Academic journal article Academy of Marketing Studies Journal

The Effect of Market Orientation on New Product Performance: The Role of Strategic Capabilities

Academic journal article Academy of Marketing Studies Journal

The Effect of Market Orientation on New Product Performance: The Role of Strategic Capabilities

Article excerpt

INTRODUCTION

In today's business world, one of the most important problems that companies encounter is new product failure. The high product failure rate has been a major concern for practitioners for years. It was reported that almost half of the new products introduced each year will actually fail (Sivadas and Dwyer, 2000). While there are different failure rates reported, the issue is absolutely a critical one for firm survival in intensely competitive markets.

Given the fact that the increasing level of technological advancement, consumer expectations, and domestic as well as international competitive pressures continue to reduce the product life cycle for new products, it has become extremely important for companies to understand the critical determinants of new product success and failure and to be able to develop satisfactory, failure-free, and long-living products for markets. A group of studies on new product performance has predominantly investigated project-level or process-based factors as the potential determinants of new product success (e.g., Cooper, 1979a, 1979b; Kalyanaram and Krishnan, 1997; Link, 1987). Another stream of past research on new product performance has addressed organizational-level predictors of new product performance (e.g., Ayers, Dahlstrom and Skinner, 1997; Gupta, Raj and Wilemon, 1986; Moorman and Miner, 1997). In a number of studies, a market orientation has been presented as a significant factor that affects new product performance (e.g., Appiah-Adu, 1997; Atuahene-Gima, 1995; Atuahene-Gima, Slater and Olson, 2005; Cooper and Kleinschmidt, 1988; Im and Workman, 2004; Langerak, Hultink and Robben, 2004; Narver, Slater and Mac Lachlan, 2004; Slater and Narver, 1994a, 1994b). In spite of its significance, the relationship between market orientation and new product performance has not received much scholarly attention (Narver, Slater and MacLaehlan, 2004). Past research has failed to explore the relationship between market orientation and new product performance in more specific studies.

It has been argued that a market orientation may enable the organization to develop a number of strategic capabilities which are critically important for the organization (Deshpandé, 1999; Narver and Slater, 1990; Slater and Narver, 1994b). A market-oriented organizational culture may develop some strategic capabilities whose independent effects and interactions with each other lead to better new product performance. Learning orientation and organizational innovativeness have been recognized by some researchers as strategic capabilities which are likely to be developed and reinforced by a strong market orientation (Day, 1994; Deshpandé, 1999).

A significant number of scholars have recognized the importance of the potential link between market orientation and innovativeness and have stressed the need for additional research on this issue (e.g., Deshpandé, 1999; Hurley and Huit, 1998; Jaworski and Kohli, 1996; Lukas and Ferrell, 2000). Deshpandé (1999) posited that since organizational innovativeness might have an important effect on business profitability, the linkage between a market orientation and a firm's innovative capability should be investigated (p.5-6).

Learning orientation is defined as "an organizational characteristic that reflects the value that a firm places not only on adroitly responding to changes in the environment but on constantly challenging the assumptions that frame the organization's relationship with the environment" (Baker and Sinkula, 1999, p.412). It is believed that a learning orientation "has a direct bearing on the degree to which higher order learning occurs" (Baker and Sinkula, 1999, p.413; Slater and Narver, 1995). This statement means that the higher the degree of learning orientation within an organization, the greater the level of organizational learning occurring within the organization. To the authors' best knowledge, the incorporation of learning orientation into marketing has been limited to date (e. …

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