The Role of Organizational Competencies in the market-orientation-performance relationship : An empirical analysis.

Summary The paper aims to examine the specific ways in which market orientation of an organization contributes to the creation of organizational competencies that lead to superior performance. According to the author, the activities involved in becoming market oriented can be considered organizational competencies, the creation of which will lead to superior organizational performance (growth in revenue, success of ne service/facilities, cost containment and success in retaining patients/customers). The market orientation-organizational competencies-performance linkages were examined through a path analytic model using a sample from acute care hospitals. Questionnaires were sent to 171 respondents but only 159 or 26.5% were usable as the rest was not fully completed. To measure market orientation, the author used market orientation scale of 25 items originally constructed and validated by Narver and Slater (1990) which later was revised, refined, expanded and modified to suit the health industry by Kumar et al (1998). Of the 25 items, five each for interdepartmental coordination, long-term focus, and survival and growth/profit emphasis; six items for customer orientation and four items for competitor orientation. To measure operating efficiency and market effectiveness, the study used a modified scale also developed by Narver and Slater (1990) to suit the hospital environment while a modified scale developed by Jennings and Lumpkin (1992) was used to measure domain protection and domain expansion. Effective personal policies and employee education and creativity was measured using items derived from the human resource management scale constructed by Hit and Ireland (1986) while a subjective approach was used to measure organizational performance and the scale was a modified scale by Gupta and Govindarajan (1984). Results of path analysis shows that path coefficients between market orientation and all of the six organization competencies are significant. Market orientation had the strongest association with the organizational competency of operating efficiency, followed by effective personal policies, market effectiveness, employee education and creativity, domain expansion activities and domain protection activities. These results provide support for the assertion that the effort to become market oriented does lead to the creation of critical organizational competencies. In terms of the relationship between the organizational competencies and performance, it was found that the four different performance measures (growth in revenue, success of ne

Greeley (1995) and Caurana et al. 2) Internal competencies developed by an organization in the process of becoming market oriented would impact both efficient internal operations (reflected in growth revenue and cost containment) and effective demand management and customer needs fulfillment (reflected in success in retaining customers/patients and success of new services/facilities. Review The paper has 7 parts. Kohli’s and Jaworski’s studies were extensively used and referred to by the author. In introduction part. the author clearly stated market orientation has long been recognized as vital in the attainment of superior organizational performance but only through the efforts of Kohli and Jaworski (1990) has there been thorough research on the relationship between market orientation and performance. cost containment and success in retaining patients/customers) are positively associated with the organizational competencies. literature review. objectives of the study. domain protection. and managerial and academic implications. In the next section which the author classified as the research framework. operational efficiency.service/facilities. Both the hypotheses were rather wordy. just to name a few. employee education. the author proposed two hypotheses which were 1)An organization’s efforts to become market oriented will facilitate the creation of organizational competencies in the areas of: market effectiveness. The authors also cited other researchers that study such relationships under various environmental conditions and context specific settings and among them were Harris (2001). Simplifying them would enhance better understanding those who read. methodology. results. which the authors should have done as it would provide better picture on the relationships of the variables of the study. For the study. . discussion and limitations. domain expansion. (1999). and personnel policy effectiveness. The author differentiated his study from others as it does not provide empirical evidence as to how market orientation influences organizational activities but rather merely suggests market orientation is a means of obtaining sustainable competitive advantage. which appears as literature review section. introduction. There was no research framework offered. The objectives of the study were clearly stated.