The effect of leadership and entrepreneurial orientation of small and medium enterprises on business performance in Taiwan

Leadership and entrepreneurship are critical concepts in academic research. Different leadership styles affect effectiveness and performance; entrepreneurial orientation is a significant concept in entrepreneurship literature. This study sought to examine how leadership can a affect the development and implementation of entrepreneurial orientation in small and medium enterprises in Taiwan. It also was designed to examine the effects of entrepreneurial orientation, leadership styles, and outcomes of leadership on business performance. The researcher used the Multifactor Leadership Questionnaire (Bass & Avolio; 1995) to measure top-level managers' transformational leadership, transactional leadership, passive-avoidant leadership, and outcomes of leadership. The researcher used the Entrepreneurial Orientation Questionnaire (Covin & Slevin, 1989) to measure entrepreneurial orientation of SMEs in Taiwan. This study also utilized self-reported measures of business performance including growth and financial performance. A total of 423 usable surveys were returned. These responses were examined for accuracy of data entry, non-response bias, missing values, reliability, and validity; 406 were used for analysis. The nine variables used in the analyses did not violate the assumption of normality. Significant conclusions from this study were that different leadership styles may affect-business-performance; that{09}transformational leadership is more strongly correlated with higher entrepreneurial orientation, higher outcomes of leadership, and higher business performance than transactional leadership or passive-avoidant leadership; that small and medium enterprises with higher levels of entrepreneurial orientation have higher business performance; and that transformational leadership with higher entrepreneurial orientation can contribute to higher business performance.