Market Orientation and Company Profitability: Further Evidence Incorporating Longitudinal Data

Abstract

This study examines the association between market orientation and company profitability. It incorporates two methodological approaches that have generally not been used in previous research. First, it uses lagged company and environmental control variables in the data analysis, to better discern their effects on profitability and, hence, clarify any relationship between market orientation and perfor Mance. Second, it analyses the individual components of market orientation and their relationships with business profitability separately. The study finds that, of the components of a market orientation, a competitor orientation emerges as the variable with the strongest association with perfor Mance. This association is robust in two models, one with solely cross‐sectional data, and the other with lagged control variables. In simple terms, the strongest distinguishing feature of high‐profit firms in this study is that they are very attuned to the activities and characteristics of competitors. For managers, this reinforces the view that while a customer orientation is vital, competitor intelligence activities may also be a key factor in ensuring high perfor Mance. The implication for researchers is that each component of market orientation should not necessarily be assumed to have equally strong associations with profitability.

Market Orientation and the Performance of Small and Medium-Sized Manufacturing Enterprises in the Accra Metropolis

“…This was found to be consistent with the findings of the empirical study conducted by Boohene et tal (2012), who established a positive relationship between market orientation and its components and financial performance of small businesses in the Takoradi metropolis. It is also in conformity with the findings of Dawes (2000), who asserted that as a result of unique characteristics of each of the elements of MO, each MO component is not necessarily equally and strongly associated with profitability.…”

“…This may be as a result of unique characteristics of each of the elements of market orientation. Thus, Dawes (2000) emphasize that each MO component is not necessarily equally and strongly associated with profitability. Thus, the following hypothesis was, therefore, developed to be tested:…”

Antecedents and Consequences of Market Orientation: A Brazilian Meta-Analysis and an International Mega-Analysis

“…In this condition, common methods variance may strengthen the correlation between market orientation and performance when research uses a subjective measure (Doty & Glick, 1998). Dawes (1999) also presents the danger of obtaining a false positive result (i.e. Type I Error) when using subjective rather than objective measures of business performance.…”

Market Orientation and Performance: A Study of Takaful Performance in Malaysia

“…In a study of market orientation and company profitability, further evidence incorporating longitudinal data, Dawes (2000) found that the components of a market orientation, competitor orientation emerged the strongest association with performance. Likewise, study by Ellis (2006) also supports the relationship between market orientation and firm performance.…”