Market oriented innovation and competitivesness : empirical investigation into Ethiopian manufacturers' strategic orientation and outcomes

Abstract

The most perplexing question of business organizations today is how to get and sustain competitive advantage. The dependable answer to this question, as Peter Drucker stated, is defining a business in terms of customer values and designing innovation activities to create those values. Hence, market orientation and innovation are the two complementary pillars of success. This research, therefore, develops a conceptual model to examine how 1) internal factors influence the development of market orientation and innovation; and 2) market orientation and innovation impact on the competitiveness of manufacturing businesses in Ethiopia, a least developed country in sub-Sahara Africa. Market and innovation orientations have been broadly recognized as performance antecedents in the strategic management literature. The performance impact of these orientations is extensively examined in the developed countries’ business environments. Studies also indicate that market and innovation orientations affect performance in situations where the competitive intensity is high. However, literature lacks adequate empirical evidence to determine whether market and innovation orientations have positive impact on performance in the least developed countries’ economies; it is also deficient with the required literature to confirm whether the impact of these orientations on performance is minimal in the least economically developed environment where competitive intensity is low. The other shortcoming in the strategic orientation literature is the heterogeneity in defining and measuring market orientation constructs. Market orientation is defined from behavioral, cultural, capability, and integrationist perspectives. Despite the contention on what the integrationist perspective suggests, very limited number of studies applies such comprehensive conceptualization. The study, therefore, is designed to fill these voids in the literature by designing a comprehensive model and testing it in the least developed context. From practical point of view, following the current encouraging economic growth of Ethiopia, changes have been observed on the competitiveness of the business environment. In response to the growing competitiveness of the business environment, organizations should adopt relevant orientations and practices; i.e., practices recognized as appropriate to the western environment. Hence, testing the validity of the sound managerial orientations and practices, based on scientifically accepted procedure in the least developed context, is mandatory before making use of them. The research is conceptually rooted in the argument of resource based view and its extension- the dynamic capability. Based on this, the study a) models strategic orientations and managerial practices as capabilities that affect competitive advantage of firms; b) reviews literature on market orientation, innovation, marketing capabilities, organizational culture, and managerial practices to theoretically validate the proposed relationships in the conceptual model; and c) develops eight main hypotheses for empirical verifications. The investigation pursues positivist paradigm. It applies quantitative research design where the study tests the proposed relationships quantitatively by analyzing 204 usable responses (n=204) of the selected manufacturing companies. The findings show that 1) market orientation and innovation have positive and significant effect on competitiveness of the manufacturing companies in Ethiopia; 2) the level of market orientation and its impact on competitiveness is influenced by sound employee training program, market based reward system, effective marketing program, and organizational culture that emphasize change, entrepreneurship, and achievement orientation; 3) the level of innovation and its impact on competitiveness is influenced by effective marketing program and organizational culture that emphasize change (i.e., adhocracy culture) and control over the change process (i.e., the hierarchy culture); 4) the effect of market orientation and innovation on competitiveness is stronger for the younger and larger organizations when compared to the older and smaller ones, respectively. Based on these findings, the study suggests that managers, beyond ensuring the smooth running of day-to-day operations, should focus on marketplace changes by adopting and developing relevant orientations (i.e., market and innovation orientations) via improving the culture, structure, and other relevant capabilities.