How entrepreneurial orientation, environmental dynamism, and resource rareness influence firm performance

Prior studies on strategic management and entrepreneurship have argued that entrepreneurial orientation (EO) is positively associated with performance when firms face certain contingencies, specifically, the dynamism of the external environment and the attributes of resources/capabilities owned by the firm. However, the current empirical evidence is inconclusive. This study advances the argument that the interactive effects of EO, environmental dynamism, and the rareness of resource-capability (rareness) combinations positively influence firm performance. By combining data collected via a secondary database and a questionnaire survey from 237 public firms in Taiwan, this study finds that EO positively influences firm performance. The EO-performance relationship is further moderated by the rareness of resource-capability combinations and environmental dynamism. It is also found that firm performance is collectively determined by the three-way interactions of EO, rareness, and environmental dynamism. That is, when firms own rare resources and are located in a dynamic environment, EO will lead to improved performance.