A meta-analysis of the relationship between market orientation and business performance: evidence from five continents

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Abstract

Market orientation has emerged as a significant antecedent of performance and is presumed to contribute to long-term success. To investigate the impact of this predictor, a meta-analysis was conducted and findings suggest that the relationship between market orientation and business performance is positive and consistent worldwide. One of the unique contributions of this research is a sample that includes studies conducted in 23 countries spanning five continents. The moderating effects of business objective (profit, not-for-profit), industry type (manufacturing, service), socioeconomic development [gross domestic product (GDP) per capita, Human Development Index (HDI)), and Hofstede's individualism cultural dimension] are examined. Stronger correlations between market orientation and business performance were found for not-for-profit compared to profit firms and service compared to manufacturing firms.

Introduction

In today's highly competitive global markets, managers seek to improve organizational effectiveness by identifying organizational metrics linked to business performance. Market orientation is one such metric that has emerged as a significant predictor of performance and is presumed to contribute to long-term success (Deshpandé & Farley, 1999). Market orientation is heavily influenced by the marketing concept Drucker, 1954, McCarthy, 1960, McKitterick, 1957, and is the cornerstone of the marketing management and marketing strategy paradigms (Hunt, 2002). The Marketing Science Institute has recognized the importance of market orientation for many years, and today it remains a research priority. Over time, scholars have acknowledged that market orientation research has significantly influenced the development of marketing knowledge Biggadike, 1981, Day, 1999, Kohli & Jaworski, 1990.

Scholars agree that meta-analysis is an important tool for conducting marketing research across different countries (Deshpandé & Farley, 1999). Early studies of the relationship between market orientation and business performance are limited to research conducted in the United States and, to a lesser extent, the United Kingdom Bhuian, 1998, Deshpandé & Farley, 1999, Subramanian & Gopalakrishna, 2001. Empirical studies incorporating samples from multiple countries are sparse (e.g., Deshpandé et al., 1997, Hooley et al., 2000, Saini et al., 2002). Efforts aimed at studying the relationship between market orientation and business performance across countries have been hampered by methodological differences Mavondo, 1999a, Shoham & Rose, 2001. Moreover, international studies in marketing most often compare developed, rather than developing countries. Marketing scholars recognize this limitation and called for the extension of research to an international context Deshpandé et al., 1997, Homburg & Pflesser, 2000, Kohli et al., 1993. This meta-analysis serves to bridge this gap in the literature by investigating studies of the relationship between market orientation and business performance conducted worldwide.

The notion that market orientation has a positive impact on business performance is well documented in scholarly research (e.g., Baker & Sinkula, 1999, Harris, 2001, Matsuno & Mentzer, 2000). Although a few studies report a negative or non-significant relationship (e.g., Grewal & Tansuhaj, 2001, Han et al., 1998, Siguaw & Honeycutt, 1995), overwhelming evidence shows a positive relationship between market orientation and business performance (Table 1). This study seeks to go beyond the assessment of the existence and the direction of this relationship by investigating two important research questions: (1) What is the strength of the relationship between market orientation and business performance? (2) What is the impact of contextual and methodological moderators on this relationship? For this purpose, a meta-analysis, which is appropriate to integrate research (Deshpandé & Farley, 1998), was conducted. Fifty-three (53) empirical studies representing an overall sample size of 12,043 respondents from 23 countries, across five continents, were included. This is the first such study to be undertaken.

Section snippets

Market orientation and business performance

Two streams of research have emerged in the last decade (Gray, Matear, Boshoff, and Matheson, 1998). First, Narver and Slater (1990) defined market orientation in terms of culture and related it to the fundamental characteristics of the organization (e.g., customer orientation, competitor orientation, and inter-functional coordination), although they operationalized market orientation in terms of employee behavior. Second, Kohli and Jaworski's (1990) approach defined market orientation in terms

Potential moderators

Arthur, Bennett, and Huffcutt (2001, p. 85) define a moderator variable in meta-analysis as “any variable that by its inclusion in the analysis accounts for, or helps explain, more variance than would otherwise be the case.” Potential moderators are identified and coded based on their theoretical justification and explanatory power of the between-study variance. The moderators of the relationship between market orientation and business performance may be classified into contextual and

Methodology

A large variety of marketing parameters have been meta-analyzed in the marketing literature (Appendix A), including research in advertising, channels, consumer behavior, research methods, new product development, diffusion of innovation, pricing, sales and strategy (Appendix A). Meta-analysis research in strategy is sparse and limited to the parameters of market share, profitability, and order of entry into the market (e.g., Szymanski, Bharadwaj, & Varadarajan, 1993). Although extensive

Sample description

The literature search generated 187 manuscripts comprised of 183 refereed publications, 3 dissertations, and 1 proceeding. Through the coding and recoding process, 134 studies not meeting the eligibility requirements were eliminated. The remaining 53 studies, drawn from 27 publications and 3 dissertations, produced 59 effect sizes. A review to assure mutual exclusivity of samples detected two overlapping studies; one study was eliminated yielding 58 useable effect sizes.

Two researchers coded

Discussion

The findings of this study support the widely held marketing notion that the attainment of organizational goals is achieved by satisfying the needs of customers more efficiently and effectively than competitors. A rapidly changing environment requires quick and continual adaptation by management, whose ability to enhance operational efficiencies may lie in their ability to develop and embrace an organization-wide commitment to market orientation (Wood, Bhuian, and Kiecker, 2000).

The results of

Limitations and future research

Several limitations to this study are now put forward. First, although the fail-safe N statistic diminishes the threat to validity from file drawer cases, selection bias may be a limitation of the study. Although diligence was exercised to reduce selection bias, this threat is inherent to the nature of meta-analysis, resulting in the potential exclusion of relevant studies. Second, market orientation accounts for about 12% of the variance in business performance leaving a substantial amount of

Acknowledgements

The authors want to thank Dr. Michael Brannick for his continued support and the anonymous reviewers for their helpful comments.

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