How entrepreneurial orientation drives firm performance: The mediating roles of process innovation and information technology (IT) infrastructure

Abstract

This study investigates how entrepreneurial orientation (EO) enhances firm performance (FP) within the Malaysian logistics industry. The research seeks to address the "IT Productivity Paradox", a phenomenon where substantial technological investments do not consistently translate into improved organisational performance. To explore this issue, the study draws upon the theoretical foundations of the Diffusion of Innovations Theory and the Dynamic Capabilities Theory. A model is suggested in which process innovation (PI) and IT infrastructure (ITI) serve as primary mediators in the relationship between entrepreneurial orientation and firm performance. The research employed a quantitative methodology and purposive sampling through surveys conducted with 406 Malaysian logistics firms in Klang Valley and Johor, where 90.33% of logistic activities in Malaysia are reported from these areas. The results were analysed using Statistical Package for Social Sciences (SPSS) for descriptive statistics and Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the hypothesised relationships. The findings revealed several key insights. Both entrepreneurial orientation and process innovation were found to have a significant positive impact on firm performance. In contrast, the direct effect of IT infrastructure on firm performance was not statistically significant. Nevertheless, both process innovation and IT infrastructure functioned as significant mediators in the entrepreneurial orientation-firm performance relationship, with process innovation demonstrating a stronger mediating effect. This research contributes to the academic literature by empirically demonstrating that IT does not generate value in isolation because it requires the complementary influence of an entrepreneurial mindset and innovative internal processes. For practitioners, the study offers clear managerial implications. To achieve greater returns on technology investments, managers should prioritise cultivating an entrepreneurial culture and fostering process innovation in their firms.