Entrepreneurial behaviour, firm size and financial performance: the case of rural tourism family firms

ABSTRACT

Family firms dominate the rural tourism industry, and within these firms family related interests guide entrepreneurial behaviour. This study utilises the entrepreneurial orientation (EO)–performance relationship to investigate which kind of entrepreneurial behaviour is important in order for rural tourism family firms to perform well. Considering the moderating effect of firm size, findings based on a sample of 198 firms and 4 follow-up interviews with owner-managers show that Innovativeness and Proactiveness are relevant variables to explain performance, while Risk-Taking is not. In addition, the Proactiveness–performance effect was negatively impacted by micro firm size. Initiatives to foster firm collaboration to overcome the disadvantage of small firm size and to stimulate entrepreneurship and innovation are suggested.

KEYWORDS:

• Rural tourism
• entrepreneurial behaviour
• family firm
• firm size
• quantitative

Introduction

Entrepreneurship in rural tourism firms (Nair, Munikrishnan, Rajaratnam, & King, 2015) shows peculiarities that often cannot be explained with Schumpeter’s growth-oriented entrepreneur (Andersson, Carlsen, & Getz, 2002; Legohérel, Callot, Gallopel, & Peters, 2004; Zhao & Getz, 2008). While financial performance forms a basic goal (Altinay & Altinay, 2006; Getz & Petersen, 2005; Tinsley & Lynch, 2008), entrepreneurial behaviour is more complex (Weiermair, Peters, & Schuckert, 2007). Previous research shows that the motivations of entrepreneurs in this industry are often lifestyle-related (Ateljevic & Doorne, 2000; Carlsen, Morrison, & Weber, 2008; Getz & Petersen, 2005; Peters, Frehse, & Buhalis, 2009), social or sustainable (Morrison, 2006; Weiermair & Peters, 2012), family driven (Carlbäck, 2012; Peters & Kallmuenzer, 2015) and affected by regional settings (Morrison, 2006). Concerning the influence of the family on entrepreneurial behaviour, family business research shows that family related interests affect decision-making structures in family firms (Alsos, Carter, & Ljunggren, 2014; Habbershon & Pistrui, 2002; Kallmuenzer, 2016; Nordqvist, Habbershon, & Melin, 2008). However, in the case of rural tourism family firms in particular it remains unclear which kind of entrepreneurial behaviour is required to perform well and which factors explain this behaviour.

When answering this question, it has to be considered that most enterprises in rural tourism are small or micro family firms possessing unique characteristics (Getz & Carlsen, 2000, 2005; Peters & Buhalis, 2013), with micro firms being defined as firms with less than 10 employees (European Commission, 2009; Greenbank, 2000). Prior research has shown that firm size affects entrepreneurial behaviour in tourism (Pansiri, 2007) and that barriers resulting from sub-optimally sized configurations block organisational development in micro firms (Weiermair & Peters, 1998).

Addressing these issues, this study applies the entrepreneurial orientation (EO)–financial performance relationship from general management research (Lumpkin & Dess, 1996; Miller, 1983; Rauch, Wiklund, Lumpkin, & Frese, 2009) to rural tourism (Solvoll, Alsos, & Bulanova, 2015) and considers firm size as a contingency factor in its investigation of family firms’ ability to implement entrepreneurial efforts. The study relies on data from a survey with 198 family firm owner-managers and 4 follow-up interviews (Jansen, Merchant, & van der Stede, 2009) in rural tourism regions of Western Austria. To the best of our knowledge, this study is among the first to empirically test entrepreneurial behaviour and its influence on financial performance in the context of rural tourism family firms (Hallak, Assaker, & O’Connor, 2014; Jogaratnam & Ching-Yick Tse, 2006).

The article is structured as follows: first, it presents the theoretical background of entrepreneurship in rural tourism and the EO–performance relationship in family firms. Second, it displays the research design and outlines sample characteristics. Third, the study presents the results from multivariate data analyses. Fourth, results are discussed and interpreted in light of continuative literature and interviews with owner-managers of our sample. To conclude, theoretical and practical implications are developed and limitations of the study are stated.

Theoretical foundation

Literature review

Rural tourism and entrepreneurship

Rural tourism is characterised by small family firms (Getz & Carlsen, 2000, 2005; Horobin & Long, 1996; Peters & Buhalis, 2013), which are often embedded in specific regional settings that require individual entrepreneurial behaviour to perform well (Morrison, 2006; Polo-Peña, Chica-Olmo, Frías-Jamilena, & Rodríguez-Molina, 2015). Rural tourism was traditionally developed using existing properties (e.g. farm houses and land property) and offering them to tourists (Flanigan, Blackstock, & Hunter, 2014). It could be defined as being the form of tourism taking place in rural, non-urban areas and building on the rural world’s special features (Lane & Kastenholz, 2015). Today’s rural tourism firms in developed countries such as the context-region of this study, Western Austria, vary from resorts to small bed and breakfast accommodations and are mostly small-scale enterprises and are traditional in character (Lane, 1994; Park, Doh, & Kim, 2014). In addition, these firms are well-connected with the rural environment, economy and history. According to Lane’s (1994) three continua of rural tourism, Austria’s rural tourism firms mainly fall into the end of the second continuum, which is characterised by consolidated growth of many firms, being active in the categories of activity tourism (e.g. mountain biking, skiing), relaxation and health (e.g. wellness resorts) or cultural and heritage-oriented business (e.g. gourmet hotels).

Previous research on entrepreneurship in tourism generally resulted in a growing amount of literature and was focused on either characteristics (e.g. Ahmad, 2015; Carmichael & Morrison, 2011) or on the motives of entrepreneurs (e.g. Ateljevic & Doorne, 2000; Shaw, 2014). Literature has investigated the economic impact and development strategies of rural tourism entrepreneurship (Camarero Izquierdo, Carrión, & Gutiérrez, 2008; Polo-Peña, Frías-Jamilena, & Rodríguez Molina, 2013; Tinsley & Lynch, 2001; Wang & Fesenmaier, 2007), where small firms ‘are the foundation of the tourism product’ (Komppula, 2014, p. 365). Further research on small tourism firm management (e.g. Angeles Montoro-Sánchez, Mas-Verdu, & Ribeiro Soriano, 2008; Dewhurst & Thomas, 2003; Li, 2008) focused on investigating the influence of these businesses on destination development (e.g. Altinay & Altinay, 2006; Ateljevic & Doorne, 2000; Cushnahan, 2004) and started to increasingly discuss the relevance of entrepreneurship to tourism development and growth (Rogerson, 2008). In this vein, more qualitative research was focused on exploring the entrepreneurial mind-set of rural tourism firms (e.g. Peters & Kallmuenzer, 2015; Reijonen & Komppula, 2007).

Drawing on Thomas, Shaw, and Page (2011), this growing interest in entrepreneurship in tourism requires further theoretical development of entrepreneurial characteristics and motivations of tourism firms as decisive factors ‘for small business growth or failure’ (p. 972). Getz and Carlsen (2005) emphasise that despite being the dominant form of business in rural tourism (Nair et al., 2015), family related issues remain ‘a secondary and often incidental topic associated with small business, entrepreneurship, and other themes’ (p. 251). Furthermore, research on the impact of firm size on entrepreneurial decision-making in tourism is scarce (Pansiri, 2007; Sundbo, Orfila-Sintes, & Sørensen, 2007), despite its relevance to firm management structures, product innovation and financial performance (Lussier & Sonfield, 2015).

Entrepreneurial behaviour

To investigate the entrepreneurial behaviour of rural tourism family firms, this study draws on corporate entrepreneurship literature and the EO construct as the most prominent construct for categorising entrepreneurial behaviour on a firm-level (Rauch et al., 2009). This construct is considered to consist of three dimensions: Innovativeness, Proactiveness and Risk-Taking (Covin & Slevin, 1989). These dimensions characterise firms that show ‘a willingness to innovate and take risks, and a tendency to be (…) proactive relative to marketplace opportunities’ (Lumpkin & Dess, 1996, p. 137). In early research (Covin & Slevin, 1989; Miller, 1983), EO constituted a unidimensional construct where all three dimensions had to be present simultaneously for an EO to exist or, in other words, for a firm to be considered to be ‘entrepreneurial’. More recent research argues for its applicability as a multidimensional construct where not all dimensions have to be present simultaneously in order to be categorised as entrepreneurial (Kreiser, Marino, & Weaver, 2002; Lumpkin & Dess, 2001). In general management, EO is said to positively affect financial performance (Rauch et al., 2009), which is usually measured in terms of profitability, sales growth or by using other financial measures (Lumpkin & Dess, 1996, 2001).

Family firm entrepreneurship

In addition, family related interests are important to consider as altering entrepreneurial behaviour (Nordqvist et al., 2008; Zellweger & Sieger, 2012). Recent findings from family business research show that family firms are particularly risk-averse (little Risk-Taking) due to image and reputation reasons (Deephouse & Jaskiewicz, 2013; Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007; Naldi, Nordqvist, Sjöberg, & Wiklund, 2007). Instead, goals that protect the longevity and the socio-emotional wealth goals of the family firm (Brannon & Edmond, 2016) as well as assuring long-term performance tend to dominate (Berrone, Cruz, & Gomez-Mejia, 2012; Zellweger, Nason, & Nordqvist, 2012). Risk-Taking was also found to negatively affect financial performance (Naldi et al., 2007). Concerning Innovativeness, family business research found this dimension to also be relevant for family firms, although as a dimension, Innovativeness was not usually fully utilised (Chrisman, Chua, De Massis, Frattini, & Wright, 2015), however it did have positive effects on financial performance (Bergfeld & Weber, 2011; Gudmundson, Tower, & Hartman, 2003; Kellermanns, Eddleston, Sarathy, & Murphy, 2012; Nordqvist et al., 2008; Zellweger et al., 2012). Finally, Proactiveness is said to be relevant to family firms as well as being performance-enhancing, but it often only occurs in select moves over time (De Massis, Chirico, Kotlar, & Naldi, 2014; Lumpkin, Brigham, & Moss, 2010; Martin & Lumpkin, 2003; Zellweger & Sieger, 2012). This study draws on the multidimensional EO construct to consider the complexity of entrepreneurial behaviour in family firms.

Following the findings from tourism, entrepreneurship and family business literatures, this study aims to contribute empirical evidence on family related entrepreneurial behaviour in rural tourism family firms and its effect on firm performance, considering firm size as a contingency factor. The following section will derive hypotheses regarding the influence of the distinct EO dimensions and firm size on the performance of rural tourism family firms.

Hypotheses development

EO and financial performance

Literature on the three EO dimensions Innovativeness, Proactiveness and Risk-Taking shows divergent results for their effects on the financial performance of family firms. Prior research predominantly argues that Innovativeness is an important driver for the financial performance of family firms (Zellweger & Sieger, 2012), especially when the family is strongly involved (Bergfeld & Weber, 2011; Gudmundson et al., 2003; Kellermanns et al., 2012). Proactiveness was found to foster financial performance (Casillas, Moreno, & Barbero, 2010), but only when it was necessary, and the resultant financial performance depended on the family generation leading the firm (De Massis et al., 2014; Martin & Lumpkin, 2003; Zellweger & Sieger, 2012). These findings show that family firms in general need to be willing to be innovative and proactive relative to marketplace opportunities (Lumpkin & Dess, 1996) in order to maintain competitive advantages and perform well financially. Tourism literature adds that research on innovation and proactivity is very limited for these industries (Hjalager, 2010), but many scholars agree that innovative and proactive behaviour is necessary for long-term survival in ever-changing environments such as tourism (Hjalager, 2010; Sundbo et al., 2007; Tajeddini, 2010). It is therefore hypothesised:

H1a: A rural tourism family firm’s Innovativeness has a positive effect on its financial performance.

H1b: A rural tourism family firm’s Proactiveness has a positive effect on its financial performance.

Risk-Taking in family firms is often considered to be less prevalent (Lumpkin et al., 2010; Nordqvist et al., 2008; Nordqvist & Melin, 2010; Short, Payne, Brigham, Lumpkin, & Broberg, 2009) for safety thinking (performance hazard risk) and keeping firm control within the family (control risk) are assumed to be superior goals (Gómez-Mejía et al., 2007; Zellweger & Sieger, 2012). However, as undiversified wealth of managers’ own capital (ownership risk) is invested in the company, financial commitments can lead to a risk-bearing and risk-sharing style of family management (Zahra, 2003). In tourism literature, previous research on the Risk-Taking behaviour of entrepreneurs is quite limited, with the exception of articles about the effect of risk perception on firm control (Legohérel et al., 2004) or on the relevance of risk prone entrepreneurs for the competitiveness of destinations (Komppula, 2014; Williams & Peters, 2008). In light of the ongoing discussion about the performance impact of Risk-Taking (Peters & Kallmuenzer, 2015) and due to the lack of findings in tourism research, this study follows the predominant view of family business research and hypothesises that also in rural tourism, family firms are rather risk-averse, and high levels of risk are negatively associated with financial performance (Naldi et al., 2007).

H1c: A rural tourism family firm’s Risk-Taking has a negative effect on its financial performance.

Firm size and the EO–financial performance relationship

General management literature (e.g. Bamiatzi & Kirchmaier, 2014; Lussier & Sonfield, 2015; Smith, Guthrie, & Chen, 1989) has shown that firm size has substantial impact on financial performance. Considering the dominance of small and micro firms in rural tourism (Getz & Carlsen, 2005), this study aims to investigate the moderating impact of firm size on the effect of EO dimensions on financial performance. Previous research on the relevance of firm size has shown that small firm size, as is prevalent in rural tourism, can block organisational development due to a lack of economies of scale, access to capital, bargaining power and employee attraction (Bamiatzi & Kirchmaier, 2014; Pansiri, 2007; Sundbo et al., 2007; Weiermair & Peters, 1998; Zhao & Getz, 2008). Larger (family) firms are also usually more able to endure financial crises (Lee, 2006) due to greater financial endowment. At the same time, small firms can benefit from more flexible business behaviour, such as being able to quickly react to environmental changes or by focusing on niche strategies (Bamiatzi & Kirchmaier, 2014). To conclude, previous findings lead to the hypothesis that firm size negatively affects the implementation of EO in rural tourism family firms, as micro firm size potentially blocks an effective exploitation of innovative, proactive and risk-taking efforts due to restrictions in capital and workforce.

H2a: A rural tourism family firm’s Innovativeness has a less positive effect on financial performance when firms are micro-sized.

H2b: A rural tourism family firm’s Proactiveness has a less positive effect on financial performance when firms are micro-sized.

H2c: A rural tourism family firm’s Risk-Taking has a more negative effect on financial performance when firms are micro-sized.

Research design

Sample and procedure

The study utilised a quantitative research design to test the EO–performance relationship of rural tourism family firms. For this purpose, a survey of a larger sample of family firms was conducted (Nordqvist et al., 2008). Following established definitions, family firms were identified as firms where ownership and management were aligned within one or more families, with owning family/-ies holding more than 50% of shares, and at least two family members being active in the firm (Chua, Chrisman, & Sharma, 1999; Litz, 1995; Miller, Le Breton-Miller, Lester, & Cannella, 2007; Westhead & Cowling, 1998).

As a first step, an email link to an online questionnaire was sent out to a sample of 1456 rural tourism family firm owner-managers in June 2015, in the 3 states of Vorarlberg, Tyrol and Salzburg in Western Austria. This geographic area was chosen due to its relatively homogeneous context with regard to population, income and infrastructure. This mountainous area also is known for its established rural tourism industry (Weiermair et al., 2007), mostly concentrated in known winter sport destinations such as a Lech and St. Anton am Arlberg, Ischgl or Kitzbühel. It is also largely dominated by small and medium-sized family firms (Doerflinger, Doerflinger, Gavac, & Vogl, 2013). The questionnaire link was not sent to businesses in the three major urban areas (Innsbruck, Salzburg and Dornbirn/Bregenz) so as to ascertain the coverage of rural, non-urban firms. The questionnaire was based on prior scales from entrepreneurship and family business literature. The scales were originally formulated in English, but were then translated into German through a translation and back-translation procedure by either established translations from literature (for the EO construct) or, if not available, through translations by two university academics. The questionnaire was pre-tested by six academics and two family executives from family firms. The comments of these academics and executives on content, structure, wording and scaling were incorporated into the final version of the survey. Two email reminders were sent out after 4 and 8 weeks respectively and 1 reminder phone call was conducted after 12 weeks to complete the data collection in September 2015. The online survey resulted in 198 completed questionnaires, which equals an above average response rate of 13.6% (e.g. Sieger, Zellweger, & Aquino, 2013). As can be seen in the descriptive statistics in Table 1, the sample shows to be representative concerning dominant small firm size for the rural tourism industry in general (Peters & Buhalis, 2013), and Western Austria in particular (Doerflinger et al., 2013).

Table 1. Sample characteristics.

	No. of respondents	Percentage
Gender of respondents
Male	119	60.1%
Female	79	39.9%
Generation of firm
Founder-led	117	59.1%
Descendant-led	81	40.9%
Size of firm
Micro (≤9 employees)	70	35.4%
Small (10–49 employees)	99	50.0%
Medium (50–249 employees)	27	13.6%
Large (≥250 employees)	2	1.0%
Age of respondents	Mean (SD)
	46.84 (15.17)

Note: N = 198.

In a second step, respondents from the survey (who were invited to leave their email addresses) were contacted for a follow-up interview (for a similar procedure see, e.g. Jansen et al., 2009). This approach resulted in 44–60 minutes interviews with 4 family firm owner-managers (3 hotels, 1 retail store). The owner-managers were invited to provide more detailed information on the answers given in the survey. In this way, more detailed insights into the results of the survey could be gained and discussed (Kellermanns, Eddleston, Barnett, & Pearson, 2008). After completion, interviews were transcribed and structured into meaningful text units. Data and analysis were based on the original data in German; relevant quotes were translated into English. Accurate and meaningful translation was ensured by consulting a professional language editor. To increase the validity and reliability of the results, a second author critically reviewed the data work done by a first author (Eisenhardt, 1989).

Measures

EO dimensions (independent variables)

The scales to evaluate the EO dimensions were measured on a seven-point semantic differential of two opposed statements, which were based on prior entrepreneurship literature (Covin & Slevin, 1989; Hughes & Morgan, 2007; Lumpkin & Dess, 2001). Overall, three EO dimensions were measured with nine items in total. A factor analysis with varimax rotation was conducted to extract uncorrelated components for the multidimensional EO construct. Table 2 shows that this analysis fully confirmed the existing dimensions, as all items of Innovativeness (items I1–I3; Covin & Slevin, 1989), Proactiveness (items P1–P3; Covin & Slevin, 1989; Lumpkin & Dess, 2001) and Risk-Taking (items R1–R3; Covin & Slevin, 1989) passed the necessary factor loading (>0.60). Since the average variance extracted (AVE) values for all three dimensions range between 0.61 and 0.74 and therefore exceed the cut-off value of 0.50 (Fornell & Larcker, 1981), discriminant validity is achieved. All dimensions also passed the reliability level considered as acceptable for this relatively untested tourism family business context (Casillas et al., 2010; Naldi et al., 2007). The Cronbach’s Alpha reached satisfying levels for Innovativeness (AVE = 0.61; α = 0.67), Proactiveness (AVE = 0.69; α = 0.75) and Risk-Taking (AVE = 0.74; α = 0.83).

Table 2. Items for EO dimensions and results of factor analysis.

	Component (varimax rotation)	α	AVE
I1: In general, the managers of my firm favor a strong emphasis on the marketing of tried and true products or services//  … on R&D, technological leadership, and innovations	0.65
I2: My firm has marketed no new lines of products or services in the past 5 years//  … many new lines of products or services in the past 5 years	0.78	0.67	0.61
I3: Changes in product or service lines have been mostly of a minor nature// … have usually been quite dramatic	0.89
P1: In dealing with competitors, my firm typically responds to actions which competitors initiate//  … initiates actions which competitors then respond to	0.67
P2: In dealing with competitors, my firm is very seldom the first business to introduce new products/services, administrative techniques, operating technologies, etc.//  … very often the first business to introduce new products/services, administrative techniques, operating technologies, etc.	0.89	0.75	0.69
P3: In general, the managers of my firm have a strong tendency to ‘follow the leader’ in introducing new products or ideas//  … to be ahead of other competitors in introducing novel ideas or products	0.91
R1: In general, the managers of my firm have a strong proclivity for low-risk projects (with normal and certain rates of return)//  … for high-risk projects (with chances of very high returns)	0.82
R2: In general, the managers of my firm believe that owing to the nature of the environment, it is best to explore it gradually via timid, incremental behaviour//  … , bold, wide-ranging acts are necessary to achieve the firm’s objectives	0.89	0.83	0.74
R3: When confronted with decisions involving uncertainty, my firm typically adopts a cautious, ‘wait-and-see’ posture in order to minimize the probability of making costly decisions//  … a bold posture in order to maximize the probability of exploiting potential opportunities	0.87

Firm size (independent variable)

Firm size was measured by the number of employees and was then categorised as a dummy variable. The created dummy variable equalled ‘one’ if the firm size was ≤9 employees, therefore categorising all micro-sized firms, and ‘zero’ if the firm size was >9 employees (Greenbank, 2000). Descriptive statistics (see also Table 1) show that this categorisation encompasses 70 micro-sized firms, compared to 128 firms larger than this.

Financial performance (dependent variable)

To measure financial performance, established measures of performance (Lumpkin & Dess, 2001: Sales Growth, Return on Sales, Gross Profit and Net Profit; Becker, 2005: Return on Equity and Return on Investment) were applied. Respondents were asked how these variables developed over the last three years relative to their competitors, measured on a 7-point Likert Scale from ‘low performer’ (=1) to ‘high performer’ (=7). An exploratory factor analysis with varimax rotation for financial performance exhibited that all measures loaded on the same factor (AVE = 0.80) with a high Cronbach’s Alpha (α = 0.95) and thus were reduced to one variable of financial performance.

Control variable

As a control variable, the generation of the firm (founder- vs. descendant-led) was used, for research has shown that the generation of the firm might affect entrepreneurial behaviour and firm performance (e.g. De Massis et al., 2014; Martin & Lumpkin, 2003).

Results

In the sample, self-reported data were used to assess the dependent and independent variables at the same time and from the same individual. Thus, there is a potential source for common method bias in our data (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). To control for this bias and to improve internal validity, some items in the questionnaire were reversed, and variables and items to eliminate proximity effects were separated (Podsakoff, MacKenzie, & Podsakoff, 2012). To test for non-response bias and to improve external validity, the 20% earliest and 20% latest respondents were compared via ANOVA, as late respondents (those only replying at the reminders) are more similar to non-respondents (Armstrong & Overton, 1977). No significant differences were found.

Table 3 summarises the main statistics that define the variables considered in the study. The levels of correlations among the constructs are found to be rather low and below the recommended threshold of 0.65 (O’brien, 2007; Tabachnick & Fidell, 2012). Therefore, it can be concluded that multicollinearity is not a serious concern for the data.

Table 3. Descriptive statistics and correlations.

	Mean	SD	1	2	3	4
(1) Innovativeness	4.05	1.35
(2) Proactiveness	4.58	1.40	0.578**
(3) Risk-Taking	3.23	1.41	0.560**	0.573**
(4) Financial performance	4.75	1.09	0.283**	0.287**	0.198**
(5) Firm size	1.65	0.48	0.165*	0.215**	0.222*	0.194**

Note: N = 198.

*p < .05.

**p < .01.

***p < .001.

Table 4 reports the results of hierarchical multiple regression analyses from the three EO dimensions and their effect on financial performance in tourism family firms. This effect was hypothesised to be negatively moderated by micro firm size. The generation of the firm (founder- vs. descendant-led) was used as a control variable. All ordinal variables were mean-centred to reduce multicollinearity concerns (Aiken & West, 1991), which was not a problem in the data according to correlation analysis.

Table 4. Results of multiple regression analysis.

Financial performance	Model 1	Model 2	Model 3	Model 4
Generation (founder- vs. descendant-led)	0.07	0.04	0.03	0.03
Innovativeness		0.19*	0.18*	−0.22
Proactiveness		0.19*	0.17*	0.76*
Risk-Taking		−0.02	−0.03	−0.17
Firm size (micro vs. larger)			0.12	0.11
Firm size × Innovativeness				0.39
Firm size × Proactiveness				−0.59°
Firm size × Risk-Taking				0.14
F-value	0.83	5.40***	4.87***	3.47***
Adjusted R²	0.00	0.09	0.10	0.10
R²	0.00	0.11	0.12	0.14

Notes: °p < .1; *p < .05; **p < .01; ***p < .001 (two-tailed). Dependent variable: financial performance.

The proposed hypotheses were tested by using four models (Table 4). In the first model only the control variable was considered. In the second model the direct effects of the three EO dimensions, i.e. Innovativeness, Proactiveness and Risk-Taking, on the dependent variable financial performance were incorporated. In the third model the direct effect of firm size on the dependent variable was added. Finally, in the fourth model the interaction effects between firm size and the three EO dimensions were included.

For the regression analysis (Table 4), the first model with the control variable gives an adjusted R² value of 0.00 (F = 0.83; p > .1). The second model for the direct effect of the EO dimensions on financial performance (H1) gives a final R² value of 0.09 (F = 5.40; p < .001). Results for the three dimensions show that Innovativeness (β = 0.19; p < .05) and Proactiveness (β = 0.19; p < .05) are significant and thus, H1a and H1b are supported. The remaining independent variable (Risk-Taking) does not show a significant influence on financial performance. Therefore, results do not support H1c.

The third model for the direct effect of firm size on financial performance shows a slightly positive but insignificant effect (β = 0.12; p > .1). The fourth model investigates the interaction effect of each of the three EO dimensions and firm size. Results show that one new variable is significant: the interaction between Proactiveness (β = −0.59; p < .1) and firm size for financial performance as the dependent variable. Thus, H2b can be supported, while the hypothesised interaction effects for the other EO dimensions cannot be supported. Therefore, results do not support H2a or H2c.

Discussion

This section discusses results of the survey in light of earlier research and insights from the four follow-up interviews conducted with family firm owner-managers from the sample (Jansen et al., 2009). This way, further exploratory insights on the results could be gained. Initially, the factor analysis confirms all three EO dimensions characterising entrepreneurial behaviour in rural tourism family firms. The dimensions also strongly correlate with each other and with performance, therefore satisfying even the assumptions of proponents of the unidimensional construct (Miller, 1983; Wales, Gupta, & Mousa, 2013). However, the regression analyses for the effect of the EO dimensions on financial performance only show significant results for Innovativeness and Proactiveness. These results are in line with Sundbo et al.’s (2007) and Nybakk and Hansen’s (2008) suggestions to focus on Innovativeness and Proactiveness as decisive behaviours of small tourism businesses.

In more detail, the results for Innovativeness confirm assumptions by prior literature (Lerner & Haber, 2001) that in rural tourism family firms innovations in the form of problem-solving ideas (Hjalager, 2010) are key to improving financial performance, as is also pointed out by an owner-manager in the follow-up interviews:

We like to take on new challenges, market changes, and to develop a strategy, which fits our company. Innovation is important. (Retail store, 49 employees)

One solution to implement this Innovativeness in entrepreneurial firms is to develop a strong corporate culture, which often particularly exists in family firms due to their strong familial and social ties (Zahra, Hayton, & Salvato, 2004), which in return actively encourages innovation (Chrisman et al., 2015; Gray, Matear, & Matheson, 2000).

In these endeavours, it is also necessary to consider that innovation in tourism occurs more incrementally than radically (Pikkemaat & Peters, 2006), meaning that innovations in tourism can be different from other industries and refer to increased productivity, quality improvements or training of staff (Hjalager, 2002; Pikkemaat & Zehrer, 2016).

Concerning the Proactiveness of rural tourism family firms, which usually refers to the advantages of being the first mover (Lumpkin & Dess, 1996), Jogaratnam and Tse (2004) found related empirical evidence on the importance of proactive behaviour for the Asia-Pacific hotel industry, where hoteliers ‘proactively scan their environments for emerging trends’ (p. 464). This also holds true for small ethnic tourism firms where proactive monitoring was found to be a major factor for survival (Altinay, 2010). Entrepreneurs in the follow-up interviews point out that this will for Proactiveness is often driven by the goal to pass on the firm to the next generation:

Our way calls for constant change (…) our goals are to sustain and to improve. Change is necessary. (…) I want to pass on a well-working business to my children. (Hotel, 15 employees)

Results did not show significant effects for Risk-Taking on financial performance. This is still very interesting when compared to findings in general family business literature, which identify ambiguous results about the relevance of risk behaviour to family firms (e.g. Naldi et al., 2007; Zahra, 2003). One conclusion about why rural tourism family firms do not relate Risk-Taking and financial performance could be related to their goal of developing a sustainable tourism product (Komppula, 2014) for successive generations. Ostensibly, long-term orientation leads to the rather risk-averse behaviour of rural tourism family firms (Gómez-Mejía et al., 2007; Naldi et al., 2007; Zellweger & Sieger, 2012), as interviewees also point out:

We only take secure investments. Ok, when we started up and built this hotel, there was risk. We were the first ones out here (…). Today, my goal is to sleep well (…) and to not be under too much pressure; I leave these decisions to my successor. (Hotel, 15 employees)

Interestingly, risk in some family firms is not just associated with financial performance, but also with how well the family preserves its socio-emotional wealth goals (Brannon & Edmond, 2016; Chrisman, Chua, & Zahra, 2003):

For me, performance (…) also means that you are able to maintain a harmonic family life instead of achieving short-term business performance. (Hotel, 9 employees)

The interaction effects of the EO–performance relationship with firm size showed that the positive effect of Proactiveness particularly on financial performance is hampered by micro firm size. This finding indicates that despite the flexibility originating from their small size (Bamiatzi & Kirchmaier, 2014; Getz & Carlsen, 2000), micro firms might face difficulties in either implementing proactive efforts due to limited workforce, expected margins, or that they simply do not have the financial means to exploit these proactive capabilities (Weiermair & Peters, 1998). Drawing on the literature of social networks in tourism and the regional embeddedness of tourism family firms (Peters & Kallmuenzer, 2015; Strobl & Peters, 2013), one can find that micro-sized rural tourism family businesses use their networks and social ties to cooperate (Chrisman et al., 2015; Glover & Reay, 2015) and overcome their size disadvantage (Harms, Memili, & Steeger, 2015; Sundbo et al., 2007). This interpretation can also be supported by quotes from the follow-up interviews:

By nature, it is not that easy for such a small company like ours to manage this very professionally, compared to a large firm. (Retail store, 49 employees)

I think we have to cooperate. Of course there is competition on the market, but if we do not try to work together and further develop our destination, then we will have the same problem in winter that we already face in summer: Businesses will shut down. (Hotel, 85 employees)

However, it is worthwhile to mention that the success of these networks also depends on the availability of such regional resources (Komppula, 2014; Lordkipanidze, Brezet, & Backman, 2005).

Conclusion

This empirical study of the EO–performance relationship revealed peculiarities of entrepreneurial behaviour in rural tourism family firms. In addition, micro firm size was found to reduce the efficiency of proactive capabilities.

However, this study is not without limitations. Regarding the sample selection, it has to be considered that the study was conducted in the rural tourism regions of Western Austria. Thus, the sample might be affected by regional and cultural specifics. In addition, even though firm size of the firm offered insights into factors explaining the EO–performance relationship in tourism family firms, it can only explain certain effects. Adding other influencing factors to the analysis of this phenomenon such as the generational status of the firm or theoretical lenses for the behaviour of entrepreneurs (e.g. agency or stewardship theory, Chrisman, Chua, Kellermanns, & Chang, 2007) might further add to our knowledge about entrepreneurial behaviour in rural tourism family firms. Finally, the study relied on subjective performance indicators, and thus objective performance measures could strengthen the identified effects, even though self-reported data was found to correlate with actual performance (Brush & Vanderwerf, 1992).

For future research, this study suggests to further concentrate on the heterogeneity of rural tourism family firms (Nordqvist, Sharma, & Chirico, 2014) concerning their governance structures (e.g. Calabrò & Mussolino, 2013). Family firms with different governance structures such as the percentage of non-family members in firm management supposedly develop different entrepreneurial behaviour and (performance) goals (Getz & Carlsen, 2005). Another concrete avenue for tourism and family business research might be that of further exploring the particular relevance and effects of Risk-Taking. Future studies might want to focus on investigating the risk behaviour in rural tourism family firms, considering the complexity of risk components (performance hazards, ownership, control; Zellweger & Sieger, 2012). Furthermore, this study confirmed the relevance of Innovativeness for tourism firm performance. Drawing on findings from prior tourism research that show a negative correlation of innovation and productivity (Sigala, Airey, Jones, & Lockwood, 2004), it might be fruitful to investigate antecedents and consequences of innovative behaviour in more detail (see also Pikkemaat & Peters, 2006).

Practical implications refer to the fact that the economic development of tourism regions could profit from fostering the entrepreneurial (Ahmad, 2015; Beeton & Graetz, 2001) and cooperative capabilities (Pansiri, 2007) of local family firms such as the creation of cooperative regional initiatives in the form of, for instance, festivals, which in return would contribute firm growth and the creation of jobs (Bamiatzi & Kirchmaier, 2014). Rural tourism is in particular need of long-term oriented, sustainable family entrepreneurs which would assure the longevity of the region (Getz & Carlsen, 2000; Komppula, 2014; Zhao & Getz, 2008). These firms need to be supported in identifying, understanding and using the advantages of regional networks and cooperation (e.g. Baggio, 2011; Strobl & Peters, 2013) to counteract the negative effects of small firm size such as low economies of scale or scope (Sundbo et al., 2007; Zhao & Getz, 2008). Finally, prior research has shown that entrepreneurial best-practices are crucial for destinations’ competitiveness (Svensson, Nordin, & Flagestad, 2005). Ryan, Mottiar, and Quinn (2012) add that entrepreneurial behaviour strongly influences tourism development by stimulating others to follow innovative behaviour. Findings from general management (Faems, van Looy, & Debackere, 2005) confirm that increased inter-organisational collaboration improves the degree of innovation of single organisations. Therefore, it can be concluded that destination management organisations are important actors to stimulate entrepreneurial behaviour of rural tourism family firms by initialising cooperation in product/service development.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Andreas Kallmuenzer is an Assistant Professor at the Department of Strategic Management, Marketing and Tourism, University of Innsbruck, Austria. Before graduating with a PhD of Management in 2015 from the Faculty of Management, University of Innsbruck, he worked several years as an entrepreneur in the rural tourism industry. His research interests are the entrepreneurial behaviour and heterogeneity of family firms with a particular focus on the tourism/hospitality industry.

Mike Peters is Full Professor at the Department of Strategic Management, Marketing and Tourism and holds the chair of ‘SME & Tourism’ at the University of Innsbruck. He started his career with an apprenticeship in the restaurant industry and received his doctoral degree in 2001 for his study regarding internationalisation behaviour of small- and medium-sized tourism businesses. Since then his research interests focus on the processes of entrepreneurship and associated problems, such as succession planning, product development and innovation.

Additional information

Funding

This work was supported by the Tyrolean Science Fund [grant number UNI-0404/1482].