Role of entrepreneurial orientation on performance of firms in the Nigerian stock exchange

Abstract

This study examines the role of Entrepreneurial Orientation in performance of firms on the Nigerian Stock Exchange. This study was based on positivism philosophy whereby the research design approach will be exploratory combine both qualitative and quantitative research designs, techniques and measures. This approach provides the basis for navigating the empirical, construct, and the reality approaches. The target population was 176 firms listed in Nigerian Stock Exchange with financial returns as at August, 2014. Out of the population,asampleof60 firms were selected. Secondary data collection instruments were applied on the sampled firms. Tools used in the analysis included frequency tables, mean, standard deviation and correlation coefficient. SPSS Version 20 was also used in the analysis of the data. The study took critical interest in the contents of a number of studies which concluded that among Nigerian managers, aversion to risk-taking, lack of innovation and pro-activeness, which are critical factors for growth of SMEs, were found to be high in 2007. Other methods of statistical analyses were Pooled, Random and Fixed regression models based on the preferences suggested by the Hausman specification test results. The results of panel analysis of the relationship between Entrepreneurial Orientation dimensions – Innovation, Risk-taking, Pro-active Posture and Aggressiveness; and performance of firms listed in the Nigerian Stock Exchange, with Returns on Assets and Returns on Equity as proxy, showed a negative relationship between Innovation and Returns on Equity and Innovation and Returns on Equity. It also revealed a negative relationship between Risk-taking and Returns on Assets, but a positive relationship between Risk-taking and Returns on Equity. Other dimensions of entrepreneurial orientation such as pro-active posture and aggressiveness had positive relationships with Returns on Assets and Returns on Equity. This results, confirmed a study conducted in 2007 in Nigeria on 88 SMEs earlier mentioned; however, two dimensions of Entrepreneurial Orientation – Proactive posture and Aggressiveness have been widely adopted having positive relationship with Returns on Assets and Returns on Equity. But, contrary to the outcome of a study carried out among Kenya’s manufacturing firms operating under the EAC in 2012, which showed that there existed a positive relationship between entrepreneurial orientation adoption and firm performance, only two of the entrepreneurial orientation dimensions exhibited similar characteristics in Nigeria; while Innovation and Risk-taking had negative relationships with both Returns on Assets, and Returns on Equity. The implication of this study results is that, in Nigeria, though entrepreneurial orientation has been widely adopted and practiced, innovation and risk-taking are yet to have positive relationship with Returns on Assets and Returns on Equity. This may be due to the fact that Innovation and Risk-taking may be at infancy stage and cosmetic as revealed in previous studies or the firms were operating, essentially, in a seller’s market or both.