Examining the Moderating Effect of Environmental Hostility on the Entrepreneurial Orientation -Performance Relationship

Abstract: While the EO-performance nexus has received extensive attention in entrepreneurship literature, other studies suggest that the magnitude of this relationship is dependent upon the external environment and internal organizational processes. The objective of this study was to measure the effects of EO (innovativeness, risk-taking, proactiveness, autonomy and competitive aggressiveness) on SME performance, as well as to examine the moderating effect of environmental hostility on the EO-performance relationship in South Africa. The study showed thatwhile innovativeness and proactiveness does not have a significant effect on SME performance; risk taking propensity, competitive aggressiveness, and autonomy have a significant positive effect on SME performance. It was also seen that while the risk taking-performance relationship is negatively moderated by environmental hostility, the competitive aggressiveness-performance relationship is positively moderated by environmental hostility. This suggest the need for SMEs to always align their business strategies with appropriate EO dimensions to mitigate some of the negative consequences of operating in hostile business environments and improve the performance of their businesses. Keywords: Entrepreneurial orientation, SME performance, Environmental Hostility, South Afric