The impact of entrepreneurial orientation and business environment towards business performance: Small and medium fashion Moslem industry in Bandung

B. F. Putria & T. Gunawan

Parahyangan Catholic University, Bandung, Indonesia

ABSTRACT: This study aims to investigate the effect of entrepreneurial orientation (EO) and business environment (BE) on business performance (BP).

1 INTRODUCTION

The fashion industry in the world has evolved and managed to changed people’s perception of the prime function of clothing into a way of expressing identity, creating the welfare of creativity, and link­ing global society (Pratt et al. 2012). Besides, fash­ion is regarded as a unique reflection of social, cultural, and environmental characteristics and it also plays a crucial role in complementing one’s self-image (Azuma & Fernie 2003). The Moslem fashion industry is a creative industry sub-sector that is interesting to be studied in Indonesia. Along with the emergence and development of creative indus­tries in Indonesia, the Moslem fashion industry also emerges as important industry that has great poten­tial to be developed in Indonesia.

A general tendency in today’s business environ­ment (BE) is the shortening of product and business model life cycles (Hamel 2000). Consequently, the future profit streams from existing operations are uncertain and businesses need to constantly seek out new opportunities. Based on previous studies, we found that one of the factors that may improve firms’ performance is through applying entrepreneurial orientation (EO) (Gunawan et al. 2015). Therefore, they may benefit from adopting an “entrepreneurial strategic orientation”. This involves a willingness to innovate and rejuvenate market offerings, take risks to try out new and uncertain products, services, and markets, and be more proactive than competitors toward new marketplace opportunities (Covin & Slevin 1991). EO refers to a firm’s strategic orienta­tion, capturing specific entrepreneurial aspects of decision-making styles, methods, and practices. As such, it reflects how a firm operates rather than what it does (Lumpkin & Dess 1996). Miller (1983) sum­marizes the definition of an entrepreneurial firm as “firm that engages in product market innovation undertakes somewhat risky and proactive ventures”. Based on this, several researchers have agreed that EO is a combination of the three dimensions: innovativeness, reactiveness, and risk-taking. Thus, EO involves a willingness to innovate and rejuvenate market offerings, take risks to try out new and uncer­tain products, services, and markets, and be more proactive than competitors toward new marketplace opportunities. The BE can also affect business per­formance (BP). In a research, Wispandono (2010) argued that the BE includes factors outside the com­pany that may cause opportunities or threats to the company. Therefore, this study will show whether the EO and BE have a significant effect on BP. The findings of this research will give some contribution to entrepreneurship literature, as well as new views for small and medium business actors in designing business strategy for the future.

2 LITERATURE REVIEW

2.1 Orientation of entrepreneurship

Researchers have agreed that EO is a combination of three dimensions: innovation, proactive, and risk­taking. Thus, the entrepreneurial orientation involves a willingness to innovate and rejuvenate market supply, take risks to try uncertain, new, and more proactive products, services and new markets, rather than competitors against new market opportunities (e.g. Covin & Slevin 1991, Miller 1983, Wiklund 1999, Zahra and Covin 1995).

2.2 Business environment

Glueck and Jauch in Wispandono (2010) argued that the BE includes factors outside the company that may cause opportunities or threats to the company. Environmental analysis is defined as the process used by strategic planners to monitor the environ­mental sector in determining opportunities or threats to the company. Based on the results of research from Wispandono (2010), there are 4 indicators of BE: (1) Business Costs, (2) Availability of Labor, (3) Competitor Level, and (4) Market Dimensions.

2.5 Hypothesized research model

Figure 1 shows the conceptual framework that explains the relationships proposed in our hypoth­eses, depicting how the interplay between EO and BE affects BP.

Figure 1. ResearchModel.

3 RESEARCH METHOD

2.3 Business performance

Performance is a multidimensional concept. Accord­ing to Rivai (2004), BP is something that is produced by a company within a certain period with a certain standard. BP is an assessment of the indicators owned. According Hadjimanolis in Ratna Kusuma- wati (2010), the indicators are: (1) Total Sales, (2) Number of New Products, (3) Amount of Profit. Per­formance (BP) is at the performance level. The vari­ables in this study were also developed by Lee & Tsang (2001).

2.4 Relationship of entrepreneurial orientation and business environment to business performance

Miller (1983) argues that entrepreneurial-type strat­egies tend to be more successful when handling cus­tomers who are premium on unique innovations and services.

Hypothesis 1: Orientation entrepreneurship has a sig­nificant influence on business

performance.

Hypothesis 2: Business environment has a significant influence on business performance.

3.1 Research design and data collection

We collected data in 2018 based on extensive sur­veys, using questionnaires and interviews with busi­ness owners. We selected owners as respondents to this research because they are the souls of small organizations and their “rational analysis” and “cre­ative intuition” are directly reflected in the SME’s decision and its performance (Van Gils 2005). We used convenience sampling, because we consider it fast and appropriate to test hypotheses in the initial stages, with 60 owners representing 60 Muslim fash­ion stores in Pasar Baru Trade Center Bandung taken as sample members. We combed each floor at Pasar Baru Trade Center Bandung and collected contact addresses. We then distributed questionnaires to all Muslim fashion store owners we found, and fol­lowed them with interviews.

3.2 Analytical approach

In processing our data, we used validation test of questioner entrepreneurial orientation variable (X1), BE (X2), and company performance (Y), and then we checked the test reliability.

4 RESULTS AND DISCUSSION

The results of research and data analysis are obtained by distributing questionnaires to 60 SMEs clothing businessmen in the city of Bandung. The method of data analysis used is descriptive analysis method.

4.1 Analysis descriptive

In this study with the number of respondents as many as 60 companies, the maximum score that may be obtained is 5 ? 60 = 300 and the minimum score that may be obtained is 1 ? 60 = 60. If divided into five cat­egories, then the score range of each category is 48.

Interpretation interval amount of respondent response score can be seen in Table 1.

Based on Table 2, it can be seen that the average total score of respondents on statements on variables EO 232.5, BE 218.846, and BP 225, and when refer­ring to the categorization guidelines contained in the interval interpretation table, the number of respond­ents’ scores can be categorized as Agree.

4.2 Test validity and reliability

Validity test result using the correlation of the valid­ity index of the question item is considered valid if the validity of the question index ≥0.2108. The reli­ability test used the Cronbach’s alpha method and

Table 1. Respondents answer recapitu­lation against variables.

Table 2.

Table 3. Validity and reliability test results.

Cronbach alpha > 0.70

Cronbach alpha > 0.70

the result is considered reliable if the reability coeffi­cient is greater than 0.70.

Based on Table 3, all items of question has a valid­ity index greater than 0.2108. It means the question­naires submitted are all valid and the data can be used for further analysis. Then, the value of reevaluation variable coefficient is greater than 0.70, and thus can be concluded that the questionnaire is reliable.

4.3 Multiple regression analysis

By using SPSS software, the results obtained from multiple linear regression analysis are as follows:

Table 4. Coefficients

Coefficients^a

a Dependent Variable: BP.

a Predictors: (Constant), BE, EO.

Based on Table 4, EO has a significant effect on BP but BE has no significant effect on BP. However from Table 5, the coefficient of determination or R square is obtained as 0.279 or 27.9%. This shows that EO (X1) and BE (X2) is simultaneously contributing to influence BP (Y) (27.9%). While the rest of 100% - 27.9% = 72.1% is the influence of other variables that are not researched. The finding of this study is quite interesting because the BE does not have a significant effect. Based on our observa­tion, this may occur because entrepreneurs have a high EO, especially seen from their desire to achieve goals and belief that success is an effort from within themselves, and the attitude of the entrepreneurs who are always proactive and innovate that make them more confident in running their business. The entrepreneur characteristics have greatly affected the success of the BP (Idrus, 1999). These characteris­tics are: self-confidence, task result-oriented, risk­taker, originality, future-oriented. The success of a business is largely determined by how much of these traits are inherent in the spirit of the entrepreneur.

4.4 Simultaneous hypothesis testing (F-statistic test)

Table 6. Annova.

a Dependent Variable: BP. b Predictors: (Constant), BE, EO.

Based on Table 6, the calculated F-value is 11.055 > F-table (3.16). In accordance with the result, H1 is accepted and H2 is rejected, thus both EO and BE sig­nificantly influence the company performance.

5 CONCLUSION

Based on the results of data analysis and discussion, it is true that there is a significant influence of entre­preneurship orientations on company performance. However, in this study, the BE has not significantly affected the BP, so that according to the hypothesis testing criteria, H1 is accepted and H2 is rejected, but EO and BE simultaneously have a significant effect on BP. Based on observations in the field, this might be caused by entrepreneurs who have a high EO, especially seen from their desire to achieve goals and the belief that success is an effort within themselves. In addition, entrepreneurial attitudes are always proactive and innovative to make them more confident in running their business. Therefore, improving the performance of Muslim fashion SMEs in the city of Bandung is inseparable from the entre­preneurial ability to understand EO. In this harsh environment, we recommend SMEs to maintain an entrepreneurial spirit to remain high to win the competition and perform well. In addition, entrepre­neurs must be more active in finding new ideas, con­tinue to innovate, and also focus on changing the BE in an effort to maintain the stability of their business.

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