This article was downloaded by: [University of Saskatchewan Library] On: 02 October 2013, At: 12:42 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Technology Analysis & Strategic Management Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/ctas20 Alignment of market orientation and innovation as a success factor: a five- country study Malte Brettel a , Monika Oswald a & Tessa Flatten a a Lehrstuhl Wirtschaftswissenschaften für Ingenieure und Naturwissenschaftler, RWTH Aachen University, Germany Published online: 02 Feb 2012. To cite this article: Malte Brettel , Monika Oswald & Tessa Flatten (2012) Alignment of market orientation and innovation as a success factor: a five-country study, Technology Analysis & Strategic Management, 24:2, 151-165, DOI: 10.1080/09537325.2012.647640 To link to this article: http://dx.doi.org/10.1080/09537325.2012.647640 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use of the Content. This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms- and-conditions
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This article was downloaded by: [University of Saskatchewan Library]On: 02 October 2013, At: 12:42Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK
Technology Analysis & StrategicManagementPublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/ctas20
Alignment of market orientation andinnovation as a success factor: a five-country studyMalte Brettel a , Monika Oswald a & Tessa Flatten aa Lehrstuhl Wirtschaftswissenschaften für Ingenieure undNaturwissenschaftler, RWTH Aachen University, GermanyPublished online: 02 Feb 2012.
To cite this article: Malte Brettel , Monika Oswald & Tessa Flatten (2012) Alignment of marketorientation and innovation as a success factor: a five-country study, Technology Analysis & StrategicManagement, 24:2, 151-165, DOI: 10.1080/09537325.2012.647640
To link to this article: http://dx.doi.org/10.1080/09537325.2012.647640
PLEASE SCROLL DOWN FOR ARTICLE
Taylor & Francis makes every effort to ensure the accuracy of all the information (the“Content”) contained in the publications on our platform. However, Taylor & Francis,our agents, and our licensors make no representations or warranties whatsoever as tothe accuracy, completeness, or suitability for any purpose of the Content. Any opinionsand views expressed in this publication are the opinions and views of the authors,and are not the views of or endorsed by Taylor & Francis. The accuracy of the Contentshould not be relied upon and should be independently verified with primary sourcesof information. Taylor and Francis shall not be liable for any losses, actions, claims,proceedings, demands, costs, expenses, damages, and other liabilities whatsoever orhowsoever caused arising directly or indirectly in connection with, in relation to or arisingout of the use of the Content.
This article may be used for research, teaching, and private study purposes. Anysubstantial or systematic reproduction, redistribution, reselling, loan, sub-licensing,systematic supply, or distribution in any form to anyone is expressly forbidden. Terms &Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions
Alignment of market orientation andinnovation as a success factor:a five-country study
Malte Brettel, Monika Oswald and Tessa Flatten∗
Lehrstuhl Wirtschaftswissenschaften für Ingenieure und Naturwissenschaftler, RWTH Aachen University, Germany
The traditional perception of market orientation – as the satisfaction of expressed customerneeds – is considered to be too customer-led, thus producing no radical but only incrementalinnovation. The present study deals with the second facet of market orientation – proactivemarket orientation, i.e. the discovery and satisfaction of latent customer needs – and investigatesthe relationship of firm performance with both market orientation facets in conjunction withincremental and radical innovation. We test interaction effects based on survey data from 737firms from Austria, Germany, Switzerland, Thailand and the USA, and conduct a cross-culturalcomparison of the results. The empirical results indicate significant relationships betweenmarket orientations and market effectiveness and reveal significant interactions between eachmarket orientation facet and the corresponding innovation focus. These findings suggest thatfirms across cultures benefit when they act in a market-oriented way and when they align theirmarket orientation with their innovation strategy.
Since its origin in the two articles of Narver and Slater (1990) and Kohli and Jaworski (1990),market orientation (MO) has been considered to foster several aspects of performance (e.g. Cano,Carrillat, and Jaramillo 2004; Kirca, Jayachandran, and Bearden 2005; Ellis 2006). However,the literature provides two contradictory positions as to how MO influences radical innovation.Christensen and Bower (1996) as well as Berthon, Hulbert, and Pitt (1999) criticise the understand-ing of MO’s positive influence on innovation by arguing that the emphasis on market orientationlimits the development of truly new products. In the same line, Atuahene-Gima (1995) concludesthat MO has a stronger relationship with incremental innovation than with radical innovation.
To resolve these contradictory positions, an additional complementary facet of MO has beenintroduced – proactive MO (Narver, Slater, and MacLachlan 2004). A similar development of MOis also described in the conceptual works of Jaworski, Kohli, and Sahay (2000), Hills and Sarin
(2003) and Kumar, Scheer, and Kotler (2000) who use the concepts of market driven (currentneeds) and market driving (future needs). The relationships of proactive MO with new productsuccess (Narver, Slater, and MacLachlan 2004; Atuahene-Gima, Slater, and Olson 2005) and,from a customer’s point of view, with superior value (Blocker et al. 2011) already have beenvalidated empirically. However, ‘the key assumption that responsive and proactive market orien-tations … influence … incremental and radical innovations, respectively’(Atuahene-Gima, Slater,and Olson 2005, 465) has only been tested with regard to product innovation performance (Zhangand Duan 2010), but not to firm performance. As Tellis, Prabhu, and Chandy (2009) have recentlyrevealed that radical innovation is rather driven by internal culture than by national attributes,it could enhance our understanding of radical innovation to examine these internal cultures andstrategic orientations.
Thus, the present study aims at bridging this gap in the research on proactive MO and radicalinnovation Grinstein 2008a, 2008b) and deals with the following questions:
• Does the type of innovation moderate the relationships between responsive and proactive MOand performance?
• Are these relationships influenced by different cultural contexts?
By providing answers to these questions, we contribute to shed some more light on the relationshipbetween the MO dimensions and incremental and radical innovation. To do so, we develop atheoretical model that integrates responsive and proactive MO in conjunction with incrementaland radical innovation and firm performance. This model is then empirically tested across fivecountries to examine cross-cultural generalisability.
This study proceeds as follows: The next section lays out the theoretical premises. Theresearch model and hypotheses are generated in the third section. The fourth section describes themethodology of the analysis. Our findings are presented in Section 5 and discussed in Section 6.
2. Theoretical premises
2.1. Responsive and proactive market orientation
The construct of market orientation (MO) captures how an organisation implements its marketingconcept. Narver and Slater (1990, 21) define MO as the ‘organizational culture that most effec-tively and efficiently creates the necessary behaviors for the creation of superior value for buyers,and thus, superior performance for the business’. Thus, the traditional MO view is that the wholeorganisation adapts to the expressed needs of customers; it has been confirmed as positively relatedto various organisational performance measures (e.g. Cano, Carrillat, and Jaramillo 2004; Kirca,Jayachandran, and Bearden 2005; Ellis 2006). In this study, the ‘traditional’understanding of MOis referred to as responsive MO. This traditional concept of MO, however, is criticised as beingtoo customer-led and considered to be an obstacle to innovation (Christensen and Bower 1996;Hamel and Prahalad 1994; Kumar, Scheer, and Kotler 2000). Although the conceptual definitionof traditional MO contains ‘future needs of customers’, the two most common operationalisa-tions, MARKOR (Kohli, Jaworski, and Kumar 1993) and MKTOR (Narver and Slater 1990),do not comprise items that deal with customers’ future or latent needs (see Blocker et al. 2011;Narver, Slater, and MacLachlan 2004). Intending to improve the MO construct, Narver, Slater,and MacLachlan (2004) introduced the concept of ‘proactive MO’ and labelled the traditionaloperationalisation ‘responsive MO’.
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Proactive MO aims at identifying more latent needs of customers and at creating a competitiveadvantage based on knowledge about these latent needs (Narver, Slater, and MacLachlan 2004;Atuahene-Gima, Slater, and Olson 2005). The extant literature on the performance consequencesof a proactive MO focuses on its relationship with new product success (Narver, Slater, andMacLachlan 2004; Atuahene-Gima, Slater, and Olson 2005; Tsai, Chou, and Kuo 2008), with theexception of Blocker et al. (2011), who find positive consequences of a strong proactive MO onperceived customer value. The differences between responsive and proactive MOs can also beviewed from the perspective of organisational learning (Cohen and Levinthal 1990; Levinthal andMarch 1993; March 1991). Organisations with a focus on responsive MO are characterised byproximity, refinement, efficiency and implementation, all of which reflect exploitation; those witha focus on proactive MO are characterised by discovery, variation, innovation and risk-taking,which reflect exploration (Tsai, Chou, and Kuo 2008). The differences between responsive andproactive MO are summarised in Table 1.
Table 1. Differences between responsive and proactive MO.
Responsive MO Proactive MO
Customer needsaddressed
Expressedfocused on current needs (Narver et al.2004; Atuahene-Gima, Slater, and Olson2005)
Latentfocused on unexpressed and futureneeds (Kumar, Scheer, and Kotler2000)
Learning/Innovationapproach
Exploitativefocused largely on the domain of the firm’scurrent knowledge and experience andon providing an in-depth understandingof current customers and their expressedneeds (Berthon, Hulbert, and Pitt 1999)
Explorativefocused on the search for new anddiverse information and knowledgethat takes the firm beyond the scopeof its experience and experimentationand yields variation in organisationalactivities (Atuahene-Gima, Slater, andOlson 2005)
Market Existing(Narver and Slater 1990; Narver et al.2004)
Existing or new(Jaworski et al. 2000)
Product or serviceinnovation
Incremental(Narver et al., 2004; Christensen andBower 1996)
Novel and radical(Kumar, Scheer, and Kotler 2000;Atuahene-Gima, Slater, and Olson2005)
Comparatively interactiveinteraction, experiment, lead-userconcept (Narver et al. 2004)
Product or serviceinnovation
Incremental(Narver et al. 2004; Christensen andBower 1996)
Novel and radical(Kumar, Scheer, and Kotler 2000;Atuahene-Gima, Slater, and Olson2005)
Risk-taking Lowfocused on current customers andexpressed needs to reduce likelihood oferrors and make future information searchmore predictable and its use more reliable(Atuahene-Gima, Slater, and Olson 2005)
Highdegree of inefficiency associated witha focus on unfamiliar information andrisking cannibalisation of existingsales (Atuahene-Gima, Slater, andOlson 2005)
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2.2. Incremental and radical innovation
Incremental innovations are developed by broadening existing knowledge and skills, improvingestablished designs, expanding existing products and services, and increasing the efficiency ofexisting distribution channels to meet the needs of existing customers or markets (Danneels2002; Jansen, Van den Bosch, and Volberda 2006). As incremental innovations involve existingknowledge and reinforce existing skills and processes by refining the capabilities, applying currentknowledge and focusing on current activities in existing domains, they are also referred to asexploitative innovations (Lewin, Long, and Carroll 1999).
In contrast, radical innovations are designed to satisfy the needs of latent, emerging customersand markets by offering new designs, creating new markets, or developing new channels ofdistribution (Danneels 2002; Jansen, Van den Bosch, and Volberda 2006). As a major driverof superior performance (Tellis, Prabhu, and Chandy 2009), radical innovation requires newknowledge or departure from existing knowledge. The search for new organisational routines andthe discovery of new approaches to technologies, businesses, processes and products results in amore explorative approach. In other words, the presence of refinement, production, efficiency andexecution may characterise incremental innovations, whereas the presence of search, variation,experimentation, flexibility and risk-taking may be typical for radical innovation (McGrath 2001).
3. Research model
We first examine the performance consequences of responsive and proactive MO. Subsequently,we analyse the interaction effects of responsive and proactive MO with incremental and radicalinnovation to elaborate on how firms with different foci on innovation can benefit from either aresponsive or a proactive MO. Next, as a result of the lack of empirical evidence, we analyse ina somewhat exploratory manner to what degree the performance consequences of the interactioneffects are subject to national circumstances. Our research model is illustrated in Figure 1.
In contrast to Narver, Slater, and MacLachlan (2004),Atuahene-Gima, Slater, and Olson (2005)and Tsai, Chou, and Kuo (2008), who examine how proactive MO influences new product success,
Controls for firm performance• Organizational age• Organizational size• Differentiation focus• B2B vs. B2C• Industry sector
Controls for firm performance• Organizational age• Organizational size• Differentiation focus• B2B vs. B2C• Industry sector
National Culture National Culture
Figure 1. Overview of the examined conceptual model.
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Alignment of market orientation and innovation as a success factor 155
we measure the firms’ performance in terms of market effectiveness, which is conceptualised as afour-item construct (Vorhies and Morgan 2005). We control for various firm-related characteristicsthat could affect our dependent variable, namely organisational age, size, differentiation focus,B2B vs B2C and industry sector (service vs manufacturing).
Direct effects of responsive MO and proactive MO
Responsive and proactive market-oriented behaviours are key capabilities because they generateinformation and use processes that involve complex interactions among individuals and depart-ments within the firm (Jaworski and Kohli 1993). Thus, they reflect superior skills and processesthat are subtle and hard to understand, cannot be easily imitated by competitors and henceconstitute competitive advantages (Hunt and Lambe 2000).
The positive performance consequences of responsive MO are extensively examined in theliterature (e.g. Kirca, Jayachandran, and Bearden 2005). Firms with a strong responsive MObenefit from market-sensing and customer-linking capabilities that enable them to better adapttheir offer to changing customer preferences and that consequently lead to superior performance(Day 1994; Hult and Ketchen 2001). Furthermore, because of close alignment with and reactionto expressed customer needs, responsive MO may reduce risks in the product development pro-cess and enhance the likelihood of new product success (Atuahene-Gima, Slater, and Olson 2005;Jaworski, Kohli, and Sahay 2000; Lukas and Ferrell 2000; Narver, Slater, and MacLachlan 2004).Thus:
H1a: Responsive MO is positively related to firms’ market effectiveness.
To stay ahead of its competitors, however, a firm has to exceed the expectations of its customerscontinuously (Deming 1986; Day 1998, 1999) and ‘merely satisfying customers’ expressed needsmay be insufficient for a business to attract and to retain customers’ (Narver, Slater, and MacLach-lan 2004, 336). An inherent part of proactive MO is understanding the latent needs of customers,that is, needs that are not evident even to the customers themselves. Exploring these needs incooperation with customers can create a high degree of satisfaction and lead to an enduring rela-tionship with repeat business (Atuahene-Gima, Slater, and Olson 2005). When a firm concentrateson latent and future customer needs, it enhances its ability to detect new market and technologydevelopments and to integrate these developments into product innovation (Jaworski, Kohli, andSahay 2000; Kumar, Scheer, and Kotler 2000; Narver, Slater, and MacLachlan 2004). Thus, inline with the studies of Narver, Slater, and MacLachlan (2004) and Atuahene-Gima, Slater, andOlson (2005) on new product development, we hypothesise:
H1b: Proactive MO is positively related to firms’ market effectiveness.
Interaction effects of responsive MO, proactive MO, and incremental and radical innovation
Responsive market orientation, as a customer-led approach (Slater and Narver 1998, 1999), isrelated to understanding and satisfying customers’expressed needs. In other words, a business thatadopts a responsive market orientation exploits its customers’expressed needs for the developmentof new products (Grinstein 2008b). This exploitative approach is associated with organisationalbehaviour ‘which usually is sequential, incremental, and focused on issues or opportunities thatare within the traditional scope of the organization’s activities’ (Slater and Narver 1995; see
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also Baker and Sinkula 2007). Therefore, firms with a responsive market orientation may benefitfrom continually improving or upgrading the inherent product and/or service for their customersthrough incremental innovation (Li, Lin, and Chu 2008).
Extant research argues that responsive market orientation can only drive incremental improve-ment of products or services but cannot lead to radical change because it focuses on currentcustomers and their expressed needs (Christensen and Bower 1996). Radical innovation requiresan explorative approach to product development that incorporates needs and ideas that current cus-tomers might not be aware of (Danneels 2002). Therefore, a responsive market orientation mightwell inhibit radical innovation and its benefits (Li, Lin and Chu 2008). Following the argument ofa linkage between explorative and exploitative learning approaches and innovation effectiveness,we hypothesise:
H2a: The relationship of responsive MO and firms’market effectiveness is positively moderatedby incremental innovation.H2b: The relationship of responsive MO and firms’market effectiveness is negatively moderatedby radical innovation.
Proactive market orientation is described as exploring customers’ latent needs and satisfyingthem (Narver, Slater, and MacLachlan 2004; Atuahene-Gima, Slater, and Olson 2005). A firm thatadopts a proactive market orientation is likely to be open to a range and scope of product and mar-ket opportunities that may lie outside its existing experience (Atuahene-Gima, Slater, and Olson2005). Since their approach is rather explorative than exploitative, firms with a strong proactiveMO may be able to detect new market and technology developments early and to challenge exist-ing wisdom, which can result in radically innovative products with unique features (Jaworski,Kohli, and Sahay 2000; Kumar, Scheer, and Kotler 2000; Narver, Slater, and MacLachlan 2004).Therefore, this study expects that the proactive MO performance relationship is positively asso-ciated with radical innovations. However, as it has been suggested that the success of incrementalinnovation depends on how effective a firm is in applying adaptive/exploitative learning (Slaterand Narver 1995), proactive market orientation as an explorative organisational behaviour mightbe inconsistent with the efficiency-oriented refinement characteristic of incremental innovation.Therefore, a proactive MO could weaken the impact of incremental innovations. Hence, a proac-tive market orientation should be associated with more radical innovation, but hinder a firm’sability to perform incremental innovation effectively:
H3a: The relationship of proactive MO and firms’market effectiveness is negatively moderatedby incremental innovation.H3b: The relationship of proactive MO and firms’market effectiveness is positively moderatedby radical innovation.
Role of national context
It has been shown that national characteristics moderate marketing-related phenomena (e.g. Bret-tel et al. 2008). The cultural dimensions (individualism, power distance and uncertainty avoidance)developed by Hofstede (2001) represent the common operationalisation of national culture. Pre-vious research and meta-analyses examine the performance consequences of responsive MO ina large set of countries (e.g. Shoham and Rose 2001; Kumar, Subramanian, and Yauger 1998).While the meta-analysis of Kirca, Jayachandran, and Bearden (2005) does find moderating effects
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Alignment of market orientation and innovation as a success factor 157
of the national cultural dimensions of power distance and uncertainty avoidance, Cano, Carrillat,and Jaramillo (2004) do not detect a moderating effect of the national cultural dimensions or thesocioeconomic development stage on the relationship between MO and firm performance. Most ofthe research on proactive MO to date is conducted with a single-culture focus (US firms surveyedby Narver, Slater, and MacLachlan (2004) and Atuahene-Gima, Slater, and Olson (2005); Tai-wanese firms by Tsai, Chou, and Kuo (2008) and Li, Lin, and Chu (2008)). The culture-spanningresearch of Blocker et al. (2011) on the influence of proactive MO on customer value does notexplicitly investigate cultural and socioeconomic differences, but compares countries. Taking intoaccount that the research on MO found no consistent national dependencies related to the rela-tionship between this construct and performance, we hypothesise in a rather explorative mannerthat the same applies to the performance consequences of the interactions between responsiveand proactive MO and incremental and radical innovation:
H4: The consequences of the interaction between (responsive/proactive) MO and innovationfocus on firms’performance are not moderated by cultural dimensions of individualism, powerdistance, or uncertainty avoidance.1
4. Methodology
4.1. Samples
To validate the research model empirically, survey data was generated in five national contextschosen for their differences in Hofstede’s (2001) major cultural dimensions (individualism, powerdistance, uncertainty avoidance). Table 2 shows the classification of each sample country withrespect to these dimensions.
Firms from diverse industries were surveyed to achieve generalisability of findings (Table 3).The survey was conducted between January and April 2010. Overall, 737 usable answers weregenerated through online surveys and personal interviews (in Thailand), all based on a standardisedquestionnaire: 51 from Austria, 98 from Switzerland, 183 from Germany, 257 from Thailand and148 from the USA. Most of the respondents were managing directors of the surveyed companiesthat we assumed to be well qualified to answer the questionnaire (Table 3).
Since dependent and independent variables were obtained from the same person, there is thepotential for common method bias. Following Podsakoff et al. (2003), we integrated a commonmethod factor into the structural model on which all items loaded in addition to their originalconstruct.As the path coefficients and their significances do not change when the common methodfactor is integrated into the structural model, we conclude that common method bias is not aproblem in our data.
Table 2. Classifications of cultural dimensions, Hofstede (2001).
Nation Power distance (PDI) Individualism/collectivism (IND)a Uncertainty avoidance (UAI)
The present study builds upon established measures already employed in the literature.
Independent variablesThe measures for responsive and proactive MO are drawn from Narver, Slater, and MacLachlan(2004) and were also used by Atuahene-Gima, Slater, and Olson (2005) and Tsai, Chou, andKuo (2008). Incremental and radical innovation were measured through the question proposed byTellis, Prabhu, and Chandy (2009) that collects information on the share of revenue contributedto products or services with either no, incremental or radical modification within the last 3 years.
Dependent variablesWe applied the measurement approach of Vorhies and Morgan (2005) and operationalised thefirms’ market effectiveness with a four-item construct.
National culture and control variablesNational cultural dimensions are measured by the scores developed by Hofstede (2001), whichare shown in Table 2. Organisational size is measured by number of employees; organisational
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Alignment of market orientation and innovation as a success factor 159
Table 4. Correlation, statistics, and square root of AVE in diagonal.
1 2 3 4 5 6 7 8 9 10 11 12 13
Constructs1. Responsive MO 0.942. Proactive MO 0.48 0.903. Market
age by years since foundation; customer focus and industry are self-reported classifications. Themeasure of differentiation focus follows Govindarajan and Fisher (1990).
We calculated Cronbach’s alpha, composite reliability and the average variance extracted (AVE)for all multi-item constructs; all measures are above the thresholds accepted commonly (Bagozzi,Youjae, and Phillips 1991). Discriminant validity according to Fornell and Larcker (1981) isobserved, since the square root of theAVE of each multi-item measure is larger than the correlationof this construct with all other constructs (Table 4).
As survey data is gathered from five different national settings, it is necessary to test formeasurement invariance because invariant measures could lead to biased results. In line withSteenkamp and Baumgartner (1998), configural invariance (the same pattern of factor loadingsacross cultures), metric invariance (equal loadings), and scalar invariance (equal intercepts) forall multi-item constructs with three items or more were analysed. The tests of metric invariance(constraining the factor loadings to be invariant) and scalar invariance (further constraining theintercepts to be invariant) confirm good fit of the data, and at least partial metric and scalarinvariance was established for the multi-item constructs.
5. Findings
Multiple regression analysis with interaction terms was applied (Aiken, West, and Reno1991). Mean-centred values were used to form interaction terms to reduce the likelihood of
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Table 5. Findings of interaction terms (dependent variable: market effectiveness).
H2a Responsive MO × incremental innovation α13 0.04 0.06∗H2b Responsive MO × radical innovation α14 −0.06∗∗∗ −0.07∗∗H3a Proactive MO × incremental innovation α15 −0.08∗∗∗ −0.07∗H3b Proactive MO × radical innovation α16 0.06∗∗∗ 0.07∗∗H4 Individualism (IND) α10 −0.32∗∗
Power distance (PD) α11 −0.17∗Uncertainty avoidance (UA) α12 −0.11Responsive MO × IND α17 0.15Proactive MO × IND α18 0.15Responsive MO × PD α19 0.06Proactive MO × PD α20 0.11Responsive MO × UA α21 0.13Proactive MO × UA α22 −0.00Incremental innovation × IND α23 −0.15Radical innovation × IND α24 −0.08Incremental innovation × PD α25 −0.10Radical innovation × PD α26 −0.05Incremental innovation × UA α27 −0.04Radical innovation × UA α28 0.01Three-way interaction effects
H4 Responsive MO × incremental innov. ×IND
α29 0.03
Responsive MO × radical innov. × IND α30 0.05Proactive MO × incremental innov. × IND α31 −0.01Proactive MO × radical innov. × IND α32 0.22Responsive MO × incremental innov. ×
PDα33 −0.10
Responsive MO × radical innov. × PD α34 0.07Proactive MO × incremental innov. × PD α35 0.08Proactive MO × radical innov. × PD α36 0.04Responsive MO × incremental innov. ×
UAα37 0.05
Responsive MO × radical innov. × UA α38 −0.01Proactive MO × incremental innov. × UA α39 −0.01Proactive MO × radical innov. × UA α40 0.02R2 0.2% 32.0% 32.9% 36.5%F-value 0.27 44.29∗∗∗ 31.72∗∗∗ 11.12∗∗∗
∗∗∗p < 0.01, ∗∗p < 0.05, ∗p < 0.10.
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Alignment of market orientation and innovation as a success factor 161
multicollinearity. In a first step, the control variables were entered in the regression analysis, withmarket effectiveness as the dependent variable (Step 1). Next, the main effects of responsive andproactive MO as well as incremental and radical innovation were entered (Step 2). H1a and H1bare supported since responsive and proactive MO each are positively related to performance. Next,the interaction terms were entered into the regression (Step 3). While the positive interaction effectbetween proactive MO and radical innovation is supported (in line with H3b), thereby lendingsupport to the hypothesis of an alignment of MO facet and innovation focus, the positive interac-tion effect of responsive and incremental innovation is not significant (rejecting H2a). The inverseeffects (of proactive MO with incremental as well as of responsive MO with radical innovation)are both significantly negative, thus supporting H2b and H3a. The results are shown in Table 5.
H4 relates to the national dependency of the interaction effects examined in H1a to H3b. To testwhether national cultural dimensions affect the relationship between the two interaction effects andnew venture performance, we built upon the procedure recently proposed by Kirkman et al. (2009).We added the scores for the cultural dimensions reported by Hofstede (2001) to the interactionterms; i.e. three-way interactions were built that comprised the two constructs examined (e.g.responsive MO and incremental innovation) and the respective scores for cultural dimensions(Step 4). (For these three-way interactions, compare also Dawson and Richter (2006); and for theapplication of interactions with culture dimension values, Martin et al. (2011)). Further, in orderto estimate these three-way interactions, all possible two-way interactions among the relevantvariables were entered into the regression equation (Merlo and Auh 2009). The results of theoriginal independent variables do not change (see step 4 in Table 5) and no significant three-wayinteraction emerges (results in Table 5 (continued)). Following Kirkman et al. (2009), these resultsindicate that the interaction effects examined are not subject to significant national variation. Thus,the interaction effect between responsive, proactive MO and innovation types holds regardless ofnational circumstances; hence, H4 is supported.
6. Discussion and conclusion
6.1. Implications for research
The purpose of the present research is to shed light on the interactions between MO in its respon-sive and proactive forms and innovation. While previous studies have shown that firms benefitfrom following a ‘traditional’ responsive MO, the present study complements extant research byexamining how responsive and proactive MO interact with the degree of innovation.
First, in line with common wisdom in the literature, our study shows that firms generally benefitfrom both responsive and proactive MO. To the best of our knowledge, this is the first study toempirically investigate the relationship between the two MO facets and market effectiveness,thereby complementing the findings of Narver, Slater, and MacLachlan (2004), Atuahene-Gima,Slater, and Olson (2005) and Tsai, Chou, and Kuo (2008) on the positive effect of a proactive MOon new product development.
Second, keeping in mind that both incremental and radical innovation as well as responsiveand proactive MO are each positively related to a firm’s performance with regard to marketeffectiveness, the present study at its core tries to determine which facet of MO is the ‘right’ or‘more appropriate’one for firms with a certain innovation focus. The study finds that the interaction(or alignment) of a strong proactive MO with radical innovation influences firm performancepositively, thereby supporting the argument underlying the creation of the two-dimensional viewof MO by Narver, Slater, and MacLachlan (2004). The alignment of organisational orientation
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and innovation focus in product development guides and focuses the organisation consistentlyand effectively. However, as no significant effect of the interaction of responsive and incrementalinnovation on performance could be found, the question arises whether effective incrementalinnovation requires a strong market orientation. A possible explanation could be that the costs ofa strong market orientation do not outweigh the benefit of incremental product innovations, thusfirms might be better off with a moderate approach of MO. The negative effects of the interactionof proactive (responsive) and incremental (radical) MO suggest that a mismatch of MO type andinnovation focus sends mixed signals to the organisation and hinders effective commercialisationof the innovations developed.
Third, as we did not discover any significant interaction of the investigated effects with cul-tural dimensions, we conclude that – in a globalised business context – MO and innovationconsequences are not influenced by national cultures. Therefore, managers can standardise theirapproach to MO and innovation across national cultures.
6.2. Limitations and avenues for further research
The present study has some limitations that suggest useful avenues for further research.First, this study focuses on the two orientations of responsive and proactive MO. However, the
literature provides more types of orientation a firm can pursue, such as a technology orientation,innovation orientation, and employee orientation (e.g. Siguaw, Simpson, and Enz 2006). Giventhe resource constraints of firms, a thorough understanding is necessary to determine which ofthese orientations can be combined to a firm’s advantage.
Second, as Atuahene-Gima, Slater, and Olson (2005) and Tsai, Chou, and Kuo (2008) show anonlinear relationship of both MO types with new product development, it seems reasonable thatthe relationships and interactions tested in this study could be subject to nonlinearity. Especiallythe combined effect of responsive MO and incremental innovation could have an inverse U-shapedcorrelation with performance and should be investigated further.
Third, the present study focuses on the performance consequences of proactive and responsiveMO as well as on their interactions with innovation types. A next research step might be toelaborate on how to implement a certain orientation or a certain combination of orientations byidentifying their antecedents. While the literature has established the antecedents to a responsiveMO (e.g. Jaworski and Kohli 1993; Kirca, Jayachandran, and Bearden 2005), to our knowledgeno study has investigated empirically how a strong proactive MO can be implemented at theorganisational level.
Fourth, since the same items were used in all five nations, the applied measurement method-ology represents an etic approach. While Berry (1989) recommends this procedure for a firstcross-national study, subsequent studies should adapt the items of the measurement models inorder to accommodate local particularities. As such, particular stakeholders in the proactive MOconstruct could be more important in some national cultures, which would require adaptations ofthe measurement model.
Fifth, as most studies, this study would also benefit from a longitudinal examination, testingthe results with dyadic survey data with different measures of innovation type (e.g. market andtechnology based) and across a broader selection of cultures.
6.3. Managerial implications
It is common wisdom that firms need to adopt a market perspective and be innovative to besuccessful. Firms can learn from the present study that both responsive MO and proactive MO
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Alignment of market orientation and innovation as a success factor 163
are important performance drivers, but also that the ‘right’ market orientation depends on theirdegree of innovation. More radically innovative firms should learn to leverage by following amore proactive MO and refrain from becoming too responsive and customer-led. However, firmsaiming to improve their products incrementally might not necessarily benefit from an overlystrong market orientation; hence, they should extend their market orientation only in a responsivemanner and with a close view on the potential costs and benefits. Since firms typically have limitedfinancial resources and limited time to market their product or service concept, this guidance onwhich type of MO is most beneficial is of central importance. As the findings also hold whennational cultural dimensions are integrated into the interaction terms, firms that internationalisecan benefit from the generalisability of the findings in terms of responsive MO, proactive MOand innovation.
Note
1. This means that we do not expect the estimated influence of cultural dimensions to differ significantly from zero; formethodology, see Verbeek (2004, 24).
Notes on contributors
Malte Brettel is Professor for Business Administration at RWTH Aachen University, Germany, and Professor forEntrepreneurship at WHU Otto Beisheim School of Management (part time). He received his doctoral degree and hispostdoctoral qualification from WHU and is co-founder of several companies. His areas of research interest includeentrepreneurial management and development. He has published his work in various books and journals, including theStrategic Management Journal, the Journal of Product Innovation Management and the Journal of Business Venturing.
Monika Oswald is a PhD student and researcher at the RWTH Aachen University in Germany. She received her Diplom-Kauffrau from the University of Paderborn, Germany and worked for two years for an international top managementconsultancy before starting her PhD studies. Current research interests are responsive and proactive market orientation,as well as cross-cultural research.
Tessa C. Flatten is a postdoctoral candidate at the chair for Business at RWTH Aachen University, Germany. She receivedher masters’degree in business administration from RWTH Aachen University, Germany. Her research focuses innovationmanagement and entrepreneurship. She has presented her research at leading international conferences such as the AoMannual meeting or the AMA and published her work in journals, including the European Management Journal or theJournal of Managerial Issues.
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