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European Journal of Marketing

Market orientation and marketing practice in a developing economy


Paul D. Ellis,
Article information:
To cite this document:
Paul D. Ellis, (2005) "Market orientation and marketing practice in a developing economy", European
Journal of Marketing, Vol. 39 Issue: 5/6, pp.629-645, https://doi.org/10.1108/03090560510590746
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Market
Market orientation and orientation
marketing practice in a developing
economy
629
Paul D. Ellis
Department of Management and Marketing, Hong Kong Polytechnic University, Received February 2004
Hung Hom, Kowloon, Hong Kong, People’s Republic of China Revised October 2004
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Abstract
Purpose – The central question of this study is whether the implementation of the marketing concept
boosts organizational performance in developing economies. A subsidiary aim is to identify those
antecedents that influence the formation of market orientation (MO) and marketing practice (MP).
Design/methodology/approach – Interview data were collected from a sample of 57 exporter
manufacturers located in central China.
Findings – Although there is a link between MP and overall business performance, no such link
exists for Narver and Slater’s concept of MO. In general, MP was found to be a superior predictor of
business performance. This study also found that the most significant antecedents to MO for
developing country firms were customers and markets located outside the home market.
Research limitations/implications – Marketing-minded managers in developing economies
encounter a number of institutional and environmental obstacles to collecting useful market
intelligence. In such cases, the development of a MO will be inevitably hindered and it will be
preferable to focus instead on boosting MP, which has a clearer link with performance. As the
economy matures, customers and competitors located in export markets may provide useful
MO-enhancing intelligence.
Originality/value – As an exploratory study, this study has value as a first step towards integrating
the two MO and MP research streams in the context of marketing in developing economies. The
study’s findings reinforce the idea of the marketing concept as a universal construct when measured in
terms of specific business activities.
Keywords Market orientation, Marketing, Exports, Performance measurement (quality)
Paper type Research paper

Introduction
The implementation of the marketing concept is widely thought to have a positive
influence on business performance. This assumption underlies two separate areas of
research. On one side, is a group of predominantly American scholars, who have
sought to demonstrate the link between market orientation (MO) and superior business
performance (Baker and Sinkula, 1999; Kohli and Jaworski, 1990; Moorman and Rust,
1999; Narver and Slater, 1990; Pelham and Wilson, 1996). The emphasis in this body of
work is on the marketing concept as an over-arching business philosophy or corporate

The author would like to acknowledge the invaluable assistance provided by Luk Yim Kwan,
European Journal of Marketing
Liu Xiaohong and Hui Bi Xian during the data collection phase of this study. An earlier version Vol. 39 No. 5/6, 2005
of this paper was presented at the European Marketing Academy Conference in Murcia, Spain, in pp. 629-645
q Emerald Group Publishing Limited
May 2004. This project was supported by the Research Grants Council of the HKSAR (Project no. 0309-0566
PolyU 5234/99H). DOI 10.1108/03090560510590746
EJM culture that is manifested in those activities that create superior value for customers
39,5/6 (Narver and Slater, 1990). This perspective is top-down and external for the critical
issue concerns the degree to which the top management team is mindful of customers’
ever-changing needs and competitors’ strategies. On the other side, a group of mainly
European-based scholars has focused on the execution of the marketing function in
terms of specific marketing activities (Akimova, 2000; Avlonitis and Gounaris, 1997;
630 Doyle et al., 1992; Greenley and Shipley, 1992; Hooley and Beracs, 1997). The emphasis
here is managerial rather than cultural, and internal in the sense that above-average
performance is seen to result from the firm-specific implementation and organization of
marketing strategies (Chang, 1996; Woodside et al., 1999). If the first group is
concerned with a MO, then the second group is more interested in actual marketing
practice (hereafter MP).
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A recent meta-analysis of extant MO research (Ellis, 2004b) revealed that the


strongest findings linking MO with performance have generally been found in mature
economies such as the US (Jaworski and Kohli, 1993; Slater and Narver, 1994a),
Germany (Homburg and Pflesser, 2000), and the Netherlands (Langerak, 2001). To
date, very few MO studies have been reported from developing nations
(cf. Appiah-Adu, 1998). In contrast, a significant amount of MP work has been done
in emerging economies such as Russia (Golden et al., 1995), Puerto Rico (Galbraith and
Holton, 1955), Venezuela (Boyd et al., 1958), the Philippines (Huszagh et al., 1992),
Hungary (Hooley and Beracs, 1997), Yugoslavia (Shama, 1992) and Ukraine (Akimova,
2000). This publication trend hints at an intriguing question: which has the greatest
effect on firm performance in developing economies – MO or MP? In mature economies
characterized by the prevalence of buyer’s markets, stable growth and intense
competition, firms that are more oriented towards customers’ needs and competitors’
actions will do better, as per the claims of MO scholars. In contrast, in developing
economies characterized by ill-defined market boundaries and strong or burgeoning
demand, firms may be able to “get away with” a minimal amount of MO (Kohli and
Jaworski, 1990, p. 15). Yet the findings of Akimova (2000), Hooley and Beracs (1997)
and others, indicate that in such exchange settings, high-MP firms still tend to
outperform their low-MP rivals.
The aim of this study is to explore the relative merits of pursuing the marketing
concept as external orientation towards markets versus internal MP in a developing
economy. This paper is organized in five parts. A brief review of the main implications
for firms in developing economies stemming from extant MO and MP research is
presented first. Next, some hypotheses are developed and this is followed by a
description of the research design used in this study. The main findings are then
presented and these form the basis for a final discussion section in which the relevant
implications for scholars and practitioners are identified.

Literature review
The domain of marketing management is predicated on the assumption of a positive
link between the marketing concept and firm performance. Firm’s embracing the
marketing concept – generally defined as being synonymous with a customer focus
(Houston, 1986; Levitt, 1960; McCarthy and Perreault, 1984) – usually do so with the
expectation of making long-term gains in profitability and market position (Webster,
1988). This connection between the marketing concept and business performance was
widely held to be self-evident until the mid-1980s, when marketing practitioners found Market
themselves being increasingly out-marketed by superior, usually Japanese, imports. orientation
Declining US competitiveness, coupled with a rising trade deficit, provided
indisputable evidence of firms’ inability to respond effectively to changes in their
markets (Kotler and Fahey, 1982; Webster, 1988). Accordingly, existing modes of
thinking about marketing were called into question and a divide began to appear
between marketing scholars, who held unswervingly to the pre-eminence of the 631
marketing concept (Payne, 1988) and those who began to wonder whether the concept
was the optimal management philosophy at all (Houston, 1986).
It was in this environment of intellectual and market-place uncertainty that the first
serious attempts to empirically assess the purported performance enhancing effects of
the marketing concept were made. Over time, two separate veins of research emerged,
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one emphasizing a corporate-wide philosophy manifested in a measurable outward


orientation towards markets, and the other focusing on the actual execution of the
marketing function by the marketing department or division within the firm. The first
vein benefited from the seminal contributions of two pairs of authors (Kohli and
Jaworski, 1990; Narver and Slater, 1990), who laid much of the conceptual foundation
on which subsequent MO research was based (Baker and Sinkula, 1999; Chan and Ellis,
1998; Ellis, 2004a; Harris and Ogbonna, 2001; Homburg and Pflesser, 2000; Moorman
and Rust, 1999; Pelham and Wilson, 1996; Shoham and Rose, 2001; Slater and Narver,
1994a; Tse et al., 2003). The second vein, in stark contrast, is a disparate assortment of
studies lacking the cohesion afforded by a shared set of instruments or even common
terminology. The authors in this group variously claim to be interested in marketing
capabilities (Chang, 1996; Vorhies et al., 1999), marketing competencies (Conant et al.,
1990; Woodside et al., 1999), marketing efficiency (Galbraith and Holton, 1955),
marketing strategies (Shaw, 2001), marketing orientation (Avlonitis and Gounaris,
1997; Golden et al., 1995), and MP (Greenley and Shipley, 1992; Huszagh et al., 1992). To
avoid adding to the confusion, the label “marketing practice” will be used here to
describe those studies which share a common focus on the implementation of the
marketing function. The key difference between the two areas of research is subtle: one
side is concerned with markets; the other side is concerned with marketing. This
difference is cast into sharper relief when the implications for firms in developing
economies are considered.

Market orientation and economic development


In 1990, two influential articles were published in the Journal of Marketing reporting
evidence in support of a relationship between MO and business performance. In the
first of these articles, MO was explicated in terms of the generation and dissemination
of market intelligence throughout the firm leading to an appropriate, market oriented,
response (Kohli and Jaworski, 1990). In the second article, MO was defined as the
combination of three factors, namely, a customer orientation, a competitor orientation,
and the interfunctional coordination of marketing activities (Narver and Slater, 1990).
(Two other components proposed by these authors – long-term horizon and profit
emphasis – were later abandoned.) The vast majority of MO studies published since
1990 have adopted either one or the other of these two seminal MO definitions. For
example, studies in the Kohli and Jaworski tradition include: Baker and Sinkula (1999),
Homburg and Pflesser (2000), Jaworski and Kohli (1993), Kwon and Hu (2000), and
EJM Shoham and Rose (2001). In contrast, studies based on Narver and Slater’s definition
39,5/6 include: Chan and Ellis (1998), Ellis (2004a), Fahy et al. (2000), Farrell (2000), Harris and
Ogbonna (2001), Moorman and Rust (1999), Pelham and Wilson (1996), Slater and
Narver (1994a), and Tse et al. (2003).
The pattern of results evidenced in these MO-replication studies hides an interesting
tale. In the years immediately following the publication of the two original JM hits, it
632 became evident that the strongest links between MO and performance were being
found only in the US (Baker and Sinkula, 1999; Pelham and Wilson, 1996; Slater and
Narver, 1994a). Studies done in other countries at that time, such as the United
Kingdom (Greenley, 1995), Hong Kong (Chan and Ellis, 1998), and Korea (Kwon and
Hu, 2000), generally returned weak to no significant findings. It began to appear that
MO might be a uniquely American concept, not easily transferred to other business
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cultures. Yet, the emergence in recent years of several new studies indicates that this is
not the case, for MO has now been found to have a significant effect on firm
performance in Germany (Homburg and Pflesser, 2000), the Netherlands (Langerak,
2001), Australia (Farrell, 2000), the United Kingdom (Harris and Ogbonna, 2001), Israel
(Shoham and Rose, 2001), and elsewhere. However, before any claims regarding the
robustness of the MO construct can be made, more research is needed from developing
nations. Indeed, from the limited data that are available, it appears that MO effect sizes
may well be influenced by the research location (Ellis, 2004a). For example, a recent
meta-analysis of extant research demonstrated that the MO-performance link is
significantly correlated with the gross national income of host economies. Comparing
the effect sizes of 56 studies drawn from 28 nations revealed that the level of economic
development of the study’s setting may explain as much as 12 percent of the variance
in the results observed in existing MO research (Ellis, 2004b). The implication is that
MO is not a particularly potent predictor of firm performance in developing economies.
This was certainly the case in Appiah-Adu (1998) test of the MO-performance link in
Ghana. Based on data collected from 74 firms, this author found no correlation between
MO and two performance measures.

Marketing practice and economic development


MP studies are distinguished by their focus on the operationalization of the marketing
concept. In contrast with MO research, the central question of MP research concerns
the effectiveness of a firm’s marketing activities. While MO scholars would argue that
the presence of a customer and competitor orientation “provides a solid foundation for
value-creating activities” (Slater and Narver, 1994b, p. 22), and therefore, the term
“market orientation” should imply the implementation of the marketing concept (Kohli
and Jaworski, 1990), it does not follow that the opposite is true, particularly in the case
of developing country firms. Indeed, when it comes to measurement, MP proponents
often prove themselves to be unconcerned with external orientations. From an MP
perspective, performance is seen to be influenced primarily by the firm’s management
of the marketing mix, the usefulness of its market research, the appropriateness of its
positioning strategies, and the nature of its marketing goals (Doyle et al., 1992;
Greenley and Shipley, 1992; Shaw, 2001; Vorhies et al., 1999; Woodside et al., 1999). The
implication is that it is possible for a firm to be functionally adept at the practice of
marketing without top management teams exhibiting any evidence of an external MO.
While some authors do not discriminate between MO and MP (Akimova, 2000), the
approach of this study heeds McGee and Spiro (1988, p. 45) admonition to “distinguish Market
between the marketing philosophy and management of the marketing mix, both orientation
conceptually and in implementation”.
MP scholars differ from their MO counterparts in other important ways. For
example, a cursory glance at the literature just cited reveals that studies done by this
group tend not to be published in top tier marketing journals. This presumably reflects
the more practitioner-oriented nature of the research. The underlying motivation 633
behind many MP studies is the desire to enhance firms’ MPs by highlighting the
performance implications of doing marketing well. Consequently, many MP studies are
comparative in nature, contrasting high- and low-MP performers (Akimova, 2000) or
the practices of firms occupying different strategic groups (Conant et al., 1990;
Woodside et al., 1999) or industry sectors (Greenley and Shipley, 1992; Huszagh et al.,
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1992), or the various marketing strategies of firms from different countries competing
in the same market (Doyle et al., 1992; Shaw, 2001). This methodological tendency to
compare firms on marketing activities has led to a substantial body of work done in
developing countries (Akimova, 2000; Galbraith and Holton, 1955; Golden et al., 1995;
Hooley and Beracs, 1997; Huszagh et al., 1992). As a result, much more is known about
the effects of MP than MO in such societies.
In their survey of 200 Russian firms, Golden et al. (1995) measured a number of
marketing-related dimensions such as the level of product quality, marketing research,
and customer service, as well as the degree of importance attached to activities such as
advertising, personal selling, and sales promotion. These authors found a positive link
between firm performance and the provision of high quality products and customer
service. Curiously, promotion- and pricing-related items had no effect on firm
performance. In spite of these mixed results, Golden et al. (1995, p. 45) optimistically
reported on the “presence of a new breed of Russian managers, who have changed the
way they conduct business, shifting attention from a production orientation to more of
a marketing orientation”.
Based on data collected from 564 Hungarian companies, Hooley and Beracs (1997)
found that the better performing firms in their sample were significantly different from
the rest in terms of a number of MP-related measures. Top performers were more likely
to exhibit high levels of technical product quality, offer a wider range of products, and
provide greater distribution coverage. In her investigation of 221 Ukrainian firms,
Akimova (2000) similarly sought to compare the differences between groups of firms.
But unlike Hooley and Beracs (1997), Akimova classified firms in terms of the predictor
variables, which in this case, entailed a combination of typical MO measures (e.g.
marketing as a guiding philosophy) and MP measures (e.g. marketing as product
promotion and positioning). Having identified four discrete clusters of firms, Akimova
observed that those managers, who placed the greatest emphasis on marketing
activities scored significantly higher on measures of competitive advantage than
managers, who emphasized production or selling. Moreover, these high-MP firms
enjoyed higher profits, greater sales volumes and a better return on their investments,
than other firms.
In contrast with the scant returns of MO research, the findings of MP studies would
seem to indicate that the practice of marketing is just as important in developing
economies as in mature economies. These differences form the basis of the following
hypothesis development.
EJM Conceptual development
39,5/6 The critical catalyst to the development of MO is the acquisition of timely and relevant
market information. In their popular MO instrument, Kohli et al. (1993) included ten
items specifically geared towards measuring intelligence generation. Market
information is no less important to Narver and Slater (1990, p. 21) who stated that
“customer and competitor orientation include all of the activities involved in acquiring
634 information about buyers and competitors in the target market . . . ”. The chief
assumption underlying MO research is that rewards accrue to those firms that are
better able to gather, interpret, and respond to market intelligence. This assumption
may hold for firms competing in mature economies characterized by the relatively free
flow of information about market prices, competitors’ product offerings and changing
consumer preferences, but for firms in developing economies, the pursuit of a MO will
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be constrained to the degree to which these environmental conditions are absent.


Conditions in developing economies are qualitatively unlike those found in mature
markets. Products are typically in short supply, consumers have fewer choices, supply
chains are unreliable, and prices often do not reflect the true state of supply and
demand owing to government intervention in markets. In centrally planned economies,
market signals will typically be relegated secondary importance to changes in the
regulatory environment leading to an “efficiency gap” between marketing activities in
command versus free economies (Shama, 1992). Although the absence of reliable
market intelligence will undermine attempts to cultivate MO, consumers in developing
economies may still reward firms for providing them with better quality products,
more comprehensive distribution, and credit-pricing terms. It is unlikely that every
marketing activity will bear fruit, as Golden et al.’s (1995) Russian managers learned
with regard to their promotional and pricing activities, but in the main, high-MP firm’s
should generally outperform their low-MP rivals. The differential effects of MO and
MP on performance can be expressed in hypothesis form as follows:
H1. In a developing economy, MP will be a better predictor of business performance
than MO.
If good quality market intelligence is a necessary precursor to the formation of MO
(Kohli and Jaworski, 1990), then firms operating in developing economies will be
severely handicapped by their limited access to reliable information pertaining to
emerging trends, sources of supply, competitors’ actions, and changing regulations.
Over time, the rules of the game will ideally become clearer and more stable suggesting
that the value of MO will rise in tandem with economic development. In the context of
this development process, it is interesting to speculate on those triggers or sources,
which will precipitate the formation of MO. To date, these developmental issues have
been ignored in the extant literature with investigations of MO-antecedents being
confined to mature economies (Jaworski and Kohli, 1993).
Presumably the desire for, and value of, MO will be highly variable among a group
of developing country firms reflecting the quality of market intelligence to which each
is exposed. The dominant logic in MO research assumes that market intelligence
relating to changing product preferences is gleaned primarily from a firm’s customers.
Given the positive correlation between the level of economic development and the
quality of local market information, it may be that for firms competing in developing
countries the most potent MO-enhancing information sources will be found outside
the local system (Ellis, 2003). Exposure to sophisticated foreign customers and Market
competitors via exporting may provide the indigenous firm with improved access to orientation
information about emerging trends, changing preferences, competitor’s actions and so
forth, and have a direct influence on subsequent MO formation.
While exchange links with foreign markets can be expected to have a predictable
and positive bearing on MO, the effect on MP is more ambiguous. Ideally, a rise in MO
should be matched by gains in MP, but this is not necessarily so for firms competing in 635
developing economies. An alternative tentative view is that it is possible for a firm to
be good at the practice of marketing without possessing a MO. Entrepreneurial
marketers will always find ways to compete in even the most unstable and ill-defined
markets. In such cases, MP will exceed MO and any subsequent gains in MO will
merely serve to reduce the gap between the firm’s business philosophy and its existing
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practice. In short, because the pre-exporting ceiling for MP will generally be higher
than that for MO, any increase in export marketing activity will have a less of a
catalytic effect on MP than MO.
It has been speculated that foreign market exposure will have a positive effect on
the formation of MO for firms in developing economies. This exposure may be
measured in terms of both the quantity and diversity of information received from
external sources. For exporters, information quantity and diversity will be reflected in
the proportion of total income earned from foreign markets and the number of export
markets served, respectively. This leads to the following hypothesis:
H2. In contrast with MP, MO for firms located in developing economies will be
positively influenced by (a) the number of export markets and (b) the
proportion of income earned from foreign customers.
Firms develop MO and MP because top managers perceive the value of implementing
the marketing concept. Consequently, an important precursor to both MO and MP will
be corporate goals that emphasize marketing-related outcomes such as long-term gains
in market position. Such goals are often unrealistic in developing economies, where for
many firms, survival or the prevention of decline is the main order of business. In
addition, firms in transition economies may see their main objective as the provision of
continued employment for large numbers of workers facing redundancy as a result of
industry rationalization and privatization.
For those managers which do espouse marketing-related goals, success may well be
frustrated by the institutional and informational adequacies of the local economy.
In view of the reasons already mentioned – imperfect information flows, artificial
prices, rapid market growth, etc. – it will be less problemmatic for marketing-motivated
firms to improve their MP than their MO. This can be expressed in hypothesis form as
follows:
H3. Corporate objectives emphasizing marketing-related outcomes will have a
greater effect on MP than MO for firms in developing economies.

Research method
Sampling and data collection
The population for this study was defined as indigenous exporters based in the city of
Xi’an in Shaanxi Province in central China. Xi’an, China’s former capital, is the largest
EJM city in the interior and had a per capita GDP of around US$1,200 in 2001 (TDC, 2004),
39,5/6 compared with Shanghai’s US$4,160 (Statistical Yearbook of Shanghai, 2001).
Although double digit GDP growth in China’s coastal provinces has been well
publicized over the past decade, Xi’an has only very recently begun to enjoy similar
levels of development. In 2000, exports from Shaanxi Province increased by 30 percent
on the previous year (TDC, 2004). However, with total exports of only US$1.3 billion,
636 Xi’an’s foreign trading activity remains around ten percent of Shanghai levels (US$25
billions in 2000) after accounting for differences in population. Straddling the old Silk
Road, once China’s primary trade link with the West, it is ironic that Xi’an’s progress
has perhaps been most hindered by its distance from foreign markets. While Xi’an does
have a small international airport (Xi’anyang), most external trade is trans-shipped via
ports on the coast, some 600 km distant (or about 24 hours by train). The generally
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limited level of inward investment into central China combined with the distance to
markets has meant that Xi’an remains a developing economy still caught in the very
early stages of China’s transition to a market-based system.
Data collection was based on in-depth interviews with exporters of locally-made
manufactured goods. Interviews were deemed necessary given Xi’an managers’ lack of
experience with mail surveys and the unreliable nature of the local postal system. In
China research, data collection for foreign scholars is often facilitated by relying on the
local knowledge of resident research collaborators, and this study was no exception.
The bulk of the fieldwork was conducted by a team of Mandarin-speaking researchers
based at the Xi’an Statistical Institute. To ensure the integrity of the data collection
exercise, the author spent three days training interviewers and supervising pre-tests in
Xi’an. It is important to note that the leader of the research team in Xi’an had been
identified via the collegial ties of the author. As Uzzi (1996) has found, new exchanges
that come “primed” with social resources appropriated from pre-existing relationships,
offer benefits in the form of uncertainty-reducing norms regarding expectations and
the promotion of trust-creating behaviors. One important reason for visiting Xi’an,
therefore, was to build a good working relationship with the interviewing team based
on this initial stock of “borrowed” trust.
At the close of data collection, 57 useable questionnaires had been completed.
Interviews took between 30 and 60 minutes to conduct and any uncompleted
interviews were followed up with a repeat visit or phone call. Respondent firms
employed an average of 109 workers, had been exporting for 14 years, and earned 65
percent of their income from 20 export markets.

Measurement
MO was measured using the constructs of customer orientation and competitor
orientation developed and validated by Narver and Slater (1990). Some items were
eliminated from the original scale (e.g. pertaining to after-sales service) as they were
deemed to be irrelevant to the business practices of Chinese exporters. The final
nine-item scale was essentially the same as the scale used by Pelham and Wilson
(1996). MP was assessed by asking informants to rate their firm’s performance on six
diverse marketing activities including pricing, advertising and market research.
Following Woodside et al. (1999) performance on each activity was judged by asking
informants to rate themselves relative to competitors. Coefficient alphas for the MO
and MP scales are reported in Table I and both exceed the 0.70 threshold.
Corrected item-total a if item Cronbach’s
Market
correlation deleted a orientation
Market orientation 0.7708
Customer satisfaction objectives 0.5221 0.7418
Understand customers’ needs 0.6845 0.7117
Create customer value 0.4513 0.7524 637
Know our competitors well 0.4507 0.7503
Respond rapidly to competitor’s actions 0.5211 0.7387
Entire business contributes to customer value 0.6670 0.7116
Visit important customers to learn future needs 0.4106 0.7580
Top managers discuss competitive strategiesa 0.1702 0.7816
Target opportunities to exploit competitors’
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weaknessesa 0.1966 0.7793


Marketing practice 0.7025
Compared to competitors we are much worse/better in
terms of . . .
Prices 0.4198 0.6671
Advertising activities* 20.0423 0.7905
Sourcing and negotiating supply 0.4756 0.6504
Delivery times 0.6301 0.6006
Customer service and support 0.6047 0.6016
Market research 0.5799 0.6107 Table I.
Note: aDeleted from the analysis Reliability analyses

Performance was measured three ways; satisfaction with performance, performance


in comparison with major competitors, and an overall performance measure based
on sales growth and profitability. Informants were first asked to rate their degree of
satisfaction with the firm’s performance over the last year on four variables: sales
growth, cash flow, gross profit margin, and ROI ða ¼ 0:85Þ: Mindful that Chinese
respondents tend to gravitate toward mid-points on scales (Shenkar, 1994), an
even-numbered scale ranging from one (highly dissatisfied) to eight (highly satisfied)
was used. Competitive performance was measured by asking informants to compare
their firm’s three-year performance with major market competitors in terms of sales
growth, operating profits, ROI, and market share ða ¼ 0:88Þ: Answers could range
from one (“much worse than competitors”) to eight (“much better than competitors”).
Finally, a measure of overall business performance was assessed by multiplying
quantitative scores for sales growth and profitability measured over each of the past
three years ða ¼ 0:84Þ: Sales growth was measured using a seven-point scale
ranging from 1 (decline) to 7 ð. 20 percent) and profitability was measured using a
three-point scale; 1 (loss), 2 (breakeven), 3 (profit). A correlation matrix showing the
interrelationships between all the variables is presented in Table II.
The final instrument was translated into simplified Chinese by a pair of translators
each working independently. The final agreed upon version was then back-translated
into English by the leader of the research team in Xi’an. The original and
back-translated questionnaires were then compared to resolve inconsistencies.
Pre-tests with three exporters in Xi’an were also valuable for assessing issues of
translation and conceptual equivalence. These pre-tests were conducted by both the
local research team leader and one of the two original (Mandarin-speaking) translators.
EJM 1 2 3 4 5 6 7 8 9
39,5/6
1. Market orientation 1.00
2. Marketing practice 0.245 1.00
3. Firm size (employees) 0.070 0.104 1.00
4. Total sales income 20.111 0.041 0.216 1.00
638 5. Export markets (n) 0.281 0.110 0.089 0.388 1.00
6. Exporting income (percent) 0.285 20.048 2 0.042 0.005 0.136 1.00
Performance measures
7. Satisfaction 0.216 0.321 0.074 0.265 0.068 2 0.009 1.00
8. Competitive 0.418 0.290 0.102 0.014 0.116 0.402 0.466 1.00
Table II. 9. Overall 0.102 0.326 2 0.005 0.179 0.052 0.180 0.652 0.379 1.00
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Correlation matrix Note: All correlations above 0.22 are significant at p , 0:05

At the end of the pre-tests, only minor cosmetic changes to the instrument were
required indicating full equivalence of the original and translated versions of the
questionnaire.

Findings
To test whether MO or MP is a better predictor of firm performance, multiple
regression equations were estimated linking both predictors with each of the three
performance indicators. The results of the multiple regression analyses are presented
in Table III. Controlling for the extraneous influence of firm size (measured as the total
number of employees) reveals that the standardized regression coefficients for MP are
significant when linked with satisfaction ðb ¼ 0:277; p , 0:05Þ and overall
performance ðb ¼ 0:313; p , 0:05Þ; but not with competitive performance ðb ¼
0:199; p . 0:05Þ: In contrast, MO was found to be linked with competitive performance
ðb ¼ 0:374; p , 0:01Þ; but not with either satisfaction-measures ðb ¼ 0:147; p . 0:05Þ
or overall performance ðb ¼ 0:028; p . 0:05Þ: Accounting for firm size reveals that
MO can be used to explain close to 14 percent of the variation in competitive
performance. Is MO a significantly stronger predictor of competitive performance than
MP? To answer this question in view of the low statistical power of the study, the
partial correlation coefficients from both the MO and MP equations were compared
using Fisher’s r-to-z transformation. The resulting one-tailed Z-test indicated that there
is no significant difference between MO and MP in explaining competitive performance
ðz ¼ 0:79; p ¼ 0:215Þ:

Performance measures – coefficients (standard errors)


Independent variables Satisfaction Competitive Overall

Market orientation 0.147 (0.16) 0.374 (0.14)** 0.028 (0.18)


Marketing practice 0.277 (0.17)* 0.199 (0.14) 0.313 (0.19)*
Firm size 0.035 (0.00) 0.055 (0.00) 2 0.040 (0.00)
Table III. R2 0.122 0.224 0.102
Main effects – MO, MP F-value 2.370*** 4.912** 1.936
and performance Note: *p,0.05; **p , 0.01; ***p , 0.10
To further explore the differences between the predictive power of MO and MP, firms Market
were categorized into high- and low-scoring groups on both dimensions. Performance orientation
differences were then compared across the groups using independent t-tests for each of
the three measures. The results, which are reported in Table IV, reinforce the view that
MP is a superior predictor of performance. Although there is a statistically significant
difference between high- and low-MO groups on competitive performance, no other
differences were observed across these groups. High-MP groups, on the other hand, 639
significantly outperformed low-MP groups on all three measures revealing that MP is a
more robust predictor of firm performance. These findings collectively indicate
support for H1.
What makes some firms more market oriented than others in developing
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economies? To test the hypothesis that external information sources play a catalytic
role in promoting MO, two multiple regression equations were estimated for each
dependent variable (MO and MP). Given that firms with higher incomes might be
better resourced to engage in marketing activities, firm income for the previous
financial year (measured on a scale ranging from 1 ( , RMB1m) to 10 ( . RMB1b))
was included as a control variable. The results of the regression analyses are presented
in Table V. The findings show that the degree to which a firm is exposed to foreign
markets has a strong and positive influence on MO, but no influence on MP at all. The
standardized regression coefficients in the MO model reveal a significant link with the
number of export markets ðb ¼ 0:338; p ¼ 0:018Þ; and a slightly weaker link with
share of income earned from exporting ðb ¼ 0:242; p ¼ 0:064Þ: Thus both H2a and
H2b are supported. Interestingly, a weakly significant link with the control variable
firm income was also observed, but running in the direction opposite to the expectation

Market orientation groups (means) Marketing practice groups (means)


Low High t-statistic P Low High t-statistic P

N 28 29 28 29
Market orientation 5.07 6.48 2 7.637 , 0.000 5.42 6.16 2 2.984 , 0.004
Marketing practice 4.60 5.26 2 2.703 , 0.009 4.22 5.67 2 8.571 , 0.000
Performance measure
Satisfaction 3.80 4.26 2 1.461 , 0.150 3.69 4.40 2 2.311 , 0.025
Competitive 4.01 4.74 2 2.642 , 0.011 4.04 4.73 2 2.514 , 0.015 Table IV.
Overall 3.98 4.49 2 1.456 , 0.151 3.72 4.77 2 3.210 , 0.002 MO and MP compared

Dependent variables
MO b(SE) MP b(SE)

Export markets (n) 0.338 (0.01)* 0.126 (0.01)


Income from exports (percent) 0.242 (0.34)** 2 0.032 (0.37)
Total sales income 2 0.233 (0.05)** 2 0.028 (0.58)
R2 0.186 0.014 Table V.
F-statistic 3.891* 0.238 Antecedents of a market
Note: *p,0.05; **p , 0.10 orientation
EJM ðb ¼ 20:233; p ¼ 0:095Þ: This may reflect the nature of the firms surveyed. More than
39,5/6 two-thirds of sampled firms were large state-owned enterprises, which generally
returned lower MO and MP scores than some of the other, smaller firms in the study.
This finding is consistent with Deng and Dart’s (1999) observation that state-owned
enterprises are less market oriented than other firms in China.
Finally, do differences in MO and MP reflect corporate objectives? To address this
640 question, informants were asked to indicate whether their priorities over the next five
years were survival-oriented, focused on short-term profits, or geared towards
long-term gains in market position (Hooley and Beracs, 1997). Answers in the first two
categories were then combined yielding a total of 27 firms pursuing short-term goals.
The MO and MP scores of this group were then compared with the 30 firms oriented
towards long-term gains in market position and the results are reported in Table VI.
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T-tests indicate that a firm’s future priorities have little bearing on MO, but a
significant and positive bearing on MP. Informants working towards long-term
gains in market position scored significantly higher on their implementation of
the marketing function than those working towards short-term profits ðt ¼ 22:189;
p ¼ 0:03Þ: Thus, H3 is supported.

Discussion and implications


The findings of this study reveal that, for the firms in this study, MP generally has a
greater impact on business performance than MO. MO was not found to be correlated
with either satisfaction-based or overall performance measures and the correlation
with competitive performance may reflect the measurement of the underlying
constructs. Four of the nine items pertaining to MO queried the degree of orientation
towards competitors. Specifically, interviewees were asked to make judgments about
their knowledge of, and responses to, major market competitors. Managers unfamiliar
with their competitors’ strengths and weaknesses would accordingly not score highly
on overall MO. Similarly, the competitive performance indicator required some a priori
knowledge about benchmarks set by competitors. It is difficult to imagine managers
rating themselves highly on sales growth relative to major competitors if they had just
demonstrated a low orientation towards their competitors. Conversely, interviewees
more familiar with competitive realities (scoring high on MO) may have greater
confidence in making favorable self-assessments on the competitive advantage
measure. This leads to the conclusion that the link between MO – as measured using
Narver and Slater (1990) instrument – and competitor-based performance measures
will always be susceptible to concerns regarding discriminant validity. (The same also
applies to competitor-based assessments of MP.) Given the widespread use of such
measures in the literature (Fahy et al., 2000; Farrell, 2000; Slater and Narver, 1994a; Tse
et al., 2003), it is recommended that scholars take the necessary steps to isolate the true
effect size of MO from any equivalence in the measurement of the predictor and

Future priorities
Short-term survival/profits Long-term market gain t P

N 27 30
Table VI. Market orientation 5.582 5.967 2 1.477 0.146
Corporate objectives Marketing practice 4.648 5.193 2 2.189 0.033
criterion variables. In this study, the inclusion of a variety of performance indicators Market
served as a safeguard. Another option is to simply avoid using competitor-based orientation
performance measures altogether.
In contrast with MO, MP was found to be significantly correlated with three diverse
measures of performance across a sample of firms drawn from a variety of industries.
This finding reinforces the supposition that firms in developing economies can be good
at managing the marketing mix without possessing a customer and competitor 641
orientation. For scholars, the chief implication is that the lack of MO does not
necessarily mean that the firm is neglecting the marketing concept. Indeed,
environmental factors may well be undermining attempts to cultivate (and measure the
effects of) MO in developing economies. How can an organization define objectives in
terms of customer satisfaction when no mechanism or infrastructure exists to measure
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satisfaction levels? How can managers from different departments call important
customers when there is no reliable phone system? Personal visits might also be out of
the question if key clients are located in distant markets (Ellis, 2004a). It will also be
difficult to articulate responses to competitors’ strategies when the firm is competing
with unknown suppliers from other low-cost nations. Even within the domestic market
competitors’ strengths and weaknesses may be obscured behind the protective
insulation of state-sponsorship. A rival firm hemorrhaging funds in a price war may be
in no immediate danger of collapse if the government is more concerned about the
political impact of massive job losses. Most disruptive of all will be mistaken messages
gleaned from prices that reflect subsidies and tariffs as much as real market
valuations.
Where conditions such as these prevail, it will be difficult, if not impossible, for a
marketing-intentioned firm to compensate for spotty market intelligence. The
problems confronting the firm are institutional and macroeconomic rather than micro
and managerial. The implication for managers is clear: where the costs of acquiring
useful and reliable market intelligence are prohibitive, the development of MO will be
inevitably and significantly hindered. In such cases, it will be preferable to focus on
boosting MP. Indeed, for managers in developing countries looking to make long-term
gains in their market position, the chief finding of this study is that marketing-oriented
goals are significantly correlated with gains in MP. In contrast, no link between
corporate goals and MO was found. All the marketing ambition in the world would not
alter the fact that the encumbered flow of information thwarts attempts to reap good
market intelligence. What motivated managers can do instead is concentrate on setting
strategies that reflect their marketing objectives. Attention can also be given to
improving their product’s technical quality and reliability, developing closer links with
suppliers, reducing delivery times to customers, and implementing systems to evaluate
the effectiveness of their marketing activities.
The market imperfections that impede the acquisition of market intelligence in
developing economies diminish over time, suggesting a positive correlation between
MO effects and economic development (Ellis, 2004b). As economies mature, managers
will find it both easier and more desirable to pursue MO. A significant finding of this
study is that the primary catalysts to MO formation are found outside of the host
economy. This conclusion is intuitively appealing: if local factors are obstructing the
development of MO, external factors, such as exposure to foreign customers and
competitors, may be more beneficial. For the exporters interviewed in this study, the
EJM degree of foreign marketing activity was significantly and positively correlated with
39,5/6 MO. A relevant implication for MO researchers is to consider the potentially
moderating factor of distance to major markets, as well as the size and level of
development of the host economy. The interplay between these variables has generally
not been a factor in past research for the reason that most studies have been based on
data collected from American consumer goods firms domiciled within their most
642 important market. For firms outside of the US, and particularly for firms in much of
Asia, Eastern Europe, South America and Africa, it is likely that MO will be affected
by both the size and level of development of the host market (Ellis, 2004b) and the
extent of their foreign marketing activity (Ellis, 2004a).
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Conclusion
As an exploratory study, this study has value as a first step towards integrating the
two MO and MP streams in the context of marketing in developing economies.
Although the boundaries between MO and MP are often blurred (Akimova, 2000), each
has unique and distinguishable antecedents and outcomes when measured in
developing economies. MP has a stronger impact on business performance and is more
likely to reflect corporate goals emphasizing long-term market gains; MO may become
more important over time and is significantly shaped by the degree to which the firm is
exposed to foreign markets.
In summary, this study has found that developing country firms that engage in
marketing research while offering better prices, delivery times and customer service
than rivals, tend to perform better in the marketplace. Taken in context with research
done in other developing economies (Akimova, 2000; Boyd et al., 1958; Golden et al.,
1995), these findings reinforce the idea of the marketing concept as a universal
construct when measured in terms of specific business activities. Further, scholarly
work in this area would benefit from a more systematic approach to measuring MP.
To date, no widely-agreed upon definition of MP exists; no Kohli and Jaworskis have
yet emerged to provide researchers with a multi-item, psychometrically-sound
instrument. It may transpire that as opportunities to test the MO construct diminish,
more attention will be given to the measurement of marketing activities in developing
countries. Undoubtedly, this area will offer both marketing theorists and empiricists a
significant opportunity for useful work for some time to come.

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