an empirical study of small- and medium-sized firms in taiwan:...

2015年 8月第十八卷三期 • Vol. 18, No. 3, August 2015

An Empirical Study of Small- and

Medium-Sized Firms in Taiwan:

Entrepreneurship, Core Competency and

Market Performance

Kuo-Feng Wu

http://cmr.ba.ouhk.edu.hk

Web Journal of Chinese Management Review • Vol 18• No 3 1

An Empirical Study of Small- and Medium-Sized

Firms in Taiwan: Entrepreneurship, Core

Competency and Market Performance

Kuo-Feng Wu

ABSTRACT

The average life of small- and medium-sized enterprises (SMEs) in Taiwan has

gradually increased from 13 to 20 years, and more than 97% of companies are SMEs.

SMEs have been the main structure in the Taiwanese economy and, for this reason,

entrepreneurship is very important. Since the 1990s, the trend of globalization has

prompted rapid changes and increased competition in the industrial environment. One

of the major concerns of SME owners is how to combine entrepreneurship with core

competency to improve business performance.

This study aims to explore the relationship among entrepreneurship, core competency

and market performance. For this purpose, 1,207 questionnaires were mailed to SME

owners in Taiwan, of which 155 were returned. It was found that the owners of SMEs

place a high emphasis on entrepreneurship to improve profitability and revenue

growth, while enhancing their core competences to improve market performance.

Keywords: SMEs, entrepreneurship, core competency, market performance

______________________________________________________________________

Kuo-Feng Wu Graduate Institute of Human Resource Management, National Central

University

Health Management Center, Wan Fang Hospital


Introduction

From 1982 to date, SMEs have been maintained at more than 97% of all enterprises,

and they play a key role in Taiwan’s industrial achievement. How to identify

entrepreneurial opportunities and enhance core competency are the main factors

affecting their performance. The average life of SMEs has gradually increased from

13 to 20 years, and the number operating for more than 20 years has risen from 8.84%

in 1995 to 19.59% (White Paper on Small and Medium Enterprises in Taiwan, 2008),

increasing their stability.

Despite the rapid changes and intensifying competition in the manufacturing industry,

the resource-constrained SMEs have had the drive and determination, a strong

entrepreneurial mindset, high adaptability and a capacity for change and innovation.

Thus, they have been able to play a crucial role in stabilizing the economy, even under

unfavourable circumstances. Taiwan’s SMEs were praised for their adaptability

during the Asian financial crisis in 1997, with entrepreneurship in particular definitely

being an important factor (Chen, 2003).

Taiwan’s industrial environment has experienced significant changes in recent years,

with wages increasing, labour shortages and rising house prices, which affect the

operating costs of SMEs. Also, the new industrialized countries in Southeast Asia and

in China, which have cheaper labour and abundant natural resources, have become

new rivals for Taiwan’s foreign trade (Guo & Huang, 1995). In 2007, Taiwan’s trade

performance with the major countries or territories continued the growth trend of the

previous years, with the growth rate of exports to China being higher than the overall

export growth.

SMEs in Taiwan are limited by their size and resources and their long-term reliance

on a large number of standardized production factories, which clearly limits their

scope for innovation and investment in research and development. In this era of

knowledge integration, SMEs must make the best use of technology in order to create

a new situation for their enterprises. At the same time, increased technical innovation

and R & D are needed in order to create a market under intense competitive pressure

(Barringer & Bluedorn, 1999). Entrepreneurship — which is an interactive

development process (Tsai, Li & Lin, 2008) — focuses on the pursuit of market

opportunities. It has become a phenomenon that cannot be ignored in management

practices, and entrepreneurial issues have become the focus of attention of many

management scholars. In the complex and turbulent environment, companies must


adopt a more entrepreneurial approach in order to maintain a high performance in

their enterprises’ output (Hayton, 2005). When entrepreneurs have a higher level of

achievement motivation, risk-taking and innovation, they can be more successful and

improve their performance (Stewart, Watson, Carland & Carland, 1999).

The resource-based view emphasizes that when enterprises have key core competency,

they will be able to take advantage of this ability to enhance corporate performance.

Core competency, which is accumulated by an organization from the learning effects

of past and present knowledge (Phahalad & Hamel, 1994), is the ability of an

enterprise to coordinate resources, usually by a combination of organizational

procedures, in order to produce the desired result (Amit & Schoemaker, 1993).

In Taiwan, SME owners are the key people who make decisions on the main

directions of development. SME are usually dominated by a handful of family

members who perform various duties on behalf of the executives of enterprises (Fang,

Chang & Lin, 2008). High entrepreneurship can produce investment in new business,

taking risks and constantly updating organizational strategy to improve market

performance (ibid.). Through the long-term profits, innovation comes from product

innovation, market innovation, and scientific and technological innovation (Robert,

1999); and, for this reason, SMEs owners need special core competency which can

bring long-term benefits for their companies.

This research analyses the concept of the integration of entrepreneurship, core

competences and market performance, and explores the resource-constrained and

limited ability of small- and medium-sized enterprises.

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Theoretical Background and Development of Hypotheses

Entrepreneurship

The initial research centred on the individual level (Casson & Giusta, 2007; Cope,

Jack & Rose, 2007), referring mainly to the psychological characteristics of the

individual, the characterization of social status, a collection of social roles or similar

sexual behaviour and social processes. Miller and Friesen (1982) state that

entrepreneurship involves creating new features, risk-taking, and trying to succeed in

venture investment; while Miller (1983) divided entrepreneurship into three kinds —

innovation, risk-taking and proactive behaviour. Entrepreneurship is constructed via

the business owners’ personal level of ability to guide the direction of development of

SMEs. In SMEs, business owners grasp the corporate decision-making and, when

they have a culture of innovation and the relevant skills, they will be able to develop

corporate entrepreneurship (Rutherford & Holt, 2007). Entrepreneurship involves the

integration of unique resources, and seeking opportunities to create value (ibid.).

The resource-based view (RBV) suggests that, to achieve superior performance in an

international market, an entrepreneurial firm needs to develop competitive advantages

that create value through unique products or services that satisfy foreign customers

(Dhanaraj & Beamish, 2003; Li & Ogunmokun, 2001; Lu & Beamish, 2001; Peng,

2001). Numerous studies indicate that, because of their small size and limited

financial and managerial personnel resources, entrepreneurial firms actively seek

resources from the external environment and inter-firm networks (Bruton, Dess &

Janney, 2007; Chetty & Agndal, 2007; Elango & Pattnaik, 2007). Research also shows

that entrepreneurial firms can take advantage of institutional capital and managerial

ties to obtain the resources necessary for exploring opportunities in foreign markets

(Liesch & Knight, 1999; Peng, 2001; Peng, Wang & Jiang, 2008; Yli-Renko, Autio &

Tontti, 2002; Zhou, Wu & Luo, 2007).

This study combine the resource-based view (RBV) of firms and the

capacity-building perspective of rent creation to shed light on the crucial role of

firm-specific capabilities that transform key resources into performance outcomes.

This adaptive capability is a firm’s ability to coordinate, recombine, and allocate

resources to meet the different requirements of foreign markets. While possession of

resources is important, the RBV suggests that capabilities are a source of inimitable

and sustainable competitive advantages to firms, because they transform resources

into products or services superior to those of competitors (Amit & Schoemaker, 1993;

Barney, 1991; Grant, 1991; Makadok, 2001).


However, despite the documented relationship between resources and international

performance, little is known about how entrepreneurial firms can capitalize on those

resources that relate to distinctive capabilities to achieve superior international

performance. To address this research gap, we combine the RBV with the

capability-building perspective of rent creation (Amit & Schoemaker, 1993; Ethiraj,

Kale, Krishnan & Singh, 2005; Makadok, 2001; Teece, Pisano & Shuen, 1997) to

examine the firm-specific capabilities that transform the resources of institutional

capital and managerial ties into successful internationalization.

The RBV literature presents divergent views on resources and capabilities (Priem &

Butler, 2001). Some researchers tend to view these two terms as synonymous

(Newbert, 2008). This combining of the two concepts is based in part on Barney’s

(1991) definition of resources, which lists together firm assets, capabilities, processes,

attributes, information, and knowledge. Based on this view, a firm can develop and

sustain its competitive advantage only if it can create an idiosyncratic pool of

resources. The resource-based view of the firm and the capability-building perspective

of rent created shed light on the crucial role of firm-specific capabilities that

transform key resource into performance outcomes. This adaptive capability is the

firm’s ability to coordinate, recombine, and allocate resources to meet the different

requirements of foreign markets. In recent years, in measuring entrepreneurship,

innovative risk has been proposed to describe the dimensions of the proactive

entrepeneurial spirit (Caruana, Morris & Anthony, 1998; Covin & Slevin, 1989;

Naman & Slevin, 1993; Rutherford & Holt, 2007; Venkatraman, 1989; Wiklund,

1999).

Market performance

Compared to large enterprises, SMEs have high flexibility and low formalization

(Lindmark, 1997); and the lower the degree of formalization of a company, the greater

its entrepreneurship and, hence, the better its performance (Covin & Slevin, 1989).

Audretsch (2004) points out the link between entrepreneurship, innovation and

growth, and states that the entrepreneurial spirit improves the economic performance.

Matsuno, Mentzer and Ozsomer (2002) found that the market share, the percentage of

sales of new products and the return on investment rate showed a positive direct

impact. The entrepreneurial spirit of a company can be created or new products and

technologies introduced to generate superior economic performance; and a proactive

company, by forecasting the demand for new markets, new products and services, can

gain the advantages of proactive targeting of markets and adding segments early

ahead of other companies.


Naman & Slevin (1993) point out that measuring a company’s performance is a

complex and controversial issue. Using the return on assets (ROA) and return on

equity (ROE) ratios, entrepreneurship can achieve higher corporate performance. The

sales rate of return is a commonly used measure to assess the performance of

businesses and sales growth. For the study sample of SMEs, corporate performance

algorithms vary with the start and end of the year, while SMEs are most concerned

about the performance part of the most direct profitability and revenue growth —

therefore, these two indicators are used in this research as a measure of market

performance variables. Many studies have been carried out on business performance,

most of which take the overall performance, market performance or new product

performance as the focus. Therefore, drawing on a growing body of literature that

distinguishes between a firm’s product and its resource and capabilities (Barney, 1991;

Henderson & Cockburn, 1994; Hitt & Ireland, 1985; Markides & Williamson, 1996;

Snow & Hrebiniak, 1980), this study proposes the following hypothesis.

H1: Entrepreneurship contributes positively to core competency.

Core competency

From the point of view of resource-based theory, using an enterprise resource

perspective to analyse businesses makes sense as a company must have direct or

indirect competitors in order to gain the ability or resources to build competitive

advantage. In a further interpretation of competitive advantage for businesses, Barney

(1991) argues that it consists mainly of strategic resources that are valuable, rare,

inimitable and irreplaceable; and competitors are unable to follow similar

value-creating activities. SMEs, with all the various resources they can obtain, may

not be comparable to the big corporations. However, with their organizational

flexibility that acts in accordance with the globalization trend, the SMEs can grasp the

key resources, which in turn leads to the formation of core competences, and so they

are able to build competitive advantage and long-term successful performance.

Despite having a close relationship, there is a research gap between what the

resource-based view advocates — such as the source of sustainable competitive

advantage, heterogeneous resource and core competences — and what the service

management view emphasizes, such as customers’ perceived quality, customer

satisfaction and customer value (Wang & Lo, 2003). By bridging the gap and

integrating these views, this study seeks to identify and recognize the closely

intertwined competency-building and leveraging process, which consists of

organizational learning, strategic flexibility and core competency. This determines

customer-focused performance and further sustainable competitive advantages in a


turbulent environment, and also assists in realizing superior performance.

Bogner and Thomas (1994) define core competences as firm-specific skills and

cognitive traits directed towards the attainment of the highest possible levels of

customer satisfaction, vis-à-vis competitors. Therefore, core competences are skill

that allow a firm to deliver fundamental customer benefits (Hamel & Heene, 1994) by

enabling it to establish, enhance, upgrade and utilize proprietary access to those

resources that lead to a stream of sustainable competitive advances. However, core

competences are the least definable kinds of productive resource, and consist of a

complex composition of constituent skills and technologies, collective learning, and

both tacit and explicit knowledge, contributing to competitiveness through

organizational processes that ensure superior coordination of functional activities

(Prahalad & Hamel, 1994). These have often been referred to in the contexts of

functional areas (Snow & Hrebiniak, 1980), abilities, technologies (Prahalad & Hamel,

1994), or simply skills and resource (Reed & DeFillippi, 1990). They provide the

conceptual glue that gives shared meaning to all the separate functional activities and

programmes, and serve to coordinate competitive actions driven by the unique

strategic positioning of a firm.

Core competences represent both the underlying knowledge base and the set of skills

required to compete successfully. What is more, a firm’s current core competences

serve as platforms for ongoing development and applications of the new competences

needed to sustain competitive advantages in the future, which evolve through an

iteration of repeated doing and learning, with each sequence expanding knowledge

and enriching the core competences. This may explain why firms are being

increasingly seen as portfolios of core competences, which admit a proactive

construction of competency, seeing competency as spanning multiple businesses, and

viewing competition as being over the acquisition and development of competences.

Furthermore, superior competences also give firms the capability to generate and act

on knowledge about competitors’ actions and reactions, which helps them to develop

the basis for competitive advantages (Narvel & Slater, 1990; Tuominen, Moller &

Rajala, 1997; Woodruff, 1997). Today, there are many different ways to view core

competences, with different emphases. For example, Hanel and Heene (1994)

distinguishe market-access competences, integrity-related competences and

functionality competences. In general, technological competences determines which

products or services can be provided technically at any one time; marketing

competences determine which products are demanded by targeted customers; and

integrative competences reflect the degree of fit between the above two competences


and the effectiveness and efficiency of delivering offerings with superior customer

value. This study uses Wang & Lo’s (2004) proposed technical ability — the ability to

integrate and market capacity as core competency metrics.

Technological competences refer to the ability to develop and design new products

and combine knowledge about the physical world in unique ways, transforming this

knowledge into designs and instructions for the creation of desired outcomes.

Market competences are defined as the processes designed to apply the collective

knowledge, skills and resources of a firm to the market-related needs of a business,

which adds value to its goods and services so as to meet the competitive demands of

customers.

Integrative competency helps to achieve a positive interaction among elements of the

dynamic competency-building and leveraging process that enhances the strategic

alignments and strategic positioning, and finally determines the ultimate results of

competition.

This study proposes the following hypothesis.

H2: Core competency contributes positively to market performance.

Entrepreneurship and market performance

According to Wang and Lo’s (2004) definition, core competency comprises technical,

integrative and marketing capabilities. The source of SMEs’ competitive advantage is

not only the pricing, but also non-price factors such as unique designs and

customization, which are of particular importance in the current, rapidly changing

industry (Prajogo & Ahmed, 2006). These factors are also essential to the

enhancement of market performance.

From a resource-based perspective, core competency comprises characteristics of

heterogeneity, value, ductility, inimitability, path dependence, and dynamics. SMEs

possess their own special composition of capabilities and resources, and each

company focuses on the research and development of its specific products. These

special operating skills and tricks of the trade cannot be easily described in words —

hence the dynamic quality of SMEs’ core competency. As each individual enterprise

has different resources and capabilities, each would have a different performance

through the dynamic process (Mahoney & Pandian, 1992).

When an enterprise possesses its own unique core competency, which increases the

product’s added value and offers a final product that is most beneficial to customers


(Tampoe, 1994), its market performance can then be continually maintained. As SME

performance is calculated in different ways, it is not possible to obtain objective

performance indicators. Therefore, this study uses the SMEs’ own self-assessment of

profitability and revenue growth over the last three years, compared to other

companies in the same industry, as a measure of market performance.

In this research, based on the above literature, the following hypothesis is proposed:

H3：Entrepeneurship has a positive impact on market performance

Entrepreneurship, core competency and market performance

Corporate entrepreneurship is the embodiment of innovativeness, risk retention and

pro-activeness. With innovativeness, new products can be developed and produced;

risk retention is the initiative and willingness of an enterprise to assume risks; and

pro-activeness is the constant search for new markets or the adoption of appropriate

plans. Entrepreneurship allows the thoughts and ideas of enterprise owners to be

imported into a new product and the development of new technology (Knight, 2000).

The company’s core capabilities are turned into a long-term competitive advantage, to

enhance the value of the product and create customer interest (Khalid, Yan-Bing &

Malak, 2002). On the other hand, core competency is an assembly of experience,

knowledge and method, which plays the role of a catalyst in accumulating and

creating new strategic assets (Duysters & Hagedoom, 2000). The knowledge and

experience of enterprise owners can be integrated into SMEs and transformed into

clearer strategic measures, thus creating economic benefits for the enterprise. Kash

and Rycroft (2002) comment that core competency plays a crucial role in innovative

leadership. When SME owners have innovative ideas, this can be transformed into

technical capabilities to improve the products, re-model new marketing capabilities,

and integrate the core capabilities of the enterprise, thereby generating returns for the

company. As noted earlier, Prajogo and Ahmed (2006) point out that the source of

competitive advantage not only involves attractive prices but also, more important,

the need to contain some non-price factors, including the design and customization,

and the design of new products in a rapidly changing industrial environment.

On the basis of the literature above, the following hypothesis is proposed:

H4: Core competences in entrepreneurship and market performance have a

mediating effect


Method

Sample and data collection

A stratified sampling method was used first, and then a random sampling technique

was applied to identify potential respondents based on a name list of high-tech SME

firms, as a result of which 1,207 firms were identified. The sample was selected from

the population of four databases in Taiwan:

manufacturing companies from the Honorary Instructor Database from the Small

and Medium Enterprise Administration, the Ministry of Economic Affairs

companies which won the National Outstanding Small and Medium Enterprises

Award over the last three years

companies which won Innovation Research Awards in the last three years from the

Small and Medium Enterprise Administration, Ministry of Economic Affairs

companies which won Small Business Innovation Research awards, again over the

last three years, from the Small and Medium Enterprise Administration, Ministry

of Economic Affairs

The numbers selected from these databases were 479, 30, 119 and 861 respectively.

However, to improve the reliability and validity of this approach, several measures

were taken to delete repeated samples from the databases, resulting in a total of 1,207

companies.

The questionnaires were mailed to these 1,207 companies and also both formal and

informal contacts with them were made to help raise the response rate. After

discounting invalid and incomplete responses from the 211 returns, there were 155

usable questionnaires, which were used for analysis. The data analysis in this study

follows a two-step procedure: first, using confirmatory factor analysis (CFA) to assess

measurement models; and, second, assessing path relationships using structural

equation modelling (SEM) (Anderson & Gerbing, 1988).

Variables and measures

Dependent variable

We used perceptual measures of market performance by modifying the items from

Delaney and Huselid (1996). A five-point Likert scale was adopted (1=very


dissatisfied; 5=very satisfied) to capture the participants’ perceptions of the market

performance of their firms. The survey asked respondents how satisfied they were

with: (1) growth in the markets (growth performance) and (2) profitability from

markets expansion (profitability performance).

Mediating variables

The core competency concept contained technology competences, integrative

competences and market-driven competences (Wang & Lo, 2003). Core

competency — the most important factor that determines an SME’s performance —

was assessed using the following items: (1) more advanced than major competitors in

technological advantages; (2) the main strategy of the company, which accounted for

a very important part of the functional integration; and (3) information and analysis of

the products or services of the company.

Independent variables

Miller’s (1983) innovation, pro-activeness and risk-taking concepts were the

independent variables. Five-point Likert scale items (1=very dissatisfied; 5=very

satisfied) were used to find out the perceptions of the entrepreneurship scales. We

asked entrepreneurs or human resource managers how far their firms: (1) emphasized

research and development on new products, innovation, and technology leadership; (2)

introduced new products or services over the last five years, compared with the main

competitors; (3) made important decisions involving uncertainty, and tended to take a

more bold and positive attitude to grasp potential opportunities over the past five

years; and (4) strategically exited mature or recessionary causes.

CMV

Data were measured on a five-point scale, providing a psychological frame which

countered common method bias (Podsakoff, Mackenzie, Lee, & Padsakeoff, 2003).

Also, many previous studies have provided substantial evidence to support the

reliability and validity of self-reported measures by key informants (Brush &

Vanderwerf, 1992; Dess & Robinson, 1984; Spanos & Lioukas, 2001; Venkatraman

& Ramanujam, 1986). Besides, some effective steps were taken to avoid any distorted

self-reports and socially desirable answers, as suggested by Podsakoff and Organ

(1986), and Harman’s (1967) one-factor test was used and a five-factor solution

emerged, explaining 80.4% of the variance with no single factor explaining more than

20%. The total variance explained was 67.323% and a single factor explained

37.525% — and so common method variance was not a significant problem.


Data Analysis and Structural Equation Modelling

Table 1 Measurement model

Dimension Factor Eigenvalue total variance

explained (%) Cronbach’s α

Entrepreneurship

innovation 3.862 38.622 0.8196

risk-taking 1.718 55.801 0.7264

pro-activeness 1.101 66.813 0.7134

Core

competences

market-driven

competences 5.635 46.962 0.831

technology

competences 1.588 60.196 0.7473

integrative

competences 0.993 68.469 0.87.2

Market performance 1.094 79.308 0.7391

The analysis used the SPSS statistical software package. First, reliability as a measure

of internal consistency was calculated; next (as shown in Table 2), the descriptive

statistics were calculated; and, finally, stepwise structural equation modelling was

carried out to determine whether entrepreneurship and core competency were

independent predictors of market performance. The results of item-to-total score

correlations and the effects of deleting items on Cronbach’s α based on the study data

showed that only the items in Table 1 should be finally retained (Nunnally, 1978).

The respondents were asked to assess their market performance relative to those of

their rivals in two items; and then ten items were adapted to measure entrepreneurship.

For core competency, 12 items were retained. The findings from exploratory factor

analysis, Cronbach’s α, the Eigen value and total variance are shown in Table 1.

Table 2 shows the mean, SD and correlations between the constructs in our model

(Fornell & Cha, 1994; Fornell & Larcker, 1981). The largest correlation coefficient

was that between integrative competences and technology competences, with a value

of 0.56, which indicates strongly that all the constructs involved are both conceptually

and empirically distinct from each other.


Table 2 Means, deviations and correlations

N=155, *P<0.05；**P<0.01

Hypothesis testing using structural equation modelling (SEM): To examine how

core competences might act as mediators in the relationships between

entrepreneurship and the market performance outcome of SMEs, the SEM approach

outlined by Mackinnon and associates (Mackinnon, Lockwood, Hoffman, West &

Sheets, 2002) was adopted. SEM is generally considered the preferred causal

modelling method (James, Muliak & Brett, 2006; Schneider, Ehrhart, Mayer, Saltz &

Niles-Jolly, 2005) because researchers can use it to control for measurement error,

provide information on the degree of fit of the tested model, and test multiple

mediators (Brown, 1997; MacKinnon, 2000). We estimated a baseline model as the

full mediation model (see Figure 1).

Table 3 The fit indices

Dimension χ2 d.f. p-value χ2 /

d.f.

GFI AGFI CFI NFI SRMR RMSEA

Entrepreneurship 50.91 32 0.018 1.591 0.938 0.893 0.96 0.911 0.059 0.063

Core

competence

70.295 41 0.003 2.714 0.920 0.871 0.962 0.915 0.029 0.069

Table 3 shows that all of the fit indices indicated a good fit — entrepreneurship(χ

2=50.91, p<0.01, GFI=0.938, CFI=0.96, RMSEA=0.063, SRMR=0.059); core

competency (χ2=70.295, p<0.001, GFI=0.920, CFI=0.962, SRMR=0.029).

To test hypotheses 1 to 3, the SEM model was used and the parameter estimates of the

mediation model were as shown in Figure 3. This is the final model and best

illustrates the results of the hypothesis testing. As shown in Figure 1, the data support

entrepreneurship being related to core competency (β=0.72, p<0.01) and core

competency being related to market performance (β=0.034, p<0.1). The mediation of

Mean SD innovation risk-taking pro-activeness technology

competences

integrative

competences

market-driven

competences

innovation 3.76 0.74 —

risk-taking 2.91 0.84 0.32**

pro-activeness 3.40 0.71 0.45** 0.38**

technology

competences

3.81 0.56 0.37** 0.36** 0.30**

integrative

competences

3.88 0.60 0.47** 0.16* 0.42** 0.56**

market-driven

competences

3.74 0.58 0.30** 0.092 0.29** 0.48** 0.55**

market

performance

3.34 0.74 0.331** 0.074 0.40** 0.29** 0.22** 0.28**


core competency between entrepreneurship and market performance was supported

Figure 1 Final model (Parameters are standardized parameters.)

* P＜0.05 (t＝1.96)，**P＜0.01 (t＝2.58)，***表 P＜0.001(t＝3.29)

Core competence

Entrepreneurship Market performance

0.720**

0.514*

0.034+


Conclusion

In this study, an in-depth analysis of SME entrepreneurship found that the impact of

core competences on the market performance was as follows:

Entrepreneurship contribute positively to core competence

This research shows that entrepreneurship does have an impact on market

performance. The results indicate that business owners increased their willingness and

ability for risk-taking, in order to open up new markets and innovatively predict, to

help their businesses find new opportunities in a changing environment, and by an

effective combination of various resources enhance corporate performance. How to

enhance the entrepreneurial spirit of Taiwan’s SMEs is clearly a matter of importance

and urgency; and, in this regard, the government should play a more active role in

counselling on entrepeneurship and devote more resources to enterprise development

and entrepreneurship.

Core competency contributes positively to market performance

This research found that SME entrepreneurship does affect the core competences.

Ireland, Reutzel and Webb (2005) point out that entrepreneurship is mainly associated

with the activities and behaviours of entrepreneurs and their individual characteristics;

organizational growth; entrepreneurial residual or failure rate; and companies

underwriting stock for their first performance. Company performance is seldom

explored through the impact on core competences — the black box in the middle —

to better reflect the shift in the core competences, which is more meaningful than the

direct link to the output indicators.

Entrepreneurship changes through the strategic development of core competency also

lead to changes in the company and its environment, and consequently changes the

entire result. With the current increased competitive pressures on time, speed, price

and functionality, rapidly changing technology and increasingly short product life

cycles, the low-cost niche is already eroded. Therefore, in this era of knowledge

integration, SMEs must integrate entrepreneurship for businesses, create new product

capabilities and market capacity, and strengthen their ability to integrate, in order to

open up the market.

Entrepreneurship has a positive impact on market performance

The theory that corporate entrepreneurship can effectively raise organizational

performance has been confirmed by a number of scholars (Anderson, Park & Ieed,


2007; Lumpkin & Dess, 1996; Moon, 1999; Murphy, Trailer & Hill, 1996). At present,

many regional economies are in continuous integration — with the world’s three

largest regional economies being the European Union, the North America Free Trade

Area and the Asia-Pacific Economic Community. Although similar integrated trade

organizations are constantly emerging and creating greater opportunities, enterprises

are subsequently faced with increased competition, greater risks, uncertainties and

challenges. Therefore, the risks borne by entrepreneurs are relatively higher, and they

must improve their market sensitivity and sales forecasting ability. Taiwan’s economy

has always had a high dependence on trade, and thus it cannot avoid the changes and

challenges brought by the trend of globalization. Entrepreneurs must be able to

integrate these changes in order to achieve high performance in this high

trade-dependent market.

Core competences in entrepreneurship and market performance have a

mediating effect

The study found that the entrepreneurial spirit of small business owners affects the

market performance through core competences — that is, the entrepreneurial spirit

can import the ideas of the business owners in generating new products and new

technology (Knight, 2000). A company’s core capabilities can be transformed into a

long-term competitive advantage, and thus enhance the product value and create

customer benefits (Khalid, Yan-Bing & Malak, 2002); and, in the future, can create

long-term market advantage and maintain a persistent source of performance.

Although SME owners clearly understand that their enterprises can have an impact on

core competences through entrepreneurship and thus increase market performance,

the resources, market and scale experiences that SMEs have in Taiwan are far weaker

than those of big corporations.

Therefore, SMEs can achieve synergy through clustering, and overcome the threats

due to their smallness of scale, insufficient information, and difficulty in the paradigm

shift in network and communications technology. At the same time, this can

strengthen SMEs in handling the discrepancies in standardization of new technologies,

building powerful integration mechanisms according to the distinctiveness of the

region, and increasing the competitiveness of their products and services. These will

be important directions to take in the midst of the harsh economic challenges. As the

scale of SMEs in Taiwan varies, the formation of economic agglomerations would be

more difficult. It is believed that governmental promotion and provision of

environment-shaping can lay the foundation for the advancement of SME innovation

in Taiwan.


Recommendations

So far, Taiwan’s 1.24 million SMEs, with 794 million people in employment, can be

said to be the cornerstone of Taiwan’s economy, and play an important role in

stabilizing social employment. They are faced with a wide range of challenges:

internationalization; globalization; industrial division strategy; regional trade and

economic integration; the rise of emerging economies and low-cost competition;

rising international oil prices and raw material; environmental consciousness; the

development of international economic circumstances — and, at the same time,

technological innovation and the impact of Internet business on the industrial

management style and employment. Enabling SMEs to obtain funds is not easy; and

strengthening core competences and marketing capacity have their difficulties.

Therefore, it is recommended that, in future, Taiwan’s SMEs can develop into local

enterprises, with small business owners combining local capacity to form unique core

competences. In addition to fostering long-term resources and human sources, this

will also promote local employment, strengthen local capabilities, and improve

product quality standards to help stabilize the SMEs and enhance long-term

profitability and revenue growth.

In addition, in order to encourage SMEs to enhance their research and development

capabilities, the Ministry of Economic Affairs should introduce programmes to help

enterprises reduce their development costs and risks, and provide innovative R &D

advice and funding, including small business development programmes, industrial

development plans, innovative technology applications service plans, and technology

development programmes to assist traditional industries to promote positive

innovation, transformation and upgrading.

Limitations of the Study and Suggestions for Future Research

In this research, the SME owner was the object of study. Using a self-report inventory,

the more sensitive research tools or ambiguous statements were amended before the

tests in order to reduce the participants’ concern and subjectivity. However, due to

budget and time constraints, the tests were conducted simultaneously and used the

same methods, which might indicate a problem of common variance. Nevertheless,

the enterprise owners must personally complete the questionnaires as

entrepreneurship and core competency constructs are considered psychological

assessments. Furthermore, in terms of market performance, SMEs have varying

methods for performance measurement, and different fiscal year periods and industry

types. Therefore, in order to strengthen the rigour of the research, participants were


carefully selected during random sampling to reduce bias in the study. Due to the

difficulty in obtaining performance data, the method of self-assessment was used to

increase the empirical evidence related to SME performance, thereby enhancing the

contribution to this study.

Secondly, due to time constraints, a cross-sectional study was used for the collection

of data. However, as data related to the process of entrepreneurship’s impact on core

competency cannot be collected through questionnaires, it is recommended that future

studies be supplemented with interviews with the entrepreneurs. Also, there may be

time discrepancies in the impact of core competency on market performance and,

therefore, information cannot be entirely collected through cross-sectional studies.

Future research may focus on the causal relationship resulting from the effects of time,

with information being collected at different points in time, to enhance the process of

the impact of core competency on market performance.

In addition, the subjects in this study were mainly SMEs in the manufacturing,

financial service and high-tech industries. However, SMEs in Taiwan also include

agricultural, industrial (manufacturing and construction) and service (wholesale and

retail; accommodation and catering) industries. Future research can focus on the

different industries and their characteristics, and explore the effects of SMEs

entrepreneurship on core competency and market performance.

Finally, this study used only SMEs in the Taiwan region as its research sample but,

due to the increasingly frequent cross-strait exchanges, the establishment of

manufacturing facilities by Taiwanese businesses in mainland China is becoming

increasingly common, with many having subsidiary companies there. Their source of

performance and income also come largely from the mainland market. It is therefore

recommended that research can also consider samples from mainland China, and

explore how Taiwan’s SMEs can form unique core competences through

entrepreneurship, and achieve market performance in the mainland.


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