Academic journal article Academy of Strategic Management Journal

Strategic Orientations and Their Relationship with Performance: A Case of a Mexican Family Firm

Academic journal article Academy of Strategic Management Journal

Strategic Orientations and Their Relationship with Performance: A Case of a Mexican Family Firm

Article excerpt

INTRODUCTION

Strategic orientations in a firm have attracted the attention of scholars in diverse disciplines like marketing, entrepreneurship and management. They are seen as principles that direct and influence the activities of a business organization in their effort to achieve a better performance in the marketplace and ensure its viability (Noble, Sinha and Kumar, 2002; Hakala, 2011). Having their roots in the strategy research field, the concept of Strategic Orientation of a Business Enterprises (STROBE) has been studied as a multidimensional construct trying to advance in the operationalization of measures that test theoretical relationships proposed by researchers (Venkatraman, 1989; Morgan and Strong, 2003).

Strategy--as an academic field--has been considered as fragmented and lacked of coherence identity (Nag, Hambrick and Chen, 2007); however, strategic management is undoubtedly a successful emerging field producing a rich research line for scholars.

There is a tacit agreement that argues that the strategic management concept can be categorized in a three-level mode: business, corporate and functional (Venkatraman, 1989). According to this, business strategy can be characterized as the manner in which a firm decides to compete (Morgan and Strong, 2003). Several approaches have been used in order to develop a strategy measurement (narrative, classificatory and comparative). For the comparative approach, Venkatraman (1989) specifies six a priori dimensions: aggressiveness, analysis, defensiveness, futurity, proactiveness and riskiness. As an example of the use of this approach, Morgan and Strong (2003) found that firms' emphasis upon analysis, defensiveness and futurity are related to business performance. For a more detailed description of each of the six dimensions, see Venkatraman (1989).

One typology of strategic orientations used in strategy research-that is widely adopted- is suggested by Miles and Snow (1978; cited by Morgan and Strong, 2003):

1. Prospector: firms that conduct externally oriented business.

2. Defender: organizations internally oriented, focusing on efficiency and low cost operations.

3. Analyzer: firms that have the characteristics of prospector as well as defender, depending on the market environment.

4. Reactor: firms that respond to competitive circumstances when they are forced.

Another typology of strategic orientations mainly used in the marketing research area, was proposed by Narver and Slater's (1990) and Slater and Narver's (1994) articles that are considered pioneer studies of the impact of market orientation (MO) on firm performance; Lumpkin and Dess (1996) pioneering entrepreneurial orientation (EO); Gatignon and Xuereb's (1997) technology orientation (TO) and Sinkula, Baker and Noordewier (1997) studying learning orientation. Other strategic orientations have been acknowledged, such as employee orientation, customer orientation, competitor orientation, and production orientation or selling orientation (Grinstein, 2008; Calantone, Cavusgil and Zhao, 2002; Noble et al, 2002; Gatignon and Xuereb, 1997). However, for the purposes of this study, only market orientation, entrepreneurial orientation, learning orientation and technology orientation are considered.

Research in marketing has focused almost exclusively on maintaining a market orientation emphasis, based on the adoption and implementation of the marketing concept (Noble et al., 2002; Hult, Ketchen and Slater, 2005); however, some scholars have addressed a caution point about relying only on market orientation because customers do not necessarily know what they really want, due to the lack of information about the latest market trends or technologies (Zhou, Yim and Tse, 2005). Little is reported about multiple orientations studies and how strategic orientations are related between them and its relationship with performance (Lee, 2011; Hakala, 2011). For instance, Hakala (2011) reports that he did not find studies relating entrepreneurial and technology orientation or entrepreneurial, technology and learning orientation and their relationship with the firm performance, declaring that a window is open for future research, not only through empirical studies, but also through the use of qualitative research.

Many authors have researched the relationship between market orientation and performance with the purpose of contradicting or fortifying the paradigm in marketing research about the superior contribution of market orientation to performance (Grinstein, 2008). However, empirical studies have shown mixed results about the linkage between market orientation and performance, several studies have tried to assess how alternative strategic orientations are related to market orientation and how these relationships have an impact on the firm performance (Noble et al, 2002; Grinstein, 2008). These studies suggest that research should be shifted from the binomial relationship of market orientation-performance toward the multiple orientations performance form. However, few studies have used more than one strategic orientation (Grinstein, 2008; Hakala, 2011), so this field remains open and researchers are encouraged to deepen in this research field.

Even though a significant amount of literature has been developed over the last two decades regarding strategic orientations, few qualitative studies can be founded. The present case study has the purpose of collaborating to the understanding of how managers set up a competitive strategy for the firm; how top management contributes to set up this competitive strategy and how a firm relates strategic orientations in order to enhance its performance. Company X (Real name is disguised for confidentiality reasons) was selected for the case study by two main reasons; on April of 2012, they received from Endeavor Global -an international organization devoted to catalyze long-term economic growth by selecting, mentoring and accelerating the best high-impact entrepreneurs around the world (Endeavor, 2013)-the International Endeavor Entrepreneur Certificate, which is an international distinction for innovative enterprises around the world. Second, this company received the highest number of mentions when it was asked what firm was considered an extraordinary example of success in the metropolitan area of Guadalajara, considering the opinion of several local businessmen.

The study is organized as follows: section two describes the theoretical framework for the case study, setting the knowledge background. In section three, the methodology is presented and the results are presented in section four. The discussion, theoretical and practical implications are presented in the final section.

THEORETICAL FRAMEWORK

Resource-based View

Businesses are always trying to advance in their competitive advantage in order to survive and thrive. The resource-based view theory (RBV) claims that firm's resources influence performance and hence, provide a competitive advantage for the firms. Resources are defined as physical assets, intangible assets, and organizational capabilities that are tied semi-permanently to the firm (Wernerfelt, 1984), but if these resources can provide a competitive advantage in a short term, a sustainable competitive advantage is required for these resources to be heterogeneous in nature (Peteraf, 1993). When resources become neither perfectly imitable nor substitutable without great effort, they are considered resources that can be labeled like valuable, rare, in-imitable and non-substitutable (Barney, 1991).

From the RBV perspective, the strategic orientation of the firm has been considered an important business capacity (Zhou et al., 2005; Hult and Ketchen, 2001), and if this capacity can be translated into a rare, valuable and in-imitable resource, it is possible for the firm to acquire a competitive advantage (Hult and Ketchen, 2001). Four strategic orientations have been acknowledge to provide a significant impact on firm performance: market orientation (MO), entrepreneurial orientation (EO), learning orientation (LO) and technology orientation (TO) (Calantone et al.; Hakala, 2011).

Market Orientation

Market orientation can be viewed as the activities of the organization that effectively create the behaviors required for superior performance (Kohli & Jaworsky 1990; Narver & Slater 1990). Two different approaches have been identified by scholars regarding market orientation. The first one appreciates market orientation related to the organization-wide generation and dissemination of market information and the response to that information. The second one splits market orientation into elements of customer and competitor orientation (Kohli & Jaworsky 1990; Narver & Slater 1990). Market orientation may be perceived as a hybrid construct containing elements of exploration, but emphasizing exploitation of market opportunities. There is evidence of a positive link between market orientation and firm performance, although it is a link that may require the support of entrepreneurial behavior in high-technology industries (Renko, Casrud and Brannback, 2009).

Entrepreneurial Orientation

Entrepreneurial orientation is a strategic orientation which captures the specific entrepreneurial aspects of a firm's strategy (Covin & Slevin 1989; Lumpkin & Dess 1996). The entrepreneurial tendencies toward risk-taking, innovativeness and proactiveness are considered central to entrepreneurial orientation. The main proposition of entrepreneurial orientation is that organizations acting entrepreneurially are more able to adjust their operations to dynamic competitive environments (Covin & Slevin 1989). Entrepreneurial oriented organizations shape the environment and are willing to commit resources to exploit uncertain opportunities. They explore new and creative ideas which may lead to changes in the market place, and do so proactively ahead of the competition in anticipation of future demand.

Learning Orientation

Learning may be viewed as the development or acquisition of new knowledge which has the potential to influence behavior; a more rigorous view states that learning results in new behaviors or value creation (Hakala, 2011). Learning orientation is viewed as the organization's propensity to create and use knowledge in order to attain competitive advantage. Sinkula, Baker and Noordewier (1997) conceptualize organizational learning orientation in the dimensions of shared vision, open-mindedness and a commitment to learn. It is possible to understand learning orientation as the intersection between technology orientation and marketing knowledge. The development of new technologies can be seen as specific forms of learning; however, the commonly used measures of learning orientation do not deal with the aspects of customers, competitors or technologies (Hakala, 2011).

Technology Orientation

Technology orientation or the closely related terms of innovation and product orientation (Grinstein, 2008), refers to a firm's inclination to introduce or use new technologies, products or innovations. A technology orientation is said to improve business or new product performance, but studies have not always identified positive effects (Hakala, 2011). At the heart of technology orientation is the interest in new solutions that create superior customer value, and some authors tried to incorporate this on the view of market orientation (Hakala, 2011); however, the commonly used scales for measuring market orientation do not incorporate any new technology, product or innovation dimensions, thus technology orientation is viewed separately from market orientation. Gatignon and Xuereb (1997) state that a technology oriented firm can be defined as a firm with the ability and will to acquire a substantial technological background and use it in the development of new products, meaning also to build new technical solutions for new needs of clients.

Contingency Theory

Classified as a class of behavioral theory, contingency theory asserts that there is no best way to organize a corporation, to lead a company, or to make decisions under all conditions (Ginsberg and Venkatraman, 1985); "It is perhaps a truism that any theory of corporate or business strategy must be, by definition, contingency-based" (Ginsberg and Venkatraman, 1985, p. 421). Hakala (2011) suggests that research on orientation configuration can be performed both, universal and contingency-dependent. For instance, if a firm sees strategic orientations as alternatives to choose from, it is because they think that there is a best orientation depending on the contingency (competitive intensity, technology turbulence, demand uncertainty, etc.). Another example is what Gao, Zhou and Yim (2007) found regarding the wide notion that customer orientation represents the most critical component of market orientation, and in consequence it always has a positive impact on the firm performance. In China, it improves performance when demand uncertainty is low, but harms performance when demand uncertainty is high.

In an attempt to better understand the interaction between multiple strategic orientations, Hakala (2011) proposed three approaches to understand market, entrepreneurial, learning and technology orientations (see figure 1). 67 scholarly articles that were published between 1987 and 2010 (Tranfield, Denyer and Smart, 2003) were reviewed using a systematic review method. It tries to identify the key scientific contributions by the construction of an evidence base that would be beyond the parameters of a single study.

Orientations as sequences in development

The orientation of the firm evolves over time or through its life cycle; orientations develop into other orientations; it is thought as an evolution from an internal orientation towards an external strategic orientation. Based technology firms can be the best representation of this because of its initial entrepreneurial orientation (Renko et al., 2009).

Orientations as alternatives to choose from

Some orientations work better than others in certain contingencies, depending on the effects they produce; there is a number of effective orientation alternatives.

External environmental factors can be thought as one of the major reasons why a company decides to choose among different orientations (Gao et al, 2007).

Orientations as complementary patterns

Orientations are different but work together in configuration; different configurations may suit different contingencies; the orientation configuration evolves. Different strategy topologies can be devised using different dimensions of the overall strategic orientation (Berthon, Hulbert and Pit, 1999).

The contingency approach appears in two of the three options of the framework proposed, suggesting that this theoretical framework could better explain the relationships between the different strategic orientations. Hakala (2011) suggests that orientations as complementary patterns would be the most productive way to enhance understanding of orientations as principles and activities of adaptation that support the performance of a firm.

Finally, the three options proposed are just one way to better understand the different purposes of the strategy defined by the firm.

Technology orientation and alternative strategic orientations

As one of the latest strategic orientations to be formally considered in the research field, technology orientation and its association with related terms such as innovation has been increasing its relevance in the research field because of its importance as a potential source of competitive advantage (Gatignon and Xuereb, 1997; Zhou et al, 2005).

Table 1 shows the articles where technology orientation is related with alternative strategic orientations. Appendix I shows a summary of the articles of table 1 containing: title, author, objective, theoretical framework, data/analysis and results. The first interesting finding when analyzing articles in table 1 is that more than a half of the articles (62.5%) do not have an explicitly theoretical framework. Contingency theory (16.6%) and Resource-Based View (12.5%) appear as the most frequent theories used to support the hypothesis proposed. This can lead to an intuitive conclusion, that more theoretical research is needed in order to robust the research field.

Although performance-orientations appears in 45.8% of the articles, it is clear that strategic orientations open a new window of research for scholars, particularly in untraditional research areas like non-profit or social organizations (Voss and Voss, 2000; Izquierdo and Samaniego, 2007). Another interesting group of studies are related with the relationship between innovationnew product development (Berthon, Hulbert and Pitt, 2004; Jeong, Pae and Zhou, 2006; Zhou, Yim and Tse, 2005). Particularly Berthon et al. (2004) with the development of the scale to measure the innovation-customer orientation (ICON); this represented an advance management research. Regarding empirical analysis techniques, an evolution over time can be seen from a linear regression analysis through structural equation modeling, and the number of studies relating more than two strategic orientations is scarce, with market orientation leading the mainstream.

Finally, nine out of the twenty four articles demonstrate some type of diagram or graphic that illustrates the relationships among strategic orientations. Some empirical studies state implicitly that the relationships are one to one, so there is no need of any conceptual model.

Leadership and Business Performance in Family Firms

Recently, researchers using the strategic management approach have begun to rely more and more on two theoretical perspectives that represent a confluence of insights from the fields of strategic management, finance, and economics: the RBV of the firm and agency theory. We believe that this focus is both appropriate and entirely consistent with a strategic management view of the field because RBV and agency theory potentially assist in explaining important strategic management issues such as the formulation and content of goals and strategies, strategy implementation and control, leadership, and succession in family firms. Furthermore, both theoretical perspectives have a performance orientation.

The agency theory approach to explain the distinctiveness of family firms is based on altruism and entrenchment. Of the two, altruism is a credible attribute for distinguishing family and nonfamily firms because it is easier to accept its possible existence among family owners and family managers than its existence among nonfamily owners and managers. The strong indications that there are contingencies that might influence the relationship between altruism, paternalism and performance are also important because it implies that the variations are not random (Chrisman, Chua and Sharma, 2005).

One of the biggest issues with the agency theory is the managerial opportunism which can be presented within the members of the family, this can cause a major managerial problem; when a family member is seen by other employees and the rest of the family as an impediment for the business this phenomenon has been denominated "Fredo Effect" (Kidwell et al, 2012). For this reason, it is very important the preparation of future leaders in the family.

One of the greatest family challenges is to understand that the next generation of leaders will be leading a different company within a distinct environment than their predecessors had. This means that we cannot prepare the children in the same way that our parents prepared us.

The leading styles that were successful in the past are not good enough to face a competitive and global environment, new employee values and radical technological changes.

Carlock and Ward (2001) argue that the following are important abilities that the family leaders must have:

1. Good communicator

2. Conciliator between family's needs

3. Abilities to plan fun and amusement activities

4. Conflict mediator

5. Organized

6. Committed with ethics and family business

EMPIRICAL STUDY

Methods and Sample

As the purpose of the study is to identify how a firm relates strategic orientations in order to construct a competitive strategy that produce an improved performance using the example of Company X, an exploratory single case study is highly recommended, as long as the question "how" deals with the "operational links needed to be traced over time, rather than mere frequencies or incidence". The case study is suitable to provide in-depth information from managers regarding the main motivations behind strategic orientations arrangements (Yin, 2009). The time period of analysis will cover from 2004 to 2013, a reasonable amount of time to look for changes in a competitive strategy and the reasons behind it. Finally, this case study is a great opportunity to research in a so-called "emerging economy" like Mexico; none study was found in the literature review that addressed a research project that included Latin American countries.

The first step was to design the exploratory case study emphasizing on construct validity and reliability (Ying, 2009). An in-depth semi-structured interview was designed and performed between May 23rd and May 30th, 2013 (see appendix II). These interviews were performed on top management (president and CEO) as well as five direct reports to top management. It took an average of about 90 minutes, trying to get as much information as possible about the competitive strategy of Company X. Because of the interview method was semi-structured, three main open questions were asked:

1. In your experience, which are the key factors for the company to be competitive?

2. In your experience, what does the company require to become more competitive?

3. Describe -in a general way- the competitive strategy that the company uses in terms of: market, human resource, technology and innovation, new products or services to the market.

Along with the in-depth semi-structured interview, it was also applied a strategic orientations and firm performance questionnaire to complement the interview information. Additional information was collected from public information like Company X's web page and some other web based information like Youtube interviews and online news. It is also important to mention enquires were tried for media databases (like Factiva), but not significant results were retrieved. Finally, internal documents relating strategic planning and business model documentation were provided.

A manual content analysis was performed for different printed material of Company X in order to deepen in information. It is important to consider that many of the documents provided by Company X do not have the expected temporal sequence (e.g., strategic planning documents). All of this material was used in combination with interviews in order to construct a robust body of evidence that could support the findings from different sources of information (triangulation).

The case study analysis considers three aspects: what elements determine the competitive strategy for Company X; how top management and first line of executives support the competitive strategy and how strategic orientations are interrelated in order to execute the strategy devised by Company X.

The case of Company X

The history of Company X could be similar to many family firms around the world. By this time, the company could be considered a second generation family business but in a process of professionalization and institutionalization. The following piece of history includes the actual president of Company X, Rene Freudenberg and the actual CEO, Roberto Iberri:

"In the early 1980s, the Mexican petrochemical industry operated under a system of import substitution, but no company was filling the void in specialized lubricants. In 1984 Rene's father, Peter Freudenberg, decided to fill that niche. Peter did not know much about lubricants, so a few months after founding Company X, Peter met Roberto who was working in a larger lubricants company in Mexico. A chemical engineer from Guadalajara with a strong technical background and extensive experience in quality control. Roberto served as an advisor to Company X before joining fulltime in 1986. In 1994, a crisis was turned into an opportunity when within a week the Mexican peso lost nearly half its value. Company X confronted the situation and started testing their products internationally. Today its lubricants can be found in over 30 countries, most of them in their initial sales stage."

While Roberto Iberri joined Company X in 1986, Rene Freudenberg did it in 2003, and by 2004 the following were the mission and vision of the company:

"Mission: to provide solutions and specialized services for lubrication, manufacturing processes and maintenance to improve the competitive and ecological situation of our customers.

Vision: to become a world class company that adapts to our clients necessities."

In 2012, Company X received the Endeavor Global Entrepreneur award, and Endeavor Global posted the following company snapshot:

"Company X seeks to be the world's leader in developing and providing customized, environmentally oriented solutions for critical industrial processes and machinery, where friction and wear are involved. For large manufacturers in Mexico, Company X is smoothing out the road to success. Entrepreneurs Rene Freudenberg and Roberto Iberri improve the efficiency and longevity of their clients' expensive industrial machinery by replacing conventional industrial lubricants with specialized solutions. Company X has been able to gain market share by avoiding the saturated conventional lubricants market, focusing instead on the minority of lubricant applications that demand high-touch service and specialized--often made-to-order--products. By helping customers to identify their needs through a high-touch customer service and consulting model, Company X has won over nine of the ten largest manufacturing companies in Mexico. With the support of these high profile clients, Company X's brand recognition has spiked and sales have increased substantially since 2006.

Company X has a history of seizing opportunities in challenging markets. In the early 1980s, the Mexican petrochemical industry operated under a system of import substitution, and specialized lubricants were not available. In 1984, Rene's father, Peter Freudenberg, decided to fill that niche. Peter didn't know much about lubricants, so a few months after founding Company X, Peter sought out Roberto, who was working in a larger lubricants company in Mexico at the time. A chemical engineer from Guadalajara with a strong technical background and extensive experience in quality control, Roberto served as an advisor to Company X before joining fulltime in 1986. In 1994, the Mexican crisis turned the market on its head, and in just a week the peso lost nearly half its value. Company X was able to pivot, maintain profitability, and begin exporting products, serving clients as far away as Japan.

Peter's son and current president of Company X, Rene, has built a fast-growing business on this resilient foundation. Raised in Guadalajara, Rene studied business administration in Germany before earning an MBA from Tias Nimbas in the Netherlands. He then went to work for the multinational tire company Continental AG. Rene gained valuable international experience working in Germany, Belgium, England, and Spain after graduation, but returned to Guadalajara in 2004 to rejoin the family business. Soon thereafter, he moved to Brazil to launch Company X's Brazilian subsidiary and distributor. In 2006, Peter retired and Rene returned to Mexico to take over as president of Company X."

By 2013, Company X's competitive strategy is based on three main concepts:

1. Market contact (labeled C); that determines direction and rhythm

2. Technology (labeled T); taking advantage of experience and R&D

3. Production and Processes (labeled P); complex but flexible

The most operative part of the strategy is performed through a very specialized consultant, a leader that is identified with the following characteristics:

Reliable

Creative

Aspirational

Charismatic

Service oriented

Systemic thinker

Analytical

Technically strong

Empathic

Ambassador of the Company X culture

Self drived

According to Company X's data, it takes approximately two years to train this type of sales force.

RESULTS

Identified model

The first significant result in the Company X case was the identification of a model corresponding to the strategy devise by the company. Figure 2 shows the model identified. This configuration of strategic orientations seems to agree with Hakala's (2011) evidence that suggest that the complementary pattern is the most productive way to enhance understanding of orientations as principles and activities of adaptation that support the performance of a firm.

The model was constructed by interpreting the information gathered from different information sources. It is interesting that production orientation appears in the model like a "virtuous" loop with technology orientation and learning orientation. This finding also strengths the contingent nature of a firm addressed by Ginsberg and Venkatraman (1985), because Company X heavily relies on its technological experience and its sales force specially trained to detect and design an ad hoc solution for their customers.

Questionnaires results

Two sources of information were used to present the following results: the in-depth semistructured interview and the strategic orientations and performance scales. Table 2 shows some descriptive data that provides context of Company X executives. It is interesting to observe that the period of time defined for the case study (9 years) is almost the same that the average of the number of years that an executive holds a position. One possible conclusion of this data is that Company X is experiencing a consolidation about the performance of the first line of executives. Table 3 presents the results for the strategic orientations questionnaire.

Scales are seven-point Likert with anchors "strongly disagree" (=1) and "strongly agree" (=7) except for performance that anchors "inferior" (=1) and "superior" (=7). For technology orientation a five-point Likert scale was used with anchors "strongly disagree" (=1) and "strongly agree" (=5) (see appendix C). It is interesting to observe that this data is consistent with the proposed model in the sense that technology and learning scores are high ("virtuous" loop) along with the high score of market orientation. In contrast, the subjective low score for entrepreneurial orientation could be interpreted as the mediating effect of this orientation in the model. It is also remarkable the high score for the performance item.

Interviewers were also asked to evaluate how competitive they thought the company was, using a one to ten scale where 1 stands for no competitive at all and 10 stands for fully competitive.

The average of the respondents (n=8) was: 8.38 for the lower limit and 8.69 for the upper limit. And when they were asked (in their experience) about what factors they thought that could improve the company competitiveness, diverse responses were provided: to expand to different markets; to professionalize the company; to better use the technical experience (new product development); to better use the actual business model; to look for different applications with the same base product.

In the same way, interviewers were also asked to evaluate the company performance, using a one to ten scale where 1 stands for very poor performance and 10 stands an outstanding performance. The average of the respondents (n=8) was: 7.44 for the lower limit and 7.63 for the upper limit. And when they were asked (in their experience) about what factors could improve the company performance, also two characteristics appeared: a better internal communication and a clear definition of key performance indicators (KPIs).

DISCUSSION

The exploratory case study performed at Company X was designed to better understand: how a firm devises a competitive strategy, how leaders contribute to this competitive strategy and how strategic orientations interact in order to enhance the company performance.

The identified model tries to capture Company X's competitive strategy, based on what Rene Freudenberg labels as market contact. One possible alternative in the identified model is changing market orientation for more specific customer orientation. The concept of market contact is grounded through the specialized technical consultant and currently is the key resource for the company to enhance its performance. Under the RBV theory, the market contact concept can be seen as a source of competitive advantage.

Regarding the question: how competitive is your company in the market? The average number can be considered high (8.69/10) however, the top management is not completely clear on how the competitiveness of the company can be enhanced. This is not the case for the question: how do you evaluate your company performance? The average number reflects a wider opportunity area (7.63/10), but executives have a clearest landscape on how performance can be improved: better internal communication and clearest KPIs. They also detected a lack of role definition that could be improved.

Regarding strategic orientations, the evidence shows an agreement with Hakala's (2011) framework and strategic orientations appear as complementary patterns in consistency with the contingency paradigm.

Implications for theory

As we saw in the case of company X the lack of leadership and a good internal communication can cause problems in the family and in the company. For this reason, preventive measures must be taken to avoid or minimize these problems.

The problem in the family business is that many things can be assumed; there are many rules that are not written and many ideas that the founder has but they are never shared.

For example, when one of the second generation members lets the family know about going to work for a different company, as in Company X, the father reacts saying: "And why don't you join our company?" and the answer is: "Because you never told me that you wanted me to work there".

For this reason it is important to have an "employment agreement". This is a document that establishes the conditions for the entry and exit of the family in the company. First at all, the founder must make clear his intention of offering employment to his children in the company, but without forcing the option; at the end the participation is voluntary (a very attractive career must be designed in order to attract the youngest members without being forced). It must also be cleared that the fact of being accepted in the company does not guarantee an executive position in the future, this will depend on the performance. This is a basic part if the company wants to be professionalized: avoid nepotism in any decision. The family can define the professional requirements that the members need in order to be part of the business or be promoted once they are part of the company. For example; one of the requirements is that the family members must have external experience or a bachelor degree. All these specifications are covered in the employment agreement.

The employment agreement must be redacted before the youngest family members join the company and the opportunities must be described clearly in a way that even the children can understand. Not all the children and cousins can be directors; thus it must be clear that the highest positions will be assigned by performance, and not by last name.

This agreement is as important as a contract; it is the tranquility between the current and future employees of the family business. And like any other agreement, it can be modified before the corresponding corporate governance and always under the family consensus. The "employment agreement" can be included in a family protocol, which highlights the rules and minimum requirements to participate in the company.

Implications for practice

Considering the results of this case analysis, some conclusions can be derived for management practice. As we noticed in the results of the interviews, Company X suffers a lack of role definition which can be an opportunity to improve its competitiveness and performance if this problem is solved.

The definition of roles is a process more than an isolated activity. The definition of profiles goes along with the description of positions; they are two processes that we prefer calling "living processes", they will allow the constant renewal and updating of the family business. These "living processes" are connected naturally with the creation of organizational charts during different stages of the family business. For example, the first organizational charts will be the ones that integrate the first family members to the company, however, when they integrate the family members it is very common not to describe each one of them, thus it is recommended that before incorporating family members or not family members to the next stage of the family business it is important to make an organizational chart and delimitate the functions that these new members will have in the business.

One of the main and potential benefits of the definition of roles is the prevention of conflicts that can damage the company and the family.

The company must be presented as a place with many challenges and growth opportunities; the children must know about the business possibilities in a globalized world. At home the family must talk about the joy and achievements in the company. This is important and sometimes we read that several authors "forbid" the company owners to talk about business issues at home, but this is not appropriate; what it cannot be done is to take problems to home, this must be restricted to the labor space, but definitely the successes must be shared during family meals and toast for them (non-alcoholic beverages) with the purpose of sharing that energy and plenitude that will help the family communication.

Limitations and future research

First, the study cannot be thought as a comprehensive one because of the nature of the exploratory single case study. It is clear that this is one of the several limitations that the study has. Another limitation is that none of the results can be generalized; one natural research opportunity is to replicate the case and see what happen.

It has been established that market orientation is related to the business performance and leadership in this case, but that relationship is still developing. Further studies could track any such development.

Research is needed into cost-benefit ratios of any strategic orientations we mentioned in this paper. There is also need for further research into the extent to which family business are market orientated, as some components of market orientation seem better developed than others in emergent economies. The appropriate method would be to develop and apply a scale to measure strategic-orientation replicating methodologies that have been used successfully in other countries.

One final conclusion is that strategic orientation research is still a fertile research field for those who try to better understand the improvement of the firm performance.

Acknowledgements: The authors acknowledge the support received from Tecnologico de Monterrey on carrying out the research reported on this article.

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Table 1.

Studies relating technology orientation and alternative
strategic orientations

Investigated            Number of   Articles
Orientations            articles

Market and technology   18          Appiah-Adu and Singh 1998;
orientations                        Berry 1996; Berthon et al.
                                    1999, 2004, 2008; Fritz 1996;
                                    Gao et al. 2007; Izquierdo and
                                    Samaniego 2007; Jeong et al.
                                    2006; Knotts et al. 2008;
                                    Marinov et al. 1993; Paladino
                                    2009; Pearson 1993; Shaw 2000;
                                    Shipley et al. 1995; Suh 2005;
                                    Voss and Voss 2000; Zaharieva
                                    et al. 2004.

Market, technology      3           Aloulou and Fayolle 2005; Kaya
and entrepreneurial                 and Seyrek 2005; Li 2005.
orientations

Market, technology      2           Noble et al. 2002; Salavou
and learning                        2005.
orientations

Market, technology,     1           Zhou et al. 2005.
entrepreneurial and
learning orientations

Total                   24

Source: adapted from Hakala (2011)

Table 2.

Descriptive data for the executives interviewed (n=8)

Age (average     Years in the         Years in the
in years)      company (average)   position (average)

43                   16.41                9.41

Table 3.

Descriptive data for strategic orientations scores and performance
(average; n=8)

MO       EO     LO    TO    PERFORMANCE

5.36    4.86   6.28   3.8      5.41
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