Assessing the Impact of Environmental Conditions on Entrepreneurial Orientation at the SME Level

This study examines the impact of environmental characteristics, such as dynamism, hostility, and uncertainty, on entrepreneurial orientation (EO), which consists of dimensions of innovation, proactivity, and risk-taking dimensions. The study sample comprised 172 local SMEs from various sectors, and data analysis conducted through structural equation modelling. The findings confirm that environmental dynamism (ED) improves risk-taking and innovation tendencies, aligning with previous research. Entrepreneurs in dynamic environments are more likely to take risks and pursue innovative opportunities. On the contrary, economic uncertainty encourages more conservative strategies instead of a high EO. However, technological and market uncertainties are found to stimulate innovation. The results reveal that uncertainty, whether in products, markets, and demand (PMD) or technology, drives firms to adapt their entrepreneurial strategies by improving their innovation orientation. The study also notes that the proactivity dimension of EO is negatively affected by economic uncertainty and environmental threats, contrary to some literature. Additionally, the results on the hostility-EO relationship indicate that risk-taking behavior increases in a hostile environment. These findings suggest that, while dynamic and uncertain conditions shape entrepreneurial behaviors, the type of uncertainty, which is political, economic, technological, or market-related, plays a crucial role in determining whether firms adopt innovative or conservative approaches.