(2009) 37:144160
DOI 10.1007/s11747-008-0114-0
Received: 23 August 2007 / Accepted: 7 August 2008 / Published online: 8 January 2009
# Academy of Marketing Science 2008
145
146
147
New Constructs
Market Environment
Market Turbulence (H1)
Competitive Intensity (H2)
Technical Turbulence (H3)
Innovation Strategy
Prospector
Analyzer
Defender
Reactor
(H4)
GAP
UNDER a
OVER
(H5)
(H6)
Business Unit
Performance
ROI
Relative Market Share
Customer Retention
Overall Performance
Interdepartmental Dynamics
Conflict (-)
Connectedness (+)
Organizational Systems
Formalization (-)
Centralization (-)
Departmentalization (-)
Reward Systems (+)
(-)
a: UNDER = IMO AMO when IMO > AMO and 0 otherwise. OVER = AMO IMO when AMO > IMO and 0
otherwise.
148
measure accounts for the costs of achieving that performance (Matsuno and Mentzer 2000). Because we have
defined the desired level of market orientation to be the
level that maximizes profits, overachieving should reduce
measures like ROI that reflect both market performance and
costs. In contrast, over-achieving can have a positive
impact on market performance measures that do not reflect
relevant costs. For example, high levels of responsiveness
to market intelligence might lead to product line expansions
that increase relative market share and customer retention
but reduce SBU profitability. Taken together, these considerations suggest the following hypotheses:
H6a: When the desired level of market orientation
exceeds the achieved level (DMO>AMO), business unit performance is negatively related to the
gap between the desired and achieved levels of
market orientation.
H6b: When the achieved level of market orientation
exceeds the desired level (AMO>DMO), ROI is
negatively related to the gap between the
achieved and desired levels of market orientation.
H6c: When the achieved level of market orientation
exceeds the desired level (AMO>DMO, relative
market share and customer retention are positively related to the gap between the achieved
and desired levels of market orientation.
149
each interviewee, (2) the achieved level of market orientation, and (3) the desired level of market orientation. A key
portion of the interview focused on the interviewees
evaluation of the Jaworski and Kohli (1993) model of the
antecedents and consequences of the achieved level of
market orientation. In general, interviewee responses
confirmed the validity of the JaworskiKohli model.
We also asked the interviewees to define the desired
level of market orientation and to identify factors that
influence this desired level. An analysis of interviewee
responses yielded four antecedents of the desired level of
market orientation: innovation strategy (including entry
timing), competitive environment, market/customer environments, and technology environments. These findings
were consistent with the variables that emerged from our
literature review.
Survey instrument development
Data collection
Methodology
150
Measures
Tables 1a, 1b, and 1c contain variable means, standard
deviations, and correlations. Because most measurement
items were taken from existing, well-validated scales that
are described in the literature (e.g., Jaworski and Kohli
1993; Moorman 1995; Moorman and Miner 1997; Slater
and Narver 1994), we do not repeat them here (but we
detail them in the Appendix). With a few exceptions (five
control variables used by Slater and Narver (1994) and
three measures of performance) these scales consisted of
multiple items. The few new items developed specifically
for this study were extensively pretested in the field
research. To measure the achieved level of market orientation within each business unit, we averaged together the
three sub-scales developed by Jaworski and Kohli (1993)
and Kohli et al. (1993). These sub-scales measure respondent agreement with statements about their performance of
21 different activities. To measure the desired level of
market orientation, we asked respondents to indicate on an
11-point scale the optimal levels of these 21 activities. The
wording of the instructions was based on our field
interviews and questionnaire pretests indicated that
respondents clearly understood these instructions.
Because strategic orientation can also affect the desired
level of market orientation (Day and Nedungadi 1994;
Slater and Narver 1993), our analysis included three
dummy variables that measure the following distinct
strategy types identified by Miles and Snow (1978):
3.86
3.82
3.84
4.10
6.97
5.56
1.51
0.10
5.40
3.91
4.88
0.30
0.36
0.26
6.39
45.39
6.88
4.20
5.96
3.05
6.16
3.65
5.42
6.58
5.93
5.73
4.73
4.81
2.72
2.78
2.80
2.52
1.44
1.85
1.06
0.29
2.51
2.06
2.83
0.46
0.48
0.44
1.92
18.24
2.02
2.36
2.19
2.76
2.68
2.39
2.56
2.09
2.79
3.67
3.73
3.41
SD
1.00
0.86*
0.82*
0.80*
0.02
0.57*
0.89*
0.48*
0.31*
0.01
0.14**
0.13**
0.04
0.10***
0.34*
0.26*
0.23*
0.49*
0.25*
0.22*
0.00
0.23*
0.33*
0.17*
0.27*
0.04
0.30*
0.02
ROI
1.00
0.85*
0.85*
0.02
0.54*
0.83*
0.38*
0.30*
0.01
0.21*
0.10***
0.10***
0.12**
0.32*
0.27*
0.25*
0.53*
0.22*
0.14**
0.08
0.27*
0.35*
0.20*
0.26*
0.02
0.19*
0.02
RMS
1.00
0.85*
0.05
0.54*
0.89*
0.45*
0.32*
0.04
0.21*
0.07
0.10
0.13**
0.33*
0.23*
0.20*
0.51*
0.29*
0.15*
0.07
0.25*
0.38*
0.21*
0.23*
0.04
0.13**
0.01
CRR
1.00
0.11**
0.61*
0.80*
0.40*
0.33*
0.03
0.29*
0.02
0.10***
0.08
0.38*
0.34*
0.25*
0.51*
0.27*
0.18*
0.06
0.22*
0.38*
0.29*
0.27*
0.04
0.15*
0.04
OPF
1.00
0.75*
0.00
0.16*
0.41*
0.12**
0.07
0.42*
0.06
0.37*
0.30*
0.71*
0.10***
0.25*
0.25*
0.02
0.11**
0.21*
0.34*
0.25*
0.29*
0.16*
0.02
0.01
DMO
UNDER=DMOAMO if DMO>AMO and 0 otherwise. OVER= AMODMO when AMO>DMO and 0 otherwise.
*p=0.01; **p=0.05; ***p=0.1.
ROI
Relative market share (RMS)
Customer retention rate (RR)
Overall performance (OPF)
Desired market orientation (DMO)
Achieved MO (AMO)
Underachieve (UNDER)
Overachieve (OVER)
Competitive turbulence (COMTU)
Market turbulence (MKTU)
Technological turbulence (TECHTU)
Prospector (PROS)
Analyzer (ANLZ)
Defender (DEFD)
Top management emphasis (TME)
DMOTME
Top management risk aversion (RISK)
Interdepartmental conflict (CONF)
Interdepartmental connectedness (CONN)
Formalization (FORM)
Centralization (CENT)
Departmentalization (DEPT)
Reward system (REWARD)
Relative size (RSIZE)
Relative cost (RCOST)
Market growth (MGRO)
Ease of entry (ENTRY)
Buyer power (BPOW)
Mean
1.00
0.65*
0.30*
0.58*
0.11***
0.15*
0.24*
0.01
0.18*
0.48*
0.72*
0.24*
0.52*
0.40*
0.12**
0.05
0.33*
0.54*
0.37*
0.44*
0.13
0.17*
0.03
AMO
1.00
0.47*
0.40*
0.04
0.15*
0.12**
0.06
0.13**
0.38*
0.29*
0.26*
0.51*
0.35*
0.22*
0.02
0.26*
0.43*
0.28*
0.34*
0.02
0.24*
0.05
UNDER
1.00
0.20*
0.06
0.05
0.09
0.13
0.20*
0.14
0.01
0.10
0.21*
0.04
0.03
0.18*
0.15
0.19*
0.10***
0.15*
0.02
0.12**
0.04
OVER
1.00
0.09**
0.07**
0.04
0.10**
0.12**
0.51*
0.56*
0.18*
0.41*
0.24*
0.16*
0.13**
0.15*
0.44*
0.35*
0.61*
0.12**
0.12**
0.06
COMTU
1.00
0.12**
0.04
0.05
0.03
0.16*
0.19*
0.02
0.15**
0.10***
0.02
0.36*
0.11**
0.03
0.14**
0.01
0.01
0.09
0.16*
MKTU
152
TECHTU PROS
ANAL DEFD
1.00
0.08
0.09
0.02
0.07
0.01
0.12**
1.00
0.48*
0.39*
0.02
0.19*
0.02
1.00
0.45* 1.00
0.01 0.03
0.04 0.22*
0.00 0.05
0.08
0.17*
0.29*
0.14**
0.30*
0.43*
0.03
0.15*
0.04
0.03
0.19*
0.38*
0.29*
0.01
0.03
0.06
0.11
0.20*
0.06
0.19*
0.03
0.04
0.00
0.07
0.04
0.16*
0.01
0.03
0.06
0.13** 0.08
0.08
0.02
0.20*
0.06
TME
1.00
0.87*
0.53*
TME
DMO
1.00
0.45*
0.33* 0.38*
0.19* 0.25*
RISK
CONF
1.00
0.18*
0.05
1.00
0.28*
0.01
0.21* 0.15** 0.09
0.07
0.46* 0.40*
0.13**
0.17* 0.17* 0.22* 0.14**
0.16*
0.27* 0.34*
0.07
0.05
0.51* 0.49*
0.54*
0.03
0.62* 0.58*
0.44*
0.13** 0.01 0.06
0.02
0.01
0.27* 0.23* 0.15*
0.01
0.16* 0.14** 0.10***
0.20*
0.11***
0.22*
0.44*
0.26*
0.36*
0.08
0.26*
0.04
1.00
0.41*
0.15*
0.08
0.42*
0.31*
0.09
0.02
0.22*
0.16*
1.00
0.29* 1.00
0.20* 0.07
0.16* 0.07
0.00
0.19*
0.07
0.16*
0.17* 0.17*
0.48* 0.36*
0.36* 0.21*
1.00
0.13**
0.18*
0.12**
0.02
0.13**
0.16*
REWARD
RSIZE
RCOST
MGRO
ENTRY
BPOW
1.00
0.30*
0.35*
0.24*
0.01
0.01
1.00
0.46*
0.05
0.08
0.13**
1.00
0.13**
0.16*
0.12**
1.00
0.16a
0.14**
1.00
0.36*
1.00
153
154
4.00*** b (0.31)
0.07** (0.03)
0.23*** (0.02)
0.05** (0.02)
2.13*** (0.24)
1.21*** (0.24)
0.42* (0.25)
40.62***
0.44
Model 1B
Model 1C
Model 1C-SUR
4.41*** (0.31)
0.08*** (0.03)
0.24*** (0.02)
0.04 (0.04)
1.41*** (0.37)
0.63* (0.36)
0.38 (0.24)
0.14** (0.05)
0.11** (0.05)
4.41*** (0.35)
0.08*** (0.03)
0.24*** (0.02)
0.04 (0.04)
1.47*** (0.35)
0.57* (0.34)
0.38 (0.24)
4.52*** (0.35)
0.08*** (0.03)
0.24*** (0.02)
0.07* (0.04)
1.42*** (0.34)
0.49 (0.33)
0.39 (0.24)
0.13*** (0.05)
36.50***
0.45
3.59**
0.16*** (0.05)
31.89***
0.45
0.45
The first three columns of coefficient estimates were obtained using OLS regression, while the last column was obtained using seemingly
unrelated regression (SUR). The SUR estimates were obtained by estimating a system of equations in which DMO, AMO, and RMS were the
dependent variables.
b
Table entries are unstandardized regression coefficient estimates and standard deviations (in parentheses). All hypotheses were evaluated using a
two-tailed test of significance.
c
The F-statistic in this row tests the hypothesis that the added variable in the model (relative to the model in the previous column) has a
coefficient of zero.
***p=0.01; **p=0.05; *p=0.1.
155
0.11b
(0.41)
0.72***
(0.04)
0.21***
(0.04)
0.03
(0.03)
0.15***
(0.03)
0.09***
(0.03)
0.04*
(0.02)
0.12***
(0.02)
0.10***
(0.02)
0.09***
(0.02)
119.10***
0.78
Model
2B
Model 2BSUR
1.29*
(0.75)
0.50***
(0.11)
0.01
(0.11)
0.03**
(0.02)
0.02
(0.03)
0.14***
(0.03)
0.09***
(0.03)
0.04*
(0.02)
0.13***
(0.02)
0.10***
(0.02)
0.10***
(0.03)
109.12***
0.78
4.97**
2.19***
(0.73)
0.40***
(0.10)
0.06
(0.11)
0.04***
(0.02)
0.02
(0.03)
0.16***
(0.03)
0.08***
(0.03)
0.03
(0.02)
0.13***
(0.02)
0.11***
(0.02)
0.10***
(0.02)
Discussion
We have described a model of market orientation that (1)
specifies the antecedents of the desired level of market
orientation, (2) identifies the desired level of market orientation as an antecedent of the achieved level of market
orientation, and (3) links business unit performance to the
gap between the desired and achieved levels of market
orientation. Our empirical analysis confirms the usefulness
of this conceptual framework for understanding the antecedents and consequences of a business units market
orientation. In particular, the data examined here support the
6
156
Independent variablesb
Fit statistics
Dependent variablesa
ROI
3A
3B
3C
3D
3E
RMS
CRR
OVP
12.93***
0.24
22.58***
0.39
74.38***
11.00***
0.21
18.34***
0.34
59.76***
9.89
0.19
16.13***
0.31
52.61***
15.65***
0.30
26.73***
0.43
81.61***
21.28***
0.40
6.12**
18.54***
0.36
11.49***
15.19***
0.32
4.87**
24.13***
0.43
0.87
142.72***
0.81
877.79***
76.75***
0.69
465.95***
136.68***
0.80
911.01***
83.42***
0.67
364.30***
131.61***
0.81
6.77***
68.93***
0.69
0.28
123.31***
0.80
1.39
64.08***
0.67
0.43
ROI=Return on Investment, RMS=Relative Market Share, CRR=Customer Retention Rate, OPF=Overall Performance.
UNDER=DMOAMO when DMO>AMO and 0 otherwise. OVER = AMODMO when AMO > DMO and 0 otherwise (recall that AMO=
Achieved Level of Market Orientation and DMO=Desired Level of Market Orientation).
c
The Overall Fit F statistic tests the hypothesis that all regression coefficients are zero.
d
This F-statistic tests the hypotheses that the coefficient of the added independent variable is zero. In Model 3B (3C), this F-statistic tests the
hypothesis that the coefficient of AMO (AMO2 ) is zero. In Model 3D (3E), this F-statistic tests the hypothesis that the coefficient of UNDER
(OVER) is zero.
***p=0.01.
b
157
RMS
CRR
OPF
8.19***
(0.43)
2.23***
7.76***
(0.54)
2.36***
8.11***
(0.44)
2.52***
6.30***
(0.50)
1.88***
(0.08)
0.81***
(0.10)
(0.08)
(0.09)
(0.26)
0.00
0.04
0.09**
0.07*
(0.03)
0.04
(0.05)
0.01
(0.04)
0.03
(0.04)
0.05
(0.04)
0.04
(0.05)
0.08**
(0.04)
0.05
(0.04)
0.15***
(0.03)
0.11***
(0.04)
0.02
(0.03)
0.03*
(0.02)
0.09***
(0.02)
0.04*
(0.02)
131.61***
(0.04)
0.05
(0.05)
0.02
(0.04)
0.04*
(0.02)
0.03
(0.03)
0.05*
(0.03)
76.75***
(0.03)
0.01
(0.04)
0.09**
(0.03)
0.01
(0.02)
0.04*
(0.02)
0.00
(0.02)
136.68***
(0.03)
0.09**
(0.04)
0.07*
(0.04)
0.00
(0.02)
0.03
(0.03)
0.04
(0.03)
71.28
0.80
0.67
0.81
0.69
158
References
Aaker, D. A. (1984). Strategic market management. New York: Wiley.
Achol, R. S., Reve, T., & Stern, L. W. (1983). The environment of
marketing channel dyads: A framework for comparative analysis.
Journal of Marketing, 47(4), 5567. doi:10.2307/1251399.
Appiah-Adu, K. (1997). Market orientation and performance: Do the
findings established in large firms hold in the small business
sector? Journal of Euromarketing, 6(3), 126. doi:10.1300/
J037v06n03_01.
Belseley, D. A., Kuh, E., & Welsch, R. E. (1980). Regression diagnostics.
New York: Wiley.
Christensen, C. (1997). The innovators dilemma: When new technologies cause great firms to fail. Boston: Harvard Business School
Press.
159
Kohli, A. K., Jaworski, B. J., & Kumar, A. (1993). MARKOR: a
measure of market orientation. JMR, Journal of Marketing
Research, 30(November), 467477. doi:10.2307/3172691.
Kristof, A. L. (1996). Personorganization fit: An integrative review
of its conceptualizations, measurement, and implications. Personnel Psychology, 49(1), 149. doi:10.1111/j.1744-6570.1996.
tb01790.x.
Lawrence, P. R., & Lorsch, J. W. (1969). Organization and
environment: Managing differentiation and integration. Homewood, IL: Richard D. Irwin.
Lee, J. K. H., Sudhir, K., & Steckel, J. H. (2002). A multiple desired
point model: Capturing multiple preference effects from within
an desired point framework. JMR, Journal of Marketing
Research, 39(1), 7386. doi:10.1509/jmkr.39.1.73.18931.
Lindell, M. K., & Whitney, D. J. (2001). Accounting for common
method variance in cross-sectional research designs. The Journal
of Applied Psychology, 86(1), 114121. doi:10.1037/00219010.86.1.114.
Lusch, R. F., & Laczniak, G. R. (1987). The evolving marketing
concept, competitive intensity and organizational performance.
Journal of the Academy of Marketing Science, 15(Fall), 111.
doi:10.1007/BF02722166.
Malhotra, N. K., Kim, S. S., & Patil, A. (2006). Common method
variance in is research: A comparison of alternative approaches
and a reanalysis of past research. Management Science, 52(12),
18651883. doi:10.1287/mnsc.1060.0597.
Matsuno, K., & Mentzer, J. T. (2000). The effects of strategy type on
the market orientationperformance relationship. Journal of
Marketing, 64(4), 116. doi:10.1509/jmkg.64.4.1.18078.
McDaniel, S. W., & Kolari, J. W. (1987). Marketing strategy
implications of the Miles and Snow strategic typology. Journal
of Marketing, 51(4), 1930. doi:10.2307/1251245.
McKee, D. O., Varadarajan, P. R., & Pride, W. M. (1989). Strategic
adaptability and firm performance: A market-contingent perspective. Journal of Marketing, 53(3), 1535. doi:10.2307/1251340.
Miles, R. E., & Snow, C. E. (1978). Organizational strategy,
structure, and process. New York: McGraw-Hill 1978.
Miller, D. (1988). Relating Porters business strategies to environment
and structure: Analysis and performance implications. Academy
of Management Journal, 31(2), 280308. doi:10.2307/256549.
Mintzberg, H. (1979). The structuring of organizations. Englewood
Cliffs, NJ: Prentice-Hall 1979.
Moorman, C. (1995). Organizational market information processes:
Cultural antecedents and new product outcomes. JMR, Journal of
Marketing Research, 32(August), 318335. doi:10.2307/3151984.
Moorman, C., & Miner, A. S. (1997). The impact of organizational
memory in new product performance and creativity. JMR,
Journal of Marketing Research, 34(February), 91106.
Narver, J. C., & Slater, S. F. (1990). The effect of a market orientation
on business profitability. Journal of Marketing, 54(October), 20
35. doi:0.2307/1251757.
Noble, C. H., Sinha, R. K., & Kumar, A. (2002). Market orientation
and alternative strategic orientations: A longitudinal assessment
of performance implications. Journal of Marketing, 66(4), 2539.
doi:10.1509/jmkg.66.4.25.18513.
Olson, E. M., Slater, S. F., Thomas, G., & Hult, M. (2005). The
performance implications of fit among business strategy, marketing organization structure, and strategic behavior. Journal of
Marketing, 69(3), 4965. doi:10.1509/jmkg.69.3.49.66362.
Olson, E. M., Walker, O. C., Jr., & Ruekert, R. W. (1995). Organizing
for effective new product development: The moderating role of
product innovativeness. Journal of Marketing, 59(January), 48
62. doi:10.2307/1252014.
Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). A conceptual
model of service quality and its implications for future research.
Journal of Marketing, 49(4), 4150. doi:10.2307/1251430.
160
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations:
A resource dependence perspective. New York: Harper and Row.
Phillips, L. W. (1981). Assessing measurement error in key informant
reports: A methodological note on organizational analysis in
marketing. JMR, Journal of Marketing Research, 18(November),
395415. doi:10.2307/3151333.
Qu, R., & Ennew, C. T. (2005). Developing a market orientation in a
transitional economy: The role of government regulation and
ownership structure. Journal of Public Policy & Marketing, 24
(1), 8289. doi:10.1509/jppm.24.1.82.63900.
Robertson, T. S., & Gatignon, H. (1998). Technology development
mode: A transaction cost conceptualization. Strategic Management Journal, 19(6), 515531. doi:10.1002/(SICI)1097-0266
(199806)19:6<515::AID-SMJ960>3.0.CO;2-F.
Ruekert, R. W., Walker, O. C., Jr., & Roering, K. J. (1985). The
organization of marketing activities: A contingency theory of
structure and performance. Journal of Marketing, 49(Winter),
1325. doi:10.2307/1251172.
Sharma, S., Durand, R. M., & O Gur-Arie, O. (1981). Identification
and analysis of moderator variables. JMR, Journal of Marketing
Research, 18(August), 291300. doi:10.2307/3150970.
Shocker, A. D., & Srinivasan, V. (1974). A consumer-based
methodology for the identification of new product ideas.
Management Science, 20(6), 921937.
Slater, S. F., & Narver, J. C. (1993). Productmarket strategy and
performance: An analysis of the miles and snow strategy types.
European Journal of Marketing, 27(10), 3351. doi:10.1108/
03090569310045870.
Slater, S. F., & Narver, J. C. (1994). Does competitive environment
moderate the market orientationperformance relationship? Journal of Marketing, 58(January), 4655.