Market Orientation and the New Product Paradox

Abstract

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.

Supplier traits for better customer firm innovation performance

“…Atuahene-Gima, Slater, and Olson (2005) found that responsive and proactive market orientations have a positive effect on product development performance when one is at higher level and the other is at lower level, and that they are moderated by organizational implementation conditions and marketing function power. Baker and Sinkula's (2005) summary of empirical studies reinforces the strong link between market orientation and new product performance, since they show that 16 out of 17 studies which they analyzed report such positive links.…”

Market orientation, marketing capability, and new product performance: The moderating role of absorptive capacity

“…MO is present in a set of skills and capabilities representing firms' knowledge assets (Kohli & Jaworski, 1990;Morgan et al, 2009), which not only result in new product success (Baker & Sinkula, 2005;Tsai et al, 2008), but also facilitate other capabilities of firms to "become more distinctive (relative to the competition) over the long run, resulting in sustainable competitive advantage" (Kumar et al, 2011, p. 17).…”

The determinants of hotels' marketing managers' green marketing behaviour

“…The literature shows that firms have taken different approaches to green marketing activities (Baker and Sinkula, 2005a;Baker and Sinkula, 2005b;Crane, 2000b;Drumwright, 1994;Hudson and Miller, 2005;Kärnä et al, 2003;Menon and Menon, 1997;Polonsky and Rosenberger, 2001). In many cases, firms claim to embrace Business Environmental Responsibility (BER) because they realize that this is the right thing to do and perceive they have a duty to behave in a socially responsible manner-in other cases because they come under stakeholder pressure, and clearly many will fall in between.…”

“…Bansal and Roth, 2000;Buil-Carrasco et al, 2008;Gonzalez-Benito and Gonzalez-Benito, 2005a;Gonzalez-Benito and GonzalezBenito 2005b), green marketing (e.g. Baker and Sinkula, 2005a;Baker and Sinkula, 2005b;Kärnä et al, 2003;Menon and Menon, 1997) and corporate social responsibility (e.g. Aguilera et al, 2007) literatures.…”