An Empirical Investigation of the Link Between Market Orientation and New Product Performance: The Mediating Effects of Organizational Capabilities

AN EMPIRICAL INVESTIGATION OF THE LINK BETWEEN MARKET ORIENTATION AND NEW PRODUCT PERFORMANCE: THE MEDIATING EFFECTS OF ORGANIZATIONAL CAPABILITIES Turkan Dursun-Kilic Old Dominion University, 2005 Director: Dr. John B. Ford In today’s business world, one of the most important problems that companies encounter is new product failure. The high product failure rate has been a major concern for practitioners for many years. It was reported that almost half of the new products introduced each year will actually fail (e.g., Sivadas and Dwyer 2000; Zirger and Maidique 1990). Given the fact that the increasing level of technological advancement, consumer expectations, and domestic as well as international competitive pressures continue to shorten the product life cycle for new products, it has become extremely important for companies to understand the critical determinants o f new product success and failure and to be able to develop satisfactory, failure-free, and long-living products for markets. The fact that the economic survival of a firm is unarguably dependent upon the successful development and introduction of new products has motivated many scholars to investigate the potential antecedents of new product performance over the last three decades (e.g., Ayers, Dahlstrom, and Skinner 1997; Cooper 1979, 1983, 1990; Cooper and Kleinschmidt 1988; Moorman and Miner 1997). In a number o f studies, a market orientation has been presented as a significant factor that positively affects new product performance (e.g., Atuahene-Gima 1995; Cooper 1990,1994; Cooper and Kleinschmidt 1988; Slater and Narver 1994a, 1994b). In spite of its significance, the relationship R eproduced with perm ission of the copyright owner. Further reproduction prohibited without perm ission. between market orientation and new product performance has received scant scholarly attention (e.g., Atuahene-Gima 1995). This research study aims to fill this void in the literature. The overall objective of the study is twofold: ( 1) to empirically investigate the suggested link between market orientation and new product performance and (2 ) to identify the organizationaland project-level mediators and their interrelationships that facilitate this link. A marketoriented culture is expected to encourage certain behaviors (Narver and Slater 1990) and build/maintain certain skills and capabilities (Day 1994; Slater and Narver 1994b). The purpose o f the suggested model is to identify the behaviors, skills, and capabilities of a market-oriented culture that are prone to significantly affect new product performance. A comprehensive theoretical model was suggested based on a careful review of the literature. The suggested model was tested with data from a sampling frame consisting of U.S. manufacturing companies listed in the D&B Million Dollar Database. A sample of 1,804 manufacturing companies was selected from the sampling frame using systematic random sampling. A self-administered questionnaire package was sent to the marketing manager / executive of each selected company with two waves of mailings employed. A total of 129 companies responded to the survey. Of those, 111 responses were usable. The sample covered a wide spectrum of industries and businesses. The fit o f the model was assessed using confirmatory factor analysis (CFA) in AMOS 4. The study revealed that there was no significant relationship between market orientation and organizational innovativeness. A strong positive relationship between market orientation and learning orientation was found which indicated that the internal environment of an organization can affect the degree to which the organization is R eproduced with perm ission of the copyright owner. Further reproduction prohibited without perm ission. learning-oriented. Thus, a learning orientation was proved to be a consequence of a market orientation. The study findings support the notion that a learning orientation can be viewed as a cultural antecedent of organizational innovativeness or innovation orientation as suggested by Hurley and Hult (1998). A higher level of market orientation within an organization resulted in a higher level of integration between the marketing and R&D/engineering functions in the new product development (NPD) process/project undertaken by the organization. A market orientation was also found to have a significant positive effect on the organizational memory level pertinent to the new product’s domain. Higher levels of organizational memory pertaining to the new product project resulted in better overall new product performance in the absence of environmental moderators (i.e., competitive intensity, market and technological turbulence). Thus, organizational memory level served as a mediator between market orientation and new product performance. The organizational memory dispersion associated with the new product category had a significant positive effect on the integration between marketing and R&D/engineering functions in the new product development process/project undertaken by the organization. Furthermore, the possible moderating effects of the organization’s age on various links in the suggested model were also investigated. The study results revealed that a market orientation significantly affects a learning orientation for both young and old organizations. However, there was no significant difference in the strength of these effects across the two groups. In the final chapter of this study, managerial implications of the research results were discussed, limitations of the study were addressed, and future research suggestions were provided. R eproduced with perm ission of the copyright owner. Further reproduction prohibited without perm ission. This dissertation is dedicated to my husband, Dr. Ceyhan K1I19, and to the loving memories of three beautiful people who are no longer here: Mom, §ahinaz Dursun, Dad, Zihni Dursun, and my son, Alper T. K1I19. R eproduced with perm ission of the copyright owner. Further reproduction prohibited without perm ission. vii ACKNOWLEDGEMENTS At a young age, when I read classical fictional works o f some renowned Turkish, English, French, and Russian novelists, I was always fascinated by their power to touch people’s emotions and influence their lives in a positive way, and I admired them for that. I remember myself dreaming about becoming a novelist with a most influential story to tell. Later, when I started to see the world through complex mathematical formulas at a molecular and atomic level, my dream of becoming a novelist slowly faded away. As I realized how complicated the world was, how little we knew about it, and what great work scientists were undertaking in solving the mysteries of the world, I was drawn into a more realistic dream of becoming a scientist. That was why I chose engineering as a career path after the high school. When I completed this dissertation, I felt that both of my teenage dreams actually came true. In this study, I have a scientific story to tell which is likely to influence many organizations and the behaviors of their employees in a positive way. I am realizing however that I no longer care about whether the story that I am telling is the most influential or not. As long as it is beneficial to even a single organization, I would feel that I have made an important contribution to the ongoing research effort devoted to solving the unknowns of the world. That would be a great feeling. This study would not have been completed without valuable contributions of many people that I have been fortunate enough to know. I am forever grateful to my husband, Dr. Ceyhan K1I19, for his continuous love and support, encouragement, and understanding. He has been the main source of my motivation and commitment during the time span of this study. When I felt upset, he always found a way to cheer me up. I R eproduced with perm ission of the copyright owner. Further reproduction prohibited without perm ission. am thankful to my dear mother, §ahinaz Dursun, for always warming my heart with her motherly love and care, always being there for me when I needed her, and sharing my concerns/problems during all of my studies. I am grateful to my dear father, Zihni Dursun, for always supporting my dreams and teaching me the value of learning and education early in my life. I am thankful to God for blessing both of my parents with long lives so that I could have a chance to know them and be with them longer. Special thanks are due to my mother-in-law, Halime K1I19, and my father-in-law, Akif K1I19, for their continuous emotional support and encouragement, and their prayers for me during this study. Special thanks are also due to my dear son, Alper T. K1I19, who brought a lot of joy and happiness to my life and taught me valuable lessons o f a lifetime during the short span of his life in this world. My memories with him still make me smile. I wish to thank my niece and friend, Necla Yeni, for bringing home closer with her yearly visits. Finally, I would like to thank all of my sisters, brother-in-laws, nieces, and nephews for their continuous support and best wishes during my doctoral studies. I am very grateful and thankful to my dissertation committee chair, Dr. John B. Ford, Professor o f Marketing and International Business, for his invaluable contributions to this study. It has been a great pleasure for me to work on this dissertation under his guidance and supervision. Throughout the duration o f this study, he has always been very supportive, understanding, caring, and kind to me. He carefully reviewed lengthy manuscripts o f this study with the greatest of patience and provided many insightful comments and suggestions that shaped and improved this study. His fast response time made it very convenient for me to often communicate with him via e-mail. I would like to thank Dr. Edward P. Markowski, Professor of Decision Sciences, who reviewed the R eproduced