Entrepreneurial orientation, control aversion, and performance in SMEs : the contribution of equity investors

Entrepreneurial orientation is a concept that captures the importance of how and why certain individuals decide to take higher risks than the average small business owner so as to increase their return on assets deployed. Entrepreneurial orientation is linked to the concept of control aversion, which is used to explain why certain individuals refrain from using external financing to expand their firms. Control aversion suggests that most small business owners prefer to maintain total control rather than invite in the potentially disruptive influence of an external owner/investor. This study combines these two concepts in an attempt to introduce financing and investors into the discussion of entrepreneurial orientation and performance. Equity investors are shown to have a major influence on entrepreneurial performance, because business owners with an entrepreneurial orientation gain substantially from interaction with investors through the transfer of knowledge. The model was tested with a LInear Structural RELations (LISREL) analysis on a sample of 459 Swedish small and medium-sized enterprises