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Entrepreneurship is an important component for growing the economy of any nation. Aside its role in creating job opportunities through start-up ventures and existing firms, it creates avenues for new product development, spurs business expansion and generally increases national prosperity (Lumpkin et al., 2009). Entrepreneurial activities account for major economic strides recorded in developed nations of the world (Aldrich and Cliff, 2003) because of their fundamental roles in activating and stimulating all economic activities.

The connection between entrepreneurship and family business was not made until the last decade when it was observed that the two phenomena act as the backbone of a nation’s economy. Dyer and Handler (1994), in their conceptual paper are able to establish theoretically that these two steams of research are actually linked. Therefore the investigation of the entrepreneurial behaviour of family enterprises is still an evolving area of research in family business literature. Entrepreneurship is viewed as a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach and leadership balanced (Timmons and Spinelli, 2007), while family business is defined as a business with family involvement in any two or more of these dimensions: ownership, management, governance, succession, employees and culture.

Entrepreneurial Orientation (EO) is a phenomenon that examines the entrepreneurial processes of firms. This according to Lumpkin and Dess (1996) refers to the methods, practices, and decision-making styles business owners and/or managers use to act entrepreneurially. Entrepreneurial Orientation (EO) refers to the strategic orientation of a firm that captures specific

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entrepreneurial aspects of its decision-making styles, methods and practices (Wiklund and Shepherd, 2005). It is a construct which has been extensively used in literature to test the extent of entrepreneurial behaviour in firms (Rauch et al., 2009). The principles guiding the theory of EO constructs is embedded in the entrepreneurship literature.

The concept of Entrepreneurial Orientation was developed based on the early works of Khandwalla (1970). Some years later, Miller and Friesen (1978) built further on this by developing eleven entrepreneurial dimensions, through their study on the ‘complexes of attributes and relationships’. The EO concept was further expanded by Miller (1983) through the identification of three dimensions (Innovation, Risk-taking and Proactiveness). This was from his definition of an entrepreneurial firm as one that engages in product marketing innovation, undertakes somewhat risky ventures, and is first to come with proactive innovations.

Today, most of the studies on EO and firm-level performance build on the publication by Miller (1983). Morris and Paul (1987) impliedly introduced EO as the inclination of a firm’s top management to take calculated risks, be innovative and demonstrate proactiveness. This was the definition that Lumpkin and Dess (1996) built on by adding two new dimensions (‘propensity to act autonomously’ and ‘a tendency to act aggressive towards competitors’) to the already established ones in the literature on entrepreneurship.

Also noteworthy in this review is the theoretical argument by Lumpkin and Dess (1996, 2001) that positions Entrepreneurial Orientation as a multidimensional phenomenon, in contradiction to the well-established and widely-held view that it is a unidimensional construct (Covin and Slevin 1991; 1989). Although Lumpkin and Dess’ (1996) argument on the multidimensionality of the EO is still a developing line of research, empirical evidences are emerging systematically to

support their views (Rauch et al., 2009). Most of these empirical studies confirm that despite the synergistic relationship among the five constructs of EO, they can individually influence certain entrepreneurial behaviours in firms (Naldi et al., 2007; Rauch et al., 2009). Employing any of the EO dimension could be a strategic choice for family businesses (Miles et al., 2000). However, some factors (such as intentions, attitudes and values of the family behind the firm) m a y naturally influence this choice.

The general view in literature on entrepreneurship is that EO influences firm performance positively (Rauch et al., 2009). This is also a growing trend in family business literature. For example, Zahra (2005) reports a positive relationship between family ownership and firm performance; Kellermanns et al. (2008) also finds that proactiveness increases employment growth in family firms; Chirico and Sirmon (2011) finds a significant relationship between Entrepreneurial Orientation and performance of family firms. Although there are mixed findings in studies investigating the Entrepreneurship Orientation of family firms, the dominant view still suggests that EO may influence family firm’s performance positively.

EO is in this study, assessed at the organisational level, in line with the focus of literature on EO (Covin and Slevin, 1991). The five EO constructs (innovation, proactiveness, risk-taking, autonomy and competitive aggressiveness) presented in the article by Lumpkin and Dess (1996) is also adopted in this study.

Autonomy

Entrepreneurs (mostly founders and/or founding families) are very passionate about their vision because it usually forms the motivating factor for establishing their autonomy (Schumpeter, 1934). Autonomy refers to the independent action taken by an individual or a group of people to bring forth an idea or vision and further carry it out to completion (Lumpkin and Dess, 1996). It

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is the ability of an individual or a team to incubate an idea (usually directed at creating new products; market opportunities or new ventures) and taking absolute steps to ensure its completion (Lumpkin and Dess, 1996). It is a practice that is deeply embedded in being independent, wanting to establish one’s individuality or unique capability (Krauss et al., 2005). Within an organisation, autonomy captures the absence of organisational constraints such as any bureaucratic process that would hinder the realisation of new opportunities (Lumpkin and Dess, 1996). These attributes of autonomy above are well represented in family business literature. The place of autonomy is important in family businesses for various reasons. Most family owners crave the independence of their firms from external influences (Chrisman et al., 2003). Furthermore, the alignment of family and company’s goals in family businesses (Daily and Dollinger, 1992) reduces bureaucracy in decision making, thus promoting entrepreneurial behaviours in family businesses. Although some contrary views hold that family businesses may sacrifice important and urgent economic needs in order to protect their independence from external influences (Schulz et al., 2001), it still remains one of the major goals of family firms that is positively linked with their performance (Astrachan and Zellweger, 2008).

In line with the above, this thesis measures autonomy through a family business’ independence in decision making without interference from external parties or stakeholders, such as financial institutions. Autonomy is also reflected through the informal decision making process that occurs within small and medium-sized family businesses in Nigeria.

Based on the foregoing, the thesis proposes the following:

H2 (i) a: Autonomy positively influences the performance of Nigerian family firms.

H2 (iii) a: Autonomy positively moderates the relationship between family culture and firm performance.

Innovativeness

Lumpkin and Dess’ (1996:142) definition of innovativeness is also adopted in this thesis. A firm’s innovativeness is a reflection of its tendency to engage in and support new ideas, novelty, experimentation and creative processes that may result in new products, services, or technological processes. Schumpeter’s famous ‘creative destruction’ principle introduced the role of innovation in the entrepreneurial process (Schumpeter, 1943). Innovation involves introducing new products, new production method, new marketing style, new product concept that aims at disrupting the existing structure within an industry or market (Schumpeter, 1934). It represents the desire to depart from an existing way of doing things by the organisation to continuously identifying new practices and solutions.

Lumpkin and Dess (2001) put the above categorisation by Schumpeter in clearer perspective by grouping innovation into two forms. These are product market innovation and technological innovation. Product market innovation takes place in the design, marketing and sales of products; whereas, technological innovation explains advancement in product development, engineering and research, with an emphasis on specialist knowledge. The basic assumption under the innovation construct is that it constitutes a company’s exit from known organisational practices, to promotion of new ideas, effective changes, and identification of new opportunities. Thus, a firm that engages in innovative activities would most likely improve its chances of firm growth and subsequent profitability (Naldi et al., 2007).

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However, it is important to mention that the extent to which firms engage in innovative activities may vary. Innovation in family businesses may depend on firm size, the intentions of family owners, and the balance between family orientation and business orientation. Overall, the RBV of the firm argues that family businesses are innovative in nature, based on the huge evidence of family participation in new venture creation (Aldrich and Cliff, 2003).

Therefore, innovation may occur significantly in Nigerian family businesses due to strong drive by Nigerian families for their firms to be successful, able to survive and fulfil family goals such as building a reputation and lasting legacy for the next generation (PWC Report, 2014). It is also further argued in this thesis that the presence of strong family values and commitment (family culture) in Nigerian firms would prompt innovative actions that would affect the performance of such firms positively. The following hypotheses are thus proposed:

H2 (i) b: Innovativeness positively influences the performance of family firms.

H2 (ii) b: Innovativeness is positively predicted by family culture.

H2 (iii) b: Innovativeness positively moderates the relationship between family culture and firm performance.

Proactiveness

Proactiveness involves the process of anticipating on what might occur in the future and acting on it. Proactiveness, according to Lumpkin and Dess (2001), reflects ‘the forward-looking perspective’ characteristic of a founder or management leader (CEO). This represents the ability and the foresight of the founder and/or CEO to act in anticipation of future demands (Lumpkin

and Dess, 2001:433). A broad definition that is adopted in this thesis is given by Venkatraman, (1989a). He defines proactiveness as

seeking new opportunities which may or may not be related to the present line of operations, introducing new products and brands ahead of competition and strategically eliminating operations that are in the immature or declining stage of the company’s life cycle.

This is the most used definition for proactiveness in literature. This dimension of Entrepreneurial Orientation is sometimes confused with competitive aggressiveness (Lumpkin and Dess, 2001). However, they are two clearly distinct dimensions. Proactiveness is usually characterised by the act of creating new products, technologies ahead of market demand; while competitive aggressiveness involves defending the firm’s position in the market (Lumpkin and Dess, 1996). There are some measures of risks involved in being proactive; these are considered slightly higher than those normally associated with competition aggressiveness. This is because proactiveness involves taking actions to recreate a dynamic and/or hostile environment to one’s competitive advantage, while competitive aggressiveness involves reacting to existing competitive trends and demands in a more stable and steady environment (Lumpkin and Dess, 2001). Proactiveness is thus characterised by being the first responder to an anticipated gap in the market. Two factors are identified by Lumpkin and Dess (2001) as factors that might affect proactiveness and competitive aggressiveness. They are environment and industry life cycles.

Environmental life cycle: This is examined under two concepts. They are dynamism of the environment which relates to the unpredictable change in a firm’s environment; and hostility which indicates the level of scarcity and intensity of competition for environmental resources.

Studies examining the effect of environmental dynamism on the performances of small firms present the literature with diverse outcomes (Zahra and Pearce, 1989; Wiklund, 1999). The

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outcome of a study by Miles, Covin and Heeley (2000) investigating the above relationship in small manufacturing firms suggests that environmental dynamism promotes organisational structure among small firms, which subsequently impacted positively on their performance. A similar study by Lumpkin and Dess (2001) on 94 mixed sized firms in the United States of America (USA) supports that proactiveness is most effective in a dynamic environment. The authors found that proactiveness is positively related to firm performance in a hostile environment. In family business literature, Dyer and Mortensen, (2005) investigating entrepreneurial process in a hostile environment found that entrepreneurs often times create ways for their firms to survive in a hostile environment.

Industry life cycle: This refers to the different growth phases of an industry, as previously explained on page 111 (Lumpkin and Dess, 2001). The industry life-cycle may affect a firm’s proactiveness in different situations. This is because an industry that is matured or saturated is often times associated with slow growth, and any recorded successful entrance is usually done by taking over existing market share from a competitor (Lumpkin and Dess, 2001:438). Thus, little or no proactive decision taken by a firm operating within a saturated industry will affect its performance. On the other hand, a growing industry is often times associated with much better performance because there is less competition and more market opportunities for both new entrants and existing businesses to survive (Lumpkin and Dess, 2001; 437). Hence, the ability to recognise and tap into new opportunities within a growing industry will place a firm at a better advantage than its competitors. Thus, it is important to control for these factors in family business research.

In this thesis, proactiveness dimension of EO is measured by investigating a family business’ inclination towards being the first to introduce products and/or services into the market. The

firm’s position in initiating changes within the market or industry is also captured. These factors, if present in a family business, would promote positive firm performance through exploitation of opportunities by them. Thus, based on the above presentations, it is suggested that proactiveness dimension in family businesses prompts actions that may lead to positive firm performance. Furthermore, family culture also promotes behaviours (such as collectivism in decision making) and values (such as trust), which enhances the ability of the firm to make quick decisions when necessary, to stay ahead of competition.

The following are therefore proposed:

H2 (i) c: Proactiveness positively influences the performance of family firms.

H2 (ii) c: Proactiveness is positively predicted by the family culture of family firms.

H2 (iii) c: Proactiveness positively moderates the relationship between family culture and firm performance.

Risk Taking

In literature on EO, risk taking involves taking bold steps in attempting to move into a completely new or unknown terrain. Lumpkin and Dess, (1996) define risk taking in line with the three types of strategic risks identified by Baird and Thomas (1985:231-232). They are moving from the known to the unknown; committing large resources to new ventures; and heavy borrowings (Lumpkin and Dess, 1996:144). Therefore, in line with the above, this study defines risk-taking as venturing into the unknown which sometimes holds a high level of uncertainty. There is no organisation that does not take risk; their level or extent of risk taking is what differentiates entrepreneurial organisations from non-entrepreneurial organisations.

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Risk taking is the only dimension of EO that has enjoyed significant coverage in family business literature. Zahra (2005) in his study, identifies “the nature of entrepreneurial activities undertaken by family firms in their operations as an important source of risk-taking”. The author also suggests that the involvement of families in new venture creation and subsequent investment of their resources in those ventures are behaviours that indicate the risk-taking attributes of family firms. Consequently, risk taking has been identified as a clear entrepreneurial process in family firms (Zahra et al., 2004). This view is also supported empirically by Zahra (2005) in his study who found that family business ownership generally promotes risk taking. Despite the link between family firms and risk-taking, the general view in literature suggests that non-family firms engage in more risky ventures than family-involved businesses (Fama and Jensen, 1983). This is because family firms are long-term oriented. This tends to reduce their propensity towards taking risks that they perceive would hurt the family’s investment in the firm (Naldi et al., 2007; Zahra, 2005).

In the Nigerian context, businesses are more protective of their wealth and this behaviour may be more prevalent in family-involved firms. The probability of Nigerian family businesses engaging large resources for unknown ventures would be considerably lower, in comparison with their counterparts in other countries due to their limited access to external funding (Africa’s Progress Report, 2014). This leads to a stronger propensity towards protecting the family’s resources in the firm. Furthermore, Nigerian family businesses operate in a more hostile business environment which is characterised by unfavourable and unstable government, policies among other factors (Ibrahim and Muritala, 2015). Therefore, venturing into actions that require more uncertainty than certainty may lead to unfavourable outcomes such as business loss. These constraints faced by Nigerian family businesses might also limit their resources (financial and

human) to very few risky ventures. Consequently, any attempt to undertake bigger projects (riskier ventures) may lead to negative firm performance.

This thesis therefore, presents the view that a high propensity towards risk-taking may negatively affect the performance of Nigerian family firms. Furthermore, the presence of family culture in Nigerian firms may influence behaviours that might prevent them from undertaking risky ventures because of the need to ensure the survival of their business.

Therefore, based on the above arguments, it is proposed in this thesis that

H2 (i) d: risk-taking negatively influences the performance of family firms; H2 (ii) d: risk-taking is negatively predicted by family culture of family firms.

H2 (iii) d: risk-taking negatively moderates the relationship between family culture and firm performance

Competitive Aggressiveness

Competitive aggressiveness is suggested as one of the basic characteristics surrounding the activities of an entrepreneurial firm (Krauss et al., 2005). This is because it propels a firm to take an offensive position most times without letting down their guard, especially when entering a new market (Lumpkin and Dess, 2001). Competitive aggressiveness refers to the intensity of a firm’s effort to outperform rivals within their industry (Lumpkin and Dess, 2001). For example, using a familial setting, when parents create a subtle competitive environment among their children, it often times leads them to the desire to work harder at their various duty positions, in an effort to outdo each other. Therefore, competition might create an opportunity for improved performance in stable environments.

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According to Lumpkin and Dess (2001), competitive aggressiveness is achieved by setting ambitious market share goals; and taking bold steps to achieve them. Specific examples of competitive aggressive entrepreneurial actions in a highly competitive market include drastically reducing the price of products and/or services; and sacrificing immediate profitability for future gains (Lumpkin and Dess, 2001).

Examining the effect of this dimension among ninety-four (94) (mixed industry and sized) American firms, the findings of Lumpkin and Dess (2001) suggest that in more mature economies, competitive aggressiveness may enhance a firm’s effort to maintain a strong position in the midst of intense competition due to the availability of very few opportunities. A positive correlation is found between firm performance and competitive aggressive behaviours such as strong marketing efforts and vigorous cost controls in mature industries. Thus, it might be in order to suggest that competitive aggressiveness, as an entrepreneurial construct, is required by small family firms operating within matured industries to stay ahead of competition while prospecting for long-term gains. However, the extent to which a family firm is willing to engage in aggressive competition may be relative to firm size and family goals.

The positive performances reported by some studies investigating the family involvement-firm performance relationship in large listed firms (Anderson and Reeb, 2003a) suggest that family firms engage in aggressive marketing of their products amongst other entrepreneurial drives to ensure the survival of their firms. In this thesis, it is therefore argued that Nigerians employ more of an aggressive posture towards marketing their products and services in order to stay ahead in competitions, ensure the survival of their firms and protect their businesses from unfavourable government policies. Given the importance of loyalty, discipline, promotion of family goals, interest, and name to firms with high family culture, the likelihood that this phenomena would

influence competitive aggressiveness in family firms is strong. Therefore, the following hypotheses are proposed: