International Journal of Emerging Markets

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Market orientation, entrepreneurial orientation and performance in emerging

markets
Tina Gruber-Muecke Katharina Maria Hofer

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560
Received 7 May 2013
Revised 25 September 2013
Accepted 27 November 2013

Market orientation,
entrepreneurial orientation
and performance in
emerging markets
Tina Gruber-Muecke
Department of Entrepreneurship and Organizational Development,
Johannes Kepler University, Linz, Austria, and

Katharina Maria Hofer

Department of Retailing, Sales and Marketing, Johannes Kepler University,
Linz, Austria
Abstract
Purpose The purpose of this paper is to examine how market-oriented and entrepreneurial-oriented
behaviour drives firm performance in an emerging markets context.
Design/methodology/approach Using data from 170 Austrian exporters to Central and Eastern
Europe, the authors test a conceptual model including market-oriented and entrepreneurial-oriented
practices as predictors of performance.
Findings Results indicate that both market-orientated and entrepreneurial-oriented strategies have
positive performance effects in emerging markets.
Research limitations/implications A limitation is that firms were not examined longitudinally, as
this is a cross-sectional study. Future research may include longitudinal studies or focus on other
markets/regions.
Practical implications Firms are encouraged to adopt a market-oriented and entrepreneurialoriented strategy to achieve better results in international, emerging market operations.
Originality/value The authors add to the emerging economy research literature by studying the
relevance of market orientation and entrepreneurial orientation in determining firm performance
in emerging markets. Furthermore, this study supports the generalizability of findings from an advanced
to an emerging economies research setting.
Keywords Emerging markets, Eastern Europe, Performance, Market orientation
Paper type Research paper

International Journal of Emerging

Markets
Vol. 10 No. 3, 2015
pp. 560-571
Emerald Group Publishing Limited
1746-8809
DOI 10.1108/IJoEM-05-2013-0076

Introduction
Emerging markets present significant socioeconomic, cultural and regulative departures
from the institutional assumptions of western countries, calling into question our
understanding of constructs and relations (Burgess and Steenkamp, 2013). A large
number of well-established theories in international business research have been derived
from the context of advanced markets and highly industrialized research settings, which
raises the question whether these theories can be applied to the context of emerging
markets as well (e.g. Jaworski and Kohli, 1993; Dawar and Chattopadhyay, 2002; Burgess
and Steenkamp, 2006).
The question of the generalizability of findings from advanced markets to emerging
markets is a central area of interest. Firms should consider an emerging market strategy
with respect to the communalities across emerging markets (Dawar and Chattopadhyay,
2002). Companies operating in the emerging markets of Central and Eastern Europe need

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to adjust internal and external management procedures to different cultures (Park and
Jang, 2010).
In this paper we analyze two firm-level constructs, market orientation (MO) and
entrepreneurial orientation (EO), both extensively discussed in the literature (Baker
and Sinkula, 2009). The former reflects the extent to which firms establish the satisfaction
of customer needs and wants as an organizing principle of the firm ( Jaworski and Kohli,
1993; Kohli et al., 1993). The latter reflects the extent to which firms establish the
identification and exploitation of untapped opportunities as an organizing principle of the
firm (Lumpkin and Dess, 1996a,b). The nature of a firms MO and EO becomes important
as both seem to contribute to firm performance according to the marketing literature
(Chiarvesio and Di Maria, 2009; Coe and Hess, 2005). Considering this fact, we argue that
firms must be able to increase efficiency through both MO and EO in order to cope with
market conditions in emerging markets characterized by comparatively high levels of
uncertainty (Grewal and Tansuhaj, 2001). Consequently, we ask: do market-oriented and
entrepreneurial-oriented practices complement each other as predictors of performance in
emerging markets?
We contribute to the emerging markets literature by providing a deeper understanding
of performance predictors in the context of transition economies. This assists firms in
allocating limited resources to those areas contributing most to international performance
and in facilitating the international growth process. Furthermore, the results add to the
generalizability of basic concepts to an emerging market research setting. Structuring our
paper, we start with a literature review before deriving our hypotheses. After data
analysis, we discuss the results and finish with the presentation of implications.
Literature review
In the following section we explore the linkages between MO and performance and EO and
performance. We identify the key variables for the conceptual framework.
MO and performance assessment
Literature suggests two strategic options to enhance performance (Kuivalainen et al., 2007).
One alternative is to establish managerial ties and networks in order to achieve business
success in the target market. The other alternative debated in the literature (Kwon, 2010)
highlights superior customer value as a prerequisite of competitive advantage and
performance (Zhou et al., 2006, 2008). We assume that firms use MO in order to achieve
both competitive advantage and superior business performance (Li, 2009). Therefore,
we argue that firms are facing not only high demand uncertainty which plays a role
regarding MO, but also a high level of infrastructural variability and diversity among
customers (Dawar and Chattopadhyay, 2002). The more accustomed the firm is to
monitoring customers, the better is the position for necessary adjustments for new demand
curves (Slater and Narver, 1995).
A growing body of empirical evidence from both the USA (e.g. Narver and Slater,
1990) and Europe (e.g. Pitt et al., 1996) supports the proposition that MO is positively
related with superior performance (Kirca et al., 2005). Nevertheless, this relationship
is mediated by a number of variables such as strategy, economic volatility, supplier
relationships and innovation (Qureshi et al., 2009). Manufacturing firms seem to exhibit a
stronger relationship between MO and organizational performance than service firms.
When a firm internationalizes, market-oriented values and norms and the cultural
aspects of MO have to be considered (Kirca et al., 2009; Narver and Slater, 1990). These

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international activities require firms to take a market-oriented approach so that they can
adapt and improvise (Sorensen, 2009).
Looking at the MO construct in more detail we find a chronological development
(Kirca et al., 2005) as Narver and Slater (1990) identify three behavioural components for a
definition: first, customer orientation, which involves understanding target buyers now
and over time in order to create superior value for them; second, competitor orientation,
which involves acquiring information on existing and potential competitors,
understanding the short-term strengths and weaknesses and long-term capabilities of
both the key current and potential competitors; and third, inter-functional coordination,
which is the coordinated use of resources in creating superior value for target customers.
According to Jaworski and Kohlis (1993) definition a market orientation refers to the
organization wide generation, dissemination, and responsiveness to market intelligence.
Similarities can be found in the definitions as they both focus on the central role of
the customer in the manifestation of MO and entail an external orientation. The central
role of customer satisfaction was highlighted in several studies (e.g. Webb et al., 2000).
Later, Cadogan et al. (2002) developed an integrated model. All activities go back to
a coordinating mechanism that ensures efficient and effective processes, incorporating the
component of inter-functional coordination coined by Narver and Slater (1990). The activities
of intelligence generation, intelligence dissemination and responsiveness are focused on
customer orientation and competitor orientation, leaving out other factors of influence.
Based on this model, additional factors of influence emerge in an international context.
These factors represent political, legal, social and economic aspects of a foreign country
market and are important for the internationalization process of a company. Cadogan et al.
(2002) mention seven influence factors for international MO: foreign market experience;
availability and quality of information; reliance on third parties; organizational
complexity; information load; purification and distortion; response rationale; and human
resource policies. Kirca and Hult (2009) highlight the context of the company and
underline that national culture influences company values and organizational behaviour
(Diamantopoulos et al., 2008).
EO and performance assessment
Literature suggests that EO can drive business success (Boso et al., 2012a,b) and several
measures for EO exist (Lumpkin and Dess, 1996a,b). Covin and Slevin (1989, p. 79) theorized
that innovation, proactiveness, and risk taking acted together to comprise a basic
unidimensional strategic orientation. Two more dimensions, according to Lumpkin and
Dess (1996a), are autonomy and competitive aggressiveness. EO is a firm-level construct
that is closely linked to strategic management and the strategic decision-making process
(Lumpkin and Dess, 1996a,b). EO enables firms to influence the market and market
behaviours by offering innovative products in emerging markets that satisfy export
customers latent needs (Boso et al., 2012a). We argue in line with the literature that EO is a
multidimensional construct and it needs to integrate the management professionalization as
pointed out in the literature.
Hypotheses development
We include MO and EO in our conceptual framework. Our empirical study aims to validate
these factors and determine the relationship between these factors and international firm
performance. Figure A1 shows the MO and EO performance framework.

Based on the framework, we hypothesize the following:

H1. There is a positive relationship between the MO factors and overall firm performance
in the international target market.

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H2. There is a positive relationship between the EO factors and overall firm performance
in the international target market.
Methodology
Data collection
We chose the key informants method, which selects respondents in an organization based
on various criteria, such as job title, experience and know-how (Lin et al., 2008).
The questionnaire was pretested with regard to contents and technical practicability and
then reduced to six pages with 62 questions. A list of 5,369 Austrian exporters was
provided by the Austrian Chamber of Commerce in 2010. We selected only firms that had
international business operations for at least three years to ensure that they were able to
assess the performance indicators regarding the last three years. We invited the CEOs or
the marketing managers and marketing managing directors to participate in the online
survey. We thought that they had a greater understanding of the organizational culture,
performance and market environment than managers in other functions. A reminder was
sent after two weeks. Responses to both the independent and dependent variables came
from the same informants.
Non-response bias was assessed by comparing the average duration of the online
survey. Questionnaires with less than 120 seconds time frame were excluded. The second
stage in the data assessment was the exclusion of incomplete responses. The fieldwork
yielded 170 usable questionnaires, representing a 13 per cent response rate which is in
line with recently published studies on this topic (e.g. Boso et al., 2012b; Lado et al., 2013).
Measures
MO: this measure is one of the key drivers of performance and determines how well firm
management addresses the requirements and expectations of current and future customers,
and the measurement of customer satisfaction. We chose the Narver and Slater (1990) and
the Kohli et al. (1993) scales, because both had been previously tested. They were found to
have acceptable measurement properties, and both had been used interchangeably in
discussing the domain, antecedents and consequences of MO. Although Kaur and Gupta
(2010) criticize the measurement by Narver and Slater (1990) and Kohli et al. (1993), recent
publications rely on this scale, particularly for developing economies (Boso et al., 2013, p. 716).
All items were measured on a seven-point Likert scale anchored by strongly agree and
strongly disagree.
EO: this factor is another key driver of performance (Boso et al., 2013). The measurement
of each item of the three dimensions mainly involves evidence from three aspects: first,
an entrepreneurs manner and action towards innovation (innovativeness); second, the
propensity and proactiveness in behaviour to risk (risk handling capability and risk
proactiveness); and third, the attitude and performance to management professional
qualification and adherence to management standards (management professionalization)
(Zhan and Deschoolmeester, 2004). All items were measured on a seven-point Likert scale
anchored by strongly agree and strongly disagree.
Firm performance: to capture different aspects of firm performance, we employed
measures of financial performance and growth (Wiklund and Shepherd, 2005).
First, profitability (Narver and Slater, 1990), which may itself be proxied by using the

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return-on-assets ratio, which is defined as the quotient of net profit after taxes to total
assets. Second, the employee growth rate was taken as a measure for firm performance.
Third, firm performance was measured by market share (Baker and Sinkula, 1999).
The respondents were asked to state their performance assessments regarding the last
three years in their major foreign target market. All items were measured on a seven-point
Likert scale anchored by strongly agree and strongly disagree.
Data analysis
Regarding the assessment of the measurement model, we examined our measures through
factor analysis of the variables to ensure reliability. A cut-off loading of 0.3 was used to
screen out variables that were weak indicators of the construct. The application of this
technique requires that the minimum size of the sample should be five times the number
of variables to be analysed. For this study, the Kaiser-Meyer-Olkin (KMO) measure of
sampling adequacy was used. Kaiser (1974) suggests that samples with KMO values
below 0.5 are not acceptable, values between 0.5 and 0.7 are mediocre, values between 0.7
and 0.8 are good, values between 0.8 and 0.9 are great and values above 0.9 are superb.
KMO measure of sampling adequacy for this survey was 0.849. Therefore we considered
the result of the factor analysis on the 170 observations as stable. Out of the 36 original
independent variables, four underlying factors were identified. For this study summated
scales were used to represent the identified composite variables. The composite variables
were derived from factor analysis. Reliability analysis was used to check whether the
associations between selected variables are strong enough to make their sum a sufficiently
accurate measure of the underlying phenomenon. The identified composites were tested
for internal reliability. All were found to have Cronbachs exceeding 0.8.
Results
Manufacturing firms from various industries participated in the study, and they represented
the structure of the Austrian economy. The mean number of export countries was 7.38, and
all the firms had an international experience of at least three years. Tables I and II show the
results of the factor and reliability analyses. For this study, a cut-off loading of 0.7 was used
to screen and remove variables that were weak indicators of the construct. Of the
36 variables used for factor analysis, eight fail to make the cut-off, leaving 28 variables to
constitute the four constructs which are divided into MO and EO practices. The four
constructs are: customer orientation; competitor orientation; management professionalization;
opportunity and risk behaviour. The dependent construct is the three-item firm performance
(Table III). Thereliability values of the four independent and one dependent constructs meet
or exceed Nunnallys recommended standard (Cronbachs W0.70) for early stage research
(Andersson et al., 2009).
MO factors and performance
MO had a strong and significant correlation with overall firm performance. The second
factor, competitor orientation, also had a strong and significant correlation with overall
firm performance. The results of the bivariate correlation analysis of this study suggest
that MO practices are significantly and positively related with competitor orientation
(r 0.697, po0.01) (see Table II).
EO factors and performance
The EO constructs consisting of management professionalization and opportunity
and risk behaviour indicate moderate correlations with firm performance

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Item

Factor loadings

F1: market orientationa

Quality work of people in the country
Product quality as moral standard
Quality interest of human resources/staff
Total quality philosophy
Quality as a strategy
Quality know-how of people in the country
Media and quality reports
Quality as branding aspect

0.787
0.748
0.739
0.734
0.698
0.682
0.673
0.670

F2: competitor orientationb

Competitive advantage compared to competitor
Reaction to measures of competitor
Communication about strategies of competitor
Internal communication
Coordination between departments
Customer visits
Resource sharing among division
Analysis of customer needs

0.872
0.864
0.849
0.820
0.800
0.786
0.777
0.770

F3: management professionalizationc

Uniqueness of goods/services
Protection of processes/routines
Imitation of human resources
Independence of competitor
Branding protection

0.847
0.804
0.779
0.727
0.726

F4: opportunity and risk behaviourd

R&D have an impact on our venture
0.774
Accounting and controlling procedures influence our venture
0.769
TQM influences our venture
0.753
Marketing know-how influences our venture
0.714
Patenting influences our venture
0.691
Notes: aConstruct reliability, 0.841; bconstruct reliability, 0.823; cconstruct reliability, 0.846;
d
construct reliability, 0.802

F1 (IV)
F1: market orientation
F2: competitor orientation
F3: management professionalization
F4: opportunity and risk behaviour
F5: firm performance
Notes: IV, Independent variable; DV,
(one-tailed)

F2 (IV)

F3 (IV)

F4 (IV)

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Table I.
Factor analysis:
independent
variables

F5 (DV)

1
0.697**
1
0.544**
0.788**
1
0.578**
0.632**
0.659**
1
0.489**
0.683**
0.476**
0.445**
1
dependent variable. **Correlation significant at 0.01 level

(r 0.579, p o 0.01). Management professionalization and opportunity and

risk behaviour also show moderate correlations (r 0.659, p o 0.01).
Opportunity and risk behaviour and firm performance are also correlated
(r 0.445, p o 0.01). Table III shows the multiple regression analysis of the

Table II.
Correlation matrix
of constructs

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four independent factors on firm performance F5. Together with the result of the
bivariate analysis, the multiple regression analysis is used to test the H1 and H2
as stated above.
Hypotheses testing
The linear regression model (adj. R2 0.44) explains 44 per cent of the variation in firm
performance. The result indicates that of the MO factors only MO exhibited a highly
significant and positive relationship with overall firm performance. Therefore, H1 is
supported. Examination of the correlation matrix in Table II shows that the Pearson
correlation coefficients between the MO constructs and firm performance are positive.
Regression analysis shows that both MO and EO have relationships with firm
performance. All factors are positively related with firm performance ( +). The
results of the bivariate correlation analysis indicate that MO and EO constructs have a
significant correlation with firm performance. The constructs together have a greater
explanatory power on firm performance. Based on the correlation analysis, all four
factors are positive and significant in their relationship with firm performance.
Therefore, H2 is supported.
We also wanted to determine if the constructs of the MO and EO model are valid and
reliable measures of the underlying theoretical assumptions. Content, construct and criterion
validities were considered. Content validity is based on the extent to which a measurement
reflects the specific intended domain of content (Carmines and Zeller, 1991, p. 20).
The literature review included the appropriate literature in the field of marketing and
entrepreneurship. Therefore we believe that the measures of the MO and EO model were
considered to have content validity. The items which were developed from the literature can
clearly define the boundaries and conceptualization of the MO and EO model. Construct
validity is the degree to which an assessment instrument measures the targeted construct
(i.e. the degree to which variance in obtained measures from an assessment instrument is
consistent with predictions from the construct targeted by the instrument). We assessed the
elements by using principal component factor analysis. The items for each of the factors were
analysed (using orthogonal varimax rotation). Items which had factor loadings less than 0.5
were dropped. Convergent and discriminant validity are both considered as subcategories or
subtypes of construct validity. Convergent validity was achieved because all the items loaded
on one particular factor (construct). Discriminant validity was also achieved as these items
already loaded on the particular construct. Tables I and II show the results of the items and
their loadings. To demonstrate the predictive validity of the MO and EO construct, we ran a
linear regression. The result as shown in Table III produce R equals 0.69 indicating that the
four factors have a reasonably high degree of criterion-related validity when taken together
and explain 44 per cent of variance in firm performance. Therefore our model has strong
external validity.
Analysis of variance (ANOVA)

Table III.
Summary of
regression analysis
on dependent
variable, F5: overall
firm performance

t-test

F1: market orientation

0.079
0.154
1.955
0.050
F2: competitor orientation
0.125
0.011
3.728
0.000
F3: management professionalization
0.007
0.190
4.707
0.000
F4: opportunity and risk behaviour
0.119
0.142
3.450
0.010
Notes: IV, Independent variable; DV, dependent variable. F5, firm performance F(7.096) 16.358
(Sig. F 0.000). Multiple R 0.695; R2 0.498; adj. R2 0.440

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Reliability is concerned with the consistency of a measure. The stronger the

correlation, the higher is the reliability of the measure. Cronbachs is the most
commonly used reliability coefficient to determine internal consistency of a set of
measurement items. The PASW software was used to assess separately the internal
consistency of each of the factors. A Cronbachs with a value above 0.7 is generally
accepted a minimum. The results of the reliability test are shown in Tables I and II.
All our constructs had Cronbachs exceeding 0.7.
Discussion and managerial implications
The results of the regression analysis demonstrate that both constructs of EO
(in particular opportunity and risk behaviour) and MO are related with firm performance
in Central and Eastern European markets. Therefore, the main contribution of this study
is that MO and EO do have an impact on firm performance in emerging markets. Thus,
strategies and variables that have been proven successful in advanced markets can be
transferred to emerging markets. From a theoretical perspective, our MO and EO
measures can be used for developing a framework for MO and EO performance in
transition economies. We also confirm through our survey that both constructs are
relevant for international marketing activities in Central and Eastern European countries.
Furthermore it can be said that the internationalization process towards Central and
Eastern Europe can be positively influenced if a company acts market oriented, but also as
an entrepreneurial organization. We therefore contribute with this paper to the stream of
literature suggesting that firms have to develop towards an entrepreneurial organization.
This is even more important when international activities are carried out in Central and
Eastern European countries. This can be underlined as we tested our hypotheses in four
different CEE markets. While the opening of the CEE region has occurred more than two
decades ago, it still seems to be a challenge for firms not only from a marketing
perspective, but also from an entrepreneurial perspective. Therefore, as far as managerial
implications are concerned, firms are encouraged in the internationalization process
towards CEE. This strategy needs to consider both elements from marketing activities as
well as opportunity seeking behaviour. We cannot confirm from our research that firms
should develop different strategies for each single market. This applies to both advanced
and emerging market regions.
Limitations and future research
Nevertheless, it has to be mentioned that our study has a few limitations. First, only
companies with international activities in four CEE markets (Hungary, Russia, Poland, Czech
Republic) were analysed. The inclusion of more countries is certainly desirable when
assessing the influence of cultural and geographic distance on foreign economic activity
dynamics. Second, the analysis incorporating data from the Austrian perspective was
restricted by the range of countries which are targets of international activities.
The corresponding results might not hold for firms on a global level. Third, the analysis was
done using only a few parameters of firm performance. However, it is possible that the
results may change through the integration of more performance parameters in the linear
regression model. Fourth, the time horizon for the analysis was very short, i.e. we performed
a cross-sectional study. A longitudinal view of foreign economic activities is necessary to
ascertain the sustained nature of variations of MO and EO and firm performance in different
country groups. Another possible limitation is that this study does not directly focus on the
relationships between resource availability of concrete countries and corresponding
international activities and export inflow in Austria. Availability of resources poses barriers

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to the growth of economic activity from countries with lack of resources. Firms from
advanced and emerging economies are likely to have different resources and capabilities.
Most likely, firms from transition economy countries are bound by the lack of resources that
are impending export or international development. Therefore, distinguishing between
developed and developing countries in an other clustered group or specifying resource
availability in a Europe group might yield more accurate results in future research.
Moreover, different measures might be employed. Specifically, not only performance
indicators, but also performance growth ratios that capture dynamic developments
(increase or decrease of exports from 2009 to 2010 for instance). Finally, other factors
such as the specific industry of a firm may influence the dynamics of international
activities in specific ways, and are desirable for inclusion in future research.
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Appendix

Performance
in emerging
markets
MO Factors
Market orientation
Competitor orientation
Interfunctional
coordination

Firm Performance
ROA
Employee Growth

EO Factors
Management
Professionalization
Opportunity and Risk
Behavior

About the authors

Tina Gruber-Muecke is an Assistant Professor and the Vice Head of Department in the Department
of Entrepreneurship and Organizational Development at the Johannes Kepler University Linz,
Austria. Her research interests include small firm internationalization and business succession.
Katharina Maria Hofer is an Associate Professor in the Department of Retailing, Sales and
Marketing at the Johannes Kepler University Linz, Austria. Her research interests include
international marketing focusing on emerging markets and brand management. Katharina Maria
Hofer is the corresponding author and can be contacted at: katharina.hofer@jku.at

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571
Figure A1.
MO and EO in
emerging markets
conceptual
framework