The Effects of Strategy Type on the Market Orientation-Performance Relationship Author(s): Ken Matsuno and John T.

Mentzer Source: The Journal of Marketing, Vol. 64, No. 4 (Oct., 2000), pp. 1-16 Published by: American Marketing Association Stable URL: http://www.jstor.org/stable/3203474 . Accessed: 16/09/2011 01:00
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KenMatsuno&JohnT.Mentzer

The

on the Effects of Strategy Type Market Orientation-P Relationship

Priorresearch has been equivocal on the role that competitiveenvironmentplays in moderatingthe relationship between marketorientationand a firm'sbusiness performance,even though such a moderatingeffect is concepexamine the role of business tuallyquite plausible (Slater and Narver1994). Inthis article,the authors empirically as an alternative,potentialmoderatorof the marketorientation-performance relationship. using By strategy type and Kohli1993; Kohli,Jaworski,and an improved scale (Jaworski version of Kohliand Jaworski'smarketorientation Kumar1993), the authors find evidence that supports the moderatingeffects of business strategy type on the The authors also offer implicabetween marketorientationand business performance. strengthof the relationship tions and futureresearch questions based on the findings.
positive for the noncommodity businesses. Narver and Slater (1990) propose a potential explanation that the market orientation-performancerelationshipmight be contingent on some industry situations in which firms operate, such as commodity versus noncommodityand/or competitive versus noncompetitive.Deshpand6and Farley (1998a) on study potentialinfluences of industrycharacteristics market orientationand business performance.They classify the industry into consumer goods (durables and nondurables), industrialgoods (capital goods, raw materials, and others), and services (financial and others) and find that industryat this level of aggregation or classification has little or no effect on either performanceor marketorientation. Selnes, Jaworski, and Kohli (1996, 1997) and Deshpand6and Farley(1998a) examine the explanatorypower of the regional (Europeanversus U.S.) marketenvironmentfor both market orientation and performance, but the results consistently indicatethat the geographicenvironmentalfactor plays no significant role. Kohli and Jaworski(1990, pp. 14-15) propose that the degree of market orientation is influenced by the market environment(i.e., market turbulence, competitive intensity, and technological turbulence), Industryand market environmenthas been investigated in and two factors (supply-side factors and demand-side facthe literatureas a potentialmoderatorof the marketorientators) moderatethe relationshipbetween market orientation tion-performance relationship. In Narver and Slater's and business performance.However, Jaworski and Kohli (1990) study, among the 140 strategic business units of a (1993) find that none of the three environmentalcharactermajorcorporation'sforest productdivision (commodity and istics (i.e., marketturbulence,technological turbulence,and noncommodity businesses), the correlation between percompetitive intensity)plays a moderatingrole. Jaworskiand ceived profitability(returnon assets) and the marketorienKohli (1993) conclude that a marketorientationprobablyis tation scale was mixed (i.e., some were positive and others robust across variousmarketcontexts. were negative) for the commodity businesses, but it was Slaterand Narver(1994) also investigatethe moderating role of competitive environment on the market orientation-performance relationship. The rationale for this Ken is Matsunoanassistant ColDivision, professor, Marketing Babson hypothesized role is that effectiveness of a particularstrateJohn J. VivienneBruce is Harryand R. Excellence Chair gic orientationis contingenton marketenvironmentfactors lege. T.Mentzer of Business ofMarketing, and Department Policy, Logistics, Transporta- (Day and Wensley 1988; Hambrick 1983; Kohli and ofTennessee. authors the The thank three JM tion, University anonymous and Jaworski 1990; McKee, Varadarajan, Pride 1989; Snow and comments on reviewers, Jeannet, Michael for valuable Levy their J.-P. and Hrebiniak 1980). For example, if demand is growing versionsthis of article. previous faster thansupply,a firm could simply cash in on the opporresearchhas focused on its performanceimplications (e.g., Deshpand6 and Farley 1998a; Jaworski and Kohli 1993; Kohli and Jaworski 1990; Narver and Slater 1990). Although it has been shown that marketorientation is, in general, positively related to several business performance measures (Jaworski and Kohli 1993; Narver and Slater 1990; Selnes, Jaworski,and Kohli 1996, 1997; Slater and Narver 1994), the question whetherthe positive market orientation-performancerelationship is monotonic across differentstrategieshas not been fully investigated(Greenley 1995). A closer look at the literaturesuggests the equivocal nature of its performance impact (Deshpand6 and Farley 1998a; Jaworskiand Kohli 1993; Kohli and Jaworski 1990; Narver and Slater 1990; Slater and Narver 1994). Because evidence of the positive performanceimpact has accumulated but with some equivocality,the time is ripe to investigate more closely the potential moderatorsof the market orientation-performance relationship.

Asignificant

portion of prior market orientation

LiteratureReview

Journal of Marketing Vol. 64 (October 2000), 1-16

Market Orientation-Performance /1 Relationship

tunity without being highly market oriented (Kohli and Jaworski 1990). Similarly,if the buyer'sbargaining power is low, the seller firms could use this leverage to profit from the transactionwith a minimal level of market orientation (Slater and Narver 1994). Conversely,if the marketis characterized by intense seller competition, the seller firms could not achieve acceptablelevels of profit without being marketoriented(Day and Wensley 1988; Slater and Narver 1994). Slater and Narver(1994), however, find only mixed support for the moderatingeffects hypotheses of environmental factors (i.e., marketturbulencewith returnon assets, technological turbulence with new product success, and marketgrowth on sales growth). In spite of the theoretical propositions,Slater and Narver (1994) conclude that across different market environments, the positive relationship between market orientation and profitability is robust (Narver, Park, and Slater 1992; Narver and Slater 1991; Slater and Narver 1994), consistent with Jaworski and Kohli's (1993) empirical results. A subsequent study (Greenley 1995), however, finds partialsupportfor some of Slater and Narver's (1994) results (i.e., supportfor market turbulencewith returnon investment[ROI] and technological change with new product success, but not for market growth). Collectively, however, the findings on the moderating effects of environmentalfactors to date are mixed and equivocal. Although prior studies find only limited supportfor the rolesby market the environment, findingsdirectus moderating to a factorthatis relatedto-but different from-market environment(Greenley 1995).More specifically,the classic structure--conduct-performance paradigm(Thorelli 1977; Vernon 1972) suggests thatthe conductof the firm is constrained by the internaland externalstructure of (i.e., environments) the is firm and that its performance a resultof the response(conThe theoretical contentionis that duct) to such environments. if the conduct is "right," enabling the organizationto fit its environments better,it shouldlead to betterperformance. In reality,however, it is perceived environmentthat is a determinantof the response of the firm, and it is business strategy that incorporates,articulates,and reflects on management's perceived environment.The firm then communicates and implements the direction and focus of the response, or business strategy,1by setting specific performance goals, criteria,and actions (Chandler 1962). Walker and Ruekert(1987) argue that strategicorientation,performance on particulardimensions, and marketing activities have contingent relationships:Firms choose a strategytype and orienta(1997) operationalize 'Gatignon Xuereb strategic of tion as a combination customer, (see Narverand competitor Slater1990),andtechnological orientation. Their focalinterest lies in the relativeimportance the threeorientations marketing of in execution(especiallyon innovation). Morebroadly, however,a of strategytype is a genericpattern response(e.g., Miles and Snow's[1978]typology) thebusiness-unit pertaining the at level to choiceof performance and domain, criteria, marproduct-market execution. froma market orientation that Thus,it is distinct keting is purported facilitate to businesses' of understanding the market environment KohliandJaworski's and (see [1990]conception) is to in hypothesized facilitate superior performance thechosen,specific criteria by the strategy set type (or, morebroadly, strategic orientation).

to excel in particulardimensions of performanceand execute each strategyby the most appropriate marketingactivities. Business strategy as a general direction of the firm's response based on the filtered or distilled environmental information(see Jenningsand Zandbergen1995), therefore, can conceivably explain the varying magnitudeof relationship between performancemeasures and a firm's specific marketingresponse(or conduct)mechanism,such as a market orientation. Combining Kohli and Jaworski's (1990) of conceptualization a marketorientationas an organizedset of marketingactivities, the degree to which marketorientation is related to business performance could vary more across differentbusiness strategiesthan the marketenvironment that influences the business strategies (Hambrick 1982; Jemison 1984). Because implementing a strategy requires control and monitoring of its effectiveness in the market, a particular strategy pursued by an organization may determine the kinds of performance dimensionsit strives for and attendsto and the level of performancerelative to competition with other strategic orientations. Because Miles and Snow's (1978, pp. 28-29) typology posits strategic orientationas a planned pattern of organizational adaptation to the perceived environment(market),it is particularlyrelevantto a marketorientationthat refersto a firm's externallyoriented intelligence-relatedactivities and responsiveness. A brief recapitulation the four strategictypes defined of by Miles and Snow (1978) is in order(see also AppendixA). It has been empirically demonstratedthat the typology is a useful frameworkin distinguishingdifferentstrategicorientationsof firms (Hambrick1982, 1983;McDaniel and Kolari 1987; Snow and Hrebiniak1980). Defenders are those organizations which have narrow product-market domains.... a resultof thisnarrow As focus,theseorganizationsseldomneed to makemajoradjustments their in or of structure, methods operation. Instead, technology, attention improving efficiency to the theydevoteprimary of theirexisting (MilesandSnow 1978,p. 29) operations. Prospectors are searchfor market whichalmostcontinually organizations and with potenopportunities, they regularly experiment tial responsesto emergingenvironmental trends.Thus, these organizations often are the creators changeand of to must respond. uncertainty which their competitors because theirstrong of concern product for and However, marketinnovation, these organizations usually are not efficient. (MilesandSnow 1978,p. 29) completely Analyzers are whichoperate two typesof product-marin organizations ket domains, relatively one In stable,the otherchanging. their stable areas,these organizations operateroutinely and efficiently through formalized structures and areas,top managers processes.In their more turbulent watchtheircompetitors closely for new ideas, and then they rapidlyadoptthose which appearto be the most (MilesandSnow 1978,p. 29) promising. Reactors are in organizations whichtop managers perceive frequently in changeand uncertainty occurring their organizations butareunable respond to [Thistypeof orgaeffectively....

2 / Journal Marketing, of October 2000

of seldom makes nization] adjustment anysortuntilforced to do so by environmental (Miles and Snow pressures. 1978,p. 29) Buildingon Child's(1972) work,Miles and Snow (1978) contendthatorganizations choose the appropriate deliberately strategyto fit themselves to theirenvironment.Furthermore, organizationsselect their strategieson the basis of the envicriteronment,intendingto be good at particular performance ria, such as economic efficiency and new productinnovation. Therefore, it can be hypothesized that the relationships between market orientationand some aspects of economic are Dependperformance not monotonicacrossorganizations. on the strategytype and its primary criteria, ing performance the relationships be eitherstrengthened weakened. can or However, a direct influence of strategytype on the level of marketorientation(i.e., strategytype as a lineardeterminant of the market orientation level) is less conceivable.2 Whatever strategy a firm may choose, it may (or may not) engage in intelligence-related activities. For example, within the same strategy type, some defender companies may engage extensively in intelligence-relatedactivities in search of cost reduction,but othersmay not. Some prospector companies may not actively engage in intelligencerelatedactivities, perhapsbecause such activities can be too costly and time-consuming to bring out a new product quickly, but others may choose to engage in these activities in search of new, unnoticedmarketneeds. Also acrossdifferentstrategytypes, no a prioritheoretical reasons seem to predict whether a company with a certain strategytype is more (or less) likely to engage in intelligencerelated activities (or market orientation). For example, a defendercompanymay engage in a high level of marketorientation in search of a low-cost supplier,a prospectorcomas pany may engage in a high level of marketorientation well in search of unexplored foreign markets, and an analyzer companymay engage in an equallyhigh level to avoid falling too far behind prospectors.Companieswith differentstrategies may well engage in high or low levels of marketorientation. Thus, thereseems to be no consistentand predictivepatternbetweenstrategytype andthe level of marketorientation. In spite of the suggestion that environment-basedstrategy choice moderates the market orientation-performance relationship(e.g., Day and Wensley 1988; Hurley and Hult 1998; Kohli and Jaworski 1990; Miles and Snow 1978), it has been neither investigated nor understoodwell whether strategytype moderatesthe marketorientation-performance relationship. Understanding such potential moderating effects is important for understanding the relationship between marketorientationand economic performance.

should play a fundamentalrole. However, because the strategy types of Miles and Snow are planned patternsof adaptation with a particularset of business performancegoals and a perceived external environment in mind (Arag6nCorrea 1998; Jennings and Zandbergen 1995), the instrumentality of a market orientation(a set of adaptive behaviors) in achieving higher levels of performanceshould vary across different business performance dimensions. The streamof strategytypology literature suggests threerelevant points to our theoreticalposition: (1) A company chooses its strategy on the basis of its understandingof the environment, (2) a chosen strategydirects a company's attentionto certain performancedimensions, and (3) a company tries to excel in the determined performancedimension. In other words, the rationale behind our general hypothesis is that market-oriented companies are more likely to identify relevant information, share such information,and make more informed decisions conducive to achieving specific and determinedperformancecriteriaratherthanall performance dimensions. The point is a subtle but extremely important one, because prior empirical studies do not provide clear indicationas to whetherthe marketorientation-performance relationshipis invariantacross different strategytypes. Thus, our umbrellahypothesis is as follows: orientation economic and market between HI:Therelationship is employed. by performancemoderated thetypeof strategy In the following sections, this umbrellahypothesisis articulatedaccordingto thedifferenttypesof economicperformance measurespursuedby firms with differentstrategytypes. It is believed thatdefendersand prospectorsoccupy two opposite ends of a continuum of environmentalstrategies (Miles and Snow 1978; Shortelland Zajac 1990). Analyzers sit betweenthese two extremes.A uniquecombinationof the strengthsof the two other strategies, the analyzer type tries to balance risk and profit opportunity. Analyzers emphasize developing new products and markets, but only after their feasibility has been verified (Miles and Snow 1978, p. 70). The analyzer's strategy can result in a follower or respectable second place position in both product market growth (after prospectors)and efficiency (after defenders) dimensions. Holding its performancecriteriaas a combination of the defenders and prospectors, the analyzer must maintain"its firm base of efficient operationwhile pursuing effectiveness through the well-conceived addition of new products and markets" (Miles and Snow 1978, p. 77). In summary,analyzersaspireto be consistently good, if not the best, performers in both efficiency and product market effectiveness performancedimensions. Conversely, the distinct feature of the defender's product-market domain is its narrow focus and stability. A defender's good performancein the industrydepends on its ability to maintainits eminence aggressively within a welldefined market segment (Miles and Snow 1978). The aggressive maintenance effort is said to be evident in its continuous and intensive efforts in preparingits business infrastructure (Dvir, Segev, and Shenhar 1993), including the investmentin technological efficiency (Miles and Snow 1978). Because the defender's primary emphasis is efficiency (Fox-Wolfgramm,Boal, and Hunt 1998) ratherthan

Hypotheses
The review of the literaturesuggests the existence of moderating effects of strategy types. The central logic is that implementinga particular strategyis essentially a process of organizationaladaptationto the marketenvironment(Miles and Snow 1978, pp. 28-29), in which a marketorientation 2Wearegrateful ananonymous reviewer suggested to who a JM potentialdirect effect of strategytype on the level of market orientation.

Market Orientation-Performance /3 Relationship

effectiveness, its fundamental performance appraisal method involves comparingits efficiency with that of other in organizations.In spite of its generalinstrumentality interthe environment and facilitating the company's preting response (Jaworski and Kohli 1993; Kohli and Jaworski 1990), in the efficiency dimension, a market orientation should help the defenders adapt, focus, and perform well. Therefore, we expect the impact of market orientationon ROI, an efficiency measure,is greaterfor the defendersthan for either the prospectorsor the analyzers. The of between market orientation and H2: strength relationship as (ROI)is greater performance measured profitability by fordefenders foreither than or prospectors analyzers. Unlike the defender, the prospector's capabilities are finding and exploiting new productand marketopportunities. Its product-market domain is usually broadand continuously developing. Growthprimarilycomes from the development of new marketsand expansion of productofferings (Shortell and Zajac 1990). Prospectorsare innovators and thus often find technological innovationexpensive and not as efficient as do competitors focused on standardization (Miles and Snow 1978). Because the defendersseem to pay attention to maintaining their share through low cost and financial efficiency (Porter 1980; Segev 1989; Shortell and Zajac 1990) in narrowly defined market segments, we believe that the benefit for defendersto be marketoriented in product-market growthdimensions (marketsharegrowth, relative sales growth, new productsales as a percentageof total sales) would be smaller than the benefit for prospectors. Therefore,prospectorsevaluate themselves more often than any other types of organizationin terms of effectiveness in new productdevelopment,new marketdevelopment, and aggressive growth in the chosen market(Dvir, Segev, and Shenhar1993; ParnellandWright 1993). In the productmarketgrowth dimension, a marketorientationas a mechanism for adaptationand focusing should serve prospectors better than other strategictypes. Therefore, we developed the following hypothesis relatedto productmarketgrowthto test the moderating effect of the strategytypes on the influence of marketorientation: of betweenmarket orientaH3:The strength the relationship tion and performance measured (a) marketshare as by growth,(b) relativesales growth,and (c) new product salesas a percentage totalsales is greater prospecof for torsthaneitherdefenders analyzers. or Reactors Different from the three other types, reactorsdo not present any consistent patternof response behaviorto environmental conditions.As the name suggests, they simply react, usually only after environmental pressure exceeds tolerance. Miles and Snow (1978, p. 82) provide several reasons for this lack of strategic consistency: (1) management'sfailure to articulatea viable organizational strategy;(2) lack of linkage among technology, structure, process, and strategy; and

Because of the incoherent intent and behaviors among the reactors, this type of strategy is not identified as a viable strategic alternative for a firm. Managerially speaking, it cannot be a strategy, because neither planned actions nor response behavior patterns are observed, and few, if any, managers would actively pursue this pattern of inconsistency. Because of this inconsistency, no a prioripredictions or hypotheses can be made regarding reactors' strategic intent (Mintzberg 1978; Shortell and Zajac 1990) and its consistent effect on the market orientation-performance relationship.Moreover,the lack of consistency would pose a great empirical challenge, especially in a cross-sectional design, because reactorscould exhibit other strategictypes' characteristicsat different times (Shortell and Zajac 1990); indeed, the reactor type could not be clearly identified in several priorstudies (see Slater and Narver 1993; Wrightet al. 1991). Thus, in this study, we used only three viable strategy types (see Hambrick 1982, 1983; McDaniel and Kolari 1987) for evaluating the moderating effect on the relationshipbetween marketorientationand performance.

Method
Data Collection
A masterlist of 3300 U.S. manufacturing companies,which identifiedone marketingexecutive (vice presidentor director level) per company,was obtainedfrom a well-known, Midwest-based commercial vendor. The 3300 companies were comparandomlychosen from all the listed manufacturing nies (a total of about 600,000) in the vendor's quarterly masterlist, whichencompasseda wide rangeof Stanupdated dard Industrial Classificationcodes (2011-3999).3 The profiles (employee size and annualsales) of the 300 manufacturand ing companiesin the pretest(discussedsubsequently) the 1000companiesfor the final samplearegiven in AppendixB. A mailing-including cover letter,stampedreturnenvelope, and questionnaire-was sent to a random sample of 1000 marketingexecutives of the 3300 companies in the master list. Three-wavemailingsproducedan effective responserate of 38.76% (or 364 usable responses) after the number of to undeliverable surveypacketsreturned the authorswas subtracted. For nonresponse bias examination, multivariate analysisof variancewas appliedto the foureconomic performancevariables(ROI,marketshare,sales growth,percentage of new productto total sales), comparingthe three different tests of mailing wave respondents.None of the multivariate significance indicated differences in the performancevariables. Because no significant statisticaldifferences in those fourvariableswere found, it was concludedthatnonresponse bias was not a significantproblemfor the analysis. Measures Themarketorientationscale. Kohli and Jaworski(1990) and Jaworskiand Kohli (1993) provide a conceptualization lumberand were food; tobacco;textiles;apparel; 3lncluded chemical;petroleum; rubber; woods;furniture; paper;printing; elecmetal;machinery; leather; stone,clay, glass, and concrete; and tronicand electricalequipment; transportation equipment; others. instruments, among measuring

(3) management'sadherenceto a particularstrategy that is already irrelevantto environmentalconditions. Having no consistent strategy, reactors wish to be good in every performance dimension but typically fail to excel in any.

of October 2000 4 / Journal Marketing,

and operationalizationof a market orientation. Consistent with the use of market informationresearchstream (Deshpand6and Zaltman 1982;Maltz and Kohli 1996; Menon and 1992; Moorman 1995; Moorman, Deshpand6, Varadarajan and Zaltman 1993; Shapiro 1988; Sinkula 1994), their scale places a particular emphasis on the firm's activities in dealwith informationaboutcustomerneeds and the environing ment (i.e., market) that affects organizations (Deshpand6 and Farley 1998a, b; Jaworskiand Kohli 1996; Narver and Slater 1998). Although we supportthe fundamental conceptual position of market orientation as intelligence-related activities, Kohli and Jaworski'sscale (Jaworskiand Kohli 1993) falls short in two areas: breadth of item-sampling domain and the scale's factorial structure and fit. Two streamsof literaturesupporta broaderconceptualizationof the item sampling domain: the environmentalscanning literature(Aguilar 1967; Culnan 1983; Daft, Sormunen,and Parks 1988; Hambrick1982; Kefalas and Schoderbek 1973; Meyer 1979; Rhyne 1986) and the so-called stakeholder concept and constituency-basedtheory literature(Anderson 1982; Connolly, Conlon, and Deutsch 1980; Kotler 1972; Pfeffer 1978; Pfeffer and Salancik 1978; Sturdivant 1977; Zeithaml and Zeithaml 1984). Moreover, the need for a broader range of market stakeholders and forces in the domain of a marketorientationis acknowledgedin the more recent literature(Kohli, Jaworski,and Kumar 1993; Slater and Narver 1995). We believe that a broaderand more balanced explication of marketfactors is critical because business strategyis postulatedas a reflection of perceived market environmentsand a choice of focal performancecriteria and actions. In addition,the empiricalliterature indicatesthatmanyof Kohli and Jaworski'sscale items (Jaworskiand Kohli 1993) seem to have fit problemsin the originalsecond-orderfactorial structure (see Kohli, Jaworski,and Kumar1993;Siguaw, Simpson, and Baker 1998). Siguaw, Simpson, and Baker (1998) consequentlyremove the items Kohli, Jaworski,and Kumar(1993) use to capturethe original breadthof market factors.Having to remove several items from an alreadynarrow domainof marketfactorsis not desirablefrom the theoretical position that the breadthof domain is critical. Therefore, we decided to develop a marketorientationscale that improvedboth item domainbreadthand psychometricproperties. We define a market orientationconstruct with this extendeddomain as a set of intelligence generationand disseminationactivities and responsespertaining the relevant to (i.e., competitors,suppliers,and industrymarketparticipants buyers) and influencing factors(i.e., social, cultural,regulatory, and macroeconomicfactors).Thus, the improvedscale extends the item domains to include supplier relationships, regulatoryaspects, social and culturaltrends,and the macroeconomic environmentexplicitly. Our overall scale improvementmethodology followed the proceduresrecommendedby Churchill(1979) and Gerbing andAnderson(1988). The scale developed for this study evolved from a combination of qualitative in-depth interviews, a review of the market orientationliterature,and a survey pretest of the scale. The results of the interviews strongly indicate that managers conceive a market more broadlythanas a combinationof customersand competition

and specifically include such factors as macroeconomicelements (e.g., exchange rates, macroeconomic fundamentals of foreign countries),suppliers (e.g., new technical capability of suppliers,availability of alternativesuppliers), social and cultural trends (e.g., growth of one particularsegment that corresponds to a different lifestyle), and regulatory environment(e.g., productsafety, labor regulations). With the activity and environmentdomains in mind, we developed a set of the items designed to measuremarketorientation (MO). For our improved MO scale, we generated 37 new items for intelligence generation (IG; 15 items), intelligence dissemination (ID; 10 items), and responsiveness (RESP; 12 items). We added these newly developed items to the original set of Jaworski and Kohli's (1993) 32 marketorientationscale items to constitute collectively the originalcandidateitems for the MO scale (a total of 69 items for a pretest).We conductedthe pretestnot only to evaluate reliability and constructs but also to reduce the numberof items to a more manageable number.For this pretest, we sent a mailing-including cover letter,stampedreturnenvelope, and pretestquestionnaire-to a randomsample of 300 marketing executives of manufacturingcompanies in the United States. The profile of the 300 companies is given in AppendixB. After the purificationof items throughmultiple iterationsof confirmatoryfactor analysis, reliabilityevaluation, and item-by-item substantive evaluation, we reduced the total numberof items from 69 to 46. With the 46 items in the final data set, we conducted item purification in the same manner as the pretest. The purificationprocess with the final data set led us to retain a total of 22 items for the MO scale (see Appendix A). After conducting a confirmatory factor analysis on the measurementmodel to validate the internaland externalconsistencies among the factors,we conducteda second-orderconfirmatoryfactor analysis. Path coefficients between the higher-order construct (MO) and the three dimensions were all significant at the a = .05 level (Table 1). The fit statistics (X2= 404.666, degrees of freedom [d.f.] = 206, goodness-of-fit index [GFI] = .913, adjustedgoodness-of-fit index [AGFI] = .893, noncentrality parameter[NCP] = 157.623, Tucker-Lewis Index [TLI]= .894, normedfit index [NFI] = .809, and comparativefit index [CFI] = .906) demonstratedan acceptable improvementover the three-componentmarket orientation scale reportedby Kohli, Jaworski, and Kumar(1993; X2 =
1010.05, d.f. = 464, GFI = .722, AGFI = .675, NCP =

546.05, TLI = .641, and NFI = .524),4 given thatour market orientation scale extends the breadth of the construct domain and still retains the second-orderfactorial structure that is conceptually consistent with the three-component market orientation construct (Jaworski and Kohli 1993; Kohli and Jaworski 1990). The correlation matrix (the improvedMO scale components, Kohli and Jaworski'sscale components, and performance indicators) is supportive of the convergent validity of the MO scale with Kohli and Jaworski's original 32-item market orientation scale 4Thefollowingfit indiceswerecalculated thethree-compofor nent MO scale in Kohli,Jaworski, Kumar and (1993): AGFI=

464/496 x .722 = .675, NCP= X2statistics- d.f. = 1010.05 - 464 = 546.05, NFI = (2121.28 - 1010.05)/2121.28 = .524.

Market Orientation-Performance /5 Relationship

TABLE1 Final LISREL Standardized Estimates and t-Values: Improved MarketOrientation Second-Order Scale Parameter
MO (22 items) IG (8 items): y (IG-MO) X (IG Vl) X (IG V2) X (IG V3) X (IG V4) X (IG V5) X (IG V6) X (IG V7) X (IG V8b) ID (6 items): y (ID-MO) X (ID V9) X (ID V10) X (ID V11) X (ID V12) X (ID V13) X (ID V14) RESP (8 items): y (RESP-MO) X (RESP V15b) X (RESP V16b) X (RESP V17b) X (RESP V18) X (RESP V19) X (RESP V20b) X (RESP V21) X (RESP V22b) aindicatesfixed item. blndicatesreverse-codeditem.

Estimate LISREL
.790 .324 .312 .585 .584a .447 .451 .429 .503 .967 .633 .407 .669a .579 .674 .685 .701 .583 .646 .369 .431 .741 .749a .250 .314

t-Value
8.59 4.94 4.78 7.86 6.47 6.51 6.26 7.08 11.04 9.95 6.69 9.22 10.48 10.62 9.91 9.85 10.89 6.25 7.30 12.32 4.24 5.32

Reliability a) (Cronbach's
.84 .66

.78

.74

(Jaworski and Kohli 1993; Kohli, Jaworski, and Kumar 1993) and its predictive validity with regardto the performance indicators(Appendix C). The reliability coefficients (Table 1) were also acceptable: .84 for the entire new MO scale (22 items). Thus, we deemed our revised second-order scale of marketorientationadequatefor the purposeof this study. For hypothesis testing, we then aggregated the MO scale to have three indicators(i.e., IG, ID, and RESP) by summing the measurementitems at the first-orderconstruct level.5 Strategy types. The strategy type (labeled V27, Types 1-4, in Appendix A) was measuredby using a categorical variable.A self-typing measure(see Jamesand Hatten 1995; Shortell and Zajac 1990) asked the respondentsto evaluate the strategies of their own organizationsusing descriptions of the four generic strategies in Miles and Snow's (1978) typology. The descriptions of the types were the same as those used by Snow and Hrebiniak(1980) and McDaniel 5Thisaggregation justified is because thevalidity thesecof (1) ond-order scale with all 22 item measures been estabMO has allowsmaximization size,aggregation lished; giventhesample (2) of thed.f. in estimating pathcoefficients the between MOand the and levelsof random measures; (3) it reduces performance higher errorwhile accounting measurement for errorand retaining the three-dimensional of market scale orientation.

and Kolari (1987). The strategictypes--defender, prospector, analyzer,and reactor-were labeled, respectively,Type I throughType 4 (Appendix A). Although only the three viable strategy types (defender, prospector,and analyzer) were used for the test of moderatingeffects of the strategy type on the relationships between market orientation and measures,the reactortype was also includedas performance a choice in the questionnaire.The purpose of having this type as a response alternativewas to screen, for the moderating effect test, organizationswith no strategicbehavioral pattern. The response frequencies for each strategy type were 77 defenders (21.2%), 133 prospectors(36.5%), 130 analyzers (35.7%), and 18 reactors(4.9%). There were six item nonresponses(1.6%). Business performance.Four economic outcome indicators (labeled V23-V26 in Appendix A)-market share (SOM), relative sales growth (SGRO), percentageof new product sales to total sales (PCTNP), and ROI -were developed for the final questionnaire. The market orientation literature and the results of exploratoryin-depthinterviews indicatedthat a marketorientation is important because it provides a competitive advantageto the organization.Thus, the criterion variables (economic outcomes) were measured in comparison with those of the organization'scompetition. Because competitors are the standard of comparison in the performance

6 / Journal Marketing, of October 2000

FIGURE1 The Multiple-GroupAnalysis (An Example Using ROI)

MO Performance yROI Defenders XIG D XRESP ROI

Defenders

8 IG

8 ID

8 RESP
Performance y ROI ROI

MO

Prospectors
IG

Prospectors
XID RESP

8 IG

8 ID

8RESP
Performance yROI Analyzers ROI

MO

Analyzers
IG

XID

RESP

8 IG

8 ID

8 RESP

scale, each economic outcome item was phrasedso that the aspect of economic performance was evaluated by the respondents relative to their organizations'primary com1990). petitors (see Conant, Mokwa, and Varadarajan

The Statistical Model and Analysis

To test the existence of a moderatingeffect by strategytype, we first conducted a moderatedregressionanalysis to identify interactioneffects among marketorientation,the performance variables, and the three strategy types that were transformedto three dummy variables (Sharma, Durand, and Gur-Arie 1981). We found no significant main effects among the dummy variableson the performancevariables. The only significant interaction term,albeit very weak at the .05 level (t-value = 2.044), was between prospectorsand market orientation with respect to ROI. In addition, there was no statistically significantcorrelationbetween the strategy type and the level of market orientation.Thus, of 12 possible interaction effects (three dummy moderatorvari-

ables x four performancevariables), only one interaction effect was marginallysignificant, and there was no correlation between the strategytype and marketorientation,which led us to the next step for conducting subgroup analysis (Sharma,Durand,and Gur-Arie 1981). For the subgroup analysis, we applied multiple-group structural equation analyses (Bollen 1989, pp. 355-69; Joreskog and S6rbom 1993, pp. 51-84; Scott-Lennox and Lennox 1995) to examine whether the parameterestimate (y) between each performance measure and MO differs across the three viable strategy types (see Figure 1 as an illustration for ROI). Multiple-group structural equation modeling (MSEM) deals with moderators indirectly. In other words, the empiricalcriterionis whetherthere are different values for structural parametersat different values of a moderator. Thus, the subjects are divided into groups (for our strategy type, they are already divided because it is a categorical variable) according to different values of the moderatorvariable.We used MSEM because, given our theoretical model, the most precise empirical answer can be

Market /7 Orientation-Performance Relationship

found by this method. The advantages for using this technique are that it enables us to account for measurement errors,estimate the pathcoefficients with less bias, and proof vide more informationon the psychometricproperties our new MO scale. In addition, MSEM is uniquely suited for our theoretical model because of its ability to test such a model for the applicabilityof the marketorientation-performance relationshipto different strategytypes (i.e., population subgroups)simultaneously. The mechanics of this procedureare as follows: First, the sample was divided into the three strategytype groups. For each subsample, a covariance matrix was calculated, and the parameterswere estimated for each subsample by LISREL. Of particularinterest was the y estimate between each performance measureand marketorientation. The pairwise comparison of the ys of the three strategy types for each performancemeasure was conducted. More specifically, the pairwise comparisonwas based on the chi-square difference between the two models, in which one model constrained the two ys to be equal (i.e., an equality constraintmodel, in which the influence of marketorientation on performancemeasure is constrainedto be equal across two differentstrategytypes) and the othermodel left the two ys free to covary (i.e., a free model in which the influence of marketorientationon performance measureis allowed to be different).The difference of the two models' statistical significance was used as a test for the equal ys, that is, whether the equality constraintmodel (ys are equal) produceda better fit than the free model (ys are not equal).

Results
The chi-squarestatistics for every pair of strategytypes for each performanceindicatorare providedin Table 2. H2 and H3 examine a moderatingrole of Miles and Snow's (1978) strategytype on the relationshipsbetween MO and the four economic performancemeasures (SOM, SGRO, PCTNP, and ROI).

ROI
H2 predicts that, for the profitabilitymeasure (ROI), the y would be greaterfor the defendersthan for either parameter the analyzersor the prospectors. > and > y H2(ROI): (defenders) y (prospectors) y (defenders) y (analyzers). For ROI,the first pairwisecomparisonwas between defenders (Type 1) and prospectors(Type 2). The chi-square was 423.899 (d.f. = 15) for the equal-ymodel and 304.070 (d.f. = 14) for the free-y model. The chi-square difference was 119.829 (d.f. = 1). The critical value of chi-squarestatistical difference with one d.f. at the a = .05 level is 3.84. Thus, the chi-squarestatistic was worsened when the two parameters were constrainedto be equal. The y estimates for the free-y model were 1.166 for defendersand .163 for prospectors. The second pairwisecomparisonwas between defenders (Type I) andanalyzers(Type3). The chi-squarewas 404.723 (d.f. = 15) for the equal-ymodel and 276.938 (d.f. = 14) for the free-y model. The chi-square difference was 127.785 (d.f. = 1). Thus, the chi-squarestatisticwas not improvedby

TABLE2 Pairwise Comparisons of Strategy Types: Chi-Square Statistics, y Estimates, and t-Values Performance Measures
ROI Defenderprospector Defenderanalyzer SOM Defenderprospector Prospectoranalyzer SGRO Defenderprospector Prospectoranalyzer PCTNP

Equality Constraint Model

X2= 423.899 (d.f.= 15) X2= 404.723 (d.f.= 15) X2= 410.953 (d.f.= 15) X2= 640.831 (d.f.= 15) X2= 426.917 (d.f.= 15) X2= 656.986 (d.f.= 15)

Free Model
X2= 304.070 (d.f.= 14) X2= 276.938 (d.f.= 14) X2= 348.514 (d.f.= 14) X2= 480.340 (d.f.= 14) X2= 349.232 (d.f.= 14) X2= 500.829 (d.f.= 14)

Chi-Square Difference
X2= 119.829 (d.f.= 1) X2= 127.785 (d.f. = 1) X2= 62.439 (d.f. = 1) X2= 160.491 (d.f. = 1) X2= 77.685 (d.f.= 1) X2= 156.157 (d.f.= 1)

y Estimatesof FreeModel (t-Value)

Defender: Prospector: Defender: Analyzer: Defender: Prospector: Prospector: Analyzer: Defender: Prospector: Prospector: Analyzer: 1.166 (11.102) .163 (4.353) 1.287 (9.734) .060 (1.368) -1.532 (-7.611) .119 (2.194) 1.926 (8.970) .069 (.956) -1.680 (-7.128) .132 (2.432) 1.735 (9.851) .005 (.103)

Defenderprospector Prospectoranalyzer

X2= 376.167
(d.f.= 15) X2= 611.564 (d.f.= 15)

X2= 314.168
(d.f.= 14) X2= 498.441 (d.f.= 14)

X2= 61.999
(d.f.= 1) X2= 113.123 (d.f. = 1)

Defender:
Prospector: Prospector: Analyzer:

-1.671 (-6.547)
.089 (1.561) 1.563 (10.367) .032 (.599)

of 8 / Journal Marketing, 2000 October

to constrainingthe two parameters be equal. The y estimates for the free-y model were 1.287 for defendersand .060 (not significant at the a = .05 level) for analyzers. Together, the defenders' y was greater than either the prospectors'or the analyzers'.Therefore,H2 was supported.

hypothesis:The relationshipbetween marketorientationand economic performancewas found to vary across the strategy types. Thus, H1 was supported.

SOM, SGRO,and PCTNP

H3a predicts that for SOM, the prospectors'y parameteris the greatest, followed by the analyzers'and the defenders'. > and H3a(SOM):y (prospectors) y ( defenders) y (prospectors)> y (analyzers). The first pairwise comparison was between defenders (Type 1) and prospectors (Type 2). The chi-square was 410.953 (d.f. = 15) for the equal-y model and 348.514 (d.f. = 14) for the free-y model. The chi-square difference was 62.439 (d.f. = 1). Thus, the chi-square statistic was worsened by constrainingthe two parametersto be equal. The y estimates for the free-y model were -1.532 for defenders and .119 for prospectors.Defenders' y was not only smaller but also negative. The second pairwise comparisonwas between prospectors (Type 2) and analyzers (Type 3). The chi-square was 640.831 (d.f. = 15) for the equal-y model and 480.340 (d.f. = 14) for the free-y model. The chi-square difference was 160.491 (d.f. = 1). Thus, the chi-square statistic was not improved by constraining the two parameters to be equal. The y estimates for the free-y model were 1.926 for prospectorsand .0476 (not significant at the a = .05 level) for analyzers. Together,the prospectors'y was greaterthan either the defenders' or the analyzers'. Therefore, H3awas supported. The same procedures were applied to test both H3b (SGRO) and H3c (PCTNP). For both of these two performance indicators, the same conclusion as for H3a (SOM) was obtained:The prospectors' was greaterthan either the y defenders' or the analyzers'. Therefore, H3band H3c were also supported. The results of testing the individual subhypotheses (H2 and H3) were supportive of the umbrella

Discussion and Implications

The moderatingrole of the strategytype on the relationship between marketorientationand economic performancewas empiricallyexamined in this study, and all hypotheses were supported.It was found that the relationshipsbetween market orientationand performancemeasures are not monotonic. For a better understandingof the support for these hypotheses,a post hoc analysis was conducted.For each performancedimension, a mean score was comparedfor each strategytype by one-way analysis of variance(Table 3). Note that the y coefficient representsthe ratioof change in the dependent variable (performancevariable) to a unit change in the independentvariable (marketorientation).In a managerialsense, it is a measureof the impactthatcan be expected when market orientation is increased. However, the mean scores simply representthe currentoverall level of by performance differentstrategytypes. By combiningthese two differentcriteria,it can be concluded that wouldgainlittlebenefit any in speaking, analyzers *Relatively the orientation dimension increasing market by performance t-values(Table werefoundon theiry level. No significant 2) whichsuggeststhattheyarelikelyto receiveno coefficients, the benefit(or loss) fromincreasing additional performance orientation. levelof market ranked secondin scoresareconsistently *However, analyzers' the meanscoreon anyof the measures. This is an interestingfinding. The analyzers, in pursuit of a unique combination of the strengthsof defenders and prospectors, try to minimize the risk while maximizing profit opportunity.In short, analyzers aspire to be good, if not the best, in all performancedimensions as theorized by Miles and Snow (1978) and empirically demonstratedhere and elsewhere (Shortell and Zajac 1990). The lack of significance of y for the analyzers begs some explanation.Orga-

TABLE3 Mean Performance Scores and y Estimate Rankings Resultsa Analysisof Variance
ROI Prospectors= analyzers; Analyzers= defenders; Prospectors> defenders Prospectors> analyzers = defenders

Mean Scoresb
(P) 5.339 (A) 5.008 (D) 4.750 (P) 5.313 (A) 4.900 (D) 4.740 (P) 5.344 (A) 4.992 (D) 4.658

HypothesisTesting Results:y Estimates

Defenders > prospectors Defenders > analyzers Prospectors > defenders Prospectors > analyzers Prospectors> defenders Prospectors> analyzers Prospectors> defenders Prospectors> analyzers

SOM

SGRO

Prospectors> analyzers = defenders

(P) 5.315 (A) 4.592 (D) 4.299 aMean differences werebasedon pairwise test comparisons usingScheffe's at the a = .05 level.
bp = prospectors,A = analyzers, D = defenders.

PCTNP

Prospectors> analyzers = defenders

Market /9 Orientation-Performance Relationship

nizations with an analyzer-type strategy are already conducting market intelligence activities to some extent, and these activities are the cornerstoneof their strategy implementation: extensive marketing surveillance mechanisms (Miles and Snow 1978). Nonetheless, simply analyzing the marketmay go only so far when the firm is tryingto be good at everything. That a marketorientationrequiresacting on (i.e., responsivenessto) marketintelligence thatis generated and disseminated(Kohli and Jaworski 1990) seems to provide one possible explanationfor the general lack of performance gains expected for analyzers.In otherwords, it might be that the performancebenefit of increasing the level of marketorientationonly throughmarketanalysis is limited. Simply engaging in marketintelligence activities would not be good enough; it takes focus and responsiveness,or acting on them. An alternativeexplanationis that there might be a contingency factor at play that was not modeled in our study. For example, the effects of environmental on uncertainty the market orientation-performance are equivocal relationship at best. Jaworski and Kohli (1993) find no moderating effects of market turbulence, competitive intensity, and technological turbulenceon the marketorientation-performance relationship. Conversely, Gatignon and Xuereb (1997) implicitly suggest that the payoff from a marketorientation might be greater under greater environmental uncertainty.6Relating to a turbulentenvironment, Glazer and Weiss (1993) find that formal informationanalysis and planningprocesses (in partrequiredby a marketorientation) hinder business performance in quickly changing market environments.In such an environment,it is recommendedto avoid high levels of formality in the procedure,because it and could lead to overanalyzingthe information diminishing the return on market analysis. In contrast, Jaworski and Kohli (1993) find no moderatingeffects of market turbulence, competitive intensity, and technological turbulence. Unfortunately,because we did not model environmental uncertaintyin our study, we have little basis to conclude one way or the other on this intriguingspeculation.These possible explanationsindicatethatmore researchis necessaryfor a full understanding the natureof environmentalcontinof involved in the analyzertypes. gencies For the defenders, the following observations can be made: with and *Compared the othertypes, prospectors analyzers, benefitin ROI by defenders gain the greatestperformance level. market orientation increasing to with *However, appear compared theothertypes,defenders of lose most in market share,sales growth,and percentage new product sales (see the negative values)by increasing y level. On market the market orientation share,salesgrowth, of andpercentage new product sales,theyarethe worstperjudgingfromthemeancomparisons. formers, Recall thatdefendersare supposedto excel in efficiency, and their productmarketdomains are typically narrowand stable over time. They strive to maintainefficient operations capabilities and by continuously improving manufacturing 61tis implicit becausetheirfocuswas on technology, customer, of orientation. instead market andcompetitor orientations,

in-depthmarketcoverage. However,judging from the mean score, the defenders in the sample are not doing very well even on the efficiency measure(ROI):They are tied with the analyzersbut lower thanthe prospectors.According to the y coefficients, however, defenders were the highest on ROI. Leveraging the highest y, defenders improving marketorientation can increase the level of ROI, on which they currently fail to excel but aspireto improve.More important,in contrastto the ROI case, they would lose the most in market share, sales growth,and percentageof new productsales by increasingthe level of marketorientation.This is a dilemma for defenders;an attemptto increaseone relativemeasureof performancemay lead to decreasing other measures that they consider secondary but nonetheless importantaspects of business in general.The implication is significant:There might be a trade-offbetween choosing a strategyand implementing a marketorientation,and defender-typecompanies should be aware of this trade-off. Finally, regardingprospectors, from greatest the benefit gain,overbothanalyzers *Prospectors and in anddefenders, market share,salesgrowth, percentage level. orientation market sales of newproduct by increasing arethebest fromthemeancomparisons, prospectors *Judging measure. in However, can they performers everyperformance in ROI. stillexpectpositive gains Growthfor prospectorsprimarilycomes from new market and productdevelopments.They are innovatorsand thus often find technological innovation expensive and not as efficient as do competitorsfocused on standardization (e.g., defenders). However, the mean performancescores in this study's data indicate otherwise: Prospectorsdo well on all dimensionson the basis of the mean score. This is somewhat surprising, though one empirical study reports similar results (Shortell and Zajac 1990). Even better news is that they can furtherexpect greatergains comparedwith the others. On the basis of the ys, relative to the other two types, prospectorscan gain the most performancebenefit in market share,sales growth,and percentageof new productsales measures by increasingthe marketorientationlevel. These are the areasin which prospectorsshould do, and are doing, well. If the prospectors' strategytype was the most proactive business strategyof all (Arag6n-Correa1998), these organizations would be the most sustainable in environmental changes and capable of producingconsistently high performance (Jennings and Zandbergen 1995). This study provides empiricalsupportfor this argumentas far as the curscore (Table3) is concerned. rentlevel of mean performance The relevance for marketingscholars and practitionersis that a market orientation is critical for prospectors to achieve and maintaintheir high performancelevels. A high market orientation leading to a greater marketingcompetency is consistent with Conant,Mokwa, and Varadarajan's marketingcompetencies (1990) finding thatthe prospectors' are superior to those of other firm types. Prescriptively speaking, prospectors should try to maintain or even increasethe currentlevel of marketorientation,which could even improvethe sustainabilityof the organization.If all the resultsof hypothesistesting are takentogether,a marketorientation and the prospectorstrategy are the most positive contingency relationshipof all. performance

2000 of October 10/ Journal Marketing,

Future Research Issues and Limitations

Several additional future research directions can be suggested on the basis of the limitations of this study.The first is fundamentallya theoretical one. Although it is our position (and our data's suggestion) that there is no direct path from the strategy type to a market orientation, it by no means negates the potential that a mediating factor exists between strategy type and market orientation.7For example, strategy type may determine a type of corporateculture, which in turn may influence the level of market orientation. More research on the relationships among these three related but distinct constructs and establishment of the relevant culture dimensions to the scale are warranted. Second, economic performanceof the business was chosen as the measure of business performance, which in a more generalsense may include some noneconomicaspects. As business performanceis multifaceted,investigatingmarket orientation'simplications on other performancecriteria should make an important contribution to the body of knowledge. They include, but are not limited to, customer satisfaction, customer retention, social acceptance, corporate image, and employee satisfaction.Whetherthe strategy type moderatesthe relationshipsbetween marketorientation and these noneconomic performancemeasures is intriguing and should be explored in futurestudies. The sampleconsistedof marketing executivesof business units in manufacturing companiesand thus excluded the service sector,which continuesto increase in importancein the economy. Priorempiricalstudies on marketorientationwere also based on samples of manufacturers. Because providing more and consistentreferencepoints is a useful contribution 7Wearegrateful thissuggestion for madeby an anonymous JM reviewer.

at the currentstage of marketorientation research,we decided to limit the sample frameto manufacturing companies in the United States. Furthermore, sought only marketingexecwe utives for their responses. Because of their professionaland educationalbackgrounds and the focus of attention-which may well be differentfromotherfunctionalexecutives-their with caution.Replicationsof responsesshould be interpreted the study with different samples should provide additional of insights on the representativeness the respondents.Such with differentsamplesshouldrenderproperqualreplications ificationsto the resultsof this study. The validity of the resultsis also dependenton the validity of the measures used in this study.As marketorientation refersto a firm's attentivenessand responsivenessto external environments,it has a clear implicationto strategyformulation andthereforethe realizedstrategytype. Unfortunately, it was not possible to establish the discriminant validity between the MO scale and the measuresof strategytype by using a rigorous method such as confirmatoryfactor analysis, becausethe strategytype measureswere categoricalvariables. Althoughmarketorientationandstrategytype areconceptually related but distinct and our data analysis suggests no statistically significant relationshipbetween the level of market orientation and strategy type measures, empirical confoundis still a possibility.Resolutionof this issue through the use of noncategoricalmeasuresof strategytype, and subsequent more rigorousanalysis, is left to furtherresearch. The cross-sectionalsurvey researchdesign that relies on a single informantper organizationhas its own limitations. one In additionto the reliabilityof a single informant, important issue is the extent of common method bias (the same respondentrating marketorientation,strategytypes, and all the other measures on the same survey instrument).Use of and longitudinalstudies, multipleinformants, multiplemethods should be considered in the futureto enable researchers to examine closely the extent to which such a bias is present.

A APPENDIX Measures Construct IG Item Number V1 V2 V3 V4 Item We pollend usersat leastonce a yearto assess the quality of ourproducts services. and Inourbusinessunit,intelligence ourcompetitors generon is atedindependently severaldepartments. by We periodically effectof changesinourbusireview likely the ness environment regulation) customers. on (e.g., Inthisbusinessunit, frequently we collectandevaluate generalmacroeconomic information interest rate, (e.g., product, exchangerate,grossdomestic industry growth rate,inflation rate). Inthisbusinessunit, maintain we contactswithofficials of and bodies(e.g., Department of government regulatory Federal Trade Food Administration, Agriculture, and Drug in to Commission, Congress) order collectandevaluate information. pertinent Inthisbusinessunit, collect evaluate we information and consocialtrends consciouscerning general (e.g., environmental that affectourbusiness. ness, emerging lifestyles) might Source Jaworski Kohli and (1993) and Jaworski Kohli (1993) Jaworski Kohli and (1993) developed Newly

V5

Newly developed

V6

developed Newly

Market / 11 Orientation-Performance Relationship

A APPENDIX Continued Construct Item Number

V7 V8a ID V9 V10 V11 V12 V13 V14 RESP V15a V16a V17a V18 V19 V20a V21 V22a PerformanceSOM PerformanceSGRO PerformancePCTNP PerformanceROI Strategytypedefender V23 V24 V25 V26 V27, Type 1

Item
Inthis business unit,we spend time withour suppliersto learn more about variousaspects of theirbusiness (e.g., manuprocess, industrypractices,clientele). facturing Inour business unit,only a few people are collectingcompetitor information. personnel in our business unitspend time disMarketing cussing customers'futureneeds withother functional departments. circulatesdocuments (e.g., Ourbusiness unitperiodically on reports,newsletters)that provideinformation our customers. We have cross-functional meetings very often to discuss market trends and developments(e.g., customers, competition, suppliers). We regularly have interdepartmental meetings to update our of regulatory requirements. knowledge Technicalpeople in this business unitspend a lot of time sharabout technologyfor new productswith ing information other departments. Market information spreads quicklythroughall levels in this business unit. Forone reason or another,we tend to ignorechanges in our customers' productor service needs. The productlines we sell depend more on internalpolitics than real marketneeds. We are slow to start business withnew supplierseven though we thinkthey are betterthan existingones. Ifa majorcompetitorwere to launchan intensivecampaign targeted at our customers, we would implementa response immediately. The activitiesof the different departmentsin this business unit are well coordinated. Even if we came up witha great marketing plan, we probably would not be able to implementit in a timelyfashion. Ifa special interestgroup(e.g., consumer group,environmenbusiness tal group)were to publicly accuse us of harmful practices,we would respondto the criticismimmediately. We tend to take longerthan our competitorsto respond to a change in regulatory policy. market Ourbusiness unit'smarketshare growthin our primary last year. Ourbusiness unit'ssales growthrelativeto majorcompetitors last year. Percentage of sales generated by new productslast year relative to majorcompetitors. Ourbusiness unit'sROIrelativeto majorcompetitorslast year. This type of business unitattemptsto locate and maintaina secure niche in a relatively stable productor service area. The business unittends to offera more limitedrange of productsor services than its competitors,and it tries to protect its domainby offeringhigherquality, superiorservice, lowerprices, and so forth.Oftenthis business unitis not at of the forefront developmentsin the industry-it tends to ignore industrychanges that have no directinfluenceon currentareas of operationand concentrates instead on doing the best job possible in a limitedarea.

Source
Newlydeveloped Newlydeveloped Jaworskiand Kohli (1993) Jaworskiand Kohli (1993) Newlydeveloped Newlydeveloped Newlydeveloped Newlydeveloped Jaworskiand Kohli (1993) Jaworskiand Kohli (1993) Newlydeveloped Jaworskiand Kohli (1993) Jaworskiand Kohli (1993) Jaworskiand Kohli (1993) Newly developed Newlydeveloped Newlydeveloped Newlydeveloped Newlydeveloped Newlydeveloped Snow and Hrebiniak (1980); McDanieland Kolari (1987) Categoricalvariable

12 / Journalof Marketing, October2000

APPENDIXA Continued Construct

Strategytypeprospector

Item Number
V27, Type2

Item
This type of business unittypicallyoperates withina broad domainthat undergoes periodicredefiniproduct-market in" tion.The business unitvalues being "first in new product and marketareas even if not all of these efforts prove This organizationresponds rapidly to be highlyprofitable. and to early signals concerning areas of opportunity, these responses often lead to a new roundof competitive actions. However,this business unitmay not maintain marketstrengthin all of the areas it enters. This type of business unitattemptsto maintaina stable, limitedline of productsor services while at the same time movingquicklyto followa carefullyselected set of the This more promisingnew developments in the industry. in" organizationis seldom "first withnew productsand the services. However,by carefullymonitoring actions of majorcompetitorsin areas compatiblewith its stable base, this business unitcan frequentlybe product-market "second in"witha more cost-efficientproductor service. This type of business unitdoes not appear to have a conThis organizationis orientation. sistent product-market established usuallynot as aggressive in maintaining productsand marketsas some of its competitors,nor is it willingto take as many risks as other competitors.Rather, this type of business unit responds in those areas where it is forcedto by environmental pressures.

Source
Snow and Hrebiniak (1980); McDanieland Kolari (1987) Categoricalvariable

Strategytypeanalyzer

V27, Type3

Snow and Hrebiniak (1980); McDanieland Kolari (1987) Categoricalvariable

Strategytype-reactor

V27, Type4

Snow and Hrebiniak (1980); McDanieland Kolari (1987) Categoricalvariable

alndicatesa reverse-codeditem.

APPENDIXB Profile of 1300 Companies: 300 Companies (Pretest Sample) and 1000 Companies (Final Sample) Pretest SampleProfile Employee Size
20-49 50-99 100-249 250-499 500-999 1000-4999 5000-9999 10,000+ Total

Count
1 3 145 89 37 24 1 0 300

%
.33% 1.00% 48.33% 29.67% 12.33% 8.00% .33% .00%

AnnualSales Volume
$10 million-20million $20 million-50million $50 million100 million $100 million-500million $500 million-1billion >$1 billion

Count
51 137 62 45 4 1

%
17.00% 45.67% 20.67% 15.00% 1.33% .33%

Total

300

FinalSampleProfile
Size

Employee

Count

Annual Sales Volume

Count

20-49 50-99 100-249 250-499 500-999 1000-4999 5000-9999 10,000+ Not available Total

3 10 520 323 109 32 1 1 1 1000

.30% 1.00% 52.05% 32.33% 10.91% 3.20% .10% .10% .10%

$10 million-20million $20 million-50million $50 million-100million $100 million-500million $500 million-1billion >$1 billion

147 530 199 118 3 3

14.70% 53.00% 19.90% 11.80% .30% .30%

Total

1000

/13 Market Orientation-Performance Relationship

C-

0J C,

APPENDIX C Correlation Matrix IG IG ID RESP MO KJIG KJID KJRESP KJMO ROI SOM SGRO PCTNP 1.000 ID .588 .000 1.000 RESP .383 .000 .484 .000 1.000 MO .826 .000 .838 .000 .766 .000 1.000 KJIG .669 .000 .529 .000 .395 .000 .663 .000 1.000 KJID .471 .000 .743 .000 .563 .000 .722 .000 .440 .000 1.000 KJRESP .461 .000 .569 .000 .821 .000 .759 .000 .501 .000 .626 .000 1.000 KJMO .651 .000 .713 .000 .729 .000 .860 .000 .812 .000 .768 .000 .881 .000 1.000 ROI .264 .000 .214 .000 .426 .000 .375 .000 .239 .000 .257 .000 .363 .000 .355 .000 1.000

= KJMO theoriginal Notes:Figures correlation p-value. and 32-item Pearson are Kohli Jaworski and scale;indicators represent preceded "KJ" from by

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