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Employee Orientation and Performance: An Exploration of the Mediating Role of Customer

Orientation
Author(s): Junfeng Zhang
Source: Journal of Business Ethics, Vol. 91, Supplement 1: THE 2 <sup>ND</sup> WORLD
BUSINESS ETHICS FORUM THEME: RETHINKING THE VALUE OF BUSINESS ETHICS (2010), pp.
111-121
Published by: Springer
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Journal
of Business Ethics
(2010)
91:111-121 ©
Springer
2010
DOI 10.1007/S10551-010-0570-6
Employee
Orientation and Performance:
An
Exploration
of the
Mediating
Role
of Customer Orientation
Junfeng Zhang
ABSTRACT.
Managing
stakeholders is an
important
managerial aspect
of
corporate
social
responsibility.
Em-
ployee
stakeholder is one of the
primary
stakeholders that
are critical to a
company.
Previous studies have shown
inconclusive
findings regarding
the
performance impact
of
managing
this
stakeholder,
with some
identifying
little
impact
while others
finding
a
positive
association. This
study
further
explores
this issue in the context of
foreign
companies'
subsidiaries in China. A
potential mediating
mechanism
(i.e.,
customer
orientation)
between
employee
stakeholder orientation and
performance (both
financial
performance
and innovation
performance)
was
proposed;
a
sample
of 103 Chinese subsidiaries of
foreign companies
which have new
product development responsibilities
was
used to test
hypotheses.
A
subsidiary's employee
orienta-
tion was found to show a
significant positive relationship
with its
product
innovation
performance,
but no
signifi-
cant
relationship
with its financial results.
Moreover,
employee
orientation showed a
significant
indirect rela-
tionship
with both
performance
outcomes
through
cus-
tomer orientation.
KEY WORDS:
China,
customer
orientation,
employee
orientation, innovation, performance,
subsidiaries
Abbreviation: CSR:
corporate
social
responsibility
Introduction
Corporate
social
responsibility (CSR) represents
"actions that
appear
to further some social
good,
Junfeng Zhang
is Assistant
Professor of Marketing, Department
of Marketing, Hong Kong Baptist University.
Her research
interests include new
product development, marketing
man-
agement,
and international
marketing.
beyond
the interests of the firm and that which is
required by
law"
(Me
Williams and
Siegel, 2001,
p. 117).
Stakeholder
relationship
orientation reflects
an essential
yet implicit
characteristic of the business
case for CSR
(Barnett, 2007, p. 798).
As CSR
becomes a source of
competitive advantage (e.g.,
Porter and
Kramer, 2006),
one
way
of
displaying
it is
to
put
an
emphasis
on
partnerships
that
align
with
the interests of the firm's most
strategically important
stakeholders
(Maxfield, 2007).
The
employees
con-
stitute one such
group
of a firm's
primary
stake-
holders. In
practice, many managers
devote resources
to
encouraging socially responsible
behavior toward
their
employees.
For
example,
Standard Chartered
Bank
(Hong Kong)
Limited
(2008)
launched a
"Happy Fridays" program
to
promote
work-life
balance
among
its
employees (www.standardchart
ered.com.hk). Johnson
and
Johnson
Service Inc.
(2009)
stresses the welfare of their
employees
by articulating
in their credo values such as
equal
opportunity, respect,
and fair
compensation (www.
jnj.com).
Academic research has
explored
the
per-
formance
impact
of
building
relations with
employee
stakeholders
through
CSR
(e.g., Barnett, 2007),
but
the
findings
are so far inconclusive. Hillman and
Keim
(2001)
found a
positive effect,
while Luk et al.
(2005)
could
identify
little
impact.
This
study
was
designed
to
provide
some
insight
into this issue
by examining
the
potential
mediat-
ing
role of customer orientation in the relation-
ship
between
employee
orientation and
performance
(Figure 1). Employee
orientation reflects how a
firm addresses the interests of its
employees (Luk
et
al, 2005).
Customer orientation reveals a firm's
emphasis
on
meeting
market needs
(e.g.,
Han et
al.,
1998;
Kirca et
al., 2005). Realizing
the benefits of
employee
orientation
may
demand that a customer-
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112
Junfeng Zhang
Hla
'
i
Financial
!
1
, ! ,
Ute^*
Performance
Employee
,
H2
^
!
Customer
,
^^ |
Orientation Orientation
^^ |

^^
^^^-^^^^^
|
Innovation
I

H4a,H4b H3b*
Performance
_3
Hlb
Figure
1. The
hypothesized
model. Note: The Hs des-
ignate
the
study's hypotheses.
H4a and H4b describe
the
mediating
effects of Customer Orientation in the
relationships
between
employee
orientation and finan-
cial
performance
and innovation
performance, respec-
tively.
oriented culture to be in
place, through
which better
performance
can be achieved.
Performance was defined in terms of new
product
development (termed
innovation
performance)
as
well as
profits,
sales
growth,
and market share
(together,
financial
performance).
Given the
paucity
of research
relating
CSR with innovation-related
outcomes,
innovation
performance
was of
particular
interest. A
majority
of studies in CSR have been
concerned
primarily
with financial
performance
and
stakeholder
relationships.
Performance in terms of
product
innovation has been
largely
overlooked,
though
some researchers have
argued
that CSR
can be used as a differentiation
strategy
which
may
involve investment in research and
development
(R&D)
that results in CSR-derived
product
inno-
vations
(Me
Williams and
Siegel, 2001). Others,
however,
contended that CSR can itself be a vehicle
for innovation
(Husted, 2005).
Further research is
needed to
expand
the definition of firm
performance
beyond
financial measures
(e.g.,
Berman et
al.,
1999).
To address calls for CSR research in an interna-
tional context
(Luk
et
al., 2005; Robertson, 2008),
this
study
dealt with China subsidiaries of multi-
national
companies.
Such subsidiaries
usually
face
institutional
pressure
from the host
country
to con-
form to local human resources
practices (Bjorkman
et
al., 2008),
so
they
can
provide
some valuable
insights
into the effect of
prioritizing employee
stakeholders. On the other
hand,
subsidiaries have
become
increasingly
active in the
dynamic learning
processes
of multinational
companies (Makino
and
Inkpen, 2003).
Some have taken on new
product
development responsibilities
and become a valuable
source of innovation
(Cantwell
and
Mudambi,
2004).
Research into such situations can offer a
better
understanding
of how a stakeholder orienta-
tion
may
be instrumental in innovation.
Theory
and
hypothesis development
A firm's
primary
stakeholders are
generally
consid-
ered to be its
shareholders,
employees,
customers,
suppliers,
and
public
stakeholder
groups (Clarkson,
1995).
Stakeholder
theory argues
that firms can
benefit
financially
from
good relationships
with their
various stakeholders
(Freeman, 1984).
This is be-
cause
building
better relations with
primary
stake-
holders can assist firms in
developing "intangible
but
valuable assets which can be sources of
competitive
advantage" (Hillman
and
Keim, 2001,
p. 126).
The
ability
to
"identify,
act
on,
and
profit
from
oppor-
tunities to
improve
stakeholder
relationships through
CSR"
(Barnett, 2007,
p. 803) represents
one of such
valuable
intangible
resource that
may
lead to com-
petitive advantage (Barney, 1991). Among
various
stakeholders,
employees
have
recently
received
increasing
attention as evidenced
by
the
burgeoning
research on
employee
welfare
(e.g.,
Baker et
al.,
2006; Kuvaas, 2008).
The
significance
of
employee relationships
can be
attenuated in
subsidiaries,
as one of their
greatest
challenges
is to
gain legitimacy (DiMaggio
and
Powell, 1983).
This makes it
relatively
critical for
subsidiaries to conform to or at least
incorporate
elements of local human resources
practices.
The
norms of the host
country
exert
pressure
on subsidi-
aries so that
employee
stakeholders become more
important
as
they
increase their
legitimacy (Mitchell
et
al., 1997).
Studies have shown that
foreign
subsidiaries in China often use a
hybrid personnel
management system
that exhibits "Chinese charac-
teristics"
(Ding
and
Warner, 2001).
These Chinese
characteristics feature
practices
such as harmonious
peer-subordinate relationships
in work
appraisals,
and
respect
for
authority (Bjorkman
et
al., 2008).
This reflects characteristics of traditional Chinese
culture that values
reciprocity
and
harmony
in the
workplace (Fryxell
et
al., 2004). Hence,
it is essential
for a
subsidiary
to
promote
an
employee-oriented
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Employee
Orientation and
Performance
113
climate that is consistent with the Chinese institu-
tional
context,
as this
helps
to
legitimize
its
practices
and build trust inside the
subsidiary.
An
employee-oriented
climate shows the
sincerity
and benevolence of a
foreign company
toward its
local
employees.
It could enhance the
subsidiary's
performance through
benefits such as better
coop-
erative
learning
and
knowledge sharing (Janz
and
Prasarnphanich, 2003)
and
greater employee
com-
mitment
(Baker
et
al., 2006;
Lings
and
Greenley,
2005).
The
alignment
of customer orientation with
employee
orientation
helps
to realize the benefits of
employee
orientation
by providing
some essential
resources such as
market-sensing capabilities
a
subsidiary
can use to link with its market. These
resources enable a
subsidiary
to
identify,
act
on,
and
reap
benefits from CRS activities and
opportuni-
ties
(Barnett, 2007;
McWilliams and
Siegel, 2001),
thereby being
more
likely
to achieve better
perfor-
mance.
Employee
orientation and
performance
Employee
orientation describes an
employee-
focused
organizational
climate
(Plakoyiannaki
et
al.,
2008)
which reflects an
organization's
value
system
in terms of rewards and
provides
a warm and
sup-
portive
environment
(Janz
and
Prasarnphanich,
2003;
Li twin and
Stringer, 1968).
A focus on em-
ployee well-being provides
a
healthy
environment
for
employees,
which reduces their stress and en-
hances their satisfaction and commitment
(Baker
et
al., 2006;
Lings
and
Greenley, 2005).
It
may
result
in better trust between the
organization
and its
employees,
which can lower labor costs
by reducing
turnover
(e.g.,
Berman et
al., 1999; Kuvaas, 2008).
Consequently, socially responsible
behavior toward
employees
can
improve
the effectiveness of a firm's
marketing strategy by aligning employees' objectives
with those of the
company (Ahmed
and
Rafiq,
1993;
Wasmer and
Brunner, 1991).
This is
partic-
ularly important
in Chinese subsidiaries.
Promoting
a
warm,
supportive,
and fair climate in a
subsidiary
may
show the
sincerity
and benevolence of the
foreign parent.
In
return,
the
employees
are
likely
to
reciprocate
with
greater
commitment and more
willingness
to act in the best interests of the sub-
sidiary creating superior
customer value
(Gounaris,
2006;
Plakoyiannaki
et
al., 2008).
In
addition,
an
employee-oriented
climate can facilitate
cooperative
learning
and
knowledge sharing (Janz
and Prasarn-
phanich, 2003). Through
such
learning
and
sharing,
employees
can better understand customer needs and
be more
responsive
to market
opportunities;
hence,
they
can
develop
new
products
more
quickly
and
with attributes that better serve the market. This is
critical for
product innovations,
as
knowledge
and
related activities often differentiate successful
prod-
ucts,
projects,
or
programs
from those that are
unsuccessful
(e.g.,
Brockman and
Morgan,
2003;
Calantone and Di
Benedetto, 1988).
Hypothesis
ia: The
degree
of
employee
orientation
of a
subsidiary
has a
positive relationship
with its
financial
performance.
Hypothesis
ib: The
degree
of
employee
orientation
of a
subsidiary
has a
positive relationship
with its
innovation
performance.
Employee
orientation and customer orientation
Customer orientation is a "...set of beliefs that
puts
the customer's interest
first,
while not
excluding
those of all other stakeholders such as
owners,
managers,
and
employees,
in order to
develop
a
long-term profitable enterprise" (Deshpande
et
al.,
1993,
p. 27). Companies
with this orientation view
customers as their most
important
assets and strike
for value creation
through managing
the
relationship
with them
(Srivastava
et
al., 1999).
It is often
sug-
gested
that
employees
are the most critical
compo-
nent of this
process (Reinartz
et
al, 2004;
Srivastava
et
al, 1999).
An
employee-oriented
climate
may
affect the
building
of a customer orientation in Chinese
subsidiaries in two
ways.
On the one
hand,
the
climate
may
define
employee
behavior toward the
firm's customers
(Plakoyiannaki
et
al., 2008).
It
may
increase
employee responsiveness
to their needs
(Berry
et
al., 1976),
as
employees may
feel an obli-
gation
to
reciprocate
the
subsidiary's
benevolence
(Kuvaas, 2008).
It also
encourages
customer-ori-
ented behaviors such as
collecting
and
sharing
information about both
existing
and
prospective
customers
(Plakoyiannaki
et
al., 2008).
On the other
hand,
the
caring
culture
may
enhance
employees'
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114
Junfeng Zhang
responsiveness
to
opportunities
for
building
rela-
tionships
with customers
(McWilliams
and
Siegel,
2001).
Hypothesis
2: An
employee
orientation of a Chinese
subsidiary
has a
positive relationship
with its
customer orientation.
Customer orientation and
performance
A customer-oriented
subsidiary
is
likely
to contin-
uously
and
proactively
strive to meet its customers'
needs
(e.g.,
Han et
al., 1998;
Kirca et
al, 2005).
This
involves
market-sensing
and customer
linking by
the
subsidiary (Kirca
et
al., 2005,
p. 25).
Such
capabili-
ties
help
subsidiaries to be
proactive
with
respect
to
changing
customer
preferences
and to be more
willing
to
incorporate
such
considerations,
particu-
larly
in their new
product development (Im
and
Workman, 2004). Moreover,
being
customer-
oriented means
putting
an
emphasis
on
greater
information use
(e.g.,
Han et
al., 1998;
Kirca et
al.,
2005).
In China this is
necessary
because the volatile
Chinese market
requires
a business to be
responsive
to
change (Luo
and
Park, 2001). By using
infor-
mation
better,
a
subsidiary
can remain
proactive
as
increasing knowledge
reduces the uncertainties to
which it is
exposed (Song
and
Montoya-
Weiss,
1998).
All these enhance the financial as well as the
innovation
performance
of a
subsidiary
in China.
Hypothesis
3a: The
degree
of customer orientation
of a
subsidiary
has a
positive relationship
with its
financial
performance.
Hypothesis
3b: The
degree
of customer orientation
of a
subsidiary
has a
positive relationship
with its
innovation
performance.
Mediating effects of
customer orientation
Being employee-oriented
can
effectively
reduce fric-
tion
among employees,
hence
encourage
their
cooperative learning
and
sharing
of
knowledge (Janz
and
Prasarnphanich, 2003)
and
promote
the creative
thinking
which leads to innovation
(Baker
et
al.,
2006).
It also
promotes
effective and
timely sharing
and
using
of information to
satisfy
customers' needs
(Plakoyiannaki
et
al., 2008).
As a
result,
an
employee
orientation
may
enhance "the effectiveness of a
company's strategic response
and,
eventually,
its
ability
to
satisfy
customers
consistently" (Gounaris,
2006,
p. 432). However,
realizing
these benefits
demands certain
capabilities
that
help
the
subsidiary
get
link with its market. For
example,
market-
sensing capabilities
are needed to channel
employ-
ees' creative
thinking
toward the needs of customers.
Knowledge-related capabilities
are needed to
acquire
external
knowledge
and
integrate
it with the firm's
internal
knowledge
for
employees
to learn and share.
Customer orientation
provides
a
subsidiary
with
these
capabilities,
as discussed
previously.
The
alignment
of a
subsidiary's
customer orientation with
its
employee
orientation
may
thus enable the sub-
sidiary
to
identify,
act
on,
and
profit
from its rela-
tions with its customers
(Barnett, 2007). Therefore,
it is
likely
that
Hypothesis
4a: A
subsidiary's
customer orientation
mediates a
relationship
between
employee
ori-
entation and financial
performance.
Hypothesis
4b: A
subsidiary's
customer orientation
mediates a
relationship
between
employee
ori-
entation and innovation
performance.
Research methods
Sample
and data collection
Data were collected from a
sample
of
wholly
owned
subsidiaries of multinational
companies operating
in
China. A national research
company
was commis-
sioned to undertake the data
collection,
and R&D
managers
or staff in
charge
of
product development
were contacted and invited to fill out a
questionnaire
online. A total of 103 valid
responses
were obtained
(46.2%
of 223
companies).
These subsidiaries were
operated by manufacturing companies primarily
from the United States,
Japan, Europe,
or South
Korea,
and were located in Eastern China where the
majority
of
foreign
direct investment is concen-
trated. The
sample
was limited to the follow-
ing
sectors
(based
on the classifications used in
China): chemicals,
machinery,
electrical
equipment,
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Employee
Orientation and
Performance
115
electronics,
communication
equipment
and com-
puters,
food and
beverages,
software and data ser-
vices,
and a Chinese
category
which
groups
instruments, meters,
cultural and office
machinery.
The
sample
is described in Table I.
Nonresponse
bias was examined
by comparing early
with late
respondents
across all variables
(Armstrong
and
Overton, 1977).
The results of the i-tests indicated
no
significant
differences.
Measures
The
survey
items
assessing employee
orientation were
developed
based on those used
by Janz
and Prasarn-
phanich (2003).
The scale was
designed
to reflect the
managers'
values and beliefs about rewards and about
providing
a warm and
supportive
environment in the
subsidiary (Cronbach's alpha
=
0.85).
The
managers
were asked to indicate the extent to which
they agreed
with five statements
using
a scale
ranging
from
1,
"strongly disagree",
to
5,
"strongly agree".
The customer orientation assessment was
adopted
from the
study
of
Deshpande's group (Deshpande
et
al, 1993) (Cronbach's alpha
=
0.89).
The
respondents
were also asked to evaluate their firm's
financial
performance
in terms of sales
growth,
market
share,
and
profitability
relative to their three
largest competitors (Cronbach's alpha
=
0.87).
Then
they
were asked to assess their firm's innovation
performance
in terms of the number of successful
new
products
launched,
speed
in
getting
new
products
to market and
product
innovation in
general
rela-
tive to their three
largest competitors (Cronbach's
alpha
=
0.80).
In
addition,
R&D
intensity, export
intensity, subsidiary age,
size,
demand
turbulence,
technology
turbulence,
competitive intensity,
and
industry
were added as control variables.
Harman's one-factor
analysis
was conducted to
examine common method bias. No
single general
factor
emerged
from the
analysis.
This seems to
suggest
that common method variance was not a
serious
problem (Podsakoff
and
Organ, 1986).
Analysis
and results
Table II
presents descriptive
statistics and correla-
tions of the
study's key
variables. To test the
proposed relationships,
the
three-step regression
TABLE I
Sample profile
Variable
Categories Frequency Percentage
Region Yangzte
River Delta 56 54.4
Pearl River Delta and
Fujian
Province 36 35.0
Jingjintang
Economic Zone 11 10.7
Parent
nationality
U.S. 38 36.9
Japan
29 28.2
Europe
18 17.5
South Korea 11 10.7
Others 7 6.8
Years in
operation
<
5 31 30.1
6-15 64 62.1
>16 8 7.8
Numbers of
employees
1-199 58 56.3
200-499 15 14.6
500-1000 30 29.1
Position R&D/PD
management
59 57.3
Other
management (e.g., foreman)
34 33.0
Engineers/staff
10 9.7
Sample
total 103 100.0
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116
Junfeng Zhang
TABLE II
Mean
values,
standard
deviations,
and correlations
Variable 12 3 4
1. Innovation
performance
1.00
2. Financial
performance
0.57 1.00
3.
Employee
orientation 0.39 0.27 1.00
4. Customer orientation 0.48 0.54 0.55 1.00
Mean 3.32 3.25 3.55 3.79
Standard deviation 0.76 0.84 0.77 0.66
Note: All correlations are
significant
at the 0.01 level
(2-tailed).
procedure
recommended
by
Baron and
Kenny
(1986)
was
applied,
and the results are
reported
in
Table III.
As Model 1
(Table HI) shows,
employee
orien-
tation had a
positive
and
significant
correlation with
customer orientation

=
0.38,
p
<
0.01),
in
sup-
port
of H2. Models 2 and 4 show the
relationship
between
employee
orientation and a
subsidiary's
financial and innovation
performance. Employee
orientation was
significantly
and
positively
corre-
lated with innovation
performance (ß
=
0.22,
p
<
0.05)
but was not
significantly
related with financial
Performance

-
0.10, n.s.). Therefore,
Hlb was
supported,
but H la was not.
TABLE III
Results of
regression analysis:
standardized
path
coefficients
(¿-values)
Variables Customer Financial Financial Innovation Innovation
orientation
performance performance performance performance
Model 1 Model 2 Model 3 Model 4 Model 5
Control variables
R&D
intensity(log)
0.08
(0.90)
-0.02
(-0.16)
-0.05
(-0.50)
0.16
(1.60)
0.14
(1.41)
Export intensity(log)
0.09
(0.96)
0.14
(1.23)
0.10
(1.00)
-0.09
(-0.82)
-0.12
(-1.09)
Demand turbulence -0.34
(-3.94)**
-0.22
(-2.19)*
-0.08
(-0.78)
-0.18
(-1.79)
-0.08
(-0.76)
Technology
turbulence 0.17
(2.02)*
0.29
(3.05)**
0.23
(2.43)*
0.25
(2.56)*
0.20
(2.06)*
Competitive intensity
-0.09
(-1.15)
-0.29
(-3.28)**
-0.26
(-3.03)**
-0.16
(-1.18)
-0.13
(-1.51)
Age
0.08
(0.96)
0.01
(0.05)
-0.03
(-0.31)
0.01
(0.13)
-0.01
(-0.11)
Region(Yangtze)
-0.01
(-0.13)
0.06
(0.57)
0.07
(0.65)
0.25
(2.34)*
0.25
(2.44)*
Sizeflog)
0.02
(0.19)
0.12
(0.91)
0.11
(0.90)
0.20
(1.54)
0.19
(1.53)
Industry(l=low tech)
0.02
(0.28)
-0.06
(-0.67)
-0.07
(-0.82)
0.03
(0.28)
0.02
(0.22)
Main effect
Employee
orientation 0.38
(4.27)**
0.10
(0.98)
-0.06
(-0.52)
0.22
(2.11)*
0.11
(0.97)
Mediating
effect
Customer orientation
0.41
(3.62)**
0.29
(2.50)*
F value 8.93** 4.52** 5.84** 4.45** 4.84**
R2 0.49 0.33 0.41 0.33 0.37
AR2
0.08 0.04
F
change
13.08** 6.24*
*/>
< 0.05
(two-tailed test).
**p
< 0.01
(two-tailed test).
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Employee
Orientation and
Performance
117
When customer orientation was entered into
Model 5
(Table III),
it showed a
positive
and
sig-
nificant correlation with innovation
performance

=
0.29,
p
<
0.05),
in
support
of H3b.
Including
customer orientation led to a decrease in the effect
size of the
employee
orientation
(from
0.22 to
0.11),
and
employee
orientation was then no
longer
a
significant predictor, indicating
full mediation. Fur-
thermore,
when customer orientation was entered
into Model 3
(Table III),
it showed a
positive
and
significant relationship
with financial
performance

=
0.41,
p
<
0.01), lending support
to H3a.
However,
recall that
employee
orientation
appeared
unrelated to financial
performance. Testing
media-
tion for such a variable was a violation to Baron and
Kenny's (1986)
test conditions.
Hence,
Sobel's
(1982)
test was also
conducted,
because this test can
examine indirect effects for
independent variables,
regardless
of the
significance
of their relation-
ship
with the
dependent
variable
(De
Luca and
Atuahene-Gima, 2007).
The results of Sobel's tests
indicated a
significant,
indirect
relationship
between
employee
orientation and financial
performance
(b
=
0.51,
t
=
2.75,
p
<
0.01),
as well as with inno-
vation
performance (b
=
0.11,
t
=
2.14,
p
<
0.05),
thus
supporting
H4a and H4b.
Previous studies
(e.g.,
Luk et
al., 2005)
have
suggested
that better
performance may
result in
synergetic
effects between
employee
orientation
and other stakeholder orientations. To
investigate
this,
an alternative model was also tested in which
employee
orientation interacted with customer
orientation to have an
impact
on
performance.
Customer orientation was found to be a
significant
factor associated with both
performance
measures.
On the
contrary, employee
orientation indicated
no
significant relationships.
No
significant syn-
ergies
were revealed
by
the
analyses
involv-
ing
either innovation
performance
or financial
performance.
Discussion
This
study
has examined the
relationship
between a
subsidiary's employee
orientation and its customer
orientation,
and the resultant financial and innova-
tion
performance.
The results
support
the idea of a
positive relationship
between
employee
orientation
and customer orientation. This
supports
the
assumptions
of the "internal
marketing" theory
that
companies
need to focus on
employee well-being
in order to be customer-oriented
(Conduit
and
Mavondo, 2001).
It has further demonstrated that
being employee-oriented
is
important
for
imple-
menting
customer
relationship management,
of
which customer orientation is a
key component
(Plakoyiannaki
et
al., 2008).
It seems that
caring
about
employees' well-being
could assist a
subsidiary
in
building
a customer-focused culture.
That customer orientation is
positively
associated
with both innovation and financial
performance
is
consistent with the dominant view in
marketing
that
being
customer-focused is a critical element in
product
innovation and financial success
(e.g.,
Kirca
et
al., 2005;
Slater and
Narver, 1994).
In
addition,
this
study
has observed that
employee
orientation has
a
significant
and
positive relationship
with innova-
tion. It seems to
suggest
that
companies
could
reap
success in new
product development
while
being
socially responsible
toward their
employees.
A warm
and
supporting working
environment seems to be
more conductive to fast and successful
product
innovations.
The results also show that
employee
orienta-
tion has a
significant
indirect
relationship
with a
subsidiary's
innovation and financial
performance
through
customer orientation. This seems to
suggest
that customer orientation could be a
significant
mechanism
by
which a Chinese
subsidiary might
realize the benefits of an
employee-oriented
climate
featuring warmth,
support,
and
respect.
However,
the
findings
indicate no
significant
relationship
between
employee
orientation and a
subsidiary's
financial
performance.
This is no sur-
prise,
as
previous
studies have made similar
findings
(e.g.,
Luk et
al, 2005),
but this lack of correlation
seems to be in conflict with a
general
belief that
superior organizational performance
can be achieved
by motivating employees
to act on the
organization's
behalf
(e.g., Kuvaas, 2008).
One reason could be that
being employee-focused
incurs
costs,
which benefit
the
company
in the
long
run but
may
not contribute
financially
in the short term. Another reason
might
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All use subject to JSTOR Terms and Conditions
118
Junfeng Zhang
lie in the
specific setting
of this
study.
The Chinese
market is
highly
uncertain and
dynamic (Luo,
2003),
which
may
induce
disproportionate
atten-
tion to market conditions rather than
employees
in the
struggle
to realize reasonable sales and
profits. Employee
orientation
may
be
acting
mainly
as a tool for a
subsidiary
to obtain
legit-
imacy
in the host
country
but not a direct
booster of
subsidiary profits
and sales. More
likely,
it functions as a
key
driver to
building
a customer-oriented
culture,
through
which
both innovation and financial
performance
can be
strengthened.
The
significance
of market condi-
tion variables such as
technology
turbulence and
competitive intensity may
be some evidence of
this,
along
with the
consistently non-significant
associations between
employee
orientation and
performance
measures and the
significant
indi-
rect
predictive power
of
employee
orientation
through
customer orientation.
However,
such
findings may
be
context-specific.
Further studies
are called for.
These
findings provide
further
empirical
evidence
of the
complexity
of
managing
stakeholder rela-
tionships.
The CSR literature has indicated that
relationships
with individual stakeholders
may
exert
differential direct influences on firm
performance
(Kassinis
and
Vafeas, 2006).
In addition to the
synergetic
effects found
by
Luk et al.
(2005),
the
findings
of this
study
seem to
suggest
that an indi-
vidual stakeholder orientation
may rely
on certain
underlying
mechanisms,
customer orientation in this
case,
to realize its benefits. This echoes Harrison and
Freeman's
(1999)
claims that the overall stakeholder
relationship
is "a
multi-faceted,
multiobjective,
complex phenomenon" (p. 484),
and that collabo-
ration with other business areas such as
marketing
can benefit in
gaining
"a
fine-grained understanding
of stakeholder
relationships (e.g.,
customer rela-
tionship [s])
within an overall stakeholder frame-
work"
(p. 484).
The
findings
do,
though,
offer additional
justifi-
cation for
acting responsibly
toward
employees,
at
least in the subsidiaries of multinational
companies
in
China.
Though
the CSR
literature,
more
specifically
on stakeholder
management, presents diverging
views on the effect of
attending
to
employee
stakeholders,
marketing
and
management
studies
have
suggested
that
being employee-focused
or
customer-focused could be beneficial to firm
per-
formance. This
study
has to some extent confirmed
this. Both
orientations,
but
particularly
customer
orientation,
are critical to both the financial
perfor-
mance and innovation
performance
of a
subsidiary.
Management perhaps
needs to allocate
adequate
resources to
promoting
both
capabilities
to
reap
the
greatest performance
benefits in an international
context.
This research has not been able to resolve the
ongoing
debate about the
performance impact
of
CSR.
Instead,
it has shed
light
into the
potential
interrelationships
between
pursuing
orientations to-
ward two stakeholder
groups.
Future research
might
fruitfully incorporate
additional stakeholder rela-
tionships
involved in CSR and
investigate
their
interplay
and relative
importance.
Future research
may
also benefit from exam-
ining possible
mechanisms and
contingencies
associated with the
relationships
examined here.
For
example,
trust
may
have a role in trans-
forming strategic
orientation into
performance
(Berman
et
al., 1999).
In
addition,
the relative
importance
of each stakeholder orientation
may
depend
on their relative
power, legitimacy,
and
urgency (Mitchell
et
al., 1997). Hence,
the
pro-
posed
model and the results of this
study may
be
limited to this
specific
context
-
multinational
company
subsidiaries in China which have new
product development responsibilities.
The
gener-
alizability
of the results
may
be limited in this
regard.
Future research
might
involve cross-cul-
tural
comparisons
which
may
reveal
interesting
contextual influences.
Acknowledgments
The author
gratefully acknowledges
the financial
sup-
port provided by Temple University, Temple
CIBER,
and
Monterey
Institute of International Studies for data
collection. The author also thanks the
anonymous
reviewers for their constructive feedback.
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All use subject to JSTOR Terms and Conditions
Employee
Orientation and
Performance
119
Appendix
Measures of
key
variables
Customer orientation
(a
=
0.89)
We have routine or
regular
measures of customer ser-
vice
Our
product
and service
development
is based on
good
market and customer information
We know our
competitors
well
We have a
good
sense of how our customers value our
products
and services
We are more customer-focused than our
competitors
We
compete primarily
based on
product
or service
differentiation
The customer's interest should
always
come
first,
ahead
of the owners'
Our
products/services
are the best in the business
I believe our
operation
exists
primarily
to serve cus-
tomers
Employee
orientation
(a
=
0.85)
In this
organization people
are rewarded in
proportion
to the excellence of their
job performance
We have a
promotion system
here that
helps
the best
person
to rise to the
top
This
organization
is characterized
by
a
relaxed, easy-
going working
climate
There is a lot of warmth in the
relationships
between
management
and workers in this
organization
The
philosophy
of our
management emphasizes
the
human
factor,
how
people feel,
etc.
You don't
get
much
sympathy
form
higher-ups
in this
organization
if
you
make a mistake3
Innovation
performance (relative
to
your
three
largest competitors
in the
industry
in the mainland
Chinese market
during
the
past
3
years)
(a
=
0.80)
Performance on numbers of successful new
products
Performance on
speed
of
getting
new
products
to
market
Performance on
product
innovations
Financial
performance (relative
to
your
three
largest competitors
in the
industry
in the Chinese market
during
the
past
3
years) (a
=
0.87)
Performance on sales
growth
Performance on market share
Performance on
profitability
aItem was deleted in the
purification process
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from a Case
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