The impact of market orientation on NSD and financial performance of hospital industry

Abstract

PurposeThe principal aim of this study is to determine the critical factors of market orientation (MO) and to measure its effect on new service development (NSD) and financial performance of hospital industry in Turkey.Design/methodology/approachDrawing on a self‐administered questionnaire, the data were collected from a sample of privately‐held general hospitals within the city of Istanbul in Turkey. Based on theoretical considerations, a model was proposed to examine the interrelationships among MO, NSD‐performance and financial performance.FindingsData analysis reveals that while MO has a strong and positive effect on NSD‐performance, it has no significant effect on financial performance. Also a strong and positive relationship was noted between NSD‐performance and financial performance. Finally, the findings also provided evidence for the mediating role of NSD‐performance in the relationship between MO and financial performance in the hospital industry.Research limitations/implicationsFirst, due to relatively small sample size, a caution should be exercised when interpreting the results. Second, the data were collected from hospitals in Turkey, which may restrict to some extent generalizability of findings. Third, we relied on the subjective evaluations of senior executives. It would therefore be useful to replicate the results with objective measures of performance indicators.Practical implicationsAlthough there is compelling evidence that MO has a positive effect on business performance, it alone may not be able to produce superior performance. Many hospitals are committed to MO and new services development. The framework clearly indicates that a strong commitment to both the NSD‐performance and marketing areas is essential for improving the financial performance of hospitals. Also, to remain competitive in today's healthcare industry, hospital managers should all keep pace with the daily changes in the market place and stay attuned to NSD activities and quality management practices.Originality/valueThe main thrust of this study is to investigate whether the relationship between MO and financial performance is mediated by NSD‐performance in hospital industry. This constitutes the novelty of this research as most prior empirical research investigating a mediating mechanism through which MO affects firm performance largely focused on other factors with no or little emphasis being placed on NSD activities or NSD‐performance in healthcare context.

A survey of market orientation research (1995–2008)

“…There is no significant relationship between MO and business performance Caruana, Pitt, and Berthon (1999) NO significant relationship Lonial et al (2008) NO significant effect on financial performance (2007) Financial performance Lonial et al (2008) New product performance Hsieh et al (2008) Retail performance…”

“…While the majority of the performance measurements identified focused on macro level-business performance (Cravens & Guilding, 2000;Ogbonna & Harris, 2002; Santos-Vijande, Sanzo-Perez, AlvarGonzalez, & Vazquez-Casielles, 2005;Martin-Consuegra & Esteban, 2007), a more micro performance perspective is dealt with in several studies, for example, new product performance (Hsieh, Tsai, & Wang, 2008), financial performance (Lonial, Tarim, Tatoglu, Zaim, & Zaim, 2008), retail performance (Panigyrakis & Theodoridis, 2007), and specific brand performance (O'Cass & Ngo, 2007). Based on the concept of Siguaw, Brown, and Widing (1994), Piercy, Cravens, and Lane (2009) strongly argue that a market-oriented company would influence salespeople's selling behaviors and their performance.…”

Technology investments, performance and the effects of size and region in Turkish hospitals

“…Finally, they observe that NSD mediates the relationship between MO and financial performance. To our knowledge, none of these studies has surveyed hospital managers (expect for Lonial et al (2008), who used a survey on only Istanbul hospitals) or investigated the technology investments -performance relationship, or used this comprehensive a sample from all regions of Turkey, or investigated the impact of hospital size and region.…”

“…They also observe that specialty hospitals with low performance should take the high performer general hospitals as examples. Finally, Lonial, Tarim, Tatoglu, Zaim, and Zaim (2008) measure the effect of market orientation (MO) on new service development (NSD) and financial performance in a survey of 145 senior managers of 70 hospitals only in Istanbul. Using factor analysis, SEM and the survey methodology, they find that while MO has a strong and positive effect on NSD, it portrays no significant effect on financial performance.…”

Indonesian Hospitals under the “BPJS” Scheme: a War in a Narrower Battlefield

“…In this context, Lonial, Tarim, Tatoglu, Zaim & Zaim (2008) believed that there are two forcing factors behind such phenomena, namely quality improvement and the strong movement among health care organizations internationally to be more pro-market institutions. In the Indonesian context, those two factors have been also clearly apparent.…”