Bernard J. Jaworski and Ajay K.

Kohli

Market Orientation: Antecedents

and Consequences
This research addresses three questions: (1) Why are some organizations more market-oriented than
others? (2) What effect does a market orientation have on employees and business performance? (3)
Does the linkage between a market orientation and business performance depend on the environmental
context? The findings from two national samples suggest that a market orientation is related to top man-
agement emphasis on the orientation, risk aversion of top managers, interdepartmental conflict and con-
nectedness, centralization, and reward system orientation. Furthermore, the findings suggest that a mar-
ket orientation is related to overall (judgmental) business performance (but not market share), employees'
organizational commitment, and esprit de corps. Finally, the linkage between a market orientation and
performance appears to be robust across environmental contexts that are characterized by varying de-
grees of market turbulence, competitive intensity, and technological turbulence.

R ECENT years have witnessed a renewed empha-

sis on delivering superior quality products and
services to customers (e.g., Bitner 1990; Day and
Several propositions pertaining to the antecedents of
a market orientation have recently been advanced by
Kohli and Jaworski (1990). However, as they point
Wensley 1988; Parasuraman, Zeithaml, and Berry out, these propositions need empirical validation.
1985). Because customer needs and expectations con- Furthermore, although a market orientation is pos-
tinually evolve over time, delivering consistently high- ited to lead to greater customer satisfaction and or-
quality products and services requires ongoing track- ganizational commitment of employees, these rela-
ing and responsiveness to changing marketplace needs, tionships also have not been subjected to empirical
i.e., being market-oriented. More formally, a market testing. In an encouraging step, Narver and Slater
orientation refers to the organization-wide generation (1990) report empirical support for the often-assumed
of market intelligence, dissemination of the intelli- or implied relationship between a market orientation
gence across departments, and organization-wide re- and performance. However, arguments have been ad-
sponsiveness to it (see Kohli and Jaworski 1990). vanced in the literature suggesting that a market ori-
Why are some organizations more market-oriented entation may have a strong or a weak effect on busi-
than others? Remarkably, this fundamental issue has ness performance, depending on the environmental
not been addressed in any empirical study to date.
conditions such as market turbulence and competitive
intensity (e.g., see Houston 1986). Such potential
Bernard J. Jaworski is Associate Professor in the Department of Mar-
keting at the Karl Eller Graduate School of Management, University of variations in the impact of a market orientation on
Arizona, Tucson and currently Visiting Associate Professor, Harvard performance remain to be empirically investigated.
Business School. Ajay K. Kohli is Associate Professor in theDepartment The purpose of this research is to address the voids
of Marketing Administration, College of Business Administration, Uni- in knowledge noted above. Specifically, two national
versity of Texas-Austin. The authors express their thanks to Tom Kin-
near for hisdirection and to three anonymous reviewers and Rick Stae- samples are investigated to determine (1) the effect of
lin for their helpful suggestions. They gratefully acknowledge the support three sets of factors posited in the literature on a mar-
they received from the Marketing Science Institute and the College of ket orientation, (2) the hypothesized effect of a market
Business Administration at the University of Texas-Austin. The au- orientation on business performance and employees,
thors contributed equally to the paper.
and (3) the role of environmental characteristics in

Journal of Marketing
Vol. 57 (July 1993).53-70 Market Orientation: Antecedents and Consequences / 53
moderating the relationship between market orienta- There is, however, a strong resurgence of academic
tion and business performance. This research sheds and practitioner interest in market orientation (e.g.,
light on the relative importance of a number of or- Deshpande and Webster 1989; Deshpande, Farley, and
ganizational factors that are posited to help or hinder Webster 1993; Houston 1986; Narver and Slater 1990;
a market orientation, as well as the nature of the im- Olson 1987; Linden 1987; Shapiro 1988).
pact of the orientation on employees and business per- Using a theories-in-use approach described by
formance. Zaltman, LeMasters, and Heffring (1982), Kohli and
In addition to testing theory, the research findings Jaworski (1990) define a market orientation as com-
are useful to managers for undertaking change efforts posed of three sets of activities: (1) organization-wide
directed at building market-oriented organizations (see generation of market intelligence pertaining to current
also Day 1990). Furthermore, this research empiri- and future customer needs, (2) dissemination of the
cally addresses the issue of whether all businesses intelligence across departments, and (3) organization-
should focus on a market orientation. This is an im- wide responsiveness to it. Furthermore the respon-
portant consideration, because devoting resources to siveness component is defined as being composed of
develop a market orientation potentially may be two sets of activities-response design (i.e., using
wasteful if the orientation does not lead to higher per- market intelligence to develop plans) and response
formance in certain business environments, such as implementation (i.e., executing such plans). This def-
those with low competitive intensity. Finally, this re- inition focuses on specific behaviors and therefore fa-
search sheds light on the impact of a market orien- cilitates operationalizing the market orientation con-
tation on the employees of an organization, an aspect struct.
of market orientation that has been underemphasized The three-component conceptualization also makes
in previous writings. possible a more focused analysis of the role of any
First, a brief review of the literature on market given antecedent of a market orientation. (As will be
orientation will be provided, and hypotheses pertain- discussed later, the same antecedent may potentially
ing to the antecedents and consequences of the ori- have an opposite effect on the different components
entation will be discussed. While internal organiza- of a market orientation.) Therefore, the authors adopt
tional as well as external factors (e.g., competitive the three-component conceptualization of market ori-
intensity) can be argued to be antecedents of market entation in the present study. It is useful to note that,
orientation (see Lusch and Laczniak 1987), the pres- traditionally, customers have been considered to be
ent study focuses on internal factors. This perspective the primary focus of a market orientation. Consistent
embodies a more applied orientation, because man- with Lusch and Laczniak (1987), a somewhat broader
agers have more control over internal antecedents perspective is embraced, in that additional forces in a
compared to external ones. Next, two large-scale field market (e.g., competition, technology, regulation) are
investigations undertaken to test these hypotheses are considered to belong to the domain of the market ori-
described, followed by a discussion of the research entation construct.
results. The paper will conclude with a discussion of In order to guide the following discussion, a figure
the managerial relevance of the findings and future identifying the key constructs included in the study is
research directions. provided (Figure 1). Based on the literature subse-
quently discussed, three sets of antecedents pertaining
to top management, interdepartmental factors, and or-
Background and Hypotheses ganizational systems are hypothesized to be related to
Introduced in the early 1950s, the marketing concept market orientation, and market orientation is hypoth-
(the philosophical foundation of a market orientation) esized to be related to employee commitment, esprit
represents a cornerstone of marketing thought (see de corps, and business performance. Finally, the link
Borch 1957; McKitterick 1957). However, given its between a market orientation and business perfor-
widely acknowledged importance, it is remarkable how mance is hypothesized to be moderated by market tur-
little research has focused on the subject. Only a small bulence, competitive intensity, and technological tur-
set of conceptual articles exists that offers preliminary bulence. Because a fairly detailed discussion of the
suggestions for engendering a market orientation (e.g., hypotheses is provided by Kohli and Jaworski (1990),
Felton 1959; Stampfl 1978; Webster 1988). And the only a brief synthesis is offered in order to conserve
few empirical studies that have been conducted on the space for discussing the empirical aspects of the re-
subject primarily concern the extent to which organ- search in detail.
izations have adopted the marketing concept, rather
than the antecedents or consequences of a market ori- Antecedents to a Market Orientation
entation (e.g., Barksdale and Darden 1971; Hise 1965; The first set of antecedents included in the present study
Lusch, Udell, and Laczniak 1976; McNamara 1972). pertains to top management in an organization. Sev-

54/ Journal of Marketing, July 1993

 FIGURE 1
Antecedents and Consequences of Market Orientation

TOP MANAGEMENT EMPLOYEES

• Emphasis
......- ...... • Organizational
Commitment
• Risk Aversion
• Esprit de Corps

INTERDEPARTMENTAL MARKET ORIENTATION ENVIRONMENT

DYNAMICS
...
..-
....
..- • Intelligence Generation ....... ~ • Market Turbulence
• Conflict • Intelligence Dissemination • Competitive Intensity
• Connectedness • Responsiveness • Technological Turbulence

ORGANIZATIONAL

" ......
SYSTEMS
....
--
• Formalization
BUSINESS
• Centralization PERFORMANCE
• Departmentalization
• Reward Systems

eral authors suggest that top managers play a critical accept occasional failures as being natural, junior
role in shaping an organization's values and orienta- managers are more likely to propose and introduce new
tion (e.g., see Felton 1959; Hambrick and Mason 1984; offerings in response to changes in customer needs.
Webster 1988). The central theme in these writings is By contrast, if top management is risk aversive and
that unless an organization gets clear signals from top intolerant of failures, subordinates are less likely to
managers about the importance of being responsive to focus on generating or disseminating market intelli-
customer needs, the organization is not likely to be gence or responding to changes in customer needs.
market-oriented (see Levitt 1969, p. 244; Webster 1988, Therefore, it can be expected that
p. 37). Top management reinforcement of the impor- Hz: The greater the risk aversion of top management, the
tance of a market orientation is likely to encourage lower the (I) market intelligence generation, (2) in-
individuals in the organization to track changing mar- telligence dissemination, and (3) responsiveness of the
kets, share market intelligence with others in the or- organization.
ganization, and be responsive to market needs. There-
The second set of factors that is hypothesized to
fore:
have an effect on a market orientation pertains to in-
HI: The greater the top management emphasis on a mar- terdepartmental dynamics. A particularly salient fac-
ket orientation, the greater the (I) market intelligence tor proposed to affect a market orientation is inter-
generation, (2) intelligence dissemination, and (3) re-
departmental conflict, which refers to the tension among
sponsiveness of the organization.
departments arising from the incompatibility of actual
A second antecedent of market orientation relates or desired responses (cf. Gaski 1984; Raven and
to top managers' risk posture. Responsiveness to Kruglanski 1970, p. 70). Several authors point to in-
changing market needs often calls for the introduction terdepartmental conflict .as an inhibitor of a market
of new products and services to match the evolving orientation (see Levitt 1969; Lusch, Udell and La-
customer needs and expectations. But new products, czniak 1976; Felton 1959). Essentially, interdepart-
services, and programs often run a high risk of failure mental conflict is likely to inhibit communication across
and tend to be more salient than established products. departments (cf. Ruekert and Walker 1987), thereby
Kohli and Jaworski (1990) argue that if top manage- lowering market intelligence dissemination. In addi-
ment demonstrates a willingness to take risks and to tion, tension among departments is likely to inhibit a

Market Orientation: Antecedents and Consequences /55

concerted response by the departments to market needs, ganizational structure may not affect the three com-
thereby hampering a market orientation. No effects ponents of a market orientation in the same fashion.
are expected for intelligence generation, because in- As noted earlier, because a market orientation essen-
terdepartmental conflict should not affect the infor- tially involves doing something new or different in
mation acquisition process in a given department. response to market conditions, it may be viewed as a
Hence: form of innovative behavior. Zaltman, Duncan, and
H 3 : The greater the interdepartmental conflict, the lower Holbek (1973, p. 62) characterize innovative behavior
the (1) market intelligence dissemination and (2) re- as being composed of two stages: (1) the initiation
sponsiveness of the organization. stage (i.e., awareness and decision-making) and (2)
the implementation stage (i.e., carrying out the de-
A market orientation is also posited to be affected
cision). In the present context, the initiation stage cor-
by interdepartmental connectedness, which refers to
responds to intelligence generation, dissemination, and
the degree of formal and informal direct contact among
the design of organizational response, whereas the im-
employees across departments. Several related streams
plementation stage corresponds to the actual organi-
of research suggest that connectedness facilitates in-
zational response.
teraction and exchange of information, as well as the
Zaltman, Duncan, and Holbek (1973) draw on nu-
actual utilization of the information (see Cronbach and
merous studies to argue that organizational dimen-
Associates 1981; Deshpande and Zaltman 1982; Pat-
sions such as formalization, centralization, and de-
ton 1978). Therefore, it can be expected that the greater
partmentalization may have opposite effects on the two
the extent to which individuals across departments are
stages of the innovative behavior. In particular, they
directly connected (or networked), the more they are
indicate that, whereas these variables may hinder the
likely to exchange market intelligence and respond to
initiation stage of innovative behavior, the same vari-
it in a concerted fashion (see also Kohli and Jaworski
ables may actually facilitate the implementation stage
1990). As before, no effects are expected for the in-
of innovative behavior. This suggests that formali-
telligence generation component. Thus:
zation, centralization, and departmentalization may be
H4 : The greater the interdepartmental connectedness, the inversely related to market intelligence generation,
greater the (1) market intelligence dissemination and dissemination, and response design but positively re-
(2) responsiveness of the organization.
lated to response implementation. Therefore, it is hy-
The third set of antecedents that is proposed to pothesized that:
affect a market orientation pertains to organizational
H s: The greater the formalization, (1) the lower the in-
structure and systems. Three structural variables- telligence generation, dissemination, and response de-
formalization, centralization, and departmentaliza- sign and (2) the greater the response implementation.
tion-must first be considered. Formalization repre- H 6 : The greater the centralization, (1) the lower the in-
sents the degree to which rules define roles, authority telligence generation, dissemination, and response de-
relations, communications, norms and sanctions, and sign and (2) the greater the response implementation.
procedures (Hall, Haas, and Johnson 1967). Central- H 7 : The greater the departmentalization, (1) the lower the
ization refers to the inverse of the amount of dele- intelligence generation, dissemination, and response
design and (2) the greater the response implementa-
gation of decision-making authority throughout an tion.
organization and the extent of participation by orga-
nizational members in decision-making (Aiken and The last antecedent investigated in this study re-
Hage 1968). Departmentalization refers to the number lates to the measurement and reward system that is in
of departments into which organizational activities are place within an organization. Literature on the subject
segregated and compartmentalized. suggests that measurement/reward systems are instru-
Research to date suggests that both formalization mental in shaping the behaviors of employees (cf. An-
and centralization are inversely related to information derson and Chambers 1985; Jaworski 1988; Lawler
utilization (see Deshpande and Zaltman 1982; Hage and Rhode 1976; Hopwood 1974). In the present con-
and Aiken 1970; Zaltman, Duncan, and Holbek 1973). text, Webster (1988, p. 38) argues that " ... the key
In the present context, information utilization corre- to developing a market-driven, customer-oriented
sponds to designing programs in response to market business lies in how managers are evaluated and re-
intelligence. Therefore, as Stampfl (1978) argues, it warded." He observes that if managers primarily are
appears that formalization and centralization are in- evaluated on the basis of short-term profitability and
versely related to an organization's responsiveness. sales, they are likely to focus on these criteria and
Similarly, Lundstrom (1976) and Levitt (1969) dis- neglect market factors such as customer satisfaction
cuss departmentalization as a barrier to communica- that assure the long-term health of an organization.
tion and, hence, to market intelligence dissemination. Consistent with the preceding arguments, it can be ex-
Interestingly, there is reason to believe that the or- pected that individuals in organizations that empha-

56/ Journal of Marketing, July 1993

size customer satisfaction and market-oriented behav- a market orientation and performance. First, market
ior as bases for administering rewards will more readily turbulence-the rate of change in the composition of
generate market intelligence, disseminate it internally, customers and their preferences-is considered. Or-
and be responsive to market needs. That is: ganizations that operate in the more turbulent markets
H 8 : The greater the reliance on market-based factors for are likely to have to modify their products and ser-
evaluating and rewarding managers, the greater the vices continually in order to satisfactorily cater to cus-
(I) market intelligence generation, (2) intelligence tomers' changing preferences. By contrast, an orga-
dissemination, and (3) responsiveness of the organi- nization's products and services are likely to require
zation. relatively little modification in stable markets where
Consequences of a Market Orientation the customers' preferences do not change very much.
Therefore, businesses operating in the more turbulent
A market orientation is frequently posited to improve markets are likely to have a greater need to be market-
business performance. The argument is that organiza- oriented, (i.e., to track and respond to evolving cus-
tions that are market-oriented, i.e., those that track tomer preferences) compared to businesses in stable
and respond to customer needs and preferences can markets. In other words, a market orientation is likely
better satisfy customers and, hence, perform at higher to be more strongly related to performance in turbu-
levels. The study by Lusch and Laczniak (1987) pro- lent markets than in stable markets. Stated formally:
vides some support for this relationship. A more re-
cent study by Narver and Slater (1990) also offers em- H II: The greater the market turbulence, the stronger the
relationship between a market orientation and busi-
pirical support for the relationship posited between ness performance.
market orientation and business performance. The
formal hypothesis to be tested is: A second environmental factor that may be argued
to moderate the linkage between a market orientation
H9 : The greater the market orientation of an organization,
the higher its business performance.
and business performance is competitive intensity. As
Houston (1986) and Kohli and Jaworski (1990) ob-
The next set of consequences examined in the study serve, in the absence of competition, an organization
focus on organizational employees. The research re- may perform well, even if it is not very market-ori-
ported by Kohli and Jaworski (1990) suggests that a ented, because customers are "stuck" with the orga-
market orientation affords a number of psychological nization's products and services. By contrast, under
and social benefits to employees. Specifically, a mar- conditions of high competition, customers have many
ket orientation is argued to lead to a sense of pride in alternative options to satisfy their needs and wants.
belonging to an organization in which all departments As a result, an organization that is not very market-
and individuals work toward the common goal of sat- oriented is likely to lose customers to competition and
isfying customers. Accomplishment of this objective fare poorly, so a market orientation is expected to be
is posited to result in employees sharing a feeling of a more important determinant of performance under
worthwhile contribution, a sense of belongingness, and, conditions of high competitive intensity. That is:
therefore, commitment to the organization. The for- H 12 : The greater the competitive intensity, the stronger the
mal testable hypothesis is: relationship between a market orientation and busi-
H IO: The greater the market orientation, the greater the (I) ness performance.
esprit de corps and (2) organizational commitment of
The third environmental factor posited to moder-
employees.
ate the relationship between a market orientation and
As noted earlier, several scholars suggest that the business performance is technological turbulence-the
environmental context of an organization is likely to rate of technological change. A market orientation es-
influence its level of market orientation. As a result, sentially is a means to developing a competitive ad-
organizations in more competitive environments may vantage, because it enables an organization to under-
be expected to be more market-oriented (Lusch and stand customer needs and offer products and services
Laczniak 1987). Several scholars draw on this general that meet those needs. While this is important, there
argument to suggest that the importance of market ori- may be alternative avenues to gaining a competitive
entation varies with the environmental context (see advantage. To the extent such alternative avenues ex-
Bennett and Cooper 1981; Houston 1986; Tauber 1974). ist, the importance of a market orientation is likely to
Stated differently, they argue that the linkage between be diminished. One such avenue is technology. Or-
market orientation and performance depends on the ganizations that work with nascent technologies that
environmental characteristics of an organization. are undergoing rapid change may be able to obtain a
In the present study, three environmental charac- competitive advantage through technological innova-
teristics are included that have been proposed by Kohli tion, thereby diminishing-but not eliminating-the
and Jaworski (1990) to influence the linkage between importance of a market orientation. By contrast, or-

Market Orientation: Antecedents and Consequences /57

ganizations that work with stable (mature) technolo- formants in these SBUs were then contacted directly
gies are relatively poorly positioned to leverage tech- by the researchers and requested to complete and re-
nology for gaining a competitive advantage and must turn the study questionnaire according to the proce-
rely on market orientation to a greater extent. For ad- dure described for the MSI companies. The response
ditional arguments along similar lines, see Bennett and rate was 79.6% for the marketing executives and 70%
Cooper (1981), Houston (1986), Kaldor (1971), and for the nonmarketing executives.
Tauber (1974). The discussion above suggests that: These procedures resulted in responses from a to-
H 13 : The greater the technological turbulence, the weaker
tal of 222 business units. The market share for these
the relationship between a market orientation and business units ranges from 1% to 100%, with an av-
business performance. erage share of 30%. For the purposes of analysis, the
responses of the two informants were averaged to ob-
tain scores for each business unit. In the relatively few
Data Collection instances where only one informant provided the data,
the responses were used in the original form.
Sample I
The first sample was drawn from the member com- Sample /I
panies of the Marketing Science Institute (MSI) and In order to cross-validate the findings from the sample
the top 1000 companies (in sales revenues) listed in above, data were obtained from a second sample. The
the Dun and Bradstreet Million Dollar Directory. A sampling frame for this group was the American Mar-
multiple-informant design was employed in this sam- keting Association membership roster, which pro-
ple. vided the names of additional informants. From this
A letter from the MSI executive director was mailed sampling frame, 500 names were selected at random,
to a senior executive at all forty-nine MSI member after first eliminating those whose titles suggested that
companies requesting that they participate in the study. they were relatively low in their organizational hier-
Each executive was asked to provide the names of a archy. From this set, thirteen individuals could not be
senior marketing and a senior nonmarketing executive reached because of incorrect addresses, resulting in an
in one or more of the SBUs of the company for sub- effective base of 487. The 3-wave mailing procedure
sequent contact by the researchers. Out of a total of described earlier was used to obtain data from this
forty-nine companies, thirteen companies agreed to sample. A total of 230 responses were obtained, for
participate in the study and provided names of indi- a response rate of 47.2%.
viduals in twenty-seven SBUs. The names of both a
marketing and nonmarketing executive were provided
for each SBU. A copy of the questionnaire, together
Instrument Development and
with a personalized letter and a return envelope, was Refinement
mailed to the two informants in each SBU. A re- The study used existing scales for measuring the or-
minder postcard was mailed to each individual ap- ganizational structure constructs of formalization,
proximately 1 week after the initial mailing. After ap- centralization, and departmentalization. Scales for the
proximately 3 weeks, a replacement copy of the other constructs included in the study were not avail-
questionnaire, together with another personalized let- able in the literature. Therefore, the first step entailed
ter, was mailed to the informants. The response rate the development of new scales for these constructs.
was 88.9% for the marketing executives and 77.8% The following 4-phase iterative procedure was adopted
for the nonmarketing executives. for the purpose.
From the D&B sampling frame, 500 companies First, the authors independently generated a large
were chosen from among the top 1000 by selecting pool of items for each of the constructs included in
every alternate listing. The initial contact was made the study. Care was taken to tap the domain of each
with the CEO of each company in a personalized let- construct as closely as possible. For example, multi-
ter requesting the company's participation in the study. ple items were generated to correspond to each of the
A total of twenty-one companies could not be reached three components of market orientation. From this pool
because of incorrect addresses and CEO successions, of items, a subset was selected using the criteria of
resulting in an effective base of 479 companies. The uniqueness and the ability to convey "different shades
CEOs were requested to provide the names of two se- of meaning" to informants (see Churchill 1979). Sev-
nior executives (one marketing and the other non- eral items were reverse-scored in order to minimize
marketing) in their SBUs to serve as informants. A response set bias.
total of 102 companies agreed to participate, and 229 Next, because of the centrality of the market ori-
SBU names were obtained. Names were provided for entation scale, its items were tested for clarity and ap-
206 marketing and 187 nonmarketing executives. In- propriateness in personally administered pretests with

58 / Journal of Marketing, July 1993

twenty-seven managers from marketing as well as inforcement top managers provided for market-ori-
nonmarketing departments and also from top man- ented activities. The risk aversion scale was com-
agement levels. The managers were asked to complete posed of six items (e.g., "Top managers in this business
a questionnaire that included the items and indicate unit like to "play it safe"), and tapped top managers'
any ambiguity or other difficulty they experienced in disposition toward innovative actions in the face of
responding to the items, as well as offer any sugges- risk and uncertainty. Items for each scale were scored
tions they deemed appropriate. Based on the feedback on a 5-point scale, ranging from "strongly disagree"
received from the managers, some items were elimi- to "strongly agree."
nated, others were modified, and additional items were The two constructs pertaining to interdepartmental
developed. dynamics-conflict and connectedness-were each
This was followed by another phase of pretests in measured by 7-item scales. The conflict items per-
which the scales for all constructs were clearly marked tained to the extent to which the goals of the different
as such and presented to seven academic experts, who departments were incompatible and tension prevailed
were asked to critically evaluate the items from the in interdepartmental interactions (e.g., "Protecting one's
standpoint of domain representativeness, item speci- departmental turf is considered to be a way of life in
ficity, and clarity of construction. Based on the de- this business unit"). The connectedness items tapped
tailed critique received, some items were eliminated notions of the extent to which individuals in a de-
and others revised to improve their specificity and partment were networked to various levels of the hi-
precision. erarchy in other departments (e.g., "In this business
The items that were developed and refined were unit, it is easy to talk with virtually anyone you need
subjected to yet another phase of pretests involving to, regardless of rank or position"). Items for each
personal interviews with seven managers, who were scale were scored on a 5-point scale, ranging from
asked to complete a questionnaire that included the "strongly disagree" to "strongly agree."
measure items as they applied to their business unit. Formalization and centralization were measured
At this stage, very few concerns were raised and only by the widely used scales developed by Aiken and
very minor refinements were made. A brief descrip- Hage (1966, 1968). The 9-item formalization scale
tion of the final scale items follows. The complete assessed the extent to which jobs in the organization
scales are provided in the Appendix. were codified, and there was an emphasis on observ-
Market orientation was measured by a 32-item ing rules (e.g., "How things are done around here is
scale. Of these items, ten pertain to market intelli- left up to the person doing the work" [reverse-coded]).
gence generation, eight to intelligence dissemination, The 5-item centralization scale assessed the degree of
and fourteen to responsiveness at the business unit level. hierarchical authority within an organization (e.g., "A
Of the fourteen responsiveness items, seven tap the person who wants to make his own decisions would
extent to which an organization develops plans in re- be quickly discouraged here"). All items were scored
sponse to market intelligence (response design), and on a 5-point scale, ranging from "strongly disagree"
the remaining seven assess the actual implementation to "strongly agree."
of these plans (response implementation). Consistent Departmentalization was measured by a count of
with Lusch and Laczniak (1987), items that tapped the the number of departments in the business unit. Re-
three components were interwoven with issues related ward system orientation was measured by a 6-item
to the needs and preferences of customers and end users, scale that assessed the extent to which customer re-
competitiors' moves, and regulatory trends. Sample lations, customer satisfaction, and market-oriented
items for the three components were: (1) "In our busi- behaviors were used to evaluate and reward individ-
ness unit, intelligence on our competitors is generated uals in the organization. For example, "Customer sat-
independently by several departments," (2) "We have isfaction assessments influence senior managers' pay
interdepartmental meetings at least once a quarter to in this business unit." A 5-point scoring format (1 =
discuss market trends and developments," and (3) strongly disagree; 5 = strongly agree) was employed
"Customer complaints fall on deaf ears in this busi- for these items.
ness unit" (reverse-scored). Each item was scored on Market turbulence, competitive intensity, and
a 5-point scale, ranging from "strongly disagree" to technological turbulence were measured by three scales
"strongly agree." composed of six, six, and five items, respectively. The
Top management emphasis on market orientation items for the market turbulence scale assessed the ex-
and risk aversion were measured by two separate scales. tent to which the composition and preferences of an
The first scale was composed of four items (e.g., "Top organization's customers tended to change over time
managers repeatedly tell employees that this business (e.g., "We are witnessing demand for our products
unit's survival depends on its adapting to market and services from customers who never bought them
needs"). Items in this scale focused on the verbal re- before"). Competitive intensity scale items assessed

Market Orientation: Antecedents and Consequences / 59

the behavior, resources, and ability of competitors to items, each rated on a 5-point scale, the differences
differentiate (e.g., "Anything that one competitor can noted were extremely small (on the order of 5% or
offer, others can match readily"). Technological tur- less) and seemed to indicate the lack of a systematic
bulence items tapped the extent to which technology bias in one direction or another in the reports of the
in an industry was in a state of flux (e.g., "The tech- marketing and nonmarketing managers.
nology in our industry is changing rapidly"). A 5-point Second, for each of the constructs, the correlation
scoring format (1 = strongly disagree; 5 = strongly between the responses of the marketing executives and
agree) was employed for all items. nonmarketing executives was computed. In general,
Business performance was measured using two the correlations are moderate and positive (.09, . 17,
distinct approaches reflected in the literature-judg- .35, .28, .39, .29, .24, -.07, .31, .36, .52, .84, .02,
mental as well as objective measures. The judgmental .29, .17, .24, .18, .26, .42, .53, .37, .33, .51, .17,
measure asked informants for their assessment of the .33, .34). Although the two reports were positively
overall performance of the business and its overall correlated, the correlations were not perfect, which
performance relative to major competitors, rated on a suggests that the two informants were keying in on
5-point scale ranging from "poor" to "excellent. " The different perspectives in providing their responses. (The
objective measure was the dollar share of the served lack of perfect congruence between the informants was
market. entirely consistent with the results from previous
Organizational commitment and esprit de corps multiple-informant studies (e.g., Silk and Kalwani
were measured by two 7-item scales. The organiza- (1982) reported in the literature.) Therefore, the scores
tional commitment scale items tapped the extent to obtained from the two informants were averaged to
which a business unit's employees were fond of the derive the score for each construct, in an attempt to
organization, saw their future tied to that of the or- obtain more complete measurement of the focal or-
ganization, and were willing to make personal sacri- ganizational characteristics.
fices for the business unit (e.g., "Employees often go Next, the scores for market orientation (and the
above and beyond the call of duty to ensure this busi- other multi-item constructs) were computed by equally
ness unit's well-being"). The esprit de corps scale as- weighting and adding the corresponding item scores.
sessed the extent to which a team spirit prevailed in (As a result, the market orientation score was the un-
the organization (e. g., "People in this business unit weighted sum of the three components of generation,
are genuinely concerned about the needs and prob- dissemination, and responsiveness.) The mean score
lems of each other"). All items were scored on a 5- of market orientation was 113.95, with a standard de-
point scale, ranging from "strongly disagree" to viation of 15.80 and a range of 68.5 to 150 (out of a
"strongly agree." possible range of 31 to 155). The correlation between
Each of the scales described above was refined in the generation and dissemination component was .62,
the following manner. The reliability of each scale was between dissemination and responsiveness .70, and
estimated by computing its coefficient alpha. Items between responsiveness and generation .55. Further-
that exhibited low inter-item correlations were elim- more, the correlations between the overall market ori-
inated, in order to improve the internal consistency of entation and the generation, dissemination, and re-
the scales. The reliability coefficient of each of the sponsiveness components were .79, .88, and .92,
refined scales is reported in the Appendix (except for respectively.
the overall responsiveness construct, which has a re- The first nine hypotheses (H I through H 9 ) related
liability coefficient of .89). As may be seen from the to the antecedents of a market orientation. These were
Appendix, the refined scales generally have good to tested by estimating the following regression equa-
high reliability coefficients that exceed the levels rec- tions:
ommended by Nunnally (1978).
Y1= b.X, + bzXz + + bsXs + el
Yz = b1X1 + bzXz + + bsXs + ez
Analyses and Results Y3 = b1X 1 + bzXz + + bsXs + e3
The data obtained from Sample I were analyzed to Y4 = b1X1 + bzXz + + bsXs + e4
assess the degree of congruence between the two in-
formants. First, the difference in the ratings of the two where Y 1 denotes overall market orientation, Y z through
informants for each of the twenty-six constructs in- Y 4 denote market intelligence generation, market in-
cluded in the study was computed. The average ab- telligence dissemination, and responsiveness, respec-
solute differences for twenty-one of the twenty-six tively, and XI through Xs correspond to (1) top man-
constructs were less than 1.0. In the case of five con- agement emphasis on market orientation, (2) top
structs, the average absolute differences ranged from management risk aversion, (3) interdepartmental con-
1.01 to 3.86. Given that most scales include multiple flict, (4) interdepartmental connectedness, (5) for-

60 / Journal of Marketing, July 1993

malization, (6) centralization, (7) departmentaliza- of formalization, centralization, and departmentali-
tion, and (8) reward system orientation. The e's are zation on the two components of responsiveness in
the error terms. Because interdepartmental conflict and both samples were identical to those obtained for overall
connectedness were hypothesized to affect intelli- responsiveness reported in Tables 1 and 2.
gence dissemination and responsiveness, but not in- Hypotheses 9 and 10 pertained to the effect of a
telligence generation (H 3 , H4 ) , conflict and connect- market orientation on business performance and em-
edness were not included as predictors of intelligence ployees' organizational commitment and esprit de corps.
generation in the second equation above. The results These were tested by regressing performance (using,
obtained from estimating the four equations with in tum, the judgmental measure as well as the objec-
Sample I and Sample II are provided in Tables I and tive measure of market share) on market orientation.
2. To control for the effects of additional determinants
Additionally, H, through H 7 hypothesized oppo- of performance, six control variables were incorpo-
site effects of formalization, centralization, and rated as independent variables in the regression equa-
departmentalization on the two components of tions. The control variables related to competitive in-
responsiveness-response design and response tensity, buyer power, supplier power, entry barriers,
implementation. Accordingly, two additional regres- pressure from substitute products, and product qual-
sion equations were estimated by incorporating re- ity. The literature suggests these variables to be im-
sponse design and response implementation as the de- portant determinants of performance (e.g., Boulding
pendent variables and the eight independent variables and Staelin 1990; Jacobson and Aaker 1987; Porter
previously noted. The results obtained for the effects 1980). Measures of these variables were specifically

TABLE 1
Antecedents of a Market Orientation: Standardized Regression Coefficients Estimated With Sample I
Dependent Variables
Independent Market Intelligence Intelligence
Variables Orientation Generation Dissemination Responsiveness
Top Management Emphasis .24*** .27*** .25*** .20**
Top Management Risk Aversion ns ns ns -.24***
Interdepartmental Conflict -.17* -.27*** -.23**
Interdepartmental Connectedness .20** ns ns
Formalization ns ns ns ns
Centralization -.22** ns -.14* -.22**
Departmentalization ns ns ns ns
Reward System Orientation .30*** .39*** .24*** .16*
R2 .63 .34 .49 .54
N 134 144 154 150
***p < .001
**p < .01
*p < .05

TABLE 2
Antecedents of a Market Orientation: Standardized Regression Coefficients Estimated With Sample II
Dependent Variables
Independent Market Intelligence Intelligence
Variables Orientation Generation Dissemination Responsiveness
Top Management Emphasis .24*** .20* .28*** .24***
Top Management Risk Aversion ns ns ns -.12*
Interdepartmental Conflict -.28*** -.20* -.32***
Interdepartmental Connectedness .22** .27** ns
Formalization ns ns ns ns
Centralization ns -.34** ns ns
Departmentalization ns ns ns ns
Reward System Orientation .31*** .38*** .20** .19**
R2 .58 .33 .38 .55
N 123 130 138 138
***p < .001
**p < .01
*p < .05

Market Orientation: Antecedents and Consequences / 61

developed for the study. Similarly, employees' or- Then, the regression equation was reestimated, this
ganizational commitment and esprit de corps were time constraining the coefficient associated with mar-
separately regressed on market orientation and the ket orientation to take on the same value in the two
control variables to test H 9 and HID' The results ob- subgroups. The Chow (1960) test was performed to
tained are reported in Tables 3 and 4. assess the statistical significance of the difference in
Finally, H I 1 thru H 13 hypothesized that the impact the regression coefficients of the market orientation
of a market orientation was contingent upon the level variable across the low and high market turbulence
of market turbulence, competitive intensity, and tech- sub-groups. The hypothesized moderating effects of
nological turbulence. To test for the moderating effect competitive intensity and technological turbulence were
of the three moderator variables, a split group analysis tested in a similar fashion by re-sorting the samples
was performed, with both Sample I and Sample II using these variables in tum and proceeding as de-
separately (see Arnold 1982). First, the sample was scribed.
sorted in ascending order of a moderator variable (e.g.,
market turbulence) and then it was split at the median
to form two groups, one with relatively low market Findings and Discussion
turbulence and the other with relatively high market In this section, the focus is on the substantive inter-
turbulence. Next, performance was regressed on mar- pretation of the results and the emergent findings. Ad-
ket orientation and the six control variables in the full ditionally, several methodological issues that are ger-
sample, while allowing all regression coefficients to mane to the substantive interpretation of the results
take on different values in the two subgroups. are discussed.

TABLE 3
Consequences of a Market Orientation: Standardized Regression Coefficients Estimated With Sample I
Dependent Variables
Independent Overall Market Organizational Esprit
Variables Performance Share Commitment de Corps
Market Orientation .23** ns .44*** .51 ***
Product Quality .24** ns .18* .18*
Competitive Intensity ns -.39*** ns ns
Buyer Power ns ns ns ns
Supplier Power ns .22* ns ns
Entry Barriers ns ns ns ns
Substitutes ns ns ns ns
R2 .18 .06 .31 .40
N 145 112 153 153
***p < .001
**p < .01
*p < .05

TABLE 4
Consequences of a Market Orientation: Standardized Regression Coefficients Estimated
With Sample II
Dependent Variables
Independent Overall Market Organizational Esprit
Variables Performance Share Commitment de Corps
Market Orientation .36*** ns .66*** .58***
Product Quality ns ns ns ns
Competitive Intensity ns -.21* ns ns
Buyer Power ns ns ns ns
Supplier Power ns ns ns ns
Entry Barriers ns ns ns ns
Substitutes ns ns ns ns
R2 .25 .11 .50 .39
N 136 89 139 135
***p < .001
**p < .01
*p < .05

62/ Journal of Marketing, July 1993

 First, focusing on the antecedents of a market ori- Comparisons of the standardized regression coef-
entation, there is strong convergence in the findings ficients in both Sample I and Sample II suggest that
from the two samples. The only exceptions relate to the design of reward systems has the strongest impact
the role of interdepartmental connectedness and or- on market orientation from among the set included in
ganizational centralization (see Tables 1, 2). Overall, the study. The "right" reward systems appear to fa-
the results suggest that several factors drive the mar- cilitate all three components of a market orientation-
ket orientation of a business. The amount of emphasis intelligence generation (b = .39, p < .001, Sample
top managers place on a market orientation appears to I; b = .38, p < .001, Sample 11), intelligence dis-
affect the generation of market intelligence (b = .27, semination (b = .24, p < .001, Sample I; b = .20,
p < .001, Sample I; b = .20, p < .05, Sample II), p < .01, Sample II), and responsiveness (b = 16, p
its dissemination within the organization (b = .25, P < .05, Sample I; b = .19, p < .01, Sample 11).
< .001, Sample I; b = .28, p < .001, Sample II), The results from both samples suggest that cen-
and the responsiveness of the organization (b = .20, tralization of decision-making serves as a barrier to a
p < .01, Sample I; b = .24, p < .001, Sample 11). market orientation. However, the patterns of results
Therefore, it appears important that top managers for this variable across the two samples is different.
continually emphasize the need for ongoing tracking In sample I, centralization is inversely related to in-
and responding to market developments to employ- telligence dissemination (b = - .14, p < .05) and re-
ees. Top managers' risk aversion does not appear to sponsiveness (b = - .22, p < .01), and in sample II,
affect intelligence generation or dissemination, but it centralization is inversely related to intelligence gen-
seems to have a negative effect on the responsiveness eration (b = - .34, p < .01).
of the organization (b = - .24, p < .001, Sample I; Contrary to prior hypotheses, formalization does
b = - .12, p < .05, Sample 11). These findings sup- not appear to be related to a market orientation. This
port the earlier expectation that responding to market result parallels in part the results reported by Narver
developments entails some amount of risk and that if and Slater (1991), who suggest that programmatic ap-
top managers are unwilling to assume these risks, the proaches to improving market orientation may not be
organization is less likely to be responsive to the effective. Formalization refers to the existence of for-
changing preferences of customers. mal rules and regulations in an organization and the
Interdepartmental conflict, as expected, appears to organization's efforts to enforce those rules.
inhibit intelligence dissemination (b = -.27, p < .001, Emphasis on rules is typically argued to make an
Sample I; b = - .20, p < .05, Sample II) as well as organization less adaptive to external changes. While
the responsiveness of an organization (b = - .23, p the results suggest that formalization is unrelated to a
< .01, Sample I; b = - .32, p < .001, Sample II). market orientation, an alternative interpretation is that
This supports the expectation that individuals in or- mere emphasis on rules is less relevant than the pre-
ganizations in which tension prevails across depart- cise nature of the rules in an organization. In other
ments are less likely to be willing to share market in- words, it is possible that, if properly designed, rules
formation or to work in concert with other departments may facilitate rather than hinder a market orientation.
to satisfy customer needs and expectations. For example, an organization may use rules to man-
Results from both samples suggest that connect- date that the various departments meet every month
edness among departments promotes a market orien- for a "market assessment" meeting. Such a rule is likely
tation. The results from Sample II suggest that con- to enhance intelligence dissemination. Similarly, other
nectedness facilitates the dissemination of intelligence rules may mandate fast response to customer com-
within an organization (b = .27, p < .01), thereby plaints or other market developments, thereby im-
improving the market orientation. Curiously, in Sam- proving a market orientation. Similarly, the lack of a
ple I, connectedness does not appear to be related to relationship between departmentalization and a mar-
intelligence dissemination, although it is related to ket orientation suggests that the sheer number of de-
overall market orientation (b = .20, p < .01). These partments is less important than the connectedness and
results call for additional research to examine the link- level of conflict among departments.
age between connectedness and a market orientation. What are the hypothesized effects of a market ori-
Turning now to the role of organization-wide sys- entation on business performance and employees? As
tems, a market orientation appears to be very strongly shown in Tables 3 and 4, a market orientation appears
related to the orientation of the reward systems within to be significantly related to business performance when
the organization (b = .30, p < .001, Sample I; b = overall performance is assessed using judgmental
.31 , p < .001, Sample 11). Organizations that reward measures (b = .23, p < .01, Sample I; b = .36, p <
employees on the basis of factors such as customer .001, Sample II). By contrast, a market orientation
satisfaction, building customer relationships, and so does not appear to be related to performance using the
on tend to be more market-oriented. more objective measure of market share. These results

Market Orientation: Antecedents and Consequences / 63

would appear to provide somewhat mixed support for Conclusion
the importance of a market orientation. However, sev-
eral issues warrant mention in this context. A4anageriallmpHcations
First, it is unclear whether market share is a par- The purpose of the study was to empirically test sev-
ticularly appropriate indicator of performance. For ex- eral hypotheses advanced in the literature regarding
ample, it is possible that certain high-performing antecedents and consequences of a market orientation.
companies may deliberately pursue a "focus" strategy The findings of the study suggest that the market ori-
and be unconcerned about share positions (cf. Porter entation of a business is an important determinant of
1980). The literature is replete with examples of low- its performance, regardless of the market turbulence,
share companies outperforming high-share companies competitive intensity, or the technological turbulence
(e.g., Inland Steel vs. USX). In such instances, mar- of the environment in which it operates. As such, it
ket share may be a less accurate indicator of perfor- appears that managers should strive to improve the
mance compared to judgmental assessments that take market orientation of their businesses in their efforts
into account the particular strategy of a company. to attain higher business performance. It should be noted
Second, it is possible that there is a lag in the ef- that, although a relationship between market orien-
fect of market orientation on market share, i.e., a tation and market share was not found in this study,
market orientation leads to higher market share over this finding should be tempered by the considerations
a relatively long period of time. If so, such effects discussed earlier in the paper.
may not be captured in the cross-sectional design em- The study suggests several factors as important de-
ployed in the study. Based on these considerations, terminants of a market orientation. Specifically, a
the authors tend to place more confidence in the re- market orientation appears to be facilitated by the
sults obtained using judgmental measures of perfor- amount of emphasis top managers place on market
mance. (The results also suggest that product quality orientation through continual reminders to employees
is not related to market share, a finding that diverges that it is critical for them to be sensitive and respon-
from the results of studies using the PIMS database.) sive to market developments. Importantly, a market
The results reported in Tables 3 and 4 provide strong orientation appears to require a certain level of risk-
support for the hypothesized effects of a market ori- taking on the part of senior managers and a willing-
entation on employees' organizational commitment (b ness to accept occasional failures of new products and
= .44, P < .001, Sample I; b = .66, p < .001, Sam- services as being a normal part of business life. In the
ple II) and esprit de corps (b = .51, P < .001, Sample absence of such a willingness to take calculated risks,
I; b = .58, p < .001, Sample II). It appears that a employees in the lower levels of an organizational hi-
market orientation nurtures a bonding between em- erarchy are unlikely to want to respond to market de-
ployees and the organization, as well as promotes a velopments with new products, services, or programs.
feeling of belonging to one big organizational family While the role of top managers in engendering a
dedicated to meeting and exceeding market needs and market orientation is important, it appears that the na-
expectations. ture of interdepartmental dynamics also plays a very
Finally, the tests of the hypothesized moderating important role in determining the level of market ori-
effects of market turbulence, competitive intensity, and entation of a business. Two factors that appear to af-
technological turbulence on the linkage between mar- fect a market orientation are interdepartmental con-
ket orientation and performance (H 11-H 13) are ex- nectedness and conflict. Interdepartmental conflict
amined. The differences in regression coefficients as- appears to reduce a market orientation, whereas con-
sociated with market orientation are not statistically nectedness appears to playa facilitative role. As such,
significant (p < .05) across environments character- it may be useful to promote interdepartmental con-
ized by high and low levels of the three moderator nectedness through physical proximity of departments
variables in both samples. These results do not sup- and through telematics (e.g., computer hookups, voice
port the hypothesized moderating effects for any of mail). While some level of interdepartmental conflict
the three moderator variables. In other words, the is inherent in the charters of the different departments,
linkage between a market orientation and performance it appears useful to reduce the level of conflict by us-
appears to be robust across contexts characterized by ing various means such as interdepartmental training
varying levels of market turbulence, competitive in- programs, cross-functional activities, and alignment
tensity, and technological turbulence. (Alternatively, of departmental performance objectives by focusing
it is possible that the hypothesized moderating effects them on markets (e.g., customer satisfaction).
do exist but were not detected because of the poten- The role of market-based reward systems and de-
tially insufficient power of the statistical test as a re- centralized decision-making in engendering a market
sult of the relatively small sample size or because the orientation appears to be strong, suggesting that re-
reliabilities of the measures were not sufficiently high.) ward systems should take into account the contribu-

64/ Journal of Marketing, July 1993

tions of individuals in sensing and responding to mar- Furthermore, it is possible to argue that certain
ket needs. Additionally, the negative relationship variables, such as interdepartmental conflict, modeled
between centralization and market orientation sug- in the study as antecedents of a market orientation
gests that it may be useful to "empower" employees can also be treated as consequences of market orien-
to make decisions at lower levels of organizations rather tation. It would be useful to conduct studies to assess
than concentrate decision-making in the upper eche- the size and direction of the relationship between
lons of an organization. Although formalization and interdepartmental conflict and market orientation.
departmentalization do not appear to affect a market In a similar vein, it appears likely that the environ-
orientation, it would seem that the content of formal mental variables modeled in this study as moderators
rules, rather than their mere presence, is a more im- act in tandem either to increase or decrease the im-
portant determinant of market orientation. Similarly, portance of market orientation for business per-
the manner in which the various departments interact formance. The limited sample size in this study
with each other appears to be a more important de- precludes an analysis of such joint moderating ef-
terminant of market orientation than the sheer number fects. It would be useful to perform such analyses in
of departments in a business. future studies to better understand the conditions un-
der which market orientation is particularly important
Research Directions for business performance.
There appear to be several areas in need of further From a methodological standpoint, data in this study
research. Perhaps the most important relates to an as- were obtained from senior managers in each of the
sessment of the impact of a market orientation on SBUs. It would be useful to obtain a broader sample
business performance. Although the results of this study of managers and perhaps even nonmanagers in SBUs
provide support for a relationship between market ori- in future studies. This would minimize any potential
entation and a judgmental measure of performance, bias in the data resulting from the level of the infor-
the posited relationship between market orientation and mants. Furthermore, it would be very interesting to
market share was not supported. In this regard, it is compare perceptions of employees at different levels
important to note that business performance is a mul- of an SBU and account for differences in perceptions,
tidimensional construct and may be characterized in a if any, concerning the SBU's market orientation.
number of ways, including effectiveness, efficiency, It also would be useful to try to measure market
and adaptability (see Walker and Ruekert 1987). Fur- orientation using unobtrusive measures, such as
thermore, performance on one dimension may run content analysis of internal company memos, annual
counter to performance on other dimensions. There- reports, and so on and relate these to other measures
fore, it would be useful to explore the complexities of market orientation, such as the one used in this
of the relationship between market orientation and al- study.
ternative dimensions of business performance in fu- Finally, this study employs a cross-sectional anal-
ture studies. It would also be useful to assess the re- ysis of a large number of businesses. While providing
lationship between a market orientation and business important insights into the determinants of a market
performance over extended periods of time. orientation, it does not shed much light on the change
Second, it seems desirable to assess the role of processes involved in improving a market orientation.
additional factors in influencing the market orienta- For example, a relatively low level of market orien-
tion of an organization. For example, do certain in tation may in fact lead managers to alter certain
characteristics of employees (personality, attitudes) help antecedents such as reward systems which, in tum,
or hinder a market orientation? Similarly, some of the lead to a higher level of market orientation. In this
variables included in the present study deserve further regard, it would be useful to conduct in-depth studies
investigation. For example, while formalization was of a few organizations engaged in the change process
hypothesized to affect a market orientation, it was found so as to better understand the factors that influence
to be unrelated to it or any of its components. Future the initiation and implementation of change efforts
research is needed to assess the characteristics of rules directed at improving the market orientation of a
that facilitate or hinder a market orientation. business.

Appendix
Coefficient
Scale Scale Items Alpha
Market Orientation 1. In this business unit, we meet with customers at least once a
(Intelligence year to find out what products or services they will need in the
Generation) future. .71
2. Individuals from our manufacturing department interact di-
rectly with customers to learn how to serve them better.

Market Orientation: Antecedents and Consequences / 65

 3. In this business unit, we do a lot of in-house market research
4. We are slow to detect changes in our customers' product pref-
erences.
5. We poll end users at least once a year to assess the quality of
our products and services.
6. We often talk with or survey those who can influence our end
users' purchases (e.g., retailers, distributors).
7. We collect industry information through informal means (e.g.,
lunch with industry friends, talks with trade partners).
8. In our business unit, intelligence on our competitors is gen-
erated independently by several departments.
9. We are slow to detect fundamental shifts in our industry (e.g.,
competition, technology, regulation).
10. We periodically review the likely effect of changes in our busi-
ness environment (e.g., regulation) on customers.

Market Orientation 1. A lot of informal "hall talk" in this business unit concerns our
(Intelligence competitors' tactics or strategies. * .82
Dissemination) 2. We have interdepartmental meetings at least once a quarter to
discuss market trends and developments.
3. Marketing personnel in our business unit spend time discuss-
ing customers' future needs with other functional departments.
4. Our business unit periodically circulates documents (e.g., re-
ports, newsletters) that provide information on our customers.
5. When something important happens to a major customer or
market, the whole business unit knows about it in a short pe-
riod.
6. Data on customer satisfaction are disseminated at all levels in
this business unit on a regular basis.
7. There is minimal communication between marketing and man-
ufacturing departments concerning market developments.
8. When one department finds out something important about
competitors, it is slow to alert other departments.

Market Orientation 1. It takes us forever to decide how to respond to our competi-

(Response Design) tors' price changes. .78
2. Principles of market segmentation drive new product devel-
opment efforts in this business unit.
3. For one reason or another we tend to ignore changes in our
customers' product or service needs.
4. We periodically review our product development efforts to en-
sure that they are in line with what customers want.
5. Our business plans are driven more by technological advances
than by market research.
6. Several departments get together periodically to plan a re-
sponse to changes taking place in our business environment.
7. The product lines we sell depend more on internal politics than
real market needs.

Market Orientation 1. If a major competitor were to launch an intensive campaign

(Response targeted at our customers, we would implement a response
Implementation) immediately. .82
2. The activities of the different departments in this business unit
are well coordinated.
3. Customer complaints fall on deaf ears in this business unit.
4. Even if we came up with a great marketing plan, we probably
would not be able to implement it in a timely fashion.
5. We are quick to respond to significant changes in our com-
petitors' pricing structures.
6. When we find out that customers are unhappy with the quality
of our service, we take corrective action immediately.
7. When we find that customers would like us to modify a prod-
uct or service, the departments involved make concerted ef-
forts to do so.

Top Management 1. Top managers repeatedly tell employees that this business un-
Emphasis it's survival depends on its adapting to market trends. .66

66 / Journal of Marketing, July 1993

 2. Top managers often tell employees to be sensitive to the ac-
tivities of our competitors.
3. Top managers keep telling people around here that they must
gear up now to meet customers' future needs.
4. According to top managers here, serving customers is the most
important thing our business unit does.

Top Management Risk 1. Top managers in this business unit believe that higher finan-
Aversion cial risks are worth taking for higher rewards. .85
2. Top managers here accept occasional new product failures as
being normal. *
3. Top managers in this business unit like to take big financial
risks.
4. Top managers here encourage the development of innovative
marketing strategies, knowing well that some will fail.
5. Top managers in this business unit like to "play it safe."
6. Top managers around here like to implement plans only if they
are very certain that they will work.

Interdepartmental 1. Most departments in this business get along well with each
Conflict other. .87
2. When members of several departments get together, tensions
frequently run high.
3. People in one department generally dislike interacting with those
from other departments.
4. Employees from different departments feel that the goals of
their respective departments are in harmony with each other.
5. Protecting one's departmental turf is considered to be a way
of life in this business unit.
6. The objectives pursued by the marketing department are in-
compatible with those of the manufacturing department.
7. There is little or no interdepartmental conflict in this business
unit.

Interdepartmental 1. In this business unit, it is easy to talk with virtually anyone you
Connectedness need to, regardless of rank or position. .80
2. There is ample opportunity for informal "hall talk" among in-
dividuals from different departments in this business unit.
3. In this business unit, employees from different departments feel
comfortable calling each other when the need arises.
4. Managers here discourage employees from discussing work-
related matters with those who are not their immediate su-
periors or subordinates.
5. People around here are quite accessible to those in other de-
partments.
6. Communications from one department to another are ex-
pected to be routed through "proper channels."*
7. Junior managers in my department can easily schedule meet-
ings with junior managers in other departments.

Formalization 1. I feel that I am my own boss in most matters. .76

2. A person can make his own decisions without checking with
anybody else.
3. How things are done around here is left up to the person doing
the work.
4. People here are allowed to do almost as they please.
5. Most people here make their own rules on the job.
6. The employees are constantly being checked on for rule vio-
lations.
7. People here feel as though they are constantly being watched
to see that they obey all the rules.

Centralization 1. There can be little action taken here until a supervisor ap-
proves a decision. .88
2. A person who wants to make his own decision would be quickly
discouraged here.

Market Orientation: Antecedents and Consequences /67

 3. Even small matters have to be referred to someone higher up
for a final answer.
4. I have to ask my boss before I do almost anything.
5. Any decision I make has to have my boss' approval.

Reward System 1. No matter which department they are in, people in this busi-
Orientation ness unit get recognized for being sensitive to competitive
moves. .73
2. Customer satisfaction assessments influence senior managers'
pay in this business unit.
3. Formal rewards (i.e., pay raise, promotion) are forthcoming to
anyone who consistently provides good market intelligence.
4. Salespeople's performance in this business unit is measured
by the strength of relationships they build with customers.
5. Salespeople's monetary compensation is almost entirely based
on their sales volume.*
6. We use customer polls for evaluating our salespeople.

Organizational 1. Employees feel as though their future is intimately linked to

Commitment that of this organization. .89
2. Employees would be happy to make personal sacrifices if it
were important for the business unit's well-being.
3. The bonds between this organization and its employees are
weak.
4. In general, employees are proud to work for this business unit.
5. Employees often go above and beyond the call of duty to en-
sure this business unit's well being.
6. Our people have little or no commitment to this business unit.
7. It is clear that employees are fond of this business unit.

Esprit de Corps 1. People in this business unit are genuinely concerned about the
needs and problems of each other. .90
2. A team spirit pervades all ranks in this business unit.
3. Working for this business unit is like being a part of a big fam-
ily.
4. People in this business unit feel emotionally attached to each
other.
5. People in this organization feel like they are "in it together."
6. This business unit lacks an "espirit de corps."
7. People in this business unit view themselves as independent
individuals who have to tolerate others around them.

Overall Performance 1. Overall performance of the business unit last year. .83
2. Overall performance relative to major competitors last year.

Market Turbulence 1. In our kind of business, customers' product preferences change

quite a bit over time. .68
2. Our customers tend to look for new product all the time.
3. Sometimes our customers are very price-sensitive, but on other
occasions, price is relatively unimportant.*
4. We are witnessing demand for our products and services from
customers who never bought them before.
5. New customers tend to have product-related needs that are
different from those of our existing customers.
6. We cater to many of the same customers that we used to in
the past.

Competitive Intensity 1. Competition in our industry is cutthroat. .81

2. There are many "promotion wars" in our industry.
3. Anything that one competitor can offer, others can match readily.
4. Price competition is a hallmark of our industry.
5. One hears of a new competitive move almost every day.
6. Our competitors are relatively weak.

Technological 1. The technology in our industry is changing rapidly. .88

Turbulence 2. Technological changes provide big opportunities in our indus-
try.

68/ Journal of Marketing, July 1993

 3. It is very difficult to forecast where the technology in our in-
dustry will be in the next 2 to 3 years.*
4. A large number of new product ideas have been made pos-
sible through technological breakthroughs in our industry.
5. Technological developments in our industry are rather minor.
*This item was eliminated, based on the scale refinement procedure described in the text.

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