Market Orientation,Learning Orientation and Product Innovation: Delving into the Organization's Black Box

Many scholars now agree that market orientation is necessary, but not sufficient to facilitate the type of innovation that breeds long-term competitive advantage (cf. Dickson, 1996). In addition to a strong market orientation, a firm must also be able to institutionalize higher order learning processes, the type of learning that enables radical innovation. Recent research (cf. Baker and Sinkula, 1999) has empirically established a synergistic effect of market orientation and learning orientation on organizational performance. This paper attempts to add to the literature by offering a more complete theoretical explanation of how these two constructs interact to affect product innovation capabilities. Three types of marketing firms are identified. Phase I firms learn primarily through modeling and are typically limited to manager-driven incremental innovation. Phase II firms learn primarily through adaptive learning and are typically limited to market-driven incremental innovation. Phase III firms engage in generative learning and pursue ongoing radical innovation. We propose that only Phase III firms are capable of maintaining competitive advantage in dynamic market environments.