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

Abstract: This study investigates how entrepreneurial orientation (EO) affects governance of SaaS platforms in SMEs, including strategy alignment and long-term governance performance. This study uses SaaS as a hybrid governance model to examine how transaction cost variables affect strategic alignment and how EO moderates these associations. The research uses multi-study design. Study 1 examined 180 UK and US entrepreneurs' survey data using PLS-SEM with reflecting constructs. Study 2 used a quasi-experimental approach using a secondary dataset from 238 European start-ups to operationalize variables using industry-based indicators. The study found an inverted U-shaped association between human asset specificity, SaaS usage frequency, and SMEs' strategic objectives. Risk-taking deepens the link between human asset distinctiveness and SaaS strategic alignment, while proactiveness strengthens the link to long-term success. Both studies show that SaaS strategic alignment has an inverted U-shaped connection with long-term performance, suggesting that excessive SaaS dependence may harm governance-enabled strategic outcomes. This paper introduces SaaS as a hybrid governance paradigm and examines its strategic influence on SMEs, utilizing transaction cost theory and EO perspectives. It shows the non-linear effects of SaaS adoption on strategic alignment and performance, emphasizing entrepreneurial decision-making in digital technology adoption.