Market orientation and performance: a meta-analysis

The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0263-4503.htm Market orientation and performance: a meta-analysis Market orientation and performance Aviv Shoham Graduate School of Business, University of Haifa, Haifa, Israel 435 Gregory M. Rose University of Washington, Tacoma, Washington, USA, and Fredric Kropp Received March 2004 Revised March 2005 Accepted April 2005 Monterey Institute of International Studies, Monterey, California, USA Abstract Purpose – To assess quantitatively the impact of market orientation on the performance of the firm. While much empirical work has centered on market orientation, the generalizability of its impact on performance has been under-researched. Design/methodology/approach – A substantive meta-analysis quantitatively summarizes the results of empirical studies of the direct and indirect impact of market orientation on three outcomes. A second, methodological meta-analysis assessed the influence of methodological variables on explained variance in performance. Findings – The direct, indirect, and total impacts of market orientation on performance were all significant. Additionally, the geographic location of the study and the performance measure used (but not the scale) affected explained variance. Research limitations/implications – First, across study contexts, market orientation affects performance. Second, its impact might be stronger than previously thought due to the indirect paths not considered in previous research. Third, the strength of its impact depends on the country in which it was implemented; managers should expect higher payoffs in less developed countries. Originality/value – The findings of this study significantly refine the body of knowledge concerning the impact of market orientation on the performance of the firm, and thereby offer an improved conceptual framework for marketing planners. Keywords Market orientation, Organizational performance Paper type Research paper Introduction Market orientation (MO) is a central construct in a theory developed to explain firm performance (Jaworski and Kohli, 1993; Kohli and Jaworski, 1990; Kohli et al., 1993; Narver and Slater, 1990; Deshpandé and Farley, 1998). MO was initially studied in the USA where it was linked to performance, organizational commitment, esprit de corps (Jaworski and Kohli, 1993), and return on assets (Narver and Slater, 1990). Recent extensions have used other performance measures, such as ROI and new product success (Deshpandé et al., 1997; Greenley, 1995; Pelham and Wilson, 1996) and have focused on additional countries (Diamantopoulos and Hart, 1993; Golden et al., 1995; Rose and Shoham, 2002; Selnes et al., 1996; Shoham and Rose, 2001), which has enriched the disciplinary understanding of MO. While a positive MO-to-performance link has been established (Cadogan et al., 1999; Jaworski and Kohli, 1993; Narver and Slater, 1990), there are still questions about its Marketing Intelligence & Planning Vol. 23 No. 5, 2005 pp. 435-454 q Emerald Group Publishing Limited 0263-4503 DOI 10.1108/02634500510612627 MIP 23,5 436 robustness. For example, in a US and Swedish study, Selnes et al. (1996) found a positive correlation between Kohli and Jaworski (1990) and subjective performance, but not with market share. Similarly, in a five-country study, Deshpandé et al. (1997) did not find a consistent impact of MO on performance. Likewise, Slater and Narver (1996) found no relationship between MO and profitability or ROI (see Deshpandé and Farley, 1998). This study employs a substantive meta-analysis to quantitatively aggregate the effects of MO on performance, organizational commitment, and esprit de corps. This relationship has been under-researched in the literature. Moreover, it explores the indirect impact of MO on performance, through commitment and esprit de corps. To the best of our knowledge, no previous study has examined these mediated influences of MO on performance. To the extent that such indirect paths are identified, the impact of MO on performance might be stronger than previously thought. Furthermore, a second, methodological meta-analysis was conducted as well. Three factors that could potentially affect the strength of the MO-to-performance relationship: study location (USA versus other nations), MO operationalization (Kohli et al., 1993; Narver and Slater, 1990), and the performance measure used (subjective, objective, or both) were included in this meta-analysis. These contextual effects are managerially important as they set boundary conditions for the generalizability of the impact of MO on performance. In sum, we seek to establish empirical generalizations from previous studies and identify the aggregate effect of MO on performance. In addition, we test the robustness of the MO-to-performance relationship to identify the conditions under which MO is most effective. Theoretical background MO involves an implementation of the marketing concept (Deng and Dart, 1994). It facilitates a firms’ ability to anticipate, react to, and capitalize on environmental changes, thereby leading to superior performance. Two approaches to MO have been widely adopted. The first distinguishes three components: organization-wide generation of market information about current and future customer needs; dissemination of such information across departments and individuals within the market-oriented firm; and an organization-wide responsiveness to the disseminated information (Jaworski and Kohli, 1993; Kohli and Jaworski, 1990). The second also uses three components, but conceptualizes MO differently (Narver and Slater, 1990; Slater and Narver, 1995). The first component is customer orientation, which reflects the necessary activities for acquiring and disseminating information about customers. The second, a competitor orientation, implies an effort to gather and disseminate information about competitors of the MO firm. The third component, inter-functional coordination, involves “. . .the business’s coordinated efforts. . .to create superior value for them continuously” (Narver and Slater, 1990, p. 21). Cadogan and Diamantopoulos’s integrative paper Cadogan and Diamantopoulos (1995) identified many common themes between the two approaches, except for responsiveness and the customer and competitor orientations. While firm performance is central to Jaworski and Kohli (1993) and Narver and Slater (1990), the former also assessed behavioral outcomes: organizational commitment and esprit de corps. Below, we discuss the three MO outcomes. Since MO’s impact on these outcomes has been well argued and documented in the literature, we provide a brief overview only. Outcomes of an MO Behavioral outcomes. Previous research has established the positive impact of a firms’ MO on employees’ esprit de corps (Jaworski and Kohli, 1993; Rose and Shoham, 2002; Shoham and Rose, 2001). MO provides employees with a sense of belonging, direction, and feelings of contributing towards satisfying customer needs, thereby leading to greater esprit de corps. Kohli and Jaworski (1990) suggested that their use of esprit de corps is similar to the teamwork concept in a services marketing context (Zeithaml et al., 1988). MO provides psychological and social benefits to employees and enhances esprit de corps and teamwork. Moreover, MO was the strongest predictor of the seven antecedents of esprit de corps tested by Jaworski and Kohli (1993). Thus: H1. MO is related positively to employees’ esprit de corps. MO is a positive driver of organizational commitment. By providing team spirit, it can enhance employees’ pride, which, in turn, should increase their commitment to the firm. Dubinski et al. (1986) emphasized the importance of salespeople’s socialization, which can enhance workers’ understanding of their role definition and provide an understanding about the tasks to be performed. In combination, these benefits should enhance employees’ task-specific self-esteem and help resolve conflicting job demands. Role definition should increase job involvement and organizational commitment (Dubinski et al., 1986). A well-developed MO can serve as initiation and socialization mechanisms for the workforce, thereby enhancing organizational commitment indirectly. Thus: H2. MO enhances employees’ commitment to the firm. Performance outcomes. MO helps firms track and respond to changing customer needs; hence, high-MO firms should outperform low-MO firms. Three theoretical approaches (an evolutionary perspective, an industrial organization approach, and a resource-based-view of the firm) underlie the expected positive MO-to-performance link. The evolutionary perspective (Lusch and Laczniak, 1987) argues that organizational characteristics that made a firm fit its environment become a part of its future evolution only when replicated. MO provides an organization with a winning philosophy in the face of intensifying competition. Thus, it will be selected because it increases the probability of an organization’s survival. Lusch and Laczniak (1987) found that the link between the marketing concept and organizational performance was positive and significant. Industrial organization theory provides additional justification for the MO-to-performance link (Knight and Dalgic, 2000). Firms manage their relationship with the environment to maximize performance (Scherer and Ross, 1990). RBV postulates that differential firm resources give rise to superior strategy and performance (Barney, 1991; Porter, 1991; Wernerfelt, 1984). Prahalad and Hamel (1990) described core competencies as the collective learning of an organization. By enhancing MO, it is possible to enhance the core competencies of a firm. Therefore: H3. MO is related positively to firm performance. Market orientation and performance 437 MIP 23,5 438 Organizational commitment, esprit de corps, and performance. MO might also impact performance indirectly (through its behavioral consequences). Unfortunately, previous MO research has not focused on the potential of its behavioral outcomes (organizational commitment and esprit de corps) to affect performance. These links are important because the impact of MO on performance may be direct, as hypothesized and documented previously, but it may also be indirect, through its behavioral outcomes. An advantage of the meta-analysis used here is that it makes it possible to test such indirect impacts. Organizational commitment. Committed employees are less likely to be absent from work or to resign from their firm (Steers, 1977), are more likely to go beyond required norms to contribute to the attainment of organizational goals (Steers and Porter, 1979), are willing to give of themselves for the general wellbeing of the organization (Mowday et al., 1982), and are more likely to remain members of the organization (Porter et al., 1974; Cohen, 1993; Dunham and Pierce, 1989; Somers, 1995; Tett and Meyer, 1993). Similarly, less committed employees are less willing to share and sacrifice for the organization (Randall et al., 1990). Bloemer et al. (1998) hypothesized a relationship between organizational commitment and customer loyalty, enhancing performance. In the context of professional associations, Gruen et al. (2000) hypothesized and documented that organizational commitment enhances retention, participation, and co-production. Organizational commitment may also enhance salesforce performance leading to higher organizational performance (Michaels et al., 1988) since committed employees are likely to identify with their work (O’Reilly and Chatman, 1986). Grant and Cravens (1999) found that high organizational commitment resulted in higher sales, market share, and customer satisfaction. So: H4. Organizational commitment is related positively to firm performance. Esprit de corps. Team spirit is commonly discussed in the context of group cohesiveness. Greenberg and Baron (1997, p. 259) state that: “cohesiveness refers to a ‘we’ feeling, an ‘esprit de corps’, a sense of belonging to a group”. Members of cohesive groups participate more in the groups’ activities, accept group goals more readily, are absent from work less often than members of less cohesive groups (Cartwright, 1968; Dunham and Pierce, 1989), and tend to stay longer with their organization (George and Bettenhausen, 1990). The higher willingness of cohesive groups’ members to work together and conform to group norms contributes to the groups’ performance (Shaw, 1981). Dunham and Pierce (1989) and Jewell and Reitz (1981) identified six group development stages: orientation, conflict, cohesion (which pertains to team spirit), delusion, disillusion, and acceptance. They summarized: “Cooperation, low levels of emotionalism, and goal directed activity are common characteristics of highly cohesive groups. Significant increases in group effectiveness are common during the cohesion stage.” Thus: H5. Team spirit is related positively to firm performance. Methodological considerations Up to this point, we have discussed substantive/theoretical issues related to MO and its consequences. However, methodological and contextual variables may affect the strength of MO’s impact on performance. An examination of the methodological and contextual variables is the focus of a second, methodological meta-analysis. We examine three potential moderators of the MO performance relationship: location (USA versus other nations), MO operationalization (Kohli et al., 1993; Narver and Slater, 1990, and others), and the performance measure used (subjective, objective, or both). These variables were selected based on their potential impact on the MO-to-performance relationship. Additionally, each was included in enough studies to provide a sufficient number of effect sizes to test their impact. Notably, little theoretical contributions are available to guide the hypotheses’ formation process for the second meta-analysis. Thus, moderators are discussed using exploratory terminology. Study location. Study location has the potential to be an important determinant of the strength of relationships in meta-analyses (Farley et al., 1982). MO should have its greatest effect in a nation with a highly dynamic and competitive business environments (Jaworski and Kohli, 1993; Kohli and Jaworski, 1990). While initial conceptualizations of MO were developed in the USA, other nations may provide a less dynamic environment, mitigating the performance consequences of MO. Thus, MO may also have a stronger influence in the USA. Deshpandé et al. (2000) assessed MO in five countries (Japan, the USA, France, England, and Germany) and documented differences across them (see Deshpandé and Farley, 1998 for an exception). Selnes et al. (1996) found differences on two MO components between American and Scandinavian samples. Cadogan et al. (1999) reported differing MO components – performance relationships for UK and Dutch exporters. Thus, cross-nation studies have yielded differing MO-to-performance relationships. Notably, Deshpandé and Farley (2000) argued against their own findings (Deshpandé et al., 2000, p. 26). In a study of Chinese firms, they documented that MO was the most important variable in separating high- versus low-performing firms. They concluded: “Market orientation can be especially effective in a transforming economy, although this proposition requires much more testing.” In sum, findings about the impact of study location have produced mixed results. Thus (avoiding a null hypothesis): H6. The MO-to- performance relationship differs between firms in the USA and in other nations. MO operationalization. MO operationalizations can influence the strength of its impact on performance. Kohli et al. (1993) and Narver and Slater (1990) offered two theoretically plausible and widely used measures for studying MO. Other measures have been used, but they are conceptually or empirically similar to those. Additionally, the number of empirical studies based on different operationalizations is too small to be assessed specifically in a meta-analysis. Consequently, all other approaches were combined into an “other” category. The Kohli and Jaworski and Narver and Slater scales are theoretically sound. Although each measures some different aspects of MO, both have repeatedly proved to be reliable and valid. We draw on Cadogan and Diamantopoulos (1995) and Cadogan et al. (1999) to compare these approaches. The former integrated Kohli and Jaworski’s and Narver and Slater’s conceptualizations, and identified many themes common to both approaches. They suggested that MO can be viewed as a business philosophy or Market orientation and performance 439 MIP 23,5 440 as a behavior-guiding orientation and that the two approaches are philosophically distinct. Kohli and Jaworski emphasized behavior, while Narver and Slater emphasized a combination of the philosophical and behavioral facets of the MO construct. Cadogan and Diamantopoulos developed a three-by-three matrix to assess the conceptual and empirical overlap between Jaworski and Kohli’s dimensions (intelligence generation, intelligence dissemination, and responsiveness) and Narver and Slater’s (customer orientation, competitor orientation, and interfunctional coordination). Customer orientation overlaps conceptually with intelligence generation and intelligence dissemination, and operationally with intelligence generation and responsiveness. Competitor orientation overlaps conceptually with intelligence generation and intelligence dissemination and operationally with their intelligence dissemination and responsiveness. Finally, interfunctional coordination overlaps both conceptually and operationally with intelligence generation, intelligence dissemination, and responsiveness. Cadogan and Diamantopoulos (1995) found that the Narver and Slater conceptualization of MO shares a nomological network with that provided by Kohli and Jaworski (1990), customer orientation, competitor orientation and interfunctional coordination tapping a similar domain to intelligence generation, dissemination and responsiveness. Thus (avoiding a null hypothesis): H7. The strength of the relationship between MO and business performance differs across scales. Performance operationalization. Performance has been operationalized in many ways including market share, profitability, return on assets or on investment, change in market share or profitability, new product success, and composite measures of these variables. Such measures can be classified as objective, subjective, or combinations of the two. Subjective measures center on managers’ assessment of the performance of their business unit or firm, relative to expectations or competitors. In such cases, managers may account for competitive and environmental conditions when producing subjective measures. For example, managers may rate their firms’ profitability relative to major competitors’. Alternatively, managers may be asked to indicate how satisfied they are with their firm’s performance, e.g. sales growth. Objective measures, in contrast, assess the actual performance of the firm on absolute scales. Schlegelmilch and Ram (2000) found that MO affected perceived, but not actual ROI. Jaworski and Kohli (1993) found that MO had a positive impact on subjective performance, which is an assessment of overall performance relative to competitors’. Yet, its impact disappeared when an objective measure of performance (dollar share on the served market) was used. They argued that judgmental performance assessments might be more accurate in MO studies as subjective measures account for the particular strategies of a company. The existence of a time lag between MO and objective performance also may be important (Jaworski and Kohli, 1993; Sargeant and Mohamad, 1999). Thus, cross-sectional research, the norm in MO studies, may not capture the true strength of MO’s impact on performance. Thus, Jaworski and Kohli (1993, p. 6) concluded: “Based on these considerations, the authors tend to place more confidence in the results obtained using judgmental measures of performance.” To sum up: H8. The relationship between MO and performance will be strongest when subjective measures are used, followed by combinations of objective and subjective measures, followed by objective measure of performance. Method Literature search The literature was searched for empirical studies that reported at least one relationship between the study’s constructs. We identified papers through a computerized search and an issue-by-issue search of nine journals and three conferences over 15 years. They appeared in the Journal of Marketing, Journal of Marketing Research, Journal of the Academy of Marketing Science, Journal of International Business Studies, Journal of International Marketing, Journal of Business Research, International Journal of Research in Marketing, European Journal of Marketing, and Journal of Global Marketing. The proceedings of the Academy of Marketing Science, European Marketing Academy, and American Marketing Association were also searched. When an abstract was included in conference proceedings, we attempted to contact authors and request correlations of the constructs. We also contacted scholars active in this area to identify non-published research. Finally, we identified papers in other journals and proceedings from the references of the papers identified. Unfortunately, many papers did not report correlation coefficients, t-tests, or F-tests that are necessary for meta-analyses. Whenever possible, we contacted authors with a request for the needed data. When unavailable, these papers were excluded, resulting in 29 papers in the meta-analysis (Table I). As some papers reported on multiple samples (e.g. Selnes et al., 1996) or operationalizations of MO (e.g. Deshpandé and Farley, 1998), the total number of data-points was 35. All relationships included data from 4-34 samples (ns ¼ 517-5,165; average total n per relationship ¼ 1,347). Procedure Sample size and correlation coefficients were recorded for each study. Pooled correlation coefficients were calculated for the model’s constructs. Z-transformed study correlations were averaged and weighted by an estimate of their variance to increase the weight of more accurate estimates ((n – 3); Hedges and Olkin, 1985). The transformation involved a calculation of zijk, the z-transformation of the correlation coefficient observed in study k for constructs i and j. The pooled and transformed study effects were reconverted to correlation coefficients using Hedges and Olkin’s formulae. Hypotheses 1 to 5 were tested by OLS regression models, run in LISREL 8.30, with the pooled correlation coefficients used as input (n ¼ 1,347). Hypotheses 6 to 8 were tested by an ANOVA model with the pooled correlations between MO and performance serving as dependent variables. Results Substantive meta-analysis The calculated correlation coefficients appear in Table II. The correlation coefficients for the three outcomes (performance, commitment, and esprit de corps) are of medium strength (0.21-0.66), suggesting that the outcomes are related, but not identical. Market orientation and performance 441 Country Sample Market orientation operationalization Athuahene-Gima (1995) Australia 275 firms Ruekert Avlonitis and Gounaris (1997) Greece Kohli and Jaworski Avlonitis et al. (1992) Greece Two sample: 161 and 236 firms 381 Au and Tse (1995) Balakrishnan (1996) Hong Kong and New Zealand USA 69 (HK) and 250 (NZ) Hotels 139 firms Kohli and Jaworski Becker and Homburg (1999) Bhuian (1997) Germany Saudi Arabia 234 firms 92 banks Kohli and Jaworski Kohli and Jaworski Breman and Dalgic (1998) Holland 105 exporters Kohli and Jaworski Cadogan and Diamantopoulos (1999) Cadogan, Diamantopoulos, and de Mortanges (1997) Caruana et al. (1997) UK 48 exporters Narver and Slater UK and Holland 198 and 103, respectively Kohli and Jaworski 134 public-sector government departments Australia and New 84 university schools Zealand USA and Europe 82 firms Kohli and Jaworski Caruana et al. (1998) Deshpandé and Farley (1998) Australia Diamantopoulos and Hart (1993) UK 86 firms Gray, Matear, Boshoff, and Matheson (1998) 490 firms New Zealand Kohli and Jaworski; Narver and Slater Proprietary Kohli and Jaworski Kohli and Jaworski; Narver and Slater; Deshpandé et al. Kohli and Jaworski-based; proprietary Kohli and Jaworski combined with Narver and Slater MIP 23,5 442 Table I. Empirical studies used in the meta-analyses Study Findings New product performance (þ ); project performance (þ ) Performance relative to competitors (þ ) Profitability (þ ) Occupancy rates (- HK; þ NZ; not significant) Repeat business and customer retention (þ; not significant) Market performance (þ ) ROA; ROE; sales per employee (þ ; not significant) Performance relative to competitors (þ ) Subjective performance (þ ) Satisfaction and overall performance (þ) Organizational commitment (þ ) Subjective assessment of performance (þ) Subjective assessment of performance (þ) Performance relative to industry (mixed) Brand awareness, customer satisfaction and loyalty, and ROI (þ ) (continued) Study Country Sample Market orientation operationalization Homburg and Pflesser (1999) Germany 160 firms Kohli and Jaworski Horng and Chen (1998) Taiwan 76 small/medium-sized firms Kohli and Jaworski Hulland (1995) USA and Canada 55 firms Narver and Slater Kohli, Jaworski, and Kumar (1993) Moorman (1995) USA 230 firms Kohli and Jaworski USA 92 firms Narver and Slater (1990) Pelham (1997) USA USA 365 SBUs 160 small firms Narver and Slater-based; proprietary Narver and Slater Mostly Narver and Slater Pelham (1999) Pelham and Wilson (1996) USA USA 229 small firms 78 small firms Pelham Pelham Rose and Shoham (2002) Israel 124 exporters Kohli and Jaworski Sandvik and Gronhaug (1998) Selnes et al. (1996) Norway US and Scandinavia 28 firms 222 and 70 firms, respectively Kohli and Jaworski Kohli and Jaworski Shoham and Rose (2001) Israel 101 firms Kohli and Jaworski Siguaw (1994) USA 278 firms Narver and Slater Findings Subjective market performance (þ ) Subjective performance, commitment, and esprit de corps (þ ) ROI and sales growth (þ; not significant) Subjective performance (þ ) New product performance (þ ; not significant) ROA relative to competitors (þ ) Subjective performance (þ ; not significant) Multi-item subjective scale (þ ) New product success; sales growth; profitability (þ ) Subjective and objective; commitment; esprit de corps (þ ) Subjective performance (þ ) Market share; commitment; esprit de corps; and subjective performance (þ) Subjective and objective; commitment; esprit de corps (þ ) Commitment (þ ) Market orientation and performance 443 Table I. MIP 23,5 Market orientation Market orientation Performance 444 Organizational commitment Esprit de corps Table II. Summary of meta-analytic correlations Performance 1.00 0.279 340 5,165 0.511 8.0 1,235 0.460 5.0 593 Organizational commitment Esprit de corps 1.00 0.283 4.0 517 0.206 4.0 517 1.00 0.660 4.0 517 1.00 Note: Entries are mean weighted correlation coefficients (r), the number of correlation coefficients per each (k), and the total sample size per each (n) Additionally, all three outcomes are related positively to MO, which provides initial support to H1-H5. Table III shows the results of the OLS regressions and provides standardized b-coefficients based on aggregated effects over the entire set of papers. In the first, we tested a model with MO directly affecting the three outcomes, but without its indirect impact on performance through the behavioral outcomes. x2 of the model was 39.56 (df ¼ 2; p , 0.01). Root mean square residual (0.05), standardized root mean square residual (0.05), goodness of fit index (0.99), and adjusted goodness of fit index (0.93) were acceptable, suggesting that the model fits the data well. Hypothesized relationship (expected sign) H1 Table III. Summary of OLS regression models’ results Market orientation ! performance (þ) H2 Market orientation? ! organizational commitment (þ ) H3 Market orientation? ! esprit de corps (þ) H4 Organizational commitment? ! performance (þ) H5 Esprit de corps ! performance (þ) x2; root mean square residual; standardized root mean square residual; goodness of fit index; adjusted goodness of fit index OLS beta (standardized) coefficients Mediated Mediated model for model for Direct model esprit de corps commitment only 0.28 (10.66) * 0.18 (6.06) * 0.23 (7.96) * 0.51 (21.81) * 0.51 (21.81) * 0.51 (21.81) * 0.46 (19.01) * 0.46 (19.01) * 0.46 (19.01) * 0.19 (6.33) * 0.10 (3.36) 39.54; 0.05; 0.05; 0.99; 0.93 0.27; 0.001; 0.001; 1.00; 1.00 28.35; 0.03; 0.03; 0.99; 0.90 Notes: * Significant correlation coefficients ( p , 0.05); * * Marginally significant correlation coefficients ( p , 0.09) Consequences of MO: direct impact model The data provide strong support to the hypotheses dealing with the three outcomes. The impact of MO on performance was positive and significant (b ¼ 0.28; t ¼ 10.66; p , 0.05), supporting H1. MO had a positive and significant impact on organizational commitment (b ¼ 0.51; t ¼ 21.81; p , 0.05) and esprit de corps (b ¼ 0.46; t ¼ 19.01; p , 0.05), supporting H2 and H3. In short, MO has the hypothesized positive financial and behavioral consequences. Consequences of MO: direct and indirect impact-model 1 In the second model, MO was allowed to affect performance directly, as well as indirectly, through commitment. As before, MO was also modeled as affecting the two behavioral outcomes. This model served to test H4. x2 was 0.27 (one df; p , 0.88). Root mean square residual (0.001), standardized root mean square residual (0.001), goodness of fit index (1.00), and adjusted goodness of fit index (1.00) were acceptable, suggesting that the model fits the data well. As was the case in the first model, MO significantly affected all outcomes. The standardized impacts on firm performance (b ¼ 0.18; t ¼ 6.06), organizational commitment (b ¼ 0.51; t ¼ 21.81), and esprit de corps (b ¼ 0.46; t ¼ 19.01) were all positive and significant ( p , 0.05). In support of H4, the impact of organizational commitment on firm performance was positive and significant (b ¼ 0.19; t ¼ 6.33; p , 0.05). The impact of MO on firm performance may be stronger than indicated in previous research because of its additional positive impact on organizational commitment and the latter’s positive impact on firm performance. Consequences of MO: direct and indirect impact-model 2 In this model, we allowed MO to affect firm performance directly and indirectly, through esprit de corps. Here too, MO directly affected the two behavioral outcomes. This model served to test H5. The model’s x2 was 28.35 with one degree of freedom ( p , 0.05). Root mean square residual (0.03), standardized root mean square residual (0.03), goodness of fit index (0.99), and adjusted goodness of fit index (0.90) were acceptable, suggesting that the model fits the data well. As was the case in the first two models, MO was a significant predictor of the three outcomes. Its standardized impacts on firm performance (b ¼ 0.23; t ¼ 7.96), organizational commitment (b ¼ 0.51; t ¼ 21.81), and esprit de corps (b ¼ 0.46; t ¼ 19.01) were positive and significant ( p , 0.05). Supporting H5, the impact of esprit de corps on firm performance was positive and marginally significant (b ¼ 0.10; t ¼ 3.36; p , 0.09). This suggests that the total impact of an MO on firm performance may be stronger than indicated in past research because of its added positive impact on esprit de corps and, through it, on firm performance. Methodological meta-analysis An ANOVA model tested H6-H8 (Table IV). The pooled MO-to-performance correlations served as dependent variable. Study location (USA versus other countries), scale used and performance (objective, mixed, and subjective) served as independent variables. The ANOVA model was significant (type III sum of squares ¼ 0.51; df ¼ 5; F ¼ 5.57; p , 0.01) and accounted for 50.8 percent of the variance in explained performance. Consequently, the individual impacts of study location, scales used, and Market orientation and performance 445 MIP 23,5 446 Table IV. ANOVA model resultsa Source Corrected model Intercept Scale used Performance measure Study location Error Total Type III sum of squares df F Significance Eta squared 0.507 0.419 0.024 0.487 0.096 0.491 3.752 5 1 2 2 1 27 33 5.571 23.029 0.653 13.377 5.292 0.001 0.001 0.529 0.001 0.029 0.51 0.46 0.05 0.50 0.164 Notes: a Scale: 0 – Jaworski and Kohli (1983); 1 – Narver and Slater (1990); 2 – others. Performance measure: 0 – subjective; 0.5 – subjective and objective; 1 – objective. Location: 0 – USA; 1 – other performance measures used on the explained variance in firm performance were examined. H6 posited that the relationship between MO and performance would differ between the USA and other nations. In support, study location was significant (F ¼ 5.29; p , 0.03). The correlations averaged 0.276 in the USA and 0.293 in other countries. Under H7, no differences were expected in the strength of the relationship between an MO and performance across the three types of scales. The model supported this hypothesis: the impact of the scale used was not significant ( p . 0.52). The correlations averaged 0.306 for the Kohli and Jaworski scale, 0.297 for the Narver and Slater scale (1990), and 0.256 for other scales. Finally, H8 suggested that the MO-to-performance relationship would be strongest for subjective measure of performance, of medium strength for subjective and objective combinations, and weakest for objective performance measure. This was the case; the type of measure used had a significant impact (F ¼ 13.38; p , 0.01) on the relationship’s strength. The correlation coefficients averaged 0.070 for studies using objective performance measures, 0.248 for studies using both types, and 0.404 for studies using subjective measures. Discussion and implications Substantive meta-analysis The study supports the notion that MO has a positive impact on organizational commitment, esprit de corps, and performance. The MO-to-performance link is significant and robust. Comparing a firm’s intended strategy to performance measures might be an important consideration in determining the effectiveness of MO (Jaworski and Kohli, 1993). It is important to use performance measures that capture a firm’s goals to avoid weakening the MO-to-performance relationship. For example, Sin et al. (2000) found that MO affected sales growth, customer retention, and overall performance; however, it had no impact on ROI or market share for the Chinese firms sampled. It is plausible that the firms in their sample might have emphasized strategies designed to enhance sales growth, customer retention, and overall performance, rather than ROI or market share. Future research should ascertain whether the performance measures used fit the firms sampled. Mediation. The total impact of MO may be stronger than previously thought. We can certainly imagine numerous other potential partial mediators for the MO-to-performance relationship beyond those included here. For example, Fritz (1996) suggested that overall corporate management might mediate the impact of MO on success. In his study of German firms, he documented that MO affected overall corporate management, which, in turn, affected corporate success. Unfortunately, he did not include a direct path from MO to corporate success. Thus, the partial mediation explanation could not be tested. Siguaw et al. (1994) suggested another mediation possibility. In their study of USA salespeople, they developed a model in which MO and a customer-orientation affect role conflict and role ambiguity. In turn, these role facets affect job satisfaction and organizational commitment. While we included the latter in our study, the former may suggest another variable for inclusion in future research. Job satisfaction (of salespeople or other employees) might be beneficial for firm performance, providing another mediated link between a MO and performance. Moderation. Future research could examine moderated hypotheses. As noted before, environmental/market characteristics could potentially affect MO outcomes. Jaworski and Kohli (1993) suggested market turbulence, competitive intensity, and technological turbulence as moderators of the MO-to-performance relationship. Similarly, Slater and Narver (1994) identified additional potential moderators, such as supplier and buyer power and seller concentration. However, in his test of market turbulence, technological turbulence, competitive intensity, and market growth as potential moderators, Appriah-Adu (1997) identified only three significant effects out of a total of twelve. Similarly, Jaworski and Kohli (1993) failed to uncover significant moderators in their study and argued that these findings might have been due to insufficient power of their statistical tests resulting from small sub-sample sizes. In addition, Breman and Dalgic (2000) argued convincingly that organizational learning might moderate the relationship between an MO and firm performance. However, the findings failed to support their theoretical arguments for a moderated relationship, perhaps due to insufficient statistical power. Thus, an assessment of the moderating impact of such environmental/market characteristics remains an important topic for future study. MO antecedents. To the extent that MO drives performance, directly and indirectly, the issue of how to build and maintain MO is of immense managerial importance. While the body of research on consequences of MO is large, relatively little research has investigated its antecedents. Thus, antecedents remain an important task for future research. Although Kohli and Jaworski’s framework includes a comprehensive set of antecedents, other frameworks, such as Narver and Slater’s, have placed less emphasis on identifying antecedents. Unfortunately, few studies have provided data about the links between Kohli and Jaworski’s antecedents and MO. Thus, meta-analyses of these relationships could not be conducted. Based on their review of the literature, Jaworski and Kohli (1993) included three sets of MO antecedents. The first focuses on top management factors and includes the top managers’ emphasis on customer needs. MO is developed when a firm emphasizes the importance for managers to track market changes, share market information with others, and be responsive to market needs. In addition, top management’s willingness to take risks drives the firm towards MO. Such willingness is necessary because responding to changing markets often requires the introduction of new products. Thus, top managers need to accept and encourage occasional failures (Kohli and Jaworski, 1990). Market orientation and performance 447 MIP 23,5 448 The second set of antecedents pertains to interdepartmental dynamics, including interdepartmental conflict and connectedness. Conflict can harm MO by reducing communication flows, thus limiting the coordination and implementation of effective firm-wide responses to gathered and disseminated information. In contrast, constructive interdepartmental connectedness can facilitate the dissemination of information. The third set of antecedents includes organizational systems: centralization, formalization, and firm reward systems. Centralization involves the participation in and delegation of decision-making responsibilities throughout the firm. Formalization is defined as the degree to which roles, authority, communications, norms, sanctions, and procedures are defined by rules (Jaworski and Kohli, 1993). Centralization and formalization could limit flexibility and the communication and utilization of information across departments, thus inhibiting the development of MO. On the other hand, the more customer-focused the firm’s reward system is, the higher its level of MO (Kohli and Jaworski, 1990). Managers can facilitate the creation of MO firms by stressing a customer orientation and encouraging organizational learning through experimentation (Jaworski and Kohli, 1993; Rose and Shoham, 2002). A sense of commitment should facilitate connectedness and reduce conflict. Top management emphasis, MO rewards (Ruekert, 1992), low interdepartmental conflict, top managers’ willingness to take risks, and high interdepartmental connectedness could all be included in the menu of actions designed to foster MO (Shoham and Rose, 2001). However, more research is needed to establish the robustness of these findings in the Jaworski and Kohli and Narver and Slater traditions. Future research could also assess additional organizational factors to facilitate MO such as creating and maintaining a learning organization, a stronger emphasis on MO during recruiting and selection of employees, and a training system. Harris (2000) and Harris and Ogbonna (1999) studied organizational barriers to developing MO. They were concerned with the “flip side” of MO antecedents, including those enumerated by Jaworski and Kohli (1993). For example, they included connectedness and coordination mechanisms, which could contribute to, rather than hinder MO. However, they too included centralization and formalization as factors detrimental to MO. In short, much remains to be done in addressing the question of how to build and maintain MO. Methodological meta-analysis This study used a meta-analysis to establish empirical generalizations about the consequences of MO. In general, as noted, MO positively affects organizational commitment, esprit de corps, and, directly and indirectly, performance. While these effects were aggregated across a variety of research contexts in the substantive meta-analysis, we examined the effect of three context variables on the strength of the relationship between MO and performance in a methodological meta-analysis. Two methodological variables, location and the performance measure employed, affected the strength of this relationship. American samples, as a whole, exhibited a weaker relationship between MO and performance than those drawn elsewhere. This result is intriguing since both major approaches to conceptualizing and measuring MO were developed in the USA. Our findings indicate that, while the MO-to-performance relationship is relatively robust and generalizes across nations, its impact depends on the country setting. MO may have its greatest effect in nations where high standards of consumer service and expectations are still evolving. In such countries, MO may allow firms to create competitive advantage by providing a higher level of service than their competitors. The impact of MO on subjective measures of performance is stronger than its impact on objective measures, with combinations of the two capturing the middle ground. Subjective measures may provide a better assessment of performance because managers incorporate environmental conditions into their performance assessment. Thus, subjective measures may provide a more contextual and accurate assessment of performance than do objective measures. An innovative approach to examine differences involves using multiple measures of performance. Researchers would then pick the most relevant performance item for each firm according to its strategic thrust. Finally, the scale employed did not moderate the MO business-performance relationship. Consistent with previous theoretical expositions of the similarity of approaches to measuring MO (Diamantopoulos and Cadogan, 1996), no effect was found for the scale used. This provides support for the generalizability of results across studies, regardless of the specific scale used. As Cadogan et al. (1999) argued, behaviors such as intelligence generation, intelligence dissemination, and intelligence responsiveness are common to Kohli and Jaworski’s and Narver and Slater’s approaches. Deshpandé and Farley (1998) discuss the syntactical similarity of the scales and find high correlations (0.55 , r , 0.65) between MO scores across three separate operationalizations in the same sample of firms. Our study further examines these arguments by aggregating effects across studies and suggests that the majority of the explained variance in performance across scales is shared. Thus, MO operationalizations have produced a consistent and empirically robust MO – performance relationship. This finding notwithstanding, further work is needed to provide a philosophically based operationalization of MO. Kohli and Jaworski’s approach is behavioral, whereas Narver and Slater’s approach, while conceptually philosophical, leans operationally to behaviorism (Cadogan and Diamantopoulos, 1995). Future research can operationalize MO philosophically and assess its relationship with a behavioral operationalization. Limitations Not all constructs that may affect outcomes were included in the meta-analysis (e.g. market power; Narver and Slater, 1990). While this situation is typical for meta-analyses (Geyskens et al., 1999), the constructs studied most frequently in the context of MO were included here. Specifically, the impact of MO may depend on the environmental context of each study. Environmental influences, such as technological turbulence, may affect the MO-to-performance relationship (Jaworski and Kohli, 1993). Establishing the generalizability of moderating variables will become increasingly feasible as the volume of MO research continues to grow. Second, only a limited number of methodological variables were examined. Subsequent primary research should facilitate the examination of additional variables. Market orientation and performance 449 MIP 23,5 450 Conclusion The meta-analyses provide an ability to generalize from previous primary research about the consequences of MO. As discussed in the introduction, our potential goals materialized. MO affects firm performance and has behavioral consequences. These impacts survived the test of multiple contexts for studies of MO, enhancing our confidence in the generalizability of its impact on companies’ performance. Moreover, managerially important and as yet untested, MO’s positive impact on performance might be greater than previously assumed because of its indirect impact on performance through organizational commitment and esprit de corps. 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