1

The impact of entrepreneurial orientation and marketing innovation on sustained

competitive advantage of female SMEs in Egypt: A conceptual framework
Abstract
This paper presents a comprehensive review oI recent studies dealing with
entrepreneurial orientation and sustained competitive advantage. To that end, the paper
develops a conceptual Iramework to address the paucity oI research concerning the role
oI marketing innovation in the relationship between entrepreneurial orientation and
sustained competitive advantage. The research Iramework is based on the dynamic
capability view oI the Iirm and uses qualitative data Irom Iemale entrepreneurs who own
and/or manage SMEs in Egypt.
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Introduction
The current dynamic environment characterized by rapid technological changes and
Iragmented markets increased the volatility, risk and uncertainty Iaced by SMEs
(Skerlavaj et al., 2010; Hughes and Morgan, 2007). This has led to a shiIt Irom relying on
price competition and eIIiciency to Iocusing on non price competition (Weerawardena,
2003) such as product characteristics and other marketing tactics (Bloch, 2007).
Marketing innovation can be considered as an attractive strategy in such environment
as it Iocuses on low-risk product modiIications, extensions and design changes and thus
provide quick innovative solutions (Naidoo, 2010). Bloch (2007) deIines marketing
innovation as 'The implementation oI a new marketing method that involves signiIicant
changes in product design or packaging, product placement, product promotion or
pricing, p.29.
The current literature, however, Iocuses on technological innovation only. There is a
need to examine non-technological innovations to reach a more comprehensive
understanding oI how Iirms innovate (Bloch, 2007). Nevertheless, only Iew studies
examined marketing innovation in SMEs (De Vrande et al., 2009; Naidoo, 2010). For
example, De Vrande et al., (2009) Iound that SMEs, as entrepreneurial Iirms, pursue
innovation primarily Ior market-related motives such as meeting customer demands, or
keeping up with competitors. Also, Naidoo (2010) Iound that marketing innovation
assisted in developing and sustaining competitive advantages Ior SMEs. ThereIore, the
present study will address this gap by examining the mediating role oI marketing
innovation in the relationship between entrepreneurial orientation and sustained
competitive advantage oI Iemale SMEs in Egypt. The research`s model is based mainly
on the dynamic capability view oI the Iirm and uses qualitative data Irom Iemale
entrepreneurs who own or manage SMEs in Egypt.
The paper is organized as Iollows: Iirst, the theoretical background Ior the research is
presented, Iollowed by the methodology used in developing the conceptual Iramework,
then, the Iramework and the logic behind it are introduced and Iinally the conclusion and
Iuture agenda will be highlighted.
Theoretical background
The current state oI research in entrepreneurship is still somewhat Iragmented.
Entrepreneurship as a concept has been studied Irom both individual and corporate
perspectives, thereIore, its theoretical background is diverse and there is no generally
accepted deIinition oI entrepreneurship, and what is considered as its Iundamental nature
depends largely on the researcher background and the research purpose (Jantunen et al.,
2005). In the current study, we deIine entrepreneurship Irom an opportunity lenses.
Dynamic capabilities which is considered as one oI the strategic management
underlying theories (Foley, 2005) Iocus on the ability oI the Iirm to sense and seize
opportunities (Teece, 2000), and thus the Iirm`s dynamic capabilities reIlect the
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entrepreneurial Iacet oI management (Teece, 2003). In this sense several scholars support
the research integration between entrepreneurship and strategic management (McGrath
and MacMillan, 2000; Zahra and Dess, 2001; Ireland et al., 2003; Choi and Shepherd,
2004).
The inIluence oI entrepreneurial orientation on sustained competitive advantage and
thus perIormance is inconsistent/mixed results (Jantunen et al., 2005). Li et al., (2009)
argued that most studies investigating the independent eIIect oI entrepreneurial
orientation on Iirm perIormance ignored the Iactors that may mediate this relationship. In
this sense, Hughes and Morgan (2007) noted that research is needed to examine what
constructs that may mediate this relationship. As such Jantunen et al., (2005) study Iound
that entrepreneurial behaviour combined with reconIiguring capabilities oI the
organization represents a potential source oI competitive advantage. Naidoo (2010) study
Iound that marketing innovation in SMEs directly inIluence sustained competitive
advantage. De Vrande et al., (2009) study Iound that SMEs marketing innovation is
essential Ior revenues and growth achievement. This is perhaps because the essence oI
marketing innovation is that it guarantees SMEs survival in the current dynamic
environment and thus it is considered as an important variable that strongly inIluence
sustained competitive advantage.
In light oI this, this paper will extend the extant entrepreneurial orientation and
sustained competitive advantage literature by proposing a conceptual Iramework that
considers marketing innovation as an important mediating variable in the relationship
between these two constructs. SpeciIically, this paper aims at explicating how SMEs in
Egypt that are entrepreneurially oriented practice marketing innovation to gain a
sustained competitive advantage in the market.
Methodology
The population oI this study consists oI all SMEs owned and/or managed by Iemales
working in Egypt. SMEs were selected as the empirical context oI this research because
these Iirms are the primary driver Ior job creation and economic growth (World Bank,
2010). In addition, Iemale-owned/managed SMEs, though smaller, are Iound to have the
highest perIormance among all Egyptian Iirms (Investment Climate Assessment, 2005).
Finally, Iemale-owned Iirms in Egypt are well integrated into the global market, active
exporters, and heavy users oI inIormation technology (World Bank, 2010).
A non probability randomizes judgment sample was used; 50 Iemale small enterprises
were selected Irom the social Iund Ior development (SFD) directory, and a random
sample oI 50 Iemale medium enterprises were chosen Irom the General Authority Ior
Industrial Development (GAID) directory. SFD and GAID directories were used as
sampling guides since the population is indeIinite. Female owners and managers 'top
management levels were the key inIormants to provide the inIormation sought. In-depth
interviews were used using a semi-structured with interviewing guide to collect data
because the In-depth interview methodology can capture a large volume oI inIormation
and allows Ior clariIication (Marshall and Rossman, 1999).
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The Conceptual Framework and Research Propositions
The exploratory evidences Irom the literature review and qualitative in-depth interviews
were the bases on which the conceptual Iramework is grounded. The conceptual
Iramework proposes that entrepreneurial SMEs achieve a sustained competitive
advantage through marketing innovation as depicted in Iigure 1. The rest oI this section
introduces a conceptual justiIication Ior these arguments.
Sustained competitive advantage
The current study adapts the dynamic capability view as a strategic approach Ior
understanding competitive advantage. The dynamic capability view reIlects the later
versions oI the resources based view and it Iocus on the Iirm`s capabilities in developing
and deploying the available resources in a way that match the changing environment
(Morgan et al., 2009a). According to Jantunen et al., (2005) having the ability to seize the
opportunities that a dynamic operating environment provides, depends on the
entrepreneurial Iirms` reconIiguration oI their existing asset base and processes.
Competitive advantage, as a dependent variable in this study, is considered as a superior
marketplace position through the provision oI superior customer value and/or the
achievement oI lower relative costs that lasts over a long period oI time and results in
superior perIormance (Weerwardena, 2003; Weerawardena and O`Cass, 2004). Thus, this
construct is conceptualized as to whether the Iirm has gained market advantages and
whether it is possible Ior competitors to duplicate the Iirm`s competitive strategy and
distinctive capabilities on which advantages have been Iounded.
Entrepreneurial orientation (EO)
Entrepreneurial orientation concept emphasizes the Iirm-level practices, processes,
decision-making style (Lumpkin and Dess, 1996), and strategic orientation (Wiklund and
Shepherd, 2003) oI an entrepreneurially-oriented Iirm. Zheng et al. (2009) and Rhee et al.
(2010) deIine EO as an entrepreneurial attitude that Iundamentally involves alertness to
discoveries and seizing opportunities ability. Based on this, entrepreneurial orientation,
has great impact on the development oI dynamic capabilities (Jiao et al., 2010; Li et al.,
2009; Merlo and Auh, 2009; Lin et al., 2008).
There is a broad consensus among scholars (Bhuian et al., 2005; Hughes and Morgan,
2007; Morris and Sexton, 1996; Merlo and Auh, 2009; Rhee et al., 2010) around Miller`s
(1983) view that entrepreneurial orientation includes three key dimensions: risk taking,
proactiveness and innovativeness.
Risk taking. It represents resource commitment in implementing projects that involves
high uncertainty level Ior the likely outcomes (Hughes and Morgan, 2007; Morris and
Sexton, 1996; Bhuian et al., 2005; Li et al., 2009; Merlo and Auh, 2009) which lead to
increased pace in the strategic decision making regarding the introduction oI innovations
(Hughes and Morgan, 2007).
S
Proactiveness. It reIers to seeking new opportunities and aiming to be leaders rather than
Iollowers due to a desire to shape the environment through seizing new opportunities,
thus, it is anticipated that proactiveness will Iacilitate innovation (Merlo and Auh, 2009).
Innovativeness. According to (Marcati et al., 2008) entrepreneurs` innovativeness plays a
major role in SMEs` adoption oI innovation. Innovativeness reIlects the
tendency/willingness oI a Iirm to engage in and support new ideas and processes that are
creative and may result in introducing new products, services or processes (Merlo and
Auh, 2009; Lumpkin and Dess, 1996; Li et al., 2009; Hughes and Morgan, 2007; Lin et
al., 2008; Rhee et al., 2010).
Entrepreneurship with respect to innovation is deIined as 'the creation oI new goods and
methods oI production, opening oI new markets, capturing new sources oI supply and the
evolvement oI new organizations oI industry (Schumpeter, 1928). In this sense, we posit
that entrepreneurial orientation inIluence marketing innovation as there is a strong link
between innovation and entrepreneurial activity in which entrepreneurs are portrayed as
'innovator(s) (Schumpeter, 1965, p. 55).
ThereIore, the role oI entrepreneurs in Iostering innovation is especially important, since
the innovation-related research has consistently shown that entrepreneurs are the main
driver oI innovation. Hence in the present study we hypothesized that;
P1: Entrepreneurial orientation positively inIluence marketing innovation
Marketing Innovation
Marketing innovation is seen as a powerIul tool in gaining sustainable competitive
advantage through the combination oI inimitable various marketing Iactors that deliver
both value and proIit (Ren et al., 2010). It emphasizes low-risk product modiIications,
extensions and design changes that provide quick innovative solutions and thus it is
considered as an attractive strategy Ior increasing sales (Naidoo, 2010). In Iact, it is
perceived as an incremental type oI innovation that Iocuses on improvements in product
design, packaging, product placement, product promotion or pricing (Bloch, 2007; Ren et
al., 2010; Naidoo, 2010).
Generally, the main drive oI enterprises to practice innovation is the achievement oI basic
entrepreneurial values such as revenues and growth (De Vrande et al., 2009). In this
sense, the implication oI marketing innovation speciIically on business perIormance and
customer value has been acknowledged in the literature (Blazevic and Lievens, 2004;
Mavondo and Farrell, 2003; Mavondo et al., 2005; Roper and Love, 2002). Recently,
Naidoo (2010) investigated whether marketing innovation can assist in withstanding the
challenges oI operating under the current economic conditions, and Iound that marketing
innovation assisted in developing and sustaining competitive advantages. Hence the
present study hypothesized that:
P2: Marketing innovation positively inIluence sustained competitive advantage
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Figure 1: The Research framework
Limitations
Although our sample oI SMEs is extensive, there is still a chance that some types oI
enterprises were still overlooked. The screening oI respondents implied that start-ups and
micro-enterprises (with less than ten employees) were excluded. This is an issue that
Iuture researchers should pick up. Also, this research did not include large manuIacturers.
Additional research is, thereIore, required to provide Iurther insights on the role oI
marketing innovation in assisting large manuIacturing Iirms. Finally, the Iindings ought
to be only exploratory in nature since a cross-sectional study might not adequately
capture a longitudinal-type phenomenon such as Iirm survival.
Conclusion and Future Agenda
This article represents the Iirst phase oI a multiphase project. The Iirst phase`s objective
is to conceptualize the role oI marketing innovation in enhancing entrepreneurial SMEs
sustained competitive advantage. The conceptual Iramework developed in this paper has
served to highlight Iemale SMEs entrepreneurial orientation inIluence on sustained
competitive advantage through marketing innovation. The next phases oI the project will
Iocus on reaching an empirically substantiated policy support mechanism Ior encouraging
SMEs marketing innovation Ior the purpose oI stimulating economic development in
Egypt. This is expected to lead to understand the antecedents and mechanism Ior the
achievement oI sustained competitive advantage oI SMEs.
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