Jaworski Jaworski and Kohliand Kohli

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    Ajay K. Kohli Bernard J . Jaworski

    Market Orientation: TheConstruct, Research Propositions,

    and Managerial ImplicationsThe literature reflects remarkably little effort to develop a framework for understanding the implemen

    tation of the marketing concept. The authors synthesize extant knowledge on the subject and provide afounda tion for future research by clarifying the construct s d om ain, developing research propositionsand constructing an integrating framework that includes antecedents and consequences of a market ori-entation. They draw on the occasional writings on the subject over the last 35 years in the marketingliterature, work in related disciplines, and 62 field interviews with managers in diverse functions anorganizations. Managerial implications of this research are discussed.

    THOUGH the marketing concept is a cornerstoneof the marketing discipline, very little attentionhas been given to its implementation. The marketingconcept is essentially a business philosophy an idealor a policy statement (cf. Barksdale and Darden 1971;McNamara 1972). The business philosophy can becontrasted with its implementation reflected in the ac-tivities and behaviors of an organization. In keepingwith tradition (e.g., McCarthy and Perreault 1984, p.36), we use the term market orientation to mean theimplementation of the marketing concept. Hence, amarket-oriented organization is one whose actions areconsistent with the marketing concept.

    In recent years, there has been a strong resurgence

    of academic as well as practitioner interest in the mar-

    Ajay K. Kohli is Assistant Professor, Department of Marketing Admin-istration, The University of Texas at Austin. Bernard J . Jaworski is As-sistant Professor, Department of Marketing, Karl Eller Graduate Schoolof Management, University of Arizona. Th e authors thank DipankarChakravarti, Rohit D eshpande, Jonathan F renzen, Richard L utz, Deb orahMaclnnis, Kent Nakamoto, C. W. Park, P. Rajan Varadarajan, MelanieWallendorf, Frederick Webster, Robert Westbrook, Gerald Zaitman, an dfour M reviewers fo r their helpful comments on previous versions ofthe article. Research support provided by the Marketing Science Insti-tute is gratefully acknowledged. Both authors contributed equally to the

    article.

    keting concept and its implementation (e.g., Deshpandand Webster 1989; Houston 1986; Olson 1987; Webst

    1988). We seek to further that interest by providina foundation for the systematic development of a thory of market orientation. Given its widely acknowedged importance, one might expect the concept thave a clear meaning, a rich tradition of theory dvelopment, and a related body of empirical findingOn the contrary, a close examination of the literatureveals a lack of clear definition, little careful attetion to measurement issues, and virtually no empircally based theory. Further, the literature pays littattention to the contextual factors that may make market orientation either more or less appropriate f

    a particular business. The purpose of this article is delineate the domain of the market orientation costruct, provide an operational definition, develop propositional inventory, and construct a comprehesive framework for directing future research.

    We first describe our method. Essentially, we draon the literature in marketing and related disciplineand supplement it with findings from field interviewwith managers in diverse functions, hierarchical leels, and organizations. Our discovery-oriented approach (cf. D eshpande 1983 ; Mahrer 1988) is similto the qualitative, practitioner-based approach used bParasuraman, Zeithaml, and Berry (1985) and is d

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    signed to tap the cause and effect maps of managers(see Zaltman, LeM asters, and Heffring 1982).

    We then compare and contrast the alternative con-ceptualizations in the literature with the view thatemerges from the field interviews and provide a syn-thesis. Next we develop a series of research propo-sitions in the spirit of propositional inventories de-

    veloped in such diverse areas as sales management(cf. Walker, Churchill, and Ford 1977; Weitz 1981),organization of marketing activities (cf. Ruekert,Walker, and Roering 1985), diffusion of technology(cf. Robertson and Gatignon 1986), information pro-cessing (cf. Alba and Hutchinson 1987), and market-ing control systems (cf. Jaworski 1988). These liter-ature-based and field-based propositions are synthesizedin an integrative framework that provides for a par-simonious conceptualization of the overarching fac-tors of interest. Finally, we conclude with a discus-sion that alerts managers to important issues involvedin modifying business orientations.

    Method

    Literature Review review of the literature of the last 35 years revealsrelatively little attention to the marketing concept. Thelimited research primarily comprises (1) descriptivework on the extent to which organizations have adoptedthe concept (e.g ., Barksdale and Darden 1971; Hise 9 6 5 ;

    Lusch, Udell, and Laczniak 1976; McNam ara1972), (2) essays extolling the virtues of the businessphilosophy (e.g.. Business Week 1950; McKitterick 9 5 7 ; Viebranz 1967), (3) work on the limits of theconcept (e.g., Houston 1986; Levitt 1969; Tauber1974), and to a lesser extent (4) discussions of factorsthat facilitate or hamper the implementation of themarketing concept (e.g., Felton 1959; Lear 1963;Webster 1988). We draw on these limited writings,especially the last category, and also on related lit-erature in the management discipline.

    Field InterviewsThe field research consisted of in-depth interviews with62 managers in four U.S. cities. Because the purposeof the study was theory construction (i.e., elicitationof constructs and propositions), it was important totap a wide range of experiences and perspectives inthe course of the data collection. Therefore, a pur-posive or theore tical sampling plan (Glaser andStrauss 1967) was used to ensure that the sample in-cluded marketing as well as nonmarketing managersin industrial, consumer, and service industries. Carealso was taken to sample large as well as small or-ganizations.

    Of the 62 individuals interviewed, 33 held mar-

    keting positions, 15 held nonmarketing positions, 14 held senior management positions. A total oforganizations were included in the sample; multindividuals were interviewed in certain organizatioThe organizations of 18 interviewees marketed csumer products, those of 26 marketed industrial pucts, and those of 18 marketed services. In size,

    organizations ranged from four employees to sevtens of thousands. The sample thus reflects a divset of organizations, departments, and positions, hence is well suited for obtaining a rich set of idand insights. In addition to managers, 10 businacademicians at two large U.S. universities were terviewed. The ptirpose of these interviews was to insights that might not emerge from the literatureview and the field interviews.

    A standard format generally was followed for interview. After a brief description of the reseaproject, each interviewee was asked about four issalong the following lines.

    What does the term maricet/marketing orientatmean to you? What kinds of things does a m arket/mketing-oriented company do?

    2 What organizational factors foster or discourage orientation?

    3 What are the positive consequences of this orientatWhat are the negative consequences?

    4 Can you think of business situations in which thisentation may not be very important?

    These questions provided a structure for each inview, but it was frequently necessary to explain aclarify some of the questions, as well as probe deewith additional questions to elicit examples, illustions, and other insights.

    The personal interviews typically lasted aboutminutes and were audiotaped unless the interviewrequested otherwise. The information obtained frthese interviews affords novel insights into the meing, causes, and consequences of a market oriention. Though a large number of new insights emerfrom the study, we focus on the more interestinones (see Zaltman, LeM asters, and Heffring 1982)

    those with the greatest potential for stimulating furesearch.

    Market Orientation: The Construct

    omp aring Literature and Fieid erspectivesA review of the literature reveals diverse definitiof the marketing concept. Felton (1959, p. 55) defithe marketing concept as a corporate state of mthat insists on the integration and coordination ofthe marketing functions which, in turn, are meld

    with all other corporate functions, for the basic ppose of producing maximum long-range corporprofits. In contrast, McNam ara (1972, p. 51) ta

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    broader view and defines the concept as a philos-phy of business management, based upon a com-any-wide acceptance of the need for customer ori-ntation, profit orientation, and recognition of themportant role of marketing in comm unicating the needsf the market to all major corporate departments.

    Variants of these ideas are offered by Lavidge (1966 ),Levitt (1969), Konopa and Calabro (1971), Bell andEmory (1971), and Stampfl (1978).

    Three core themes or pillars underlie these adhoc definitions: (1) customer focus, (2) coordinatedmarketing, and (3) profitability (cf. Kotler 1988).Barksdale and Darden (1971, p. 36), point out, how-

    ver, that these idealistic policy statements repre-ented by the marketing concept are of severely lim-ted practical value, and assert that the major challenges the development of operational definitions for the

    marketing concept . . . (emphasis added). Hence,hough the literature sheds some light on the philos-ophy represented by the marketing concept, it is un-iear as to the specific activities that translate the phi-osophy into practice, thereby engendering a market

    orientation. Even so, it appears reasonable to con-lude from the literature that a market-oriented or-

    ganization is one in which the three pillars of the mar-keting concept (customer focus, coordinated marketing,profitability) are operationally manifest.

    The view of market orientation that emerges fromhe field interviews is consistent with the received

    view in the literature, though certain differences areevident. Importantly, the field interviews provide aignificantly clearer idea of the construct's domain and

    enable us to offer a more precise definition. This pre-cision facilitates theory development, construct mea-surement, and eventually theory testing. In the fol-owing discussion, we first compare the field-based

    view of market orientation with the received view onhe three commonly accepted pillarscustomer fo-us, coordinated marketing, and profitabilityand then

    elaborate on the elements of the field-based view ofhe construct.

    Customer focus. W ithout exception, the managersnterviewed were consistent in the view that a cus-omer focus is the central element of a market ori-

    entation. T hough they agreed with the traditional viewhat a customer focus involves obtaining information

    from customers about their needs and preferences,several executives emphasized that it goes far beyondcustomer research. The comments suggest that beingcustomer oriented involves taking actions based onmarket intelligence, not on verbalized customer opin-ons alone. Market intelligence is a broader conceptn that it includes consideration of (1) exogenous mar

    as future needs of customers. These extensions dchallenge the spirit of the first pillar (customer frather, they refiect practitioners' broader, moretegic concerns related to customers.

    Coordinated m arketing. Few interviewees exitly mentioned coordinated marketing in the couthe discussions, but the majority emphasized tmarket orientation is not solely the responsibilitmarketing department. Moreover, the executiveterviewed emphasized that it is critical for a vof departments to be cognizant of customer needsaware of market intelligence) and to be responsthose needs. Thus, the interviewees stressed thportance of concerted action by the various dments of an organization. Importantly, the fieldings limit the domain of the second pillar of morientation to coordination related to market in

    gence. This focused view of coordination is impbecause it facilitates operationalizing the construclearly specifying the type of coordination that evant.

    Profitability. In sharp contrast to the received however, the idea that profitability is a componmarket orientation is conspicuously absent in thfindings. Without exception, interviewees vprofitability as a consequence of a market orientrather than a part of it. Th is finding is consistenLevitt's (1969, p. 236) strong objection to viprofitability as a component of a market orientwhich he asserts is like saying that the goal of hlife is eating.

    Thus, the meaning of the market orientationstruct that surfaced in the field is essentially aprecise and operational view of the first two pilthe marketing conceptcustomer focus and cnation. The findings suggest that a market orienentails (1) one or more departments engaging tivities geared toward developing an understandcustomers' current and future needs and the faffecting them, (2) sharing of this understanding departments, and (3) the various departments eing in activities designed to meet select customer In other words, a market orientation refers to tganization wide generation, dissemination, ansponsiveness to market intelligence.

    Further, though the term marketing orienthas been used in previous writings, the label morien tation appears to be preferable for thresons. First, as Shapiro (1988) su ggests, the latteclarifies that the construct is not exclusively a coof the marketing function; rather, a variety of dments participate in generating market intelligdi i ti g it d t ki g ti i

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    est markets, and so on. The following quotation fromhe director of marketing in a high-tech industrialroducts company illustrates the information collec-ion and analysis activity.

    We do a lot of visiting with customers, talking withcustomers on the phone, we read the trade pressitis full of good information about what our competi-tors are doing. We always want to position relative

    to competitors. A lot of marketing is informationgathering.

    Importantly, intelligence generation is not the ex-clusive responsibility of a marketing department. Forexample, R&D engineers may obtain information atcientific conferences, senior executives might un-

    cover trends reported in trade joumals, and so on.Managers in several industrial products companies in-dicated that it was routine for dieir R&D personnel tonteract directly with customers to assess their needs

    and problems and develop new business targeted atsatisfying those needs. One company we interviewedgoes to extreme lengths to encourage exchange of in-ormation between nonmarketing employees and cus-omers. For its annual open ho use , invitations to

    customers are hand delivered by manufacturingnotmarketingpersonnel. Customers visit the plant andnteract with shop floor personnel as well as white collar

    employees. This approach not only enables manufac-uring personnel to understand b etter the purchase mo -ivations of customers, but also helps customers to ap-

    preciate the limits and constraints of processes involvedn manufacturing items they require. As the president

    of this company described it:

    [The open house ] does two things for you. First,it impresses the customers that the people in manu-facturing are interested in your business, and the otherthing is that it impresses on the people in manufac-turing that there are people who buy the productreal, live-bodied, walking-around people. Our peo-ple leam, but our customers are educated at the sametime.

    To help it anticipate customer needs accurately,one blue chip industrial product company assigns cer-tain individuals exclusively to the task of studying trendsand forces in the industries to which major customergroups belong (see related discussion by Lenz andEngledow 1986). This company goes so far as toidentify future need s of custom ers and plan future of-ferings jointly with customers. The important point isthat generation of market intelligence does not stop atobtaining customer opinions, but also involves carefulanalysis and subsequent interpretation of the forces thatimpinge on customer needs and preferences. Equallyimportant, the field findings suggest that the genera-tion of market intelligence is not and probably cannotbe the exclusive responsibility of a marketing depart-ment (see also Webster 1988). Rather, market intel-ligence is generated collectively by individuals and

    departments throughout an organization. Mechanismtherefore must be be in place for intelligence generated at one location to be disseminated effectively toother parts of an organization.

    Intelligence dissemination As the interviews pro-gressed, it became increasingly clear that respondingeffectively to a market need requires the participationof virtually all departments in an organizationR&Dto design and develop a new product, manufacturingto gear up and produce it, purchasing to develop vendors for new parts/materials, finance to fund activities, and so on. Several managers noted that for anorganization to adapt to market needs, market intelligence must be communicated, disseminated, andperhaps even sold to relevant departments and individuals in the organization. Marketing managers in twoconsumer products companies developed and circulated periodic newsletters to facilitate disseminationof market intelligence. These activities echo sugges

    tions in the literature that organizational direction is result of marketing managers educating and communicating with managers in other functional areas (Levit1969) and that marke ters' m ost important role may bselling w ithin the firm (Anderson 1982). As noted before, howev er, m arket intelligence need not always bdisseminated by the m arketing department to other departments. Intelligence may fiow in the opposite direction, depending on where it is generated. Effectivdissemination of market intelligence is important because it provides a shared basis for concerted actionby different departments. A vice president of an in

    dustrial products company recounted the intelligencdissemination process for a new product required ba customer:

    I get engineering involved. Engineering gets produc-tion involved. We have management lunches and in-formal forums. Call reports circulate. By the time youdesign, [you have] engineering, production, and pur-chasing involved early in the process.

    A formal intelligence dissemination procedure iobviously important, but the discussions with managers indicated that informal hall talk is an extremely powerful tool for keeping employees tuned tcustomers and their needs. Despite sparse treatmentof the effects of informal information disseminatioin virtually any literature (for a rare exception, seAguilar 1967), the importance of this factor is welrecognized by managers and it is tapped extensivelyFor example, the vice president of a manufacturinfirm indicated that customer information is disseminated in her organization by telling stories about customers, their needs, personality characteristics, aneven their families. The idea is to have the secretarieengine ers, and production personnel get to kno wcustomers. Her description of informal intelligencdissemination follows.

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    One goal when I took over was to know everythingabout customers, [whether] they liked cats, know[their] wives' names, favorite pet peeve about ourproduc ts. Our sales reps need to know this . . . I doa lot of storytelling. LJater, [I] developed software tocomputerize all this. Everyone in the organization hasaccess to this database.

    This emphasis on intelligence dissemination par-

    allels recent acknowledgement of the important roleof horizontal comm unication in service organiza-tions (S^ithaml, Berry, and Parasuraman 1988). Hor-izontal communication is the lateral flow that occursboth within and between departments (Daft and Steers1985) and serves to coordinate people and depart-ments to facilitate the attainment of overall organi-zational goals. Horizontal communication of marketintelligence is one form of intelligence disseminationwithin an organization.

    Responsiveness. The third element of a market ori-entation is responsiveness to market intelligence. Anorganization can generate intelligence and disseminateit intemally; however, unless it responds to marketneeds, very little is accomplished. Responsiveness isthe action taken in response to intelligence that is gen-erated and disseminated. The following statement byan account executive in a service organization de-scribes this type of responsiveness.

    e are driven by what the customer wants. [We] tryto gather data, do research, put together new prod-ucts based on this research, and then promote them.

    The field findings indicate that responsiveness tomarket intelligence takes the form of selecting targetmarkets, designing and offering products/services thatcater to their current and anticipated needs, and pro-ducing, distributing, and promoting the products in away that elicits favorable end-customer response. Vir-tually all departmentsnot just marketingpartici-pate in responding to market trends in a market-ori-ented company.

    ynth sis and CommentaryFrom the preceding discussion, we offer the followingformal definition of market orientation.

    Market orientation is the organizationwide generation of market intelligence pertaining to current andfuture customer needs, dissemination of the intelli-gence across departments, and organizationwide responsiveness to it.

    Defining market orientation as organizationwidegeneration, dissemination, and responsiveness to mar-ket intelligence addresses the concerns of Barksdaleand Darden (1971) by focusing on sp)ecific activitiesrather than philosophical notions, thereby facilitatingthe operationalization of the marketing concept. In-

    terestingly, it appears more appropriate to view a mar-ket orientation as a continuous rather than a dicho-

    tomous either-or constmct. As the sales manager Asia in an industrial products company put it:

    The first thing to recognize is that there is no abso-lute,' that there are many shades of g ray.

    In other words, organizations differ in the extentwhich they generate market intelligence, disseminit intemally, and take action based on the intelligenIt therefore is appropriate to conceptualize the marorientation of an organization as one of degree, ocontinuum, rather than as being either present or sent. This conceptualization facilitates measuremby avoiding certain difficulties inherent in asking formants to indicate whether or not their organizatis market oriented (e.g., it may be somewhat maroriented). The proposed definition suggests thameasure of market orientation need only assess degree to which a company is market oriented, ti s generates intelligence, disseminates it, and taactions based on it. Relatedly, the appropriate unitanalysis appears to be the strategic business unit ratthan the corporation because different SBUs of a cporation are likely to be market oriented to differdegrees.

    We next discuss antecedents and consequencesa market orientation, and moderators of the linkbetween market orientation and business perfmance. We draw on the marketing literature, magement literature, and field interviews for develing research propositions.

    Research PropositionsFigure 1 is a conceptual framework for the followdiscussion. Briefly, the framework comprises four of factors: (1) antecedent conditions that foster or courage a market orientation, (2) the market orietion constmct, (3) consequences of a market oritation, and (4) moderator variables that either strengtor weaken the relationship between market orientatand business performance. We discuss each of the ffactors and develop propositions based on the liteture and the field interviews.

    ntecedents to a Market Orientation

    Antecedents to a market orientation are the orgazational factors that enhance or impede the impmentation of the business philosophy representedthe marketing concept. Our examination of the liature and the insights from the field interviews revthree hierarchically ordered categories of antecedeto a market orientation: individual, intergroup, andganizationwide factors. We label these as senior m

    agement factors, interdepartmental dynamics, and ganizational systems, respectively.

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    FIGUREAntecedents and Consequences of a Market Orientation

    A N T E C E D E N T S M A R K E T O R I E N TAT I O N MO D ERATO RS OONSEOUENCES

    S E N I O R

    M A N A G E M E N T

    FA C T O R S

    I N T E R D E PA RT M E N TA L

    D Y N A M I C S I

    O R G A N I Z AT I O N A L

    S Y S T E M S

    M A R K E T

    O R I E N TAT I O N

    CU S TO MER

    R E S P O N S E S

    S U P P LY S I D E

    M O D E R ATO R S

    B U S I N E S S

    P E R F O R M A N C E

    D E M A N D S ID E

    M O D E R ATO R S

    E M H O Y E E

    R E S P O N S E S

    Senior management factors The role of seniormanagement emerged as one of the most importantfactors in fostering a market orientation (see Figure2). Interviewees repeatedly emphasized the powerfulimpact of top managers on an organization. The fol-lowing quotations are representative of the ideas thatsurfaced in the interviews.

    We'll do almost a $100 million [worth of sales] thisyear. We have a customer that bought [a mere]$10,000 worth of services. [He] calls the president[and launches into a long tirade of complaints]. [Thepresident] writes down what he says and responds tohim in writing. He investigates the difficulty. He getsback to him. In that process, if you are a junior en-gineer who just worked on a $10,000 project and thepresident calls you up and says let's talk about thisand work out some kind of response to him, theword spreads throughout the base of the company [that]we're a customer-oriented company, we're market-place oriented, we want to satisfy customer needs.Senior vice president, industrial services company

    The founder of this organization is a salesman. Hisshortcoming is that he does not know what marketingis. We reflect the leader.

    Marketing manager, service organization

    The critical role of top managers in fostering amarket orientation is also reflected in the literature.For example Webster (1988) asserts that a market

    orientation originates with top management an customer-oriented values and beliefs are uniqueresponsibility of top managem ent (p. 37) . LikFelton (1959) asserts that the most important dient of a market orientation is an appropriate smin d, and that it is attainable only if the bodirectors, chief executive, and top-echelon execappreciate the need to develop this marketing stmind (p. 55) . In other word s, the comm itmentmanagers is an essential prerequisite to a markentation.

    Additionally, Levitt (1969, p. 2 44) argues thof the factors that facilitates the implementationmarke ting concep t is the presence of the right from the chief operating officer to the entire ration regarding its continuing commitment marketing conc ept. In a similar vein, W ebster p. 37) suggests that CEO s must give clear sand establish clear values and beliefs about sthe custom er. Thu s, these scholars assert that dition to being committed to a market orientatiomanagers must clearly communicate their commment to all concerned in an organization.

    Interestingly, the management literature goes further to provide novel insights. Argyris (19gues that a key factor affecting junior managers

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    FIGURE 2Senior Management Factors and Market Orientation

    COMMUNICATION - A Cn ON GAP OF TOPMANAGEMENT

    RISK AVERSION OFTOP MANAGEMENT

    UPWARD MOBILITYAND EDUCATION OFTOP MANAGEMENT

    TOP MANAGEMENTATTITUDE TOWARD

    CHANGE

    PI A MIDDLE MANAGERS'AMBIGUITY

    PIB

    P2

    P3

    P4

    MARKETING MANAGERS'ABILITY TO WIN TRUST

    OF NON-MARKETINGMANAGERS

    P5INTERDEPARTMENTAL

    CONFLICT

    P6

    MARKETORIENTATION

    g p between what top managers say and what they do(e.g., they s y be market oriented , but cut backmarket research funds, discourage changes). Argyrisexamined 265 decision-making meetings with seniorexecutives and concluded that the actual behavior ofmanagers does not conform to their verbal espousals.One could argue, however, that if the gap is consis-tent over time, junior m anagers may to be able to inferwhat top managers truly desire. In contrast, if the sizeand/or direction of the gap is inconsistent over time,junior managers are unlikely to be able to infer top

    managers' actual preferences. Such variability is likelyto lead to ambiguity about the amount of effort andresources junior managers should allocate to market-oriented tasks, thereby leading to lower market ori-entation. Hence:

    P u The greater the variability over time in the gap be-tween top managers' communications and actions re-lating to a market orientation, the greater the juniormanagers' ambiguity about the organization's desireto be market oriented.

    P u The greater the junior managers' ambiguity about theorganization's desire to be market oriented, the lowerthe market orientation of the organization.

    A market orientation involves being responsive to

    market intelligence. Changing market needs callthe introduction of innovative products and servto match the evolving needs. The introduction of nmodified offerings and programs, however, is inently risky because the new offerings may fail.two executives noted:

    Hospitals cannot survive unless they are innovativethroughout the organization. It means taking risks,doing some real concrete things with customers.

    Marketing director, service organization

    To be marketing oriented is not to be safe becauseyou're running a risk. You have to invest in yourideas. To not be marketing oriented is to be safe. [Itmeans doing] the same old [thing]. You're not in-vesting in your business, not [taking] risks.

    President, industrial services company

    In the course of the discussion with the latter extive, it became clear that top managers' responsinnovative programs that do not succeed sends csignals to junior employees in an organization. Ifmanagers dem onstrate a w illingness to take risksaccept occasional failures as being natural, jumanagers are more likely to propose and introduce offerings in response to changes in customer neIn contrast, if top managers are risk averse and

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    tolerant of failures, subordinates are less likely to beresponsive to changes in customer needs. Hence:

    P2: The greater the risk aversion of top managers, the lowerthe market orientation of the organization.

    Because a market orientation involves being re-sponsive to changing customer/client needs with in-novative marketing programs and strategies, it can beviewed as a continuous innovative behavior. Hambrickand Mason (1984) suggest that organizations headedby top managers who are young, have extensive for-mal education, and are of low socioeconomic origin(and, by implication, have demonstrated upward so-cial mobility) are more likely to pursue risky and in-novative strategies. In the diffusion of innovations lit-erature, formal education and upward mobility arereported as being related consistently to innovativebehavior (see Rogers 1983, ch. 7). However, the agevariable does not produce consistent findings acrossstudies. T aken together, these findings suggest thatthe market orientation of an organization may be afunction of the formal education of its senior man-agers and the extent to which they are upwardly mo-bile. More formally:

    P3: The greater the senior managers (1) educational at-tainment and (2) upward mobility, the greater the mar-ket orientation of the organization.

    A positive attitude toward change has been linkedconsistently to individual willingness to innovate. Ina comprehensive review, Rogers (1983, p. 260) re-ports that 43 of 57 studies found a positive relation-ship between these two constructs. Willingness to adaptand change marketing programs on the basis of anal-yses of consumer and market trends is a hallmark ofa market-oriented firm. Hence, top managers open-ness to new ideas and acceptance of the view thatchange is a critical component to organizational suc-cess are likely to facilitate a market orientation. T hatis:

    P4: The more positive the senior managers attitude to-ward change, the greater the market orientation of theorganization.

    Certain characteristics of department managers andthe nature of interactions among them appear likelyto affect an orga nizatio n s m arket orientation throughtheir impact on interdepartmental conflict (see Figure2 ). Interdepartmental conflict is tension between twoor more departments that arises from incompatibilityof actual or desired responses (cf. Gaski 1984; Ravenand Kniglanski 1970, p. 70). Felton (1959) and Levitt(1969) suggest that it is critical for a marketing vicepresident to be able to win the confidence and co-operation of his or her corporate peers to minimizeconflict and engender a maricet orientation tho gh the

    do not elaborate on the factors that afford this abT he implication is that:

    P5: The greater the ability of top marketing managers win the confidence of senior nonmarketing managerthe lower the interdepartmental conflict.

    Interdepartmental dynamics Interdepartmen

    dynamics are the formal and informal interactionsrelationships am ong an organ ization s dep artmentP5 we introduced the first interdepartmental consconflict. We begin our discussion in this section the linkage between interdepartmental conflict market orientation, then examine additional intepartmental dynamics (see Figure 3).

    Levitt (1969), Lusch, Udell, and Laczniak (19and Felton (1959) suggest that interdepartmental fiict may be detrimental to the implementation omarketing concept. Interdepartmental conflict may from natural desires of individual departments tmore important or powerful, or may even be inhin the charters of the various departments. Forample, Levitt (1969) argues that the job of a mfacturing vice president is to run an efficient pT herefore it is only natural for that individual topose costly endeavors that might be called for market orientation. Recent research (e.g., RuekertWalker 1987) suggests that interdepartmental coninhibits communication across departments. Hencterdepartmental confiict appears likely to inhibit ket intelligence dissemination, an integral compo

    of a market orientation. Additionally, tension amdepartments is likely to inhibit concerted responsthe departments to market needs, also a componemarket orientation. We therefore expect that:

    Pe: The greater the interdepartmental conflict, the the market orientation of the organization.

    A second interdepartmental dynam ic that emein several interviews as an antecedent of a markeentation is interdepartmental connectedness. variable is the degree of formal and informal d

    contact among employees across departments. Foamp le, one executive noted that to improve its morientation, her organization opened communicchannels across departmentsin marked contrathe earlier practice of departments operating inddently of one another and coordinated only bymanagement. One interviewee indicated that heganization/ormaZfy required periodic meetings oployees from different departments, thereby faciing the sharing of market intelligence.

    T he importance of interdepartmental conneness in facilitating the dissemination of and ressiveness to market intelligence is supported byevaluation literature (cf. Cronbach and A ssociates

    d h k i li ( f E) h d d

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    FIGURE 3Interdepartmental Dynamics and Market Orientation

    INTERDEPARTMENTALCONFLICT

    P

    I N T E R D E P RT M E N T LC O N N E C T E D N E S S

    P 7

    CONCERN FOR IDEASOF OTHER DEPARTMENTS

    P 8

    M ARKETORIENTATION

    1982). Indeed, the key predictors of research infor-mation utilization in program evaluation settings arethe extent and quality of interaction between the eval-uators and the program personnel (see Patton 1978).Hence:

    P7: The greater the interdepartmental connectedness, thegreater the market orientation of the organization.

    As Figure 3 illustrates, an additional construct per-taining to interdepartmental dynamics suggested bythe literature on group dynamics is concern for othe rs'ideas (Argyris 1965, 1966). Concern for others' ideasrefers to openness and receptivity to the suggestionsand proposals of other individuals or groups. In thepreviously noted study on decision making, Argyris(1966) observed that low levels of concern are relateddirectly to restricted information flows, distrust, andantagonism, which result in ineffective group pro-cesses. Therefore, low levels of concern for the ideasof individuals in other departments can be expectedto impede the dissemination of market intelligenceacross departments as well as the responsiveness ofindividuals to intelligence generated in other depart-ments. That is:

    h h f d f l h

    departments, the greater the market orientation organizat ion.

    Organizational systems The third set of anteents to a market orientation relate to organizationcharacteristics and therefore are labeled orgational system s (see Figure 4). A set of barriersmarket orientation briefly hinted at in the markliterature is related to the structural form of orzations. Lundstrom (1976) and Levitt (1969) didepartmentalization or specialization as a barricommunication (and hence intelligence dissem

    tion). Additionally, Stampfl (1978) argues that grformalization and centralization make organizaless adaptive to marketplace and environmchanges.

    These references to organizational structure their roots in the organizational sciences literaFormalization is the degree to which rules define authority relations, communications, norms and tions, and procedures (Hall, Haas, and Johnson 1Centralization is defined as the delegation of decimaking authority throughout an organization anextent of participation by organizational membedecision making (Aiken and Hage 1968). Hically, both formalization and centralization have f d b l d i l i f i ili

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    FIGURE 4Organizational Systems and Market Orientation

    D EPA RTMEN TA LIZATIO NP9A

    P9 BFORMALIZATION

    CENTRALIZATIONP9C

    MA RK ET - BA SEDREWA RD SY STEMS

    PIO

    ACCEPTANCE OFPOLITICAL BEHAVIOR

    P l lIN TERD EPA RTMEN TA L

    CO N FLICT

    P 6

    M A R K E TORIENTATION

    D eshpande and Zaitman 1982; Hage and Aiken 1970;Zaitman, Duncan, and Holbek 1973). In our context,information utilization corresponds to being respon-sive to market intelligence. Thus, the literature sug-gests that structural characteristics of an organizationcan infiuence its market orientation.

    Interestingly, there is reason to believe that or-ganizational structure may not affect all three com-ponents of a market orientation in the same way. Be-cause a market orientation essentially involves doingsomething new or different in response to market con-ditions, it can be viewed as a form of innovative be-havior. Zaitman, Duncan, and Holbek 1973, p. 62)characterize innovative behavior as having two stages, 1) the initiation stage i.e ., awaren ess and decision-making stage) and 2) the implementation stage i.e .,carrying out the decision). In our context, the initia-tion stage corresponds to intelligence generation, dis-semination, and the design of organizational re-sponse, whereas the implementation stage correspondsto the actual organizational response.

    Zaitman, Dun can, and Holbek 1973) draw on nu-merous studies to argue that organizational dimen-sions such as departmentalization, formalization, and

    centralization may have opposite effects on the tstages of innovative behavior. In particular, they dicate that whereas these variables may hinder the tiation stage of innovative behavior, they may factate the implementation stage of innovative behavHence departmentalization, formalization, and ctralization may be related inversely to intelligegeneration, dissemination, and response design, positively to response implementation.

    Pg^ The greater the departm entalization, 1) the lower intelligence generation, dissemination, and respondesign and 2) the greater the response implem ention.

    P^b The greater the formalization, 1) lower the integence generation, dissemination, and response desiand 2) the greater the response implem entation.

    Pg^ The greater the centralization, 1) the lower the telligence generation, dissemination, and respondesign and 2) the greater the response implem ention.

    The management literature refiects a rich histof work on measure men t/reward systems and their

    fects on the attitudes and behavior of emp loyees Hopwood 1974; Lawler and Rhode 1976 for reviewRecent research in marketing builds on this work

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    emphasizing the importance of measurement and re-ward systems in shaping both desirable and undesir-able behaviors (cf. Anderson and Chambers 1985;Jaworski 1988). Webster (1988, p. 38) argues that thekey to developing a m arket-driven, customer-orientedbusiness lies in how managers are evaluated and re-wa rded. He observes that if managers are evaluatedprimarily on the basis of short-term profitability andsales, they are likely to focus on those criteria andneglect market factors such as customer satisfactionthat ensure the long-term health of an organization.

    Webster's observations are supported by the prac-tices of several organizations included in our study.Though only one organization sampled appears to tiecompensation to market-oriented performance, if re-wards are construed more broadly to include appre-ciation, recognition, and approval, a larger number oforganizations in the sample measure and reward mar-

    ket-based performance. For example, several organi-zations make it a point to single out and recognizeemployees who are identified by customers as beingparticularly helpful. Other organizations have insti-tuted one or more variations of the employ ee of themonth theme.

    However, considerable variance is evident in theextent to which organizations measure and rewardmarket-based performance. One marketing managerrecounted a current situation in which employees arerewarded for short-term flnancial performance (i.e.,units sold). She noted that this system works against

    a long-run market orientation and any long-run stra-tegic orientation that the organization may decide totake. A sales manager in an industrial firm made asimilar observation, noting that his sales reps may leadthe company astray because their reward systems arebased on sales in the short run. Currently, no systemis in place to encourage them to think strategically.The preceding discussion suggests that:

    Pio: The greater the reliance on ma rket-bas ed factors forevaluating and rewarding managers, the greater themarket orientation of the organization.

    All of the preceding organizationwide character-istics involve formal systems within organizations.Recent writings in the management literature reflectan increasing re ognition of the important role of looser,less formal systems in shaping organizational activi-ties (e. g., Feldman and M arch 1981; Ouchi 1979; Ouchiand Wilkens 1985; Pettigrew 1979; Smircich 1983).More recently, these informal characteristics havegained the attention of marketing academicians (cf.Deshpande and W ebster 1989; Jaworski 1988). Thoughseveral different concepts can be identified, an infor-mal organizational characteristic that appears to beparticularly relevant as a determinant of a market ori-entation is political norm structure, a variable dis-

    cussed in some detail by P orter, Allen, and A(1981).

    P olitical behavior consists of individuals' attemto promote self-interests and threaten others' inter(P orter, Allen, and Angel 1981). P olitical norm sture is an informal system that reflects the extenwhich members of an organization view politicalhavior in the organization as being accep table. A mket orientation calls for a concerted response byvarious departments of an organization to markettelligence. A highly politicized system, however, the potential for engendering interdepartmental flict (thereby inhibiting a market orientation). He

    Pii: The greater the accep tance of political behav ior inorganization, the greater the interdepartmental cflict.

    inkages mong the Market OrientationComponentsLiterature suggests that the three elements of a maorientation may be interrelated. For example, theerature on source credibility (cf. P etty and Cacio1986; Zaltman and Moorm an 1988) suggests thatdividuals in an organization are likely to be moresponsive to intelligence generated by individual(s) are regarded as having high expertise and trustwthiness. That is , responsiveness to market intelligeis likely to be a function of the characteristics ofsource that generates the intelligence. Further, theerature on research utilization (cf. Deshpande

    Zaltman 1982) suggests that responsiveness may bfunction of such factors as the political acceptabof intelligence and the extent to which it challenthe status quo. Similarly, the extent to which intgence is disseminated within an organization maypend on the political acceptability of intelligence the challenge posed to the status qu o. Hence the soof market intelligence and the very nature of intgence may affect its dissemination and utilization (responsiveness). More formally:

    P n.: The greater the perceived expertise of the sogenerating market intelligence, the greater the sponsiveness to it by the organization.

    Pi2b: T he greater the perceived trustworthiness of the sogenerating market intelligence, the greater the sponsiveness to it by the organization.

    P,2c: The smaller the challenge to the status quo posedmarket intelligence, the greater (1) its disseminatand (2) the responsiveness to it by the organizat

    Pi2d: The greater the p>olitical acceptability of markettelligence, the greater (1) its dissemination and the responsiveness to it by the organization.

    onsequences of a Market OrientationSeveral insights obtained ftom the field interviews the literature pertain to the consequences of a maorientation. The interviews uncovered an interes

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    nvironmental Moderators of the MarketOrientation Business Performance Linkage

    With a few exceptions, writings in the literature tendto view the marketing concept as a universally rele-vant philosophy. In contrast, the field interviews elic-ited several environmental contingencies or conditionsunder which the impact of a market orientation on

    business performance is likely to be minimal. That is,the field findings suggest that certain contingenciesmoderate (i.e., increase or decrease) the strength ofthe relationship between market orientation and busi-ness performance. In the following discussion, weconsider four such contingencies or moderator vari-ables.

    One moderator that surfaced in the course of theinterviews is market turbulence changes in the com-position of customers and their preferences. This vari-able is more focused than the widely studied environ-mental turbulence construct. The role of marketturbulence in influencing the desirability of a marketorientation was highlighted by the experience of twoconsumer (food) products companies that marketed theirproducts in a specific region in the United States. Thepopulation in this region had remained unchanged foryears, and the preferences of the customers were knownand stable. Neither company did much market re-search. Over the last few years, however, the regionhad received a tremendous influx of population fromother parts of the country. Both companies were forcedto initiate research to assess the needs and preferences

    of the new potential customers, and to develop newproducts to suit their particular preferences. These ex-periences suggest that when an organization caters toa fixed set of customers with stable preferences, amarket o rientation is likely to have little effect on per-formance because little adjustment to a marketing mixis necessary to cater effectively to stable preferencesof a given set of customers. In contrast, if the cus-tomer sets or their preferences are less stable, there isa greater likelihood that the company's offerings willbecome mismatched with customers' needs over a pe-riod of time. An organization therefore must ascertainthe changed preferences of customers and adjust itsofferings to match them. That is:

    P,a: The greater the market turbulence, the stronger therelationship between a market orientation and busi-ness performance.

    Several authors (e.g., Bennett and Cooper 1981;Houston 1986; Kaldor 1971 ; Tauber 1974) point outthat many generic product class innovations do notevolve from consumer research. Rather, these inno-vations are developed by R&D personnel who are oftenoutside the industries into which the innovations even-tually assimilate. Similar notions emerged in the in-

    terviews. As two of the managers interviewed cated:

    [It is important to] recognize that new products dnot always originate from the custom er, [particularlyin high-tech industry. [An organization needs] to baance R&D [initiated] projects as well as customemarket driven products.

    Sales manager, industrial products compan

    Let ine explain why we are not marketing orientedWe are a complex business, the industry is changindramatically. Some of our products did not exist threyears ago. The technology is changing. Everyone get t ing wrapped up in production/operat ions.

    Marketing manager, service organizat io

    The basic idea expressed in the quotations isin industries characterized by rapidly changing nology (note that firms in such industries often sot r firms , a market orientation m ay not be aportant as it is in technologically stable indus Techno logy here refers to the entire proces

    transforming inputs to output and the delivery of outputs to the end customer. The proposition i that a market orientation is unimportant in technically turbulent industries, but rather that it is less portant. That is:

    P : The greater the technological turbulence, the wthe relationship between a market orientationbusiness performance.

    Several executives noted that the degree of petition in an industry has a straightforward beon the importance of a market orientation. S

    competition leads to multiple choices for custoConsequently, an organization must monitor anspond to customers' changing needs and preferto ensure that customers select its offerings over peting alternatives. As two executives indicated

    Historically, [we] were a technically driven company. In the early years it was a successful approachIf we had a better mousetrap, customers would searc[us] out. However, as more companies came up witmore solutions, we had to become more market orented. Find out what solution [the] customer is looing for, and try to solve it. In the past little time waspent with customers. Now coordinate with cutomer, solution for him, try to utilize that development energy to provide solution for segment.

    Sales manager, industrial product firm

    One thing is that marketing and advertising changso much. What worked last year may not work thyear. A lot of it has to do with the competitive natuthat you're in at the time because people's needchange. . . . If you don't have competi tion, you donneed it as much.

    Marketing director, service organizatio

    Thus, an organization with a monopoly in a mmay perform well regardless of whether or not it ifies its offerings to suit changing customer pences (see also Houston 1986, p. 84). As one seexecutive noted, If one has a patent or lock o

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    product, it may not be efficient to allocate resourcesto marke ting . In other wo rds, the benefits affordedby a market orientation are greater for organizationsin a competitive industry than for organizations op-erating in less competitive industries.

    Pig: The greater the competition, the stronger the rela-tionship between a market orientation and business

    performance.

    Several executives indicated that in strong econ-omies characterized by strong demand, an organiza-tion may be able to get away with a minimal amountof market orientation. In contrast, in a weak econ-omy, customers are likely to be very value consciousand organizations must be more in tune with and re-sponsive to customer needs in order to offer good valuefor money. Paradoxically, marketing seems to requiremore resources precisely at times when the organi-zation is short of resources because of weak businessconditions. As one academician noted:

    I think in weak economies, on the one hand [there isa] need to be more marketing oriented [because] con-sumers might need better inducements, their dollarhas to go farther. On the other hand, to be marketingoriented requires greater amounts of money that theymay not be able to provide at that point.

    The preceding observations suggest the followingproposition.

    P,,: The weaker the general econom y, the stronger the re-lationship between a market orientation and businessperformance.

    Our 19 research propositions fit the broad frame-work depicted in Figure 1. Note that the moderatorvariables discussed are labeled supply-side and de-mand-side moderators. The latter relate to the natureof demand in an industry (e.g., customer preferences,value consciousness) whereas the former refer to thenature of competition among suppliers and the tech-nology they employ. The framework in Figure 1 fa-cilitates parsimonious conceptualization and, moreimportantly, offers the potential for extending re-search by identifying additional constructs that mayfit into each of the broad categories (senior manage-ment factors, interdepartmental dynamics, etc.).

    Managerial ImplicationsOur propositions have direct managerial im plications.First, our research suggests that a market orientationmay or may not be very desirable for a business, de-pending on the nature of its supply- and demand-sidefactors. Second, the research clearly delineates thefactors that can be expected to foster or discourage amarket orientation. These factors are largely control-lable by managers and therefore can be altered by themto improve the market orientation of their organiza-

    tions. Overall, our research gives managers a comprehensive view of what a market orientation is, wayto attain it, and its likely consequences.

    To e or Not To e Market OrientedOur study suggests that though a market orientatiois likely to be related to business performance in gen

    eral, under certain conditions it may not be criticaA market orientation requires the commitment of resources. The orientation is useful only if the benefitit affords exceed the cost of those resources. Henceunder conditions of limited competition, stable markpreferences, technologically turbulent industries, anbooming economies, a market orientation may not brelated strongly to business performance. Managers obusinesses operating under these conditions should paclose attention to the cost-benefit ratio of a markeorientation.

    Implementing a Market OrientationOur research provides very specific suggestions abothe factors that foster or discourage a market orientation in organizations. Because the factors identifieare controllable by senior managers, deliberate engendering of a market orientation is possible.

    For example, our findings suggest that seniomanagers must themselves be convinced of the valuof a market orientation and communic te their com-mitment to junior em ployees. T hough annual reporand public interviews proclaiming a market orienttion are helpful, junior employees need to witness bhaviors and resource allocations that reflect a commitment to a market orientation. Senior managers mudevelop positive attitudes toward change and a wilingness to take calculated risks. A market orientatiois almost certain to lead to a few projects or programthat do not succeed. However, supportive reaction failures is critical for engendering a change-orientephilosophy represented by the marketing concept.

    We also identify interdepartmental dynamics thacan be managed through appropriate in-house effortInterdepartmental variablesconflict, connectednessclearly have a key role in influencing the disemination of and responsiveness to market intellgence. Some inexpensive ways to manage these twantecedents (conflict, connectedness) include (1) iterdepartmental lunches, (2) sports leagues that rquire mixed-department teams, and (3) newsletters th poke fun at various interdepartmental relations. Moadvanced efforts include (1) exchange of employeacross departments, (2) cross-department training prgrams, and (3) senior department managers spendina day with executives in other departments. Such eforts appear to foster an understanding of the persoalities of managers in other departments, their culturand their particular perspectives.

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    The third set of variables that senior managers mightalter to foster a market orientation pertains to orga-nizationwide systems. The impact of structural factorssuch as formalization and centralization is unclear be-cause, though they appear to inhibit the generation anddissemination of market intelligence, these very fac-tors are likely to help an organization implement its

    response to market intelligence effectively. How anorganization should structure itself appears to dependon the activity involved. Clearly, however, seniormanagers can help foster a market orientation bychanging reward systems from being completely fi-nance based (e.g., sales, profits) to being at least partlymarket based (e. g., cu stomer satisfaction, intelligenceobtained). Simultaneously, informal norms such as theacceptability of political behavior in the organizationshould be changed to facilitate concerted response bythe departments to market developments.

    The Pace and Dynamics of hangeA change in orientation takes place slowly. We wereapprised of certain organizations that were actively in-volved in becoming more market oriented, but plannedto complete the change process over a period of aboutfour years. In describing a change to a market focus,an executive director noted that there is always a pulland tug between a new idea and old ways of doingthin gs. It appears especially difficult to carry em-ployees who are concerned that a movement along themarket orientation dimension might jeopardize their

    power in the organization or expose other inadequa-cies related to their jobs.Further, the balance of power across departments

    must be managed carefully in any effort to becomemore market oriented. Though a market orientationinvolves the efforts of virtually all departments in anorganization, the marketing department typically hasa larger role by virtue of its contact with customersand the market. Individuals in marketing departmentsmay try to relegate other departments to a secondarystatus. One health care administrator recounted thatwhen the organization had begun to emphasize a mar-ket philosophy, it had started treating marketing per-sonnel as tile blue-eyed bo ys of the organ ization.Within a very short time, personnel in other depart-ments began to resent this treatment and raised ques-tions with the chief executive ( What are you doingfor us? ).

    For any change to take place, an organization firstmust perceive a gap between its current and its pre-ferred orientation. We were apprised of several in-stances in which members of an organization felt theywere very customer oriented, but in fact were hardly

    so. An executive narrated the exam ple of a serviceorganization's employees who felt they were very re-

    sponsive to customer needs. However, when thteractions of these employees with customers pital patients) were videotaped and played back temployees, they were horrified at the callous main which they saw themselves treating customersWeick (1979) notes, it is the perceptions of situathat are the triggers of action.

    The Qu ality of arket Orientation

    Though in general organizations that develop mintelligence and respond to it are likely to perform band have more satisfied customers and employeesones that do not, simply engaging in market-orieactivities does not ensure the qu lity of those actties. The quality of market intelligence itself masuspect or the quality of execution of marketinggrams designed in response to the intelligence mapoor. In such instances, a market orientation mayproduce the desired functional consequences. Foample, to meet a customer's needs, one indusproducts company went to extreme lengths to cusize small batches of products for the customer, wresulted in poor financial performance. Similarlyexecutive noted that a company's efforts may so customer expectations about product quality, resptime, and other factors as to result in eidier unnomical operations or dissatisfied customers. Thificulty parallels the problem posed by overpromin service settings discussed by Zeithaml, BerryParasuraman (1988). Though we do not addres

    issue of variations in the quality of market ingence, its dissemination, and organizational respthese variations clearly are important and warrantsideration by both managers and researchers.

    ConclusionWe attempt to clarify the domain of the marketentation construct and provide a working definand a foundation for developing a measure of thestruct. Additionally, we identify three classes oftors affecting a market orientation and interrelaships among the elements of market orientationhighlight the impact of a market orientation on aganization's strategy, emp loyee dispositions, andtomer attitudes and behavior. Finally, and in anificant departure from previous work, we introsupply- and demand-side factors as potential mators of the impact of market orientation on busperformance.

    Our propositional inventory and integrative frwork represent efforts to build a foundation fosystematic development of a theory of market o

    tation. However, the objective of our research isory construction rather than theory testing. Much

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    emains to be done in terms of developing a suitablemeasure of market orientation and empirically testing

    ur propositions.In recent years, considerable interest has focused

    n organizational resources and positions that repre-ent sustainable competitive advantages (e.g., Day and

    Wensley 1988). Much less attention has focused oorganizational processes such as market orientationthat represent a long-term advantage. Because a maket orientation is not easily engendered, it may bconsidered an additional and distinct form of sustainable competitive advantage.

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