The Strategic Nexus of Risk, Innovation, and Performance in Family Firms: An Integrated EO–DC Perspective

Abstract

The dynamic and uncertain business landscape requires family firms to engage in risk-oriented strategic behavior while simultaneously leveraging their internal capabilities to achieve sustained performance. Drawing on the integrated perspectives of Entrepreneurial Orientation (EO) and Dynamic Capabilities (DC), this study examines how risk taking—as a strategic entrepreneurial behavior—influences perceived firm performance (PFP) through the mediating role of innovativeness (INV). Data were collected from 460 family-owned small and medium-sized enterprises (SMEs) operating in manufacturing and services sectors. Using SPSS and AMOS-based structural equation modeling, the results demonstrate a significant positive relationship between risk taking and perceived firm performance, with innovativeness serving as a partial mediator. Specifically, risk-taking behavior enhances firms’ innovativeness, which in turn contributes to higher levels of perceived performance. The mediation model displayed robust fit indices supporting the hypothesized framework. This study advances EO and DC literature by empirically validating the mechanism through which risk taking is transformed into superior firm outcomes via innovativeness capability. Practical implications suggest that family business leaders should cultivate innovation-friendly environments and encourage calculated risk-taking to foster sustainable competitiveness. Future research directions are discussed with emphasis on longitudinal and cross-cultural validations.