Although previous research has theoretically asserted and provided partial empirical support for a positive relationship between an organization\u27s market orientation and business performance, few studies have demonstrated this relationship using a broader conceptualization of business performance that extends beyond market-based and financial measures. This dissertation conceptualizes and develops valid measurements of key dimensions of a business performance construct—termed strategy-balanced measure of business performance (SBMBP)—and empirically tests this construct with the market orientation construct. To fully capture the financial and operational domain of business performance, the SBMBP construct is developed through a multidisciplinary literature review, in-depth telephone interviews, and industry and academic pretests.
The sample methodology involves mailing questionnaires to marketing executives at business units predominantly in the manufacturing industry. Based on exploratory and confirmatory factor analyses to test the hypothesized and alternative measurement models of business performance, six first-order indicators of business performance—financial, customer value, market, internal business process, employee, and new growth performance—are developed. These indicators form the foundation to develop the second-order SBMBP construct. An evaluation of the measurement properties indicates that all operational measures of business performance satisfy the criteria for unidimensionality, reliability, and convergent, discriminant, and predictive validity.
Results of a series of ordinary least squares regressions show that market orientation is positively related to each of the six first-order indicators of business performance, the second-order SBMBP construct, and each of the five unidimensional measures of business performance borrowed from previous research. The control variables for market growth and business size are also positively related to all measures of business performance. High levels of market turbulence, technological turbulence, and competitive intensity increase the strength of the relationship between market orientation and most measures of business performance.
The major contribution of this dissertation is the development of a creative and balanced perspective for measuring business performance that incorporates indicators of financial performance and indicators of operational performance, which are the drivers of future financial performance. It sheds new light on how managers can measure their organization\u27s business performance and determine the adequacy of market orientation as a source of long-term competitive advantage
