurial orientation was collected with an online survey which was sent to companies. The results of the survey indicated the degree of entrepreneurial orientation of the companies in separate categories; innovativeness, proactiveness and risk taking. The results were linked to their financial performance which was obtained from a database. Comparisons between the performance before and during the crisis in relation to the scores on entrepreneurship were made, and the development of their financial performance since the crisis was examined. The results of this study indicate that an entrepreneurial orientation has a relatively more positive influence on performance during the crisis. However the relationship between an entrepreneurial orientation and performance is highly dependent on the company and type of industry so no unilateral positive correlations with performance were found. For a set of industrial, manufacturing, chemical and service companies the development of the financial performance since the crisis is highly positively correlated with innovativeness and proactiveness. For a set of other company types including foundations, (public) utility companies, (public) real estate companies, construction companies, trade and investment firms no correlations were found. The findings in this study indicate that depending on the type of company and industry, an entrepreneurial orientation can have a strong positive effect on the development of financial performance in the crisis.