Advances in Economics, Business and Management Research, volume 191

Proceedings of the 3rd Annual International Conference on Public and Business

Administration (AICoBPA 2020)

Entrepreneurial Orientation (EO), Agility Capability

(AC), and Competitive Advantage (CA):
The Moderating Role of Information Technology Operations (ITO)

Wheny Khristianto* Suharyono, Edriana Pangestuti, M.K. Mawardi

Postgraduate Program of Business Administration Department of Business Administration
Faculty of Administrative Science Faculty of Administrative Science
Malang, Indonesia Malang, Indonesia
*[email protected]

Abstract—Small and medium-sized enterprises (SMEs) must developing flexibility and responsiveness, to be able to deal
be prepared to face an uncertainty business environment due to with dynamic environmental changes [4].
the New Normal era and the Industrial Revolution 4.0. This
research investigates the nexus between EO, AC, CA, and ITO in Currently, SMEs must also face the New Normal after the
small and medium-sized tour operators (SMTOs) in East Java, emergence of Covid-19. This New Normal accelerates the pace
Indonesia. Data were collected from 127 directors or managers of of the Industrial Revolution 4.0, which brings disruptive
SMTOs in Surabaya and Malang, East Java. The empirical data technology and market behavior changes that lead to the digital
were analyzed by using Structural Equation Modeling (SEM) age. Therefore, adjusting to the business environment is the
with WarpPLS 6.0. The results show that EO positively affects primary key for SMEs in this New Normal era. One type of
AC and CA. AC also has a positive effect on CA. Surprisingly, SME that faces changes in market and technological behavior
ITO has no effect on the relationship between EO and AC. is the SMTO.
Therefore, directors or managers of SMTOs should consider EO
as the main factor for achieving AC and creating a CA. Besides, As one of the backbones of economic growth [5], SMTO
they must evaluate ITO in order to escalate its values for SMTOs takes a vital part in the Indonesian tourism industry, designated
to face the New Normal as well as the Industrial Revolution 4.0. as a leading sector [6]. The New Normal has resulted in
In the future, it is necessary to add aspects of information disruptions that fundamentally changes the tourism industry.
technology (IT) knowledge and IT Objects to find out more about This change was triggered by the increasing use of various
the IT Competency of the SMTOs. The novelty of this research digital technologies. These technologies make people easier to
lies within its country and industrial setting and the addition of carry out their activities. Therefore, SMTOs must respond
ITO as a moderating variable. market and technology changes through entrepreneurship and
agile behavior to create a CA.
Keywords—agility capability, competitive advantage,
entrepreneurial orientation, IT Operations, Indonesia, tour Several studies have been carried out to examine the effect
operator of EO on CA [7,8]. There have been earlier studies
investigating the effects of AC on CA [9-11]. However, very
I. INTRODUCTION few studies have examined the effects of EO on AC. Based on
research’s review, it is assumed no research linking EO with
SMEs’ are undoubtedly crucial contributors to the national AC and CA in the context of SMTO in Indonesia, particularly
and regional economies. SMEs contribute to employment as in the tourism industry setting. Moreover, there is currently no
their business activities are more flexible, more moderate in consensus standard for AC measures [9]; therefore, it is
bureaucracy, and tend to use simpler methods of recruiting possible to find inconsistent results. This research aimed to
employees and making decisions [1]. Apart from having the investigate the effects of EO on AC, the effects of EO and AC
advantages of being informal and flexible, SMEs are thick with on CA, and also to analyze ITO as a moderating variable for
entrepreneurial behavior. This behavior is reflected in the EO, the relationship between EO and AC. ITO was added in this
which is the main foundation in dealing with a changing and study following the New Normal context, which is in line with
unpredictable environment [2]. In uncertain business the Industrial Revolution 4.0. The addition of the important
environments and its intricate interaction patterns, EO can be variables of country, and industry setting shows the novelty
considered as an essential factor in ensuring business success and values of this research.
[3]. These conditions require business organizations to be more
agile. Some scholars believe that agility is a crucial key to

Copyright © 2021 The Authors. Published by Atlantis Press International B.V.

This is an open access article distributed under the CC BY-NC 4.0 license -http://creativecommons.org/licenses/by-nc/4.0/. 44
 Advances in Economics, Business and Management Research, volume 191

II. MATERIAL AND METHODS B. Measurement

All items in the questionnaire were adopted and modified
A. Theoretical Background and Hypothesis Development from several prior research. The EO adopts nine items,
1) EO and AC: Through entrepreneurship, an enterprise focusing on proactive, innovative, and risk-taking behaviors
can improve its business performance [12]. The dimensions in [27]. AC is measured using six items, focusing on
EO are the driving force for the enterprise to exist and responsiveness and speed [4,14]. CA refers to four modified
continue to grow. An entrepreneurial spirit needs to be items from Rhee et al. [28], and ITO adopts three items [24]. A
supported by the ability to adapt to a changing market 5-point Likert scale (1 = strongly disagree and 5 = strongly
agree) was employed to measure all items.
situation. Agility is a vital capability for companies to sense,
respond to environmental changes [13], and adapt quickly to
C. Data Collection
unexpected circumstances [3]. This relation makes it seem
logical to see EO and AC as two interrelated concepts. Data were taken from SMTOs, which operated in Surabaya
and Malang, East Java, Indonesia. The sampling technique
Empirically, EO affects AC [14]. EO dimensions allow
used was purposive sampling with sampling criteria: SMTO
organizations to manage their processes efficiently, in an agile had been operating for at least 2 years and had a government
manner, and quickly in response to changing market license. According to the general rules of SEM analysis, the
conditions [15]. Hence, minimum sample size is 100 respondents [29]. 130
H1: EO significantly affects AC. questionnaires were distributed to directors or managers. Of the
2) EO and CA: EO is emerging as a solution for business 130 questionnaires, 127 questionnaires were used for analysis.
organizations wishing to achieve a sustainable CA [16].
Entrepreneurial behavior dramatically affects CA and D. Data Analysis
performance in business organization [17]. A potent EO will Data analysis were conducted using SPSS 23 and WarpPLS
direct the enterprise to allocate its resources for profit [18]. EO 6.0.
plays a vital role in developing a product/service specifically
made to react to the market or anticipate competitors' actions III. RESULTS AND DISCUSSION
[19]. Past research proved that EO affects CA [7,8]. Therefore,
H2: EO significantly affects CA. A. Measurement Model
3) AC and CA: Business organizations must quickly adapt Average variance extracted (AVE), composite reliability
to new situations. Organizations need the flexibility to adapt to (CR), and Cronbach’s alpha were used to test validity and
the rapidly changing environments [20]. AC is the primary reliability. The test results showed that all AVE values were ≥
driver of the enterprise in facing unstable conditions [21]. It is 0.5, CR values> 0.7, and Cronbach's alpha values ≥ 0.6. All
said that AC takes a critical role in detecting innovation meet the requirements of validity and reliability.
opportunities and seizing market opportunities [22]. Reducing
production costs, increasing customer satisfaction, stopping B. Structural Model
value-added works, and increasing CA are the benefits that The measurement results showed: Average Path Coefficient
can be realized over strategic agility [23]. Past research found (APC) = 0.340, p <0.001; Average R-squared (ARS) = 0.570, p
a significant positive relationship between AC and CA <0.001; Average Adjusted R-squared (AARS) = 0.561, p
businesses [9]. Therefore, <0.001; Average block VIF (AVIF) = 1.817, acceptable if = 5;
H3: AC significantly affects on CA. Average full collinearity VIF (AFVIF) = 2.458, acceptable if =
5; Tenenhaus GoF (GoF) = 0.579, acceptable if = 0.36;
4) The moderator role of ITO: Conceptually, ITO includes
Sympson's Paradox Ratio (SPR) = 0.800, acceptable if> = 0.7;
a process for managing information about customers and Statistical Suppression Ratio (SSR) = 1,000, acceptable if =
markets using IT [24]. These competencies provide the 0.7; Nonlinear Bivariate Causality Direction Ratio (NLBCDR)
technical means used by companies to connect business = 0.886, acceptable if = 0.7. The model has a good set of data
processes and IT-based services. ITO is more likely to be and has the quality indicators that meet WarpPLS’s
associated with technical work to achieve a specific goal, such requirements.
as completing a product or service. The technical aspects of
ITO play an important role in processing market information, C. Results of Hypotheses Tests
so that business actors can be proactive and innovative in The direct path between EO and AC has a positive and
dealing with the rapidly changing business environment. With significant effect (coefficient = 0.648, p <0.001). Thus, H1 is
ITO supports, they can quickly make strategic decisions with supported. Furthermore, EO has a positive and significant
fast and flexible business processes [25,26]. Thus, effect on CA (coefficient = 0.282, p <0.001). Therefore, H2 is
H4: ITO moderates the relationship between EO and AC. supported. The results prove that AC has a positive and
significant effect on CA (coefficient = 0.613, p = 0.077). Then,
H3 is supported. The results show that ITO has no significant

45
 Advances in Economics, Business and Management Research, volume 191

effect on the relationship between EO and AC (coefficient = - relationship. This result is also in line with Mandal et al. [10].
0.12, p = 0.08). Hence, H4 is not supported. Fig. 1 shows the Responsive and prompt actions by the enterprise are essential
results of hypotheses tests. to creating CA in a changing business environment [33].
Contrary to the hypothesis, this research found that ITO
does not affect the relationship between EO and AC. This
finding reveals that there are technical problems in IT-based
business processes and services that occur within SMTOs. This
finding also indicates that ITO has not optimally supported
directors or managers in information processing and technical
work. The lack of technical support devices that link SMTOs’
business processes to IT services is a significant constraint.
Thus, the role of IT utilization to organize information from
market and customer has not been realized clearly in this case.
This finding does not support the opinion of Tippins and Sohi
[24].

IV. CONCLUSION
This research has an academic implication on the
relationship between EO and AC as moderated by ITO. The
result provides new insights for the literature in the context of
ITO, EO, and AC, especially within the context of SMTO in
Fig. 1. Results of hypothesis test. Indonesia. This research also has two practical implications for
SMTO's management. First, directors or managers need to
maintain the EO aspects that support AC and CA. Second, they
D. Discussion must also immediately evaluate the technical aspects of ITO in
The results display that EO has a positive and significant order to has a crucial role in the relationship between EO and
effect on AC. SMTO's efforts to test their new products or new AC. Hence, SMTOs are ready to face the New Normal and
services, introduce innovative products or services, and take Industrial Revolution 4.0.
business risks can improve AC. Directors or managers believe
that SMTOs need to continually seek new opportunities in the This research was conducted at SMTOs in two major cities
rapidly changing environment. In addition, they have to face in East Java, so the results cannot be generalized. It is
the phenomenon of shorter product life cycles and the risk of recommended that further studies are carried out in several
profit uncertainty. With various new products or services, other large cities in Indonesia. It is also necessary to add
SMTOs can become more responsive to changing product and aspects of IT knowledge and IT Objects to find out more about
market behavior and faster to fulfill market demands. This the IT Competency of the SMTOs.
finding is in line with Tahmasebifard et al. [14] that EO affects
AC. This result also reinforces the assumption of Chen and Liu REFERENCES
[30] that entrepreneurial skills and agility are inseparable
components for companies facing an environment that tends to [1] F.J H.M. Verhees and M.T.G. Meulenberg, “Market Orientation,
change rapidly. Innovativeness, Product Innovation, and Performance in Small Firms,
Journal of Small Business Management”, vol. 42, no. 2, pp. 134-154,
The research findings confirm that EO has a positive and 2004.
significant effect on CA. This result indicates that directors or [2] A.M. Alshanty and O.L. Emeagwali, “Market-sensing capability,
managers create a CA by making different products or services, knowledge creation and innovation, Journal of Innovation &
generating new ideas, and taking risks to enter new markets. Knowledge”, vol. 4, issue 3, pp. 171-178, 2019.
Without EO, the enterprises will be hampered in carrying out [3] A.S. Arshad, A. Rasli, A.A. Arshad and Z.M. Zain, “The Impact of
decision-making activities, especially when entering new Entrepreneurial Orientation on Business Performance, Social and
Behavioral Science”, 130, pp. 46-53, 2014.
markets [31]. This finding aligns with Zeebaree and Siron [7]
and Nejad et al. [32] that dimensions of EO influence CA's [4] H. Sharifi and Z. Zhang, “Agile Manufacturing in Practice, Application
of A Methodology, International journal of operations & production
creation. management”, vol. 21, no. 5, 772-794, 1999.
The results verify the positive relationship between AC and [5] OECD, “Making the Most of Tourism in Indonesia to Promote
CA. The attitude of the directors or managers to sense market Sustainable Regional Development” Economic Department Working
Papers, no. 1535, pp. 1-41, 2019.
changes and regularly monitor products or services
[6] Kementerian Pariwisata, “Laporan Akuntabilitas Kinerja Kementerian
development plays a crucial role in improving CA. The fast Pariwisata”, 2018.
response from SMTOs in providing services and good [7] M. R.Y. Zeebaree and R.B. Siron, “The Impact of Entrepreneurial
coordination between departments also support this positive Orientation on Competitive Advantage Moderated by Financing Support

46
 Advances in Economics, Business and Management Research, volume 191

in SMEs, International Review of Management and Marketing’, vol. 7, [20] D.J. Teece, “Explicating Dynamic Capabilities: The Nature and
no. 1, pp. 43-52, 2017. Microfoundations of (Sustainable) Enterprise Performance”, Strategic
[8] I.G.N.A. Maruta, R.A. Sularso and N. Susanti, “The Effect of Market Management Journal, vol. 28, no. 13, pp. 1319–1350, 2007.
Orientation, Entrepreneurship Orientation, and Imitation Strategy on [21] Y.Y. Yusuf, M. Sarhadi and A. Gunasekaran, “Agile Manufacturing: The
Competitive Advantage”, International Journal of Business and Drivers, Concepts and Attributes”, International Journal of Production
Management Invention, vol. 6, issue 7, pp. 24-35, 2017. Economics, vol. 62, pp. 33-43, 1999.
[9] H.N. Nzewi and P. Moneme, “Business Agility and Competitive [22] Y. Lu and K. Ramamurthy, “Understanding the Link Between
Advantage of Selected Commercial Banks in Anambra State, Nigeria”, Information Technology Capability and Organizational Agility”, MIS
Pyrex Journal of Business and Finance Management Research, vol. 2, Quarterly, vol. 35, no. 4, pp. 931-954, 2011.
no. 8, pp. 81-88, 2016. [23] E. Bottani, “A fuzzy QFD approach to achieve agility, International
[10] S. Mandal, V.R. Korasiga and P. Das, "Dominance of agility in tourism Journal of Production Economics”, vol. 119, pp. 380–391, 2009.
value chains: evidence from India", Tourism Review, vol. 72, no. 2, pp. [24] M.J. Tippins and R.S. Sohi, “IT competency and firm performance, is
133-155, 2017. organizational learning a missing link?”, Strategic Management Journal,
[11] W. Ahmed, A. Najmi, Y. Mustafa and A. Khan, "Developing model to vol. 24, no. 8, 745-61, 2003.
analyze factors affecting firms’ agility and competitive capability", [25] N. Melville, K. Kraemer and V. Gurbaxani, “Review: information
Journal of Modelling in Management, vol. 14, no. 2, pp. 476-491, 2019. technology and organizational performance”, MIS Quarterly, vol. 28, no.
[12] S.A. Zahra and J.G. Covin, “Contextual infiuences on the corporate 2, pp. 283–322, 2004.
entrepreneurship-performance relationship, Journal of Business [26] P.P. Tallon, “Inside the adaptive enterprise: an information technology
Venturing”, vol. 10, pp. 43-58. 1995. capabilities perspective on business process agility, Information
[13] E. Overby, A. Bharadwaj and V. Sambamurthy, “Enterprise Agility and Technology and Management”, vol. 9, no. 1, pp. 21–36, 2008.
The Enabling Role of Information Technology”, European Journal of [27] G.T. Lumpkin, C.C. Cogliser and D.R. Scheider, “Understanding and
Information Systems, vol. 15, no. 2, pp. 120–31, 2006. Measuring Autonomy: An Entrepreneurial Orientation Perspective”,
[14] H. Tahmasebifard, A. Zangoueinezhad and P. Jafari, “The Role of Journal of Entrepreneurship Theory and Practice, pp. 47-69, 2009.
Entrepreneurial Orientation in Achieving Agility Capability”, Journal of [28] H. Rhee, K. Park and H. Lee, “Drivers of Innovativeness and
Applied Economics and Business Research, vol. 7, no. 2, pp. 137-156, Performance for Innovative SMEs in South Korea”, Technovation, vol.
2017. 30, no. 1, pp. 65–75, 2010.
[15] S.A. Zahra, I. Filatotchev and M. Wright, 2009, “How do threshold firms [29] J.F.J. Hair, G.T.M Hult, C.M. Ringe, and M. Sarstedt, A Primer on
sustain corporate entrepreneurship? The role of boards and absorptive Partial Least Squares Structural Equation Modeling (PLS-SEM), 2nd ed.,
capacity”, Journal of Business Venturing, vol. 24, pp. 248–260, 2009. Sage, Thousan Oak, CA, 2017.
[16] M. van Geenhuizen, R. Middel and A.H. Lassen, “Corporate [30] J. Chen and L. Liu, “Profiting from Green Innovation: The Moderating
Entrepreneurship in SMES During the Search for Discontinuous Effect of Competitive Strategy”, Sustainability, vol. 11, pp. 1-23, 2019.
Innovations”, In 9th International CINet Conference: Radical Challenges
in Innovation Management, 2008. [31] S. Yamin, S., A. Gunasekaran and F.T. Mavondo, “Relationship between
generic strategies, competitive advantage and organizational
[17] J. Wiklund and D. Shepherd, “Knowledge-based Resources, performance: an empirical analysis”, Technovation, vol. 19, pp. 507–
Entrepreneurial Orientation, and The Performance of Small and Medium 518, 1999.
Sized Businesses”, Strategic Management Journal, vol. 24, no. 13, pp.
1307–1314, 2003. [32] M.E. Nejad, S. A. Jalaee and S. Khosravi, “Adopting entrepreneurial
orientation to improve agile manufacturing”, International Journal of
[18] M.J. Ruiz-Ortega, G. Parra-Requena, P.M. García-Villaverde and J. Entrepreneurship and Small Business, vol. 22, no. 2, pp. 179-195, 2014.
Rodrigo-Alarcon, “How does the closure of interorganizational
relationships affect entrepreneurial orientation?”, Business Research [33] G.T. Lumpkin and G.G. Dess, “Clarifying the Entrepreneurial
Quarterly, vol. 20, no. 3, pp. 178-191, 2017. Orientation Construct and Linking It to Performance,” The Academy of
Management Review, vol. 21, no. 1, pp. 135-172, 1996.
[19] S.T. Certo, T.W. Moss and J.C. Short, “Entrepreneurial Orientation: An
Applied Perspective”, Business Horizons, vol. 52, pp. 319-324, 2009.

47