Winter is Coming - How to make sure your firm doesn't freeze

Bachelor Thesis Supervision

Winter is Coming

The idea that established firms occupy a unique competitive position and are able to defend it for a long period of time does not longer apply to most industries. It is impossible for successful top management teams to rest on their laurels as young firms relentlessly challenge the status quo. A product or service that is superior today may be outdated tomorrow. Unencumbered by hierarchical decision-making processes, companies like Uber and AirBNB seem to appear out of nowhere and stir up entire industries.

Competitive advantages evaporate quickly and companies bear the burden of the new rules of competition. A recent issue of the Economist featured the article “Reinventing the Company” in which they argued that corporate growth is stagnating and managers have to remodel their firms in order to survive. Half of the big American firms have shrinking profits and analysts expect the sales of the S&P 500 to fall. How do established firms bolster themselves against start-ups “fuelled by coffee and dreams”?

One of the answers to this question is that established firms are able to remain successful by adopting an entrepreneurial orientation — an approach to strategy characterized by innovativeness, proactiveness, and risk-taking. There are two reasons, however, that the adoption of an entrepreneurial orientation (EO) does not always lead to the same increase in performance (Lumpkin & Dess, 1996). First of all, the effect of EO on firm performance is not the same in every organizational context. Instead, it varies between industries and countries. Second, across those organizational contexts, the importance of each of the dimensions of EO varies.

More and more mature firms have to deal with young and lean competitors who — unencumbered by rigid rules and routines — change the competitive landscape. In other words, winter is coming, and these experienced firms have to adapt quickly to ensure their survival. Adopting an entrepreneurial orientation might be the answer, but its relationship with performance depends on the context in which the firm operates. Since it is important for both managers and scholars to understand this dependency, the hypothesis that has been researched during this course is:

The stronger a firm’s entrepreneurial orientation, the better it’s financial performance

The Course

In the course “Research Training & Bachelor Thesis” I coached 27 students while they conducted a scientific research project. Over the course of five months, the students had to go trough all the stages of the research process, starting with a review of the literature on entrepreneurial orientation and firm performance, followed by data collection and analysis, and finalized by writing up the findings. The end-product — the bachelor thesis — serves as the final test in the Bachelor of Science (BSc) in Business Administration programme as students have to show that they master the skills and possess the knowledge developed during the first years of their education.