Academic journal article Innovation: Organization & Management

Proactive Orientation Effects on Product Innovation Activities: Empirical Evidence

Academic journal article Innovation: Organization & Management

Proactive Orientation Effects on Product Innovation Activities: Empirical Evidence

Article excerpt

New product development (NPD) constitutes a key means for modern firms to achieve greater competitiveness and business performance (Oldenboom & Abratt 2000). However, many new products fail and instead generate significant financial and strategic losses for firms. The risk associated with the NPD process is extremely high, especially when the innovation is radical or includes a new service (Matthing et al. 2004; Van Riel et al. 2004). Accordingly, in the past decade, multiple studies have worked to establish a process that leads to NPD success, as well as to identify factors that affect the degree of market success induced by a NPD process (Jiménez-Zarco et al. 2006). However, little research has attempted to identify the factors that might foster or inhibit companies' innovation activity. The lack of research in this area motivates this study; in particular, we seek to identify factors that influence product innovation activity and define their importance for the classification of firms as innovative or not.

Our analytical starting point relies on the concept of market orientation and its particularly proactive dimensions (Narver et al. 2004). We turn to an extant model to discover the antecedents and outcomes of proactive market orientation, as well as to evaluate the discriminatory power of each factor for differentiating innovative from noninnovative companies. In turn, we analyze a sample of 2,038 Spanish companies of different sizes that function in varying activity sectors to test our series of hypotheses. Finally, we conclude by proposing some strategic recommendations that can facilitate managers' product innovation decision-making processes.

CONCEPTUAL FRAMEWORK AND HYPOTHESES DEVELOPMENT

Several recent studies have indicated that specific aspects, characteristics, and behaviors lead firms to innovate (Kahn 2001; Leenders & Wierenga 2002; Bond & Houston 2003; Deeds & Rothaermel 2003; Faems et al. 2005; Hult et al. 2005). The identified factors vary from study to study and may relate to a specific sector, situation, or productive capability, but overall, they possess two fundamental characteristics: They are determined by the firm's proactive market orientation (Slater & Narver 1998, 1999; Narver et al. 2004; Slater & Mohr 2006), and they are determinants of the new product's market success (Johne & Storey 1998; Froehle et al. 2000; Jiménez-Zarco et al. 2006).

Proactive market orientation and its effects on product innovation

A proactive market orientation refers to an organizational culture that emphasizes the use of internal and external cooperation to create superior value for customers, outperform competitors, and eventually generate more firm profit (e.g., Baker & Sinkula 2007). Despite extensive research highlighting the relationship between proactive market orientation and business performance, the direction of this relationship is still a bit unclear.

Empirical findings along the 1990s suggested some possible negative effects of market orientations for the companies implementing them (e.g., Macdonald 1995; Frosch 1996). For example, Berthon et al. (1999) observe how being market oriented could detract from innovativeness under certain circumstances. In addition, Bower and Christensen (1996) show how firms can lose their relative leadership positions if they pay too much attention to their customers. This warning is especially relevant in technology sectors, where customers usually do not know what they want, so responding to their wishes too closely can jeopardize a company's innovative capacity and opportunities to grasp and integrate new technologies into its processes.

Yet Kuada and Buatsi (2005) and Slater and Mohr (2006) argue for a positive relationship between proactive market orientation and business success, as moderated by environmental factors (Slater & Narver 1999). In this sense, a greater degree of market orientation leads to better results in the market (Kwon & Hu 2000; Winston & Dadzie 2002). …

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