Entrepreneurial behavior and firm performance:The mediating role of business model novelty

Abstract

Bricolage and effectuation have emerged as new theoretical perspectives describing entrepreneurial behavior (EB). Bricolage emphasizes the creative use of available resources, while effectuation uses available means as a starting point and encourages firms to engage in affordable loss, pre‐commitment, flexibility, and experimentation as independent dimensions for entrepreneurial actions. This study examines the influence of each dimension of EB, namely bricolage, affordable loss, pre‐commitment, flexibility, and experimentation on business model novelty (BMN). It further assesses the EB – firm performance relationship and examines the mediating effect of BMN on the relationship between each dimension of EB and firm performance. We surveyed 238 small and medium enterprises in India. Our results indicate that bricolage, pre‐commitment, flexibility, and experimentation positively influence BMN. However, affordable loss behavior had a negative impact on BMN. Moreover, our findings indicate that BMN mediates the EB‐firm performance relationship. Our study enriches the extant literature by demonstrating the impact of each dimension of EB on BMN – an aspect not covered by the extant literature. Furthermore, our study adds to the literature by highlighting BMN as an important mediator explaining EB’s impact on firm performance.