Customer orientation and SME performance: the role of networking ties

Abstract

Purpose-The purpose of this paper is to examine the moderating effect of networking ties on the relationship between customer orientation and firm performance. Design/methodology/approach-This study adopted a survey approach to collect data from 251 respondents in the Mangaung Metropolitan Municipality in the Free State province, South Africa. Scales for data collection were operationalised from prior studies. A hierarchical regression analysis was used to examine the moderating effect of networking ties on the relationship between customer orientation and firm performance. Findings-The results showed that customer orientation had a significant positive association with firm performance, thus supporting the existing calls for examining the unique contributions of customer orientation to firm performance. Furthermore, this study hypothesised that business, political, and social network ties positively moderated this association. However, the results showed that only business and social network ties had a positive and significant moderating effect, with the influence of customer orientation on firm performance being more pronounced for firms with high as opposed to low business and social network ties. Nevertheless, all the three types of network ties showed a positive and significant direct relationship with firm performance, thus supporting the consolidated literature on the positive impact of network ties on firm performance. Practical implications-The practical implications are twofold. First, it encourages business owners to develop a customer-oriented approach as a key strategic objective in their pursuit for optimal business performance. Second, business owners and managers should increasingly exploit their business and social network ties to accumulate vital resources for effectively exploiting their customer-oriented capabilities as a means to improve their performance. Originality/value-Even though customer orientation is a valuable internal strategic capability, its benefit on firm performance might be limited in small and medium enterprises (SMEs) when the businesses are unable to respond quickly to customer needs. This is more common when the SME is faced with resource limitations required for exploiting the new market opportunities. However, this study showed that SMEs can mitigate this issue by depending on their business and social network ties for valuable resources to effectively exploit opportunities that emerge from identified customer needs.

The differential effects of government support, inter-firm collaboration and firm resources on SME performance in a developing economy

“…Third, there is evidence for a positive correlation between subjective performance assessments and other objective measures that use accounting or financial data (Geringer and Hebert, 1991;Christoffersen et al, 2014). Lastly, our use of subjective measures is also in line with several recent studies on interfirm collaboration, government support and SME performance (e.g., Ibrahim and Mustapha, 2019;Danso et al, 2016;Neneh, 2018;Thongsri and Chang, 2019;Nakku, et al, 2020). Therefore, taking into account the setting for the study, the SME context and in following past research, this study finds it reasonable to use a subjective measure to capture SME performance.…”

“…To minimize the effect of common method bias, Lindell and Whitney's (2001) test was employed. Results show that originally significant correlations did not become non-significant after common method variance adjustment indicating that common method bias was not an issue in this study (Lindell and Whitney, 2001;Podsakoff et al, 2012;Spector, 2019 Bryman and Bell, 2007;Mitchelmore and Rowley, 2013;Neneh, 2018).…”

“…Two models were estimatedSince the purpose of the study was to assess the strength of the relationship between independent and dependent variables, and the proposed theoretical model suggests linear relations between the variables, multiple hierarchical linear regression analysis in SPSS PROCESS macro was used to test the direct effect hypotheses. This provided the study a simplistic and straightforward approach for determining the overall fit of the model and the relatively contribution of each of the independent variables, and is in line with previous studies (Doh and Kim, 2014;Neneh, 2018). Two models were examined to test the first three direct effect hypotheses.…”

“…Firm performance is usually seen as a multidimensional construct that consists of both financial (e.g., profit, sales growth, and return on investment) and non-financial (e.g., market share, reputation, customer satisfaction and employee satisfaction) indicators (Boso et al, 2013;Neneh, 2018). This study follows Katsikeas et al (2006) (Danso et al, 2016;Neneh, 2018).…”

“…Firm performance is usually seen as a multidimensional construct that consists of both financial (e.g., profit, sales growth, and return on investment) and non-financial (e.g., market share, reputation, customer satisfaction and employee satisfaction) indicators (Boso et al, 2013;Neneh, 2018). This study follows Katsikeas et al (2006) (Danso et al, 2016;Neneh, 2018). Most firms in Africa are usually reluctant and/or unwilling to disclose actual financial figures as they consider such information to be sensitive and confidential (Krasniqi and Branch, 2018;Agyemang and Ansong, 2017).…”