Study on the Effect of Entrepreneurship on the Business Performance of Small and Medium Enterprises: A Case Study in Vietnam

Abstract

The literature on entrepreneurship suggests that entrepreneurial orientation (EO) improves business performance, while the empirical results are mixed. Therefore, this study focuses on determining the impact of this relationship on the sample of small and medium enterprises in the context of emerging economies and transformation based on the results of a survey of 113 enterprises in Hanoi, Vietnam. Using multivariate regression analysis after testing the reliability of the scale, the research results provide evidence that enterprises in the practicing higher EO obtains better business results than those implementing low EO strategies. This result is validated even in business environments considered benign, in which the influence of the environment regulates the relationship between EO and operational efficiency. However, this initial research on entrepreneurial tendencies only confirms that only two of the three aspects of EO have a positive effect on operational efficiency, including proactiveness and risk-taking initiatives. Nevertheless, these results also suggest that, in the context of transitioning economies, where most of the businesses are active in the field of trade in services, innovation orientation is not a factor that has a direct impact on improving business performance. This result does not negate the role of innovation, but implies the direction of future research as mentioned in the paper.