Although a large body of research theoretically asserts a positive relationship between market orientation and organizational performance, fewer empirical studies demonstrate it using multiple and varied organizational performance measures. Additionally, a series of recent studies have theoretically proposed, but not empirically demonstrated, that a firm’s learning orientation is likely to indirectly affect organizational performance by improving the quality of its market-oriented behaviors and directly influence organizational performance by facilitating the type of generative learning that leads to innovations in products, procedures, and systems. This empirical study supports all of these specific contentions and the more global notion that higher order learning processes may be critical in creating a sustainable competitive advantage in the firm.

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Market orientation (MO) and entrepreneurial orientation (EO) are correlated, but distinct constructs. MO reflects the degree to which firms' strategic market planning is driven by customer and competitor intelligence. Entrepreneurial orientation reflects the degree to which firms' growth objectives are driven by the identification and exploitation of untapped market opportunities. When modeled separately, research has reported direct effects of both constructs on firm profitability. When modeled simultaneously, however, the direct effect of EO has disappeared. This has led some scholars to postulate that EO is an antecedent of MO. The results of this study contradict this presumption and suggest that EO and MO complement one another, at least in small businesses, to boost profitability. The major difference between this and previous studies is the inclusion of innovation success, which captures an indirect effect of EO on profitability. At least in small firms, the results suggest that EO complements MO by instilling an opportunistic culture that impacts the quality and quantity of firms' innovations.

The extant literature shows that the strength of the market orientation–performance relationship decays as the terminal measure of performance shifts from new product success to profitability to market share. As Day (1999) concluded, a broader nomological inquiry is needed to more fully understand the nature and limits of market orientation's effects. This suggests that a broader nomological inquiry is needed to fully understand the nature and limits of market orientation's effects. Utilizing a national sample of marketing executives, the present study's purpose is to build a fuller understanding of the effects of market orientation on firm performance. Its structural equations model includes measures of new product success, profitability, and market share. The research reinforces a strong positive relationship between market orientation and new product success. The expanded nomological network under study, however, implies barriers to market orientation's effectiveness. First, market‐orientation‐inspired increases in the priority firms place on “breakthrough” learning without commensurate increases in the priority placed on “breakthrough” innovation capabilities can boomerang and negatively impact new product success. Second, market‐orientation‐inspired new product development programs that are unable to increase market share can negatively impact profitability. These gatekeepers to the success of market orientation underscore the need for firms to coordinate a strong market orientation with resources and capabilities that increase the effectiveness of the marketing function. Without such coordination, the positive effect of market orientation on new product success may be limited to incremental innovations, and the overall effect of successful new products on profitability may be limited.

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