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Investigating the Drivers of Innovation and New Product Success:
A Comparison of Strategic Orientations
Angela Paladino
The notion of producing innovations and achieving new product success has received a
great deal of attention. Though many have investigated these effects in marketing and
various fields within management, there has been little cross-fertilization between
fields of study to explain the basis for this superior performance. Though research has
examined the resource-based view (RBV) and market orientation individually, nonehas evaluated and compared their effect on firm innovation and new product success in
one study. Furthermore, although empirical work has been conducted between market
orientation and organizational learning, comparatively less research has been con-
ducted to evaluate the relationship between organizational learning and the RBV to
examine their combined effects on a firms ability to innovate and succeed. Subse-
quently, the purpose of the present article is to investigate whether a focus on the
customer (i.e., market orientation) or the firm (i.e., RBV) will drive the ability to
(1) innovate within the firm and (2) succeed in terms of new product success, finan-
cial performance, market share, and customer value. The present article examines the
relationship between organizational learning and the RBV and market orientation. It
presents an empirically testable framework that investigates the relationship thatRBV and market orientation have with performance outcomes. Data were collected
from 249 senior executives. LISREL was applied to evaluate the relationships. Con-
firmatory factor analysis and related techniques were applied to assess the robustness
of the measures used. Findings show that organizational learning is strongly associ-
ated with market orientation, which in turn impacts various performance outcomes
including customer value. The RBV had a significant relationship with new product
success. These results suggest that managers seeking innovation and new product
success should focus less on the provision of customer value. Instead they should look
toward developing their resources within the firm, including investing in human re-
sources, to ultimately provide value to the firm. Findings indicate that this unique
offeringinnovationswill have an indirect effect on customer value and financial
performance. In contrast, those in pursuit of positive financial performance and cus-
tomer value should focus on the development of market orientation. Even though this
will not necessarily lead to the development of innovative processes and new product
success according to the present study, this approach may lead to a greater market
share in the long term. This article reviews theoretical and managerial implications in
more depth, providing an impetus for further research.
The author is grateful for the invaluable feedback provided by Abbie Griffin on an earlier version of this article. The author also thanks theeditor, Anthony Di Benedetto, anonymous reviewers of the European Institute for the Advanced Studies of Management and the Journal of ProductInnovation Management, as well as the participants at the 13th Annual Product Innovation Management conference in Milan, for their feedbackthat helped to improve this article. This study was supported by a Faculty of Economics & Commerce Grant from the University of Melbourne.
Address correspondence to: Angela Paladino, Department of Management and Marketing, Level 4, Alan Gilbert Building, University of Mel-bourne, Victoria 3010 Australia. Tel.: 61 3 8344 1916. Fax: 61 3 9348 1921. E-mail: [email protected].
J PROD INNOV MANAG 2007;24:534553r 2007 Product Development & Management Association
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Introduction
T
he resource-based view (RBV) and market
orientation (MO) have independently re-
ceived notable attention in the management
and marketing literatures, respectively, as bases of ex-plaining the attainment of a competitive advantage.
Supporters of the RBV emphasize the importance of
exploiting firm resources to achieve a marketplace ad-
vantage, whereas proponents of market orientation
emphasize the importance of customer value.
The RBV addresses how a firms resources drive its
performance in a dynamic competitive environment
(Collis and Montgomery, 1995). The ultimate objective
is to create persistent above-normal returns and superior
resource value to the firm by developing and deploying
unique and costly to imitate resource bundles to exploitenvironmental opportunities or to neutralize threats
(Peteraf, 1993; Teece, Pisano, and Shuen, 1997). In con-
trast, the ultimate objective of the market-oriented firm
is to create superior value for the customer (Kohli and
Jaworski, 1990; Narver and Slater, 1990).
The relationship among market orientation, re-
source orientation (RO), and elements of short- and
long-term performance has not previously been ex-
amined in one piece of research. Indeed, there is a
dearth of research that examines market orientation
and multiple performance measures at the one time
(Baker and Sinkula, 2005). The present article aims toaddress this gap. Additionally, this study responds to
calls for (1) cross-disciplinary research, particularly in
the areas of marketing and strategic management
(e.g., Hauser, Tellis, and Griffin, 2005); (2) compara-
tive studies of diverse strategic orientations on per-
formance (e.g., Noble, Sinha, and Ajith, 2002); and
(3) research investigating the relationship between
resource-based strategies and innovation (e.g., Karn-
iouchina, Victorino, and Verma, 2006).
Similarly, an understanding of the drivers of new
product success is also becoming increasingly perti-
nent. This variable has a demonstrated effect on prod-
uct performance, especially in highly competitive andvolatile environments that increase rates of technical
obsolescence and shorten product life cycles (Griffin,
1997; Langerak, Hultink, and Robben, 2004). Finally,
Montoya-Weiss and Calantone (1994) identified only
two studies out of more than 47 that had employed
the use of path analysis, calling for the increased use
of these sophisticated techniques.
Accordingly, the present article contrasts the ef-
fects of two strategic orientations to evaluate if and
how resource orientation and market orientation
drive innovation, new product success, and diverseelements of performance using structural equation
modeling. The study also takes into account the rela-
tionships between performance variables such as, for
example, between product quality and new product
success, where there has been a dearth of research
(Henard and Szymanski, 2001).
The present article is organized as follows. A review
of the RBV and market orientation is provided and
contrasted, followed by a brief introduction to resource
orientation. The article then reviews relevant organi-
zational learning literature, which is positioned in this
article as a key driver of the two nominated strategic
orientations. This is followed by a presentation of the
relevant hypotheses. A discussion of the methodology,
measures, and results are then provided. Finally, the
conclusions and implications are presented.
A Review of Learning and the Drivers ofPerformance
The Resource-Based View
The RBV aims to clarify how a firms resources drive
its performance in a dynamic competitive environ-
ment (Collis and Montgomery, 1995). Unlike market
orientation, the RBV is primarily internally oriented
in that its focus lies with the development and de-
ployment of unique bundles of firm resources. It is
concerned with accumulating a unique resource base
that is immobile and heterogeneous (Barney, 1991).
Hence, firms devote effort to generating a resource
base that will be difficult and costly, if not impossible,
to imitate. It then uses this resource base to exploit
BIOGRAPHICAL SKETCH
Dr. Angela Paladino is senior lecturer in the Department of Man-agement and Marketing at the University of Melbourne, Australia.
She received a Chancellors Medal for Excellence in a Ph.D. disser-
tation from the University of Melbourne and recognition for teach-
ing excellence at the undergraduate and postgraduate levels at the
university. Her research has appeared in numerous academic jour-
nals, conference proceedings, and books, including those published
by the American Marketing Association, the Academy of Market-
ing Science, the Strategic Management Society, as well as in Man-
agement International Review, Business Horizons, Management
Decision, and Journal of Customer Behaviour. Dr. Paladino active-
ly researches in strategic marketing, innovation management, and
environmental marketing and is consistently engaged with industry
and government organizations.
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opportunities or to neutralize threats that arise in the
external environment.
Market Orientation
Market orientation is defined as the organizational
culture that most effectively and efficiently creates the
necessary behaviors for the creation of superior value
for buyers and thus, continuous superior performance
for the business (Narver and Slater, 1990, p. 21).
Many researchers increasingly refer to market orien-
tation as a strategy, recognizing the impact that its
pursuit has on a firms long-term decision-making
strategies (Greenley, 1995). Similarly, Moorman and
Rust (1999, p. 484) recently established how market
orientation is a value-based strategic philosophy
manifesting itself in behaviors designed to keep the
firm close to the customer. [Conversely, it is] the mar-
keting function that is a collection of capabilities
needed to implement the output of a strong market
orientation.
Comparing the RBV and Market Orientation
It is arguable that firms pursuing a RBV leverage their
resources in search of an appropriate market. The
primary focus rests with the internal environment,
followed by an evaluation of how the external envi-
ronment fits. Hence, analysis begins internally and
progresses outward toward the market. In contrast, a
firm adhering to market orientation commences with
an examination of customer needs and then seeks to
develop the resources required to serve this market.
The focus rests with the external environment, fol-
lowed by the internal environment. Hence, analysis
begins externally and progresses inward toward the
firm. These sentiments are echoed by Kahn (2001),
who acknowledged that market orientation has an
external focus (through customer and competitor ori-entations) and an internal focus (through interdepart-
mental integration).
Internally focused firms are most likely to gauge
the strength of their position, whereas externally
focused firms rely on the market for standards to
attain (Day, 1990). As a result, these internally
focused firms risk neglecting to seek opportunities
that provide scope to better serve their customers and
to imitate their competitors. These firms are also in
danger of overlooking important competitive forces.
Similarly, market-oriented firms might provide prod-
ucts and services to customers they are ill-equipped to
serve, whereas resource-based firms may miss major
changes in the marketplace that would require the
development of new capabilities. Alternatively, these
firms may create assets that add little value to the
companys market strength (Verdin and Williamson,1994).
As the RBV is a theory of the firm, it cannot be
tested in its current form. Thus, a construct that ap-
plies the precepts of the RBV was used. The resource
orientation (RO) scale assesses the extent to which a
firm is oriented toward the development of valuable
and unique resource bundles (Paladino, 2006; Pala-
dino, Whitwell, and Widing, 2006). Resource orien-
tation, which describes the degree to which a firm
practices a RBV, is composed of three dimensions:
synergy, uniqueness, and dynamism. Thus, this stra-tegic orientation is assessed at the same level of mar-
ket orientation, an alternate strategic orientation. A
driver of these strategic orientations is now reviewed.
Organizational Learning
Organizational learning (OL) requires management to
continuously question practices and to share their
knowledge to ensure that learning pervades all deci-
sions and becomes embedded in decision rules (Hult,
1998). Three crucial areas warrant attention by those
wishing to pursue learning: (1) value, which is pro-
vided to customers through goods and services; (2)
continuous renewal of company operations and pro-
cesses; and (3) distinct resources (Belohlav, 1996).
This requires the company to engage in continuous
experimentation, learning, and resource recombina-
tions (Galunic and Rodan, 1998; Slocum, McGill, and
Tei, 1993; Webster, 1994).
Organizations that engage in learning not only rec-
ognize and exploit opportunities but in time, are also
capable of creating new opportunities (Belohlav,1996). A firm who is able to control the marketplace
through its resources would be ideally equipped to do
this. Learning is manifest in the knowledge, experi-
ence, and information of an organization (Mahoney,
1995). This will help an entity to keep up with and to
stay ahead of competitors. This will also entail listen-
ing more closely to customer complaints to revitalize
areas of the company that require attention (Slocum,
McGill, and Tei, 1993). Hence, organizational learn-
ing is related to elements of a resource orientation and
RBV and market orientation.
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Hypotheses
Organizational Learning and Resource Orientation
It is proposed that both resource orientation and
market orientation are influenced by organizationallearning. Organizational learning is history dependent
(Mahoney, 1995) and has a major influence on a
firms value systems and behavior that form (e.g.,
Sinkula, Baker, and Noordewier, 1997). Learning is
intrinsic in a resource orientation and is composed of
both internal (i.e., doing, using, and failing) and ex-
ternal activities (i.e., learning from, for example, com-
petitors and customers) (Chiesa and Barbeschi, 1994).
Resource orientation views firms that continually im-
prove their capabilities through their experience as
being able to learn. Such firms question how resources
can be developed. Furthermore, organizational learn-
ing assists a firm in accumulating its base of resources
by learning how to acquire, process, store, and
retrieve information (Mahoney, 1995).
Interfirm collaboration allows firms to engage in ex-
ternal projects and to reconsider organizational pro-
cesses and strategies. This external collaboration is an
effective mechanism through which to stimulate learn-
ing (Dodgson, 1993). It is also strongly related to the
need for a firm to adopt an external orientation in uni-
son with an internal position to be able to continually
respond to the rapidly changing environment and toanticipate future opportunities. Thus, in this respect,
organizational learning acts as an antecedent of resource
orientation. Hence, consider the following hypothesis:
H1: The greater the organizational learning, the higher
the resource orientation.
Organizational Learning and Market Orientation
A number of characteristics distinguish learning pro-
cesses that are almost analogous to a number of as-pects of market orientation (Day, 1990). These
include open-minded inquiry (whereby decisions are
made from the market-back), widespread information
distribution, mutually informed mental modes, and
an accessible memory of what has been learned. Most
important, however, is that a company act on the in-
formation received and then evaluates outcomes,
prompting further learning to take place (Sinkula,
Baker, and Noordewier, 1997). These aspects are all
strongly associated with interfunctional coordination,
a key component of market orientation. Organiza-
tional learning is argued to influence market-oriented
thought processes and related behaviors, whereby
a strong orientation toward learning is needed to
engender the type of market orientation processes
required to allow a firm to develop a competitive
advantage (Baker and Sinkula, 1999). Research sug-gests that information acquisition takes place from
organizational experiences or memory, providing fur-
ther support that organizational learning acts an
antecedent of market orientation (Slater and Narver,
1995). Thus, consider the following hypothesis:
H2: The greater the organizational learning, the higher
the market orientation.
The Effects of Resource and Market Orientationson Performance
Performance is a multidimensional construct consist-
ing of more than simply financial performance (e.g.,
Baker and Sinkula, 2005; Henderson and Cockburn,
1994; Jaworski and Kohli, 1993). Though many have
limited the assessment of performance to financial
outcomes, it is only recently that researchers have
recognized that customer outcomes are just as valu-
able as indicators of performance. Here, market ori-
entation and resource orientation are posited to have
an impact on a number of outcomes as detailed in
Figure 1.
The literature has indicated that formidable re-
lationships exist between distinct resources and
capabilities and performance (e.g., Sharma and
Vredenburg, 1998) and between market orientation
and performance (Baker and Sinkula, 2005; Jaworski
and Kohli, 1993; Kohli and Jaworski, 1990; Narver
and Slater, 1990; Slater and Narver, 1994). Consistent
with the extant literature, financial performance is as-
sessed in the present study. It is argued that a resource
orientation will enable a firm to accumulate uniquebundles of resources that are difficult to replicate by
competitors that enable them to increase financial
performance.
Overall performance measures are used to assess a
firms general perception of its relative performance.
Though some research has shown a positive relation-
ship between market orientation and overall perfor-
mance (Slater and Narver, 1994), other literature has
demonstrated that a negative or negligible relation-
ship exists (e.g., Han, Kim, and Srivastava, 1998).
Although there is no empirical support for such a
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relationship for resource orientation, research sug-
gests that a positive relationship between resource
orientation and overall performance should ensue as
evidenced by the positive relationship between dis-
tinct, valuable capabilities and resources and perfor-
mance (e.g., Barney, 1991; Henderson and Cockburn,
1994; Sharma and Vredenburg, 1998).
H3: The greater the resource orientation, the greater
(a) financial performance and (b) overall firm perfor-
mance.
H4: The greater the market orientation, the greater
(a) financial performance and (b) overall firm perfor-
mance.
Product quality is concerned with the degree to
which the product meets or exceeds a customers
expectations (Day, 1990). It encompasses the corpo-
rations assessment of the product merits and charac-teristics relative to competitors in addition to a
products design quality and the extent to which the
product is fit for consumer use (Day, 1990). Quality
levels are only achieved if a company has the internal
mechanisms, external dynamics, and performance
standards to pursue excellence. This is related to re-
source and market orientations, whereby an increase
in both will increase product quality. Quality and
market orientation have been empirically shown to be
positively and significantly related (Caruna, Pitt, and
Berthon, 1998).
Research has demonstrated that increasing percep-
tions of quality has a positive influence on a firms
financial performance (Anderson, Fornell, and Lehm-
ann, 1994). Hence, resources should be allocated and
developed to improve this. Companies must have sys-
tems in place that allow them to monitor both the
customer and the competitor and to disseminate this
information across all company functions to develop
and maintain a strong market position. This enables
the company to use its internal resources to be re-
sponsive to consumer needs. Firms need to establish
and develop resources that are required to understand
these customer requirements and to deliver promised
value. Few have analyzed the impact of unique firm
resources on quality. To preserve quality, a company
needs to continually invest in its resource base.
H5: The greater the resource orientation, the greater
the product quality.
H6: The greater the market orientation, the greater the
product quality.
Although most innovation research has examined
its impact on performance, relatively few studies an-
alyze how firm strategies influence innovation and
new product success in one investigation (Jaworski
and Kohli, 1996). Innovation is an organizational
spanning and continuous process that must continu-
ally change in response to and in anticipation of
changing environmental conditions (e.g., changing
Resource
Orientation
Market
Orientation
Strategic Orientation Performance OutcomesAntecedent
New Product
Success
Customer
Value
Overall
Performance
Financial
Performance
Organizational
Learning
Control Variables
Buyer Power
Supplier Power
Entry Barriers
Threat of Substitutes
Competitive Rivalry
Product
Quality
Innovation
Figure 1. Contrasting the Effects of Organizational Learning, Resource Orientation, and Market Orientation on Innovation andPerformance
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customer need, competitor offerings) (Pitt and Clarke,
1999). New product success constitutes the very end of
the innovation process (Perez-Bustamante, 1999).
Recent research suggests that market orientation
leads to new product success directly (e.g., Atuahene-
Gima, 1995; Baker and Sinkula, 2005; Kahn, 2001; Weiand Morgan, 2004) or through successful innovation
(Slater and Narver, 1998). Each component of market
orientation may impact innovation. For example, firms
that focus strongly on their customers may be able to
learn from their customers, hence enabling them to an-
ticipate customer latent needs and to devise truly inno-
vative offerings on a continuous basis (Han, Kim, and
Srivastava, 1998). Roberts (1990) argues that the pos-
itive relationship between market orientation and new
product success emanates from firms evolution toward
market orientation by devoting more resources andtime to structures and processes that engender an un-
derstanding of their customers.
Some studies have claimed that a market orienta-
tion is led by the customer, thereby detracting from
the ability to innovate. In fact, some have found there
to be no direct relationship between market orienta-
tion and new product performance when examined
empirically (e.g., Kirca, Jayachandran, and Bearden,
2005; Langerak, Hultink, and Robben, 2004). There is
nonetheless a plethora of work that depicts the oppo-
site to be the case. Such studies suggest that it is
indeed an in-depth understanding of consumer re-
quirements, coupled with a detailed knowledge of the
market that enables an organization to develop suc-
cessful new products (e.g., Atuahene-Gima, Slater,
and Olson, 2005). Though some studies have distin-
guished between proactive and reactive market orien-
tation, their findings still illustrate the positive
relationship that market orientation has with innova-
tion and new product success (e.g., Atuahene-Gima,
Slater, and Olson, 2005; Narver, Slater, and Mac-
Lachlan, 2004; Slater and Mohr, 2006). Research in-
dicates that a market orientation augments the abilityof management to influence the effectiveness of inno-
vation activity. Hence, although market orientation is
anticipated to lead to innovative offerings to the mar-
ketplace, it is anticipated to only indirectly lead to
new product success through customer value.
Customers are not always the key to innovation
(e.g., Higgins, 1996). Firms occasionally need to lead
customers to recognize their latent needs. This is il-
lustrated through a number of innovative products
that have been presented to the market such as the
Sony Walkman or a CD player. According to a
resource orientation, innovations refer to new combi-
nations of existing resources and skills. To facilitate
innovation, the firm must be able to create dynamic
routines, to foster collective learning, and to transfer
information and skills within the organization (Pala-
dino, 2006). The control of such resources will aug-ment the firms propensity to innovate. In addition,
these resources need to embody the necessary resource
attributes such as complexity and tacitness to aug-
ment the attractiveness of the innovation (Grant,
1991).
Firms should be able to leverage their resources to
exploit opportunities and to influence the market con-
text in which they compete through innovation. Some
studies have investigated the role of core skills and
competences (e.g., product planning) and have dem-
onstrated their positive relationship with innovationand new product success in industry-specific studies
(e.g., Muffatto and Panizzolo, 1996). Although firms
may not be able to sustain superior profits from one
innovation, they are, however, able to use their abil-
ities and resources to continually innovate (Roberts,
1998). Similarly, superior firm resources may also
translate into new product success, as they enable
firms to attain more market power and thus compet-
itive advantage (Gatignon and Xuereb, 1997). As
such, firms are able to dedicate many resources to in-
novation design and implementation. New products
succeed because of three primary reasons: (1) their
uniqueness or superiority; (2) managements posses-
sion of market knowledge; and (3) marketing profi-
ciency or the possession of technical or production
synergies (Hooley, Saunders, and Piercy, 1998, p.
370). These attributes are all highly associated with
elements of both market orientation and a resource
orientation.
H7: The greater the resource orientation, the greater
the level of innovation of the firm.
H8: The greater the resource orientation, the greater
the level of new product success.
H9: The greater the market orientation, the greater the
level of innovation of the firm.
H10: The greater the market orientation, the greater
the level of new product success.
From the preceding discussion, market-determined
factors and a commitment to the customer appear to
be the most crucial elements to new product success,
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whereas the resource endowment of the firm appears
to be more pertinent for a products innovativeness.
This suggests that new product success will be more
highly associated with a market orientation as com-
pared with a resource orientation. On the other hand,
it appears a resource orientation is more importantthan market orientation for innovations to be real-
ized. Thus, both market orientation and resource-
dependent strategies are important for innovation,
implying that a balance of both internal and external
requirements will ultimately allow the firm to succeed.
Similarly, as a result of the different starting points of
analysis, a number of different outcomes are expected.
For example, the focus of market orientation seems to
be on customer analysis, followed by competitors and
then the company. Hence, it is likely that market ori-
entation will be most strongly associated with cus-tomer outcomes, such as customer value more so than
financial outcomes. Similarly, the RBV is strongly as-
sociated with internal processes and systems. Thus,
resource orientation would be most strongly associ-
ated with dynamic outcomes, such as innovation as
compared with customer outcomes. Hence, consider
the following hypotheses:
H11: Resource orientation will have a greater influence
on innovation than market orientation.
H12: Market orientation will have a greater influence
on new product success than resource orientation.
Although customer value has been widely re-
searched in the marketing literature, research has
not examined its relationship with the RBV: Cus-
tomer value is a customers perceived preference for
and evaluation of those product attributes, attribute
performances, and consequences arising from use that
facilitate (or block) achieving the customers goals
and purposes in use situations (Woodruff, 1997,
p. 142). Conversely, market orientation is driven bythe need to provide customers with value. All em-
ployees should be motivated to provide customers
with value and must be able to create and deliver
procedures that provide value (Day, 1990). Customer
value will only be created when a firm is able to fully
exploit and leverage its critical resources. This has
implications for resource orientation. A firm exists
primarily to provide customers with a product or
service, as customers cannot satisfy all of their needs
in an effective and efficient manner (Slater, 1997).
Hence, firms need to establish resources that are
required to understand these customer requirements
and to deliver the promised value: Firms with a cus-
tomer value that is complemented by appropriate re-
sources and capabilities are best positioned to attract
the capital necessary for the expansion of scale or
scope of activities (Slater, 1997, p. 164). This, how-ever, assumes that customer value already exists: The
key to successful competition is to select market[s] . . .
where the companys skills and resources will deliver
the highest value to customers compared with com-
petitors (Webster, 1994, p. 84). The value of such a
strategy increases if competitors find it difficult to
emulate distinct offerings as a result of inadequate
funds, the absence of human resources, or inadequate
technology. Resource orientation stresses the impor-
tance of a firm being composed of unique resource
bundles that both identify the company and allow itto achieve superior performance (Paladino, 2006).
The provision of customer value is not the firms pri-
mary objective when pursuing a resource orientation.
As such, it is not expected that customer value would
be a direct outcome of resource orientation.
H13: Resource orientation will have no significant
relationship with customer value.
H14: The greater the market orientation, the greater
the customer value.
Research Design
The business-unit level of analysis was used to ensure
consistency with previous research (Henderson and
Cockburn, 1994; Narver and Slater, 1990). Data were
collected through use of survey administration. A
multiple-item survey was administered to senior exec-
utives in a sample of 500 top-performing companies in
terms of revenue. The mailing list was obtained from
company listings acquired from Dun & Bradstreet.Respondents were provided with the opportunity of
receiving a report of the findings if they participated.
Such nonmonetary incentives have been shown to in-
crease response rates (Yu and Cooper, 1983). Data for
the final survey were collected from 249 senior executive
informants after two waves of the survey and a final
reminder postcard was sent to respondents. A response
rate of 47% was achieved. Armstrong and Overtons
(1977) procedure of comparing early versus late respon-
dents was employed to assess nonresponse bias. Results
indicated that there was no nonresponse bias.
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Scale Measurement and Evaluation
A five-point Likert-type scale format was used to
measure executive assessments of each item. All mul-
ti-item scales used were derived from previously
established measures as detailed in Table 1.
The Narver and Slater (1990) MO scale was
adopted as it was broad in scope and captured an
orientation rather than specific processes and proce-
dures (Moorman and Rust, 1999). Both the RO and
MO scales were subject to confirmatory factor anal-
ysis as the RO scale is relatively new and the MO scale
Table 1. Definition of Measures
Variable Definition
Organizational Learning Organizational learning refers to the development of new knowledge or insights that are potentially able to
influence behaviors. Adopted from Kumar, Subramanian, and Yauger (1998). Items 59. Assessed on a five-
point Likert scale ranging from 15does not describe my company at all to 55describes my company to a
large extent.
Resource Orientation Adopted from Paladino (2006) and Paladino, Whitwell, and Widing (2006). Resource orientation refers to the
extent to which a firm engages in behaviors consistent with the RBV. Items 523. Assessed on a five-point
Likert scale ranging from 15 strongly disagree to 55 strongly agree.
Market Orientation Market orientation refers to the organizational culture that most effectively and efficiently creates the
necessary behavior for the creation of superior value for buyers and thus, continuous superior performance for
the business (Narver and Slater, 1990, p. 21). Adopted from Narver and Slater (1990). Items514. Assessed
on a five-point Likert scale ranging from 15 strongly disagree to 55 strongly agree.
Financial Performance Assessed the organizations profitability, sales growth, operating costs, and return on assets relative to their
competitors. The scales were adapted from Conant, Mokwa, and Varadarajan (1990), Conant, Smart, and
Solano-Mendez (1993), Narver and Slater (1990), and Slater and Narver (1994). The final scales used to assess
a firms performance were assessed on a five-point Likert scale ranging from 1 5much worse to 55much
better.
Product Quality Product quality refers to the ability of a product to perform its functions. The items used in this scale were
adopted from Kohli and Jaworski (1990). Items53. The items were taken directly from Kohli and Jaworskis
(1990) survey instrument. Assessed on a five-point Likert scale ranging from 15 strongly disagree to
55 strongly agree.
New Product Success New product success refers to the ability of a new product or innovation to avoid failure in the marketplace.
Scale adapted from Slater and Narver (1994) and Narver and Slater (1990). Items 53. The final scales used to
assess a firms performance were assessed on a five-point Likert scale ranging from 1 5much worse to
55much better.
Innovation Innovation refers to a firms ability to adopt new ideas, products, and processes successfully. The items used
were adapted from Gatignon and Xuereb (1997). Items57. Assessed on a five-point Likert scale ranging from
15 strongly disagree to 55 strongly agree.
Customer Value Adopted from Paladino (2006), the scale requested respondents for their opinion regarding how they believed
customers would rate them based on a number of customer value issues. The final scale comprised four items
assessed on a five-point Likert scale ranging from 15 strongly disagree to 55 strongly agree. Items52.
Overall Performance Overall performance measures are used to assess a firms general perception of its relative performance.
Adopted from Kohli and Jaworski (1990). Items52; Mean53.29; SD50.90. Assessed on a five-point Likert
scale ranging from 15poor to 55 excellent.
Buyer Power Buyer power refers to the extent to which buyers are able to negotiate lower prices from sellers (Slater and
Narver, 1994, p. 51). The scale items used in this research were adopted from Jaworski and Kohli (1993).
Items5
3. Assessed on a five-point Likert scale ranging from 15
strongly disagree to 55
strongly agree.Supplier Power Supplier power refers to the ability of suppliers to withstand bargaining efforts by their customers and
increase their share of the value created (Day, 1990, p. 114). The scale items used in this research were applied
from Jaworski and Kohli (1993). Items53. Assessed on a five-point Likert scale ranging from 15 strongly
disagree to 55 strongly agree.
Entry Barriers Entry barriers refer to the level of difficulty in entering an industry (Porter, 1980). The items in this scale are
derived from Jaworski and Kohli (1993). Items53. Assessed on a five-point Likert scale ranging from
15 strongly disagree to 55 strongly agree.
Threat of Substitutes Threat of substitutes refers to the ability of competitors to offer comparable products or services to customers
and to provide an alternate avenue of obtaining the same or similar benefit. The items are derived from
Jaworski and Kohli (1993). Items53. Scale Assessed on a five-point Likert scale ranging from 15 strongly
disagree to 55 strongly agree.
Competitive Intensity Competitive intensity is defined as the behavior, resources and ability of competitors to differentiate
(Jaworski and Kohli, 1993, p. 60). The scale items were applied from Jaworski and Kohli (1993). Items56.
Assessed on a five-point Likert scale ranging from 15 strongly disagree to 55 strongly agree.
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has been subject to much debate. The items that were
retained from exploratory factor analysis to represent
RO were subject to confirmatory factor analysis.
Driven by theory, several competing factor models
were evaluated: the null model and a single-factor, a
three-factor, and two competing two-factor models.
Results indicated that the hypothesized three-factor
model fit the data best relative to the competing mod-
els using chi-square difference tests (i.e., the differ-
ences yielded were significant) and fit indices.
Furthermore, the improvement in fit of the hypothe-
sized model over the null and competing models was
significant.
Driven by theory, several alternative competing
factor models were specified and evaluated for the
MO scale: the null model and a single-factor, a the-
ory-driven three-factor, and two competing two-
factor models. Results indicate that the hypothesized
model fit the data best relative to the competing mod-
els using chi-square difference tests (i.e., differences
yielded were significant) and the alternative fit indices.
The one general higher-order factor in both the MO
and RO scales explains the correlations among thefirst-order factors. Hence, the MO and RO scales were
theorized as second-order factors to customer orien-
tation, competitor orientation, and interfunctional
coordination for MO and uniqueness, synergy, and
dynamism for RO.
The RO model yielded acceptable overall fit to the
data. The fit indices for the second-order hypothesized
model were w2 5223.62 (df5 116), root mean square
error of approximation (RMSEA)5 0.06, root mean
square residual (RMR)50.05, goodness of fit index
(GFI)5 0.90, adjusted goodness of fit index (AGFI)5
0.86, normed fit index (NFI)5 0.84, parsimonious nor-
med fit index (PNFI)5 0.71, and comparative fit index
(CFI)5 0.91. The null model yielded a w2 51359.42
(df5 171). Full results are depicted in Figure 2. Ac-
ceptable standardized loadings (above 0.40) were
achieved indicating acceptable discriminant and con-
vergent validity. Although the standardized loadings
for two items were low, their removal diminished the
GFIs. Hence, the two items were retained and subject
to further testing in the measurement model.
The MO model yielded acceptable overall fit to the
data. The fit indices for the second-order hypothesized
model were w2 5 299.43 (df5 148), RMSEA5 0.06,
RMR5 0.04, GFI5 0.87, AGFI5 0.83, NFI5 0.78,
PNFI5 0.67, and CFI5 0.87. The null model yielded
a w2 5 1359.42 (df5 171).The fit indices attained for
the MO scale revealed acceptable overall fit of the
model to the data with full results depicted in Figure
2. Acceptable loadings were achieved for most indi-
cators indicating acceptable discriminant and conver-
gent validity. Two indicators had low loadings but
were retained and were subject to further testing in the
measurement models.Despite these findings, there is no certainty that
equivalent models that yield the same results do not
exist. This results from the inability to pursue differ-
ent permutations of the second-order factor models
(Marsh and Hocevar, 1985). As a result, the first-
order model was applied for the measurement and
structural models.
Correlation analysis and multiple regression were
used to assess the assumptions of linearity, additivity,
model specification, multicollinearity, and homo-
scedasticity (Berry and Feldman, 1985). LISREL 8
Resource Orientation
Uniqueness Synergy Dynamism
Market Orientation
Competitor
Orientation
Customer
OrientationInterfunctional
Coordination
Figure 2. Confirmatory Factor Analysis Results for Second-Order Factors
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(Jo reskog and So rbom, 1996) was employed to deter-
mine the relationships among organizational learning,
resource orientation, market orientation, and the var-
ious performance indicators. Table 2 provides details
of the summary statistics for each variable in addition
to the correlation matrix.The data set was screened for missing information
and outliers. All variables were initially analyzed
together to evaluate the potential for common method
variance. As no one factor appeared to account for
most of the variance and a number of factors resulted
from the data set, common method variance did not
present a problem (Podsakoff and Organ, 1986). Con-
struct validity was determined using the guidelines
recommended by Churchill (1979). To ensure that no
statistical assumptions about factor analysis were vio-
lated and to determine the viability of the groupingtechnique and the data set for factor analysis, two more
statistical tests were employed: Barletts Test of Spheri-
city and the Kaiser-Meyer-Olkin (KMO) statistic.
Barletts Test of Sphericity and the KMO results
indicated that factor analysis was an appropriate tech-
nique for analyzing the correlation matrices. All con-
structs were subject to exploratory factor analyses
(Hair et al., 1998). Results supported both discrimin-
ant and convergent validity for all constructs.
A two-step approach was adopted as advised by
Gerbing and Anderson (1988). They recommend
the assessment of a measurement model prior to
the estimation of a structural model. To assess the
dimensionality, reliability, and discriminant validity
of the measurement model, the measures were subject
to a further purification process as advised by Chur-
chill (1979) and Gerbing and Anderson (1988). One
measurement model encompassing all elements of the
model could not be used as this violated the recom-
mendation advised by Bentler and Chou (1987) that a
five-to-one ratio of sample size to free parametersshould be followed to yield appropriate significance
tests.
Two measurement models were evaluated prior to
the structural model to purify the scales and to
prevent misspecification in measurement tools
(Pillai, Schriesheim, and Williams, 1999). The mea-
sures were divided into two subsets of theoretically
related variables: (1) the independent variables and
(2) the control and outcome variables (Moorman
and Miner, 1997). Table 3 provides details of the
measurement model parameters and reliability. Theresults indicate that the models fit well with the fit
indices yielding acceptable results. Results indicate
that the number of items used, t-values, the parameter
estimates, and reliability statistics were reflective of
acceptable fit.
Individual item reliability, composite reliability, and
the average variance extracted were calculated (Fornell
and Larcker, 1981). The composite reliability of each
scale and measurement model ranged between 0.61 and
0.98. This exceeds the 0.60 threshold for acceptable re-
liability as recommended by Fornell and Larcker
(1981). This provides further evidence that the
measures used are internally consistent and exhibit
satisfactory reliabilities. The average variance extract-
ed results ranged between 0.47 and 0.90. All results
Table 2. Correlation Matrix and Descriptive Statistics
Variables 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1. Resource Orientation 1.00
2. Market Orientation 0.40 1.00
3. Financial Performance 0.24 0.20 1.00
4. New Product Success 0.24
0.32
0.31
1.005. Innovation 0.37 0.36 0.15 0.42 1.00
6. Product Quality 0.48 0.47 0.19 0.38 0.40 1.00
7. Customer Value 0.24 0.38 0.09 0.30 0.30 0.40 1.00
8. Overall Performance 0.23 0.31 0.52 0.33 0.13 0.26 0.21 1.00
9. Organizational Learning 0.38 0.53 0.30 0.22 0.18 0.37 0.30 0.34 1.00
10. Buyer Power 0.16 0.10 0.13 0.20 0.21 0.13 0.12 0.16 0.14 1.00
11. Supplier Power 0.01 0.00 0.01 0.04 0.00 0.02 0.06 0.04 0.02 0.06 1.00
12. Entry Barriers 0.07 0.00 0.01 0.08 0.15 0.08 0.00 0.13 0.09 0.21 0.01 1.00
13. Threat of Substitutes 0.07 0.02 0.03 0.08 0.06 0.04 0.03 0.06 0.02 0.06 0.02 0.06 1.00
14. Competitive Intensity 0.03 0.06 0.02 0.08 0.09 0.06 0.06 0.00 0.02 0.41 0.20 0.23 0.16 1.00
Mean 3.53 3.84 3.42 3.42 3.19 3.78 3.92 3.29 3.80 3.39 3.06 2.86 2.54 3.46
Standard Deviation 0.43 0.42 0.41 0.75 0.55 0.61 0.59 0.90 0.56 0.74 0.85 0.91 0.89 0.81
Alpha 0.82 0.86 0.86 0.67 0.79 0.76 0.85 0.70 0.90 0.66 0.85 0.60 0.86 0.77
Significant at the po.01 level.
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Table 3. Parameters for Measurement Models and Reliability
Items Parameter Estimates T-Value Cronbachs Alpha
Measurement Model 1
Organizational Learning1. My organization promotes a learning culture 0.63 1.00 0.90
2. In my organization, we question the familiar ways of thinking
and acting.
0.73 8.99
3. Our organizational value promotes open-mindedness. 0.77 9.33
4. My organization proactively questions long-held routines,
assumptions, and beliefs.
0.72 8.96
5. Members of management team act as learning agents for the
organization, responding to changes in the external and internal
environment.
0.63 8.01
6. Our organization has a strong commitment to learning. 0.73 13.41
7. People in my organization have a shared vision about
organizational expectations.
0.72 8.92
8. We believe that vision sharing is crucial for our organizations
proactive approach to managing environmental changes.
0.65 8.20
9. Our shared vision provides a focus for learning that fostersenergy, commitment, and purpose among organizational
members.
0.72 8.88
Resource Orientation
Uniqueness
1. We constantly strive to ensure that our resources cannot be
easily identified by competitors.
0.55 1.00 0.82
2. We constantly strive to ensure that our resources cannot be
easily imitated by competitors.
0.79 8.17
3. We have dedicated much time and effort to ensure that it would
be difficult for another company to acquire the same resources
we have.
0.76 8.00
4. We constantly strive to ensure that it would be almost
impossible to use our combination of resources in another
corporation.
0.72 7.76
5. We monitor our key resources to determine if competitorswould be able to replicate them.
0.68 7.55
6. Our strategy is geared toward ensuring competitors would find it
difficult to imitate our resource base.
0.76 8.03
7. We try to make certain that our competitors find it difficult to
determine the resources that may lead to our success.
0.54 6.49
Synergy
1. We share key resources across departments to ensure they lack a
clearly identified owner.
0.90 1.00
2. We work to ensure our resources span, or provide benefits, to
several departments.
0.85 12.34
3. We work to ensure our resources span, or provide benefits, to
different levels within the company.
0.57 8.70
Dynamism
1. We integrate a number of resources to increase our efficiency
and effectiveness.
0.60 1.00
2. We work to ensure our resources act as triggers for collective
learning within the company.
0.68 7.07
3. We work to ensure our resources act as triggers for innovation
within the company.
0.64 6.82
4. We work to ensure our resources act as triggers for collaborative
problem solving with stakeholders.
0.56 6.24
5. Our resources are the principle drivers used to develop strategies
that enable us to achieve efficiency or effectiveness
0.50 5.81
Market Orientation
Competitor Focus
1. Our salespeople regularly share information within our business
concerning competitors strategies.
0.61 1.00 0.86
2. We respond rapidly to competitive actions that threaten us. 0.58 6.61
0.70 7.47
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Table 3. (Contd.)
Items Parameter Estimates T-Value Cronbachs Alpha
Measurement Model 1
3. We target customers and customer groups in which we have or
can develop a competitive advantage.4. Top management regularly discusses competitors strengths and
strategies.
0.60 6.79
Customer Focus
1. Our objectives are driven primarily by customer satisfaction. 0.64 1.00
2. We constantly monitor our level of commitment and orientation
toward customers.
0.70 8.59
3. Our strategy for competitive advantage is based on our
understanding of our customers needs.
0.70 8.61
4. Our market strategies are driven by our understanding of
possibilities for creating value for our customers.
0.66 8.21
5. We measure customer satisfaction systematically and frequently. 0.53 6.81
6. We give close attention to after-sales service. 0.58 7.35
Interfunctional Coordination
1. Information on customers, marketing successes, and marketing
failures are communicated across functions in the business
0.52 1.00
2. All of our functionsnot just marketing and salesare
responsive to and integrated in serving markets.
0.71 6.78
3. All of our managers understand how the entire business can
contribute to creating customer value.
0.69 6.68
4. We share programs and resources with other business units in
the corporation.
0.56 5.94
Measurement Model Fit Statisticsa
RMSEA50.05; RMR50.04; GFI50.83; AGFI50.80; NFI50.74; PNFI50.67; CFI50.88.
Measurement Model 2 Parameter Estimates T-Value Cronbachs Alpha
Financial Performance
1. Your organizations return on investment relative to your
competitors
0.92 1.00 0.86
2. Your organizations sales growth relative to your competitors 0.51 8.12
3. Your organizations return on assets relative to your
competitors
0.91 8.88
4. Your organizations total operating costs relative to your
competitors
0.57 9.42
Overall Performance
1. Overall performance of the firm last year 0.77 1.00 0.70
2. Overall performance of the firm relative to major competitors
last year
0.92 11.50
Innovation
1. The quality of our new products or services is superior to that of
our competitors.
0.86 1.00 0.79
2. Our product or service designin terms of functionality and
featuresis superior compared with our competitors.
0.89 14.98
3. Overall, we have an advantage over our competitors in terms ofthe superior product or service we offer our customers. 0.72 11.99
4. Our new products or services are minor improvements in a
current technology.
0.49 5.42
5. Our new products or services incorporate a large new body of
technological knowledge.
0.55 5.31
6. Overall, our new products or services are similar to our main
competitors products or services.
0.67 5.83
7. The applications of our new products or services are totally
different from the applications of our main competitors
products or services.
0.70 5.89
Product Quality
1. Our customers often praise our service quality. 0.74 1.00 0.76
2. The quality of our products and services is better than that of
our major competitors.
0.58 8.18
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yielded approached or exceeded the 0.50 recommended
threshold, indicating that the variance due to measure-
ment error is smaller than the variance captured by
the construct. It also provides a preliminary indication
that the validity of the construct may be acceptable and
that the specified indicators sufficiently represent the
constructs they are intended to quantify (Hair et al.,
1998).
T-values associated with all items exceeded the 1.96
threshold for the 0.01 level of significance. The overall
reliabilities of all items in both models ranged between
0.41 and 0.96, yielding a mean item reliability of 0.68.
Composite reliability and the average variance ex-
tracted results indicated that the measures were inter-
nally consistent and reliable. Cronbachs alpha ranged
between 0.60 and 0.90. All exceed the 0.50 threshold
Table 3. (Contd.)
Items Parameter Estimates T-Value Cronbachs Alpha
Measurement Model 1
3. Our customers are firmly convinced that we offer very good
quality products and services.
0.88 11.17
Customer Value
1. In terms of quality provided to customers for the price paid, we
provide good value relative to competitors
0.82 1.00 0.85
2. Overall, our customers are very satisfied with our product
quality relative to the price they pay.
0.93 11.92
New Product Success
1. Your organizations new product success rate relative to your
competitors.
0.59 1.00 0.67
2. Your organizations revenue from new products relative to your
competitors.
0.90 7.11
3. Your organizations profitability from new products relative to
your competitors.
0.42 5.31
Competitive Rivalry
1. Competition in our industry is cut-throat. 0.81 1.00 0.77
2. There are many promotion wars in our industry. 0.54 7.60
3. Anything that one competitor can offer, others can match
readily.
0.77 10.41
4. Price competition is a hallmark of our industry. 0.56 7.79
Buyer Power
1. Our major customers are in a strong bargaining position with us. 0.71 1.00 0.66
2. Our customers see little difference between our products and
those of our competitors.
0.59 6.51
3. We pretty much have to comply with our customers demands,
even if they are unreasonable.
0.58 6.41
Entry Barriers
1. It is easy for new players to enter our industry. 0.58 1.00 0.60
2. Potential entrants into our industry can expect strong retaliation
from existing players.
0.71 3.28
Threat of Substitutes
1. Competitors outside our industry offer viable substitutes for our
products.
0.80 1.00 0.86
2. We are constantly under pressure from substitute products
offered by other industries.
0.96 13.74
3. The prices we can charge for our products are constantly under
pressure from substitute products.
0.72 11.88
Supplier Power
1. We have a large number of suppliers to choose from for our
essential inputs (e.g., raw materials).
0.80 1.00 0.85
2. Our major suppliers have the strength to bargain with us
effectively.
0.82 13.12
3. Our major suppliers or vendors have the power to dictate prices
to us.
0.85 13.69
Measurement Model Fit Statisticsa
RMSEA5
0.04; RMR5
0.04; GFI5
0.89; AGFI5
0.86; NFI5
0.86; PNFI5
0.72; CFI5
0.94.a RMSEA, root mean square error of approximation; RMR, root mean square residual; GFI, goodness of fit index; AGFI, adjusted goodness of fitindex; NFI, normed fit index; PNFI, parsimonious normed fit index; CFI, comparative fit index.Represents a fixed parameter.
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deemed acceptable for preliminary stages of research
(Churchill, 1979).
In the first instance, discriminant validity was
assessed by the chi-square difference test. This in-
volved determining the difference between one model
that allowed the correlations between the constructs tobe free and an alternate model that allowed the cor-
relations to be constrained to unity (Gerbing and An-
derson, 1988). This analysis was conducted for one
pair of constructs at a time. The results of the differ-
ence tests confirmed the discriminant validity of the
models. They show that the difference in chi-square is
greater than 3.84 in all instances, despite the loss of
one degree of freedom. The constructs with the free
(i.e., unconstrained) phi coefficient were all found to fit
the data far better than those with a fixed coefficient.
Results
Structural Model
A nested model approach was applied throughout the
analysis. Unidimensionality was satisfied through the
various analyses conducted. In addition, the scales all
exhibited sound psychometric properties of reliability,
convergent validity, and discriminant validity. As a
result, the items were aggregated into a composite for
each factor. This also measured reliability by fixing
the error variance as required. Given the difficulty as-
sociated with estimating such a large variancecovari-
ance matrix (i.e., the number of items exceeded the
number of observations), the number of items for
each construct was reduced. This procedure is consis-
tent with past research (e.g., Baumgartner and Hom-
burg, 1996). The statistics revealed moderate levels of
acceptability. The internal structure of the model was
evaluated whereby the R2 ranged between 0.14 and
0.52. These results were deemed acceptable and con-
sistent with the extant research.
As a single-indicator approach was adopted to testthe structural models, all indicators were converted to
summated scales. Summated scales have the distinct
advantage of accounting for measurement error
through the use of multiple indicators and enable
the researcher to represent multiple elements of a con-
struct in a single measure (Baumgartner and Hom-
burg, 1996; Hair et al., 1998). To avoid the problem of
method bias, reliability was assigned on the basis of
the alpha scores whereby lambda-X and lambda-Y
were set to equal the square root of the reliability of
the scale. As advised by Jo reskog (1993) and Hair
et al. (1998), the error variance of each variable under
examination was set to equal one minus the reliability
of the scale (i.e., coefficient alpha). This procedure
also optimizes the degrees of freedom and has been
successfully adopted in a number of studies (e.g.,
Pillai, Schriesheim, and Williams, 1999).The two-step process recommended by Gerbing
and Anderson (1988) was applied. A hypothesized, a
null, a saturated, and more and less constrained mod-
els were estimated. Based on tests of absolute, incre-
mental, and parsimonious fit, the hypothesized model
was superior to the alternate models. The fit indices
for the hypothesized model were RMSEA5 0.028,
NFI5 0.92, CFI5 0.98, RMR5 0.04, and GFI5
0.94. All indicated more than acceptable fit.
Figure 3 provides details of the significant relation-
ships found and identifies the supported hypotheses.There was no significant relationship found between
resource orientation and customer value, thereby pro-
viding support for H13. Results indicated a signifi-
cant, positive relationship between entry barriers and
overall performance (b5 0.17).
To assess whether or not there were significant dif-
ferences between the beta coefficients for the same
sample, the procedure advised by Cohen and Cohen
(1983) was employed. This method requires one to first
to calculate the inverse of the correlation matrix for
the independent variables. This was followed by an
assessment of the standard error (SE) and the t-statis-
tic to evaluate significance. Alternative methods, such
as the t-test or Fishers r to z transformation, which do
not encompass the inverse matrix, are often incorrectly
employed when searching for significant differences
between beta coefficients. Although these are accept-
able when evaluating significance between two inde-
pendent samples, they are not appropriate when
dealing with the one sample. These tests require the
covariance of the pair of coefficients that are only
found in the inverse matrix (Cohen and Cohen, 1983).
Although a resource orientation yielded a strongerrelationship with innovation (0.33) as compared with
market orientation (0.23), difference testing showed
that this was not statistically significant. Hence, there
was no support for H11. Appendix 1 outlines the full
results of the hypothesized relationships and also
reports on indirect effects.
Discussion and Implications for Management
A principal purpose of this study was to determine the
impact of resource orientation and market orientation
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on performance and, in particular, innovative out-
comes. The results indicate that firms pursuing re-
source orientation need to be cautious if they aim to
achieve product quality. Firms with a high degree of
resource orientation will be able to achieve superiority
in the market place as well as to increase the efficiency
and effectiveness of the firms internal operations and
processes. This will allow a firm to offer distinctive
goods and services relative to competitors. This will
primarily serve to provide the firm with value but will
inevitably be able to provide customers with offerings
that satisfy their expectations.
Resource Orientation and Performance
Statistics revealed that resource orientation was sig-
nificantly and positively related to financial perfor-
mance (0.19), product quality (0.40), new product
success (0.13), and innovation (0.33). These resultsare consistent with the present studys expectations
and research that examines the role of specific capa-
bilities and resources on performance outcomes (e.g.,
Henard and Szymanski, 2001; Montoya-Weiss and
Calantone, 1994; Muffatto and Panizzolo, 1996; Web-
ster, 1994). A focus on the development, accumula-
tion, and deployment of a firms unique resource base
will enable a corporation to provide customers with a
valuable product. Firms need to establish and develop
resources that are needed to understand customer
requirements and to deliver promised value. This
ability, together with appropriate resource bundles,
will enable a firm to attain additional capital to in-
crease its size or number of activities (Slater, 1997).
This constant investment in resources encourages in-
novation within the firm and allows it to achieve sat-
isfied employees and to provide customers with
quality products. These assertions are supported
further through the significant total effects found
between resource orientation and all performance
outcomes examined.
Market Orientation and Performance
Statistics revealed that a market orientation was signif-
icantly and positively related to product quality (0.26),
innovation (0.23), customer value (0.21), and overall per-
formance (0.15). These findings are consistent with the
present studys hypotheses and are generally consistent
with past research (e.g., Atuahene-Gima, 1995; Atua-hene-Gima, Slater, and Olson, 2005; Caruna, Pitt, and
Berthon, 1998; Day, 1990; Jaworski and Kohli, 1993;
Langerak, Hultink, and Robben, 2004; Slater and Mohr,
2006; Slater and Narver, 1998). In fact, these findings are
largely consistent with Baker and Sinkula (2005, p. 496),
who proposed that market orientation drives new prod-
uct development by creating a better fit between the
benefits consumers seek and the benefits that a firm pro-
vides its customers. Hence, managers should aim to
identify appropriate tactics that serve to improve market
orientation to maximize these effects in the short term.
Organizational
Learning
ResourceOrientation
Market
Orientation
Financial
Performance
Product Quality
New Product
Success
Innovation
Customer Value
Overall
Performance
Figure 3. Results of LISREL Analysis (Completely Standardized Coefficients [see Appendix 1 for full results])
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Comparing the Effects of Strategic Orientations onPerformance
Although a resource orientation yielded a stronger
relationship with innovation (0.33) as compared with
market orientation (0.23), difference testing showedthat this was not statistically significant. Similar
findings were derived for product quality. This
indicates that both orientations will enable a firm
to achieve innovativeness and quality through differ-
ent means.
These patterns of results provide further evidence
that a market orientation is most effective for estab-
lishing a compelling work environment to achieve
favorable customer outcomes. This suggests that a
market orientation would be more suited to customer
intensive industries, such as service industries. They
are highly dependent on customers to succeed and re-
quire loyal employees to establish relationships with
these customers and to be competent to service their
needs. Hence, customer outcomes are critical to these
firms. Contrary to expectations, market orientation
was not significantly related to financial outcomes or
new product success directly. This could suggest that
its effects are reflected in performance over time, as
indicated by the significant indirect and total effects,
thereby lending some support to the extant literature.
Resource orientation was most effective to increase
efficiency to produce favorable financial outcomes.This was further supported by the significant total ef-
fects on all performance outcomes. Notably, resource
orientation was not directly related to customer value.
This could suggest that its effects are reflected in per-
formance over time, as indicated by the significant
indirect effects. Hence, resource orientation could
lead to customer value and after a new product de-
veloped by unique resource bundles succeeds in the
marketplace.
Resource orientation thus appears to be most suit-
ed to organizations dealing with suppliers or manu-facturers dealing with stable customer needs. Such
firms do not need to deal with the end user, as often as
a service provider does, and are not as concerned with
the needs of the consumer as much as a market-
oriented firm. Such firms are less dependent on rela-
tionships as compared with service firms. The needs of
customers are not as volatile as in service encounters,
and the customer does not impact the quality of the
transaction as often occurs in service firms (Gale,
1994). Rather, resource-oriented firms focus on what
their resource base enables them to provide to con-
sumers and offer goods and services based on this in-
formation. This allows them to produce a unique
offering to the market that will often strike a chord
with the consumer, leading to its ultimate success.
Hence, resource orientation enhances firm perfor-
mance by improving internal effectiveness and effi-ciency to achieve new product success, whereas
market orientation improves performance by enhanc-
ing customer value. These results suggest that man-
agers seeking new product success should focus less
on customer value and more on resource value. In
contrast, those pursuing customer value should focus
on market orientation.
Comparing the Long-Term Effects Associated with
Strategic Orientations
It is plausible that resource orientation and market
orientation could have lagged effects on performance
in the long term. This is in accordance with Atuahene-
Gima (1995, p. 287), who suggested that market ori-
entation is more likely to enhance the cost efficiency
and performance of the firms entire product portfolio
and to open up new opportunities for the firm that
the market performance of the new product itself.
This is further supported by the significant total
effects found between both orientations and all per-
formance outcomes, with the exception of marketorientation, which only had a significant indirect
effect on financial performance. It is essential that
firms pursuing a resource orientation or market ori-
entation adopt a long-term focus so that appropriate
investments and decisions are made. If a myopic view
is adopted, firms will risk not achieving the positive
outcomes with which these strategic orientations are
associated. These issues could enable executives to
determine whether a resource orientation or market
orientation is best for their firm and hence aid them in
finding new business opportunities to enhance theirperformance.
Emphasis has shifted in the strategic management
literature toward the determination of the sources of
advantage in the marketplace, given that positional
and performance superiority is derived from skill and
resource superiority. Hence, the specific action man-
agement takes to deploy resources and enhance their
quality must be given particular attention by the firm
(Day, 1990). Managers must be attentive to both the
internal and external environments when engaging in
these actions.
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The Role of Organizational Learning
Regardless of which strategy they intend to pursue,
firms will need to incorporate learning into their
strategic planning and tactics, as this has a significant
direct impact on market orientation as well as re-source orientation. Management should encourage
and enable their employees to learn continuously
and to critically evaluate their processes, external
needs, and technologies of their customers and com-
petitors. Thus, they will be able to proactively pre-
serve and enhance their capabilities by reducing the
likelihood of ignoring the potential of emerging trends
and practices. They must promote an ongoing stream
of dialogue and inquiry concerning the current scar-
city, value, and inimitability of the firms resources.
Such actions would also permeate organizational val-
ues, knowledge, and behaviors, thereby also impact-
ing the manner in which a market orientation is
developed within the organization.
Limitations and Future Research
Notwithstanding the limitations later outlined, the
present study contributes to the overall understand-
ing of both resource and market orientations. Most
importantly, this research has established both as be-
haviorally based. In doing so, it has allowed the com-
parison of both orientations and has observed the
performance outcomes with which they were most
strongly associated. Such comparisons have not been
investigated in either field of study and provide sig-
nificant contributions to these research areas.
Moreover, it has provided preliminary evidence
that organizational learning plays a significant role
in influencing market and resource orientations.
Though a number of alternative indicators could be
examined in future research, the high degree of ex-
planatory power held by these variables indicates their
substantial effect on both fields of study. This alsoprovides opportunities for future research to reexam-
ine their effects.
This research has demonstrated how the pursuit of a
resource orientation or market orientation may allow a
firm to achieve positive performance outcomes. Future
research might investigate the difference between firms
adopting a high or low degree of market orientation or
resource orientation. If neither one of these approaches
is adopted, it would be expected that these entities
would experience a competitive disadvantage. Hence, it
would be beneficial to analyze whether an organization
may be classified in a matrix with market orientation
(higher and lower) on the x-axis and a resource orien-
tation (higher and lower) on the y-axis. This would
yield four quadrants labeled (1) unfocused (low market
and resource orientation), (2) externally focused (low
resource and high market orientation), (3) internallyfocused (high resource and low market orientation),
and (4) balanced (high market and resource orienta-
tions). From this, one could determine whether the
balanced quadrant would outperform the others. Al-
ternatively, an examination of whether the relative per-
formance of the externally versus internally focused
quadrants is subject to industry conditions would pro-
vide further insights into the effect of the external en-
vironment. Future research would need to investigate
which strategy will yield the most desirable outcomes in
addition to whether the external environment willstrengthen or weaken the relationship between an in-
ternal or external emphasis and performance.
Although the study incorporates a selection of pri-
vate and public sector organizations, it is limited to a
nationwide sample that may inhibit the generalizabil-
ity to international contexts and alternate settings.
This would significantly contribute to the knowledge
by allowing it to be determined if and how these
results differ between industries.
The use of questionnaires as the sole method of
data collection may contribute to common method
variance. Ideally, a combination of methods incorpo-
rating quantitative and qualitative techniques should
be used. Though this would be encouraged for future
research, the assurance of anonymity, budgetary and
time restrictions, and the difficulty in obtaining
industry cooperation precluded the pursuit of alter-
native data collection methods. Moreover, cross-
sectional research only enables the examination of
relationships at one point in time. As a result, causal-
ity could not be determined. Longitudinal data would
be required, suggesting that a replicated study would
be beneficial to increase confidence in measures andmodels assessed in this study.
Though it is important to recognize the limitations
of the research methods and techniques employed, it
is equally important to acknowledge the robustness of
the findings. All methods applied, ranging from data
collection techniques to managing data and data anal-
ysis are derived from widely applied and accepted
psychometric theory. In addition, the statistical tech-
niques provide strong analytical. Hence, the results
and conclusions drawn from these analyses are all
reported with confidence.
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