Effect of entrepreneurial orientation and strategic orientations on financial and nonfinancial performance of small and medium enterprises in Saudi Arabia

• Published date: 01 May 2022
• Author: Mohammed Abdulrab,Mohammed A. Alwaheeb,Yaser H. S. Al‐Mamary,Naif G. M. Alshammari,Hamad Balhareth,Hela B. Soltane,Imran Saleem
• Date: 01 May 2022
• DOI: http://doi.org/10.1002/pa.2305

ACADEMIC PAPER

Effect of entrepreneurial orientation and strategic orientations

on financial and nonfinancial performance of small and medium

enterprises in Saudi Arabia

Mohammed Abdulrab

1

| Mohammed A. Alwaheeb

1

| Yaser H. S. Al-Mamary

1

|

Naif G. M. Alshammari

1

| Hamad Balhareth

1

| Hela B. Soltane

2

|

Imran Saleem

1,3

1

Department of Management and Information

Systems, College of Business Administration,

University of Ha'il, Ha'il, Saudi Arabia

2

Community College, University of Ha'il, Ha'il,

Saudi Arabia

3

Faculty of Commerce, Aligarh Muslim

University, Aligarh, India

Correspondence

Mohammed Abdulrab, Department of

Management and Information Systems,

College of Business Administration, University

of Ha'il, Ha'il, Saudi Arabia.

Email: abdulrabd@gmail.com

Funding information

Scientific Research Deanship at University of

Ha'il- Saudi Arabia, Grant/Award Number: RG-

191349

In today's competitive environment, small and medium enterprises (SMEs) need to be

competitive and adopt innovative and strategic approaches to improve their perfor-

mance. SMEs have been recognized as the main driver of competitiveness, fueling

job opportunities and supporting economic development and growth, particularly in

developing countries. The purpose of this paper is to investigate the joint effect of

entrepreneurial orientation (EO), market orientation (MO), and technology orienta-

tion (TO) on financial and nonfinancial performance of SME in Saudi Arabia. In this

study, the author has employed a quantitative research method. The study collected

data from 206 owners/mangers of SMEs in KSA. The study has used partial least

squares structural equation modeling (PLS-SEM) to analyze the research data. The

results in this study show that five out of six hypotheses were accepted, indicating

that EO, MO, and TO have a positive and significant effect on financial performance,

as well as MO and TO have a positive and significant effect on nonfinancial perfor-

mance. However, EO was found to have an insignificant effect on nonfinancial per-

formance. The results suggest that SMEs need to evaluate their performance in

terms of financial and nonfinancial indicators and understand how these measures

relate to each other, which will aid in assess achievements and formulate SMEs strat-

egies. This is the first study that adequately examines the joint effect of EO, MO, TO

on financial and nonfinancial performance in developing economics, particularly in

Saudi SMEs sector.

1|INTRODUCTION

In today's dynamic business environment, it becomes compulsory for

small and medium enterprises (SMEs) to be competitive and adopt

innovative and strategic approaches to critical thinking. SMEs account

for about 90% of the businesses worldwide (World Bank, 2020), and

99.41% of the private sector in Saudi Arabia (Monshaat, 2020). Such

enterprises have been recognized as the main driver of competitive-

ness, fueling job opportunities and supporting economic development

and growth, particularly in developing countries (Ali, Hilman, &

Gorondutse, 2020). SMEs are seeking to grow their revenues, achieve

critical mass that improves their competitiveness, and discover new

market (Masa'deh, Al-Henzab, Tarhini, & Obeidat, 2018). Strategies

adopted by SMEs play a major role in enacting the firm's organiza-

tional purpose, sustain its vision, and create a competitive advantage

(Anwar & Shah, 2020).

One of the most significant features of strategy is the strategic

orientation. In this regard, previous studies have provided evidence

on the importance of entrepreneurial orientation (EO), market orienta-

tion (MO), and technology orientation in improving SMEs'

Received: 15 July 2020 Revised: 19 July 2020 Accepted: 21 July 2020

DOI: 10.1002/pa.2305

J Public Affairs. 2022;22:e2305. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of11

https://doi.org/10.1002/pa.2305