Gaining Superior Business Performance from Market Orientation: The Mediating Role of the Core Business Process Capabilities

Abstract

The concept of market orientation (MO) and its association with business performance have been key research themes in contemporary marketing. While most studies conclude that MO positively affects performance (Kirca et al. 2005), only few studies to date have considered the actual performance mechanisms (Hult et al. 2005), though several scholars (e.g. Hunt and Morgan 1995) have argued that MO translates into superior performance only when aligned with other organizational elements, such as capabilities. Additionally, only very few studies (e.g. Murray et al. 2010) have simultaneously considered several business process level capabilities as drivers of this relationship. Comparing the relative importance of different mediators in the relationship has thus been difficult. Still another shortcoming is lack of evidence on robustness of the results in different contextual settings, such as under varying levels of environmental turbulence (Ramaswami et al. 2009). Given these gaps, we make several contributions to the existing literature on MO, using a recent sample of 480 product-focused firms in Finland. First, we explore whether and how capabilities in the core market-relating business processes in concert mediate the relationship between cultural MO (Narver and Slater 1990) and business performance. Second, building on Srivastava et al. (1999), we demonstrate what is the relative role of each process capability (product development management; PDM, customer relationship management; CRM, supply-chain management; SCM) in realizing the potential value of MO. Ours is the first study to empirically test an integrated model where capabilities in all business processes mediate the MO-performance relationship, thus extending the recent framework of Ramaswami et al. (2009). Third, in addition to the “within a firm” analysis, we investigate the potential moderation of business environment’s dynamism.