2.1 Entrepreneurial orientation

EO is commonly acknowledged as a form of entrepreneurship that revolves around identifying and capitalizing on opportunities (Covin & Wales, 2012). The origins of EO can be attributed to upper echelon theory (Hambrick & Mason, 1984), which posits that organizations gradually adopt the characteristics and values of their senior management teams. Undoubtedly, a firm’s business priorities exert a significant influence over critical determinations, including market selection, technology investment, and service level determination (Niemand et al., 2021; Jum’a et al., 2022; Ziyadeh et al., 2023). According to Adel and Younis (2021), individuals in various positions within an organization have the capacity to initiate and execute entrepreneurial actions on behalf of the firm. Therefore, the concept of EO is widely recognized as the amalgamation of the entrepreneurial mindset of senior management and the organizational behaviors that exhibit entrepreneurial characteristics, such as proactivity, innovativeness, and risk-taking, at both the organization and managerial levels (Adel & Younis, 2021).

EO is an organizational-level construct that embodies a proactive mindset prioritizing innovation and a willingness to take risks (Niemand et al., 2021). The consequences of entrepreneurial endeavors are not uniformly favorable and can lead to unfavorable outcomes, including failure and, in severe instances, bankruptcy (Adel & Younis, 2021). To comprehend the circumstances in which EO contributes to firm performance, previous studies on EO have relied on contingency theory, which proposes that the alignment of crucial variables is crucial for achieving elevated levels of firm performance (Saeed et al., 2014).

2.2 Dimensions of EO

The term EO encompasses the various decision-making procedures, practices, and behaviors demonstrated by managers, which contribute to the initiation of new business ventures in emerging or established markets, involving either novel or pre-existing products or services (Rigtering et al., 2017). Miller (1983) has put forth the prevailing understanding of EO, which refers to the long-term direction of a firm’s strategic approach towards innovativeness, proactiveness, and risk-taking (Adel & Younis, 2021).

The concept of innovativeness pertains to a company’s inclination to actively participate in and endorse novel ideas, experimentation, and creative procedures that have the potential to yield fresh products, services, and technological advancements (Wu & Li, 2011; Yosef et al., 2023). Proactiveness is a strategic approach characterized by a proactive and forward-thinking mindset, involving the introduction of novel products and services ahead of competitors, as well as taking action in anticipation of future market demand (Vaitoonkiat & Charoensukmongkol, 2020). Risk-taking can be defined as the act of undertaking bold actions by entering unfamiliar territories, relying heavily on borrowed funds, and allocating substantial resources to endeavors in unpredictable circumstances (Rauch et al., 2009; Yosef et al., 2023).

Since its inception, the concept of EO has emerged as a prominent area of study within the field of entrepreneurship research. Scholars have conducted numerous studies on EO in diverse cultural contexts and industries. These studies have predominantly found a positive association between EO and business performance (Niemand et al., 2021).

2.3 EO and supply chain performance of firms

Previous studies have identified positive correlations between EO and firm performance across various contexts (Fairoz et al., 2010; Gunawan et al., 2016; Vaitoonkiat & Charoensukmongkol, 2020). According to Vaitoonkiat and Charoensukmongkol (2020), existing studies have indicated that EO is regarded as an intangible asset of a company that is cultivated through its internal resources. EO enables a company to actively engage in the exploration and exploitation of new market opportunities. This involves the proactive introduction of innovative products and services to gain a competitive advantage as a first mover. Additionally, EO entails setting ambitious targets and seeking superior returns to outperform competitors. This orientation involves allocating capital resources and empowering employees to independently execute the strategic plan (Park & Xiao, 2020; Baghizadeh et al., 2022). Moreover, the successful development of EO necessitates the acquisition of specific entrepreneurial resources, including the entrepreneurs’ skills, knowledge, experience, and networks (Vaitoonkiat & Charoensukmongkol, 2020). Additionally, the development process of EO is time-consuming, rendering it difficult to imitate or replace (Arunachalam et al., 2018). According to Arzubiaga et al. (2018), the identified contributions of EO align with the attributes of critical resources. This suggests that EO may serve as a distinguishing characteristic of organizations, enabling them to gain a competitive edge and achieve superior performance.

EO encompasses the attributes of creativity, proactivity, and a willingness to take risks when formulating decision-making strategies (Arzubiaga et al., 2018). According to Arunachalam et al. (2018), there exists a positive correlation between the dimensions in EO and their impact on business profitability, whether through direct or indirect influence. EO is not solely focused on financial indicators, but also encompasses more intricate aspects of business performance (Aloulou, 2018; Park & Xiao, 2020). The impact of EO on firms is contingent upon the knowledge mechanism that affects business performance (Gunawan et al., 2016). In its early stages, the concept of entrepreneurship primarily focused on the selection of a specific business venture. The current discourse in the field of entrepreneurship management process is centered on a more contemporary concept (Arunachalam et al., 2018). The literature on strategic management and entrepreneurship commonly identifies three dimensions that form the foundation of organizational inclinations toward the process of entrepreneurial management. These dimensions are typically referred to as innovation, risk-taking, and proactiveness (Vaitoonkiat & Charoensukmongkol, 2020). EO is a strategic approach that places significant emphasis on proactive behaviors towards products and markets, a willingness to undertake ventures with inherent risk, and a propensity to drive innovation and outperform competitors (Rachmawati & Suroso, 2020). Several scholars have sought to elucidate the correlation between EO and organizational performance in the business context. According to Rachmawati and Suroso (2020), businesses with EO have the ability to identify and capitalize on emerging market opportunities. Previous research has employed diverse financial indicators, including cash flow, return on assets, and return on equity, to evaluate the performance of businesses. Several scholarly studies propose that incorporating both financial and non-financial dimensions is necessary for obtaining a more comprehensive assessment of business performance (Saleh et al., 2021; Saleh et al., 2022; Al-Alawneh et al., 2023). Non-financial indicators encompass various factors such as market share perception, perception of growth in sales, the level of customer satisfaction, and loyalty level (Rachmawati & Suroso, 2020; Aloulou, 2018; Park & Xiao, 2020).

Various testing methods have been employed in empirical examinations of the association between EO and business performance. In their study, Cho and Lee (2018) observed a positive correlation between EO and both business profitability and growth. Park and Xiao (2020) conducted a study that revealed that the enhancement of firm performance through the exploration of dynamic capabilities is contingent upon the specific internal and external circumstances of the firms. In the context of developing nations’ firms, it can be observed that EO, while hindered by environmental dynamism enhances the positive impact of exploring dynamic capabilities on performance. According to the findings of Rachmawati and Suroso (2020), a significant correlation exists between EO and business performance. This study aims to address the discrepancy observed in the findings of prior research.

The primary driver of business success lies in the coherency of strategy and the efficiency of operations within the supply chain performance (SCP) (Le et al., 2022; Jum’a, 2023). The strategic dimension pertains to establishing clear roles among various entities within the broader business ecosystem, aiding managers in effectively shaping both organizations. The second dimension, referred to as operations, encompasses evaluating both supplier relationships and the efficacy of internal processes within an organization. To achieve exceptional business performance, it is imperative for firms to possess a comprehensive understanding of their positioning within the ecosystem. The positive influence of a coherent strategy on business performance is associated with establishing a well-balanced array of competitive priorities and the ability to effectively allocate resources to achieve a long-lasting competitive advantage (Hallikas et al., 2021). Implementing a suitable range of activities within an organization appears to result in a decrease in lead times across production, customer orders, and delivery. These reductions have positive effects on customer retention rates, as observed by Jum’a (2023). However, it’s important to note that the benefits derived from enhanced SCP may not always translate into overall business success, especially in situations involving intricate products or relationships, as highlighted by Hallikas et al. in 2021.

Thus, the following hypotheses were developed, as shown in Figure 1:

Hypothesis 1. Proactiveness aspect of EO positively influences SCP.

Hypothesis 2. Innovativeness aspect of EO positively influences SCP.

Hypothesis 3. Risk-taking aspect of EO positively influences SCP.