Customer Orientation, Innovation Competencies, and Firm Performance: A Proposed Conceptual Model

AbstractMany firms invest substantial resources to build innovation competencies. Firms exist to satisfy the needs of their target markets, and as such, building innovation competencies requires a strong set of organizational knowledge, abilities, and motivations to ensure that innovation activities are geared towards serving market needs and organizational goals. This paper presents an interdisciplinary view integrating literature from the disciplines of marketing, innovation, and organization studies and discusses the valuable role that a customer orientation may play in the development of innovation competencies and subsequent organizational outcomes. A customer orientation has often been criticized as constraining certain innovation processes. Nevertheless, since innovation is regarded as a knowledge-based capability, this paper posits that the execution of market-sensing, customer-relating, and customer-response capabilities lend to, rather than inhibit, innovation competencies. In describing innovation, the view taken here is on two distinct but interrelated concepts, namely creativity (i.e. idea generation and problem solving) and innovation (i.e. the implementation of creative ideas). A conceptual model, based on theoretical foundations from the dynamic capabilities perspective and resource advantage theory, is proposed linking customer orientation, creativity, innovation and firm performance. Theoretical contributions, practical implications, and future research directions are also discussed

Innovation and performance implications of customer-orientation across different business strategy types

Given that the ultimate goal of business is performance enhancement, this study approaches the phenomenon by drawing on resource-advantage (R-A) theory to conceptualize a model with the aim of investigating the links among composite operant resources (CORs), namely customer orientation, basic operant resources (BORs), innovative capability, and financial performance across Miles and Snow's five business strategy types, including prospectors, differentiated defenders, low-cost (LC) defenders, analyzers, and reactors. The scope of this study is firms based in the emerging market of Thailand. A final sample of 395 Thai firms participated in the self-administered survey. Multiple-group structural equation modeling and multivariate analysis of variance (MANOVA) were utilized to test the hypotheses. The results revealed insightful findings that advance the strategy and innovation literature. While business strategy types moderate the proposed relationships, the only one that is uniform across all five types of firms is the positive, strong, and significant customer orientation-innovation capability link. Moreover, customer orientation and innovative capability contribute significantly to financial performance among prospectors and LC defenders. However, only the former is essential to differentiated defenders, analyzers, and reactors. Overall, the findings suggest that managers must pay attention to connections between their chosen business-level strategy, customer-focused resources, and innovation capabilities to generate the best financial performance outcomes for their firms