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Risk Propensity as A Catalyst for Business Performance in Emerging Markets

Ibrahim Bolaji, Kamoru Lanre Akanbi

Abstract

This study examines the relationship between risk propensity and business performance among small and medium enterprises in Nigeria, an archetype of a volatile emerging market. Drawing on Entrepreneurial Orientation (EO) theory and Prospect Theory, and employing a cross-sectional survey of 373 SME owner-managers across Lagos, Abuja, Kano, and Ibadan, this paper tests three hypotheses relating risk propensity to overall business performance, financial performance, and non-financial performance. Data were collected via structured questionnaire and analysed using descriptive statistics, Pearson correlation analysis, and multiple regression. Results reveal that risk propensity exerts a significant and positive effect on all three dimensions of business performance (overall business performance: β = .512, p < .001; financial performance: β = .487, p < .001; non-financial performance: β = .468, p < .001). Environmental uncertainty was found to moderate this relationship, amplifying the performance returns of calculated risk-taking in high-uncertainty contexts. These findings affirm that risk propensity is not merely a personality trait but a strategic asset in emerging market environments characterised by institutional voids, infrastructural deficits, and regulatory volatility. Practical and policy implications for entrepreneurs, business support organisations, and policymakers in sub-Saharan Africa are discussed.

Keywords

Risk propensitybusiness performanceentrepreneurial orientationSMEsNigeriaemerging marketsenvironmental uncertainty

References

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