Abstract
The discourse on cognition and cognitive abilities has remained relatively sparse within the entrepreneurship literature. The present study examines the role of entrepreneurial strategic thinking as an antecedent of entrepreneurial orientation and its influence on product performance. It further investigates how a dynamic environment shapes these relationships. The findings highlight the critical role of entrepreneurial strategic thinking in the development of entrepreneurial orientation and indicate that entrepreneurial orientation partially mediates the relationship between strategic thinking and product performance. The results also challenge conventional assumptions by suggesting that the effects of proactiveness, a dimension of entrepreneurial orientation, on product performance may become detrimental in a dynamic environment. As the first study to position entrepreneurial strategic thinking as an antecedent of entrepreneurial orientation, this research contributes to the broader entrepreneurship domain by demonstrating that cognitive factors, such as strategic thinking, play a pivotal role in shaping venture outcomes.
Keywords
Although the concept of entrepreneurial orientation (EO) was initially developed within an organisational context, it inherently reflects the imprinting of individuals’ entrepreneurial characteristics within the organisation (Pittino et al., 2017). Thus, EO emanating from an entrepreneurial individual manifests at the organisational level (Ferreira et al., 2020; Kraus et al., 2019). Goktan and Gupta (2015) further note that individuals tend to exhibit proactiveness, innovativeness and risk-taking simultaneously, thereby demonstrating entrepreneurial orientation. Entrepreneurs, therefore, serve as the primary source of imprinting for the organisations they lead. Despite extensive exploration of EO, it remains a ‘vibrant research topic’ (Covin & Wales, 2019, p. 3). Prior research corroborates the persistent influence of founders’ imprinting on organisational patterns even after founders exit the firm (e.g., Baron et al., 1999). Because organisational outcomes stem from individual behaviour (Bolton & Lane, 2012; Robinson & Stubberud, 2014), EO can also be conceptualised as an individual-level phenomenon (Ferreira et al., 2017; Kraus et al., 2019). The literature indicates that individual entrepreneurs often simultaneously exhibit values associated with innovativeness, proactiveness and risk-taking (Goktan & Gupta, 2015).
Entrepreneurs develop their ventures around their business ideas, and the product or service, operations and decision-making processes are directly shaped by the entrepreneur’s characteristics and distinctive traits (Judge & Zapata, 2015; Lechner & Gudmundsson, 2014). Previous research has primarily examined personality and demographic traits as determinants of EO (Pittino et al., 2017). However, several studies suggest that cognitive factors, rather than demographic characteristics, lie at the core of entrepreneurial behaviour (Keh et al., 2002; Mitchell et al., 2002). Moreover, factors such as newness, uncertainty, dynamic environments, limited resources and informal organisational structures often require entrepreneurs to rely heavily on cognitive processes and prior experience for survival and success (Ehret et al., 2013). Consequently, when examining entrepreneurial strategic decision-making, individual cognitive factors should be regarded as a crucial component of entrepreneurship (Zhou et al., 2021). A growing body of literature identifies cognition as a promising yet underexplored antecedent of EO (Adomako, 2021). Entrepreneurial cognition has attracted scholarly attention as a mechanism for explaining how entrepreneurs identify and exploit opportunities (Jayacyril et al., 2025; Sadler-Smith, 2004). Researchers have called for greater consideration of cognitive perspectives and their influence on entrepreneurial orientation (Krueger, 2000). Although emerging work has begun exploring these cognitive perspectives, empirical evidence remains limited (Gupta et al., 2023). Recent entrepreneurship research increasingly recognises the essential role of cognition in shaping how entrepreneurs think and how these thinking processes influence entrepreneurial behaviour and actions (Clausen, 2020; Khan et al., 2025; Pirhadi et al., 2023).
Strategic thinking has been linked to entrepreneurial behaviour and outcomes (Gross, 2017; Jelenc & Pisapia, 2015; Zahra & Nambisan, 2012). Nevertheless, empirical studies investigating the relationship between the cognitive dimension of strategic thinking and EO remain sparse. Strategic thinking enables individuals to reshape competitive arenas by engaging proactively in boundary-spanning activities (Zahra & Nambisan, 2012), challenge existing market assumptions through high-risk endeavours and understand the complexities of broader environments while addressing ongoing changes through novelty (Alvarez & Barney, 2005; Srivastava & D’Souza, 2021). Accordingly, strategic thinking is positioned as a vital antecedent of entrepreneurial orientation and as a potential resource for organisational outcomes such as product performance.
Although EO and its effects on organisational outcomes are increasingly understood, the role of cognitive factors—particularly strategic thinking—in the EO–product performance relationship has yet to be empirically examined. The present study addresses this gap by empirically investigating the relationships among strategic thinking, entrepreneurial orientation and product performance, as well as the influence of environmental dynamism on these relationships. The study contributes to the entrepreneurship literature in several ways. First, it enhances the understanding of how strategic thinking relates to entrepreneurial orientation, thereby illuminating how individual cognition functions as a driver of entrepreneurial behaviour. Second, it examines how individual cognition affects product performance through entrepreneurial orientation, establishing entrepreneurial orientation as a mediating mechanism between strategic thinking and product outcomes. Third, it evaluates environmental dynamism as a moderating variable shaping the EO–product performance relationship. The study focuses on entrepreneurs managing small businesses with fewer than 250 employees who are actively involved in day-to-day operations and decision-making, as such individuals exert the greatest influence on entrepreneurial outcomes. The findings carry theoretical and practical implications, which are discussed in subsequent sections alongside a comprehensive literature review, results and discussion.
Literature Review and Hypotheses Development
Entrepreneurial Orientation
The concept of EO has existed for several decades and continues to evolve. EO refers to the processes, practices and decision-making activities that lead to new entries (Lumpkin & Dess, 1996). EO represents the entrepreneurial strategy-making process through which key decision-makers enact their firm’s organisational purpose, sustain its vision and create competitive advantages. The dimensions of EO originate from both strategy and entrepreneurship scholarship (e.g., Covin & Slevin, 1991; Miller, 1983; Rauch et al., 2009).
The critical dimensions that describe EO include a propensity to act autonomously, a willingness to innovate and take risks, and a tendency to be aggressive towards competitors and proactive in seizing market opportunities. These elements may vary independently across contexts (Lumpkin & Dess, 1996, 2001). Foundational work by Miller (1983) and Covin and Slevin (1989, 1991) suggests that entrepreneurial firms are those that exhibit innovativeness (the introduction of new products, processes or business models), proactiveness (actively entering new product spaces and seeking competitive advantage) and risk-taking (a willingness among strategic decision-makers to commit resources to projects with uncertain outcomes). Voss et al. (2005, p. 1134) define EO as ‘a firm-level disposition to engage in behaviors (reflecting risk-taking, innovativeness, proactiveness, autonomy, and competitive aggressiveness) that lead to a change in the organisation or marketplace’. By contrast, Pearce et al. (2010) conceptualise EO as ‘a set of distinct but related behaviors that have the qualities of innovativeness, proactiveness, competitive aggressiveness, risk-taking, and autonomy’ (p. 29). Covin and Lumpkin (2011) further distinguish between dispositional and behavioural interpretations of EO, arguing that EO is better understood as a behavioural phenomenon, given that entrepreneurial activity is defined by action rather than traits (Covin & Slevin, 1991).
EO is characterised by innovative and proactive orientations, along with a propensity to take risks (Miller, 1983). Anderson et al. (2015) define EO as a firm-level construct representing entrepreneurial behaviours—specifically innovativeness, proactiveness and a managerial attitude towards risk. These dimensions form the foundation for entrepreneurial decisions and actions.
According to Miller (1983), the three dimensions of EO— proactiveness, innovation and risk-taking—collectively represent a firm’s entrepreneurial posture (Rauch et al., 2009). Schumpeter (1934) emphasised the centrality of innovation in the entrepreneurial process. Innovativeness refers to a firm’s creativity and experimentation, typically through research and development activities that lead to new technological processes or products/services (Lumpkin & Dess, 2001, p. 431). Proactiveness reflects preparedness and the capability to anticipate market changes and introduce offerings ahead of competitors, thereby shaping the environment (Lumpkin & Dess, 1996, 2001). Risk-taking involves committing resources to ventures with uncertain outcomes, entering unknown markets or borrowing heavily. This risk propensity may be viewed as both a personality trait and a cultural characteristic (March & Shapira, 1987).
Strategic Thinking
Strategic thinking is a critical element of the strategising process. It involves analysing information, identifying opportunities and making decisions that generate sustainable competitive advantage. Unlike a static or episodic activity, strategic thinking is a continuous and evolving process. Mintzberg describes strategic thinking as a synthesis of intuition and creativity, representing a nonlinear and integrated perspective of the organisation. Continuous informal learning and unlearning occur across levels of the organisation, drawing on diverse sources of insight. Intuition derived from past experiences—combined with newly acquired knowledge—enables new lines of inquiry and broadens the decision-making perspective. Strategic thinking, as a cognitive process, spans multiple layers of planning and can be deployed in real time. This process offers a comprehensive vantage point of an organisation’s direction and future possibilities.
Strategic thinkers draw insights not only from their own experiences but also from a wide array of soft and hard data (Mintzberg, 1994). They employ logic and critical thinking skills to interpret complex situations, select relevant information, reinterpret it and link it to internal opportunities or challenges. Strategic thinking emphasises looking beyond assumptions, challenging underlying premises and identifying opportunities.
Research consistently suggests that strategic thinking is essential for entrepreneurs facing new and unforeseen challenges. Non-strategic thinkers may rely on patterned responses or conventional thinking, which can lead them to ignore contradictory information and make rapid, suboptimal decisions (McKenzie et al., 2009). Conversely, strategic thinkers demonstrate greater openness to taking risks and pursuing market share, often resulting in increased profitability and sales revenue. Strategic thinking is also positively associated with the openness to experience and cognitive ability among executives (Spiro et al., 1987). Collectively, the literature positions strategic thinking as a fundamental capability for entrepreneurs, which may be cultivated through cognitive ability, openness to experience and accumulated work experience while avoiding overly rigid decision-making structures (Ghoshal & Bartlett, 2009).
Srivastava and D’Souza’s (2021) comprehensive review of strategic thinking research—building on earlier works by Rowe et al. (1986) and Thompson and Strickland (1996)—indicates that various conceptualisations of strategic thinking share substantial commonality, with differences being largely semantic rather than conceptual. Their review identifies three core dimensions that jointly define strategic thinking: systems thinking, divergent thinking and reflection.
Systems thinking: Drawing on Von Bertalanffy’s (1950) general systems theory, management scholars (e.g., Fontaine, 2008; Kaufman, 1992; Senge, 1990) describe systems thinking as a holistic understanding of the enterprise and the interdependencies among internal and external elements. In the context of strategic thinking, systems thinking reflects the capacity to perceive the organisation as an interconnected whole (Bonn, 2001).
Divergent thought processing: Divergent thinking involves the ability to collect and analyse rich information through multiple mental models (Gentner & Stevens, 2014). The capacity to shift between mental models fosters novel insights and solutions (Pisapia et al., 2005). In strategic thinking, divergent thought processing involves identifying and differentiating between multiple perspectives and applying them to assess organisational situations. Drucker emphasised that strategic thinking is fundamentally about asking the right questions, reframing perspectives and adjusting priorities according to changing needs (Zand, 2010).
Reflection: Reflection represents a cognitive process in which individuals analyse situations by referencing existing beliefs, perceptions and experiences, and then applying this knowledge to problem-solving (Dewey, 1933). Reflection involves continuous evaluation of beliefs and assumptions against existing data and plausible interpretations. Reflective entrepreneurs integrate opposing viewpoints and make more rational judgements, thereby providing clearer guidance for value creation (Strange & Mumford, 2005). Reflection differs from observation because it involves systematic reassessment of perceptions against evidence, allowing for careful evaluation of past actions and formulation of future action plans (Liedtka, 1998). Within strategic thinking, reflection encompasses the ability to draw upon one’s own and others’ experiences, perceptions and knowledge to interpret and guide organisational actions.
Having described the dimensions of strategic thinking and entrepreneurial orientation, the next section introduces the proposed relationships between these constructs and organisational outcomes.
Strategic Thinking and Product Performance
Researchers widely agree that strategic thinking supports organisations in achieving desired outcomes. For example, Tregoe and Zimmerman (1980) linked the clarity of strategic thinking with corporate survival, while Porter (1980) emphasised its role in effective strategic planning. Zabriskie and Huelmantell (1991) and Hanford (1995) associated strategic thinking with opportunity recognition and long-term strategic goals. Graetz (2002) argued that strategic thinking enables entrepreneurs to ‘seek innovation and imagine new and very different futures that may lead a company to redefine its core strategies and even its industry’ (p. 457).
From an entrepreneurial standpoint, strategic thinking provides insights not only into a venture’s product domain but also into the capabilities required for successful operation. Strategic thinking enables entrepreneurs to identify gaps, understand customer needs and proactively allocate resources to align business processes with new demands (Srivastava & D’Souza, 2021). It also facilitates more effective alignment of innovations with customer needs, contributing to greater market opportunities and higher product acceptance. Products and services emerging from entrepreneurial strategic thinking processes are more likely to exhibit enhanced functionality and commercial value (Magnusson, 2009). A systems’ perspective further enables entrepreneurs to recognise the collaborative nature of value creation between customers and the organisation. Strategic thinking heightens entrepreneurs’ awareness of customers’ roles in product development, and collaborative engagement with customers has been shown to improve performance through increased participation (Chan et al., 2010). Entrepreneurs who facilitate active customer engagement benefit from both need-related and solution-related information (Poetz & Schreier, 2012). By enabling the extraction of valuable customer insights, strategic thinking enhances the value proposition of the firm’s offerings. Empirical research further supports the relationship between customer engagement and product performance (Anning-Dorson, 2018).
Based on this discussion, the baseline hypothesis is proposed as follows:
H1: Strategic thinking is positively related to product performance.
Strategic Thinking and Proactiveness
Barney (1986) asserts that strategic thinking enables entrepreneurs to identify and capitalise on valuable resources and distinctive market positions before competitors recognise them. Strategic thinking extends beyond identifying opportunities within existing organisational confines (Lumpkin & Dess, 1996) and actively drives the search for new information that fuels discovery. According to Liedtka (1998), effective strategic thinkers recognise the interdependence between their business strategies and environmental conditions. Environmental shifts necessitate corresponding adjustments in strategies and operations, a point emphasised by Pisapia et al. (2005). Therefore, strategic thinking involves maintaining dynamic alignment with the environment, reinforced by the continuous search for fresh insights (Srivastava & D’Souza, 2021). Strategic thinkers proactively scan diverse environmental factors to identify potential opportunities (Wang, 2008).
Given this reasoning, entrepreneurs with strong strategic-thinking capabilities are more likely to appreciate the importance of proactive environmental analysis and to act ahead of competitors in decision-making, resource acquisition and strategy implementation. Organisations that embed strategic thinking into their entrepreneurial activities are therefore more likely to demonstrate higher levels of proactiveness. Accordingly, the following hypothesis is proposed:
H2a: Strategic thinking has a positive relationship with proactiveness.
Proactiveness, Product Performance and the Mediating Role of Proactiveness
The proactive dimension of EO derives from Miles and Snow’s (1978) prospector typology, which asserts that prospectors’ central responsibility is the identification of new market opportunities. Venkatraman (1989) similarly argues that a proactive orientation enhances the ability to detect customer trends, anticipate market needs and evaluate the future viability of products and services ahead of competitors. Proactive entrepreneurs excel in recognising market gaps (Wang et al., 2020), resulting in products that better align with contemporary market conditions. Product offerings shaped by high levels of proactivity are often differentiated from existing market options and may capture greater interest and support, potentially outperforming competing offerings.
Proactiveness is also a behavioural manifestation of entrepreneurial strategic thinking. Strategic thinkers tend to scan broad environmental cues to interpret potential opportunities (Wang, 2008), identify emerging markets and anticipate customer needs prior to competitors (Donbesuur et al., 2020). Early market entry strengthens product performance and positions ventures advantageously within industry trajectories. Customers may also be willing to pay premium prices for differentiated offerings. Thus, entrepreneurial strategic thinking promotes enhanced product performance by enabling proactive behaviour (Davcik & Sharma, 2015).
Combining these arguments, proactiveness is expected to positively influence product performance and act as a mediating mechanism between strategic thinking and product performance. Accordingly, the following hypotheses are proposed:
H2b: Proactiveness has a positive relationship with product performance. H2c: Proactiveness mediates the relationship between strategic thinking and product performance.
Strategic Thinking and Risk-taking
Risk-taking involves bold strategic actions, including venturing into unknown markets, committing resources to uncertain initiatives and taking on financial risk. Entrepreneurs with strong systems-thinking capabilities and diverse knowledge are better positioned to understand risk sources arising from external environments (McKenzie et al., 2009). Strategic thinking enables entrepreneurs to interpret environmental signals in light of internal resources and organisational capabilities (Gross, 2017), which is central to evaluating risks and opportunities. Strategic thinkers recognise environmental risks and evaluate them against their firm’s knowledge and capabilities (Todorova & Durisin, 2007).
Drawing on the attention-based view (Ocasio, 1997), entrepreneurs with greater strategic-thinking capacity integrate new information with existing knowledge and are therefore able to pursue riskier opportunities. This risk propensity may stem from alternative framing processes, wherein entrepreneurs evaluate situations more positively and focus on potentially favourable outcomes (Palich & Bagby, 1995). Strategic thinking facilitates knowledge assimilation from the environment, supporting more robust decision-making (Jansen et al., 2005). Consequently, entrepreneurs with strong strategic-thinking skills are better able to allocate resources to meet dynamic environmental demands and pursue riskier ventures. Based on these arguments, the following hypothesis is proposed:
H3a: Strategic thinking has a positive relationship with risk-taking.
Risk-taking, Product Performance and the Mediating Role of Risk-taking
Risk-taking is a defining component of entrepreneurship. Risk-taking entrepreneurs are ‘willing to make large and risky resource commitments’ (Miller & Friesen, 1978, p. 923), particularly when launching new products or entering new markets (Rezaei & Ortt, 2018). Risk-taking fosters investment in research and development, experimentation with new ideas and adoption of new technologies. This orientation enhances confidence in outperforming industry competitors and allows entrepreneurs to identify favourable market trends, thereby exploring opportunities overlooked by others. Resulting offerings are more likely to be novel and differentiated and, therefore, more likely to perform well.
Strategic thinking enables entrepreneurs to assess risks effectively by integrating environmental knowledge and internal capabilities (Jansen et al., 2005). Entrepreneurs with advanced strategic-thinking skills identify customer needs and market gaps earlier than competitors (Donbesuur et al., 2020). Early market entry and differentiated offerings strengthen product performance and allow firms to charge premium prices. Thus, strategic thinking enhances product performance by enabling risk-taking behaviour.
Accordingly, the following hypotheses are offered:
H3b: Risk-taking has a positive relationship with product performance. H3c: Risk-taking mediates the relationship between strategic thinking and product performance.
Strategic Thinking and Innovativeness
Innovation requires new knowledge, competencies and processes. Innovativeness reflects a knowledge structure that enables entrepreneurs to connect existing competencies to changes in the external environment and recognise which routines require modification (Teece, 2016). Strategic thinking supports the identification of links between organisational processes and environmental shifts and the recognition of which competencies must be developed or adapted (Bonn, 2001, 2005; Kim & Mauborgne, 2014). Because strategic thinkers perceive system-wide interdependencies, they are better positioned to evaluate how new knowledge can be leveraged for innovation. Liedtka (1998) posited that strategic thinkers possess an integrated model of the value-creation system and understand the interdependencies within it.
Accordingly, strategic thinkers are more likely to understand the need for new competencies, capabilities and processes, all of which support innovativeness (Cho & Hambrick, 2006; Daft & Weick, 1984; Eggers & Kaplan, 2009). Thus, the following hypothesis is proposed:
H4a: Strategic thinking is positively related to innovativeness.
Innovativeness, Product Performance and the Mediating Role of Innovativeness
Innovativeness is closely linked to organisational outcomes, particularly product performance, and is especially critical in competitive and dynamic environments. It contributes to differentiation and supports sustained competitive advantage (Amit & Zott, 2012). Innovativeness enhances opportunity recognition (Fan et al., 2021), aligns offerings with market needs and supports swift market entry (Covin & Wales, 2019). It also enhances perceptual and performance advantages relative to competitors (Rauch et al., 2009).
Entrepreneurial innovativeness drives environmental transformation by reshaping market dynamics (Alvarez & Barney, 2007, 2008; Luksha, 2008). Through creative resource bundling, entrepreneurs initiate new market conditions and create economic value (Barney, 1986; Townsend & Busenitz, 2008). Innovativeness also facilitates resource allocation to foster new competencies, enabling new products, services or technologies. Early entry into emerging markets strengthens product performance (Donbesuur et al., 2020).
Thus, strategic thinking enhances product performance indirectly through its influence on innovativeness. The following hypotheses are offered:
H4b: Innovativeness has a positive relationship with product performance. H4c: Innovativeness mediates the relationship between strategic thinking and product performance.
Entrepreneurial Orientation and Product Performance in a Dynamic Environment
Environmental dynamism (ED) refers to the unpredictability and uncertainty created by external forces such as customers, suppliers, competitors, technology and market demand (Dess & Beard, 1984; Seo et al., 2020). ED shortens product life cycles, erodes competitive advantage (D’Aveni et al., 2010) and creates misalignment between firms’ resource needs and available capabilities. While global competition, technological change, shifting customer expectations and deregulation are major drivers of dynamism (Porter, 1996), they also generate opportunities for novel competitive strategies (Peteraf & Barney, 2003).
Contingency theory suggests that firms must possess resources and capabilities aligned with environmental conditions (Alves et al., 2025; Brown & Eisenhardt, 1997, 1998; Hatch & Cunliffe, 2006). EO— characterised by autonomy, innovativeness, risk-taking, competitive aggressiveness and proactiveness—serves as a key mechanism for overcoming environmental challenges. In dynamic environments, entrepreneurs must frequently make decisions under incomplete information (Aldrich, 2012; Baron & Tang, 2011). Consequently, the EO–product performance relationship is expected to strengthen under conditions of high dynamism.
Proactiveness supports opportunity identification, early detection of customer trends and evaluation of product viability (Wang et al., 2020). Risk-taking encourages investment in new technologies and exploration of opportunities overlooked by competitors (Rezaei & Ortt, 2018). Innovativeness fosters the creation of new competencies and market-adaptive offerings (Fan et al., 2021), enabling rapid strategic and operational response (Covin & Wales, 2019). Collectively, these behaviours are expected to exert stronger positive effects on product performance within dynamic environments.
Accordingly, the following moderation hypotheses are proposed:
H5a: Environmental dynamism positively moderates the relationship between proactiveness and product performance. H5b: Environmental dynamism positively moderates the relationship between risk-taking and product performance. H5c: Environmental dynamism positively moderates the relationship between innovativeness and product performance.
Methods
Sample
Qualtrics was used to collect data, as it provides access to preexisting respondent panels (Anaza & Nowlin, 2017; Srivastava et al., 2022, 2023). The Institutional Review Board of the participating institution approved the study. Because the focus was on entrepreneurs and entrepreneurial firms, respondents were selected based on criteria that ensured a decision-making role (Anaza & Nowlin, 2017; Cui et al., 2014; Ferguson et al., 2017). Screening and qualifying questions were used to ensure sample validity: only entrepreneurs involved in day-to-day processes and decision-making and operating businesses with fewer than 250 employees (to represent small businesses) were eligible to participate. Respondents were required to meet both criteria to proceed with the survey.
A total of 255 usable responses were obtained from entrepreneurs in the United States. Regarding the founding status, 186 respondents had founded their businesses alone, 55 had co-founded and 14 were not involved in founding. One hundred ninety respondents were first-time entrepreneurs, while 65 had previously founded other companies. Of the respondents, 35% were male and 65% were female. The sample represented diverse industries, including personal services (33.33%), retail (20.39%), construction (9.23%), technology (7.45%), B2B services (5.8%), restaurant/food and beverages (4.71%), wholesale (3.91%), manufacturing (3.14%), transportation (1.96%) and other sectors (9.8%).
Analysis
Partial least squares–based structural equation modelling (PLS-SEM) using SmartPLS 4.0 was employed to assess the psychometric properties of the scales and to test the hypotheses. PLS-SEM is appropriate for this model because it includes both latent and composite variables and incorporates formative constructs (Dash & Paul, 2021; Henseler & Schuberth, 2023). In addition, the research objective is exploratory in nature, and PLS-SEM has been recommended as a preferred method in such circumstances (Hair et al., 2011; Rigdon, 2016). PLS-SEM also does not impose the same constraints as regression- or covariance-based SEM, such as normality assumptions, minimum sample size requirements or restrictions on model complexity (Hair et al., 2011).
Measures
All scales used in the study were previously validated. Strategic thinking in organisations was measured using the scale developed by Srivastava and D’Souza (2021). In the original validation study, this construct is treated as multidimensional, consisting of three dimensions: systems thinking (four items), reflection (four items) and divergent thought processing (six items). In the current model, strategic thinking is specified as a second-order latent construct. The reliability scores for all three dimensions exceeded the recommended threshold of 0.70 (Peterson, 1994), as reported in Table 1. Factor loadings for the indicators of each dimension are also presented in Table 1. With the exception of two items, all loadings exceed 0.70; the remaining items, although above 0.60, were retained to maintain consistency with the original scale validation. In addition, the average variance extracted (AVE) for each dimension exceeds 0.50, meeting the criterion suggested by Hair et al. (2013). Variance inflation factor (VIF) values for all indicators are below 5.0, supporting acceptable levels of multicollinearity for a second-order construct.
Scale Items, Reliabilities, Factor Loadings and Average Variance Extracted.
Proactiveness, risk-taking and innovativeness were measured using the established EO scale developed by Bolton and Lane (2012). All three dimensions exhibited factor loadings above 0.70 and reliability scores of 0.80 or higher. The AVE values for all three constructs were at or above 0.50. Following the Fornell and Larcker (1981) criterion, the square root of the AVE for each construct exceeded the corresponding inter-construct correlation estimates, indicating adequate discriminant validity. Details are provided in Table 2.
Latent Variable Correlations and Discriminant Validity.
***p < .001.
Product performance was measured using five items from Song and Parry (1997): market share, profitability, return on assets, return on investment and sales. All indicators had loadings of 0.80 or higher. The construct reliability was 0.93, and the AVE was 0.79, indicating strong reliability and convergent validity.
Environmental dynamism, the moderating variable, was measured using five items from Jaworski and Kohli (1993). The factor loadings, reliability scores and AVE values for this construct all exceeded recommended thresholds, as reported in Table 1.
Common Method Variance
Given the nature of the data collection procedure, concerns regarding common method variance (CMV) are inevitable. However, several procedural and statistical remedies were implemented to minimise this potential bias. First, anonymity was ensured through a consent form, which reduces evaluation apprehension and has been recommended as a method for mitigating CMV (Podsakoff et al., 2003). Second, attention filters were incorporated to enhance response validity. Third, multiple remedial measures suggested by MacKenzie and Podsakoff (2012)—including selecting respondents with the necessary experience to address the survey questions, using items with simple vocabulary and syntax, and avoiding double-barrelled or multifaceted questions—were applied.
Fourth, Harman’s one-factor test was performed at the analysis stage; a single factor accounted for 34% of the variance, which is below the threshold that typically signals CMV problems (Podsakoff et al., 2003). Podsakoff et al. (2003) and MacKenzie and Podsakoff (2012) also suggest comparing variance explained by higher-order factor solutions; in this study, the three-factor (50.52%) and five-factor (60.26%) solutions indicated substantially higher explained variance, suggesting that CMV is unlikely to be a concern. Finally, variance inflation factor (VIF) tests were conducted to assess collinearity, which also serves as an indicator of CMV (Kock, 2015). These results collectively suggest a low likelihood of common method bias.
Results
Table 3 summarises the path coefficients and statistical significance associated with the hypothesised relationships.
Path Coefficients: Direct, Indirect and Moderating Effects.
H1 proposed that strategic thinking positively affects product performance. The results support this hypothesis (β = 0.274, p < .01), indicating a statistically significant direct effect of the strategic thinking second-order construct on product performance. This finding aligns with prior research suggesting that strategic thinking enhances entrepreneurs’ ability to align innovations with customer needs, thereby generating stronger market opportunities and greater product acceptance (Anning-Dorson, 2018; Magnusson, 2009).
H2a predicted a positive relationship between strategic thinking and proactiveness. The results (β = 0.534, p < .01) provide empirical support for this expectation. Strategic thinking involves maintaining a dynamic equilibrium with the environment and recognising the need for new insights (Srivastava & D’Souza, 2020, 2021). As such, strategic thinkers are more likely to adopt proactive approaches to scanning environmental conditions and identifying potential opportunities (Wang, 2008).
H3a posited a positive relationship between strategic thinking and risk-taking. This hypothesis is supported (β = 0.436, p < .01). A systems-thinking orientation, diverse knowledge and the integration of multiple perspectives help entrepreneurs evaluate risks arising from various external sources (McKenzie et al., 2009). Strategic thinking allows entrepreneurs to interpret environmental information and assess risks relative to organisational capabilities and resources (Gross, 2017; Todorova & Durisin, 2007).
H4a predicted a positive relationship between strategic thinking and innovativeness. The results support this hypothesis (β = 0.379, p < .01). Strategic thinking helps entrepreneurs understand interdependencies among systems and processes, enabling them to identify how new knowledge may support innovation. As Liedtka (1998, p. 122) notes, strategic thinkers possess ‘a mental model of the complete end-to-end system of value creation and understand the interdependencies within it’. Consequently, such individuals are more likely to develop new competencies, capabilities and processes that foster innovativeness (Cho & Hambrick, 2006; Daft & Weick, 1984; Eggers & Kaplan, 2009).
The three dimensions of entrepreneurial orientation—proactiveness, risk-taking and innovativeness—were proposed to positively affect product performance and mediate the relationship between strategic thinking and product performance.
Consistent with H2b and H2c, proactiveness is positively related to product performance (β = 0.139, p < .05) and mediates the relationship between strategic thinking and product performance. Prior research has linked proactivity to superior performance outcomes, as it enables early identification of market opportunities, anticipation of customer trends and evaluation of product viability before competitors (Venkatraman, 1989). Proactive entrepreneurs are skilled at identifying market gaps, leading to offerings that align better with market needs, thereby enhancing performance (Wang et al., 2020).
However, empirical results did not support H3b (β = 0.096, p > .05) or H4b (β = 0.009, p > .05). Risk-taking and innovativeness were not significantly related to product performance, nor did they mediate the relationship between strategic thinking and product performance. Potential explanations for these unexpected findings are discussed in the ‘Discussion’ section.
The final set of hypotheses examined whether environmental dynamism moderates the relationships among the three dimensions of entrepreneurial orientation and product performance. H5b (β = 0.104, p > .05) and H5c (β = 0.001, p > .05) were not supported.
Notably, while H5a predicted a positive moderation effect of environmental dynamism on the proactiveness–product performance relationship, the observed effect was significant but negative (β = –0.153, p < .05). This finding suggests that dynamic environments reverse the positive effect of proactiveness on product performance. A possible explanation is offered in the ‘Discussion’ section.
Discussion
The present study investigated the relationship between strategic thinking and product performance, with particular attention to the mediating roles of three dimensions of EO and the moderating effect of environmental dynamism.
As anticipated, strategic thinking was positively related to product performance. This finding aligns with long-standing themes in the strategic management literature, which highlight effective strategic planning as a critical determinant of organisational success (Porter, 1980). Although strategic thinking and strategic planning are complementary processes, they play distinct roles in effective leadership (Heracleous, 1998). Strategic thinking reflects an ongoing, holistic orientation towards sensing environmental change, identifying threats and opportunities, and asking, ‘Where should the organisation go and why?’ Strategic planning, in contrast, develops the execution road map that addresses ‘How do we get there and when?’ (Mintzberg, 1994). Both processes are essential, but strategic thinking appears particularly relevant for entrepreneurs, whose cognitive abilities, reflective capacity, systems thinking and integrative information-processing skills may translate into superior product outcomes (Sleptsov & Anand, 2008). When conceptualised as a resource, strategic thinking can confer competitive advantage as proposed by the resource dependence theory (Salancik & Pfeffer, 1978) and the resource-based view (Barney, 1991). In this study, entrepreneurs with greater strategic thinking capability developed higher-performing products, reinforcing the notion that cognitive resources are valuable, difficult-to-imitate assets.
Second, the strategic-thinking mindset was found to align with all individual dimensions of EO. Cognition plays a central role in determining how individuals make decisions and act (Gupta et al., 2023), and prior research underscores its relevance in shaping entrepreneurial behaviours (Clausen, 2020; Pirhadi et al., 2023). Strategic thinking, in particular, has been identified as essential for entrepreneurs navigating new and unforeseen challenges and has been empirically linked to EO behaviours (Jelenc et al., 2016). Strategic thinkers tend to be more open to taking risks and pursuing market share, potentially fostering increases in profits and sales revenue. Moreover, strategic thinking correlates positively with the openness to experience among executives (Spiro et al., 1987). Collectively, prior scholarship supports the view that strategic thinking functions as a meaningful antecedent to EO (Pirhadi et al., 2023; Sadler-Smith, 2004; Sanda & Sallama, 2023).
However, the findings also reveal that innovativeness and risk-taking were not significantly related to product performance, nor did they mediate the relationship between strategic thinking and performance outcomes. This is consistent with prior evidence showing that innovativeness and risk-taking may promote the development of novel capabilities but also generate uncertainty and financial exposure (Alves et al., 2025; Atuahene-Gima & Ko, 2001). Their effectiveness is highly contingent on contextual conditions, such as industry dynamism, lifecycle stage and resource availability (Covin & Slevin, 1991; Zahra & Covin, 1995). In stable environments, radical departures from existing offerings may be less advantageous than incremental improvements (Xue et al., 2018).
Past empirical work similarly indicates that risk-taking is associated with volatile or weaker performance when firms lack absorptive capacity or slack resources (Rauch et al., 2009; Wiseman & Catanach, 1997). Bowman’s (1980) ‘risk–return paradox’ suggests that poor performers often adopt riskier strategies to recover, which may help explain the dynamics observed in this sample. Innovation also carries a liability of newness, increasing the likelihood of consumer scepticism, capability gaps and inefficiencies (Stinchcombe, 1965; Vincenzi & Cunha, 2021). Furthermore, as March (1991) noted, excessive exploration (innovation and risk-taking) may deplete resources without yielding corresponding gains, particularly when exploitation is under-emphasised. Taken together, these mechanisms explain why innovativeness and risk-taking may not consistently enhance product performance, especially in environments characterised by stability or resource constraints.
The results also support both direct and mediating effects of proactiveness. Strategic-thinking entrepreneurs were more likely to generate better-performing products, and proactiveness partially facilitated this effect. From a practical standpoint, this suggests that strong strategic-thinking capabilities promote proactive behaviours that improve product performance (Allio, 2025). However, proactiveness did not operate universally across environmental conditions. In highly dynamic environments, proactiveness appeared less beneficial, possibly due to the liabilities of newness (Yang & Aldrich, 2017). Young entrepreneurial firms often face resource constraints (Atinc et al., 2017), making environmental understanding a prerequisite for creating customer value.
A particularly noteworthy finding is that environmental dynamism reversed the generally positive effect of proactiveness on product performance. Two mechanisms may account for this counterintuitive pattern. First, prediction error and information decay increase with dynamism. Proactiveness requires extrapolating from current signals to future states; however, rapidly changing contexts render existing information obsolete, resulting in misaligned early moves (Dess & Beard, 1984; Eisenhardt, 1989). Under such conditions, proactivity must be complemented by real-time sensing and rapid decision processes (Eisenhardt & Martin, 2000; Galbraith, 1973).
Second, proactiveness without adequate exploitation and capability reconfiguration can dilute performance. Overemphasis on exploration may cause misalignment between emerging opportunities and organisational capacity (March, 1991). Research on ambidexterity shows that exploration yields benefits only when paired with exploitative routines and absorptive capacity (Cohen & Levinthal, 1990; He & Wong, 2004; Jansen et al., 2005). In dynamic environments, firms require strong dynamic capabilities to sense, seize and reconfigure in response to change (Teece, 2007). Without such capabilities, proactive initiatives may become costly experiments with uncertain payoffs. Moreover, resource-intensive product development is especially vulnerable when environmental change outpaces development cycles (Van de Ven, 1986). Timing mismatches, coordination challenges and the liability of newness further contribute to difficulties in converting proactivity into successful product outcomes (Stinchcombe, 1965; Teece, 1986). These findings align with prior research suggesting that EO–performance relationships are contingent upon environmental and organisational conditions (Covin & Slevin, 1989; Rauch et al., 2009; Wiklund & Shepherd, 2005).
Theoretical Implications
This study advances the entrepreneurship theory by identifying strategic thinking as a cognitive antecedent of entrepreneurial orientation and demonstrating that entrepreneurs’ cognitive capabilities significantly shape EO behaviours. By establishing direct effects of strategic thinking on EO dimensions, the study contributes to entrepreneurial cognition research, an area less developed than trait-based or structural perspectives. The findings also extend contingency theory by showing that environmental dynamism can reverse otherwise positive effects of proactiveness on performance, underscoring the importance of contextual moderators in EO–performance relationships. This adds nuance to prior EO meta-analyses reporting inconsistent effects.
Additionally, the results challenge the prevailing assumption that risk-taking and innovativeness universally enhance performance. Instead, their effectiveness appears context-dependent, varying across industry conditions and environmental turbulence. Future research can build on these results by examining industry differences, longitudinal shifts and cross-cultural generalisability to clarify further when EO behaviours are beneficial.
Practical Implications
The findings highlight the importance for entrepreneurs and managers to develop strategic-thinking capabilities—including reflection, systems thinking and divergent thought processing—as these skills contribute to improved product performance. In practice, entrepreneurs may benefit from relying less on indiscriminate innovation or risky ventures and instead using strategic thinking to guide calibrated, proactive actions.
Because excessive proactiveness can hinder performance in dynamic environments, entrepreneurs should consider shortening planning horizons, conducting smaller-scale experiments and strengthening learning mechanisms to adapt without overcommitting resources. These insights suggest investments in decision-support tools, analytics and absorptive capacity to help align strategic foresight with real-time market signals.
For policymakers and incubators, the findings suggest value in designing training programmes that cultivate cognitive skills rather than focusing solely on personal traits, enabling entrepreneurs to develop thinking patterns that support sustainable performance. Overall, the study provides a road map for balancing exploration and exploitation to ensure value creation even under uncertainty.
Limitations and Future Research
Despite its methodological rigour, this study has limitations that warrant careful consideration. The sample consists of small businesses with fewer than 250 employees, which may limit generalisability. Because entrepreneurial ecosystems differ across countries and cultures, findings derived from US respondents may not extend to other contexts (Levenburg & Schwarz, 2008). Furthermore, service-sector firms constitute the majority of the sample, which—while reflective of the US economy—should be considered when interpreting the results. The use of cross-sectional data and reliance on entrepreneur self-reports also introduce inherent limitations.
The findings highlight multiple avenues for future research. Examining the relationship between upper-echelon strategic thinking and firm-level entrepreneurial orientation may yield deeper insights into entrepreneurial processes. The non-significant effects of risk-taking and innovativeness on product performance suggest the need for industry-specific analyses to identify contextual contingencies. Finally, the proposed model, which incorporates strategic thinking as a precursor to EO and product outcomes, offers a promising foundation for research into cognitive antecedents of entrepreneurship.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.