Content uploaded by Halit Keskin
Author content
All content in this area was uploaded by Halit Keskin on Jul 13, 2016
Content may be subject to copyright.
Market orientation, learning
orientation, and innovation
capabilities in SMEs
An extended model
Halit Keskin
Science and Technology Studies, Gebze Institute of Technology, Gebze, Turkey
Abstract
Purpose – The purpose of this paper is to examine the nomological relations among
market-orientation, learning-orientation and innovativeness in medium-sized business (SMEs) of
developing countries.
Design/methodology/approach – The study involves a questionnaire-based survey of managers
from small-sized-firms operating in Turkey. A total of 157 usable questionnaires were received from
managers. These were subjected to a structural equation modeling (SEM) analysis.
Findings – The results show that firm innovativeness positively affects firm performance; firm
learning-orientation positively influences firm innovativeness; firm market-orientation positively
impacts firm learning orientation; firm learning-orientation mediates the relationship between firm
market-orientation and firm innovativeness; and firm market-orientation indirectly impacts firm
performance via firm innovativeness and learning.
Practical implications – This study has implications for SEMs aiming at increasing their
performance and innovativeness.
Originality/value – The interrelationships among a firm’s market-orientation, learning-orientation,
and innovativeness are an important research area for investigators in the literature of management,
strategy, and marketing. However, most of the empirical studies were conducted in large-scale
firms in developed countries and ignored small and medium-sized business (SMEs) in general,
and in developing countries in particular. The results offer both theoretical and managerial
implications.
Keywords Market orientation, Learning, Learning organizations, Innovation,
Small to medium-sized enterprises, Turkey
Paper type Research paper
Introduction
Innovation is the name of the game for competition in the twenty-first century.
Increased competition, ceaseless turbulence, change, and uncertainty have forced
organizations to embrace innovation as an integral part of their corporate strategy.
In this sense, how organizations enhance their innovativeness has long been a research
question for scholars and practitioners. Even though extensive research has been
conducted to address this issue, students of organizational behavior and marketing in
general, and organizational learning in particular, have pointed out the direct influence
of market- and learning-orientation on firm innovativeness (Farrell and Oczkowski,
2002; Sinkula and Baker, 1999; Slater and Narver, 1995). Studies indicated that
market-orientation, learning-orientation, and innovativeness are highly correlated and
have overlaps based on their definitions and practices (Calantone et al., 2002; Hurley
and Hult, 1998). In particular, definitions of innovation from Thompson (1965),
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1460-1060.htm
EJIM
9,4
396
European Journal of Innovation
Management
Vol. 9 No. 4, 2006
pp. 396-417
qEmerald Group Publishing Limited
1460-1060
DOI 10.1108/14601060610707849
Damanpour (1991), and Amabile et al. (1996) converge with the ontology of
market-orientation and learning-orientation as indicated by Hurley and Hult (1998).
Accordingly, there exists both empirical and theoretical studies investigating the linear
or causal relationships among the market-orientation, learning-orientation,
innovativeness, and, thereby, their combined impact on firm performance.
Nevertheless, most of the empirical studies focused on the large-scale organizations
in western/developed countries, while ignoring the SMEs in general, and SMEs in
developing countries in particular. Specifically, studying the SMEs in developing
countries contributes to the literature for three reasons:
(1) The majority of the market-orientation and learning-orientation studies
were conducted in developed western countries, e.g. USA, UK, using the
measure scales of Narver and Slater (1990), Kohli et al. (1993), Ruekert (1992),
Calantone et al. (2002), and others. However, replication of the market-orientatio n,
learning-orientation, and innovativeness studies is warranted, because if these
constructs are reliable and valid, they should also be applicable in different
environments and economies, such as Turkey.
(2) Market- and learning-orientation studies mostly investigated large firms having
250 or more employees. However, the applicability of market-orientation,
learning-orientation, and innovativeness measures, and their research models,
which were developed for large-scale firms, may have different meanings in a
SME context. For instance, SMEs face particular problems in the formulation of
their innovation strategies due to:
.their deficiencies arising from their limited resources and range of
technological competencies;
.influence of their owners/managers on the decision-making;
.dependence on small numbers of customers and suppliers; and
.focus on the efficiency of current operations, to name just a few (Badger et al.,
2001).
Also, market- and learning-orientation are less formal, less structured, and less
sequential in SMEs (Gibb, 1997; Peterson, 1988, Anderson and Boocock, 2002; Meziou,
1991). Specifically, organizational learning is reflected as work-place learning, which is
a lower-level learning style involving the use of existing knowledge to enhance
operation efficiency in SMEs (Badger et al., 2001; Chaston et al., 2001). For instance,
Anderson and Boocock (2002) note that self-directed, work-based, and informal
learning is dominant in small firms, as it allows increased flexibility and adaptability.
In addition, SMEs are more reluctant than larger firms to embrace the marketing
concept in their strategy formulations (Meziou, 1991). In fact, most small firms do not
conduct market research, and do not have long-term market planning (Peterson, 1988;
Meziou, 1991; Blankson and Stokes, 2002).
(3) Empirical studies on market-orientation, learning-orientation, and
innovativeness in SMEs are fragmented or incomplete. For instance, studies
exist that investigate relationships between:
Capabilities in
SMEs
397
.market-orientation and overall firm performance (Horng and Chen, 1998; Pelham,
2000), export performance (Hart and Tzokas, 1999), and financial performance
(Dolinger, 1984);
.learning-orientation and firm growth and innovativeness (Sadler-Smith et al.,
2001), and firm performance (Choueke and Armstrong, 1998); and
.firm innovativeness and performance (Aharoni, 1994).
Yet there remains a gap in empirical research investigating the relations among
the market-orientation, learning-orientation, firm innovativeness, and firm
performance as an integrated model in SMEs.
The aim of this study is, therefore, to empirically test the nomological web of
market-orientation, learning-orientation, firm innovativeness, and performance and to
enhance the literature on organizational learning and marketing in SMEs.
In the sections that follow, this study:
.explains the concept of market-orientation, learning-orientation, and firm
innovativeness;
.proposes a model of market-orientation, learning-orientation, firm
innovativeness, and performance based on prior scholarship of organizational
learning, marketing, innovation;
.tests the model in Turkish SMEs, which employ 45 percent of the country’s work
force; and
.discusses the findings of the present study, explores insights gained from it,
notes the limitations of the study, and provides suggestions for future research.
Background
Since, the seminal study of Kohli and Jaworski (1990), the term “market-orientation”
found a broad appeal in the marketing literature. The literature describes
market-orientation as a set of behaviors and processes (Kohli and Jaworski, 1990), or
an aspect of culture (Narver and Slater, 1990) to create a superior customer value. For
instance, Kohli and Jaworski (1990), by adapting a process approach, use the term
market-orientation to mean the implementation of a marketing concept via market
intelligence generation, intelligence dissemination, and responsiveness (implementing a
marketing strategy). By using a cultural framework, Slater and Narver (1995) extended
the boundary of the market-orientation concept by incorporating the development of
information about competitors, and interfunctional collaboration. Ruekert (1992),
influenced by Deshpande and Webster’s (1989) cultural framework of marketing and
adopting a strategic view, identified three components of market-orientation:
(1) obtaining and using customer information;
(2) developing a strategic plan based on such information; and
(3) implementing the plan to respond to customer needs.
Accordingly, market-orientation is a cognitive, behavioral, and cultural aspect of a
firm’s marketing concept that puts the customer at the center of the organization and
its development (Deshpande and Webster, 1989). However, empirical studies on the
effect of market-orientation on superior performance revealed inconsistent results
EJIM
9,4
398
(Han et al., 1998). For instance, Narver and Slater (1990) and Ruekert (1992) found a
positive relationship, Hart and Diamantopoulos (1993) found no relationship, and Kohli
and Jaworski (1993) found mixed results. Accordingly, scholars attempted to identify
the mechanisms or factors that transform market-orientation behavior into firm
performance in their theoretical and empirical models (Han et al., 1998).
One of the most studied factors, which has synergy with market-orientation, is
learning-orientation. Many researchers (e.g. Slater and Narver, 1995; Baker and Sinkula,
1999; Farrell, 2000), for instance, argued that market-orientation only enhances
performance when it is combined with a learning-orientation. According to Baker and
Sinkula (1999, p. 412), learning-orientation “...is a mechanism that directly affects a firm’s
ability to challenge old assumptions about market and how a firm should beorganized to
address it.” Specifically, since market-oriented firms focus on customers and their
feedback in the established markets, they ignore the emerging markets, technologies, and
competitors. However, learning-orientation, embracing the commitment to learning,
shared vision, open-mindedness and interorganizational knowledge sharing, fosters a set
of knowledge-questioning and knowledge-enhancing values that leverage the adaptive
behaviors provided by market-orientation to a higher-order learning that leads to the
development of breakthrough products, services, and technologies, and the exploration of
new markets (Farrell, 2000; Slater and Narver, 1995).
In addition, to learning-orientation, another mechanism emphasized by the
management and marketing scholars is firm innovativeness, which refers to that
portion of a firm’s culture that promotes and supports novel ideas, experimentation,
and openness to new ideas (Calantone et al., 2002). For instance, Slater and Narver
(1995) propose innovation as one of the core-value creating capabilities that drives the
market-orientation and performance relationship. Kohli and Jaworski (1993) note that
market-orientation provides something new or different in response to market
conditions, which can be seen as a form of innovative behavior. Also, by investigating
134 banks, Han et al. (1998) found that innovativeness mediated the relationship
between market-orientation and performance.
In short, scholars in general management and marketing literature support the
interrelated relationships among market-orientation, learning-orientation, firm
innovativeness, and their combined impact on firm performance in large firms.
However, we know surprisingly little about the interrelationships among
market-orientation, learning-orientation, innovativeness, and firm performance in
SMEs. In particular, a systematic or holistic investigation of market-orientation,
learning-orientation, innovativeness, and firm performance is required if SME managers
and scholars are to uncover the nomological web of marketing, learning, innovation, and
improved firm performance. To address this deficiency, the present study extends the
model of Calantone et al. (2002) which addressed the role of learning-orientation in firm
innovativeness and firm performance. By using 187 US firms, the authors found that
learning-orientation has a positive influence on firm innovativeness and performance;
further, that firm innovativeness has a positive impact on firm performance. However,
Calantone et al. (2002, p. 523) noted that their study was limited, and that, “...the general
outline can be applied to other types of activities, such as marketing, and their linkage
with organizational learning.” They also suggested the applicability of the learning and
innovation constructs to other cultures and industries. In this vein, this study adapted
the model of Calantone et al. (2002) by incorporating the market-orientation as a skeleton
Capabilities in
SMEs
399
for a model of market-orientation, learning-orientation, innovativeness, and firm
performance in an SME context.
Research hypotheses
The purpose of this section is to explain the interactions of market and
learning-orientation, innovation and firm performance in the context of a SME.
Since, it is difficult to explain the interwoven relationships coherently in a holistic
model, a backward hypothesis development method was used. Specifically:
.which factors impact firm performance;
.how market-orientation and learning-orientation affect firm innovativeness; and
.how market-orientation and learning-orientation are related was discussed in
sequence.
The impact of market-orientation on firm performance has been investigated for over a
decade in SME literature. Studies by Peterson (1989), Meziou (1991), Pelham and
Wilson (1996), Horng and Chen (1998), especially, addressed the direct influence of
market-orientation on firm performance and competitive advantage. According to
Pelham (1997), a market-oriented firm, which has excellent market information
gathering and processing abilities, is able to predict the requirements and changes in
markets accurately and quickly, allowing them to respond quickly and appropriately.
Thereby, they enhance their competitive advantage. In this regard, it has been asserted
by scholars in the SME literature that market-orientation provides small firms with a
potential competitive advantage over large firms, because SMEs:
.are closer to customers and able to exploit their needs and wants quickly and
more flexibly;
.are able to transfer customer intelligence quickly, with less deterioration, due to
their reduced organizational layers and bureaucracy; and
.can implement the marketing plan fast, because it is less formal.
Therefore, considering that SMEs may lack a long-range focus and strategic
orientation that their customer orientation in general and market-orientation in
particular are critical determinants of performance (Appiah-Adu and Singh, 1998), and
consistent with SME literature, it is hypothesized that:
H1. Market-Orientation will positively lead to firm performance in SMEs.
Another well-known factor that impacts firm performance is firm innovativeness.
The positive role of firm innovativeness on firm performance has been supported by
many theoretical and empirical studies of new product developments, technology
adoption and diffusion, process improvement, and innovation (Calantone et al., 2002).
Of particular importance to an SME’s innovativeness is the reflection of the
environmental uncertainty and the lack of technology competencies for new product
development, cost effectiveness, operational efficiency, emerging market niches, and
process innovation (Appiah-Adu and Singh, 1998). For instance, studies note that
SMEs (Keizer et al., 2002; Motwani et al., 1999) should be innovative to get a
competitive advantage due to their limited resources, vulnerability to uncertainty,
turbulence in business environments, and the extensive powers of customers and
EJIM
9,4
400
suppliers. Indeed, SMEs that follow a proactive business strategy foster
innovativeness as a central part of corporate culture. SMEs can achieve leadership
positions by applying aggressive innovation strategies in niche industries. High-tech
SMEs, e.g. electronics, software, and biotechnology, for instance, demonstrate
improved performance by generating new markets and industries due to their
innovativeness (Romijn and Albaladejo, 2002).
Because innovativeness has long been associated with entrepreneurial behavior,
and theoretically linked to a high tolerance for ambiguity, taking risk, and evaluating
uncertain situations more favorably, it is therefore hypothesized that:
H2. Firm innovativeness will positively lead to firm performance in SMEs.
Noting the importance of innovativeness for firm performance, it is also important to
mention the mechanisms that promote the firm innovativeness in order to investigate
the relations in a holistic way. In their model, Calantone et al. (2002) demonstrated the
direct impact of learning-orientation on firm innovativeness. According to Calantone
et al. (2002), learning orientation influences firm innovativeness in three ways:
(1) since learning occurs through organizational observation and interaction with
their environments, it is more likely to be committed to innovation;
(2) since learning organizations are linked with their environment, it has the
knowledge and ability to understand and anticipate customer needs and
emerging markets; and
(3) since organizations closely monitor the competitors’ actions in the market, their
strengths and weaknesses, and successes and failures, that environmental
scanning contributes to firm innovativeness.
However, much of the theory on learning-orientation and firm innovativeness is based
on empirical studies completed on large-based firms rather than SMEs. In this sense,
there is a gap in the empirical investigation of learning-orientation and firm
innovativeness in SME literature (Badger et al., 2001).
Organizational learning studies in SMEs, for instance, note that learning in small
firms is context sensitive, firm-specific, and work-based, which is, by nature, reactive
and produces operational efficiency in the short-run – indicating adaptive rather than
innovative behavior (Badger et al., 2001). However, as indicated by cognitive
psychology, exploitation of each bit of information and then utilizing such information
in the workplace to advance new operational practices, in essence, develops new
schemata or thinking ways, and knowledge for employees (Hurley and Hult, 1998).
Consequently, people become more adaptive to different views, procedures, and ideas,
and become proactive to enhance the quality of workplace and the operations of firms
and customer satisfaction (Chaston et al., 2001; Anderson and Boocock, 2002; Matlay,
2000). Therefore, it is hypothesized that:
H3. Learning-Orientation will positively lead to firm innovativeness in SMEs.
Even though market-orientation and learning-orientation are antecedents of innovation
(Hurley and Hult, 1998), the effect of market-orientation on firm innovativeness is
mediated by learning-orientation. Specifically, market-orientation fosters a
knowledge-producing behavior – providing a source of ideas for change and
Capabilities in
SMEs
401
improvement by market information processing and marketing strategies. However, the
knowledge generated by market-orientation has little benefit if not appreciated and
implemented for firm innovation. For instance, Baker and Sinkula (1999) argue that
market-orientation, representing the degree to which firms acquire, distribute, and use the
market information, is an input for the innovation process. Nevertheless,
learning-orientation, reflecting the degree to which firms are committed to challenge
beliefs and practices, defines the innovation process itself. Also, since market-orientation
breeds the rigidity and stickiness of the existing customer intelligence and plans, it may
also hinder firm innovativeness, as indicated by organizational unlearning studies
(Sinkula, 2002). In this regard, learning-orientation lays a foundation for a desire to
assimilatenew ideas, and leverages customer intelligence for firm innovativeness (Hurley
and Hult, 1998; Celuch et al., 2002). For example, Farrell (2000) investigated 200
organizations in Australia and found that market-orientation is related positively to a
learning-orientation and that a learning-orientation has a stronger significant effect on
business performance than does market-orientation. Also, by investigating 304
state-owned enterprises in China, Liu et al. (2002) found that learning-orientation
mediates market-orientation and short-term outcomes – i.e. marketing program
dynamism refers to the frequency with which an organization changes its mix of
products/brands, sales, and promotion strategy. Therefore, in a SME context:
H4. Market-Orientation will positively lead to firm innovativeness via
Learning-Orientation (Learning-Orientation will mediate the relationship
between Market-Orientation and firm innovativeness) in SMEs.
Even if there is a common agreement about the relationship among learning-orientation,
market-orientation, and innovativeness (e.g. learning-orientation !firm innovativeness),
there is no clear agreement about the direction of the relationship between
learning-orientation and market-orientation. For instance, Sinkula et al. (1997)
demonstrated the impact of learning-orientation on market-orientation, whereas Slater
and Narver addressed the influence of market-orientation on learning-orientation.
However, it is important to note that studies promoting the relationship of
learning-orientation !market-orientation, essentially investigated the market
information processing rather than market-orientation. In fact, Farrell and Oczkowski
(2002) found that by investigating 340 organizations, market-orientation is able to
encompass learning-orientation, but learning-orientation is not able to encompass
market-orientation. Also, Dickson (1996) notes that market-orientation describes a set of
processes that enables the firm to learn. Further, Farrell (2000, p. 208) states that:
Market-orientation firms are effective in producing knowledge and this culture of knowledge
production, inevitably leads to knowledge-questioning values. In short, organizations that are
able to appreciate the value of timely and relevant information (market-orientation), will also
be intelligent enough to challenge existing assumptions about the way the market operates
(learning-orientation).
The relationship between market-orientation and learning-orientation has also been
investigated in SME literature. For instance, by studying 106 SMEs, Chaston et al.
(1999) found a positive correlation between market-orientation and
learning-orientation. However, they did not specify the direction of the relationship –
causality. Since, small firms are closer to their customers, they are able to generate new
knowledge and exploit the existing knowledge effectively. Specifically, they develop
EJIM
9,4
402
intelligence about customers, from which they develop a set of knowledge-questioning
values that promote innovative products, processes, and services. In fact, market
intelligence generation constantly improves and updates organization – wide learning
values and skills. Consistent with the work of Slater and Narver (1995, p. 67), since
“...a market orientation is inherently a learning orientation ...,” in the context of an
SME, it is, therefore, hypothesized that:
H5. Market-orientation will positively lead to learning-orientation in SMEs.
Research method
Sampling
To test the above hypotheses, multi-item scales were adopted from previous studies for
the measurement of the constructs. All constructs were measured using 7-point Likert
scales ranging from “strongly disagree” (1) to “strongly agree” (7). By using the
parallel-translation method, items were first translated into Turkish by one person and
then retranslated into English by a second person. The two translators then jointly
reconciled all differences. The suitability of the Turkish version of the questionnaires
was then pre-tested by eight part-time graduate students working in industry. After
refining the questionnaire, based on interviews with the pre-test subjects, the
questionnaires were distributed and collected by one of the authors, applying a
“personally administrated questionnaire” method. The unit of analysis is the firm, with
the managing director as the key informant. Firms, with less than 250 employees were
selected as SMEs, as defined by the Ministry of Commerce and Trade and the Istanbul
Chamber of Industry. The initial sample consisted of 300 firms in the industrial zone,
near Istanbul, Turkey. Data were gathered from 157 firms (a 52 percent response rate).
Several industries were represented, including manufacturing (21 percent),
construction (15 percent), materials (10 percent), textile (10 percent), food (9 percent),
chemical (8 percent), service (8 percent), transportation (6 percent), electronics (5 percent),
software (4 percent), and utility (4 percent). Twenty-seven percent of the firms had less
than 50 employees and 73 percent of the firms had between 50 and 250 employees.
Measures
Market-orientation. There have been empirical measurements of market-orientation
developed bya number of scholars from both the perspective of the organizational culture
(MKTOR scales of Narver and Slater, 1990), and by using a set of processes and activities
(MARKOR scales of Kohli et al., 1993).However, as Hunt and Morgan (1995, p. 1) point out:
Market-orientation should be conceptualized as i-) systematic gathering of information on
customers and competitors (both present and potential), ii-) the systematic analysis of the
information for the purpose of developing market knowledge, iii-) the systematic use of such
knowledge to guide strategy, recognition, understanding, creation, selection, implementation
and modification.
Therefore, in applying the market-orientation concept to SMEs, the authors drew upon
the elements of Ruekert (1992)[1], viewing market-orientation as cultural and behavioral
processes and the activities associated with creating and satisfying customers by
continually assessing their needs and wants to increase business performance.
Learning-orientation. Learning-orientation scales were adapted from Calantone et al.
(2002). According to Calantone et al. (2002), learning-orientation refers to the
Capabilities in
SMEs
403
organization-wide activity of creating and using knowledge to enhance competitive
advantage, including four components (a second-order factor):
(1) commitment to learning; the degree to which an organization values that which
promotes a learning culture;
(2) shared vision; an organization-wide focus on learning, or direction of learning;
(3) open-mindedness; willingness to critically evaluate the organization’s
operational routine and to accept new ideas; and
(4) intraorganizational knowledge sharing; collective beliefs or behavioral routines
related to the spread of learning among different units within the organization.
Firm innovativeness. Firm innovativeness scales were adapted from Calantone et al.
(2002). Calantone et al. (2002) defined firm innovativeness as openness to new ideas as
an aspect of a firm’s culture by a willingness to try out new ideas, seek out new ways to
do things, be creative in its methods of operation and rate of product introduction.
Firm performance. Firm performance scales were adapted from Calantone et al.
(2002) and Choi and Lee (2003). Because the present study used a multi-company and
multi-industry sample, an attempt was made to control for performance differences in
the nature of firms by using relative performance measures, such as market share,
growth rate, and profitability.
Measure validity and reliability
After data collection, measures were subjected to a purification process to assess their
reliability, unidimensionality, and discriminant and convergent validity (Anderson
and Gerbing, 1988; Fornell and Larcker, 1981).
First, to asses the unidimensionality, measures were divided into three subsets of
theoretically related variables: three dimensions of market-orientation (i.e. collection and
use of market information, development of market-oriented strategy, and implementation
of market-oriented strategy), four dimensions of learning-orientation (i.e. commitment to
learning, shared vision, open-mindedness, and intraorganizational knowledge sharing),
and two outcomemeasures (i.e. firm innovativeness and performance) as recommended by
Bentler and Cho (1988). Tables I-III indicate that three models fit well.
To assess discriminant validity, a series of two-factor models, as recommended by
Bagozzi et al. (1991), were estimated. In this estimation, individual factor correlations,
considered individually, were restricted to unity. The fit of the restricted models was
compared with that of the original model.
x
2
change (D
x
2
) in all models, constrained
and unconstrained, were significant ( p,0.05), confirming that the constructs
demonstrated discriminant validity.
Following Calantone et al. (2002), learning-orientation was operationalized as a
second-order construct with four dimensions. Table I denotes thatthe factor loadings from
the measurement to the corresponding first-order constructs (part A), and factor loadings
from first-order factors to the second-order factors (part B) are significant, providing
evidence of convergent validity. In addition, results of second-order CFA suggest that the
hypothesized model fits the data well, yielding acceptable fit indices (x2
ð86Þ¼241:13;
comparative fit index (CFI) ¼0.90; incremental fit index (IFI) ¼0.90; RMSEA ¼0.10).
Hence, the second-order factor model was used to demonstrate a composite
learning-orientation.
EJIM
9,4
404
Standardized first-order loadings
Construct Indicator (parameter)
Standardized
loadings
Commitment to learning Managers basically agree that our organization’s ability to learn is the key to our competitive advantage 0.76
a
The basic values of this organization include learning as key to improvement 0.74 (9.3)
b
The sense around here is that employee learning is an investment, not an expense 0.86 (11.04)
Learning in my organization is seen as a key commodity necessary to guarantee organizational survival 0.84 (10.75)
Shared vision There is a commonality of purpose in my organization 0.67
a
There is a total agreement on our organizational vision across all levels, functions, and divisions 0.79 (8.88)
All employees are committed to the goals of this organization 0.92 (9.94)
Employees view themselves as partners in charting the direction of the organization 0.89 (9.71)
Open-mindedness We are not afraid to reflect critically on the shared assumptions we have made about our customers 0.54
a
Personnel in this enterprise realize that the very way they perceive the marketplace must be continually
questioned 0.70 (6.00)
We continually judge the quality of our decisions and activities taken over time 0.74(6.15)
Intraorganizational
knowledge sharing There is a good deal of organization conversation that keeps alive the lessons learned from history 0.79
a
We always analyze unsuccessful organizational endeavors and communicate the lessons learned widely 0.83 (10.79)
We have specific mechanisms for sharing lessons learned in organizational activities from department to
department (unit to unit, team to team) 0.75 (9.65)
We put little effort in sharing lessons and experiences 0.63 (7.98)
Standardized second-order loadings
First-order construct Learning-orientation
Commitment to learning 0.87
a
Shared vision 0.77 (6.60)
Open-mindedness 0.90 (5.72)
Intraorganizational
knowledge sharing 0.93 (8.05)
Notes: CFI ¼0.90; IFI ¼0.90; x2
ð86Þ¼241:13; RMSEA – 0.10;
x
2
/df ¼2.80;
a
fixed parameter;
b
tvalues from unstandardized solutions are shown in
parentheses
Table I.
Learning-orientation
second-order
measurement model
Capabilities in
SMEs
405
Standardized first-order loadings
Construct Indicator (parameter)
Standardized
loadings
Collection and use of market information Listens to opinions of customers 0.68
a
Uses customer information to improve quality of products and services 0.73 (8.08)
b
Uses customer information to develop new products and services 0.79 (8.67)
Uses market research data in segmenting markets 0.51 (5.78)
Obtains ideas from customers to improve products and services 0.77 (8.51)
Company personnel have adequate information about customers and competitors 0.55 (6.28)
Values customer input in new product/service planning 0.75 (8.31)
Development of market-oriented strategy Company values market position more than financial performance 0.56
a
Prices are determined by customer value 0.71 (5.99)
Focuses on markets in which we have competitive strength 0.51 (4.89)
Company planning around markets rather than product or services 0.76 (6.17)
Implementation of market-oriented strategy Customer needs drive the development of our pricing and credit policies 0.59
a
Customer needs drive our binds or competition for contracts or projects 0.94 (7.53)
Product and service delivery schedules and standards are based on customer needs 0.77 (7.34)
Standardized second-order loadings
First-order construct Market-orientation
Collection and use of market information 0.66 (4.38)
Development of market-oriented strategy 0.88 (5.72)
Implementation of market- oriented strategy 0.73
a
Notes: CFI ¼0.88; IFI ¼0.88; x2
ð74Þ¼187:51; RMSEA ¼0.09;
x
2
/df ¼2.53;
a
fixed parameter;
b
tvalues from unstandardized solutions are shown in
parentheses
Table II.
Market-orientation
second-order
measurement model
EJIM
9,4
406
Following the suggestions of Hunt and Morgan (1995) and Uncles (2000),
market-orientation was operationalized as a second-order construct with three
dimensions. Although the market-orientation construct has been conceptualized into
three distinctive behavioral and cultural components in the literature, the primary
emphasis has been on the combined effect of the components in actual practice. For
instance, Uncles (2000, p. V) states that:
More conversely, perhaps the search for one-dimensional and internally consistent
components within the market-orientation scales is misplaced. Should we not expect
components of market-orientation to be multifaceted and interdependent and interconnected?
Table II shows that the factor loadings from the measurement to the corresponding
first-order constructs (part A), and factor loadings from first-order factors to the
second-order factors (part B) are significant, providing evidence of convergent validity.
Also results of second-order CFA suggest that the hypothesized model fits the data
well, thus yielding adequate fit indices, which are very close to threshold level
(x2
ð74Þ¼187:51; CFI ¼0.88; IFI ¼0.88; RMSEA ¼0.09). Hence, the second-order factor
model was used to demonstrate a composite market-orientation.
The measures were subjected to further confirmatory factor analysis (CFA) using
the analysis of moment structures program (AMOS 4.0). All nine factors were included
in one CFA model. During the CFA analysis the subscales (or parcels) were used for the
confirmatory factor analysis, rather than using individual items. Such an approach
was recommended by Drasgrow and Kanfer (1985) and Schmit and Ryan (1993). These
researchers noted that goodness-of-fit measures are affected when the number of items
used to identify a small number of factors is relatively large. Consistent with this
approach, two subscores for each scale were created, each consisting of a randomly
divided subset of the items in the scale. The CFA produced a good fit with an IFI of
0.96, and a CFI of 0.95 (x2
ð99Þ¼174:10; RMSEA ¼0.07). Table IV also shows the
correlation among all nine variables. The relatively low to moderate correlations
provide further evidence of discriminant validity.
Standardized first-order loadings
Construct Indicator (parameter)
Standardized
loadings
Firm performance Overall success 0.70
a
Market share 0.89 (9.68)
b
Growth rate 0.72 (8.18)
Profitability 0.63 (7.22)
Business size 0.77 (8.72)
Firm innovativeness Our is often the first to market with new products and services 0.63
a
Our company frequently tries out new ideas 0.77 (3.69)
Our company seeks out new ways to do things 0.79 (3.70)
Our company is creative in its methods of operation 0.74 (3.67)
Our new product/service introduction has increased over last
five years 0.54 (2.29)
Notes: CFI ¼0.89; IFI ¼0.89; x2
ð34Þ¼96:53; RMSEA ¼0.10;
x
2
/df ¼2.84;
a
fixed parameter;
b
tvalues
from unstandardized solutions are shown in parentheses
Table III.
Outcome measurement
model
Capabilities in
SMEs
407
Variables 123456789
1 Firm performance –
2 Firm innovativeness 0.38 *** –
3 Commit.-to-learning 0.25 *** 0.52 *** –
4 Shared vision 0.21 *** 0.46 *** 0.65 *** –
5 Open-mindedness 0.34 *** 0.41 *** 0.59 *** 0.52 *** –
6 IntraOrg know. share 0.20 ** 0.48 *** 0.68 *** 0.63 *** 0.64 *** –
7 Coll & use of Mark. Inf 0.24 *** 0.40 *** 0.56 *** 0.41 *** 0.61 *** 0.59 *** –
8 Dev Mar.-Orien. Str 0.07 0.20 ** 0.34 *** 0.21 ** 0.34 *** 0.36 *** 0.49 *** –
9 Imp. Mar.-Orien. Str 0.17 ** 0.21 ** 0.32 *** 0.22 *** 0.21 *** 0.17 ** 0.42 *** 0.55 *** –
Mean 5.28 5.54 5.82 5.77 5.71 5.71 5.78 5.24 5.65
Standard deviation 1.13 1.07 1.04 1.06 0.96 1.04 0.91 1.12 1.14
Cronbach’s
a
0.86 0.68 0.87 0.88 0.71 0.83 0.85 0.73 0.78
Notes: *p,0.1; **
p,0.05; ***
p,0.01
Table IV.
Descriptive scales and
construct correlations,
and reliability estimates
EJIM
9,4
408
Analysis and results
Structural equation modeling (SEM) was performed using the maximum likelihood
method to test the hypotheses. This procedure permitted an assessment of the integrity of
the measures, as well as an evaluation of the degree to which the observed relations among
variables fitted the hypothesized network of causal relationships, as shown in Figure 1.
The model included two latent variables – learning-orientation and market-orientation,
and two observed variables – firm innovativeness and performance.
Figure 1 shows the results. It shows that the conceptual model adequately fits the
data. The IFI, goodness fit index (GFI), and CFI were equal or beyond 0.9, as suggested
by Hatcher (1994). The ratio (
x
2
/df) – the chi-squares per degrees of freedom, is 3.05,
which is less than five, suggesting a reasonable fit. However, RMSEA is 0.11, beyond
the suggested level of 0.05 or less, indicating a relatively poor fit, according to Browne
and Cudeck (1993). This score is due to a small sample size (N¼157)[2], because
RMSEA is appropriate to more confirmatory and large sample situations (see Rigdon,
1996 for comparison of CFI and RMSEA for SEM).
The findings illustrate that market-orientation has no direct influence on firm
performance, declining to support H
1
. Especially, it was not found that there was a direct
impact of collection and use of market information, development of market-oriented
strategy, and implementation of market-oriented strategy on firm financial, market and
business performance. However, this does not mean that market-orientation is not
important for firm performance. Essentially, market-orientation has an indirect effect on
firm performance via learning-orientation and firm innovativeness, as discussed later.
The results demonstrate that firm innovativeness has a positive impact on firm
performance in SMEs. Specifically, when firms frequently try new ideas, seek out new
ways to do things, develop new product/services, and try to be creative in their
methods of operations, they become more profitable, get higher market share, and
growth rate, supporting H
2
.
Figure 1.
Results
Capabilities in
SMEs
409
Consistent with H
3
, learning-orientation has a positive influence on firm
innovativeness. It was found that a set of knowledge-questioning values via
open-mindedness, shared vision, commitment, and knowledge sharing, facilitate firms
to try out new ideas, seeks out new ways to do things, develop and launch new
products/services, and be creative in its methods of operations. In fact:
.fostering organization-wide beliefs and values that learning is key to
improvement and competitive advantage;
.embracing a totally agreed upon organizational vision across all levels by
employees;
.continually judging the quality of decisions and activities taken and perceptions
about marketplace; and
.having mechanisms for sharing lessons learned in organizational activities from
department to department (unit to unit, team to team) is imperative for
innovativeness in SMEs.
The results indicate that learning-orientation mediates the relationship between
market-orientation and firm innovativeness, supporting H
4
. The direct path between
market-orientation and firm innovativeness was not significant, however, the paths
between learning-orientation and firm innovativeness, and market-orientation and
learning-orientation were significant, demonstrating the effect of market-orientation on
firm innovativeness via learning-orientation. This finding demonstrates that generating
customer information and knowledge, and developing and then implementing a
marketing plan, and having a willingness to challenge assumptions, values, and beliefs
positively impacts firm innovativeness (i.e. trying out new ideas, seeking out new ways
to do things, developing and launching new product/services, and being creative).
Supporting H
5
, market-orientation has a positive impact on learning-orientation in
SMEs. Especially, collecting and using market information, developing, and then
implementing a market-oriented strategy positively affect firm commitment to
learning, shared vision, open-mindedness, and knowledge sharing. In particular, when
firms listen to customers, put value on customer information, use customer information
to improve processes and products, and put customers into the center of their
marketing plans, they will:
.have a shared direction of learning;
.have a willingness to critically evaluate the organization’s operational routine;
.accept new ideas, beliefs, and routines; and
.develop collective beliefs or behavioral routines related to the spread of learning
among different units within the organization.
Finally, as reflected by the R
2
, this model explained the 15 percent variance in firm
performance and the 35 percent of the variance in firm innovativeness.
Discussion and implications
Most business philosophies, models, and tools are grounded and developed for
large-based firms. However, SMEs also account for significant employment,
innovation and social and economic growth in both developed and developing
EJIM
9,4
410
countries (Lin, 1998). In this sense, enhancing SME theory, practice, and methodology
is imperative for both academicians and practitioners.
In this study, the authors tested the interrelated relations among market-orientation,
learning-orientation, firm innovativeness, and performance in SMEs of a developing
country, Turkey. The findings revealed that the market-orientation, learning-orientation,
and firm innovativeness scales developed in Western culture seem to begeneralized to an
emerging economy and a near-eastern culture, Turkey. Specifically, measures
demonstrated high validity and reliability, and model results were consistent with the
empirical studies completed in developed and western countries.
In addition, this study indicates the importance of learning-orientation for firm
market-orientation in a SME context. It was found that learning-orientation translates
marketing attitudes into effective behavior to facilitate innovation. Especially, firms
operationalize their market-orientation behavior and discard limiting beliefs and
assumptions about existing markets with learning-orientation, because
market-orientation in SMEs, driven by the feedbacks of customers, is a mechanistic
and narrow form of innovation – providing an operational efficiency by itself.
Accordingly, firms move from adaptive learning that is reflected in cost and
operational efficiency to a higher-order learning indicating radical innovations and the
exploration of new markets and technology via learning-orientation. In this sense,
learning-orientation is an eminent strategy to develop the full potential of
market-orientation for SMEs so they can cope with globalization and the increased
rate of competition, and changing markets and technologies. Interestingly, the
conventional wisdom on “learning” in SMEs is dominated by workplace and action
learning styles. In essence, learning is individual rather than organizational in most
SMEs (Matlay, 2000; Chaston et al., 2001). However, learning-orientation, which fosters
the collective/organizational learning, is an organizational level phenomenon.
Employee and management “learning” by education (training and seminars) is
needed but not sufficient for firm innovativeness. Aggregating and disseminating
employees’ and management’s learning throughout the organization, meshed with
social and environmental factors, in essence, facilitates the development of a learning
organization, which has the ability to:
.improve and use technology effectively;
.create a more labor efficient organizational structure;
.generate new markets; and
.become more competitive (Baker and Sinkula, 1999).
Accordingly, managers should leverage employee learning to a higher-level or gestalt,
and advance knowledge management for organizational learning in SMEs.
Even though learning-orientation is imperative for firm innovativeness and
performance, the indirect effect of market-orientation should not be ignored. In this
study, it was found that market-orientation is the antecedent of a learning-orientation
in SMEs. Consistent with the literature on large-based firms, market-orientation
provides an input for firm innovativeness and performance via learning-orientation.
In this sense, collecting and using customer information, developing and then
implementing marketing plans, guides the learning and innovation of SMEs.
Specifically, since market-orientation highlights the external focus on developing
Capabilities in
SMEs
411
information about costumers and competitors, firms can anticipate the needs of its
customers, develop new knowledge, challenge the assumptions and values, and learn.
In fact, market-oriented SMEs are inherently learning organizations. However, note
that market-orientation is not bounded just by having strategic marketing plans
in SMEs. Yet, from a methodological perspective, market-orientation is a
multidimensional and multiphased construct, which includes collecting and using
market information, developing a market plan, and then implementing that plan. To
some extent, each firm has a market-orientation. For instance, the SME literature
argues that most small firms do not have a strategic marketing plan due to their focus
on day-to-day operations. However, most SMEs have an implicit marketing plan that is
embedded in their operations and in the minds of their owners/managers. Also, Baker
and Sinkula (1999) noted that market-orientation is not a dichotomous resource – it
exists along a continuum. In this sense, managers in SMEs should highlight the
marketing philosophy more explicitly to employees to enhance organizational learning
and firm innovativeness.
Limitations and future research
There are some methodological and theoretical limitations in this study. Foremost
among these is the fact that the study used single sourcing and self- and retrospective
reporting. Because the key informants in firms, managing directors, who are most
knowledgeable about the firm’s operations, were used, key informant bias was not
expected as a major limitation in this study. Nonetheless, scholars (Gupta and Beehr,
1982; Aviolo et al., 1991) have argued that studies employing single-source
methodology can be biased by artificially high intercorrelations produced by overall
response tendency. Also, since retrospective reports were used, respondents’ answers
might have been influenced by memory distortion and halo effect.
In addition, to the nature of the data, the generalizability of sampling is another
limitation of this study. This study was conducted in a specific national context,
Turkish SMEs. For instance, Turkish culture is more collectivist (less individualistic)
than most western cultures. However, it is still important to note that readers should be
cautious when generalizing the results to different cultural contexts.
This study is based on a cross-sectional sample. Since, cross-sectional design does
not help to infer causality among the constructs and inhibits common method bias, a
longitudinal study could verify, complement, and extend the findings in this study.
Finally, the sample was collected from a variety of industries. However, a
homogenous sample may provide deeper insights about the relations among
market-orientation, learning-orientation, innovativeness and performance. In this vein,
future studies may investigate specific industries in SMEs, such as manufacturing,
service or textile.
The present model also investigated market-orientation and learning-orientation as
antecedents of firm innovativeness and performance. However, entrepreneurial-orientation
can also be included into the model for future studies. Further, the present model can be
expanded by incorporating the antecedents of market-orientation identified by Kohli and
Jaworski (1993), cultural constructs, power and trust, and organizational learning related
factors, such as tacit knowledge transfers in workplaces, social knowledge networks,
human connections, and shared memory and mental-models. Finally, how an
organization’s age, type of industry, size of the firm, market and technology dynamism,
EJIM
9,4
412
managerial behavior, and/or entrepreneurial style, moderates the relations among the
market and learning-orientation, innovation and firm performance can be investigated in
future research.
Conclusion
This study contributed to the scholarship in three ways. First, it tested the combined
effect of market-orientation and learning-orientation on firm innovativeness and
performance in SMEs. The results showed that learning-orientation is eminent for firm
innovativeness and performance. At the same time, market-orientation is needed for an
effective learning-orientation in SMEs. In essence, it was found that market-orientation
is appropriated with learning-orientation for firm innovativeness and firm performance.
Second, this study was conducted in an emerging economy and near-eastern culture,
Turkey. The market-orientation, learning-orientation, and innovation measures,
developed with a western orientation, demonstrated reliability and validity in
Turkish SMEs, indicating the generalizability of these constructs from a global
perspective. Third, this study has explored new areas in SMEs including a social
knowledge network, human connections for fostering innovation, organizational
memory, culture, and trust in SMEs.
Notes
1. Since, Ruekert (1992) defines market orientation similarly with Narver and Slater (1990) and
Kohli and Jaworski (1990), but adds an explicit focus on strategic planning and
organizational strategy, we used his scales in this study.
2. Regarding sample size for SEM, the sample size is fair enough for the analysis. For instance,
Oud et al. (1999, p. 286) mention that, “To obtain valid results in SEM, a sample size of
N$400 is often mentioned. Although N$400 may be safe as a general recommendation, it
depends, however, on the model, the kind of data collected, and the purpose of the analysis
whether such a sample is necessary.” Also Monte Carlo studies of Anderson and Gerbing
(1984) and Gerbing and Anderson (1985) on effective sample size indicate that a sample size
of 150 or more typically will be needed to obtain parameter estimates that have standard
errors small enough to be of practical use. Also, composite scores of constructs were used
rather than the individual items during the analysis.
References
Aharoni, Y. (1994), “How small firms can achieve competitive advantages in an interdependent
world”, in Agmon, T. and Drobbnick, R. (Eds), Small Firms in Global Competition, Oxford
University Press, New York, NY, pp. 9-18.
Amabile, T.M., Conti, R., Coon, H., Lazenby, J. and Herron, M. (1996), “Assessing the work
environment for creativity”, Academy of Management Journal, Vol. 39, pp. 54-84.
Anderson, J.C. and Gerbing, D.W. (1984), “The effect of sampling error on convergence, improper
solutions, and goodness-of-fit indexes for maximum-likelihood confirmatory
factor-analysis”, Psychometrika, Vol. 49 No. 2, pp. 155-73.
Anderson, J.C. and Gerbing, D.W. (1988), “Structural equation modeling in practice: a review and
recommended two-step approach”, Psychological Bulletin, Vol. 103, pp. 411-23.
Anderson, V. and Boocock, G. (2002), “Small firms and internationalisation: learning to manage
and managing to learn”, Human Resource Management Journal, Vol. 12, pp. 5-24.
Capabilities in
SMEs
413
Appiah-Adu, K. and Singh, S. (1998), “Customer orientation and performance: a study of SMEs”,
Management Decision, Vol. 36, pp. 385-94.
Aviolo, B.J., Yammarino, F.J. and Bass, B.M. (1991), “Identifying common methods variance with
data collected from a single source: an unresolved sticky issue”, Journal of Management,
Vol. 17, pp. 571-87.
Badger, I.C., Mangles, T. and Sadler-Smith, E. (2001), “Organizational learning styles,
competencies and learning systems in small, UK manufacturing firms”, International
Journal of Operations & Production Management, Vol. 21, pp. 1417-32.
Bagozzi, R., Yi, Y. and Phillips, L.W. (1991), “Assessing construct validity in organizational
research”, Administrative Science Quarterly, Vol. 36, pp. 421-58.
Baker, W.E. and Sinkula, J.M. (1999), “The synergistic effect of market orientation on
organizational performance”, Journal of the Academy of Marketing Science, Vol. 27,
pp. 411-27.
Bentler, P.M. and Cho, C.P. (1988), “Practical issues in structural modeling”, in Long, J.S. (Ed.),
Common Problems/Proper Solutions: Avoiding Error in Quantitative Research, Sage,
Newbury Park, CA, pp. 161-92.
Blankson, C. and Stokes, D. (2002), “Marketing practices in the UK small business sector”,
Marketing Intelligence & Planning, Vol. 20, pp. 49-61.
Browne, M.W. and Cudeck, R. (1993), “Alternative ways of assessing model fit”, in Bollen, K.A.
and Long, J.S. (Eds), Testing Structural Equation Models, Sage, Newbury Park, CA,
pp. 136-62.
Calantone, R.J., Cavusgil, S.T. and Zhao, Y. (2002), “Learning orientation, firm innovation
capability and firm performance”, Industrial Marketing Management, Vol. 31, pp. 515-24.
Celuch, K.G., Kasouf, C.J. and Peruvembe, V. (2002), “The effects of perceived market and
learning orientation on assessed organizational capabilities”, Industrial Marketing
Management, Vol. 31, pp. 545-54.
Chaston, I., Badger, B. and Sadler-Smith, E. (1999), “Small firm organizational learning:
comparing the perceptions of need and style among UK support service advisors and
small firm managers”, Journal of European Industrial Training, Vol. 23, pp. 36-43.
Chaston, I., Badger, B. and Sadler-Smith, E. (2001), “Organizational learning: an empirical
assessment of process in small UK manufacturing firms”, Journal of Small Business
Management, Vol. 39, pp. 139-51.
Choi, B. and Lee, H. (2003), “An empirical investigation of KM styles and their effect on corporate
performance”, Information & Management, Vol. 40, pp. 403-17.
Choueke, R. and Armstrong, R. (1998), “The learning organization in small and medium-sized
enterprises”, International Journal of Entrepreneurial Behaviour and Research, Vol. 4,
pp. 129-40.
Damanpour, F. (1991), “Organizational innovation: a meta-analysis of effects of determinants and
moderators”, Academy of Management Journal, Vol. 34, pp. 555-90.
Deshpande, R. and Webster, F.E. (1989), “Organizational culture and marketing: defining the
research agenda”, Journal of Marketing, Vol. 53, pp. 3-15.
Dickson, P. (1996), “The static and dynamic mechanics of competition: a comment on Hunt and
Morgan’s comparative advantage theory”, Journal of Marketing, Vol. 60, pp. 102-6.
Dolinger, M.J. (1984), “Environmental boundary spanning and information processing effects on
organizational performance”, Academy of Management Review, Vol. 27, pp. 351-68.
Drasgow, F. and Kanfer, R. (1985), “Equivalence of psychological measurement in heterogeneous
populations”, Journal of Applied Psychology, Vol. 70, pp. 662-80.
EJIM
9,4
414
Farrell, M. (2000), “Developing a market-oriented learning organization”, Australian Journal of
Management, Vol. 25, pp. 201-22.
Farrell, M.A. and Oczkowski, E. (2002), “Are market orientation and learning orientation
necessary for superior organizational performance?”, Journal of Market Focused
Management, Vol. 5, pp. 197-217.
Fornell, C. and Larcker, D.F. (1981), “Evaluating structural equation models with unobservable
variables and measurement error”, Journal of Marketing Research, Vol. 18, pp. 39-51.
Gerbing, D.W. and Anderson, J.C. (1985), “The effects of sampling error and model
characteristics on parameter-estimation for maximum-likelihood confirmatory
factor-analysis multivariate”, Behavioral Research, Vol. 20 No. 3, pp. 255-71.
Gibb, A.A. (1997), “Small firms’ training and competitiveness: building upon the small business
as a learning organization”, International Small Business Journal, Vol. 15, pp. 13-29.
Gupta, N. and Beehr, T.A. (1982), “A test of the correspondence between self-reports and
alternative data sources about work organizations”, Journal of Vocational Behavior,
Vol. 20, pp. 1-13.
Han, J.K., Kim, N. and Srivastava, R.K. (1998), “Market orientation and organizational
performance: is innovation a missing link?”, Journal of Marketing, Vol. 62, pp. 30-45.
Hart, S. and Diamantopoulos, A. (1993), “Marketing research activity and company performance:
evidence from manufacturing industry”, European Journal of Marketing, Vol. 27 No. 5,
pp. 54-73.
Hart, S. and Tzokas, N. (1999), “The impact of marketing research activity on SME export
performance: evidence from UK”, Journal of Small Business Management, Vol. 7, pp. 63-75.
Hatcher, L.A. (1994), Step-by-Step Approach to Using the SAS System for Factor Analysis and
Structural Equation Modeling, SAS Institute Inc., Cary, NC.
Horng, S. and Chen, A.C. (1998), “Market orientation of small and medium sized firms in
Taiwan”, Journal of Small Business Management, Vol. 36, pp. 79-85.
Hunt, S.D. and Morgan, R.M. (1995), “The comparative advantage theory of competition”,
Journal of Marketing, Vol. 59 No. 2, pp. 1-16.
Hurley, F.B. and Hult, G.T.M. (1998), “Innovation, market orientation and organizational
learning: an integration and emprical examination”, Journal of Marketing, Vol. 62,
pp. 42-54.
Keizer, J.A., Dijkstra, L. and Halman, J. (2002), “Explaining innovative efforts of SMEs:
an exploratory survey among SMEs in the mechanical and electrical engineering sector in
The Netherlands”, Technovation, Vol. 22, pp. 1-13.
Kohli, A.K. and Jaworski, B.J. (1990), “Market orientation: the construct, research propositions,
and managerial implications”, Journal of Marketing, Vol. 54, pp. 1-18.
Kohli, A.K. and Jaworski, B.J. (1993), “Market orientation: antecedents and consequences”,
Journal of Marketing, Vol. 57, pp. 53-70.
Kohli, A.K., Jaworski, B.J. and Kumar, A. (1993), “MARKOR: a measure of market orientation”,
Journal of Marketing Research, Vol. 30, pp. 67-477.
Lin, C.Y. (1998), “Success factors of small and medium sized enterprises in Taiwan: an analysis of
cases”, Journal of Small Business Management, Vol. 36, pp. 43-56.
Liu, S.S., Luo, X. and Shi, Y. (2002), “Integrating customer orientation, corporate
entrepreneurship and learning orientation in organizations-in-transition: an empirical
study”, International Journal of Research in Marketing, Vol. 19, pp. 367-82.
Capabilities in
SMEs
415
Matlay, H. (2000), “Organizational learning in small learning organizations: an empirical
overview”, Education Training, Vol. 42, pp. 202-10.
Meziou, F. (1991), “Areas of strength and weakness in the adoption of the marketing concept by
small manufacturing firms”, International Small Business Journal, Vol. 29, pp. 72-8.
Motwani, J., Dandridge, T., Jiang, J. and Soderquist, K. (1999), “Managing innovation in French
small and medium sized enterprises”, International Small Business Journal, Vol. 37,
pp. 106-14.
Narver, J. and Slater, S. (1990), “The effect of a market orientation on business profitability”,
Journal of Marketing, Vol. 54, pp. 20-35.
Oud, J.H.L., Jansen, R.A.R.G. and Dominique, M.A.H. (1999), “Small samples in structural
equation state space modeling”, in Hoyle, R.H. (Ed.), Statistical Strategies for Small Sample
Research, Sage Publications, London, pp. 285-306.
Pelham, A.M. (1997), “Mediating influences on the relationship between market orientation and
profitability in small industrial firms”, Journal of Marketing Theory and Practice, Vol. 5,
pp. 55-76.
Pelham, A.M. (2000), “Market orientation and other potential influences on performance in small
and medium sized manufacturing firms”, Journal of Small Business Management, Vol. 38,
pp. 48-67.
Pelham, A.M. and Wilson, D.T. (1996), “A longitudinal study of the impact of market structure,
firm structure, strategy, and market orientation culture on dimensions of small-firm
performance”, Journal of the Academy of Marketing Science, Vol. 24, pp. 27-43.
Peterson, R.T. (1988), “An analysis of new product ideas in small business”, Journal of Small
Business Management, Vol. 26, pp. 25-31.
Peterson, R.T. (1989), “Small business adoption of the marketing concept vs other business
strategies”, Journal of Small Business Management, Vol. 27, pp. 38-46.
Rigdon, E.E. (1996), “CFI versus RMSEA: a comparison of two fit indexes for structural equation
modeling”, Structural Equation Modeling, Vol. 3, pp. 369-79.
Romijn, H. and Albaladejo, M. (2002), “Determinants of innovation capabilities in small
electronics and software firms in southeast England”, Research Policy, Vol. 31, pp. 1053-67.
Ruekert, R.W. (1992), “Developing a market orientation: an organizational strategy perspective”,
International Journal of Research in Marketing, Vol. 9, pp. 224-45.
Sadler-Smith, E., Spicer, D.V. and Chaston, I. (2001), “Learning orientation and growth in smaller
firms”, Long Range Planning, Vol. 34, pp. 139-58.
Schmit, M.J. and Ryan, A.M. (1993), “The big five in personnel selection: factor structure in
applicant and non-applicant populations”, Journal of Applied Psychology, Vol. 78,
pp. 966-74.
Sinkula, J.M. (2002), “Market-based success, organizational routines, and unlearning”, Journal of
Business & Industrial Marketing, Vol. 17, pp. 253-69.
Sinkula, J.M. and Baker, W.E. (1999), “Learning orientation, market orientation and innovation:
integrating and extending models of organizational performance”, Journal of Market
Focused Management, Vol. 4, pp. 295-308.
Sinkula, J.M., Baker, W.E. and Noordewier, T. (1997), “A framework for market-based
organizational learning: linking values, knowledge and behavior”, Journal of the Academy
of Marketing Science, Vol. 25, pp. 305-18.
Slater, F.S. and Narver, J.C. (1995), “Market orientation and the learning organization”, Journal of
Marketing, Vol. 59, pp. 63-74.
EJIM
9,4
416
Thompson, V.A. (1965), “Bureaucracy and innovation”, Administrative Science Quarterly, Vol. 5,
pp. 1-20.
Uncles, M. (2000), “Market orientation”, Australian Journal of Management, Vol. 25, pp. 1-9.
Further reading
Becherer, R.C., Halstead, D. and Haynes, P. (2003), “Marketing orientation in SMEs: effects of the
internal environment”, New England Journal of Management, Vol. 6, pp. 13-22.
Carson, W. and Gilmore, A. (2000), “SME marketing management competencies”, International
Business Review, Vol. 9, pp. 363-82.
Chaston, I., Badger, B. and Sadler-Smith, E. (1998), “Organizational learning: research issues and
application in SME sector firms”, International Journal of Entrepreneurial Behaviour
& Research, Vol. 5, pp. 191-203.
Chaston, I., Badger, B., Mangles, T. and Sadler-Smith, E. (2001), “Organizational learning style
competencies and learning systems in small, UK manufacturing firms”, International
Journal of Operations & Production Management, Vol. 21, pp. 1417-32.
Despande, R., Farley, J.U. and Webster, F.E.J. (1993), “Corporate culture, customer orientation,
and innovativeness in Japanese firms: a quadrad analysis”, Journal of Marketing, Vol. 57,
pp. 23-36.
Diamantopoulos, A. and Hart, S. (1993), “Linking market orientation and company performance:
preliminary evidence on Kohli and Jaworski’s framework”, Journal of Strategic
Management, Vol. 1, pp. 93-121.
Hill, R. and Stewart, J. (2000), “Human resource development in small organizations”, Journal
of European Industrial Training, Vol. 24, pp. 105-17.
Liu, S.S., Luo, X. and Shi, Y. (2003), “Market-oriented organizations in an emerging economy:
a study of missing links”, Journal of Business Research, Vol. 56, pp. 481-91.
Romano, C. and Ratnatunga, J. (1995), “The role of marketing”, European Journal of Marketing,
Vol. 29, pp. 9-30.
Sinkula, J.M. (1994), “Market information processing and organizational learning”, Journal of
Marketing, Vol. 58, pp. 35-45.
Wren, B. (1997), “The market orientation construct: measurement and scaling issues”, Journal
of Marketing Theory and Practice, Vol. 5, pp. 31-54.
Wyer, P., Mason, J. and Theodorakopulos, N. (2000), “Small business development and the
learning organization”, International Journal of Entrepreneurial Behaviour & Research,
Vol. 6, pp. 239-59.
Corresponding author
Halit Keskin can be contacted at: keskin@gyte.edu.tr
Capabilities in
SMEs
417
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com
Or visit our web site for further details: www.emeraldinsight.com/reprints
