Market Orientation and Performance Measurement System Adoption Impact on Performance in SMEs

Abstract

Previous research has shown a connection between market orientation (MO) and firm performance, as well as between performance measurement systems (PMS) adoption, but their mutual interactions are as yet little understood in small and medium-sized enterprises (SMEs). Using empirical data collected by a survey from 123 Finnish SMEs, we analyze the relationship between MO, PMS adoption, and performance. According to the results, MO has positive relationships with PMS adoption and nonfinancial performance. However, the impact of MO on financial performance is mediated by PMS adoption. PMS adoption is thus an important factor in explaining variance in firm performance. Finally, empirical analysis shows that the larger SME firms adopt PMS more extensively.

The Role of Green Innovation between Green Market Orientation and Business Performance: Its Implication for Open Innovation

“…As proven by Salehzadeh et al [28], market orientation has a direct and positive effect on financial performance, customers, internal processes, and learning and growth. Another study by Länsiluoto et al [29] in Finnish SMEs proved that market orientation has a direct effect on non-financial performance. Conversely, other scholars reveal different results.…”

The impact of dynamic capabilities and market orientation on firm performance: a case study of higher education consulting firms

“…Particularly, MO works alongside other capabilities (both ordinary and dynamic), and some studies have recognised it as one of the main factors enabling firms to effectively meet the needs of their customer base (Kohli & Jaworski, 1990;Wood et al, 2000;Rodriguez Cano et al, 2004). Länsiluoto et al (2019) note that MO has mostly been studied in the context of larger organisations: this research seeks to deepen the understanding of MO in the case of some of the sole traders and MSEs. Jiang et al (2020) note that MO "affects a firm's efficiency and responsiveness in acquiring, analysing and utilising […] resources by processing market information and keeping pace with changing customer needs and market velocity" (pp.…”

Determining the presence of a long-term/short-term dilemma for SMEs when adopting strategic orientation to improve performance

“…These characteristics are defined by resource constraints, lifecycle stage, and business contingencies at points in time. SMEs have poor managerial skills, a reactive approach to management, and both internal and short-term operational focus (Ates et al, 2013;Lansiluoto et al, 2019). Scarcity of resources and difficulties acquiring and managing market information are also typical characteristics of SMEs (Bocconcelli et al, 2018).…”

“…Their more informal way of doing business leads to a lack of formal strategic planning process compared to larger firms (Pelham and Wilson, 1996;Donnelly et al, 2015). Moreover, small family businesses are viewed as being more conservative in their strategic behavior (Donckels and Fröhlich, 1991;Lansiluoto et al, 2019). For many SMEs traditional values and a link with past activities, particularly successes, can be an important aspect in defining their informal approach to doing business (Pérez and Duréndez, 2007).…”

“…In SMEs, MO presents a means to compete with larger firms in the search for differentiation, improving response to consumer dissatisfaction, facilitating flexible planning, supporting innovation because of its boundary-spanning role, as well as positively affecting performance in dynamic environments (Keskin, 2015; Lansiluoto et al, 2019; Pelham, 2000). Exploring different strategic orientations and their links with SME performance, Al-Ansary et al (2015) found that MO positively affected performance compared to technology and alliance orientations.…”