Assessing the compatibility of management behavior and entrepreneurial orientation

Abstract: The paper uses a data set on a Dutch company of which the partners – who act as managers and entrepreneurs – have assessed both themselves and their peers on dimensions of De Waal’s High Performance Management framework. Two of these dimensions relate to Management Behavior (MB) and Entrepreneurial Orientation (EO). The research addresses the question whether the theoretical differences between Management Behavior and EO (inward versus outward looking; short versus long term; directly or not directly affecting others; specific versus abstract) are reflected by differences in the predictive power of one’s self-assessment on the assessment of one’s peers. The authors’ findings indicate that Management Behavior and EO assessments are uncorrelated; and related to self-assessments in different manners. Management Behavior follows the assessment patterns that can be expected among chess players where the skills of the evaluator predict how they evaluate their peers. EO in contrast follows the pattern that can be expected in the popular game of soccer where even unskilled spectators are able to assess the players. In Management Behavior, self-assessments by evaluees are poor predictors of how they are evaluated by their peers. In EO the reverse holds: self-assessments by evaluees predict their evaluations by peers (and therefore, these self-assessments are informative). The authors argue that the differences between Management Behavior and EO have organizational consequences. Management Behavior is subject to processes of learning and adaptation, and therefore any differences within management teams can be overcome. Since team members will not easily disagree on each other’s EO related skills, weaknesses are taken for granted and may cause an entrepreneurial stalemate with no improvement.

Keywords: entrepreneurship, entrepreneurial orienation, High Performance Manager, management behavior.

Authors: Robert Goedegebuure, André de Waal

Publication: Problems and Perspectives in Management, Volume 12, Issue 3, 2014

Introduction: Assessing the compatibility of management behavior and entrepreneurial orientation

Research questions and hypotheses. It is widely recognized that knowledge and innovation are key determinants of business performance (Hall, 1999; Cho and Pucik, 2005). Innovation is broadly defined as the development of new values through solutions that meet the requirements of the market through more effective products and processes (cf. Davila et al., 2006). Entrepreneurship has many definitions ranging from factual definitions like Ganter’s (1985) interpretation of the act of starting a business, to Stevenson’s definition of entrepreneurship as the pursuit of opportunity without regard to resources currently controlled (cf. Burgstone and Murphy, 2012); or alternatively descriptions of entrepreneurs are given as knowledge workers who operate at the edge of their competence and focus their attention on what they do not know rather than controlling what they already know (Kanter, 1990, in Cornwall and Perlman). Interestingly, Kanter’s interpretation is rooted in the literature on knowledge entrepreneurship that has been put forward as the relevant approach to knowledge in the non-profit sector where profit maximization is not a main objective. It is assumed that the organizational setting (including culture and leadership) is a determinant of knowledge entrepreneurship which in turn affects innovation performance (McDonald, 2002; Senges, 2007). Skrzeszewski’s (2006) definition of knowledge entrepreneurship as “creating and using intellectual assets for the development of new services” leads us to question how non-profit sector specific the concept is. The question is especially relevant in (commercial) organizations where the divide between management and leadership (the organizational setting) on the one hand and knowledge workers and entrepreneurs on the other, is unclear, and wherethe roles are overlapping. The obvious case in point is the small firm that is owned and managed by what many would call the entrepreneur. For small firms, Sadler-Smith et al. (2003) found that managing vision is related to an entrepreneurial style, while managing performance is related to a non-entrepreneurial style (to be understood as riskaverse, non-innovative, passive and reactive; cf. Covin and Slevin, 1988). More in general, managerial styles relate to the attitudes and behaviors of people in charge of the organization toward others, while entrepreneurial skills relate to the use of creative skills externally. While managerial styles can be categorized (e.g. as formal/informal; paternalistic or autocratic; see Tannenbaum and Schmidt, 1973), entrepreneurial skills are more abstract in nature. The empirical work of Sadler-Smith et al. (2003) suggests that it is hard to combine managerial and entrepreneurial skills within the same person.

O’Reilly and Tushman (2004) put forward the idea of the Janus faced ambidextrous organization that has to strike a balance between the management of its current activities and an orientation toward the future, as both are needed to keep up with existing and upcoming competitors. The idea of the two-sided Janus-face is extended with a third dimension in the so-called MEL-index that is comprised of the three archetypical decision-makers: managers, entrepreneurs and leaders (Dover and Dierk, 2010a). Although the literature on both entrepreneurs and on managers is well established, not much research has explicitly addressed the question of whether managerial and entrepreneurial skills, however defined, are compatible skills at the individual level in the context of larger organizations.

The major research question that we address in this paper is to whether managerial skills and entrepreneurial skills are similar or different in nature. To the extent that the skills are different they are more likely to be incompatible at the level of individuals: that is, persons in charge are more likely to behave as either a manager or an entrepreneur. If on the other hand the skills are similar in nature then it is more easily conceivable that they are combined within one and the same person.
The minor research questions are the following. First, the data set will be used to check whether the nature of managerial skills is indeed different from entrepreneurial orientation. A second research question, of a methodological nature, is to find out whether it makes sense to rely on self-assessments for measuring managerial skills and entrepreneurial orientation.

The following hypotheses will be tested. First of all we hypothesize that when evaluating others on management behavior (MB) and entrepreneurial orientation (EO) the self-evaluation of the evaluator co-determines the outcome (hypotheses H1a and H1b). The logic is that especially in professional settings people are consciously or unconsciously aware of their own skills relative to the skills of peers; as a result, states-of-mind like overconfidence, self-confidence or lack of confidence will be related to evaluations of peers. Secondly we hypothesize that self-evaluations of evaluees are related to evaluations by peers. We expect that explicit and implicit feedback mechanisms in a professional environment with a relatively small number of people will see to it that self-assessments of evaluees predict how they are evaluated by others (hypotheses H2a and H2b).

Hypothesis H3 reflects the different natures of management behavior and EO. In the absence of hard indicators the best measure of management behavior and EO skills are peer evaluations, and we hypothesize that these skills are uncorrelated. Strength in one area has no bearing on our strength in the other area. Against the background of our research questions, H3, H4a and H4b are key. In H4a and H4b we test that whether the predictive power of self-evaluations is actually different for management behavior versus EO. A more elaborate justification of our hypotheses is provided in the section discussing the research model.

In summary:

H1a. With regard to on management behavior: selfevaluations of evaluators predict their evaluation of peers.
H1b. With regard to entrepreneurial orientation: self-evaluations of evaluators predict their evaluation of peers.
H2a. With regard to on management behavior: selfevaluations of evaluees predict their evaluation by peers.
H2b. With regard to entrepreneurial orientation: self-evaluations of evaluees on entrepreneurial orientation predict their evaluation by peers.
H3. Evaluations by peers on management behavior and on entrepreneurial orientation are uncorrelated.
H4a. The predictive power of self-evaluations of evaluators on their evaluation of peers differs between management behavior and entrepreneurial orientation.
H4b. The predictive power of self-evaluations of evaluees on their evaluation by peers differs between management behavior and entrepreneurial orientation.

A managerial objective of our study is to derive a tentative what-if framework that organizations can use to think about their MEL-constellation, in support of the works of Dover and Dierk (2010a). We are able to answer our research questions by making use of a unique dataset. The company is a Dutch consultancy company in the water, infrastructure, construction and spatial development sector. It was established in 1946 and has grown to become one of the leading engineering firms in the Netherlands with a workforce of over 900 people.

The company prides itself in its dedication to critical quality attributes: friendly, expert, reliable and innovative. The company offers its clients valueadded consultancy and top-quality designs for water; infrastructure; spatial development; environmental; and construction projects. The company is structured in product-market combinations (PMCs) which are clustered into four business lines. Examples of PMCs are water management (preparation, transport and distribution of drinking water), effluent treatment, environmental technology, port and river water engineering, and tunnels. The shareholders of the company are the employees, either as an associate, partner or senior partner. There are currently 79 partners out of which 19 are considered to be senior partners. The organization is idiosyncratic in its governance structure and shareholder system. The shareholders are employees, associates, or (senior) partners. Partner shareholding is by invitation of the Board of Directors, while the General Meeting of Shareholders appoints senior partners. Critically important to our research is that the partners collaborate as generalists rather than acting as either specialized managers or entrepreneurs as would be the case in the typical ambidextrous organization. Within the company, the senior partners took part in a high performance managers (HPM, hereafter; Waal, 2012; Waal et al., 2012) exercise in which they assessed both themselves and their peer senior partners on – among other factors – leadership, managerial behavior and entrepreneurial orientation….

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