Entrepreneurial Self-Efficacy, Entrepreneurial Orientation and Innovation in Small and Medium-Sized Enterprises

Abstract

As globalisation dominates the world, innovation is increasingly becoming an outstanding competitive attribute of organisations. In the United Arab Emirates, the government urges private and public organisations to adopt and embrace innovation as a major driver of economic growth. This study undertook a survey among 52 entrepreneurs (Males = 25 and Females = 27) of various SMEs in Dubai and provided important information regarding the nature of relationships among EO, ESE, and innovation. Regression analysis reveals that EO accounts for 17.6% of the variation in ESE, which in turn explains 26.9% of the variation in innovation (R2 = 0.269). Moreover, the findings show that ESE is a partial mediator because EO accounts for 53.1% of the variation in innovation while EO and ESE collectively account for 58.6% of the variation in innovation. In this view, the study established that EO and ESE are direct statistically significant predictors of innovation while ESE mediates the relationship between EO and innovation. Therefore, the study recommends entrepreneurs of SMEs in Dubai to enhance their EO and ESE to improve effective management of innovation.

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Introduction

Background

Increasing competition across the world has compelled countries and organisations to develop and adopt creative strategies, which increase their competition and enable them to survive in the competitive environments. Evidently, innovation is a major driver of modern economies as developed countries have invented innovative products and services, which significantly boost their gross domestic product and stimulate industrial growth. As one of the developed countries, the United Arab Emirates has realised that innovation is the cornerstone of economic growth and development. In 2015, Sheikh Mohammed, the vice president of the United Arab Emirates, urged private and public organisations to embrace innovation as an essential culture, which would transform the United Arab Emirates and make it a leading economy globally (United Arab Emirates 2015; Ahmed et al. 2016). In this view, Sheikh Mohammed termed 2015 as the year of innovation and implored private and public organisations to focus on generating innovative products, services, and processes to attain the world-class status in global markets.

With a robust blueprint of the National Innovation Strategy, the United Arab Emirates is on the transformative path of economic growth and development. Collective innovative aspirations of individuals, public organisations, and private institutions determine how a country generates innovative products, services, and processes aimed at improving the quality of life. Key factors that stimulate innovation are human resources, funds, regulations, competition, infrastructure, knowledge, technology, and innovations. The effective utilisation of these factors stimulates economic growth and development, which consequently improves the lives of people. According to the United Arab Emirates (2015), innovation is beneficial because it boosts the quality of life, promotes economic diversification, creates advanced job opportunities, enhances knowledge economy, improves competitiveness, and promotes entrepreneurship. What distinguishes the United Arab Emirates as a hub of innovation is its strong belief in innovation as the driver of economic growth and development and the future competitive form of investment.

As an aspect of performance, innovation is an important attribute that measures the ability of an organisation to generate innovative products, services, and process. Sidik (2012) created a conceptual framework, which indicates that innovation mediates the relationship between entrepreneur attributes and performance of small and medium-sized enterprises (SMEs). Sidik (2012) explains that SMEs operate differently from large organisations because they rely on knowledge of entrepreneurs, capabilities of entrepreneurs, and tacit knowledge. Knowledge of entrepreneurs is critical because it defines the complexity of strategies and policies while capabilities determine the effectiveness of implementing complex strategies and policies. Tacit knowledge, which is the knowledge gained from the routine experience of solving problems, is necessary to enable SMEs to cope with challenges and come up with innovative ways of solving them.

Given that SMEs are dominant and effective in stimulating economic growth and development, they constitute innovative hubs. Hertha and Mahmood (2015) explain that SMEs do not only also reduce unemployment rates but also boost innovations. In their study, Khedhaouria, Gurau, and Torres (2015) developed a conceptual model, which elucidates how self-efficacy and entrepreneurial orientation influence performance of SMEs. The findings demonstrated that self-efficacy and entrepreneurial orientation have a positive correlation with the performance of SMEs (Khedhaouria, Gurau, & Torres 2015). The existence of positive relationship indicates that attributes of entrepreneurs influence innovation in SMEs. Therefore, the examination of the influence of entrepreneurial self-efficacy (ESE) and entrepreneurial orientation (EO) on the innovation of SMEs is integral to understanding individual attributes that determine innovation.

Statement of the Problem

As the globalisation has increased competition in the modern world, it has compelled organisations and businesses to create innovations to increase their competitive advantage and survive in the increasingly competitive markets at both national and international arenas. Ionescu and Dumitru (2015) explain that innovation is a leading driver of sustained growth, profitability, and competitiveness. In this view, organisations that fail to create innovations would not attain sustained growth, achieve commendable profits, and attain competitive advantage in the competitive markets. Sidik (2015) asserts that as entrepreneurs of SMEs act as chief executive officers of their respective businesses, their entrepreneurial traits such as self-efficacy, orientation, creativity, innovativeness, resilience, and social skills determine the performance of SMEs. According to Khedhaouria, Gurau, and Torres (2015), most SMEs are yet to embrace innovation because their entrepreneurs have low self-efficacy and wanting entrepreneurial orientation.

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Following the realisation that individuals, organisations, and the government have not exploited their innovative capacities fully, Sheikh Mohammed foresees that failure to adopt and embrace innovation would lead to regression and loss of competitiveness. According to the United Arab Emirates (2015), Sheikh Mohammed launched the National Innovation Strategy to build human capacity and empower individuals, organisations, and government in boosting innovations and attaining competitive advantage in the local and global arenas. In SMEs, entrepreneurs are target individuals who have the capacity to create innovations given an enabling environment. However, entrepreneurs face challenges such as inappropriate technology, policy inertia, insufficient of information, and personal traits, which hinder SMEs from creating innovations (Herath & Mahmood 2014). Thus, lack of adequate information regarding the role of entrepreneurial orientation and entrepreneurial self-efficacy is influencing innovation hinders SMEs from creating innovative products, services, and process.

Research Aim

The aim of the study is to determine the effect of entrepreneurial orientation and entrepreneurial self-efficacy on innovation in Dubai SMEs.

Research Objectives

  1. To determine the effect of entrepreneurial orientation on entrepreneurial self-efficiency in Dubai SMEs.
  2. To determine the effect of entrepreneurial self-efficiency on innovation in Dubai SMEs.
  3. To determine if entrepreneurial self-efficacy mediates the effect of entrepreneurial orientation on innovation in Dubai SMEs.

Research Questions

  1. What is the effect of entrepreneurial orientation on entrepreneurial self-efficiency in Dubai SMEs?
  2. What is the effect of entrepreneurial self-efficiency on innovation in Dubai SMEs?
  3. Does entrepreneurial self-efficacy mediate the relationship between entrepreneurial orientation and innovation in Dubai SMEs?

Hypotheses

  1. Entrepreneurial orientation is a statistically significant predictor of entrepreneurial self-efficiency in Dubai SMEs.
  2. Entrepreneurial self-efficiency is a statistically significant predictor of innovation in Dubai SMEs.
  3. Entrepreneurial self-efficacy mediates the effect of entrepreneurial orientation on innovation in Dubai SMEs.

Scope

The study will examine the influence of entrepreneurial orientation and entrepreneurial self-efficacy on innovation in SMEs in Dubai. The study will only examine entrepreneurs who are the chief executive officers of their SMEs in Dubai. Moreover, the study will examine entrepreneurial orientation, entrepreneurial self-efficacy, and innovation as the three variables that measure entrepreneurial traits of selected entrepreneurs from SMEs. As delimitation, the study will not examine other entrepreneurial attributes that influence innovation in SMEs. Additionally, the study will not examine entrepreneurs in the government and large organisations in the United Arab Emirates.

Literature Review

Small and Medium-Sized Enterprises

SMEs are small business entities, which play a significant role in economic growth and development for they carry aspirations and ambitions of entrepreneurs. The analysis of SMEs shows that they increase economic growth and development by increasing the formation of businesses, raising productivity, intensifying formalisation, and expanding innovations. A case study of Malaysia shows that SMEs are drivers of the economy for they contribute to 97.3% of businesses, 33.1% of the gross domestic product, 28.4% of exports, and 59.5% of employment (Madanchian et al. 2015). Moreover, SMEs play a critical role in the growth and development of the United Arab Emirates’ economy. In recognising SMEs as major drivers of economic growth and development, Schiliro (2015) reports that they comprise 92% of companies, contributes about 50% of the gross domestic product, and provides over 85% of job opportunities in the private sector. Thus, entrepreneurs of these EMEs are major players in economic growth and development for they determine the nature of innovative products, services, and processes that are not only competitive but also dominant in the market.

Innovation

As SMEs play a central role in the economic growth and development of the United Arab Emirates as well as other countries across the world, innovations of these SMEs exhibit outstanding contribution. In elucidating how SMEs are drivers of economic growth and development, Schiliro (2015) evaluated the innovation model of SMEs in the United Arab Emirates and found out that innovation accounts for a considerable part of competitiveness and success of SMEs. Innovation allows SMEs to create innovative products, services, and processes, which are competitive in both local and global marketing, resulting in market dominance and increased sales. Besides, innovations enable SMEs to achieve their success as innovative products, services, and processes do not only dominate markets but also promote sustainability of SMEs. The analysis of the leading companies globally such as Samsung, Apple, Amazon, Google, Microsoft, Google, Facebook, and Coca-Cola showed that innovations have made them achieve competitive advantage and stand out in the global markets (Ionescu & Dumitru 2015). Consequently, innovative companies have achieved sustainability for they create durable products and maintain customer loyalty, resulting in a long-term impact on profitability and competitiveness.

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As innovations require enabling environment, governments should provide legislations, technology infrastructure, and investment incentives to SMEs and their entrepreneurs to explore and exploit opportunities for innovation optimally. In their study, Jabbouri et al. (2016) demonstrated that technology infrastructure correlates positively with the occurrence of innovations. Fundamentally, technology infrastructure such as the Internet, computers, and applications ease the process of performing tasks, connect organisations with clients, reduce costs of operations, and increase productivity. Given that innovation is the most influential factor in economic growth and development, Schiliro (2015) recommends the adoption of policies that support knowledge-based economy for countries to thrive on innovation. The analysis of SMEs in the United Arab Emirates reveals that innovation accounts for 30% of the economic activity (Schiliro 2015). Thus, it is apparent that innovation is a key performance indicator of SMEs in the United Arab Emirates.

Entrepreneurial Self-Efficacy

Since entrepreneurs are chief executive officers of SMEs, they have entrepreneurial traits, which motivated them to start, manage, and sustain actualisation of entrepreneurial ideas into successful SMEs. Entrepreneurial self-efficacy is a comprehensive construct that measures various attributes of a person that reflect the capacity to become an entrepreneur. According to Herath and Mahmood (2014), entrepreneurs with a higher degree of self-efficacy do not only perform better than those with a lower degree of self-efficacy but also are more innovative and creative. As an important attribute of entrepreneurs, self-efficacy determines innovative abilities of entrepreneurs in various settings and business aspects. A study performed to determine the influence of entrepreneurial leadership on innovative performance revealed that self-efficacy has a statistically significant positive influence on innovation (Hong-Da et al. 2014). Normally, entrepreneurs gain self-efficacy through social interaction, cognitive learning, and experiential learning.

Entrepreneurial self-efficacy is an integral attribute that mediates innovation and has a positive influence on entrepreneurial orientation. Khedhaouria, Gurau, and Torres (2015) found out that creativity and self-efficacy are personal attributes that have positive relationships with performance and innovativeness of entrepreneurs. These findings imply that implies that self-efficacy plays a central role in the performance and innovativeness of entrepreneurs in various organisations. The mechanism of influencing innovation and performance is that self-efficacy enables entrepreneurs to create innovative products, services, and processes, which promote competitiveness and profitability of organisations. Given that entrepreneurs lead SMEs, they have the capacity to influence the creation of innovations and performance of employees. Khedhaouria, Gurau, and Torres (2015) studied entrepreneurs of French SMEs and revealed that self-efficacy correlates positively with organisational performance while entrepreneurial orientation mediates the effect of self-efficacy on innovation. Moreover, a study performed among 350 SMEs in Sri Lanka revealed that self-efficacy reflects the ability of hotel owners to create innovative products for their clients. In this view, it is apparent that personal attributes have direct and indirect influences on the innovative performance of organisations.

Entrepreneurial Orientation

Entrepreneurial orientation is an attribute of organisations or SMEs, which measures their ability to exhibit pro-activity, take risks, and come up with innovations. The assessment of innovativeness of SMEs and their entrepreneurs using entrepreneurial orientation is valid and reliable because it is an established determinant of innovation. Khedhaouria, Gurau, and Torres (2015) explain that entrepreneurial orientation is essential for the success of organisations because it enables entrepreneurs to create innovative products, services, and process that are not only competitive but also profitable. Organisations with a high level of entrepreneurial orientation make bold decisions and take aggressive steps aimed at coming up with innovations and marketing them extensively (Kraus et al. 2012). According to Gupta and Batra (2015), entrepreneurial orientation has a moderate influence on the performance of organisations. In this view, subsequent studies try to ascertain the degree of entrepreneurial orientation’s influence on various aspects of organisational performance such as profitability and innovations.

The fact that entrepreneurial orientation influences organisational performance has prompted researchers across the world to undertake numerous studies while varying mediating factors. In their study performed among 198 Indian SMEs, Gupta and Batra (2015) found out that entrepreneurial orientation has a strong positive influence on the performance of SMEs under the mediating influence of competitive intensity and demand growth. A similar study performed among 1,122 entrepreneurs of Spanish SMEs revealed characteristics of employees, managers, and organisations are factors that determine the performance of SMEs (Rodríguez-Gutiérrez, Moreno & Tejada 2015). Of interest are the managerial characteristics for they determine innovative stance of SMEs. Therefore, comparison of findings shows that the strength of association between the entrepreneurial orientation and the performance of SMEs is variable depending on the factors that mediate the association.

Conceptual Framework

The conceptual framework shows that entrepreneurial orientation (EO) has a direct influence on entrepreneurial self-efficacy (ESE) according to the first hypothesis (H1). Moreover, the conceptual framework depicts that entrepreneurial self-efficacy (ESE) has a direct influence on innovation as per the second hypothesis (H2). According to the third hypothesis (H3), the conceptual model shows that EO has an indirect influence on innovation through the mediating influence of ESE, as illustrated in Figure 1 below.

Relationships between variables of interest
Figure 1: Relationships between variables of interest (EO, ESE, and I)

Methodology

Research Design

As a research approach, the study employed the quantitative approach in determining the effect of entrepreneurial orientation and entrepreneurial self-efficacy on innovation in Dubai SMEs. The quantitative approach is advantageous because it measures variables, quantifies data, allows performance of descriptive statistics, and permits hypothesis testing (Maxwell 2012). In measuring variables, the quantitative approach allows collection of data and statistical analysis of data to determine the validity of the findings. According to Creswell (2013), the quantitative approach provides a robust research design for researchers collect accurate data, which they analyse and make statistical inferences. Maxwell (2012) adds that the quantitative approach is advantageous as it allows comparison of dependent and independent variables and the determination of the nature and strength of relationships. Given that the study aims to determine the effect of entrepreneurial orientation and entrepreneurial self-efficacy on innovation in Dubai SMEs, the quantitative approach is appropriate in elucidating the nature and strength of the influence. Specifically, the study employed survey research design in the collection of data and analysis of the findings.

Target Population and Sampling

The target population comprises representatives of SMEs in Dubai who are entrepreneurs playing a central role in the management of SMEs. As SMEs in Dubai comprise 92% of companies, contribute about 50% of the gross domestic product, and provide over 85% of job opportunities in private sector (Schiliro 2015), they constitute appropriate target population to study the influence of OE and ESE on innovation. In sampling the data, the study used convenience sampling. According to Creswell (2013), the convenience sampling is advantageous because it is not only simple and convenient but also promotes representation of the target population. In data collection, the study sampled SMEs that were established, accessible, and its entrepreneurs were willing to take part in the study. To enhance representation of the target population, the study sampled 52 entrepreneurs from various SMEs in Dubai.

Research Instrument

As a research instrument of collecting data from entrepreneurs of SMEs, the study used a questionnaire. The questionnaire comprised demographic variables, entrepreneur orientation (EO) scale, entrepreneur self-efficacy (ESE) scale, and innovation (I) scale. Demographic variables comprise gender, age, education level, age of SMEs, and position of entrepreneurs. ES is an established scale that measures three dimensions of entrepreneurial attributes, namely, pro-activity, innovativeness, and risk-taking actions (Khedhaouria, Gurau, &Torres 2015). These dimensions measure the ability of entrepreneurs and their SMEs to influence innovations. ESE scale comprises planning, marshalling, searching, managing people, and implementing finance. Innovation scale consists of innovative behaviour, participative leadership, and innovative practices of entrepreneurs. Innovative behaviour has six Likert items, both participative leadership and innovative practices have five Likert items. Overall, these scales have numerous items on a seven-point Likert scale.

Data Collection

The data was collected from entrepreneurs of the sampled SMEs in Dubai through online surveys. Survey Monkey was used in designing survey and collecting data through the online platform. The mails of the sampled entrepreneurs were obtained and the introductory letter seeking informed consent and the link to the survey were emailed to the potential participants. The data were collected and stored in Survey Monkey database where they were retrieved and used in data analysis to obtain relevant results.

Data Analysis

The study employed SPSS program in performing analysis of data obtained from entrepreneurs of SMEs in Dubai. Descriptive statistics were used in exploring data to establish demographic attributes of participants. Moreover, descriptive statistics were employed in ascertaining trends and patterns of OE, ESE, and I’s responses from participants. Since the study employed scales with numerous Likert items, it computed variables of OE, ESE, and I. The study employed regression analysis to determine the influence of OE and ESE on I and mediation analysis to determine the mediating influence of ESE on the relationship between OE and I.

Findings and Interpretation

Demographic Data

The study used Survey Monkey to collect data from sampled entrepreneurs. The survey collected data from 58 respondents out of which 52 gave complete responses (90% completion rate). Demographic information shows that the respondents represent gender, age group, education level, company’s age, and job level. Table 1 shows that out of 52 respondents, females comprised 51.9% (27) while males comprised 48.1% (25).

Table 1:

Gender
Frequency Percent Valid Percent Cumulative Percent
Valid Female 27 51.9 51.9 51.9
Male 25 48.1 48.1 100.0
Total 52 100.0 100.0

The distribution of respondents according to their age groups (Table 2) shows that 40.4% (21) are in the age group of 20-34 years, 44.2% (23) are in the age group of 35-49 years, and 15.4% (8) are in the age group of 50-64 years.

Table 2:

Age Group
Frequency Percent Valid Percent Cumulative Percent
Valid 20-34 21 40.4 40.4 40.4
35-49 23 44.2 44.2 84.6
50-64 8 15.4 15.4 100.0
Total 52 100.0 100.0

In the aspect of the educational level (Table 3), the findings indicate that most respondents are bachelor’s graduates (40.4%) followed by master’s graduates (32.7%) and diploma graduates (13.5%). Secondary graduates, doctorate graduates, and primary graduates constituted 7.7%, 3.8%, and 1.9% respectively.

Table 3:

Education Level
Frequency Percent Valid Percent Cumulative Percent
Valid Bachelors’ graduate 21 40.4 40.4 40.4
Diploma graduate 7 13.5 13.5 53.8
Doctorate graduate 2 3.8 3.8 57.7
Masters graduate 17 32.7 32.7 90.4
Primary graduate 1 1.9 1.9 92.3
Secondary graduate 4 7.7 7.7 100.0
Total 52 100.0 100.0

Moreover, information of companies shows that most started in the past seven years (42.3%) followed by 30.8% that started in 2001-2010. Few companies (21.2%) were established in 1990s and the least number of companies (5.8%) were established beyond 1990, as shown in Table 4.

Table 4:

Year Started Period
Frequency Percent Valid Percent Cumulative Percent
Valid <1990 3 5.8 5.8 5.8
1991-2000 11 21.2 21.2 26.9
2001-2010 16 30.8 30.8 57.7
>2011 22 42.3 42.3 100.0
Total 52 100.0 100.0

The distribution of respondents according to the current job level reveals that most respondents are in the executive level (40.4%) followed by the middle management level (32.7%) and intermediate levels (11.5%). Senior management and entry level comprised 7.7% and 1.9% correspondingly.

Table 5:

Current Job Level
Frequency Percent Valid Percent Cumulative Percent
Valid Entry Level 1 1.9 1.9 1.9
Intermediate 6 11.5 11.5 13.5
Middle Management 17 32.7 32.7 46.2
Other (please specify) 3 5.8 5.8 51.9
Executive Level 21 40.4 40.4 92.3
Senior Management 4 7.7 7.7 100.0
Total 52 100.0 100.0

Correlation Analysis

Correlation analysis shows that EO, ESE, and innovation score have statistically significant positive relationships. EO has a strong positive relationship with innovation (r = 0.728, p = 0.000) and a moderate positive relationship with ESE (r = 0.420, p = 0.002). ESE has a moderate positive relationship with innovation (r = 0.518, p = 0.000).

Table 6:

Correlations
ESE Score EO Score Innovation Score
ESE Score Pearson Correlation 1 .420 .518
Sig. (1-tailed) .002 .000
N 52 52 52
EO Score Pearson Correlation .420 1 .728
Sig. (1-tailed) .002 .000
N 52 52 52
Innovation Score Pearson Correlation .518 .728 1
Sig. (1-tailed) .000 .000
N 52 52 52

Eo and Ese

The study hypothesised that EO is a statistically significant predictor of ESE in Dubai SMEs. Table 7 is a regression model showing that EO accounts for 17.6% of the variation in ESE (R2 = 0.176).

Table 7:

Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .420a .176 .160 .49756
a. Predictors: (Constant), EO Score

Table 8 shows that the regression model is statistically significant in predicting the relationship between ESE and EO, F(1,50) = 10.382, p = 0.002.

Table 8:

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 2.647 1 2.647 10.691 .002b
Residual 12.378 50 .248
Total 15.025 51
a. Dependent Variable: ESE Score
b. Predictors: (Constant), EO Score

Coefficients’ table (Table 9) shows that ES is a statistically significant predictor of ESE among entrepreneurs of SMEs in Dubai (p = 0.002). Fundamentally, the regression equation shows that a unit increase in EO results in 0.221 increases in innovation.

Table 9:

Coefficientsa
Model Unstandardised Coefficients Standardised Coefficients t Sig. 95.0% Confidence Interval for B
B Std. Error Beta Lower Bound Upper Bound
1 (Constant) 2.913 .355 8.208 .000 2.200 3.626
EO Score .221 .068 .420 3.270 .002 .085 .357
a. Dependent Variable: ESE Score

Regression equation is that: – ESE = 0.2214EO + 2.913.

Ese and Innovation

The study hypothesised that ESE is a statistically significant predictor of innovation in Dubai SMEs. Table 10 below shows that ESE explains 26.9% of the variation in innovation (R2 = 0.269).

Table 10:

Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .518a .269 .254 .78538
a. Predictors: (Constant), ESE Score

Table 11 indicates that regression model is statistically significant in predicting the relationship between ESE and innovation, F(1,50) = 18.383, p = 000.

Table 11:

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 11.339 1 11.339 18.383 .000b
Residual 30.841 50 .617
Total 42.180 51
a. Dependent Variable: Innovation Score
b. Predictors: (Constant), ESE Score

From the coefficients’ table (Table 12), it is apparent that ESE is a statistically significant predictor of innovation among entrepreneurs of SMEs in Dubai. The coefficients imply that a unit increase in ESE causes an increase of innovation by 0.869 units (p = 000).

Table 12:

Coefficientsa
Model Unstandardised Coefficients Standardised Coefficients t Sig. 95.0% Confidence Interval for B
B Std. Error Beta Lower Bound Upper Bound
1 (Constant) 2.083 .828 2.516 .015 .420 3.746
ESE Score .869 .203 .518 4.287 .000 .462 1.276
a. Dependent Variable: Innovation Score

Regression equation is that: – Innovation = 0.869(ESE) + 2.083.

Mediation Analysis

The study hypothesised that ESE is a statistically significant mediator of the effect of OE on innovation in Dubai SMEs. Simple regression analysis shows that OE accounts for 53.1% of the variation in innovation (R2 = 0.531) while multiple regression analysis shows that EO and ESE collectively account for 58.6% of the variation in innovation. Calculation of the mediating effect reveals that ESE has statistically significant mediating effect for it explains additional 5.5% of the variation in innovation.

Table 13:

Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate Change Statistics
R Square Change F Change df1 df2 Sig. F Change
1 .728a .531 .521 .62930 .531 56.510 1 50 .000
2 .765b .586 .569 .59733 .055 6.496 1 49 .014
a. Predictors: (Constant), EO Score
b. Predictors: (Constant), EO Score, ESE Score

The regression analysis also depicts that the regression models (1 and 2) are statistically significant in explaining how EO and ESE relate with innovation (p = 0.000).

Table 14:

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 22.379 1 22.379 56.510 .000b
Residual 19.801 50 .396
Total 42.180 51
2 Regression 24.697 2 12.348 34.609 .000c
Residual 17.483 49 .357
Total 42.180 51
a. Dependent Variable: Innovation Score
b. Predictors: (Constant), EO Score
c. Predictors: (Constant), EO Score, ESE Score

The coefficients’ table below shows that EO and ESE are statistically significant predictors of innovation as hypothesised (p < 0.05). In simple linear regression, coefficients indicate that a unit increase in EO results in 0.643 units increase in innovation. In comparison, multiple regression analysis indicates that a unit increase in EO and ESE causes increase in innovation by 0.548 and 0.433 units respectively.

Table 15:

Coefficientsa
Model Unstandardised Coefficients Standardised Coefficients t Sig. 95.0% Confidence Interval for B
B Std. Error Beta Lower Bound Upper Bound
1 (Constant) 2.293 .449 5.108 .000 1.391 3.194
EO Score .643 .086 .728 7.517 .000 .471 .815
2 (Constant) 1.032 .653 1.582 .120 -.279 2.344
EO Score .548 .089 .620 6.119 .000 .368 .727
ESE Score .433 .170 .258 2.549 .014 .092 .774
a. Dependent Variable: Innovation Score

Regression equations are:

  • Innovation = 0.643EO + 2.293
  • Innovation = 0.548EO + 0.433ESE + 1.032

Discussion

Demographics

Demographic data show that the entrepreneurs surveyed represented both genders for females and males comprised 51.9% and 48.1% respectively (Table 1). In the aspect of age, the findings show that most entrepreneurs (84.6%) of Dubai SMEs were below the age of 49 years while the remaining 15.4 were in the age group of 50-64 years. A notable trend of educational level is that most entrepreneurs surveyed were bachelor’s graduates (40.4%) followed by master’s graduates (32.7%) and diploma graduates (13.5%). The trend shows that education level is a factor that influences entrepreneurship of respondents because 90.4% of them had diploma level and above. Regarding the age of SMEs, the findings reveal that 94.2% of SMEs were established in the last 27 years, which means that most of them are recent. In the aspect of current job level, the data show that most entrepreneurs are executives (40.4%) followed by middle-level managers (32.7%) and senior managers (7.7%). In this view, the findings show that 80.8% of respondents are in influential positions.

Correlation

Correlation analysis revealed that EO, ESE, and innovation have positive relationships, which are statistically significant. In line with the first hypothesis, the study established that EO has a strong positive relationship with innovation that is statistically significant (r = 0.728, p = 0.000). The finding is consistent with that of previous studies because it established that ESE is an important attribute of entrepreneurs, which has a positive relationship with innovation, creativity, and performance (Gupta & Batra 2015; Herath & Mahmood 2014; Ionescu & Dumitru 2015; Khedhaouria, Gurau, & Torres 2015). Therefore, the existence of statistically significant positive relationship implies that EO has a marked influence on innovation as hypothesised. The correlation analysis also shows that EO has a moderate positive relationship with ESE, which is statistically significant (r = 0.420, p = 0.000). As an established determinant of entrepreneurship, EO has a positive relationship with ESE (Herath & Mahmood, 2014; Hong-Da et al. 2014). The findings also demonstrate that ESE moderates the relationship between EO and innovation because it has a moderate positive relationship with innovation (r = 0.518, p = 0.000). According to Jabbouri et al. (2016), ESE is an entrepreneurial trait that mediates the relationship between EO and innovation by influencing entrepreneurs and organisations to create and adopt innovations. Thus, direction, strength, and significance of relationships signify the nature of relationships between EO and innovation, EO and ESE, and ESE and innovation.

Eo Predicts Ese

Regression analysis confirmed that EO is a statistically significant predictor for it explains 17.6% of the variation in ESE. Furthermore, the regression model employed is statistically significant in assessing how EO predicts ESE (p = 0.002). As a statistically significant predictor, coefficients’ table (Table 9) indicates that a unit increase in EO causes innovation to increase by 0.221 units. These findings show that EO is an important factor that predicts ESE among entrepreneurs of Dubai SMEs. According to Khedhaouria, Gurau, and Torres (2015), EO is a significant factor that influences the ability of entrepreneurs to come up with creative and innovative products and strategies. As Dubai focuses on innovation as a key factor to revolutionise business and achieve competitiveness in global markets, the regression analysis shows that EO is a factor that determines ESE among entrepreneurs of SMEs in Dubai. Other studies show that EO has a positive influence on performance among employees in organisations for it promotes creativity and innovativeness (Gupta & Batra 2015; Kraus et al. 2012; Mohd et al. 2014). Therefore, the findings confirm that EO has a marked influence on ESE among entrepreneurs of SMEs in Dubai.

Ese Predicts Innovation

According to regression analysis, ESE explains 26.9% of the variation in innovation among SMEs in Dubai. The regression model used is statistically significant (p = 0.000), and thus, shows that ESE predicts innovation. Fundamentally, ESE is a statistically significant predictor because a unit increase in ESE results in an increase of innovation by 0.869 units. In their study, Herath and Mahmood (2014) established that entrepreneurs with a higher degree of ESE exhibit better performance, creativity, and innovation than ones with a lower degree of ESE. In this view, ESE is an entrepreneurial attribute that influences the innovative ability of entrepreneurs through performance and creativity. Schiliro (2015) argues that innovation among SMEs in the UAE is dependent on entrepreneurial attributes such as creativity and performance. Thus, the findings demonstrate that ESE influences innovativeness of entrepreneurs of Dubai SMEs.

Mediating Effect of Ese

The mediation analysis determined if ESE mediates the influence of EO on innovation among entrepreneurs of SMEs in Dubai. Simple regression analysis shows that OE accounts for 53.1% of the variation in innovation whereas multiple regression analysis indicates that EO and ESE account for 58.6% of the variation in innovation. Since regression models are statistically significant, the findings reveal that ESE increases the effect of EO on innovation. According to Sharma (2015), an independent variable can have a direct or an indirect effect on a dependent variable. Coefficients’ table (Table 15) indicates that both EO and ESE are statistically significant predictors (p = 000). Simple linear regression equation shows that a unit increase in EO results in 0.643 units increase in innovation whereas multiple regression analysis indicates that a unit increase in EO and ESE causes increase in innovation by 0.548 and 0.433 units respectively. In this view, ESE is a partial mediator of the influence of EO on innovation. In their study, Mohd et al. (2016) established that ESE is a full mediator of the relationship between personal values and EO. However, this study confirms that ESE is a statistically significant partial mediator of the relationship between EO and innovation among entrepreneurs of Dubai SMEs.

Conclusion and Recommendations

The study has established that EO and ESE are statistically significant predictors of innovation. While EO had a great influence on innovation, ESE partially mediates the influence, and thus, it contributes to the occurrence of innovation. Therefore, the findings indicate that EO and ESE are statistically significant predictors of innovation among entrepreneurs of SMEs in Dubai. Moreover, the findings show that ESE is a statistically significant mediator of the relationship between EO and innovation among entrepreneurs of Dubai SMEs. Based on these findings, the study makes the following recommendations:

  • Given that EO is a statistically significant predictor of ESE, effective management of innovation requires improvement of innovation dimension, risk-taking dimension, and pro-activeness dimension among entrepreneurs of SMEs in Dubai.
  • Enhancement ESE attributes such as marshalling, planning, searching, implementing people, and managing finances to improve innovative traits of entrepreneurs of SMEs in Dubai.
  • As ESE is a partial mediator of the relationship between EO and innovation, SMEs in Dubai should leverage it to enhance effective management of innovation.

Reference

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Mohd, R, Karana, K, Kamaruddin, B, Zainuddin, A, & Ghazali, M. 2014, ‘The mediatory effect of self-efficacy on the relationship between religious values and entrepreneurial orientations: a case of Malay owner managers of SMEs in manufacturing industry’, Social and Behavioural Sciences, vol. 130, no. 1, pp. 96-104.

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YourDissertation. 2022. "Entrepreneurial Self-Efficacy, Entrepreneurial Orientation and Innovation in Small and Medium-Sized Enterprises." January 4, 2022. https://yourdissertation.com/dissertation-examples/entrepreneurial-self-efficacy-entrepreneurial-orientation-and-innovation-in-small-and-medium-sized-enterprises/.

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