Market orientation, innovation capability and business performance

Huhtala, Juho-Petteri, Sihvonen, Antti, Frösén, Johanna, Jaakkola, Matti and Tikkanen, Henrikki (2014) Market orientation, innovation capability and business performance. Baltic Journal of Management, 9 (2), 134-152. (doi:10.1108/BJM-03-2013-0044).

Abstract

Purpose
– The paper aims to examine the role of market orientation (MO) and innovation capability in determining business performance during an economic upturn and downturn.

Design/methodology/approach
– The data comprise two national-level surveys conducted in Finland in 2008, representing an economic boom, and in 2010 when the global economic crisis had hit the Finnish market. Partial least square path analysis is used to test the potential mediating effect of innovation capability on the relationship between MO and business performance during economic boom and bust.

Findings
– The results show that innovation capability fully mediates the performance effects of a MO during an economic upturn, whereas the mediation is only partial during a downturn. Innovation capability also mediates the relationship between a customer orientation and business performance during an upturn, whereas the mediating effect culminates in a competitor orientation during a downturn. Thus, the role of innovation capability as a mediator between the individual market-orientation components varies along the business cycle.

Originality/value
– This paper is one of the first studies that empirically examine the impact of the economic cycle on the relationship between strategic marketing concepts, such as MO or innovation capability, and the firm's business performance.

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