Relationship between entrepreneurial orientation and firm performance in large organizations over time

The purpose of this study is to understand the longitudinal relationship between entrepreneurial orientation and firm performance. The authors obtain objective performance measures from archival sources and construct 10-year panel data from large, publicly traded German firms using letters to shareholders to derive entrepreneurial orientation (EO) information. Unlike prior research, this study measures all variables every year for the sample period. Analyses indicate that EO has a strong initial effect on firm performance and that this effect gradually declines with time. Competitive intensity and demand volatility influence the effect of EO on performance in both the short term and the long term. Implications for research and practice are discussed.