Knowledge nets: The role of total market orientation on firm performance and dynamic capabilities in network environments
Firms realize that outside knowledge resources can help them with creation of new ideas and innovation that may not have been realized relying solely on their own internal resources (Cohen and Levinthal 1990). But knowledge is not completely transparent, and organizations may still feel guarded about openly sharing such a valuable resource. This has created an environment in which I have described in this dissertation as "Knowledge Nets". Within these knowledge nets, firms are able to connect through explicit, codified, pieces of knowledge of emerging technology, products, processes, methods, designs, and even unique business process operations. Finns can use these unique, defined pieces of knowledge in order to orient themselves to their customers as well as their competitors in the increasing network environments of "coopetition" (Luo, Slotegraaf, and Pan 2006).
The marketing Literature has recognized Market Orientation as focal concept of a Firm s ability to internalize the marketing concept (Kohli and Jaworski 1990; Jaworski and Kohli 1993), and has promoted Market Orientation as a key to the successful introduction of innovative new products and services (Han, Kim and Srivastava 1998). Past studies of market orientation and new product performance have focused largely on behaviors associated with satisfying expressed needs of customers and markets (Day 1991, 1994; Kirca, Jayachandran, and Bearden 2005). More recently, research has introduced the concept of total market orientation (Narver, Mater, and MacLachlan 2000, 2004). Under this framework market orientation is comprised of two components, a reactive orientation focused on satisfying expressed customer needs and a proactive market orientation which focuses on the discovery and satisfaction of latent customer and market needs which have yet to be addressed.
In this dissertation I extend the literature on market orientation by examining the impact of proactive and reactive market orientation on firms' dynamic capabilities and performance. The method I use introduces a new approach in marketing for measuring orientation based on patent awards, which are central to a firm s knowledge base, and act as a knowledge conduit that can be used for tracking technology shifts and changes in a network environments (DeCarolis 2003. Dutta and Weiss 1997). In addition, measuring both a reactive and proactive orientation of a firm provides an ability to test how a firms' total market orientation may be associated with developing a firm's dynamic capabilities that translate knowledge into learning and strategic actions (Eisenhardt and Martin 2000). Dynamic capabilities are an additional resource in which firms can use the type and strength of their market orientations for creating additional formal network ties for optimum firm performance.
This dissertation examined the impact of market orientation in a network environment measured through the collection of realized patent activity over a five year period in the pharmaceutical, biotechnology and chemical supply industries. Patent measures and computations were collected for all publicly held firms in this time period that met a minimum of innovation activity. I examined 54 different models that measure (1) the impact of reactive and proactive market orientation on a firm's ability to create dynamic capabilities and firm performance and (2) the relationship between dynamic capabilities and firm performance.
This study shows that the marketplace values a firm's proactive orientation, in terms of the market capitalization as well as their return on investment. The market capitalization of a firm is also influenced by the type and amount of external dynamic capabilities of a firm. One of the most prevalent significant relationships existed between the different measures of dynamic capabilities and the firm performance measure of market-to-book. In this study there were strong, significant relationships between market-to-book and research collaborations, alliance/partnerships, and joint marketing/sales. Market-to-book had a positive relationship with firms' creation of external activities and agreements with other firms, as well as the overall composite score of dynamic capabilities. In addition, smaller firms that may be focusing a great deal of their resources on developing radical new technology, do not have the resources to develop sufficient market and sales forces, resulting in joint marketing and sales agreements with firms who have the marketing structure currently in place to execute the distribution and sales of a new product as soon as it is approved. Although the mediating relationship of dynamic capabilities on market orientation and firm performance did not exist, the mixed results warrant further exploration of this potential causal relationship between the three constructs. (Abstract shortened by UMI.)