The purpose of this paper is to provide a review of literature on developments in entrepreneurship theory and emergence of Entrepreneurial Orientation (EO) construct. It also explores and presents the literature on the relationship between entrepreneurial orientation and business performance. Three models—the construct model, the EO-Strategy model and the performance model—were identified as the lines of research on EO. The paper reviews a range of publications describing the methodology, findings and alternative approaches to study the performance model. It suggests that a strong entrepreneurial orientation results in high business performance. EO is a multidimensional construct operationalized in terms of variables ‘innovativeness’, ‘risk-taking’, ‘proactiveness’, ‘autonomy’ and ‘competitive aggressiveness’. A combination of subjective and objective measures of performance should be used for accurate measurement of performance. Various organizational and environmental elements should be introduced as moderating and mediating variables while studying the relationship of EO with performance.

In the systematic development of the entrepreneurship theory, the first half of the 20th century was devoted to defining the term entrepreneurship and identifying the role of entrepreneurship in the economic development of a country (Marshall, 1930; Say, 1834; Schumpeter, 1934 and 1942; Burns and Stalker, 1961; and McClelland, 1961). During the 1960s and 1970s, the focus shifted towards identification of factors affecting entrepreneurship, i.e., why entrepreneurs start enterprises? During this phase, entrepreneurship was associated with various individual and demographic traits that encourage individuals towards entrepreneurship. Factors such as need for achievement, locus of control, self-efficacy, risktaking propensity, family influence, educational influence, work experience, etc., along with various demographic characteristics, were identified as antecedents of entrepreneurial behavior (Hagen, 1962; Kilby, 1971; Mintzberg, 1973; Conley, 1974; Weick, 1976; and Lachman, 1980). In the 1980s and 1990s entrepreneurial research moved towards identification of the dimensions of Entrepreneurial Orientation (EO) and fit between the EO-Strategy models, which align the level of EO with different strategies (Miller and Friesen, 1982; Burgelman, 1983; Galbraith and Kazanjina, 1986; Miller and Toulouse, 1986; Covin and Slevin, 1988; Zahra, 1993; Covin et al., 1994; Lumpkin and Dess, 1996; Dess et al., 1997; and Barringer and Bluedorn, 1999). Entrepreneurial opportunity recognition process again caught the attention of researchers during 1990s (Gartner, 1988; Venkatraman, 1989a and 1989b; Bygrave and Hofer, 1991; Shaver and Scott, 1991; and Venkatraman, 1997). The last two decades have witnessed the developments in the area of EO-performance relationship and adoption of contingency framework to EO-performance relationship, where it has been acknowledged that EO-performance relationship is affected by the organizational environment and industrial turbulence (Covin and Slevin, 1989; Zahra, 1991; Wiklund, 1999; Zahra and Garvis, 2000; Lee and Penning, 2001; Yusaf, 2002; Dimitratos et al., 2004; Kraus et al., 2005; Wiklund and Shepherd, 2005; Stam and Elfring, 2008; Kreiser and Davis, 2010; Grande et al., 2011).

Business Strategy Journal, Relationship, Between, Entrepreneurial, Orientation and Business Performance, A Review of Literature, Entrepreneurial Orientation, EO-performance relationship.