Academic journal article Management International Review

Is Market Orientation Affected by the Size and Diversity of Customer Networks?

Academic journal article Management International Review

Is Market Orientation Affected by the Size and Diversity of Customer Networks?

Article excerpt

Abstract:

* The link between market orientation and firm performance is well documented. However, less is known about those factors which lead to firms being market oriented in the first place. Existing antecedent research has emphasized factors internal the firm. A complementary emphasis on external, network-specific factors is taken in this study.

* Data collected from a sample of international trade intermediaries reveal that market orientation is affected by both the size and diversity of firms' customer networks and trading activities. Network diversity both promotes and hinders a market orientation. In low diversity environments, increasing levels of network and geographic diversity boost a firm's market orientation. In high diversity environments, additional diversity confounds the interpretation of market intelligence with adverse consequences for market orientation.

Keywords: Market orientation * International trade intermediaries * Customer networks

Introduction

It is now widely accepted among marketing scholars that the implementation of a market orientation boosts firm performance (Chan and Ellis 1998; Ellis 2007; Homburg and Pflesser 2000; Kohli and Jaworski 1990; Matsuno et al. 2002; Narver and Slater 1990; Selnes et al. 1996; Slater and Narver 2000; Subramanian and Gopalakrishna 2001; Wong and Ellis 2007). Surveying all the available research on this topic, three recent meta-analyses have independently shown that the performance-enhancing effects of market orientation are robust across diverse institutional and cultural settings (Cano et al. 2004; Ellis 2006; Kirca et al. 2005). However, while there has been considerable scholarly attention on market oriented outcomes, less is known about those factors which lead to a firm being market oriented in the first place. Existing research on market orientation antecedents is heavily influenced by a list of eight constructs originally proposed by Jaworski and Kohli (1993). Thus research investigating market orientation antecedents tends to be cumulative but constrained in nature.

In the hope of stimulating further work on this important issue, the outcome of being market oriented is framed in this paper as a consequence of a firm's information acquisition activities. Customer networks are a firm's primary source of information about customer needs and satisfaction levels. Yet to date no study has examined the issue of whether a firm's market orientation is related to the size and diversity of those customer networks to which it is exposed. This knowledge gap is addressed in this study by examining a sample of firms for whom success is found in the management of broad, diverse customer networks, namely, international trade intermediaries. In the normal operation of their intermediary function, trade intermediaries are highly incentivized to collect and respond to intelligence gleaned from their networks. Presumably the quality of information received by trade intermediaries will be affected by the characteristics of those networks to which they are exposed. This suggests that intermediaries' ability to cultivate a market orientation will be fundamentally shaped by the characteristics of those intelligence-providing customer networks to which they are exposed. Consequently, this paper has two related aims; to assess the strength of the connection between network characteristics and the market orientation of trade intermediaries, and to gauge the consequences for firm performance.

Market Orientation Antecedents

A market orientation has been described as an organizational culture that fosters those activities that create superior value for customers (Narver and Slater 1990; Slater and Narver 1994, 1995, 2000). As value can only be known in terms of customers' needs and competitors' products which meet those needs, this implies a managerial orientation towards both customers and competitors (Narver and Slater 1990). …

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