This article explores the role of stewardship practices related to entrepreneurial leadership in turning entrepreneurial orientation (EO) into family firm performance while considering its environmental context. Family business research has not fully investigated how the EO–financial performance relationship depends on configurations of internal and external factors which establish strategic fit. We argue that family firms can overcome the often-highlighted paternalism-entrepreneurship paradox by employing stewardship practices related to entrepreneurial leadership (internal factor), which in turn can help them leverage strategic fit between EO and dynamic environments (external factor). The results of a survey of 162 Austrian small and medium-sized family enterprises (family SMEs) show that family SMEs can only profit from EO under certain configurations of internal and external factors. Employing stewardship practices related to entrepreneurial leadership turns out to be an efficient and necessary condition for transforming EO into performance. Environmental dynamism is, furthermore, a double-edged sword facilitating and impeding the transformation of EO into performance. These findings contribute to existing research by shedding light on the role of stewardship practices in establishing strategic fit in entrepreneurial 10 years family firms.