Too much of a good thing? Entrepreneurial orientation and the non-linear governance effects of SaaS platforms

Purpose: This study examines the role of entrepreneurial orientation (EO) in the governance of software as a service (SaaS) platforms and its impact on strategic alignment and long-term governance performance in small and medium-sized enterprises (SMEs). By conceptualising SaaS as a hybrid governance model, this research investigates how transaction cost attributes affect strategic alignment and how EO moderates these relationships. Design/methodology/approach: The research employs a multi-study research design. Using partial least squares structural equation modelling (PLS-SEM) with reflective constructs’ measurement, Study 1 analysed survey data from 180 UK and US entrepreneurs. Study 2 complemented these results with a quasi-experimental design that relied on a secondary dataset from 238 European start-ups, refining the operationalisation of the variables through industry-based indicators. Findings: The results reveal an inverted U-shaped relationship between human asset specificity and the frequency of SaaS use, and their alignment with SMEs' strategic objectives. Risk-taking enhances the alignment between human asset specificity and SaaS strategic alignment, while proactiveness strengthens the link between SaaS strategic alignment and long-term performance. Both studies support the idea that SaaS strategic alignment follows an inverted U-shaped relationship with long-term performance, indicating that excessive dependence on SaaS may negatively affect governance-enabled strategic outcomes over time. Originality: This study contributes to the entrepreneurial and digital governance literature by conceptualising SaaS as a hybrid governance model and investigating how SaaS impacts SMEs strategically, drawing on the perspectives of transaction cost theory and EO. It extends research by unveiling the non-linear effects of SaaS adoption on strategic alignment and performance, highlighting the role of entrepreneurial decision-making in digital technology adoption