The effect of chief executive officers' regulatory focus on the entrepreneurial orientation of small and medium-sized enterprises

Abstract

Entrepreneurial orientation (EO) has been identified as a central construct to understand how firms compete and perform effectively in increasingly competitive environments. Drawing on regulatory focus theory, this study examines how chief executive officers' (CEOs') regulatory focus, a motivational attribute that entails a promotion focus for growth and a prevention focus for safety, affects the EO of small and medium-sized enterprises (SMEs). Results from 110 UK SMEs show promotion focus positively, and prevention focus negatively affect EO when the two foci are examined independently. Our findings also demonstrate that EO varies significantly among firms led by CEOs with different combinations of the two foci. Specifically, firms engaged in significantly higher levels of EO when they are led by CEOs with a high rather than a low promotion focus, where prevention focus is at a high level. This study extends the literature by uncovering regulatory focus as a motivational microfoundation of EO.