Risk Propensity as A Catalyst for Business Performance in Emerging Markets

This study examines the relationship between risk propensity and business performance among small and medium enterprises (SMEs) 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 Introduction 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.