The Moderating Effect of External Environmental Characteristics on the Relationship between Entrepreneurial Orientation and SMEs Performance

Abstract

The purpose of the study is to examine the moderating effect of the external environmental characteristics on the relationship between entrepreneurial orientation and SMEs performance. Survey method of research was used by personally administering questionnaires to the owners/managers. Multistage sampling technique was used in selecting 470 SMEs that partook in the survey. SPSS 24 and PLS-SEM 3.0 were employed in the analysis of the data. The results indicated that EO significantly affects SMEs performance. Similarly, there is a significant moderating effect of environmental dynamism on the relationship between EO and SMEs performance. Surprisingly, there is an adverse moderating effect of environmental complexity and hostility on the relationship between EO and SMEs performance. While environmental diversity shows insignificant moderating effect. Therefore, the study put forward that to attain high SMEs performance. There is a need for owners/managers to consider environmental characteristics and how they affect SMEs performance.