The effect of corporate entrepreneurship dimensions on business performance of commercial banks in Ethiopia

Abstract

Corporate entrepreneurship (CE) remains under-researched within the banking sectors of developing countries, particularly in Ethiopia. While corporate entrepreneurship (CE) is proven to enhance performance internationally, studies in Ethiopia have largely focused on small and medium enterprises (SMEs) rather than large commercial banks, leaving a critical knowledge gap regarding CE adoption in this heavily regulated sector. This study examines the effect of CE dimensions—pro-activeness, innovativeness, and risk-taking, transformational leadership(TFL)—on the business performance (BP) of commercial banks in the Dessie District, Amhara Region. Adopting a quantitative research approach with an explanatory design, primary data were collected from 251 bank managers and employees via systematic random sampling. Data were validated through factor analysis and tested using multiple linear regression. Multiple linear regression analysis revealed that TFL, pro-activeness, and innovativeness have a statistically significant positive effect on BP, with innovativeness yielding the highest impact. Conversely, risk-taking has a significant negative effect on BP, suggesting a cautious financial environment. The model explains 66.2% of the variance in business performance. This study extends the Resource-Based View (RBV) and Dynamic Capability Theory by identifying TFL and CE practices as crucial, intangible assets that drive performance in highly regulated and conservative emerging markets. The findings contribute to the existing CE literature in the Ethiopian banking sector. Practically, commercial bank executives should cultivate innovative cultures, prioritize leadership development, and re-align risk management frameworks to safely stimulate entrepreneurial initiatives within this conservative economic context.