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The term “entrepreneurial orientation” has been used to refer to the strategy-making processes and styles of firms that engage in entrepreneurial activities. A popular model of Entrepreneurial Orientation (EO) suggests that there are five dimensions of EO-autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness (Lumpkin and Dess 1996). This paper reports on three of those dimensions including innovativeness, risk-taking and pro-activeness and their influences on firms’ performance. More specifically, it examines the moderating effect of environmental dynamism on entrepreneurial orientation and its three dimensions, and firms’ performance in small-medium enterprises (SMEs) in food industry. This research employs a quantitative approach. Based on a survey of 114 Palestinian SMEs, the research found that EO has significant influence on firms’ performance. In particular, the research found a positive relationship between innovativeness and pro-activeness on one side and firms’ performance on the other side, while risk taking is not significantly associated with firms’ performance. Furthermore, the research found that the interaction terms of EO with environmental dynamism are not significantly related to firms’ performance, and only risk taking is significantly related to firms’ performance when moderated with environmental dynamism. The research concludes that EO is negatively related to firms’ performance in dynamic environment especially when the level of EO does not match the level of environmental dynamism. EO dimensions vary in terms of its influences on firms’ performance, and only enhance firms’ performance in particular situations.
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