Entrepreneurial Orientation, Total Quality Management, Competitive Intensity, and Performance of SMEs: A Resource-Based Approach

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 1, Pages: 61-72

J. Environ. Treat. Tech. ISSN:

309-1185

Journal weblink: http://www.jett.dormaj.com

Entrepreneurial Orientation, Total Quality

Management, Competitive Intensity, and

Performance of SMEs: A Resource-Based

Approach

Kabiru Maitama Kura , Ramatu Abdulkareem Abubakar , Noor Maya Salleh

UTB School of Business, Universiti Teknologi Brunei, Jalan Tungku Link, Gadong BE1410, Brunei Darussalam

Distance Learning Center, Ahmadu Bello University, Samaru 810006, Zaria, Nigeria

Received: 28/06/2019

Accepted: 25/08/2019

Published: 12/09/2019

Abstract

Drawing upon resource-based theory, as well as contingency theory, this study examined the role of competitive intensity in

moderating the relationships between entrepreneurial orientation, total quality management, and SME performance. Using a stratified

random sampling, 714 self-administered questionnaires were distributed to owner‐managers of SMEs operating in Kano and Kaduna

in the north-west geopolitical zone of Nigeria. Of the 714 questionnaires distributed, 440 unusable questionnaires with 62 percent

responses were returned and further analysed. The hypotheses were tested using Partial Least Squares Structural Equation Modeling

(

PLS-SEM). Results supported the hypothesised main effects of entrepreneurial orientation, and total quality management, on SME

performance. Also, the competitive intensity was found to moderate the relationships between entrepreneurial orientation and SME

performance. On the contrary, no significant interaction effect was found between total quality management and competitive intensity.

The theoretical contribution of the present study lies in its use of competitive intensity as a moderator of the relationships between

entrepreneurial orientation, total quality management, and SME performance.

Keywords: Entrepreneurial Orientation; Total Quality Management; Competitive Intensity; Performance.

upper middle income countries, SMEs are important economic

agents for growth.

Introduction

Small and medium-sized enterprises (SMEs) have been

In Southeastern Asia, SMEs are integral to ASEAN

economic integration, providing approximately 80 percent of

employment, and contributed as much as 50 percent to the

GDP, as well as significantly constituting more than 96

percent of enterprises in the region (8). Specifically, in

Malaysia, the contribution made by SMEs to the GDP in 2015

was 36.3 percent (9), while in China, SMEs contributed 60

percent to GDP in 2015 (10).

In contrast to the aforementioned countries in developed

and emerging economies, the contribution made by SMEs to

the GDP of Nigeria was 48 percent in 2015 (11). In the same

vein, compared to the countries having the same levels of

development with Nigeria, such as South Africa, Ghana, and

Kenya, among others; SMEs contribute a much higher

proportion to GDP than currently observed in Nigeria. For

example, while SMEs in Nigeria contribute 48 percent of the

country’s GDP in 2015, in South Africa, Ghana, and Kenya,

identified as major drivers of economic growth,

competitiveness and jobs creation, in both developed and

developing countries (1-5). It is also generally accepted in both

theory and practice that SMEs are used as engine for solving

socio- economic problems such as unemployment, poverty

alleviation. For example, SMEs have been regarded as critical

to economic growth, employing 88.8 million people, as well

as generating €3,666 trillion in valued added, representing 28

percent of Gross Domestic Product (GDP) in the 28 European

Union (EU) member states (6). Relatedly, the contribution

made by SMEs to the GDP and employment of high income

countries, such as Australia, Austria, Canada, and Germany,

were 55 percent and 65 percent, respectively. It is also

estimated that in the United Kingdom (UK), SMEs contribute

60 percent to total employment and about47 percent of all

private sector turnover (7). It has also been reported that in

Corresponding author: Kabiru Maitama Kura, UTB School of Business, Universiti Teknologi Brunei, Jalan Tungku Link, Gadong

BE1410, Brunei Darussalam. E-mail: kabiru.kura@utb.edu.bn.

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 1, Pages: 61-72

SMEs contribute about 55 percent, 70 percent and 98 percent

of the countries’ GDPs, respectively (12-15).

Although Nigeria remains Africa's biggest economy,

evidence has shown that business enterprises, including SMEs

concluded that firms adopting total quality management has a

potential to achieve sustainable competitive advantage.

Demirbag, Koh (32) also demonstrated that TQM

implementation has a significant and positive relationship with

SME’ performance. In the same vein, Vinod, Franck (39)

found positive relationships between TQM implementation

and firm performance. Christos and Evangelos (35) showed

that a number of TQM factors, including quality practices of

top management, employee involvement, customer focus,

process and data quality management, and quality tools and

techniques improved organizational performance. In Turkey,

Akgün et al’s (34) demonstrated that TQM had significant and

positive effects on firm’s financial performance. Besides the

aforementioned empirical studies, there are also several

studies that established significant and positive relationships

between total quality management practices and firm’s

performance (e.g., 40, 41, 42). Consistent with above

discussion, a positive relationship between TQM and SME

performance is also expected in the present study.

Accordingly, the following hypothesis is advanced:

have been facing challenges, such as

entrepreneurial

orientation deficiencies, poor market orientation, lack of

competent management, intense competition, low demand for

product and service lack of financial support, lack of training

and experience, unfriendly business environment, and limited

capacity for innovations, among others (16-20). Therefore,

given the aforementioned statistics and issues, it will be

pertinent to understand the underlying factors that affect SME

performance. Accordingly, the purpose of this study was to

examine whether competitive intensity would moderate the

relationships among entrepreneurial orientation, total quality

management, and performance in Nigerian manufacturing

SMEs. To this end, the rest of the paper is organized as

follows. Section 2 provides a detailed review of literature of

literature toward the development of a theoretical model that

explains the moderating role of competitive intensity in the

relationships among entrepreneurial orientation, total quality

management, and SME performance. Hence, these

relationships was explained from resource-based and

H2: There will be a positive relationship between TQM

implementation and SME performance.

contingency perspectives.

Section

describes the

2.3 Competitive Intensity as a Moderator

methodology employed in this study. Next, empirical results

are presented in section 4. The final section discussed

theoretical and practical implications of the findings before

offering suggestions for future research.

Given that competitive intensity is one of the underlying

dimensions of external business environment, evidence

supporting the role of competitive intensity as a moderator

would be largely drawn from business environment literature.

Past research suggests that competitive intensity plays a crucial

role in determining organizational performance (43-47).

Specifically, Ramaswamy (44) has contributed to the literature

by investigating the moderating effect of competitive intensity

on the relationship between ownership and performance of

large manufacturing firms across both public and private sector

in India. Results of their empirical analyses revealed that the

relationship between ownership and performance is contingent

upon the intensity of competition.

Literature Review

.1 Entrepreneurial orientation and SME performance

Entrepreneurial orientation has been defined as strategies,

processes, and behaviours of firms that are reflected by

proactiveness, innovativeness, risk-taking, aggressiveness,

and autonomy (21, 22). As noted earlier several dimensions of

entrepreneurial orientation are described in the literature.

Extant researches have shown that firms that are seeking for

Additionally, Li, Lundholm (45) showed that firm’s future

profitability and stock returns are negatively influenced by the

increase in the level of competitive intensity. In a more recent

study, Lahiri (43) established that the relationship between

firm resources and firm performance is moderated by

competitive intensity, such that the relationship is stronger

when there is increase in the level of competitive intensity than

when it decreases. As noted earlier, results regarding the link

between entrepreneurial orientation and firm performance

were inconsistent (48-50). These contradictory findings

reported in the literature suggest incorporating some other

organizational variables as moderator(s) on these relationships

in order to shed light on these contradictory findings. Previous

studies have demonstrated the theoretical and methodological

importance of including a moderating role of external business

environment on the relationship between entrepreneurial

orientation and business performance. However, most of these

studies mainly focused on the other characteristics of external

business environment, i.e., market turbulence, environmental

dynamism, and technological turbulence (e.g., 49, 51), thereby

paying less attention on other characteristics of firm's

competitive intensity. Therefore, the following hypothesis is

proposed.

sustainable

competitive

advantage

need

have strong entrepreneurial orientation that creates value

added services to customers (23, 24). Entrepreneurial

orientation is the most consistent predictor of firm

performance. Firms that have

a strong entrepreneurial

orientation are more likely to out-perform other firms that have

weak entrepreneurial orientation. More so, firms that are

proactive, innovative, aggressive, as well as those that have

autonomy and willing to take risk generate higher market

share, profitability and sales growth relative to their

competitors (25-27). Several empirical studies have confirmed

the positive relationship between entrepreneurial orientation

and business performance, across a variety of research

contexts (e.g., 28, 29-31). We therefore expect entrepreneurial

orientation to be positively SME performance. Hence, the

following hypothesis is postulated:

H1: There will be a positive relationship between

entrepreneurial orientation and SME performance.

.2 TQM implementation and SME performance

A number of authors have examined the relationships

between total quality management practices and

organizational performance (32-39). Specifically, Powell (38)

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 1, Pages: 61-72

H4: Competitive intensity moderates the positive

relationship between entrepreneurial orientation and SME

performance.

The data for this research was obtained through a self-

administered survey. In order to evaluate non-response bias in

the present study, a time-trend extrapolation approach were

used dividing the respondents into two main groups, namely;

those who responded within 30 days (early responders) and

those who responded after 30 days (late responders) as

recommended by Armstrong and Overton (62). Statistically,

this approach entails conducting an independent samples t-test

to detect any possible non-response bias on the main study

variables. Accordingly, the results suggest that non- response

bias does not exists in this study. Furthermore, given that self-

reported surveys were used to collect data at the same time

from the same participants, we also conducted common

method variance (CMV) test using Harman’s one-factor test

was used in the present study (63, 64). The results of CMV test

based on principal components factor analysis yielded 32

factors, with first factor accounting for only 37% of the

variance. It was also found that no general factor was evident

in the unrotated factor structure. As such, the results suggest

that CMV was not a major concern in this study.

Theory and extant empirical studies also suggest that

competitive intensity can moderate the relationship between

total quality management implementation and SME

performance (52-54). Specifically, Contingency theory

suggests that a firm's competitive intensity could be a potential

moderator of the relationship between total quality

management and SME performance. Such that when

competitive intensity is high, the relationship between total

quality management and SME performance would become

stronger (more positive), whereas, when the competitive

intensity is low, the relationship between total quality

management and SME performance is weaken (55).

Furthermore, in today's highly uncertain business environment,

quality improvement programmes and competitiveness are

critical to organizational effectiveness. Consequently, when an

organization's quality improvement programmes like TQM

generates value for customers that is rare and difficult to imitate

(

26, 27, 38), it can be a source of sustainable competitive

advantage which will allow firms to out-perform their

competitors who pay lip service to the implementation of total

quality management (56). Therefore, the following hypothesis

is advanced.

H5: Competitive intensity moderates the positive

relationship between total quality management implementation

and SME performance.

3.2 Measures

3.2.1 Entrepreneurial orientation

Entrepreneurial orientation was assessed using Covin and

Slevin’s (50) entrepreneurial orientation scale. Specifically,

this scale contains nine items, of which three items were

designed to measure the innovativeness dimension of

entrepreneurial orientation, three items to assess risk taking,

and the remaining three to measure proactiveness.

Entrepreneurial orientation was rated using seven-point Likert

scale ranged from 1 = strongly disagree to 7 = strongly agree.

Sample item include: “Our firm favours a strong emphasis on

R&D, technological leadership, and innovations”. “The

internal consistency coefficient (i.e., Cronbach Alpha) for

entrepreneurial orientation was 0.87.

Method

.1 Sample and Procedure

In the present study, the population of interest will be the

SMEs in the manufacturing sector of Nigeria. According to the

National Bureau of Statistics and Small and Medium

Enterprises Development Agency of Nigeria (57), there are

currently 6,652 SMEs in the manufacturing sector of Nigeria.

Out of the 6,652, a total number of 3,090 are based in Kano

and the Kaduna states. For the purpose of this study, the target

population will be 3,090 SME in Kano and Kaduna, the

northwest geo-political zone of Nigeria. Kano and Kaduna

states are selected for this study because they have high

concentration of business enterprises in the northwest geo-

political zone of Nigeria. Therefore, following Saunders,

Lewis, and Thornhill’s Saunders, Lewis (58) sample size

determination table, given population of 3,090 SMEs in Kano

and Kaduna states, a sample size of 357 is required. Hence,

3.2.2 Total Quality Management

A 7-item scale developed by Chenhall (65) was used to

measure total quality management in this study. Specifically,

the items in this scale asked the participants to indicate the

extent to which their firms have implemented programmes

over the past three years to improve the quality of products and

processes, efficiency, minimizing waste, as well as involving

employees in the continuous improvement. Additionally, total

quality management was rated by the participants using seven-

point Likert scale ranged from 1 = strongly disagree to 7 =

strongly agree. Sample item include: “Our firm implements

programs to improve the quality and reliable delivery of

materials and components provided by suppliers The

Cronbach’s Alpha for total quality management was 0.88.

357 owners and managers are expected to respond to the

research questionnaires. The unit of analysis was

organizational, in which owners and managers were invited to

participate in the study. Owners and managers were

specifically involved as key informants because they are the

most informed about firms’ strategies and capabilities (59),

and could therefore respond to the research issues and the

information sought accurately (60). Additionally, owners and

managers were chosen as the key informants in the present

study because decisions regarding the strategic decision

making activities of smaller firms rest very much in the hands

of these individuals, and could therefore stand in a better

position to respond to the survey correctly (61).

.2.3 Competitive intensity

To assess competitive intensity, Jaworski and Kohli’s (66)

Competitive Intensity Scale was administered. Competitive

intensity was assessed with six items, such as “There are many

"promotion wars" in our industry”, and “our competitors are

relatively weak”. Participants were asked to use a seven-point

Likert scale ranged from 1 = strongly disagree to 7 = strongly

agree to rate extent of their agreement with statements

describing the intensity of competition in their industry.

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 1, Pages: 61-72

Sample item include: “Price competition is a hallmark of our

industry”. The internal consistency coefficients (i.e.,

Cronbach’s Alpha) for competitive intensity scale were 0.93.

Responses were on a seven-point Likert scale ranged from

1 = strongly disagree to 7 = strongly agree. Cronbach’s Alpha

was 0.88 for organizational performance scales, suggesting

good reliability.

3.2.4 Organizational performance

Six-items were used to assess a broad range of SME'

3.3 Analytical Approach and Model Estimation

performance indicators. Five items were adapted from the

work of Powell (38), and the remaining item were drawn from

the work of Baker and Sinkula (67). Examples of these items

is: “Over the past 3 years, financial performance of our firm

has exceeded our competitors”.

The structural equation model in this study was estimated

using PLS path modeling in conjunction with Smart PLS 3.0

software (68). The PLS path modeling was considered

appropriate technique of data analysis for several reasons.

First, the PLS path modeling is considered to be suitable data

analysis technique in this study because it can simultaneously

assess the measurement model, which describes the link

between theory (latent constructs) and data (corresponding

indicators) as well as relationships among constructs. Second,

the goal of the present study is to predict the effect of

entrepreneurial orientation, total quality management, and

competitive intensity on the performance of SME. Hence, the

present study is causal-predictive in nature where a complex

model with many variables, indicators and relations will be

tested. This kind of complex model requires a path modeling

approach to be employed because several researchers (e.g., 69,

70, 71) have recommended the use of PLS path modeling when

the goal of research is to predict the dependent variable.

Table 1: Demographic Profile of the Respondents Surveyed

Frequency Percentage

Gender

Male

Female

Age

261

147

64.0

36.0

0-30 years

1-40 years

1-50 years

0 years and above

6.9

116

180

28.4

44.1

20.6

Educational qualification

Primary School

Secondary School

Diploma/NCE

Bachelor Degree

Masters

113

116

12.0

19.1

27.7

28.4

12.3

Results

Others

4.1 Assessment of Measurement Model

Marital status

Single

Married

Ethnicity

Hausa/Fulani

Igbo

The measurement model was evaluated on the basis of

individual indicator reliability, internal consistency reliability,

convergent validity, as well as discriminant validity (69, 72,

172

236

42.2

57.8

73). The full Measurement model was presented in Table 3.

265

15.7

65.0

12.5

6.9

4.2 Individual Indicator Reliability

Yoruba

Others

In this study, individual indicator reliability was evaluated

Position

Owner

Manager

based on standardized loadings for all latent constructs (69, 72,

74-76). According to Carmines and Zeller (77), the reliability

of an individual item is confirmed when its standardized

loading is 0.707 or higher. As shown in Table 1, for each latent

construct, all standardized loadings have exceeded the

Carmines and Zeller’s (77) accepted cut-off point of 0.707,

except four items (i.e., EO05, TQ07, CI05, and CI06), which

were deleted from the Measurement model. Thus, individual

indicator reliability has been found to be acceptable based on

the measurement model results.

329

19.4

80.6

Table 2: Demographic Profile of Firms Surveyed

Frequency

Percentage

Ownership

Sole proprietorship

Partnership

Limited Liability Company 222

141

11.0

34.6

54.4

Firm size

Less than 50 employees

215

4.2

0-99 employees

52.7

21.3

11.8

10.0

4.3 Construct Reliability

00-249 employees

50-499 employees

00 or more employees

It has been noted earlier that reliability can be ascertained

at either the individual indicator level or at a given construct

level (76, 78). In this study, construct reliability was

determined based on composite reliability index (69, 70, 74,

Industry

Food and beverages

Packaging/containers

Metal and metal products

Printing and publishing

Agro-allied, furniture

Building materials

Others

104

176

25.5

7.8

8.6

43.1

7.1

2.2

9). According Hair, Ringle (74), a satisfactory construct

reliability is established when the composite reliability index

.70 or higher. Therefore, it can be seen in Table 3 that the

composite reliability indices of all latent constructs were

between 0.863 and .0.943. This suggests that satisfactory

construct reliability is achieved because the composite

reliability indices reported in this present study were above the

acceptable cut-off point of 0.70.

5.6

Firm age

– 6 years

– 9 years

0 – 12 years

3 years or more

220

8.8

19.4

17.9

53.9

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 1, Pages: 61-72

Table 3: Measurement Model Results

4.5 Discriminant Validity

The present study used Fornell-Larcker criterion approach

to establish discriminant validity. Fornell-Larcker approach

involves comparing the square root of AVEs (the diagonal

entries) with the correlations between constructs (the off-

diagonal entries) (69, 82, 84). According to Roldán and

Sánchez-Franco (84), adequate discriminant validity is

achieved if, the diagonal elements are significantly greater

than the off-diagonal elements in the corresponding rows and

columns. The results of the discriminant validity analysis using

Fornell-Larcker criterion are reported in Table 4. Following

Roldán and Sánchez-Franco (84), adequate discriminant

validity has been established in the present study because the

square root of AVEs were greater than the correlations

between constructs .

Average

Variance

Extracted

Standardized

Loadings

Composite

Reliability

Latent constructs and indicators

Entrepreneurial orientation

0.941

0.777

EO01

EO02

EO03

EO04

EO06

EO07

0.856

0.918

0.902

0.885

0.879

0.912

EO08

0.877

0.821

EO09

Table 4: Results of Discriminant Validity Based on Fornell-Larcker

Criterion

Total Quality Management

0.943

0.735

TQ01

0.897

0.883

0.888

0.900

0.838

0.724

Latent Construct

Entrepreneurial orientation

Total quality management

Competitive intensity

SME performance

0.882

-0.244

-0.474

0.615

TQ02

0.857

0.557

-0.317

0.849

-0.718

TQ03

0.828

Note: “Diagonal elements are the square root of the variance shared

between the constructs and their measures (AVE). Off-diagonal

elements are the correlations among constructs”.

TQ04

TQ05

TQ06

.6 Structural Model/Hypotheses Testing

It could be recalled that the conceptual model proposes that

Competitive intensity

0.912

0.721

competitive intensity moderates the relationships between

entrepreneurial orientation, total quality management, and

SME performance in Nigeria. In line with empirical evidence,

resource based theory, as well as contingency theory, six

research hypotheses were formulated and tested based on the

results of structural model. Drawing on PLS path modelling

literature, the structural model was evaluated based on five

main criteria, namely: algebraic sign, significance of the

CI01

CI02

0.860

0.887

CI03

0.843

0.803

CI04

SME performance

0.929

0.686

FP01

FP02

FP03

FP04

0.824

0.815

0.855

0.823

structural path coefficients, f values, R values, and

assessment of PLS estimates at the construct level (Q values).

Following Hair, Hult (69), as well as Henseler, Ringle (73),

bootstrapping with 5000 resamples was used to generate beta

values, standard errors, t-values, and p-values. The full results

of structural model that included both the direct effect model,

FP05

FP06

0.812

0.839

(

baseline model), and moderating effect model are presented

in Table 5.

.4 Convergent Validity

Convergent validity refers to the degree to which two or

Table 5: Structural Model Results

Hypothes

Bet

value

Relations

value

Findings

more measures of the same theoretical construct assessed by

different methods are in agreement (80, 81). The existing

literature on PLS path modelling indicates that convergent

validity is ascertained using the average variance extracted

Main Effect:

0.0

7.64**

0.44

0.11

0.00

2.63**

Supported

0.0

TQM

(

AVE; 71, 75, 82, 83). In particular, to achieve adequate

Moderating

Effect:

convergent validity, Fornell and Larcker (82) recommended

that AVE values should be 0.50 or higher. As indicated in

Table 3, AVE values ranged between 0.679 and 0.777, and all

latent constructs demonstrate AVE values higher than the

recommended threshold of 0.50. Hence, it can be concluded

that adequate convergent validity has been established in the

present study.

0.0

2.84**

EO x CI

0.00

0.43

0.12

0.01

Supported

Not

supported

TQM x CI

0.18

Note: EO = Entrepreneurial orientation; TQM = Total Quality Management; CI =

Competitive intensity; SMEP = SME performance; Note: ***Significant at 0.01 (1-

tailed), **significant at 0.05 (1-tailed), *significant at 0.1 (1-tailed).

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 1, Pages: 61-72

is reported in Table 6. As shown in Table 6, the strength of the

effect of the four exogenous latent variables, namely:

entrepreneurial orientation, total quality management, and

competitive intensity on endogenous latent variable were

0.298, 0.011, 0.040, and 0.605, respectively. Accordingly,

based on Cohen’s (1988) guidelines, the effects sizes of these

four exogenous latent variables on SME performance can be

described and interpreted as medium, none, small, and large,

respectively. Results of moderating effects size are also

reported in Table 7. Following Cohen’s (1988) threshold,

Table 7 indicated that the strength of the moderating effect of

competitive intensity on the relationships between

entrepreneurial orientation, total quality management, and

SME performance was 0.123, suggesting small effect size.

.7 Algebraic Signs

As indicated in Table 5, the algebraic signs (beta values)

in the direct effect model were all positive, which is consistent

with the first three research hypotheses were formulated.

Specifically, the positive beta values direct effect model

suggests that Hypotheses 1-3, the relationships between

exogenous latent variables and endogenous latent variables are

positive. For example, there is a positive relationship between

entrepreneurial orientation

and SME performance.

4.8 Significance of the Structural Path Coefficients

Regarding the significance of the structural path

coefficients, of the six hypotheses postulated and tested, H1,

H2, and H3 were statistically significant, while H4 was not

found to be statistically significant. It could be recalled that

Hypothesis 1 predicted that there will be a positive relationship

between entrepreneurial orientation and SME performance. As

indicated in Table 5, a significant positive relationship

between entrepreneurial orientation and SME performance

was found (β = 0.44, t = 7.64, p< 0.01). Accordingly,

Hypotheses 1 was supported. Hypothesis 2 predicted that there

will be

a positive relationship between total quality

management and SME performance. Results (Table 5)

indicated that total quality management had a significant

positive relationship with SME performance (β = 0.11, t =

2.63, p < 0.01), supporting Hypothesis 2. It could be recalled

that Hypothesis 3 postulated that competitive intensity

moderates the positive relationship between entrepreneurial

orientation and SME performance. Specifically, this

relationship is stronger (i.e. more positive) when business

environment is highly competitive than when it is not

competitive. The results shown in Table 5 indicated that the

interaction terms representing entrepreneurial orientation and

competitive intensity, towards predicting SME performance (β

Figure 2: Interaction Effect of Entrepreneurial Orientation and

Competitive Intensity on SME performance

Table 6: Effect Sizes in the Main Effect PLS Path Model

Endogenous Latent Variables

Entrepreneurial orientation

Total quality management

Competitive intensity

Effect size (f )

0.298

-0.12, t = 2.84, p < 0.01) was statistically significant. Hence,

0.011

0.605

Hypothesis 3 was fully supported. Following procedures

recommended by Dawson and Richter (85), as well as Dawson

Note: Endogenous Latent Variable = SME Performance

(

86), information from the structural model results was used to

plot a graph depicting the moderating effect of competitive

intensity on the relationship between entrepreneurial

orientation and SME performance. Figure 2 demonstrates that

the relationship between entrepreneurial orientation and SME

performance is stronger (i.e. more positive) when business

environment highly is competitive than when it is not

competitive.

Regarding Hypothesis 4, which posited that competitive

intensity moderates the positive relationship between total

quality management and SME performance. Specifically, this

relationship is stronger (i.e. more positive) when business

environment highly is competitive than when it is not

competitive. As indicated in Table 5 , this hypothesis was not

because the interaction terms representing total quality

management and competitive intensity, towards predicting

SME performance was not statistically significant (β = -0.01, t

Table 7: Moderating Effect Size

Included Excluded f-squared

0.675 0.635 0.123

Effect size

Small

R-squared

.10 Coefficient of Determination

Table 5 presents the R-squared values of the main effect

structural model, as well as the moderating effect structural

model. The coefficient of determination for the main effect

PLS model was 0.635. This suggests that the four sets of

exogenous latent variables (i.e., entrepreneurial orientation,

total quality management, and competitive intensity)

collectively explain 64% of the variance in SME performance.

In the same vein, our results also showed that the coefficient

of determination for the moderating effect PLS model was

.675. This suggests that after computing the interaction terms,

the four sets of exogenous latent variables (i.e., entrepreneurial

orientation, total quality management, and competitive

intensity) collectively explain 68% of the variance in SME

performance. Taken together, the coefficients of determination

for both the main effect PLS models, as well as the moderating

effect PLS model were above Hence, Falk and Miller’s (1992)

0.18, p > 0.10).

.9 Assessment of Effect Size (f²)

The strength of the effect of exogenous latent variables on

endogenous latent variable in the main effect PLS path model

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2020, Volume 8, Issue 1, Pages: 61-72

acceptable levels of R-squared values. Hence, it can be

concluded that the R-square values reported in both the main

effect and moderating effect PLS models were satisfactory and

acceptable.

various similar organizational performances. The result was

also in accordance to the proposition by resource-based theory

that a firm can achieve sustained competitive advantage and

superior performance by formulating and implementing

strategy that generates increased value for the firm relative to

its competitors; and sustainability is said to be achieved if the

increased value remains when competitors stop trying to copy

or imitate the competitive advantage (26, 27, 91, 92). Based

on theory and empirical evidence, it could be summed up that

entrepreneurial orientation could bring forth positive SME

performance, which include better return on assets, financial

profitability or return on equity, return on sales, higher level of

return on investments than that of competitors, increase in

market share relative to competitors, as well as increase in sale

volume relative to competitors, among others.

.11 Assessment of PLS Estimates at the Construct Level

In line with Chin’s (75) recommendation, Results of

Stone-Geisser test of predictive relevance (Q ) are presented

in Table 6. As shown in Table 8, the crossvalidated redundancy

(

Q value) for endogenous latent variable (SME performance)

was 0.427, suggesting that the structural model in this study

has predictive relevance (73, 75).

Discussion

Overall, the present study provided supportive evidence

Total quality management was also reported to have a

significant positive influence on SME performance in this

study. This denotes that firm that implements total quality

management is able to achieve sustainable business

performance. The results also provided empirical support to

the resource-based theory that articulated total quality

management practices as a crucial element in achieving

sustained competitive advantage and superior performance of

firm, relative to its competitors (26, 27, 91, 92). Furthermore,

this finding was very much similar to the previous studies in

the literature of total quality management, including Akgün,

Ince (34), Christos and Evangelos (35), Powell (38), Shaukat,

Jen Li (36), and Fields and Roman (93), Despite different

context in terms of cultural backgrounds, organizational

settings, as well as demographic factors, the aforementioned

empirical studies reported similar findings to the present study

in which total quality management practices had impacted

various organizational performance. If firms implement total

quality management practices by adopting a series of

strategies, such as quality practices of top management,

employee involvement, customer focus, process and data

quality management, they are more likely to achieve

sustainable competitive advantage by being able to achieve

superior business performance. Based on theory and empirical

evidence the present study has succeeded in substantiating the

empirical link between total quality management and SME

performance in Nigerian context. To sum it up, this study has

succeeded in achieving the second research objective.

regarding the role of competitive intensity as a moderator on

the relationships between entrepreneurial orientation, total

quality management practices, and SME performance. This

responds to calls for more research on the role of business

environment factors in predicting organizational performance.

The subheadings of the discussions of research results section

are organized according to the objectives of the study. As

noted earlier, the first objective of the present study was to

assess the influence of entrepreneurial orientation on SME

performance. Based on the results of Partial Least Squares path

modeling, the present study reported that entrepreneurial

orientation positively influenced SME performance.

Table 8: Construct Cross-Validated Redundancy

SSO

SSE

Q¬≤ (=1-SSE/SSO)

Entrepreneurial

orientation

Total quality

management

Competitive

intensity

,264.000

3,264.000

,448.000

,632.000

,448.000

2,448.000

1,632.000

1,401.617

SME

performance

0.427

It is imperative to remember that entrepreneurial

orientation was defined as a firm-level predisposition and

commitment to engage in behaviors that lead to change in the

organization or marketplace, such as initiating and sustaining

new ideas that lead to new product offerings, implementing

new business processes in order to expand new markets, trying

out new product offerings in the face of uncertainty,

encouraging employees to be independent in initiating and

implementation of innovative ideas, and monitoring industry

trends and competitors' best practices Voss, Voss (87). A

plausible explanation for this is that a firm that engages in

entrepreneurial orientation is likely to achieve superior

business performance and sustained competitive advantage

The findings of the present study provide substantial

support for the moderating role of competitive intensity. They

provide practical implications regarding how small and

medium enterprises successfully cope with various pressures

from competitors (94). In particular, results suggest that small

and medium enterprises operating in highly competitive

environment increase their performance by practicing

entrepreneurial orientation. They response to the threat of their

competitors by being proactive, innovative and risk takers

(

23, 51, 88). Thus, entrepreneurial orientation requires a firm

to engage in product-market innovation, undertake somewhat

risky ventures, and is first to come up with “proactive”

innovations, beating competitors to the punch” Miller (22).

The significant positive influence of entrepreneurial

orientation on SME performance in this study was consistent

with many of the past empirical studies, such as Li, Huang, and

Tsai (48), Jalali, Jaafar, and Ramayah (31), Real, Roldán, and

Leal (89), Tang, Chen (90), Collectively, these studies found a

significant positive impact of entrepreneurial orientation on

(

95). Accordingly, the empirical findings of the present study

contribute to previous literatures by demonstrating that

competitive intensity differentially moderates the relationship

between entrepreneurial orientation and SME performance. In

other words, competitive intensity serves as a variable that

strengthen the relationship between entrepreneurial orientation

and SME performance.

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2020, Volume 8, Issue 1, Pages: 61-72

Unexpectedly, the results of the present study do not

support the initial postulation of the moderating role of

competitive intensity on the relationship between total quality

management practices and SME performance. In other words,

competitive intensity was not found to be a significant

moderator between total quality management and SME

performance. Perhaps the inconsistent result could be

attributed to the study context. Specifically, one of the

plausible reasons for the unexpected findings could be that, in

Nigeria, due to financial constraints as results of current

economic recession, SMEs do not properly implement total

quality management strategy toward sustained organizational

performance. This plausible explanation for the unexpected

non-significant results is consistent with Abubakar and

Mahmood’s (96) argument that total quality management

strategy is resource consuming and the implementation of such

strategy dependent largely on firm's resource capacity. The

higher the firm's resource capacity, the more likely it would

properly implement TQM; and vice versa

satisfy customer expectations and improve their organizations’

performance (32).

Finally, the findings also indicate that competitive

intensity moderated the relationships between entrepreneurial

orientation, and SME performance. Thus, given that the

external environment in which organizations compete is

dynamic and rapidly changing, it is imperative for managers of

SMEs to also constantly change their strategies and operations

to reflect these increasing changes in business environment

(100). Thus, managers should focus on the strategy variables,

particularly entrepreneurial orientation, since these variable

significantly related to performance in their environments and

adjust their strategies accordingly (101).

5.2 Limitations and Future Research Directions

Despite its contributions, the present study has a number

of limitations that merit discussion. The following section

discusses the limitations of the study. First, SME performance

data used in the present study was only perceptual or

subjective. Although researchers (e.g., 102, 103) showed that

subjective measure of firm performance is valid and reliable

proxies for objective measures, however, objective measures

of firm performance has been found to be relatively free from

measurement error (104, 105). Therefore, future research

could incorporate objective measures of SME performance in

order to replicate the findings of the current study. Second, the

present study offers quite limited generalizability because it

focused mainly on SMEs in Nigerian Manufacturing sector,

particularly those located in Kano and Kaduna in Northwest

geo-political zone. Thus, subsequent similar works are needed

to include SMEs in other sector of the economy or geo-

political zones in order to generalize the findings. Furthermore,

future research could study and compared Manufacturing

sector with other sector including banking sector, and real

estate industry.

5.1 Practical implications

From a practical point of view, the results of this research

provided important insights on how entrepreneurial orientation,

total qualitymanagement, and competitive intensity could enhance

the overall performance of SMEs in Nigerian manufacturing

sector. Subsequently, the results of this study would serve as a

blueprint for the policy-makers and practitioners in

formulating vital policies that could assist and help in

improving the overall performance of SMEs. The findings

suggested that managers of SMEs require working alongside

strategic business units, including marketing and quality

assurance departments to design relevant policies that help in

promoting customer satisfaction and firm performance (97,

98).

Furthermore, the findings of this study indicated that

entrepreneurial orientation was a significant predictor of SME

performance. The findings have practical implications for

SMEs in Nigeria. In particular, findings indicate that

proactiveness, aggressiveness and innovativeness have

emerged as important strategies that grants SMEs better

capability to exploit the new opportunities in the Nigerian

business environment, thereby achieving sustained

competitive advantage (99). Managers of SMEs ought to

realize that research and development capabilities, and new

product lines will play an important role in the survival and

prosperity of their firms than ever before (99). Additionally,

the findings confirm the significant positive relationship

between total quality management practices and performance

of SMEs in Nigerian manufacturing sector. This finding

implies the need to encourage employees’ involvement and

participation in the implementation of total quality

management. Specifically, SMEs ought to develop formal

reward and recognition systems in order to encourage

employee involvement and participation, provide feedback to

the employees, as well as support teamwork (32). This finding

also suggests the need for commitment of top management in

the implementation of total quality management. The top

management of SMEs should develop an appropriate

organization culture, vision, and quality policy in order to

Third, the present study employed a cross-sectional

design. One major weakness of cross-sectional design is that it

does not allow causal inferences to be made from the

population. Hence, given the shot coming of cross-sectional

design, future research is strongly needed using longitudinal

research design in order to measure and re-examine the

relationship between entrepreneurial orientation, total quality

management, competitive intensity and SME performance by

collecting data at different points in time to confirm the

findings of the present study. Fourth, it could be remembered

that all items for each construct in this study were rated by

single key informants (owner/manager). Research

demonstrates that the use of single key informants can produce

valid and reliable results when the key informants are highly

knowledgeable about the affairs of their firm. Nevertheless,

use of single key informants is susceptible to judgmental

biases when the key informants are not highly knowledgeable

in the affairs of their firms (106). Although it is not always be

feasible, using multiple informants would have clearly

strengthened the results. Hence, future research is needed to

replicate the findings of the current study using multiple

informants.

Fifth, the present study reported that the structural model

explained 64 percent of the total variance in in SME

performance. This implies that there remain some variables

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2020, Volume 8, Issue 1, Pages: 61-72

that could significantly explain the variance in SME

performance, but not included in the research model. In other

words, the remaining 36 percent of the variance in SME

performance might be explained by other factors. Hence, this

represents a methodological limitation of the present study.

Future research is therefore needed to include more variables

that might yield additional variance in SME performance. For

example, given the fact that the context of this (Nigeria) is

prominently a collectivist culture (107), it is likely that cultural

orientation might moderate the relationships between

entrepreneurial orientation, total quality management, and

SME performance. Thus more research is needed to confirm

whether collectivist culture maters in the relationships between

entrepreneurial orientation, total quality management, and

SME performance.

on investment. Responding to a highly competitive market in

which competitors adopts an aggressive program to keep the

costs of theirs product very low is also an important strategic

option to achieve and/or maintain a sustainable competitive

advantage.

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