Background: There are different types of firms in the world. Those that lead change and those who follow change. In this thesis, the authors have chosen to see if a dynamic industry in a developing nation can be the leaders of change, or if they are stuck as the ones following developments in the west.

Sri Lanka is a developing nation with a rapidly growing software industry. Like its neighbour, India, the country and region has been known for its cheap, yet highly skilled labour. This study thus aimed at seeing if something other than price, namely entrepreneurial strategy can play a meaningful role in explaining growth.

Purpose: To study the importance of the relationships between resources, entrepre-neurial orientation, the perceived environment and growth in a developing nation perspective.

Theoretical framework: Theory based on the Resource Based View, arguing that unique combinations of resources and capabilities are the creators of strategy and competitive advantage, together with theory on the Entrepreneurial Orien-tation of firms looking at innovativeness, proactiveness, risk-taking auton-omy of firms, was used to build a framework for analysing what drives growth in a dynamic market.

Method: In order to fulfil the purpose of the thesis, a quantitative study was con-ducted. A web survey was sent out to 73 firms, while 41 responded. A smaller qualitative study was also conducted in order to exemplify and pro-vide deeper knowledge on the findings from the quantitative part.

Conclusion: Several important knowledge-based resources and the EO components of proactiveness and autonomy showed significant relations to growth. Also, the findings indicated that certain resources contributed significantly to the EO of firms. However, it was proved that Sri Lanka’s software industry is not driven by innovation, but rather other factors.