Environments, unobserved heterogeneity, and the effect of market orientation on outcomes for high-tech firms

The interaction between market orientation and facets of the environment is theoretically compelling and is hence the primary interaction studied in market orientation literature. Yet empirical literature offers mixed findings regarding these interaction effects. We suggest that these mixed findings may result from the failure of extant research to control for unobserved heterogeneity that may mask the true relationships among market orientation, facets of the environment, and firm outcomes. Such unobserved heterogeneity might arise due to presence of higher order (e.g., three-way, four-way) moderators (e.g., firm size and innovativeness). To illustrate our assertions on unobserved heterogeneity and the role of firm size and innovativeness, we present two studies that use firm performance or new product performance as the outcome variable; the studies (1) include market orientation, two facets of the environment (technological turbulence and market dynamism), and the interactions between market orientation and facets of the environment as explanatory variables, (2) employ finite mixture regression models to estimate the relationships of interest while explicitly accounting for unobserved heterogeneity in the form of latent regimes (segments), and (3) use firm size and innovativeness as concomitant profiling variables in the finite mixture model specification. The results indicate that disaggregate models (i.e., multi-regime solutions) offer the best fit in both studies. The effects across the latent regimes differ, demonstrating the possibility of an aggregation bias in empirical literature and suggesting the need for using disaggregated analyses to study important marketing phenomena. In theoretical terms, these results also suggest the possibility of developing theories that incorporate unobserved heterogeneity and perhaps higher order (e.g., three-way) interaction effects.     

Alliance orientation: Conceptualization, measurement, and impact on market performance

Interfirm collaborations have inspired a rich literature in marketing and strategy during the past two decades. Building on this extant work, the authors developed a new construct, alliance orientation, and explored its influence on firms’ alliance network performance and market performance. The authors drew on data collected from 182 U.S. firms with extensive experience informing, developing, and managing strategic alliances in marketing, new product development, distribution, technology, and manufacturing projects. Using structural equations modeling, the authors demonstrate that alliance orientation significantly affects alliance network performance, which in turn enhances market performance. The findings also suggest that market turbulence exerts a significant moderating influence on the relationship between alliance orientation and alliance network performance, whereas the moderating role of technological turbulence on that relationship does not appear to be significant. The study provides evidence that firms’ alliance orientations positively affect their performance in strengthening their alliance network relationships and in managing conflicts with their alliance partners. Destan Kandemir (kandemir@msn.edu) is a research associate in Center for International Business Education and Research at Michigan State University. She earned her PhD in marketing and international business from Michigan State University. Her articles have appeared in theJournal of Business and Industrial Marketing, Industrial Marketing Management, theJournal of International Marketing, and theJournal of Management. Her research interests include firm resources and capabilities, market-oriented knowledge management, and global alliance management. Attila Yaprak (attila.yaprak@wayne.edu) is a professor of marketing and international business at Wayne State University. He received his PhD from Georgia State University. His research interests include cross-national consumer behavior, global marketing strategy, and international alliances. His research has appeared in theJournal of International Business Studies, theJournal of International Marketing, theJournal of Business Research, andPolitical Psychology, among others. S. Tamer Cavusgil (cavusgil@msu.edu) is University Distinguished Faculty and the John W. Byington Endowed Chair in Global Marketing in the Department of Marketing and Supply Chain Management, Eli Broad Graduate School of Management, Michigan State University.     

Outsourcing and its implications for market success: negative curvilinearity,firm resources,and competition

Over the past few decades, outsourcing has become a widely used and researched means for firms to change their performance. In this article, we attempt to link outsourcing to the market success of firms, specifically their market share. We argue that although firms may be able to increase their market share through outsourcing, this is only true up to a point, beyond which market share actually decreases as a consequence of further outsourcing. There is, in other words, a negatively curvilinear (inverted U-shape) relationship between outsourcing and market share. We also hypothesize that the outsourcing–market share relationship is moderated negatively by both the strength of firm resources and the extent of competition in a firm’s market. We empirically confirm these arguments through a panel data analysis containing over 19,000 observations on manufacturing firms and offer some case examples to illustrate the mechanisms driving these results. Finally, we discuss implications for marketing research and practice.     

The desired level of market orientation and business unit performance

Existing studies of market orientation have hypothesized that the strength of the market orientation/performance relationship depends on environmental variables such as market turbulence, technological turbulence, and competitive intensity. To date most empirical studies have failed to confirm these hypotheses; however, these studies (1) assumed that performance is a linear function of the achieved level of market orientation and (2) tested whether environmental uncertainty moderates this relationship. A complementary explanation for the impact of environmental variables on a firm’s market orientation arises from studies of organizational behavior that link the need for coordination and control to environmental uncertainty and organizational strategy. Building on this perspective, the authors argue that (1) environmental uncertainty influences the desired level of market orientation and (2) the gap between the desired and achieved levels of market orientation influence business unit performance. The authors test these hypotheses with data collected from multiple respondents in 308 US firms. The data analysis confirms that the desired level of market orientation is a function of market turbulence, competitive intensity, technological turbulence, and innovation strategy. In addition, the desired level of market orientation positively influences the achieved level. Finally, when the achieved level of market orientation is less than the desired level, business unit performance is a negative function of the gap between the desired and achieved levels of market orientation.

Environmental marketing strategy and firm performance: Effects on new product performance and market share

Recent studies on marketing and the natural environment have called for research that links environmental marketing strategies to the performance of the firm. This research operationalizes the enviropreneurial marketing (EM) construct and examines its relationship with firm performance. It is the first empirical research to operationalize the EM construct. The new scale, albeit a first attempt, demonstrates encouraging psychometric properties. According to the resource-based view of the firm, a resource such as EM should directly influence firms’ capabilities (e.g., new product development success) but not competitive advantage (e.g., change in market share). A nationwide study of top-level marketing managers supports this perspective. In addition, although market turbulence also affects new product development success, it does not have an impact on EM. This suggests that EM formation is driven by internal rather than external forces. William E. Baker (william.baker@sdsu.edu) is an associate professor of marketing at San Diego State University. His research interests lie primarily in advertising effectiveness, new product success, organizational learning, and market orientation. He has published in leading scholarly journals including theJournal of the Academy of Marketing Science, theJournal of Product and Innovation Management, theJournal of Consumer Psychology, theJournal of Advertising, Psychology & Marketing, and theJournal of Market Focused Management. He has also served as the head of research in a major communications firm and is actively involved in consulting. James M. Sinkula (james.sinkula@uvm.edu) is John L. Beckley Professor of Marketing in the School of Business Administration at the University of Vermont. His research interests lie primarily in the areas of organizational learning, market orientation, product innovation, environmental marketing strategy, and organizational performance. He has published in the leading scholarly journals, including theJournal of Marketing, theJournal of the Academy of Marketing Science, theJournal of Product and Innovation Management, theJournal of Business Research, theJournal of Advertising Research, theJournal of Market Focused Management, theJournal of Business and Industrial Marketing, theJournal of International Marketing, and others.     

The impact of product market strategy-organizational culture fit on business performance

Drawing on the organization theory literature concerning configuration theory, competing values theory, and fit assessment methodologies, we examine the existence and performance impact of product market strategy–organization culture fit. Specifically, we assess the relationship among three important elements of a firm’s product market strategy and the four cultural orientations that comprise the competing values theory of organizational culture using primary and secondary data from the US trucking industry. Using two different conceptualizations and operationalizations of fit, our results provide the first empirical support for the existence of interrelationships among product market strategy decisions and organizational culture orientations consistent with configuration theory conceptualizations of product market strategy–organizational culture fit. We also find support for theorized but previously untested relationships between product market strategy–organizational culture fit and firms’ customer satisfaction and cash-flow return on assets (CFROA) performance. Since product market strategy is heavily reliant on the input of marketers, and organizational culture has long been recognized as having an important impact on marketing-related decision making, these findings have important implications for marketing strategy research and practice.     

Marketing at the retail shelf: an examination of moderating effects of logistics on SKU market share

Given that the impact of retail shelf facings and price on a product’s market share is of substantial interest to marketing managers in the retail supply chain, we examine whether these relationships may be interdependent with the firm’s supply chain activities. We offer predictions regarding the interdependence of the marketing and supply chain variables using monthly in-store observations from 62 different retail stores from five different chains, taken over a 24-month period. The in-store observations included price and number of facings, which is combined with data obtained from the manufacturer on case pack quantity and market share data from the ACNielsen HomeScan consumer scanner panel. Results indicate that shelf facings impact the effects of price and case pack quantity on market share. In addition, we explore the strength of relationships across retailers employing everyday low price versus HiLo pricing strategies. Generally, our findings suggest that retailers and suppliers must work to integrate marketing activities and supply chain processes both within and across firms to most effectively serve the consumer at the retail shelf and increase market share.     

The effect of market orientation on product innovation

Numerous scholars have debated whether marketing fosters or stifles innovation. The discussions, however, have been inconclusive due to limited empirical evidence. The authors investigate the relationship between two focal constructs in the debate: market orientation and product innovation. On the basis of a sample of U.S. manufacturing companies, the authors’ analysis shows that product innovation varies with market orientation. Specifically, (1) customer orientation increases the introduction of new-to-the-world products and reduces the launching of me-too products, (2) competitor orientation increases the introduction of me-too products and reduces the launching of line extensions and new-to-the-world products, and (3) interfunctional coordination increases the launching of line extensions and reduces the introduction of me-too products. Bryan A. Lukas is a senior lecturer in marketing at the University of Melbourne, Australia. His research interests are in the areas of strategic marketing and strategic innovation. His publications have appeared in theJournal of Business Research and other journals. Two conference papers have received recognition from the American Marketing Association. O. C. Ferrell is a professor of marketing at Colorado State University. He has served as president of the Academic Council of the American Marketing Association and is a fellow of the Society for Marketing Advances and Southwest Marketing Association. His publications have appeared in theJournal of Marketing, theJournal of Marketing Research theJournal of the Academy of Marketing Science, theJournal of Public Policy & Marketing, theJournal of Business Research, as well as others. He has co-authored 17 books and more than 100 articles and proceedings’ publications. He has worked as a consultant with organizations such as General Motors, Emerson Electric, and the Water Quality Association.     

Creating market anticipation: An exploratory examination of the effect of preannouncement behavior on a new product’s launch

Preannouncements are strategic marketing communications directed at market participants including investors, suppliers, distributors, and buyers. Most empirical literature focuses on antecedents influencing a firm’s preannouncement behavior and on outcomes related to deleterious responses by competitors. This study differs and follows the large body of extant research that examines preannouncing behavior as a deliberate marketing communication process aimed at influencing market participants in the firm’s favor. The authors develop and test a model of preannouncement behavior that affects the success of a new product launch through market anticipation, competitive equity, and new product development resources. The findings indicate that preannouncement behavior engenders new product success through its positive effect on market anticipation—a favorable industry-wide bias in advance of new product introduction—and emphasizes the use of preannouncements as business-to-business marketing communications aimed at influencing current and prospective supply chain partners in the firm’s favor. Kim Schatzel (schatzel@umd.umich.edu) (PhD, Michigan State University) is an assistant professor of marketing at the University of Michigan, Dearborn. Her business experience includes more than 20 years of corporate and new venture work including tenure as the founder and CEO of a multinational $250 million automotive components firm and three start-up technology-based companies. She is interested in the study of new product development, business-to-business marketing communications, and firm reputation issues. She has published articles in theJournal of Marketing, theJournal of Business Research, and theJournal of Product Innovation Management. She is also highly committed to teaching excellence and has won several awards for undergraduate, graduate, and executive teaching. Roger Calantone (rogercal@msu.edu) holds the Eli Broad University Chair in Business at Michigan State University and is also the director of the Broad Information Technology Management Program (ITMP). He is interested in the study of new product innovation and technology decisions in industrial firms. Currently, his research is focused on new product decisions, industrial market segmentation, global logistics, and the use of neural network and autonomous learning models to valuate product components. He is the author of more than 200 refereed academic articles and proceedings and is coauthor of several books. His publications have appeared in journals such as theJournal of Marketing, the Journal of Marketing Research, Marketing Science, Management Science, Decision Sciences, and theStrategic Management Journal.     

Market-focused sustainability: market orientation plus!

The concept of sustainability is increasingly being addressed theoretically by scholars and practically by managers and policymakers. With this growing focus on sustainability efforts, marketing is in a unique position to elevate its focus from managing relationships with customers to strategically managing a broader set of marketplace issues. Overall, an organization achieves market-based sustainability to the extent that it strategically aligns itself with the market-oriented product needs and wants of customers and the interests of multiple stakeholders concerned about social responsibility issues involving economic, environmental, and social dimensions. To set the stage for marketing’s inquiry into sustainability efforts, I briefly review the concept of sustainability, compare it with corporate social responsibility, bring in stakeholders, argue for the notion of “market orientation plus,” and consider the possibility that the notion of what sustainability encompasses is converging in the marketing literature.     

The product elimination function

Historically, major consideration given to product management has focused on research and development or the introductory stage of the product life cycle. The authors present an empirical study delineating the variables to be considered in the product elimination process. More specifically, the elimination process is evaluated under a situation of poor product performance despite a generally viable market. The basic objectives of the study were: to determine the significant variables in the product elimination process of the Small Appliance Industry; to determine the relative importance of the variables; to examine the interaction among variables. The data obtained through personal structured questionnaire interviews were analyzed and provided a ranking of twenty-six variables relevant to the elimination process. Moreover, the Johnson's Hierarchical Clustering Schemes was applied to determine the interaction among variables. The results indicate that profitability and financial variables are most significant in the elimination decision-process. Second, the primary clusters of importance are concerned with market share, market growth rate, consumer awareness, and competitive action.     

Implementation of market orientation in the subsidiaries of global companies: the role of institutional factors

Drawing upon the market orientation literature and institutional theory, this study examines the factors that affect the implementation of market orientation in the subsidiaries of global companies, using data gathered from multiple informants and multiple sources in 79 subsidiaries located in 45 countries. Findings indicate that the market orientation of subsidiaries is positively related to the legal institutions, local competition in the host country market, and the market orientation of headquarters. The findings also indicate that the headquarters’ market orientation has more pronounced effects on the implementation of market orientation for subsidiaries that strongly identify with headquarters. Moreover, the study demonstrates that cultural distance between home and host countries of the subsidiary strengthens the positive effects of competitive intensity on market orientation implementation. As such, this research addresses an important concern among researchers and managers that is related to how to increase the market orientation and, thereby, the performance of their subsidiaries located in foreign countries.     

Creating a firm-level dynamic capability through capitalizing on market orientation and innovativeness

Drawing on the resource-based view of the firm, this study addresses the dynamic capability-generating capacity of market orientation on firm performance. Whereas prior literature has examined environmental turbulence as a contextual condition shaping the market orientation-firm performance relationship, this study takes an internal approach by focusing on existing stocks of resources within the firm while controlling for environmental conditions. A conceptual model is developed that explains how market orientation can be transformed into dynamic capability when complemented by transformational (reconfig-urational) constructs, such as innovativeness. The empirical results support the authors— theory that the effect of market orientation on firm performance is strengthened when market orientation is bundled together with internal complementary resources, such as innovativeness. The authors discuss the findings in the context of varying stages of the product life cycle and at different levels of market development. Bulent Menguc (menguc@brocku.ca), Ph.D., Marmara University, is currently an associate professor of marketing at Brock University, St. Catharines, Canada. His areas of research interest include sales force management and internal marketing, strategic orientations, and cross-cultural research methodology. His research has appeared in theJournal of the Academy of Marketing Science, theJournal of Retailing, theInternational Journal of Research in Marketing, theJournal of Business Research, theJournal of Personal Selling and Sales Management, Industrial Marketing Management, theJournal of Business Ethics, and theEuropean Journal of Marketing, among others. Seigyoung Auh (sauh@yonsei.ac.kr), Ph.D., University of Michigan, is an assistant professor at Yonsei University, South Korea. His research interests are the application of the resource-based view to marketing strategy, the role of top management teams on marketing strategy, and innovation and organizational learning. He has publications in theJournal of the Academy of Marketing Science, theInternational Journal of Research in Marketing, theJournal of Business Research, Industrial Marketing Management, and theJournal of Economic Psychology, among others.     

Product portfolio analysis and market share objectives: An exposition of certain underlying relationships

Market share plays a central role in a number of portfolio planning models. This article presents an exposition of the underlying relationship between market share, market size, market growth rate, product sales volume and product sales growth rate. Three constructs—the market share multiplier, the physical volume multiplier, and the dollar volume multiplier—which aid in the strategic analysis of the product portfolio are proposed. The linkages between inter-related growth constructs such as the volumetric and dollar sales growth rate, and the nominal and real dollar sales growth rate are discussed. Certain generalizations regarding market share and its sensitivity to various environmental conditions are highlighted.     

Capabilities and financial performance: the moderating effect of strategic type

The Miles–Snow (M–S) strategic typology has continued to receive attention in the academic business press, even though it has been criticized for not making explicit the relationships between strategic type and ultimate profit performance. Using the market orientation and Resource-Based View literature, we develop hypotheses regarding relationships between M–S strategic type and four firm capabilities (technology, information technology, market-linking, and marketing capabilities), relationship between the four capabilities and performance, and the moderating role of M–S strategic type. An empirical test involves multiple data collections from 216 firms. The study results suggest that there are significant relationships between capabilities and performance if one does not account for the moderating role of strategic type. When strategic type is used as a moderating variable, we find that only certain capabilities had significant effects on profitability. For example, technology and information technology capabilities increase financial performance for prospector organizations, while a different set of capabilities (market-linking and marketing) are positively related to financial performance for defender organizations. We discuss how our findings are consistent with the expectations of the Resource-Based View of the firm. We conclude with a discussion of theoretical and managerial implications.

The influence of organic organizational cultures, market responsiveness, and product strategy on firm performance in an emerging market

Organizational culture is a strategic resource that influences a range of activities within firms, and empirical evidence from management and marketing demonstrates that it impacts performance. In this study, we investigate how organic types of organizational culture (i.e., adhocracy and clan) serve as a strategic resource to influence marketing effectiveness and performance in an emerging economy, using an extended form of the resource-based view as our theoretical framework. We posit that organic cultures, which are relatively dominant in emerging-nation firms, serve as antecedents of competitive advantage and superior performance. We selected China as the context to test the veracity of our model and use multiple informants and archival performance data to minimize common method variance. Our results support the proposed model and demonstrate that organic cultures impact market responsiveness, while confirming the critical roles of market responsiveness and product strategy change in producing superior performance. We further demonstrate a direct effect between clan culture and product strategy change, in addition to its indirect effect. Importantly, our results uncover that, although individually either adhocracy or clan culture can significantly improve the firm’s responsiveness, their combined effect does not enhance market responsiveness; that is, their interaction yields a negative coefficient. Additionally, the influence of organic cultures on market responsiveness varies across different industry types. These important differences, along with theoretical contributions and managerial implications of our findings, are discussed, and several avenues for future research are proposed.     

Institutional pressures and marketing ethics initiatives: the focal role of organizational identity

Institutional theory implies that normative societal expectations create pressures for organizations to respond acceptably to important institutional constituents. Although the role of the institutional environment on marketing has been studied, the organizational mechanisms by which firms respond to societal pressures remain under-investigated. We suggest that an important determining factor involves organizational identity, which drives firm response to societal norms and facilitates its quest for legitimacy. Accordingly, this study contributes to organizational theory in marketing by casting identity as the focal mechanism in the firm’s response to the institutional environment. Marketing ethics and CSR issues frame this research given natural synergies with institutional and organizational identity theories and evidence that increasingly, firms must respond to societal expectations involving ethics in their marketing practices. Using game theoretical models and economic experiments, we find that the influence of the institutional environment emerges through firm identity, affecting resource allocation to ethical product augmentation.     

Market orientation and performance of export ventures: the process through marketing capabilities and competitive advantages

Our study focuses on the internal process through which market orientation influences performance in export markets, and develops a model of market orientation–marketing capabilities–competitive advantages–performance relationships. Using survey data of 491 export ventures based in China, we find that marketing capabilities mediate the market orientation–performance relationship, while competitive advantages partially mediate the marketing capabilities–performance relationship. Moreover, coordination mechanism strengthens, and cost leadership strategy weakens, the effects of market orientation on new product development and marketing communication capabilities, respectively. Market turbulence attenuates the effect of market orientation on new product development capability while competitive intensity strengthens this effect.     

Unlocking the power of marketing: understanding the links between customer mindset metrics,behavior, and profitability

Recent evidence about the central role played by perceptual constructs in driving performance outcomes has produced a renewed interest in studying customer mindset metrics (CMMs; e.g., satisfaction, service quality, and loyalty intentions). However, we still lack a proper understanding of how (i.e., process) and to what extent (i.e., magnitude) these CMMs ultimately translate into profitability at the customer level. In this study, we integrate CMMs into an individual-level framework of customer behavior and profitability and provide a conceptual understanding of the process through which these metrics influence customer profitability. Specifically, we propose three mechanisms through which CMMs affect customer behavior and profitability: behavioral effect, marketing effectiveness effect, and marketing efficiency effect. We empirically test this framework across two distinct contexts, a B2B high-tech firm and a B2C telecommunications firm. The results demonstrate that these unobservable CMMs have a significant and multi-dimensional impact on customer behavior and customer profitability. Furthermore, we compute the increases in customer behavior and customer profitability that each firm can expect due to increases in CMMs to help firms improve resource allocation and make better decisions about how much (and when) to invest in CMMs.     

The effect of market orientation and its components on innovation consequences: a meta-analysis

While there is a rich body of research on market orientation’s effect on business performance, much little attention has been given to its effect on innovation consequences. This is the first meta-analytic effort to study the independent effects of market orientation components (customer orientation, competitor orientation, interfunctional coordination) on innovation consequences. Also, it is the first meta-analysis to study the impact of contextual characteristics on the way market orientation affects innovation consequences. The study finds that market orientation components positively affect innovation consequences but that competitor orientation’s effect depends on a minimum level of customer orientation. The study also suggests that the relationship between market orientation and innovation consequences is stronger in highly competitive environments but weaker in technology turbulent ones. Finally, findings suggest that the relationship is stronger in large firms, service companies, and in countries characterized by high individualism and high power distance national cultures.