Abstract:

Small and medium enterprise growth belongs to important research area due to the fact that growth oriented enterprises make most tangible contribution to economic growth. Numerous research studies which are devoted to analysing factors related to growth confirmed the SME growth complexity. However, there is a lack of studies that provide causal models of growth. The aim of this paper is to find out which factors have direct and which one indirect effects on sales growth of SMEs in Croatia where entrepreneurial orientation is set as a mediating variable. Data set for this research consists of 191 SMEs from Croatia. Structural equation modelling is used for identification of direct and indirect influences on SME growth. Results showed that entrepreneurial orientation, SME age, export, internal financial resources and corruption have direct effect on SME growth while risk taking propensity, customer orientation, growth aspiration and innovativeness have indirect effect on growth through entrepreneurial orientation. Implications of this study are of value to SME owners, managers as well as scholars by indicating growth as the volitional activity exerted through SME’s entrepreneurial orientation. The SME increases entrepreneurial orientation by anticipating changes in consumers’ needs, by introducing innovative products and services ahead of competitors. In addition, owner/manager’s risk taking propensity and intentional growth attitudes of the SME indicate types of activities that are important for entrepreneurial orientation.