Innovativeness and initiative as mediators between ...

INNOVATIVENESS AND INITIATIVE 45 EUROPEAN JOURNAL OF WORK AND ORGANIZATIONAL PSYCHOLOGY, 2000, 9 (1), 45–62

Innovativeness and initiative as mediators between achievement orientation and venture performance Andreas Utsch

University of Giessen, Giessen, Germany

Andreas Rauch

University of Amsterdam, Amsterdam, The Netherlands A central question in entrepreneurship research is how to predict venture performance. In prior research, psychological characteristics of the entrepreneur and entrepreneurial behaviours have been more or less found to be able to distinguish between successful and unsuccessful entrepreneurs. The aim in this study was to extend earlier research and to test a model in which innovativeness and initiative are mediators between achievement orientation (including the psychological characteristics: self-efficacy, higher order need strength, need achievement, and internal locus of control) and venture performance. Data from 201 entrepreneurs were analysed with structural equation modelling to test the mediation model. The results suggest that innovativeness is a mediator between achievement orientation and venture performance, whereas initiative could not be confirmed as a mediator.

Research on entrepreneurial personality and entrepreneurial success has three major weaknesses. First, most studies investigate global traits, such as the 16PF (Brandstätter, 1997). Such general conceptions of personality ignore the specific requirements of the entrepreneurial task. Second, studies of the direct relationship between personality and entrepreneurial success ignore the role of entrepreneurial behaviour. Whenever one investigates the personality of an Requests for reprints should be addressed to A. Utsch, University of Giessen, Department of Work and Organizational Psychology, Otto-Behagel Str. 10 F, 35394 Giessen, Germany. Email: andreas.utsch@ psychol.uni-giessen.de This contribution used data from the project EKU (Erfolgsfaktoren von Kleinunternehmen— success factors of small-scale entrepreneurs), which was supported by a grant from Hessia, which is gratefully acknowledged. Participants in the project EKU were Bernard Batinic, Christian Fritschle, Nathalie Galais, Sigrun Göbel, Susanne Heinz, Astrid Kuhlemann, Reiner Rothfu b , Roland Schenk, Panangiolis Venezileas, and Hannelore Wolkewitz (principal investigator Michael Frese). © 2000 Psychology Press Ltd http://www.tandf.co.uk/journals/pp/1359432X.html

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entrepreneur one must also study the actions of the entrepreneur. Third, studies of entrepreneurship often use inadequate statistical methods or they fail to exhaust the advantages of modern statistical methods. We seek to address these weaknesses in the current study. For this purpose, we discuss why achievement orientation is of particular importance in the context of entrepreneurial success. Then we argue that innovativeness and initiative are central entrepreneurial behaviours that mediate between the achievement orientation and the success of entrepreneurs. To test this mediation model we used structural equation modelling.

THEORETICAL FRAMEWORK

The personality of an entrepreneur continues to be of interest in entrepreneurship research. However, personality is a weak predictor of venture performance. Today’s research rediscovers the personality of an entrepreneur in dispositions (cf., Rauch & Frese, 2000), which “intuitively appears to be related to entrepreneurship” (Crant, 1996, p. 43). We also need to consider the specific behavioural processes and strategies by which personality characteristics influence the venture performance. Two entrepreneurial behaviours that have emerged in studies and are central to the situation of the entrepreneur are innovativeness and initiative (Frese, 1995).

Personality characteristics

There are some critical objections to the use of personality in entrepreneurship research. The most popular objections come from Gartner (1988), who argues for studying behaviour rather than traits. The problem with the trait approach in entrepreneurship research is that most investigated traits are not linked to the entrepreneurial situation or task. That means that the wrong personality characteristics have been studied in entrepreneurship research. For example, one should keep in mind that the role of personality in the process of founding a business is different from its role in the prediction of venture performance. This difference has often been ignored (Rauch & Frese, 2000). Such inadequate conceptual differentiation in entrepreneurship research may explain the weak relationships between traits and success variables. Modern personality-social psychology (cf., Mischel & Shoda, 1998) demonstrates that personality characteristics are useful in explaining the generation of behaviour when the situation is considered. This means that the power of personality characteristics to predict a certain behaviour depends on the fit between these personality characteristics and the environment in which the behaviour is shown. Therefore, entrepreneurship research should use personality characteristics, which have face validity for the specific entrepreneurial task and work situation.

INNOVATIVENESS AND INITIATIVE

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In this study we chose a set of personality characteristics that are related to McClelland’s (1985, 1987) concept of achievement orientation. Achievement orientation is the disposition towards performance improvement and achievement under challenging and competitive conditions and emphasizes how individuals explain their own success and failure. Additionally, McClelland (1986) and Miron and McClelland (1979) found empirical evidence relating achievement orientation to entrepreneurial success. Need for achievement, self-efficacy, internal locus of control, and higher order need strength can be considered as important aspects of the concept of achievement orientation. Entrepreneurs must persistently aim at working on their goals, have to continuously enhance their performance, have to take responsibility for the results of their work, and have to cope with challenging tasks (Begley & Boyd, 1987; McClelland, 1987). McClelland (1987) pointed out that high achievers show these characteristics. High achievers demonstrate a higher performance in challenging tasks, look for tasks involving personal responsibility, and “were innovative in sense of looking for new and better ways to improve their performance”, p. 221). Small business owners determine the strategy and the vision of the business. Strategy and vision must be successfully translated into action. Therefore an entrepreneur has to feel in control and recognize the steps that are necessary to reach his or her goals. Internally controlled people believe in the efficacy of their own behaviour and believe that personal effort is a primary determinant of outcomes. Therefore, a high internal locus of control may be a useful trait for an entrepreneur. Several studies support the importance of an internal locus of control and a need for achievement in venture performance (Box, White, & Starr, 1993; Brockhaus, 1980; Cooper & Gimeno-Gascon, 1992; McClelland, 1986; Rauch & Frese, 2000). Recent entrepreneurship research focuses on self-efficacy (Boyd & Vozikis, 1994; Chen, Green, & Crick, 1998; Krueger & Braezel, 1994). Self-efficacy is it is not an immutable construct but rather a task specific construct, which allows for deriving, modifying, and enhancing self-efficacy in interaction with environment. Self-efficacy is closer to action than other traits, it can be used to predict and study an entrepreneur’s behaviour choice, persistence, and effectiveness (Chen et al., 1998). Additionally, “the relationship between self efficacy and behaviour is best demonstrated in challenging situations of risk and uncertainty, which are believed to typify entrepreneurship” (Chen et al., p. 1998, p. 301). Another personality characteristic that is closely related to the domain of entrepreneurship is higher order need strength. Higher order need strength describes such needs in work that are of a higher order than security (Cook, Hepworth, Wall, & Warr, 1981, p. 133). Higher order need strength is important in entrepreneurial work because it concerns to personal growth and development and the need for challenge, achievement, and self-actualization (Abdel-Halim, 1980, p. 337; Cook, et al., 1981, p. 132).

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Mediators: Innovativeness and initiative as entrepreneurial behaviours

Innovativeness . Many authors emphasize the importance of innovativeness as a strategy in the entrepreneurial process (Frese, 1995; Lumpkin & Dess, 1996; More, 1986; Schumpeter, 1934, 1942). Innovativeness is a behaviour that characterizes entrepreneurship (Drucker, 1985; Lumpkin & Dess, 1996). Drucker (1985, p. vii) refers to innovation as the result of purposeful actions and systematic work. West and Farr (1990) defined innovation as “the intentional introduction and application... of ideas, process, products or procedures, new to the relevant unit of adoption” (p. 9). An innovation unfolds in two stages. The first stage is characterized by the creative generation of new and useful ideas (Amabile, Conti, Coon, Lazenby, & Herron, 1996). The second stage is the implementation of these ideas (Amabile et al., 1996). Amabile et al. (1996), Drucker (1985), and West and Farr (1990) stress the active part of innovation processes in their definitions of innovation. Innovativeness emphasizes the active approach of innovation, which should be distinguished from Patchen’s (1965) concept of interest in innovation. Innovativeness describes more than an interest in innovation, it describes the actual innovative behaviour, such as the daily effort to improve one’s work procedures. Innovativeness has often been shown to have a significant effect on venture performance (e.g., Baum, 1995; Rauch & Frese, 2000; Wiklund, 1998). Initiative. Personal initiative is a behaviour syndrome that includes selfstarting, proactive, and long-term oriented behaviour as well as persistence towards obstacles (Frese, Fay, Hilburger, Leng, & Tag, 1997; Frese, Kring, Soose, & Zempel, 1995). Successful entrepreneurs should be proactive rather than merely reactive to events (cf., Kotey & Meredith, 1997; Lumpkin & Dess, 1996). Difficulties and barriers accompany the entrepreneurial process. Entrepreneurs need high initiative to overcome these barriers and to persistently work on their goals. Personal initiative has some similar aspects to the concept of innovativeness, but it is a broader behaviour syndrome. Personal initiative is necessary to several aspects of the entrepreneurial situation and is not limited to the innovation processes (Fay, Sonnentag, & Frese, 1998). We think initiative and innovativeness are important behaviours for a successful entrepreneur. Both refer to the important entrepreneurial tasks of changing and improving given work settings.

Summary and hypothesis

Regarding the relationships between innovativeness and initiative with success and between personality characteristics with success (e.g., Begley & Boyd, 1987; Lumpkin, Schrader, & Hills, 1998; Miner, Smith, & Bracker, 1989; Singh, 1989),


Achievement orientation

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Vent ure performance

Figure 1. Hypothesized mediation model.

we assume a mediation model (cf., Baum, 1995; Herron & Robinson, 1993; Kotey & Meredith, 1997). Achievement orientation influences new venture performance through its generation of innovativeness and initiative. Entrepreneurs with a high achievement orientation will show more innovativeness and initiative. Innovativeness and initiative will in turn increase the venture performance. Figure 1 summarizes the hypothesized model and includes the following five hypotheses. (1) (2) (3) (4) (5)

Achievement orientation is positively related to innovativeness. Achievement orientation is positively related to initiative. Innovativeness is positively related to venture performance. Initiative is positively related to venture performance. The relationship between achievement orientation and venture performance is mediated through innovativeness and initiative.

METHODS Sample

A total of 350 entrepreneurs from Jena and from Giessen were asked to participate by mail or fax. The contacted entrepreneurs were randomly selected from a list of the local chambers of commerce (registration is mandatory in Germany) 1. 201 entrepreneurs provided data via interview and questionnaire, and the participation rate was 57.4%. The sample included 102 participants from Jena and 99 from the areas surrounding Giessen. These cities were chosen because of their sociodemographic similarities. The participants fulfilled three criteria. In accordance with the definition of small-scale units by the European Union (1990), the participants had between one and fifty employees. They were founders of the business and were owners and managers of the business. Third, participants had started their business between 1990 and 1992. Data were 1The

characteristics of the sample in this study are similar in age of founder, branch of business, gender of founder, and legal form of business to other empirical studies of small business founders in Germany (Brüderl, Preisendörfer, & Ziegler, 1996; Klandt, 1984).

1. 2. 3. 4. 5. 6. 7. 8.

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4.887 4.697 3.999 6.018 4.095 3.314 0.700 3.548

0.560 0.710 0.463 0.579 1.043 0.921 2.258 0.730

[sd] (.72) .4 54 ** .4 64 ** .2 95 ** .140 .097 .107 –.036

[1] (.83) .369(* *) .3 52 ** .2 22 ** .007 .146* .063

[2]

Reliabilities (Cronbach alphas) in parenthesis; *p = < .05, **p = < .01.

Internal locus of control Need achievement Self-efficacy Higher order need strength Innovativeness Initiative Employee growth Profit growth

[M]

(.72) .3 22 ** .23 2 ** .152* .160* .163*

[3]

(.86) .183* .135 –.001 –.005

[4]

TABLE 1 Scale characteristics and intercorrelations (N = 201)

(.83) .18 9 ** .178* .19 4 **

[5]

(.91) .112 .159*

[6]

(.90) .123

[7]

(.76)

[8]

50 UTSCH AND RAUCH


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collected between October 1993 and February 1995. Other publications have also been based on this sample (Frese, 1998; Göbel & Frese, 1999; Rauch & Frese, 1997, 1999; Rauch, Frese, & Sonnentag, in press. Utsch, Rauch, Rothfuß, & Frese, 1999). The major distinction between the current and previous study is the use of structural equation modelling and the concept of innovativeness and initiative as mediators.

Operationalization of the variables

The scale characteristics for the current study (including Cronbach’s alphas) are displayed in Table 1. Achievement orientation. The achievement orientation was measured similar to Rauch, et al. (in press) and consists by need achievement, internal locus of control, higher order need strength, and self-efficacy. Self-efficacy measured the subjective perception of a person’s capability to do the job well (Speier & Frese, 1997). An example is, “when I am confronted with a new task, I am often afraid of not being able to handle it” (This item was inverted). The measure had five items and used a 1–5 response scale (strongly disagree to strongly agree). Need for achievement (Modick, 1977) describes a person’s willingness and power to carry out tasks. A sample item for this scale is “Other people say that I work hard”. The seven items of this scale ranged from 1 (strongly disagree) to 6 (strongly agree). The scale locus of control (Levenson, 1972; translated by Krampen, 1981) represents the extent to which a person is confident to be able to modify events in an environment. One example of the eight-item scale is “If I get what I want then that is mostly the result of hard work” (1 = very false to 6 = very correct). Higher order need strength (Warr, Cook, & Wall, 1979) is defined as “the need for satisfaction and achievement through work” and “is viewed as an dispositional characteristic” (Warr, et al., 1979, p. 131). An example is “using your skills to the maximum”. The response options ranged from 1 (not at all important) to 7 (extremely important) and the scale included six items. Higher order need strength was an addition to measure achievement orientation and was not used by Rauch, et al. (in press). Innovativeness . Innovativeness was measured by two 5-point questionnaire items taken from Patchen’s (1965) interest in innovation scale: “How often do you try out, on your own, a better and a faster way of doing something in the job?” and “How often do you have chances to try out your own ideas in your job?”. We chose only the two items of the Patchen scale, which indicate innovative action rather than interest in innovation.

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Initiative. Initiative was measured via the interview. The participant was asked: “What have you done to attain your company’s goals for the next year?”. The interviewer and an additional rater rated the participants’ answers on the point 5-point scales for quality (1 = very low to 5 = very high) and quantity (1 = very few to 5 = very many) of the personal initiative entailed in their goal attainment approaches. For example, an entrepreneur wanted to reorganize his accounting and use electronic data processing in the future. If the entrepreneur had only talked to a single software dealer once, the quantity of the initiative was low, whereas it was high if he had talked several times with several dealers. If the entrepreneur had talked with software dealers only the quality was low. Had the entrepreneur additionally talked with his tax consultant and his bank manager and had made a software application course the quality of his initiative was high. The interraterreliability was assessed by the intraclass correlation coefficient (ICC). Intraclass correlation coefficients for the quantity and the quality were .74 and .78, respectively. Venture performance. One of the problems frequently discussed in entrepreneurship research is the measurement of venture performance. Some authors argue that growth variables are the best indicators to measure venture performance (Brush & Vanderwerf, 1992; Tsai, MacMillan, & Low, 1991). Growth can be measured, for example, by sales growth and employment growth. Other aspects of performance are profit, size, liquidity, or simply success vs. failure. Most authors agree that multiple measures should be used (Brush & Vanderwerf, 1992; Murphy, Trailer, & Hill, 1996). We measured venture performance by employment growth and profit growth. Two indicators measured employment growth: average percentage employment growth over years and average absolute employment growth since the business was founded. In calculating of the average absolute employment growth, the initial employment size was subtracted to reduce the effect of the size at the startup. Profit growth was measured by the following three items with 5-point answering scales (1 = strong decrease, 5 = strong increase): “Was your profit higher than last year?”, “What profit do you expect in comparison to the last year”, “Is your personal income better than last year?”.

Analyses

Structural equation modelling has two important advantages to test mediation models. First, structural equation modelling can simultaneously test all relationships within the model. Second, structural equation modelling can test the goodness of fit for different nested models (Anderson & Gerbing, 1988).


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The following indices of fit were used. In addition to the chi-square test and root-mean-square-residual (RMR), we used the normed-fit-index (NFI; Bentler & Bonett, 1980), the goodness-of-fit-index, the adjusted-goodnessof-fit-index (GFI, AGFI; Jöreskog & Sorböm, 1989), parsimonious-fit-index, and the comparative-fit-index (CFI; Bentler, 1990). CFI and GFI have the advantage of being relatively stable for smaller samples (Hu & Bentler, 1995), and NFI does not depend on sample size (Bollen, 1990). For GFI, AGFI, NFI, and CFI an acceptable fit is indicated by a value higher than .90 (cf., Medsker, Williams, & Holahan, 1994; Schumacker & Lomax, 1996). The PNFI is a modification of NFI, but this index takes degrees of freedom into account and assesses the parsimony of the models (Schumacker & Lomax, 1996). The smaller the RMR is the better. An RMR of zero indicates a perfect fit. RMR can compare two different models with the same data (Schumacker & Lomax, 1996). Finally, RMSEA (root-mean-square-error-of-approxima tion; Browne & Cudeck, 1993) was considered. A value less than .08 for RMSEA indicates a reasonable fit for the model and the RMSEA is helpful in identifying the best model among a set of alternative models (MacCallum, 1998). The nested models were compared with a sequential chi-square difference test (Anderson & Gerbing, 1988). In the theoretical model, direct paths from achievement orientation to profit growth and employee growth were added to test if a model with a direct path fit the data better. One of the reasons to work with structural equation models is the confirmatory method (Ecob & Cuttance, 1987). Anderson and Gerbing (1988) suggest a two-step approach. The measurement models should be estimated in the first step. The measurement models with acceptable fit are then included in the structural models. The different nested structural models are estimated in a second step. The models were tested using AMOS 3.6. The data were read in the form of a covariance-matrix and the parameters were estimated by the maximum likelihood method (ML).

RESULTS

Table 1 shows the intercorrelations among the variables. There were highly significant correlations between the personality characteristics. The scales of innovativeness and initiative showed different results. Innovativeness correlated significant with the personality characteristics (except for internal locus of control) and with both venture performance scales. Initiative correlated with only one personality characteristic—self-efficacy—and with the performance measure profit growth.

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6 6

Venture performance c (a) One-factor model (b) Two-factor model

10 9.5 40 7.830

5 2.3 67 9.07

3.28

[Chi2]

>.001 .251

>.001 .06

.19

[p]

.811 .985

.896 .978

.993

[GFI]

.527 .962

.740 .946

.963

[AGFI]

bIndependence

model for achievement orientation: Chi2 (6) = 140.868, p < .001. model for mediators: Chi2 (4) = 282.312, p < .001. cIndependence model for venture performance: Chi 2 (5) = 212.158, p < .001.

4 4

Mediators b (a) One-factor model (b) Two-factor model

aIndependence

2

[df]

Achievement orientation a

Measurement Model

.178 .060

.207 .114

.025

[RMR]

TABLE 2 Fit indices for the measurement models

.294 .039

.246 .080

.054

[RMSEA]

.488 .991

.825 .982

.993

[CFI]

.484 .963

.815 .968

.978

[NFI]

.329 .578

.543 .645

.326

[PNFI]

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Results of the measurement models

Prior to testing the hypotheses, we calculated three separate confirmatory factor analyses. The latent factor achievement orientation had four indicator variables (the scales of locus of control, need achievement, higher order need strength, and self-efficacy). The confirmatory analysis showed an excellent fit, c 2 = 3.28, df = 2, p = 19, GFI = .99, = AGFI = .96, RMR = .025, RMSEA = .054, CFI = .99, NFI = .98, PNFI = .33 (see Table 2) and all indicators loaded significant at the .001 level on the latent factor achievement orientation. The measurement model for mediators with the two latent factors innovativeness and initiative fitted the data as well, c 2 = 9.07, df = 4, p = .06, GFI = .98, AGFI = .95, RMR = .11, RMSEA = .080, CFI = .98, NFI = .97, PNFI = .65 (see Table 2). Also, the factor loadings were significant at the .001 level. We also calculated a measurement model with only one factor for the mediator. In the one-factor mediator measurement model all items of innovativeness and initiative were forced to load only one latent factor. The one-factor mediator model showed a poor fit in all indices (see Table 2). Therefore, we favoured the two-factor model. Venture performance was also measured by two latent factors. The latent factors profit growth and employee growth had two indicators, respectively. The measurement model for venture performance with two latent factors fitted well with c 2 = 7.83, df = 6, p = .25, GFI = .99, AGFI = .96, RMR = .060, RMSEA = .039, CFI = .99, NFI = .96, PNFI = .58 (see Table 2).2 The loadings for the indicators were significant at the .001 level. A one-factor model was calculated for venture performance with five items on one latent venture performance factor as well. The results of Table 2 show that the two-factor model clearly had a better fit.

Results of the structural equation models

The mediation model fitted the data well (see Table 3). It included the paths of the hypothesized model (see Figure 1). In order to test the mediation model, three additional nested models were additionally tested (cf., Moorman, Blakely, & Niehoff, 1998). Model 1 included a direct path from achievement orientation to profit growth. In Model 2 a direct path was added from achievement orientation to employee growth, and, finally, Model 3 had two direct additional paths from achievement orientation to profit growth and employee growth. The mediation model had an acceptable fit (Table 3). The three nested models (Model 1, 2, and 3) had nearly the same fit indices. None of the Chi2 difference tests conducted between the mediation model and the other three models were significant (see 2The

error variance for the two indicator variables respectively for profit growth, initiative in the innovation process, and trying to improve work procedures were set to be equal. That was necessary to identify the measurement models.

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7 8. 61 2 7 8. 58 8 7 7. 96 3 7 7. 95 3

[Chi2]

bModel

1 resembles the mediation model 2 resembles the mediation model cModel 3 resembles the mediation model §The Chi2-difference values always relate

62 61 61 60

Mediation model Model 1a Model 2b Model 3c

aModel

[df]

Model 1 1 2

[ D df§)] – .60 (n.s.) .04 (n.s.) .27 (n.s.)

[ D Chi2§] .94 3 .94 3 .94 3 .94 3

[GFI] .91 7 .91 6 .91 6 .91 4

[AGFI] .04 9 .04 9 .04 9 .04 9

.03 7 .03 8 .03 7 .03 9

[sRMR] [RMSEA]

.97 4 .97 3 .97 4 .97 2

[CFI]

.89 2 .89 2 .89 3 .89 3

[NFI]

with an additional path from achievement orientation to growth. with an additional path from achievement orientation to employee growth. with additional paths from achievement orientation to profit growth and employee growth. to the mediation model. Independence Model Chi2 (78) = 728.886, p < .001.

.07 6 .06 4 .07 1 .06 0

[p]

TABLE 3 Fit indices for mediation model and the nested models

.70 9 .69 8 .69 8 .68 7

[PNFI]

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Figure 2. Structural model of the mediation model; §p < .10, *p < .05, ***p < .001.

Table 3) and none of the additional paths were significant. Additionally, there were no modification indices for the mediation model and the mediation model had the best value for the PNFI (see Table 3). These results suggest that the mediation model without direct paths from achievement orientation to venture performance is the best, supporting Hypothesis 5. Within the mediation model the single paths support Hypotheses 1, 2, 3 and 4. The paths from achievement orientation to initiative and innovativeness were significant (see Figure 2). Achievement orientation explained 3% of variance of initiative and 15% of innovativeness. These results supported Hypotheses 1 and 2. Innovativeness had a significant effect on profit growth and employee growth, whereas initiative showed no significant effect on venture performance. The path from initiative in the innovation process to profit growth was only nearly significant. Thus, Hypothesis 3 was confirmed and Hypothesis 4 could be rejected. The mediation model explained 7% of profit growth and 8% of employee growth.

DISCUSSION

The mediation model fitted the data best. The most powerful factor in the mediation model is innovativeness. There was a strong link from achievement orientation to innovativeness and a strong link from innovativeness to both venture performance variables. There are several reasons why innovativeness is important for venture performance. Entrepreneurs who try to improve their work get more feedback from their work. Therefore, they have the possibility to integrate more information. Also, innovativeness is a goal-oriented behaviour and a planning behaviour. All these aspects are related to job performance or venture performance (Frese, 1995; Locke & Latham, 1990; Miner et al., 1989; Schwenk & Shrader, 1993).

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One result was that initiative had no significant effect on venture performance. This is surprising; because initiative is, for example, necessary for successful innovation. One reason why initiative did not show a clear effect on venture performance (only the path from initiative to employee growth is nearly significant) is its operationalization. Operationalization included aspects of initiative and concreteness for the implementation of goals for the next year. This is not a measurement of initiative in general, therefore the positive effect might be seen after a time lag. The results emphasize the importance of domain relevant personality characteristics of the entrepreneur in entrepreneur research. The findings suggest two lines of research that need to be considered in the future. Personality variables are interesting when the variables consider the work situation and job requirement for an entrepreneur. Second, achievement orientation is important for explaining entrepreneurial behaviour. The results show that innovativeness is the relevant behaviour to explain venture performance, but achievement orientation is significant for showing this desirable behaviour. Moreover, if we evaluate the paths from achievement orientation to the measurements of innovativeness, we need to consider that the means of all achievement orientation sub-scales are at the upper bound of the range. Therefore, variance restriction must be assumed. These results are akin to the deliberations of Farr and Ford (1990, p. 67), who argued that people with low efficaciousness (in our case with low achievement orientation) avoid innovations and initiative, because they have serious selfdoubt, show little effort, and give up quickly. Entrepreneurs with high achievement orientation expect a greater amount of effort and are persisting in the face of problems and barriers. A critical point of our study is the low explained variances of venture performance. Yet, there are some potential factors, which can reduce the effects. For example, the resistance to change of the employees can hinder positive effects of the innovativeness and initiative of the entrepreneur (cf., King, 1990). Also, innovation is related to firm size (Pfirrmann, 1994) and to the financial situation of the small-scale unit. Therefore, firm size and financial situation can be potential moderators of the relationship of innovativeness and initiative with venture performance. West and Farr (1990) pointed out that innovations must not always result in productivity or economic benefit. Other benefits of innovations “might be personal growth, increased satisfaction, improved group cohesiveness” or “better interpersonal communication” (West & Farr, 1990, p. 9). A practical suggestion of the results is that entrepreneurs should be innovative. Entrepreneurs should try as much as possible to improve their work procedures. Successful innovation means it is not necessary to buy modern machines or to use modern techniques. Successful innovation starts with daily effort of the entrepreneur. Since, results indicate a mediation model, an


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entrepreneur need not to be high in achievement orientation to be successful, but it is helpful to be innovative. Especially in fast-growing areas or in high technological areas, such as information technology, where innovativeness is necessary to persist a high achievement orientation is important. Another aspect is the disposition of high achievement orientation. A business owner with high achievement orientation is a resource for the innovativeness of enterprise.

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