Relationship between entrepreneurship, innovation and performance: Comparing small and medium-size enterprises

Abstract

Purpose - The purpose of this paper is to investigate the relationship between entrepreneurship, innovation and quality performance in small and medium-size enterprises (SMEs), and if such relationships differ between the two groups of enterprises. Design/methodology/approach - Specifically, the study investigates whether there is (or not) any moderating effect of organisation size (i.e. small versus medium firms) in the hypothesized relationships. A total of 124 SMEs provided the data for the study. The data were analysed using factor and hierarchical multiple regression analyses. Findings - The results indicate a significant direct relationship between entrepreneurship, innovation and quality performance. Specifically, the three dimensions of entrepreneurship namely, risk taking, proactiveness and autonomy are significantly associated with innovation and quality performance. Innovation is directly related to performance and mediates in the entrepreneurship-performance link. These relationships do not differ between small and medium-size enterprises, thus size is not a key factor in explaining the contributions of entrepreneurship to innovation and performance of SMEs. Research limitations/implications - The study's sample is limited to service SMEs in Pakistan. Although the objectives of the study were met, more studies are needed that compare or contrast small and medium enterprises, in other sectors and contexts. Practical implications - The study underscores the importance of entrepreneurship to innovation and firms' quality performance in both small and medium-size enterprises. This link is not dependent on the size of the enterprise. Management should promote risk taking, proactiveness and autonomy in order to enhance innovation and performance. Social implications - The ratio of female to male entrepreneurs in Pakistan's IT sector is very low. This is clearly demonstrated in the sampling frame composition and the eventual responses received from both genders - out of 124 respondents, only two are females, this is less than 0.02 percent. The paper suggests some policy interventions that could change such asymmetric representation of women in entrepreneurial activities in Pakistan. Originality/value - There is limited research comparing or contrasting small and medium-size firms. Studies on small and medium enterprises (SMEs) have often used pooled data, thereby assuming inherent similarity, yet there is hardly any empirical basis for such. This study provides such basis/justification. It further argues that entrepreneurship and innovation are robust determinants of quality performance in both small and medium firms. Keywords Entrepreneurship, Innovation, Quality performance, Small to medium-sized enterprises, IT sector, Service innovation, Entrepreneurialism, Performance management, Pakistan