Risk-Taking, Innovativeness, and Proactiveness Practices

and Proactiveness Practices
Author(s): YOUNHEE KIM
Source: Public Performance & Management Review, Vol. 34, No. 1 (September 2010), pp.
Published by: Taylor & Francis, Ltd.
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Risk-Taking, Innovativeness, and Proactiveness Practices
ABSTRACT: Public sector entrepreneurship is an approach to reinventing
government that has been applied in public and nonprofit settings to stimulate
better performance. The mind-set of public entrepreneurship (i.e., risk-taking,
innovativeness, and proactiveness) is expected to cultivate more competitive
and productive environments in organizations. This study examines the effects of
public entrepreneurial characteristics on organizational performance in 296 U.S.
state agencies. The results indicate that taking risks, being innovative, and being
proactive contribute positively to organizational performance. Proactiveness is the
most influential factor of the three for achieving improved performance. The results
suggest that state governments can better leverage their strategies and resources,
become more action oriented and opportunity driven, and take advantage of
cutting-edge opportunities by adopting entrepreneurial characteristics.
KEYWORDS: innovativeness, performance, proactiveness, public entrepreneurship,
1 he public sector has continuously sought to improve organizational perfor
mance since the late 1970s. Responding to the trend of managing for results,
various reinventing government approaches, such as new public management and
results-based management, have been broadly implemented. Public organizations
actually searched for new ways of revitalizing their performance by absorbing
more systematic information. Entrepreneurial practices such as risk-taking, in
novativeness, and proactiveness have been considered stimulating factors for
effective responses to meeting complicated demands on internal and external
changes (Cornwall & Perlman, 1990), higher operational performance, and the
generation of extra resources to address increased demands (Bellone & Goerl,
1992; Covin & Slevin, 1991; Osborne & Gaebler, 1992).
The new catchphrase of entrepreneurship was applied to several U.S. federal
East Carolina University
Public Performance & Management Review, Vol. 34, No. 1, September 2010, pp. 104-129.
? 2010 M.E. Sharpe, Inc. All rights reserved.
1530-9576/2010 $9.50 + 0.00.
DOI 10.2753/PMR1530-9576340106
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government projects, such as the National Performance Review, the Franchise
Fund Pilot Program, the venture capital program in various agencies, and the
Federal Activities Inventory Reform Act of 1998. Along with promotion of these
efforts, public entrepreneurship has been expanded by incorporating various pub
lic management practices for improving performance as well as accountability.
Although the collaborative spirit of public entrepreneurial practices has made
progress in public organizations, their promise is still rhetorical and fragmented
due to a lack of evidence. If increased performance is not adequately measured,
an undercommitment of the applicability of the entrepreneurial arrangements in
the public sector may be the consequence.
Prior research has examined the critical organizational, environmental, and
personal factors on entrepreneurial characteristics, but no empirical evidence has
examined the contributions of their activities directly on government performance
because of the difficulty of measuring improved performance as a result of en
trepreneurial activities. For research on public entrepreneurial characteristics to
be properly applied to new settings, these characteristics should be defined suf
ficiently and the magnitude of their effects on organizational performance should
be measured properly. Responding to these tasks, this study examines the effects
of public entrepreneurial characteristics on organizational performance in U.S.
state governments in an attempt to bridge the gap between conceptual discussions
and empirical results of public entrepreneurship.
The Development of the Entrepreneurial Approaches
The multidisciplinary research trend in entrepreneurship literature is far-reaching,
covering various social topics ranging from the psychological, social, and cultural
characteristics of entrepreneurs in organizational development to the functions
of organizational entrepreneurship in performance development. The term entre
preneurship was originally applied to improving economic activities, focusing
on individual characteristics. Attention to the concept of entrepreneurship dates
back to 1755, when Richard Cantillon described an entrepreneurial function as
facilitating an exchange of goods. In transferring the original concept to a modern
context, Joseph Schumpeter restimulated interest in entrepreneurship by highlight
ing its capability for carrying out innovation (Salazar, 1992).
When entrepreneurship research reemerged in the early 1980s, it centered on
psychology?mainly discussing individuals’ extraordinary traits and behaviors to
discover the vital components of entrepreneurship in the process of growth and
productivity (Covin & Slevin, 1988; Drucker, 1985; Mintzberg, 1973; Schneider,
Teske, & Mintrom, 1995). The entrepreneur is described as a rational decision
maker, a problem solver, a major agent and innovator of economic development, a
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106 PPMR/ September 2010
manager and industrial leader, or an arbitrator for creating incremental-continuous
innovations (Kirzner, 1973; Marshall, 1920; Schumpeter, 1934). For example, eco
nomic entrepreneurs may contribute their talents or tacit knowledge to searching
for the possibility of success and risking the organization’s resources for potential
gains (North, 1990). Political and policy entrepreneurs recombine existing factors
of policy making (Schneider et al., 1995) as advocates for anticipated future gain
in policy settings (Kingdon, 1995).
Beginning in the mid-1980s, entrepreneurship research began to move be
yond the individual characteristics of entrepreneurs (Gr?goire, No?l, D?ry, &
B?chard, 2006). The field has addressed a wider array of conceptual perspectives
of entrepreneurial orientations and management at the organization level. Entre
preneurial orientations focus on an organization’s commitment to the intensity
of entrepreneurial actions that tend to take more risks and proactively search
for new business opportunities (Mintzberg, 1973). Entrepreneurial management
concerns the pursuit and development of opportunities and perceives the concept
as an organizational process that promotes innovation, risk-taking, and proactive
actions (Miller & Friesen, 1982; Morris & Jones, 1999; Ramamurti, 1986; Slevin
& Covin, 1990).
As the field of entrepreneurship research has been developed, the ideas of entre
preneurship have been applied to broaden organizational boundaries and capacities
for efficiency, restructure immediate results of an organization for improvement,
and reorient an organizational long-term commitment for continued development.
The domains of entrepreneurship include enterprise entrepreneurship for inde
pendent enterprises in the creation of new ventures, social entrepreneurship for
nonprofit organizations in search of alternative strategies to create social values
and lead social changes, corporate entrepreneurship for private sector companies
in encouragement of corporate activities to create profits and to gain competitive
advantages, intrapreneurship for corporations to focus on new business venturing
within a corporation (Antoncic & Hisrich, 2003), and public entrepreneurship for
public organizations in search of innovations to improve performance.
The characteristics of entrepreneurship have been dimensioned by two, three,
or even four subconstructs (see Table 1). Although there is debate on whether en
trepreneurship can be conceptualized as a unidimensional or a multidimensional
construct, the common definition of entrepreneurship has been conceptualized by
three pragmatic dimensions: risk-taking, innovativeness, and proactiveness (Covin
& Slevin, 1988,1989; Miller, 1983; Morris & Jones, 1999).
The concept of public sector entrepreneurship has recently emerged in the main
stream of entrepreneurship literature, defined with several facets. Morris and Jones
described public entrepreneurship as “the process of creating value for citizens
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Table 1. Dimensions of Entrepreneurship
Source Characteristics of entrepreneurship
Covin and Slevin (1988)
Davis et al. (1991)
Edwards et al. (2002)
Harwood (1982)
Lumpkin and Dess (1996)
Miller and Friesen (1982)
Miller (1983)
Mintzberg (1973)
Morris and Jones (1999)
Slevin and Covin (1990)
Innovation, proactivity, risk-taking
Innovation, risk-taking, proactivity
Risk orientation in certain areas of public service, innova
tion in service delivery, leveraging of resources, the use
of partnerships to create added value, problem-solving for
finding and satisfying unmet needs
Taking initiatives, securing autonomy, taking risks, inter
nalizing uncertainty, conducting innovation
Autonomy, innovativeness, risk-taking, proactivity, com
petitive aggressiveness
Innovation, risk-taking
Innovation, risk-taking, proactivity
Risk-taking, proactivity, centralization, growth
Innovativeness, risk-taking, proactivity
Risk-taking, proactivity, innovation
by bringing together unique combinations of public and/or private resources to
exploit social opportunities” (1999, p. 74). Similarly, Bellone and Goerl (1992)
interpreted the public entrepreneurship concept as more compatible with the
values of democratic participation and institutional roles. By recognizing these
primary natures of public entrepreneurship, research has attempted to encompass
the critical values of public services.
Over the past decade, public entrepreneurship research has examined the ap
plicability of entrepreneurial behaviors and their potential impacts on performance
improvement in public organizations. Connecting with the concepts of innovation
and performance, public entrepreneurship studies have diversified the scope of
the field and the magnitude of its applicability to various government reforms.
Because the goals of public organizations are more complicated than the clear
economic goals of private organizations, public entrepreneurship activities should
connect not only with businesslike productivity but also with the core values of
public administration (e.g., equity, responsiveness, accountability, sustainability,
and citizen satisfaction). A proper interconnection between public entrepreneur
ship and the multifaceted values of the public sector may result in a consensus
in the ongoing debates on the suitability of public entrepreneurship in light of
the government’s need to maintain democratic responsibility and accountability
(Borins, 2000; Cohen & Eimicke, 2000; Goodsell, 1993; Terry, 1998).
The major research stream of public entrepreneurship has examined individual
entrepreneurial behaviors that create dramatic changes in existing management
and identify new missions for their organizations (Bellone & Goerl, 1992; Doig &
Hargrove, 1987; Lewis, 1980; Roberts, 1992; Teske & Schneider, 1994). Another
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108 PPMR / September 2010
research trend, connected with the reinventing-government movement, has applied
the concept of entrepreneurial efforts for reengineering operational processes and
improving organizational performance through adopting forward-looking oppor
tunities of changes and innovation at the organizational level (Llewellyn & Jones,
2003; North, 1990; Osborne & Gaebler, 1992). Recent research has attempted
to link public entrepreneurial concepts with contracting out and privatization
that reduce government involvement in service provision by outsourcing some
responsibilities to private organizations (Morris & Jones, 1999).
The nature of public entrepreneurship is less substantially defined (Llewellyn &
Jones, 2003; Morris & Jones, 1999) because of the broad roles of government. In
many cases, public entrepreneurship has been considered as identical to business
(i.e., government for the purpose of making profit) (Perlmutter & Cnaan, 1995),
but its approach is more than being market savvy (McDonald, 1993). Rather,
public entrepreneurial activities intend to provide better services to citizens and
to achieve public values more responsively and effectively by taking advantage of
entrepreneurial propensities (Borins, 1998; Boyett, 1996; Bozeman, 2007). With
the intention of responding to these demands, innovative and risk-taking cultures
are embodied in the development of the public entrepreneurship approach that
has been characterized as a multidimensional concept summarized in Table 2. The
three-dimensional definition of entrepreneurship (i.e., risk-taking, innovativeness,
and proactiveness) has influenced much recent research on individual, corporate,
social, and public entrepreneurship.
The typical characteristics of entrepreneurship have also been found in many
public organizations. In the public sector, risk-taking has not typically been a favor
able choice, but current performance management reforms offer an opportunity for
public managers to take risks (Berman & West, 1998). For example, a development
of nonroutine tasks and ideas may always involve some degree of risks because
there are no previous records for guaranteed success. As Vigoda-Gadot, Shoham,
Schwabsky, and Ruvio asserted, risk-taking could be one of the key characteristics
of public entrepreneurship for improving performance because “innovativeness
is inherently risky” (2005, p. 77), and there is no innovation without risk-taking
(Caruana, Ewing, & Ramaseshan, 2002). Public organizations have also been re
quired to adopt innovative strategies as a result of rapidly changing environments
(Berman, 1998; Boyne, Gould-Williams, Law, & Walker, 2005). Innovation in
public organizations has been identified as “new ways of managing, organizing
and delivering services” (Walker, 2008, p. 600). Through adopting innovative
practices, governments at all levels expect to renovate structural and managerial
approaches for improving performance. Proactiveness, the last characteristic of
public entrepreneurship, is necessary when a public organization has to respond
quickly to environmental changes (Boyne & Walker, 2004). Defensive reactions
may not respond promptly and properly to environmental changes and custom
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Table 2. Characteristics of Public Entrepreneurship_
_Characteristics of public entrepreneurship
Bellone and Goerl (1992)
Bernier and Halsi (2007)
Boyett (1996)
Forster et al. (1996)
Gore (1993)
Llewellyn and Jones (2003)
Moon (1999)
Morris and Jones (1999)
Ramamurti (1986)
Roberts and King (1991)
Schneider et al. (1995)
Stone (1992)
Zerbinati and Souitaris
Autonomy, a personal vision of the future, secrecy, risk
Autonomy, innovation, risk-taking, proactiveness, com
petitive aggression
Growth, innovation, flexibility
Leadership, creativity, innovation, opportunism, risk
taking, facilitating, synthesizing
Reduction of red tape, promotion of customer satisfaction,
empowerment of employees, promotion of cost-efficient
Service innovation, new venture creation, innovation in
service delivery
Product-based, process-based, behavior-based
Innovativeness, risk-taking, proactivity
Innovation, risk-taking, proactivity
Risk-taking, proactivity, innovation
The sense of opportunity, willingness of risk-taking, mana
gerial commitment, and capacity
Innovation, risk, proactivity
Proactivity, innovation, risk-taking, leadership, and
ized citizens’ demands. Proactive behaviors and cultures, however, can facilitate
innovative and risk-taking activities more effectively (Damanpour & Schneider,
Public Entrepreneurship and Performance
The emphasis on high-performing organizations allows governments to adopt
innovative and risk-taking practices actively. From the result-based management
standpoint, measuring outcomes of new policies and management activities helps
government implement policies more efficiently and effectively, although the
problems of measuring organizational performance in the public sector has resulted
in long-standing debates. A theoretical link between public entrepreneurship and
organizational performance has existed in performance management literature,
but, unlike corporate entrepreneurship research, empirical research for supporting
a strong positive relation between them has not been sufficiently demonstrated
(e.g., Miller & Friesen, 1982; Zahra & Covin, 1995). A direct linkage between
public entrepreneurship and organizational performance is difficult to measure,
but most public organizations at all levels of government have recognized numer
ous performance benefits from adopting entrepreneurial activities (Caruana et al.,
2002; Covin & Slevin, 1991; Moon, 1999).
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110 PPMR / September 2010
The effects of entrepreneurial practices on organizational performance can be
gauged by multiple performance measures, such as financial, operational (nonfi
nancial), and multiple hierarchical indicators (Venkatraman & Ramanujam, 1986).
Major performance measures used in private entrepreneurship research are effi
ciency, growth, profit, size, liquidity, success/failure, market share, and leverage
(Murphy, Trailer, & Hill, 1996). Unlike private sector organizations, many pub
lic-sector innovative actions do not directly yield measurable financial outcomes.
Instead, feasible nonfinancial outcomes (e.g., organizational commitment, job
satisfaction, stakeholders’ satisfaction) have been used as surrogates for measuring
government performance at both individual and organizational levels.
The measurement of organizational performance has been broadly discussed
in the contexts of external and internal measures or the contexts of objective and
subjective measures. External measures of performance are developed by exter
nal stakeholders’ decisions, whereas internal measures are grounded by internal
stakeholders’judgments (Walker & Boyne, 2006). Although external and internal
measures should not be often interchangeable, using both measures may assess
more accurate organizational performance due to significant correlations between
them. Bommer, Johnson, Rich, Podsakoff, and Mackenzie (1995) discuss two types
of performance measures: objective measures as directly countable outcomes and
subjective measures as perceptual ratings. Bommer et al. also report that, although
both objective and subjective measures cannot be equally treated as substitutes of
each measure, applying an integrative approach may evaluate more adequately
the performance dimensions under specific circumstances.
In testing a relation between public entrepreneurship and organizational perfor
mance, previous studies found that innovation leads to a high level of performance
(Zahra, 1995), and proactive organizations also tend to have a high level of organi
zational performance (Lumpkin & Dess, 2001 ; Miller & Friesen, 1983). Although
the effect of the risk-taking propensity on performance was not much more clearly
determined than those of the other two characteristics, risk-taking has been shown
to improve actual performance (Bozeman & Kingsley, 1998) in service provision
and sound financial adjustment. This study hypothesizes positive effects of three
public entrepreneurial characteristics on performance (see Figure 1).
While this study proposes a positive linear relation between innovativeness
and performance, there are also different aspects of the relation to consider. For
example, innovation and performance may be related negatively or occur simul
taneously under specific circumstances. In considering simultaneity between
innovation and performance, underperforming organizations may tend to search
for more innovative opportunities because those organizations have more room
for improvement (e.g., Manns & March, 1978). L??f and Heshmati report that the
ignorance of a simultaneity problem is “less appropriate for analyzing the relation
ship between innovation and productivity” based on sensitivity analysis (2006, p.
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Innovativeness Performance
Proactiveness Control
Figure 1. Public Entrepreneurship and Performance Framework
333) and may result in under- or overestimations of the relations under different
situations. Although this study has recognized the possibility of simultaneity bias
between innovativeness and performance, results may not be sensitive in the public
entrepreneurship model above due to insignificant selectivity bias.
Risk refers not only to a lack of predictability about potential outcomes during
decision-making processes but also to a high possibility of both significant gains
and significant losses (Cornwall & Perlman, 1990). Risk-taking is characterized
as “a tendency to take bold actions such as venturing into unknown new markets,
committing a large portion of resources to ventures with uncertain outcomes,
and/or borrowing heavily” (Lumpkin & Dess, 2001, p. 431).
Entrepreneurial risk-taking may be the hardest action orientation for public
organizations to adopt because the possibilities of high failures have limited such
actions in light of legal, political, and citizen constraints. The commitment to
excellence in services, however, offers considerable opportunities for risk-taking
actions rather than tolerating performance on the safe side (Kee & Black, 1985).
To improve government services and performance, recent management reforms
require a propensity for risk-taking and experimentation (Berman & West, 1998)
because government policy environments are hardly predictable and stable (Moon,
1999). The government needs to promote prudent risk-taking and experimenting
by providing room for failure to encourage proactive actions to solve complicated
problems (Dilulio, Garvey, & Kettl, 1993).
In the private sector, a relation between risk-taking and performance has been
often hypothesized as being curvilinear. Begley and Boyd (1987) argue that risk
taking has a positive effect on a firm’s performance up to a point, but beyond that
point firms begin to harm their performance. Unlike private-sector practices, public
organizations are limited in taking extremely risky opportunities, so this study only
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112 PPMR / September 2010
applies a positive spectrum of the relation between risk-taking and performance
in state governments. Within the moderate range toward risks (Morris & Jones,
1999), risk-laden behaviors will improve organizational performance in the public
sector. This study hypothesizes:
HI: As the level of risk-taking increases, the more positive the
performance becomes.
Innovativeness reflects an organization’s propensity to engage in the development
of new ideas through experimentation and creative processes that invent new ser
vices and develop new processes for fulfilling organizational functions (Lumpkin
& Dess, 1996, 2001; Salazar, 1992; Walker, 2008). The types of innovation are
categorized as discontinuous breakthrough innovation, dynamically continuous
innovation, continuous incremental innovation, and imitation of prior innovation
(Morris & Kuratko, 2002). Adopted innovative activities in public organizations
are less radical due to the stable, continuous nature of the required public works,
so innovation does not always require creation of new services in the public sector.
Rather, innovative efforts in the public sector may lead to a reconceptualization of
existing resources and an application of new ideas for better performance. From
a macro perspective of innovations, Walker (2008) recomposed the innovation
concept in the public sector as service, organization, marketization, and ancillary
innovations. Service and organization innovations refer to any changes to services,
new user groups, structures, and management. Marketization innovation means
any attempts to render services to users, lower costs, find extra revenues, contract
out, and outsource. Ancillary innovation represents any network activities to work
beyond own organizational boundaries. These types of innovations could be selec
tively conducted in public organizations to achieve their performance targets.
Innovation has been identified as a primary value of entrepreneurial orientations
(Gardner, 1994). Drucker defined innovativeness in terms of an entrepreneurial
context as “the specific tool of entrepreneurs, the means by which they exploit
change as an opportunity for a different business or a different service” (1985, p.
19). Innovation may be influenced by a continuum of adoption rates. As Rogers
(1995) suggests, if an innovation has greater relative advantages, compatibility,
trialability, and observability and less complexity, adoption of entrepreneurial
innovations will increase in public organizations. Innovative organizations have
continuously searched for advantageous opportunities and monitored any changes
for positive reputations, so sustained innovation may lead them to produce high
performance (Zahra & Covin, 1995). The core of innovative activities is the
transformation of innovations into ongoing performance improvement. These
arguments support the following hypothesis:
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Table 3. Survey Response Rate_
Total responses Valid responses
Regions States Samples % %
13 296
12 211
12 210
11 240
48 957
North Central
H2: As the level of innovativeness increases, the more positive the
performance becomes.
Proactiveness, which refers to forward-looking strategy-making in anticipation
of future demands (Miller, 1987), has been emphasized by most entrepreneurship
studies to achieve performance improvement in the public sector. The concept is
critical to pursuing sensed opportunities because, without agenda settings and
initiations for policy implementation, risk-taking and innovative searches are
not realized. Borins (2000) argues that innovation is usually accompanied by
proactiveness for tangible outcomes. As embodied by typical characteristics of
proactiveness, it is defined as the “initiation of action or engagement in action,
rather than activity as a reaction to an event or occurrence” (Salazar, 1992, p. 29).
Proactiveness can be either an aggressive behavior or an organizational pursuit of
favorable business opportunities (Lumpkin & Dess, 2001; Stevenson & Jarillo
Mossi, 1990). Both attributes are required in order to be anticipating and acting
on future needs by seeking new opportunities, introducing new services ahead of
competition, and eliminating operations in the declining stages of their life cycles
(Venkataraman & Van de Ven, 1998).
Prior research has concluded that proactive organizations quickly respond to
changes and emerging opportunities, and then translate them into high performance
(Lumpkin & Dess, 2001 ; Miller, 1983). An organization that tends to be proactive
may hold high levels of performance and commitment (Caruana et al., 2002). To
be proactive organizations, the action-oriented strategies, which involve “creative
interpretation of rules, skills at networking and leveraging of resources, and a
high level of persistence and patience in affecting change,” should be necessary
(Morris & Jones, 1999, p. 76) as baseline support for the proactive characteristics.
This study proposes that:
H3: As the level of proactiveness increases, the more positive the
performance becomes.
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114 PPMR/September 2010
Data were collected by a public entrepreneurship survey conducted in 2007. The
survey questionnaire package was mailed twice to 957 heads of state government
departments in the 48 contiguous U.S. states. The sampling frame evenly repre
sented four geographic regions: the South, the Northeast, North Central, and the
West. To increase the response rate, a second survey mailing package including a
copy of the questionnaire with a follow-up request letter was sent to nonrespon
dents about four weeks after the initial mailing. The total response rate was about
35 percent (n = 334), which includes 35 invalid responses, with well-represented
regional and departmental responses. To minimize nonresponse bias, this study
carefully assessed the distribution of the responses in the survey and the potential
differences of responses from respondents in two pretests. Table 3 presents the
detailed survey response.
Two hundred ninety-seven state government departments (except 2 unknown
agencies) were grouped into 14 categories by similar functions for analyzing the
patterns of entrepreneurial practice. With the exception of veterans and military
agencies, all categories included a large number of departments. Table 4 details
the demographic description of state agencies by their functional categories.
Most measures used in this survey were derived from other studies for improving
content validity. To control measurement errors, survey questions were carefully
designed in terms of the specific wording, logical formatting, and constructing
items in one variable suggested by other studies (Casley & Kumar, 1988; Fowler,
1993; Weisberg & Bowen, 1977). Brief definitions of public entrepreneurship
were explained in the survey questionnaire and the survey instruction to clarify
the concepts of public entrepreneurial characteristics to the respondents. At a
minimum, three items per variable were developed for the operational validity of
survey measures (O’Sullivan, Rassel, & Berner, 2003). Each question was rated
by a seven-point Likert scale that captures more variation than a five-point scale
(Ahire & Golhar, 1996). Cronbach’s alpha was used for estimating the homogene
ity and reliability of the survey-driven items.
Dependent Variable
Performance is measured by perceptual judgments resulting from entrepreneurial
activities, rather than archival data, due to the difficulty in developing objective
measures of organizational entrepreneurial performance. Murphy et al. (1996)
found that 75 percent of the entrepreneurial studies conducted from 1987 to 1993
used only perceptual data sources of organizational performance, and 6 percent of
the studies used both primary and archival data sources of performance. Thus, the
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Table 4. Functional Categories of State Government Departments
Functional category_Number
Administration 22
Agriculture 16
Bank and insurance 12
Commerce and economy development 32
Corrections 25
Motor vehicles and transportation 19
Education and family 32
Emergency and safety 32
Environment and natural resources 25
Health 24
Labor 16
Parks, recreation, and Revenue and financ Veterans and military reliance on primary In addition, much p performance based Pandey, 2004).
Respondents were a sulting from entrepr very low, 2 = low, 3 very high) measured performance (see Ap West (1998), Morris Cronbach’s alpha coef consistency among t computed by a facto rotation. Factor analy and yielded an acce However, the fourth 0.91 (see Appendix 3), pendent variable. Th Independent Variab Risk-taking is measu low, 7 = very high). T propensity and tolera Kingsley (1998), Mo The Cronbach’s alph of internal reliabilityThis content downloaded from on Thu, 10 Jan 2019 06:17:05 UTC
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116 PPMR/September 2010
able computed by a factor score using a principal component technique had one
factor structure with an eigenvalue greater than 1 and KMO value around 0.67 (see
Appendix 3). The values of the risk-taking variable ranged from -2.75 to 2.42.
Innovativeness measured by the four items (1 = very low; 7 = very high) gauged
the degrees of innovative propensity in terms of the search for new entrepreneurial
opportunities and fee-for-service operations (see Appendix 1 ). The four items were
derived from Moon and deLeon’s (2001) and Morris and Jones’s (1999) indexes.
The Cronbach’s values of innovativeness was 0.53, which was below the cutoff
of 0.60 (Nunnally & Bernstein, 1994). Among the four items of innovativeness,
the fourth item (the degree of fee-for-service) had a low item rest correlation of
0.14, suggesting that it needs to be eliminated from the measurement group. After
eliminating the fourth item, the Cronbach’s alpha coefficient was 0.68. The innova
tion variable, computed by a factor score using a principal component technique,
had one factor structure with an eigenvalue over 1 and KMO value over 0.67 (see
Appendix 4). The innovativeness variable ranged from -3.59 to 2.06.
Proactiveness was estimated by three items (1 = very low; 1 = very high) in
terms of degrees of implementing new changes derived from Borins’s (2000) and
Morris and Jones’s (1999) indexes. The Cronbach’s alpha value of proactiveness
was 0.72. The proactiveness variable, which was computed by a factor score us
ing a principal component technique, had one factor structure with an eigenvalue
over 1 and KMO value around 0.64 (see Appendix 3). The proactiveness variable
ranged from -4.20 to 1.47.
Control Variables
Organizational performance across state agencies has been affected differently by
various institutional factors. This study controls for four variables in structural (i.e.,
organizational size, hierarchy, and formalization) and environmental (i.e., politi
cal influence) conditions, which may affect public organizations’ entrepreneurial
capacity differently than it contributes to performance. The effect of organizational
size on performance management practices has been argued in different directions,
and each entrepreneurial dimension could be influenced differently by organiza
tional size. As Caruana et al. (2002) argued, entrepreneurial activities have existed
in all public organizations no matter the size and type. Size was measured by the
number of full-time employees in the 2006-7 fiscal year.
The remaining control variables were measured by the public entrepreneurship
survey using a seven-point scale (1 = very low; 1 – very high). Hierarchy was
measured by the degrees of hierarchical complexity using the four items derived
from Moon (1999) and Rainey and Bozeman (2000) in terms of multiple layers
of authority, structured channels of communication, hierarchical processes for
project approvals, and required red tape. Formalization is measured by the de
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grees of written forms using three items modified from the indexes of Bozeman
and Kingsley (1998) and Rainey and Bozeman (2000) in terms of existing orga
nizational regulations, internal strictness by rules and procedures, and emphasis
on written rules and procedures. Political influence is measured by the degrees
of political involvement and changes using the four items modified from the in
dexes of Borins (1998) and Sadler (1999) in terms of political authorization for
actions, political intervention in organizational decisions, external authorities for
changing organizational behaviors, and public sector reform impacts on changing
organizational behaviors.
This study uses three statistical methods: exploratory factor analysis, confirmatory
factor analysis, and ordinary least squared analysis. Exploratory factor analysis
with principal component technique was primarily used for constructing statisti
cal variables through confirming one underlying construct in each entrepreneurial
characteristic. Principal component technique provides a better understanding
of the interrelations among the variables by simplifying the description of those
variables (Afifi, Clark, & May, 2004). To compute a statistic variable, survey items
measuring one variable should be constructed on a same factor loading with an
eigenvalue over 1 and KMO value over 0.60 as typical cutoff values (Hair, Black,
Babin, & Anderson, 2005).
Confirmatory factor analysis verifies a feasible multidimensionality of public
entrepreneurship through testing model fits of the hypothesized constructions
(Tabachnick & Fidell, 2001). This study tested one-factor model fit and three
factor model fit using several fit indices: chi-square, root mean square error of
approximation (RMSEA), goodness of fit index (GFI), parsimony goodness of
fit index (PGFI), normed fit index (NFI), comparative fit index (CFI), and incre
mental fit index (IFI). For the three-factor model, the values of most fit indices
were taken as acceptable fits, except RMSEA. The chi-square measure of model
fit was statistically significant at the 0.01 level, and each value of GFI, NFI, CFI,
and IFI was greater than the typical cutoff value of 0.90 (Kreiser, Marino, &
Weaver, 2002). The PGFI measure was also greater than the cutoff value of 0.50.
The unconstrained loadings were all statistically significant at the 0.05 level,
and most standardized loadings ranged from 0.64 to 0.86, except the rt2 (0.44)
and rt4 (0.40) items. On the other hand, most fit indices in the one-factor model
were not acceptable as good model fits. Therefore, the results confirm the three
dimensionality of public entrepreneurship. Appendix 4 presents the results of fit
statistics for the three-factor and one-factor models.
Ordinary least square analysis evaluated relations between public entrepre
neurial characteristics and organizational performance. This study tests several
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118 PPMR/September 2010
regression diagnostic procedures to detect outliers, multicollinearity, homogeneity,
and normality. The results show that the analysis model did not detect any of those
problems, except three outlier cases (case codes: 93, 227,161) that exceed +3 or
-3 based on its value of studentized residuals. The three outliers were eliminated
from the final data set. The analysis model with 296 observations was confirmed
for testing the hypotheses after detecting reliability of measures and regression
The regression model tests multicollinearity using the variance inflation fac
tor. Each of the variables has variance inflation factor less than 2.5 (risk-taking
= 1.69, innovativeness = 2.16, proactiveness = 1.53) as a cutoff of less than 10,
so the performance model has no multicollinearity issue. In terms of detecting
heteroscedasticity, the Breusch-Pagan/Cook-Weisberg test rejected the null hy
pothesis of homoscedasticity, but the White’s general test did not reject the null
hypothesis. Although the White’s general test proved homoscedasticity in the
performance model, robust regression analysis is needed to ensure a heterosce
dasticity problem.
The brief descriptive analysis of three entrepreneurial characteristics offers the
overall public entrepreneurial tendencies in state governments. A degree of en
trepreneurial activities has been shown to be highly influenced by environment
conditions (Gnyawali & Fogel, 1994), even though impacts of public entrepreneur
ship will be positive on productivity. Depending on the challenges being faced
in the environment state agencies practiced different degrees of entrepreneurial
characteristics. For example, state agencies facing stable environments may need
a lower level of entrepreneurship than others facing unpredictable environments
(Caruana et al., 2002). Therefore, varied entrepreneurial intensities could be ap
propriate in different public organizations (Morris & Jones, 1999).
The average risk-taking score of 3.9 across state government departments in
dicates a somewhat low degree compared to other entrepreneurial characteristics.
This result notes that state agencies are restricted in taking risks more than innova
tions and pro-activities. The innovativeness tendency designates a fairly modest
level (the average of 4.5). Only administration and parks agencies tend to show
somewhat high levels of innovativeness. On the other hand, most state agencies
except veterans and military departments tend to have a somewhat high level (the
average score of 5.3) of proactiveness. Table 5 illustrates public entrepreneurial
tendencies in state agencies.
While the average scores of risk-taking and innovativeness are slightly different
across state government departments, most state agencies indicated the similar
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Table 5. Public Entrepreneurial Tendencies in State Agencies_
Bank and insurance
Commerce and economy development
Motor vehicles and transportation
Education and family
Emergency and safety
Environment and natural resources
Parks, recreation, and tourism
Revenue and finance
Veterans and military
Risk-taking Innovativeness Proactiveness
4.1 5.0 5.6
4.0 4.9 5.1
3.4 4.9 5.5
3.7 4.5 5.3
3.5 4.4 5.6
4.2 4.4 5.1
4.2 4.4 5.3
4.6 4.5 5.6
4.1 4.9 5.1
4.1 4.3 5.3
3.8 4.5 5.5
4.3 5.0 5.2
3.7 4.0 5.0
3.4 3.5 4.7
3.9 4.5 5.3
Table 6. Descriptive Statistics Mean s.d.
1. Perfor- 0.0232 0.057
2. Risk- -0.0115 0.058 0.463**
3. Innova- -0.0042 0.058 0.588** 0.638**
4. Proac- -0.0022 0.058 0.572** 0.402** 0.580**
5. Size 2,246 368 -0.122* -0.014 -0.059 0.066*
6. Hierarchy 0.0003 0.058-0.028 -0.142* -0.090 0.062 0.176**
7. Formal- -0.0088 0.058-0.037 -0.159**-0.072 -0.076 0.070 0.454**
8. Political 0.0044 0.057 0.177** 0.123* 0.187** 0.187** 0.134 0.232** 0.038
Note: = 296; Correlation significant at * <.05; ** <.01.
tendencies in both public entrepreneurial characteristics. This result confirms
that innovative opportunities could be frequently considered as risky activities or
vice versa. For example, motor vehicles and transportation, education and family,
emergency and safety, and health present similar scores in both risk-taking and
innovativeness at a modest level. As a result, state governments inactively practiced
risk-taking and innovative but were actively involved in proactiveness. Table 6
presents descriptive statistics and correlation analysis. The factor scores were used
to construct statistical variables, and none of the variables has a multicollinearity
problem in a typical cutoff value of 0.80.
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120 PPMR/ September 2010
Table 7. Robust Regression Analysis
Coeff. t Beta
Control variables
Political influence
No. of obs.
*p < 0.10; ** < 0.05; *** < 0.001.
As presented in Table 7, the regression model successfully explains the impacts
of individual variables on organizational performance with an R2 of 0.455. In
addition, three public entrepreneurial variables were statistically significant at a
5 percent level for improving organizational performance. The positive effect of
risk-taking on organizational performance implies that state agencies with a risk
taking propensity will perform better than those with less risk-taking tendency.
The results also suggest that more innovative state agencies will exhibit better
performance than those with less innovative tendency. In other words, searching
for innovative opportunities will eventually offer the agency a better position from
which to achieve higher performance than maintaining the status quo. As such, the
high proactive characteristics may provide state governments new opportunities
to improve their performance.
In comparing the effects of the three entrepreneurial variables on performance,
proactiveness has the strongest impact (? = 0.358), which is almost 2.5 times
higher than risk-taking and 1.3 times higher than innovativeness. This finding sug
gests that action-oriented organizations may more effectively link entrepreneurial
opportunities to organizational performance than risk accepting and innovative
oriented organizations.
Among control variables, only the size variable (p < 0.001) had a significant
influence on performance in a negative manner. This result implies that small
state agencies may achieve a better performance than large state agencies with
entrepreneurial propensities (Jennings, 1994; Morris & Jones, 1999). Although
hierarchy was not a significant impact on performance, its negative direction
was expected (Moon, 1999). Both formalization and political influence indicate
positive directions on performance, so formal structural applications and politi
cal requirements may be considered as safety devices for state governments to
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enhance performance by preventing unexpected changes from entrepreneurial
practices (Ingram & Clay, 2000).
Discussion and Conclusion
Public organizations have been required to undertake opportunities for stimulating
performance rather than for maintaining the status quo. While public entrepreneur
ship may not be an ideal approach to replacing a variety of public management
models, it may offer manageable advantages for state governments to absorb
cutting-edge opportunities linked to increased performance. By recognizing the
advantages and importance of entrepreneurial characteristics, the field of public
entrepreneurship research has been focused on identifying the entrepreneurial
characteristics and determining the critical factors in order to populate these ef
forts. Along this line, although previous research has discussed the positive effects
of entrepreneurial orientations on performance improvement, empirical data are
insufficient to confirm these arguments. This research attempts to provide a piece
of empirical evidence with the intent to fill gaps between the conceptual arguments
and the reality of entrepreneurial practices for performance improvement.
Public entrepreneurship in this research has been characterized in terms of the
opportunity-based context. This view mirrors recent studies on public and corpo
rative entrepreneurship. The results support the hypotheses in which risk-taking,
innovative, and proactive attributes may improve organizational performance
substantially in state agencies. The findings suggest that allowing risk-taking is
important to state governments because it offers competitive opportunities for
improving performance. Without risk-taking, there are no proceeding actions for
innovation and proactiveness (Caruana et al., 2002). Thus, the value of taking risks
should be reevaluated as a possible option for public organizations, especially
because the level of risk-taking tendency is low. State governments should pay
attention to defining a tolerable range of risk-taking to encourage entrepreneurial
trials and to cultivate organizational environments for taking risks, such as by
encouraging more flexibility (Jennings, 1994), less formalization, more autonomy
(Forster, Graham, & Wanna, 1996), and higher accountability (Bellone & Goerl,
1992). The findings also indicate that innovative attributes help state govern
ments to increase performance. To be innovative organizations, state agencies
need to facilitate the development of innovative strategies, such as more focus
on performance (Ramamurti, 1986), participation (Miller & Friesen, 1982), and
performance-based rewards (Kanter, 1983). This study also finds that the proac
tive characteristic is the most influential factor for achieving better performance.
Because state agencies have a somewhat active reaction to implementing innova
tive approaches in general, public organizations need to exercise action-oriented
strategies and systems for advancing proactive characteristics.
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122 PPMR / September 2010
Although this study carefully examines the effects of public entrepreneurial
attempts on organizational performance, there are still some limitations to this
research. The challenges largely stem from single, perceptual survey data. Due
to the lack of empirical data on specified entrepreneurial tendencies and their
direct impacts on performance in state government, it was difficult to use proxy
measures other than perceptual survey measures. Single survey data could threaten
the validity of measurement and the accuracy of responses as common method
biases (Podsakoff, MacKenzie, & Lee, 2003). Although the respondents evaluated
the survey questions in a neutral manner, it is possible that their choice on each
question may have been heavily influenced by their preconceptualized perceptions
of each variable and organizational desirability, rather than actual outcomes or
conditions. In the case of evaluating the impacts of the entrepreneurial activities
on organizational performance, reliance on perceptual measures for organizational
performance could result in a weak explanation between its measures and perfor
mance itself (Ganster, Hennessey, & Luthans, 1983; Van Thiel & Leeuw, 2002).
Appropriate performance measurement of entrepreneurial tendencies has
been a critical issue in public entrepreneurship research because it is not simple
to extract the uncontaminated nature of any impact of entrepreneurial influence
on performance with limited data sources. On the other hand, prior empirical
studies argue that survey data from individual perceptions were not much biased
in assessing actual work performance and other conditions (Rainey & Bozeman,
2000). To ensure the relevance of items for creating one variable, this study uses
measures already tested by other empirical research. In addition, this study rigor
ously tests measurement reliability in terms of stability, equivalence, and internal
consistency using the Cronbach’s alpha test and exploratory factor analysis with
principal component technique to minimize possible measurement errors from
the single survey data source. Whereas the results confirm the validity and reli
ability of organizational performance, the performance measures in this study
are subjective, relying on internal measures. Using both archival and perceptual
measures of organizational performance may result in more accurate assessment
(Walker & Boyne, 2006).
Recent research has debated whether the dimensionality of the entrepreneur
ship measures is a unidimensional (e.g., Covin & Slevin, 1989) or a multidimen
sional construction (e.g., Lumpkin & Dess, 1996, 2001; Zahra, 1993). As this
study proposes, the potential for each subdimension of public entrepreneurship
may have a different pattern and impact on organizational performance in state
governments. In this case, the use of aggregated measures of public entrepre
neurship may be problematic (Kreiser et al., 2002). This study confirms that the
three-dimensional model is validated using confirmatory factor analysis. Several
fit indices and the values of standardized loadings are acceptable for supporting
the multidimensionality of public entrepreneurship (see Appendix 4). The three
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dimensions, however, exhibit high correlations between risk-taking and innova
tiveness (the correlation coefficient is 0.87) as well as between innovativeness
and proactiveness (the correlation coefficient is 0.76), which may be caused by
the respondents not accurately perceiving the concepts of public entrepreneurship.
While the model fit indices supported the independency of each dimension, future
research should include more accurate, reliable measures of the multidimensional
public entrepreneurship.
Despite these limitations, this study contributes to the mainstream public
entrepreneurship literature by examining the effects of entrepreneurial attributes
on organizational performance empirically. As Zerbinati and Souitaris (2005)
described in their study, this empirical study has just opened the door in the field
of public sector entrepreneurship. Future research needs to develop multiple
measurements of entrepreneurial tendencies and organizational performance
and, taking simultaneity between entrepreneurial orientations and performance
into account, apply sophisticated analysis. In conclusion, public entrepreneurial
characteristics can streamline government behaviors, making them more efficient,
flexible, and accountable in responding to turbulent and competitive environments.
While ranges of challenges and tensions to adopting entrepreneurial orientations
still exist in the public sector, entrepreneurial activities do not necessarily devalue
the core values of the public sector (Berman & West, 1998). Governments have
to leverage their strategies and resources to overcome bureaucratic barriers for
risk-taking, innovative, and proactive propensities that have positive impacts on
performance. The public entrepreneurial endeavors will offer opportunities for
citizens and governments to improve managerial qualities and produce high- qual
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128 PPMR / September 2010
_Appendix 1. Measures of Variables_
Dependent variable
Organizational performance
To what extent has your organization reduced procedural and service costs after
implementing any entrepreneurial actions?
To what extent do entrepreneurial activities improve your organization’s perfor
To what extent has employee productivity in your organization improved after imple
menting entrepreneurial behaviors in the past three years?
To what extent are your customers satisfied with your organization’s performance?
Independent variables
To what extent does your organization have a propensity for risk-taking?
To what extent does your organization tolerate failures?
To what extent does your organization tend to take on high-risk projects?
To what extent are most employees not afraid to take risks?
How innovative is your organization?
To what extent is your organization searching for entrepreneurial opportunities?
To what extent has your organization placed emphasis on new programs/services/
administrative techniques, and procedural changes?
To what extent does your organization have fee-for-service operations?
To what extent did your organization implement new programs and services in the
past three years?
To what extent did your organization implement new administrative techniques and
procedural changes within the past three years?
To what extent does your organization take entrepreneurial opportunities to initiate
new programs/services/techniques and procedural changes?
Appendix 2. Reliability Test
Risk-taking Innovativeness Proactiveness Performance
Item Alpha_Item Alpha_Item Alpha_Item Alpha
rtl 0.500
rt2 0.659
rt3 0.561
rt4 0.708
Test scale 0.683
inni 0.597
inn2 0.646
inn3 0.544
Test scale 0.684
prol 0.588
pro2 0.546
pro3 0.784
Test scale 0.719
perl 0.708
per2 0.629
per3 0.613
per4 0.888
Test scale 0.789
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Appendix 3. Principal Component Factor Analysis
Variable_Eigenvalue_Factor 1_Uniqueness
Performance 2.50794
perl 0.8607 0.2591
per2 0.9286 0.1377
per3 0.9223 0.1494
Risk-taking 2.06947
rtl 0.8492 0.2789
rt2 0.6501 0.5777
rt3 0.8006 0.3591
rt4 0.5337 0.6152
Innovativeness 1.88907
inni 0.7880 0.3791
inn2 0.7733 0.4019
inn3 0.8186 0.3299
Proactiveness 1.99155
prol 0.8506 0.2765
pro2 0.8673 0.2477
pro3_ _ 0.7182 0.4842
Appendix 4. Fit Statistics for the Three-Factor and One-Factor Models
Three-factor model
10 items 166.48 32 0.90 0.52 0.91 0.92 0.92 0.12
One-factor model
10 items, no cross-load 264.70 35 0.84 0.54 0.85 0.87 0.8 Notes: RMSEA = root mean square error of approximation. GFI = goodness of fit inde = parsimony goodness of fit index. NFI = normed fit index. CFI = comparative fit inde incremental fit index.
Younhee Kim is an assistant professor of political science at East Carolin sity. Her research interests focus on public and performance management entrepreneur ship, and information technology and e-governance.
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